-----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, EFgGHhnXCg16ISRWwVgMHnrtxUu9bugVgLQXQvtHqVci/jlRFeD5HELNFy0h+izM jIQZMJViH/EuiJw0nKs/2Q== 0000923118-00-000037.txt : 20001206 0000923118-00-000037.hdr.sgml : 20001206 ACCESSION NUMBER: 0000923118-00-000037 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 20000630 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 20001205 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/A SEC ACT: SEC FILE NUMBER: 001-13136 FILM NUMBER: 783297 BUSINESS ADDRESS: STREET 1: 850 CLINTON SQ CITY: ROCHESTER STATE: NY ZIP: 14604 BUSINESS PHONE: 7165464900 MAIL ADDRESS: STREET 1: 850 CLINTON SQUARE CITY: ROCHESTER STATE: NY ZIP: 14604 8-K/A 1 0001.txt SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K/A CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): June 30, 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 of (Commission file number) (I.R.S. Employer incorporation or organization Identification Number) 850 CLINTON SQUARE ROCHESTER, NEW YORK 14604 (Address of principal executive offices) Registrant's telephone number, including area code: (716) 546-4900 Not applicable (Former name or former address, if changed since last report) HOME PROPERTIES OF NEW YORK, INC. CURRENT REPORT ON FORM 8-K/A Item 2. Acquisition or Disposition of Assets. Home Properties of New York, L.P. (the "Operating Partnership"), a New York limited partnership has recently purchased eight multifamily residential properties in eight separate transaction. Collectively these acquisitions are deemed "significant acquisitions" pursuant to the regulations of the Securities and Exchange Commission governing the reporting of transactions under the Current Report on Form 8-K. Home Properties of New York, Inc. (the "Company") is the sole general partner and holder, directly and indirectly through Home Properties Trust, in which the Company holds 100% of the beneficial interests, of approximately 62% of the partnership interests in the Operating Partnership. Old Friends. On February 1, 2000, the Operating Partnership acquired the Old Friends Apartments, a 51 unit community located in Baltimore, Maryland. The purchase price of $2.0 million was funded with the assumption of a $2.4 million mortgage, which secures a revenue bond and a $0.4 million payment from the Seller. Deerfield Woods and Macomb Manor ("Schostak Communities"). On March 23, 2000, the Operating Partnership acquired the Deerfield Woods apartments, a 144 unit apartment community located in Livonia, Michigan and Macomb Manor, a 216 unit apartment community located in Roseville, Michigan. The total Schostak purchase price of $14.4 million included $7.5 million of assumed debt and $6.9 million of Operating Partnership Units in Home Properties of New York, L.P. ("OP Units"). The OP Units are exchangeable for shares of the Company's common stock on a one-for-one basis. For purposes of determining the number of OP Units issued, a value of $26.35 per unit was used, based upon the 20-day average closing price of the Company's common stock prior to the closing date. Elmwood Terrace. On June 30, 2000, the Operating Partnership acquired the Elmwood Terrace Apartments, a 504 unit apartment community located in Frederick, Maryland. The purchase price of $20.6 million included $4.7 million of assumed debt, $11.9 million of OP Units, and $4.0 million of cash on hand. The mortgage carries an interest rate of 8.32% and matures in 2003. The OP Units are exchangeable for shares of the Company's common stock on a one-for-one basis. For purposes of determining the number of OP Units issued, a value of $27.00 per unit was set when the contract was negotiated in April, 2000. The community was built in 1972 and was approximately 96.2% economic occupancy in 1999. East Meadow. On August 1, 2000, the Operating Partnership acquired the East Meadow Apartments, a 150 unit apartment community located in Fairfax, Virginia. The purchase price of $13 million was paid in cash. The community is 29 years old and was approximately 99.9% occupied during 2000. Southbay Manor. On September 11, 2000, the Operating Partnership acquired Southbay Manor, a 61 unit apartment community located on Long Island in Sayville, New York. The purchase price of approximately $3.0 million was paid with $1.5 million of OP Units using the 20-day closing average price of $29.57 per unit, with the balance of $1.5 million from cash on hand. The community was built in 1959. Hampton Court. On September 30, 2000, the Operating Partnership acquired the Hampton Court Apartments, a 182 unit apartment community in Westland, Michigan. The purchase price of $6.0 million included $3.6 million of assumed debt, $1.1 million of OP Units and $1.3 million of cash on hand. The mortgage carries an interest rate of 8.875% and matures in September, 2006. The OP Units are exchangeable for shares of the Company's common stock on a one-for-one basis. For purposes of determining the number of OP Units issued, a value of $28.50 per unit was set when the deal was negotiated in March, 2000. The community was built in 1972. Bayberry Apartments. On September 30, 2000, the Operating Partnership acquired Bayberry Apartments, a 120 unit apartment community located in Troy, Michigan. The purchase price of $5.7 million included $2.5 million of assumed debt, $3.1 million of OP Units, and $0.1 million of cash on hand. The mortgage carries an interest rate of 9.75% and matures in October, 2002. For purposes of determining the number of OP Units issued, a value of $28.50 per unit was set when the deal was negotiated in May, 2000. The community was built in 1967, and was approximately 98% occupied during 1999. Blackhawk Apartments. On October 24, 2000, the Operating Partnership acquired Blackhawk Apartments, a 371 unit apartment community located in Elgin, Illinois. The total purchase price of $17.5 million included $10.7 million of assumed debt and $6.8 million of cash on hand. The mortgage carries an interest rate of 7.65% and matures in 2031. The community was built in 1971 and has achieved a 95% occupancy rate during each of the past three years. Figoni Portfolio. On November 1, 2000, the Operating Partnership acquired a portfolio of five communities, containing a total of 429 units, located in the town of Patchogue, on Long Island, New York. The purchase price of $26.5 million included $8.1 million of assumed debt and $18.4 million of cash on hand. The mortgages carry an average weighted interest rate of 8.21%, with an average weighted maturity of 4.4 years. The properties have achieved a 98.8% economic occupancy year-to-date in 2000 and the buildings have an average of approximately 35 years. Orleans Village. On November 16, 2000, the Operating Partnership acquired Orleans Village, an 851 unit apartment community located in Alexandria, Virginia. The purchase price of $67.4 million was paid in cash. The community, which was built between 1967 and 1972, has achieved an average economic occupancy of 97.4% in 1999. The property was purchased from Charles E. Smith Residential Realty, Inc. None of the above sellers were affiliated with the Operating Partnership, the Company, any directors or officers of the Company or any affiliates of any such director or officer. The properties were all previously operated as multifamily apartment properties, and it is the intent of the Company and the Operating Partnership to continue to operate them as multifamily apartment communities. The purchase prices were negotiated with the sellers and based on an internal analysis by the Company of the historical cash flows and fair market values of the properties. Item 7. Financial Statements and Exhibits. a. Financial Statements of the Businesses Acquired: Financial statements for the interests and properties acquired and noted in Item 2 are not available at this time and will be filed by amendment as soon as practicable, but not later than 60 days from the date this Form 8-K must be filed. b. Pro Forma Financial Information: Pro forma financial statements of the Company reflecting the interests and properties acquired and noted in Item 2 are not available at this time and will be filed by amendment as soon as practicable, but not later than 60 days from the date this Form 8-K must be filed. c. Exhibits: 2.1 Form of Contribution Agreement, dated December 8, 1998 between Old Friends Limited Partnership and Home Properties of New York, L.P. and Home Properties of New York, Inc., along with Amendments Number 1 and 2, thereto. 2.2 Form of Contribution Agreement dated December 17, 1999 between Deerfield Woods Venture Limited Partnership and Home Properties of New York, L.P. 2.3 Form of Contribution Agreement dated December 17, 1999 between Macomb Apartments Limited Partnership and Home Properties of New York, L.P. 2.4 Form of Contribution Agreement, dated May 22, 2000 between Home Properties of New York, L.P. and Elmwood Venture Limited Partnership. 2.5 Form of Sale Purchase and Escrow Agreement dated July 6, 2000 between Bank of America as Trustee and Home Properties of New York, L.P. (East Meadow) 2.6 Form of Contribution Agreement dated June 22, 2000 between Home Properties of New York, L.P. , Home Properties of New York, Inc. and S&S Realty, a New York General Partnership. (South Bay) 2.7 Form of Contribution Agreement dated June 7, 2000 between Hampton Glen Apartments Limited Partnership and Home Properties of New York, L.P. 2.8 Form of Contribution Agreement dated August 3, 2000 between Home Properties of New York, L.P. and Axtell Road Limited Partnership 2.9 Form of Purchase and Sale Agreement dated April 17, 2000 between Blackhawk Apartments Limited Partnership and Home Properties of New York, L.P. 2.10 Form of Purchase and Sale Agreement dated July 24, 2000 between Home Properties of New York, L.P. and Caesar Figoni. 2.11 Form of Real Estate Purchase Agreement dated August 9, 2000, by and between Smith Property Holdings Orleans, LLC and Home Properties of New York, L.P. 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. HOME PROPERTIES OF NEW YORK, INC. (Registrant) Date: December 5, 2000 By: /S/ DAVID P. GARDNER David P. Gardner Vice President Chief Financial Officer Date: December 5, 2000 By: /S/ DAVID P. GARDNER David P. Gardner Vice President Chief Financial Officer EX-2 2 0002.txt Exhibit 2.1 THIS CONTRIBUTION AGREEMENT (this "Agreement") made as of the 8th day of December, 1998, by and between OLD FRIENDS LIMITED PARTNERSHIP, a Maryland limited partnership (the "Partnership"), having its principal office at 14 Straw Hat Road, Owings Mills, Maryland 21117 and HOME PROPERTIES OF NEW YORK, L.P., a New York limited partnership ("Home Properties"), and HOME PROPERTIES OF NEW YORK, INC., a Maryland Corporation ("HME"), both having their principal office at 850 Clinton Square, Rochester, New York 14604. W I T N E S S E T H: This Agreement is made with reference to the following facts and objectives: (a) The Partnership owns a 100% fee simple interest in a Maryland apartment property known as Old Friends Apartments (the "Property"). (b) The Property comprises 51 dwelling units and is situated upon land owned in fee simple by the Partnership. (c) Upon the terms and conditions set forth in this Agreement, Home Properties desires to obtain 100% of the partnership interests (the "Interests") in the Partnership and thus a 100% partnership interest in the fee simple Property, together with the related Personal Property, Service Contracts and Trade Names (all as hereinafter defined), in exchange for assumption of existing debt covering the Property and limited partnership interests (the "OP Units") in Home Properties. (d) As the current principal balance of the Bonds (defined below) exceeds the value of the Property, Partnership agrees to allow the collateral pledged as required by applicable Bond documents (but not worth less than $400,000) to remain in place or be deposited in a comparable Partnership account until the Closing. (e) The Bonds will be replaced by Refunded Bonds (defined below) which shall be issued on terms satisfactory to Home Properties. (f) The OP Units are to be allocated among the various partners of the Partnership (the "Partners") in accordance with SCHEDULE 1 attached hereto. (g) It is expected that the exchange of the Interests for OP Units (but not the cash portion of the Consideration) will qualify for Federal income tax purposes, as a tax free transfer, pursuant to Section 721 of the Code. (h) As used in this Agreement with initial capital letters, the following terms, in each instance, shall have the meaning ascribed thereto: "Bond Issuer" shall mean and refer to the City of Baltimore; "Bonds" shall mean the $2,500,000 Baltimore City, Maryland Variable Rate Semi-Annual Demand Housing Revenue Bonds (Old Friends School Facility), 1984 Issue, as amended by Supplemental Indenture No. 2 dated May 3, 1993, which has a principal balance as of April 1, 1998 of approximately $2,450,000; "Code" shall mean and refer to the Internal Revenue Code of 1986, as amended; "Collateral" shall mean and refer to the collateral pledged as required by applicable Bond documents (but not worth less than $400,000) which shall remain in place or be deposited in a comparable Partnership account until the Closing; "Environmental Law" shall mean and refer to any Federal, state, county or municipal environmental, health, chemical use, safety or sanitation law, statute, ordinance or code relating to the protection of the environment, and/or governing the use, storage, treatment, generation, transportation, processing, handling, production or disposal of any Hazardous Materials, and the rules, regulations and orders promulgated and/or issued thereunder; "General Partner" shall mean and refer to Herbert J. Siegel; "Hazardous Materials" shall mean and refer to any hazardous substances described or defined in (i) the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended; (ii) the Hazardous Materials Transportation Act, as amended; (iii) the Resource Conservation and Recovery Act, as amended; (iv) the Toxic Substances Control Act, as amended; and (v) any applicable Maryland Environmental Laws, and the regulations promulgated thereunder, in each case, as at the date of this Agreement; "HME" shall mean and refer to Home Properties of New York, Inc., a Maryland corporation (which operates as a self-administered, and self- managed, equity real estate investment trust); "HME Common Shares" shall mean and refer to the shares of common stock in HME, which are traded on the New York Stock Exchange; "Capital Account Deficit" shall mean and refer to the negative Capital Account amount of each Unit Partner (as hereinafter defined) for Federal income tax purposes, as at the relevant date; "Home Properties" shall mean and refer to Home Properties of New York, L.P., a New York limited partnership (in which HME is the sole general partner, and through which HME conducts its operational, management and investing activities); "OP Units" shall mean and refer to limited partnership interests in Home Properties, which are, subject to restrictions, exchangeable, on a one-to-one basis, for HME Common Shares; "Partner" shall mean each and every one of the partners of the Partnership and "Partners" shall refer to all of the partners of the Partnership; "Partnership" shall mean and refer to Old Friends Limited Partnership, a Maryland limited partnership; "Property" shall mean and refer to the apartment project known as Old Friends Apartments, including: (i) the land occupied by such apartment project (the "Land"), as more particularly described on EXHIBIT A attached hereto, together with (a) all and singular the easements, rights-of-way, rights, privileges, benefits, tenements, hereditaments and appurtenances thereunto belonging or in anywise appertaining, and (b) all right, title and interest of the Partnership in and to any land lying in the bed of any street, road, avenue or alley, open or proposed, public or private, in front of, behind, or otherwise adjoining the Land, or any part of the Land, including, without limitation, all right, title and interest of the Partnership in and to (1) any award made after the date of this Agreement as a result of condemnation, or in lieu thereof, and (2) any unpaid award as at the date of this Agreement as a result of condemnation, or in lieu thereof; and (ii) all buildings, structures, fixtures, facilities, installations and other improvements of every kind and description now or hereafter in, on, over and under the Land (the "Improvements"), including, without limitation, any and all plumbing, air conditioning, heating, ventilating, mechanical, electrical and other utility systems, and fixtures, parking lots and facilities, landscaping, roadways, fences, mail boxes, sidewalks, maintenance buildings, swimming pools and other recreational facilities, security devices, signs and light fixtures; and "Refunded Bonds" shall mean those bonds to be issued by the Bond Issuer which shall replace and refinance the Bonds. "Unit Partners" shall mean the Partners who are entitled to elect and who, in fact, elect to receive OP Units in exchange for their Interests and "Unit Partner" shall mean each of the Unit Partners. NOW, THEREFORE, in consideration of the foregoing, the mutual covenants, agreements and undertakings herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Partnership and Home Properties agree as follows: 1. EXCHANGE. (a) The Partnership agrees that the Partners shall exchange 100% of their Partnership interests for Home Properties' agreement to assume the debt of the Refunded Bonds as provided by Section 5 below and OP Units. The number of OP Units to be issued to the Partners shall be determined by the following formula: $2,050,000, plus the amount of cash and value of securities on deposit in Partnership accounts on the day of Closing (which shall not be less than $400,000), minus the outstanding principal balance of the Bonds on the day of Closing, times $____ per share. (b) The transfer, exchange, conveyance and acquisition of the Interests shall, in addition, include all of the right, title and interest of the Partnership in and to the following: (1) all furniture, furnishings, equipment, machinery and other tangible personal property and fixtures of every kind and description owned by the Partnership, and used in connection with the Property (in each instance, the "Personal Property"), including, without limitation, all ranges, refrigerators, disposals, dishwashers, water heaters, furnaces, air conditioning units and equipment, carpeting, traverse rods, drapes and other window treatments, exhaust fans, range hoods, screens, model unit furniture, tools, parts, motors, supplies, pool and other recreational equipment, cabinets, mirrors, shelving, computers and other office equipment, stationery and other office supplies, maintenance vehicles and accessories, normal levels of inventory, cash and securities in Partnership accounts, and all replacements of, and/or substitutions for, any of the foregoing; but specifically excluding (A) any personal property described in EXHIBIT A-1 attached hereto and (B) any refunds on insurance which has been pre-paid by the Partnership, if not adjusted at Closing; (2) all present and subsequent leases with tenants, and/or other occupancy agreements, together with all pending applications for tenancy (in each instance, the "Leases"); (3) all service and maintenance contracts, and equipment leases, used or useful in connection with the Property, and which are not to be terminated under this Agreement (in each instance, the "Service Contracts"), including, without limitation, natural gas purchase contracts, vehicle, communication and other equipment leases (the "Equipment Leases", and the vehicles and equipment covered thereby being herein called the "Leased Equipment"), coin-operated laundry concession leases, and pending purchase orders, all of which are listed on SCHEDULE 2 attached hereto; and (4) all trademarks, service marks, logos, trade, assumed or business names and telephone numbers related to the use and operation of the Property (in each instance, the "Trade Names"), except that the Partnership makes no representation or warranty of title or usage with respect to such Trade Names. Notwithstanding the foregoing, the name "The Siegel Organization" and similar names containing the name "Siegel" are not transferred; furthermore, the telephone number (410) 356-4400 is not transferred and shall remain the property of Herbert Siegel, the General Partner of the Partnership. 2. CONSIDERATION. (a) The aggregate consideration (the "Consideration") payable by Home Properties for 100% of the Interests shall be paid as follows: (i) subject to restructuring as provided by Section 5 below, by Home Properties' assumption of the obligations of the Partnership under the Refunded Bonds. (ii) by issuance by Home Properties of the OP Units computed under the provisions of Section 1(a), to be allocated in accordance with the pro rata shares of the Partners set forth on Schedule 1. (b) Partnership shall provide evidence to Home Properties at Closing that cash and/or securities worth at least $400,000 are in place in Partnership accounts. (c) At Closing, the General Partner shall establish from Partnership funds otherwise distributable to the Partners or from funds supplied by one or more Partners a "Reserve Amount." "Reserve Amount" means the sum of: (a) an amount equal to the current liabilities of the Partnership on the Closing Date (other than the principal amount of the Refunded Bonds), together with such other amounts as the General Partner may reasonably require (the "Liabilities Reserve") and (b) $5,000 (the "Indemnity Reserve"); the Reserve Amount shall be held and disbursed by the Disbursing Agent (as defined in Paragraph (d) of this Section 2) as described in Paragraph (d) of this Section 2 and in Paragraphs (a) and (b) of Section 3. The Reserve Amount shall initially be used to pay all amounts used to satisfy the current liabilities of the Partnership and the liabilities of the Partnership that Home Properties has not specifically agreed to assume as provided herein ("Liabilities Claims") and any amounts paid or subject to claims of Home Properties by reason of a material breach or material misrepresentation of any representations, warranties, covenants or agreements of the Partnership which survive Closing (but only during the period of such survival) ("Indemnity Claims"). (d) At Closing, the General Partner shall deliver in immediately available funds from monies otherwise distributable to the partners of the Partnership (but not from proceeds of Consideration) to Tydings & Rosenberg, LLP (the "Disbursing Agent") the Reserve Amount. The Reserve Amount shall be held and disbursed pursuant to the terms of an escrow agreement that shall be in form and substance substantially similar to that attached hereto as EXHIBIT H. 3. RELEASE OF RESERVES; CLOSING COSTS. (a) On the 90th day after the Closing Date, the Disbursing Agent shall disburse to the General Partner that portion of the Reserve Amount that has not been paid, disbursed or subject to Liability or Indemnity Claims. The General Partner may then elect (i) to continue to hold such disbursed amounts for up to 360 days after the Closing Date, in trust for the benefit of the Partnership and the holders of Interests immediately prior to the Closing Date (the "Holders"), as a fund against which to pay unanticipated claims (the "Contingency Reserve"), or (ii) to distribute pro rata to the Holders. (b) At any time, and from time to time, after the 90th day after the Closing Date that there is a Final Determination (as defined in EXHIBIT H) that any remaining portion, if any, of the Reserve Amount is no longer subject to Liability or Indemnity Claims, the Disbursing Agent shall distribute such remaining portion to the General Partner. The General Partner may then elect (i) to continue to hold such disbursed amounts for up to 360 days after the Closing Date, in trust for the benefit of the Holders , as a fund against which to pay unanticipated claims (the "Contingency Reserve"), or (ii) to distribute pro rata to the Holders in accordance with their percentage interests. (c) Not later than 360 days after the Closing Date (provided that there have been no unanticipated claims asserted against the Partnership), the General Partner shall distribute any balance remaining in the Contingency Reserve pro rata to the Holders in accordance with their percentage interests. In the event that at the end of the 360 period following Closing there are unanticipated claims pending or asserted, or the General Partner has reason to believe that such unanticipated claims may be asserted, the General Partner may continue to hold the Contingency Reserve until such time as the General Partner deems prudent, after which any undisbursed amount remaining in the Contingency Reserve shall be disbursed by the General Partner pro rata to the Holders in accordance with their percentage interests. (d) Home Properties shall pay all recording fees, its attorneys' fees, the costs of obtaining a binder or commitment from a title insurance company, the premium for its title insurance policy, the costs for updating any surveys, the costs of any environmental surveys and studies, one half of any Maryland state and local recordation or transfer tax, and all other costs and expenses incidental to or in connection with closing this transaction customarily paid for by the purchaser of similar property. The Partnership shall pay its attorneys' fees, one-half of any Maryland state and local recordation or transfer tax, and all other costs and expenses incidental to or in connection with closing this transaction customarily paid for by the seller of similar property. (e) Except as provided in Section 2 (b) above or as provided below, or at any time prior to, the Closing Date, the General Partner shall have the right to spend on behalf of the Partnership and/or distribute to the partners of the Partnership any and all cash and securities held by the Partnership, it being specifically agreed and understood that Home Properties is not purchasing the cash and securities assets of the Partnership. 4. OP UNITS. (a) Distributions with respect to the OP Units will be identical in amount and timing to the dividends on HME Common Shares, except that the initial distribution payable with respect to the OP Units issued to the Unit Partners shall be made on the date on which HME shall pay the dividend to holders of HME Common Shares that relates to the earnings for the calendar quarter in which the OP Units were issued to the Unit Partners, and shall be prorated such that the Unit Partners will receive a pro-rata distribution for the period from the date on which the OP Units were issued to the Unit Partners to, and including, the last day of the calendar quarter in which the OP Units were so issued. (b) Subject to the terms of a Lock-Up Agreement, in the form of EXHIBIT B attached hereto, to be dated the Closing Date, and to the terms of the Second Amended and Restated Agreement of Limited Partnership of the operating Partnership, as amended (the "Operating Partnership Agreement"), the OP Units will be convertible into HME Common Shares, on a one-to-one basis, after the elapse of one (1) year from and after the Closing Date (the "Lock-Up Period"), during which the Unit Partners will be restricted from converting, or transferring, any of the OP Units. (c) From and after the expiration of the Lock-Up Period, the Unit Partners shall have all of the transfer, exchange and conversion rights with regard to the OP Units as are set forth in the Operating Partnership Agreement. (d) Upon the terms and conditions of a Registration Rights Agreement, in the form of EXHIBIT C attached hereto, to be dated the Closing Date, the Unit Partners shall have registration rights and a listing commitment with regard to the shares of HME Common Shares into which the OP Units can be converted (the "Registration Rights"), including demand and piggy back rights. The exercise of Registration Rights shall be without cost to the Partners. In addition, within 6 months of the Closing Date, HME agrees to file and keep current at its sole cost and expense until all OP Units issued pursuant to this Agreement have been converted into shares of HME Common Shares, a registration statement (the "Registration Statement") with the SEC registering the resale of the shares of common stock of HME into which the OP Units may be converted and to use reasonable commercial efforts to have the registration promptly declared effective by the Securities and Exchange Commission ("SEC"). Notwithstanding anything to the contrary contained in this Agreement, in the event that HME has not filed the Registration Statement with the SEC by the date (the "Outside Filing Date") which is 7 months after the Closing Date, then for and with respect to each day during the period between the Outside Filing Date and the date on which the Registration Statement is filed with the SEC, Home Properties shall pay to the Unit Partners, as liquidated damages and not as a penalty, the sum of $1,000, which sum shall be apportioned pro rata among the Unit Partners. 5. REFUNDING OF BONDS. The parties agree that within forty five (45) days from the date hereof, the Partnership shall apply to the Bond Issuer to refund the Bonds. It shall be a condition of this Agreement that the Bond Issuer shall approve the refunding of the Bonds to both Home Properties' and the Partnership's satisfaction and that the Refunded Bonds shall have been issued and closed. In the event that the Refunded Bonds are not issued and closed to both parties' satisfaction within two hundred ten (210) days from the date of the Partnership's application to the Bond Issuer as aforesaid, then either party shall have the right to terminate this Agreement by written notice to the other party, whereupon this Agreement shall, thereafter, be deemed to be null and void and of no further force and effect, neither party shall have any further rights or obligations under this Agreement. The Refunded Bonds shall be secured by a mortgage covering the Property and guaranteed by Home Properties or HME. It is the parties' intent that except as hereinafter immediately provided, any collateral pledged as required by applicable bond documents to secure the Bonds will be released; however, the Partnership acknowledges and agrees to allow the Collateral to remain in place or deposited in a comparable Partnership account until the Closing. The Partnership agrees to obtain the agreement of the Partners to guarantee the bottom or last $1,400,000 of the principal of the mortgage, after the exhaustion by the holder of the mortgage of all remedies and recourse thereunder, including, but not limited to foreclosure and sale of the Property. The guarantee shall be set forth in an agreement in form and substance satisfactory to the Partners, but in no event will the liability of the Partners exceed $1,400,000. All costs and expenses relating to the issuance and closing of the Refunded Bonds, except the fees of Partnership's counsel shall be borne and paid by Home Properties or HME, including but not limited to, any assumption fees in connection with the assumption of the Refunded Bonds. 6. PERMITTED EXCEPTIONS. The Property at Closing shall be subject only to the following (the "PERMITTED EXCEPTIONS"): (a) the Refunded Bonds; (b) the lien of real estate taxes not yet due and payable; (c) the Leases; (d) the Service Contracts; and (e) easements, rights-of-way, covenants, restrictions and other matters of record which do not materially adversely affect the use and operation of the Property. (f) such other agreements and matters as may be agreed to by the General Partner and Home Properties. 7. OBLIGATIONS AND COVENANTS OF THE PARTNERSHIP. (a) From the date of this Agreement to the Closing Date, the Partnership shall: (1) Maintain, manage and operate the Property in substantially the same condition and manner as such Property is now maintained, managed and operated by the Partnership, and keep the Property, including, without limitation, the Improvements and Personal Property, in substantially the same good condition and repair as such Property is now maintained, ordinary wear and tear excepted. The Partnership shall not be required to make repairs or replacements other than in the ordinary course of business except in the case of emergency. Within thirty (30) days prior to Closing, the Partnership shall not be required to replace any carpet or appliance without the Partnership's prior consent, which shall not be unreasonably withheld or delayed. To the extent that any such replacement shall have taken place within such thirty (30) day period, an appropriate credit shall be made at Closing in favor of the Partnership; (2) Maintain the Refunded Bonds in full force and effect, timely make all payments, and observe and perform all covenants to be paid, observed or performed by the Partnership thereunder, and promptly deliver to the Home Properties notice of any receipt or delivery of any notice (including any notice of default) thereunder; (3) Promptly provide Home Properties with a copy of any notice, citation, complaint or other directive from any person, entity or governmental authority whereby compliance with any Environmental Law is called into question; (4) Maintain in full force and effect all of the existing insurance policies regarding the Property; (5) Promptly deliver notice to Home Properties of, and, defend, at the Partnership's expense, all actions, suits, claims and other proceedings affecting the Property, or the use, possession or occupancy thereof; (6) Promptly deliver notice to Home Properties of any actual or threatened condemnation of the Property, or any portion thereof; (7) Maintain all Licenses in full force and effect; (8) Maintain all Service Contracts in full force and effect; timely make all payments, and observe and perform all obligations to be paid, observed or performed by the Partnership thereunder; and promptly notify Home Properties of any receipt or delivery of any notice (including any notice of default) thereunder; (9) Provide all services, repairs and other work required to be provided by the landlord under the Leases; (10) Reasonably cooperate with Home Properties (but without obligation to incur expenses in connection therewith) in connection with (i) the consummation of the transaction contemplated by this Agreement, and (ii) the preparation of the Closing documents and apportionments hereunder; (11) Promptly deliver to Home Properties a copy of any notice of required work from any company insuring the Property against casualty loss; (12) Subject to applicable governmental and lender requirements, terminate all management agreements pertaining to the Property, effective as of the completion of the Closing on the Closing Date, except that the current management agreement with Home Properties or its affiliate shall remain in full force and effect; (13) Promptly deliver to Home Properties a copy of any notice of any violation (or alleged violation) of any law, ordinance, order, requirement or regulation of any Federal, state, county, municipal or other governmental department, agency or authority relating to the Property; and (14) Promptly give written notice to Home Properties of the occurrence of any condition or event which materially and adversely affects the truth or accuracy of any representation or warranty made (or to be made) by the Partnership under or pursuant to this Agreement. (b) From the date of this Agreement to the Closing Date, the Partnership shall not: (1) Except with the consent or in conjunction with Home Properties, modify, amend, renew, extend, terminate or otherwise alter the Refunded Bonds, or any document or documents relating thereto; (2) Increase any wage or fringe benefit payable to any employee at the Property, without the prior written consent of Home Properties, in each instance, which consent shall not be unreasonably withheld, conditioned or delayed; (3) Remove from the Property any article of Personal Property, except as may be necessary for repairs, or the discarding of worn out or useless items, provided, however, that any such article removed for repairs shall be returned to the Property promptly upon its repair, and shall remain a part of the Personal Property, whether or not such article shall be located on the Property at the time of the Closing, and any such article so discarded shall be replaced with a new or replacement article of similar quality and utility prior to Closing; (4) Modify, amend, renew, extend, terminate or otherwise alter any of the Service Contracts, or enter into any new service or maintenance contract, equipment lease or, except in the ordinary course of business, any purchase order affecting the Property, and extending beyond, or for any work or improvement which will not be completed and paid for prior to, the Closing Date, without the prior written consent of Home Properties, in each instance, which consent shall not be unreasonably withheld, conditioned or delayed; (5) Except in the ordinary course of business, terminate any Lease. Ordinary course of business shall be deemed to include, without limitation, non-renewals of problem tenants, commencement of summary ejectment proceeding where a tenant is more than ten (10) days delinquent in the payment of rent, cases of any Lease where the tenant is more than thirty (30) days delinquent in the payment of rent, or in which there has been a material violation of the obligations of tenant; (6) Except in the ordinary course of business, enter into any new Lease, or renew or extend any existing Lease, for a term in excess of twelve months, or at a monthly rental less than the relevant rental rate set forth in the rental schedule for the Property approved by Home Properties; (7) Modify or amend the present form of lease in use by the Partnership, without the prior written consent of Home Properties; (8) Enter into any new license, franchise, concession or easement agreement affecting the Property, without the prior written consent of Home Properties, in each instance, which consent shall not be unreasonably withheld, conditioned or delayed; (9) Except in the ordinary course of business of the Partnership, apply any Security Deposits against rent delinquencies or other Lease defaults, other than in the case of tenants who have vacated their apartments, or are currently involved in litigation with the Partnership; (10) Undertake or commence any renovations or alterations at the Property, except those necessary to comply with any of the provisions of this Agreement, without the prior written consent of Home Properties, in each instance, which consent shall not be unreasonably withheld, conditioned or delayed; (11) Sell, mortgage, pledge, hypothecate or otherwise transfer or dispose of all or any part of the Property, or the Personal Property, or any interest therein, except in the case of the sale or other disposition of items of Personal Property to be replaced hereunder; (12) Except in connection with application to the Bond Issuer to modify the Refunded Bonds, initiate, consent to, approve or otherwise take any action with respect to the zoning, or any other governmental rule or regulation, presently applicable to all or any part of the Property; and (13) Issue any press release or other media publicity of any kind whatever with respect to this Agreement, or the transaction contemplated hereby, without the prior written consent of Home Properties. 7.1 OBLIGATIONS AND COVENANTS OF HOME PROPERTIES AND HME. Home Properties and HME covenant and agree with the Partnership, both before and after Closing: (a) Distributions with respect to the OP Units will be identical in amount and timing to the dividends on HME Common Shares, except that the initial distribution payable with respect to the OP Units issued to the Unit Partners shall be made on the date on which HME shall pay the dividend to holders of HME Common Shares that relates to the earnings for the calendar quarter in which the OP Units were issued to the Unit Partners, and shall be prorated such that the Unit Partners will receive a pro-rata distribution for the period from the date on which the OP Units were issued to the Unit Partners to, and including, the last day of the calendar quarter in which the OP Units were so issued. (b) The General Partner may retain copies of any and all books and records pertaining to the Partnership and the operation of the Property so that the General Partner may wind up the affairs of the previously conducted business. Home Properties will cause the management company currently managing the Property to cooperate with the General Partner so as to enable him to wind up the Partnership's affairs as aforesaid. (c) At the Closing, Home Properties shall deliver to each Unit Partner good and marketable title to the OP Units allocated to such Unit Partner, free and clear of all liens, charges, encumbrances and restrictions, except as contained in the Operating Partnership Agreement, the Registration Rights Agreement, and the Lock-Up Agreement, and shall, by execution of the Amendment, admit each Unit Partner as a limited partner in Home Properties. (d) At all times for and during a period of ten (10) years from and after the Closing Date, Home Properties shall allocate to each Unit Partner, for Federal Income tax purposes, pursuant to Section 752 of the Code, nonrecourse debt of Home Properties in an aggregate amount not less than the principal amount of debt guaranteed by the Unit Partners pursuant to Section 5 hereof. (e) The initial tax basis Capital Account Deficit of each Unit Partner in the Property, shall be determined by reference to each such Unit Partners Capital Account Deficit in the Partnership as at (just prior to) the contribution of such Partner's interest in the Partnership to Home Properties on the Closing Date, and shall be based upon the estimated information set forth in Schedule 3 attached hereto and shall be updated based upon the information set forth in a schedule to be furnished by the accountant for the General Partner within the time required by Section 34(e) hereof. Thereafter, for a period of ten (10) years from and after the Closing Date, the Capital Account Deficit of each Unit Partner shall be adjusted annually to reflect changes occasioned at the level of Home Properties, including, without limitation, distributions made by Home Properties. Furthermore, in complying with Section 4.04 of the Operating Partnership Agreement, Home Properties agrees that the methodology chosen under Section 704(c) of the Internal Revenue Code shall be the "traditional" method. (f) For a period of ten (10) years from and after the Closing Date, Home Properties shall not sell, exchange, transfer or otherwise dispose of the Property, or any replacement of the Property (in any event, a "Property Transfer"), unless such Property Transfer occurs in such manner as to be tax free to the relevant Unit Partner. For a period of five (5) years following the expiration of the ten (10) year period after the Closing Date, Home Properties agrees that, in the event that it desires to sell, exchange, transfer or otherwise dispose of the Property, it will use commercially reasonable efforts to effectuate such Property Transfer in such manner as to be tax free to the relevant Unit Partner. (g) Future transactions involving HME, or Home Properties, including, without limitation, merger(s), sale(s) of assets or similar transactions, shall be structured in such manner as to (i) not result in an amendment to the definition of Conversion Factor as it is currently included in the Operating Partnership Agreement; (ii) prevent, in the context of such a transaction, a different per unit value being assigned to the OP Units issued to the Unit Partners than the value assigned per share to the then outstanding HME Common Shares; and (iii) for a period of ten (10) years from and after the Closing Date, not interfere with the tax deferred nature of the transaction contemplated by this Agreement with respect to the OP Units issued to the Unit Partners. 8. REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP. (a) The Partnership represents and warrants that each of the following is true, complete and accurate as of the date of this Agreement (and, except as designated in writing by the Partnership at or before Closing, will be true, complete and accurate as of the Closing Date) with regard to such Partnership and the Property: (1) To the best knowledge of the Partnership, the Partnership is the sole owner of, and has good, marketable and insurable fee simple title to the Property, free and clear of all liens, charges and encumbrances, except the Permitted Exceptions. (2) To the best knowledge of the Partnership, the Partnership owns legal and beneficial title to the Personal Property, other than the Leased Equipment, free and clear of all liens, charges and encumbrances, except the Permitted Exceptions. (3) There are no agreements with regard to the Leased Equipment other than the Equipment Leases set forth in SCHEDULE 2 attached hereto, and true and complete copies of all Equipment Leases have been or will be delivered to Home Properties. (4) To the best knowledge of the Partnership, each of the Equipment Leases is in full force and effect; none of the parties thereto is in default of any of its obligations thereunder; and no event has occurred that, with the giving of notice, or the passage of time, or both, would constitute a default thereunder. (5) To the best knowledge of the Partnership, the Bonds are in full force and effect; there exists no default thereunder; and no event has occurred that with the giving of notice, or the passage of time, or both, would constitute a default thereunder. (6) To the best knowledge of the Partnership, true, complete and accurate copies of the Bond documents have been or will be made available to Home Properties. (7) The Partnership is a limited partnership, duly organized, validly existing, and in good standing under the laws of the State of Maryland, and subject to consent of the Partners of the Partnership and consent of the Bond Issuer, has full power and authority to enter into, and to fully perform and comply with the terms of this Agreement and to own, lease and operate its properties and to carry on its business as it is now being conducted. (8) Subject to consent of the Partners of the Partnership and consent of the Bond Issuer, the execution and delivery of this Agreement, and its performance by the Partnership, will not conflict with, or result in the breach of, any contract, agreement, law, rule or regulation to which the Partnership is a party, or by which the Partnership is bound. (9) Subject to consent of the Partners of the Partnership and consent of the Bond Issuer, to the best knowledge of the Partnership this Agreement is valid and enforceable against the Partnership in accordance with its terms, and each instrument to be executed by the Partnership pursuant to this Agreement, or in connection herewith, will, when executed and delivered, be valid and enforceable against the Partnership in accordance with its terms, except as such enforcement may be limited by bankruptcy and other laws affecting creditors, rights generally. (10) [Intentionally Omitted] (11) No written notice has been received by the Partnership from any insurer, or from the Bond Issuer, with respect to any defect which materially and adversely affects the Property, or the use or operation thereof, which remains uncured or uncorrected. (12) To the best knowledge of the Partnership and except as set forth on tax bills for the Property, there are no special or other assessments for public improvements or otherwise now affecting the Property, nor does the Partnership know of (i) any pending or threatened special assessments affecting the Property, or (ii) any contemplated improvements affecting the Property that may result in a special assessment against the Property. (13) To the best knowledge of the Partnership, the Partnership has not received any notice from any party that the Property, or the current use, occupation or condition thereof, violate(s) any governmental statute, law ordinance, rule or regulation applicable (or allegedly applicable) to the Property, or any order of any governmental agency relating to the Property and/or the use and/or legal occupancy thereof, or any applicable deed restrictions or other covenant, easement or agreement pertaining to the Property (including, without limitation, any of the Permitted Exceptions), or any approval pertaining to the Property, and to the best knowledge of the Partnership, the Property, and the current use, occupation and condition thereof, do not violate any such statute, law, ordinance, rule, regulation, order, restriction, covenant, easement, agreement or approval. (14) To the best knowledge of the Partnership, all certificates of occupancy, operating permits and licenses (the "Licenses") required by any relevant governmental authority for the lawful use, operation and occupancy of the Property have been issued, and are in full force and effect. (15) The Partnership has received no notice that the current use, operation or occupancy of any part, or all, of the Property violates any of the Licenses, and to the best knowledge of the Partnership all of the Licenses can remain with the Property after acquisition by Home Properties of the Partnership interests without charge by any relevant governmental authority. (16) There is no action, proceeding or investigation pending, or, to the best knowledge of the Partnership, threatened, against the Partnership, or the Property, by or before any court or governmental department, commission, board, agency or instrumentality, and the Partnership does not know of any basis for any such action, proceeding or investigation. (17) To the best knowledge of the Partnership, all financial information about the Property heretofore or hereafter furnished by the Partnership or the General Partner to Home Properties is, and shall be, true, complete and correct in all material respects as of the date therein specified. (18) The Partnership has no knowledge of any Federal, state, county or municipal plan to change the highway or road system in the vicinity of the Property, or to restrict or change access from any such highway or road to the Property, or of any pending or threatened condemnation or eminent domain proceedings relating to or affecting the Property. (19) To the best knowledge of the Partnership, there are no trade or assumed names affecting or identifying the Property other than the Trade Names, and the use of such Trade Names is freely transferable to Home Properties. (20) The Partnership has not (i) made a general assignment for the benefit of its creditors; (ii) admitted in writing its inability to pay its debts as they mature; (iii) had an attachment, execution or other judicial seizure of any property interest which remains in effect; or (iv) become generally unable to meet its financial obligations as they mature. (21) To the best knowledge of the Partnership, there is not pending any case, proceeding or other action seeking reorganization, arrangement, adjustment, liquidation, dissolution or recomposition of the Partnership, or the debts of the Partnership, under any law relating to bankruptcy, insolvency, reorganization or the relief of debtors, or seeking the appointment of a receiver, trustee, custodian or other similar official for the Partnership or the Property. (22) To the best knowledge of the Partnership, and except for lead paint, asbestos, Hazardous Materials customarily used in the operation and management of residential rental communities, and as identified in environmental reports or surveys furnished to the Partnership, there are no Hazardous Materials on, in or under the Property, and the Property has never been used by the Partnership, or any other person, to generate, treat, store, dump, release, emit, use, transport or in any manner deal with Hazardous Materials. (23) To the best knowledge of the Partnership, the present use and occupation of the Property does not violate any Environmental Law. (24) To the best knowledge of the Partnership, the tax-related information set forth on Schedule 3 attached hereto is true, complete and accurate in all material aspects as at the date set forth therein. The obligations of Home Properties contained in Section 7.1(d) and the representations of Home Properties contained in Section 9(a)(17) are conditioned upon the material accuracy of the representations of this Paragraph and the attached Schedule 3. (25) To the best knowledge of the Partnership, the summaries of Leases affecting the Property attached as EXHIBIT D to this Agreement (the "Rent Roll") are, in all material ways true, complete and accurate as at the date set forth therein. (26) True and complete copies of all Leases have been made available to Home Properties at the principal office of the Partnership. (27) Except for the Bonds, the Partnership has not assigned, mortgaged, pledged, hypothecated or otherwise encumbered any of its rights or interests under any of the Leases. (28) To the best knowledge of the Partnership, the Rent Roll attached as Exhibit D accurately includes each tenant's name, a description of the dwelling unit leased by such tenant, the amount of rent due monthly from such tenant, the amount of the security deposit, if any, paid by such tenant (collectively, the "Security Deposits"), and the expiration date of the term of such Lease. (29) To the best knowledge of the Partnership, except as indicated on the Rent Roll, each Lease is in full force and effect. (30) To the best knowledge of the Partnership, except as indicated on the Rent Roll, all rents are being paid and are current (within 15 days of their due date). (31) To the best knowledge of the Partnership, except as indicated on the Rent Roll, no tenant has paid any rent for more than one month in advance. (32) To the best knowledge of the Partnership, except as indicated on the Rent Roll, no tenant is entitled to any free rent, abatement of rent or similar concession except in accordance with the past practice of the Partnership. (33) To the best knowledge of the Partnership, as of the date of this Agreement, the Security Deposits under the Leases are as set forth in the Rent Roll. (34) To the best knowledge of the Partnership, no brokerage commission or other compensation is payable (or will, with the passage of time, or occurrence of any event, or both, be payable) with respect to any Lease. (35) As of Closing, and upon the deposit of the Security Deposit funds into a segregated account as described in Section 16 (d), the Partnership shall have complied with all of the requirements of the relevant Maryland laws regarding the holding of tenant security deposits. (36) Except for the Service Contracts listed on SCHEDULE 2 attached hereto, there are no service or maintenance contracts, or pending purchase orders pertaining to the Property which may not be terminated upon not more than thirty (30) days, notice, without payment of any penalty or termination fee. (37) True and complete copies of the Service Contracts have been made available to Home Properties at the principal office of the Partnership. (38) To the best knowledge of the Partnership, each of the Service Contracts is in full force and effect; none of the parties thereto is in default of any of its obligations thereunder; and no event has occurred that, with the giving of notice, or the passage of time, or both, would constitute a default thereunder. (39) SCHEDULE 1 hereto lists the current holders of all outstanding Partner Interests of the Partnership together with the percentage interest held by each Partner. In the event that any Partner listed on SCHEDULE 1 transfers any Interests prior to the Closing Date, the Partnership shall promptly provide written notice to Home Properties of such transfer, and such notice shall include the names of the transferor and the transferee, the address of the transferee and the number of units transferred. (40) To the best knowledge of the Partnership, except: (i) as disclosed in SCHEDULE 4 attached hereto; (ii) for liabilities and obligations incurred in the normal course of business of the Partnership; and (iii) as otherwise disclosed in this Agreement, the Partnership has no material liability or obligation of any nature which is any way materially affects or is related to the Property or Personal Property whether now due or to become due, absolute, contingent or otherwise, including liabilities for taxes (or any interest or penalties thereto). (41) Except as previously disclosed to Home Properties, all of the ranges and refrigerators in the Property are the property of the Partnership and not of the tenants. (42) To the best knowledge of the Partnership, the Partnership has filed or will file when due all notices, reports and returns of Taxes (as defined below) required to be filed before the Closing Date and has paid or, if due after the date hereof and prior to the Closing Date, will pay, all Taxes and other charges for the periods shown to be due on such notices, reports and returns. "Taxes" shall mean all taxes, charges, fees, levies or other assessments, including, without limitation, income, excise, property, sale, gross receipts, employment and franchise taxes imposed by the United States, or any state, county, local or foreign government, or subdivision or agency thereof with respect to the assets or the business of the Partnership, and including any interest, penalties or additions attributable thereto. (b) To the best knowledge of the Partnership, all of the representations and warranties of the Partnership, set forth in this Agreement shall be true and correct in all material respects at the date of this Agreement, and (except as disclosed in writing by the Partnership at or before Closing), all shall be deemed to be repeated at, and as of the Closing Date, and shall be true and correct in all material respects as at the Closing Date. (c) All of the representations and warranties of the Partnership, set forth in this Agreement, including, without limitation, the following indemnity, shall survive the Closing for a period of six months following Closing, and shall not be deemed to have merged in any document delivered at the Closing. Any claim for any breach of any representation or warranty of the Partnership shall be brought, if at all, within six months from the date of Closing or thereafter be forever barred and the limitations of liability as set forth in Paragraph (d) below shall apply to any such claim. (d) The Partnership agrees to indemnify Home Properties, and hold harmless and defend Home Properties, from and against any and all losses, costs, claims, liabilities, damages and expenses, including, without limitation, reasonable attorneys, fees, arising as the result of a material breach of any of the representations and warranties of the Partnership, set forth in this Agreement. Notwithstanding anything to the contrary contained in this Agreement, neither the General Partner nor any other partners of the Partnership shall have any personal liability, and no action of any kind shall be maintained against any of them or their respective assets, with respect to this Agreement and/or the transactions described in this Agreement, and Home Properties, its successors and assigns, shall look solely to the assets of the Partnership and the cash or assets held by the Disbursing Agent pursuant to Paragraph (c) of Section 2 above, for the payment of any claim against or the performance of any obligation of the Partnership. The foregoing limitation of liability shall not apply in the case of fraud or intentional and material misrepresentation. (e) Except as expressly provided in this Agreement, the Partnership, has made no representations and/or warranties regarding the Property and the Partnership Interests, and, except as expressly set forth in this Agreement, Home Properties shall, at Closing, accept the Property and the Partnership Interests in "AS IS" condition, with all faults, and without any other representations or warranties of any kind, whether as to merchantability, or fitness for a particular purpose, or otherwise. (f) Home Properties acknowledges that it or its affiliate is managing the Property and that certain of the information upon which the Partnership has relied in making the aforesaid representations and warranties was supplied by such manager. 9. REPRESENTATIONS AND WARRANTIES OF HOME PROPERTIES AND HME. (a) Home Properties and HME represent and warrant that each of the following is true, complete and accurate as of the date of this Agreement, and will be true, complete and accurate as of the Closing Date, and, as the context may require, thereafter: (1) Home Properties and HME are duly organized, validly existing and in good standing (under the laws of the State of New York and the State of Maryland, respectively), and each has all the requisite power and authority to enter into and carry out and perform this Agreement, according to its terms, and to own, lease and carry on its business as it is now being conducted. (2) Neither the execution and delivery of this Agreement, nor the performance of this Agreement by Home Properties, nor the execution, delivery and performance of the Registration Rights Agreement by HME, nor the execution and delivery of the Lock-Up Agreement by HME and Home Properties, nor the execution and delivery of the Amendment (as hereinafter defined) by Home Properties, nor the execution, delivery and performance of all other agreements contemplated by this Agreement, nor the issuance and delivery of the OP Units by Home Properties, will conflict with, or result in any breach of, any contract, agreement, law, rule or regulation to which either HME or Home Properties is a party, or by which either HME or Home Properties is bound. (3) Subject to the approval of the Board of Directors of HME (the "Board"), which Home Properties agrees to use all good faith reasonable efforts to obtain within the Due Diligence Period, this Agreement has been duly authorized, executed and delivered, and constitutes a legal and binding obligation of Home Properties and HME, enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy and other laws affecting creditors rights generally. (4) Subject to the approval of the Board, which Home Properties agrees to use all good faith reasonable efforts to obtain within the Due Diligence Period, each instrument to be executed and delivered by Home Properties and/or HME pursuant to this Agreement, or in connection herewith, will, when executed and delivered, be valid and enforceable against Home Properties and/or HME in accordance with its terms, except as such enforcement may be limited by bankruptcy and other laws affecting creditors, rights generally. (5) To the best knowledge of Home Properties, there is no litigation, proceeding or investigation pending, or threatened, against or affecting Home Properties, or HME, that might affect the validity of this Agreement, or any action taken, or to be taken, by Home Properties, or HME, pursuant to this Agreement, or that might have a material adverse effect on the business of Home Properties. (6) At the Closing, Home Properties shall deliver to each Unit Partner good and marketable title to the OP Units allocated to such Unit Partner, free and clear of all liens, charges, encumbrances and restrictions, except as contained in the Operating Partnership Agreement, the Registration Rights Agreement, and the Lock-Up Agreement, and shall, by execution of the Amendment, admit each Unit Partner as a limited partner in Home Properties. (7) The Operating Partnership Agreement attached as EXHIBIT E, to this Agreement is true, complete and accurate as at the date of this Agreement, and shall not be further amended prior to the Closing Date, except for (i) amendments in connection with the issuance of additional shares under HME's Dividend Reinvestment Stock Purchase, Resident Stock Purchase and Employee Stock Purchase Plan, and (ii) amendments in connection with mergers or other transactions wherein additional OP Units are issued in connection with the acquisition of real property, or of interests in entities which own real property. (8) through (11) -- [Intentionally Omitted] (12) All financial information heretofore or hereafter furnished by HME or Home Properties concerning such entities is, and shall be, true, complete and correct in all material respects as of the date therein specified. All of the information furnished and statements made by HME or Home Properties to the Partnership with respect to this Agreement, and in the periodic filings (as updated) by HME or Home Properties with the Securities and Exchange Commission, are true and correct in all material respects and do not misstate or fail to state any material fact. (13) HME or Home Properties has not (i) made a general assignment for the benefit of creditors; (ii) admitted in writing its inability to pay its debts as they mature; (iii) had an attachment, execution or other judicial seizure of any property interest which remains in effect; or (iv) become generally unable to meet its financial obligations as they mature. (14) There is not pending any case, proceeding or other action seeking reorganization, arrangement, adjustment, liquidation, dissolution or recomposition of HME or Home Properties, or the debts of HME or Home Properties, under any law relating to bankruptcy, insolvency, reorganization or the relief of debtors, or seeking the appointment of a receiver, trustee, custodian or other similar official for HME or Home Properties. (15) Except: (i) as disclosed in writing to the Partnership; (ii) for liabilities and obligations incurred in the normal course of business of HME or Home Properties; and (iii) as otherwise disclosed in this Agreement or in periodic filings (as updated) by HME or Home Properties, HME and Home Properties has no material liability or obligation of any nature which is any way materially affects their financial statements, whether now due or to become due, absolute, contingent or otherwise, including liabilities for taxes (or any interest or penalties thereto). (16) HME and Home Properties will file when due all notices, reports and returns of Taxes (as defined below) required to be filed after the Closing Date and will pay, all Taxes and other charges for the periods shown to be due on such notices, reports and returns arising after Closing. "Taxes" shall mean all taxes, charges, fees, levies or other assessments, including, without limitation, income, excise, property, sale, gross receipts, employment and franchise taxes imposed by the United States, or any state, county, local or foreign government, or subdivision or agency thereof with respect to the assets or the business of the Partnership, and including any interest, penalties or additions attributable thereto, which arise after Closing . (17) The provisions of Section 4 (a), (b), (c) and (d) of this Agreement, and the provisions of Section 7.1 (d), (e), (f) and (g) of this Agreement, are incorporated by reference herein as if recited at length as a representation and warranty of HME and Home Properties. (18) HME and Home Properties will be responsible for all activities, operations, debts, liabilities of and claims against the Partnership which arise and result from occurrences from and after Closing. (b) All of the representations and warranties of Home Properties, and HME, set forth in this Agreement, including, without limitation, the following indemnity, shall survive the Closing, and shall not be deemed to have merged in any document delivered at the Closing. (c) Home Properties and HME agree to indemnify the Partnership and each Partner, and hold harmless and defend the Partnership and each Partner, from and against any and all losses, costs, claims, liabilities, taxes (including taxes on any indemnification amount), damages and expenses, including, without limitation, reasonable attorneys' fees, arising as the result of a breach of any of the obligations, covenants, representations and/or warranties of Home Properties and/or HME set forth in this Agreement. 10. CONDITIONS TO THE OBLIGATIONS OF HOME PROPERTIES. (a) Without limiting any of the rights of Home Properties elsewhere set forth in this Agreement, it is agreed that the obligations of Home Properties under this Agreement shall be subject to the satisfaction of the following conditions ("Home Properties' Conditions"): (1) All of the representations and warranties of the Partnership set forth in this Agreement shall be true, accurate and correct in all material respects as of the Closing Date (as if made on the Closing Date). (2) Prior to the expiration of the Due Diligence Period, the Board shall have approved the acquisition of the Property by Home Properties and HME on the terms and conditions set forth in this Agreement. (3) On or before the Closing Date, all of the management agreements (except any management agreement with Home Properties or its affiliates) pertaining to the Property shall have been terminated (effective as at the completion of the Closing on the Closing Date), without cost or expense to Home Properties. (4) As at the Closing Date, the Refunded Bonds shall be in full force and effect, with no default or right to accelerate occurring thereunder. (5) The Partnership shall have delivered to Home Properties all of the documents and other items required to be delivered by the Partnership to Home Properties under the terms of this Agreement. (6) The General Partner shall have executed an agreement whereby he agrees that he will be responsible for making all final distributions to the former Partners of the Partnership from (i) any amounts remaining in the Reserve Amount and/or Contingency Account (as the case may be) at the time of expiration of such Accounts, and (ii) and from any other Partnership funds that the General Partner holds, and shall indemnify Home Properties for all claims relating thereto. (7) 100% of the interests of the Partners shall have agreed in writing within sixty (60) days after the execution of this Contribution Agreement to exchange their Interests in the Partnership for cash and/or OP Units and assignments for such interests shall have been received by Closing. (8) Within two hundred ten (210) days after the Partnership shall have applied to the Bond Issuer to refund the Bonds, the Bond Issuer shall have issued and closed the Refunded Bonds as described in Section 5 of this Agreement. (9) The average occupancy rate for the Property for the ninety (90) day period prior to Closing shall not be less than seventy five percent (75%). (10) The fulfillment by the Partnership of such other conditions to Closing as are set forth in this Agreement, including, without limitation, the performance by each Partnership of the obligations and covenants of such Partnership set forth in this Agreement. (11) Home Properties shall have no obligation to issue OP Units to any Partner who does not demonstrate to Home Properties' reasonable satisfaction that he is an accredited investor as defined in applicable securities laws. (b) Each of Home Properties' Conditions is for the benefit of Home Properties, and, accordingly, any such condition may be waived by Home Properties at any time. (c) If any Home Properties' Conditions shall not have been fulfilled by the Partnership, or otherwise satisfied, or waived, by Home Properties, Home Properties shall have the right to terminate this Agreement by written notice to the Partnership, in which event this Agreement shall, thereafter, be deemed to be null, void and of no further force or effect, and neither party shall have any further rights or obligations under this Agreement, but subject to the provisions of Section 23 of this Agreement. 11. CONDITIONS TO THE OBLIGATIONS OF THE PARTNERSHIP. (a) Without limiting any of the rights of the Partnership elsewhere set forth in this Agreement, it is agreed that the obligations of the Partnership under this Agreement shall be subject to the satisfaction of the following conditions (the "Partnership's Conditions"): (1) All of the representations and warranties of Home Properties, and HME, set forth in this Agreement shall be true, accurate and correct as of the Closing Date (as if made on the Closing Date). (2) Home Properties shall have delivered to the Partnership all of the documents and other items required to be delivered by Home Properties under the terms of this Agreement. (3) 100% of the interests of the Partners shall have agreed in writing within sixty (60) days after the execution of this Contribution Agreement to exchange their Interests in the Partnership for cash and/or OP Units and assignments for such interests shall have been received by Closing. (4) Within two hundred ten (210) days after the Partnership shall have applied to the Bond Issuer to refund the Bonds, the Bond Issuer shall have issued and closed the Refunded Bonds as described in Section 5 of this Agreement. (5) Intentionally Omitted. (6) Intentionally Omitted. (7) The fulfillment by Home Properties of such other conditions to Closing as are set forth in this Agreement. (b) Each of the Partnership's Conditions is for the benefit of the Partnership, and, accordingly, any such condition may be waived by the Partnership at any time. (c) If any of the Partnership's Conditions shall not have been fulfilled by Home Properties, or otherwise satisfied, or waived by the Partnership, the Partnership shall have the right to terminate this Agreement by written notice to Home Properties, in which event this Agreement shall, thereafter, be deemed to be null, void and of no further force or effect, and neither party shall have any further rights or obligations under this Agreement, but subject to the provisions of Section 23 of this Agreement. 12. INSPECTION PERIOD. Subject to the rights of existing tenants at the Property, Home Properties shall have a period of thirty (30) days from and after the date of this Agreement (the "DUE DILIGENCE PERIOD") within which to cause one or more surveyors, attorneys, engineers, auditors, architects, and/or other experts of its choice (i) to inspect any document related to any Property, including, without limitation, all Leases and related documents, documents pertaining to the Bonds, working drawings, plans and specifications, surveys, appraisals, engineer's reports, environmental reports, insurance policies, service contracts, real estate tax receipts and annual and monthly operating statements, and (ii) to inspect, examine, survey, appraise and obtain engineering inspection and environmental reports with respect to the Property, documents pertaining to the Bonds, or all of the Property, and otherwise to do all that, which, in the opinion of HME, is necessary to determine the condition and value of the Properties for the uses intended by Home Properties, provided, however, that Home Properties shall not conduct any environmental study of any Property beyond a Phase 1 level without the consent of the Partnership, which consent shall not be unreasonably withheld. Home Properties may declare the Due Diligence Period ended at any earlier time. Home Properties must be satisfied in all respects (in the sole and absolute discretion of Home Properties) with the results of all reviews, inspections and investigations conducted by, or under, Home Properties during the Due Diligence Period. If Home Properties shall not be so satisfied, Home Properties may, within the Due Diligence Period, terminate this Agreement, in which event Home Properties shall have no obligation or liability under this Agreement, or with regard to the Partnership or the Property, and this Agreement shall, thereafter, be null, void and of no further force or effect. If not so terminated by Home Properties, this Agreement shall continue in full force and effect according to its terms. Home Properties shall be responsible for payment of all of the costs of its due diligence activities, including, without limitation, all engineering and environmental reports, and all financial and Lease audits. Home Properties and HME shall indemnify and hold the Partnership harmless from and against any and all loss, claims, damage and expense arising out of entry by Home Properties and its agents onto the Property and any testing performed thereon; Home Properties and HME shall repair any damage which it may cause as a result of any such entry and testing; Home Properties and HME shall cause their entry, inspections and testing (if any) to be conducted in a manner so as to minimize disruption to tenants at the Property. Home Properties and HME shall give written notice to the Partnership as soon as the Board has, pursuant to paragraphs (a)(3) and (a)(4) of Section 9 hereof, acted upon a request for approval of this Agreement and the transactions envisioned herein. In the event that the Board has failed to approve, or Home Properties shall fail to give the Partnership notice of approval, within the Due Diligence Period, the Partnership shall have the right to terminate this Agreement by giving written notice to Home Properties, in which event neither party shall have any further obligation under this Agreement. 13. TITLE. (a) At Closing, the Partnership will hold good, marketable and insurable fee simple title to the Property, free and clear of all liens, charges and encumbrances, except the Permitted Exceptions. (b) Within 10 days of the execution of this Contribution Agreement, the Partnership will furnish and deliver to Home Properties a copy of the most recent title policy issued with respect to the Property and a copy of the most recent survey of the Property. (c) The obligation of Home Properties to complete the transaction described in this Agreement is conditioned upon the ability of Home Properties to obtain title insurance with respect to the Property insuring that, as of the Closing Date, title to the Property is not subject to any liens, encumbrances or other than the Permitted Exceptions. (d) The Partnership agrees that, upon the request of Home Properties, it will provide an affidavit in such customary form as shall allow to obtain a non-imputation endorsement to the title policy purchased by Home Properties. (e) If any title commitment, UCC search or survey discloses exceptions to title other than the Permitted Exceptions, or any other matter which does not conform to the requirements of this Agreement, Home Properties shall so notify the Partnership in writing, such notice to be furnished to the Partnership, if at all, within fifteen (15) days following receipt by Home Properties of the title commitments, the UCC searches and surveys, but not later than the end of the Due Diligence Period. The Partnership shall have the right, but not the obligation, within forty-five (45) days from the date of the receipt of such notice by the Partnership (the "Correction Period"), to have each such unpermitted exception to title removed, or to correct each such other matter, in each case to the reasonable satisfaction of the Home Properties. Home Properties shall have no obligation to close within the Correction Period unless the Partnership shall have caused each unpermitted exception to be removed or corrected to the reasonable satisfaction of Home Properties. If, within the Correction Period, the Partnership fails to have each such unpermitted exception removed, or to correct each such other matter as aforesaid, Home Properties may, at its option, and as the sole and exclusive remedy of Home Properties, either (i) terminate this Agreement, in which event this Agreement, without further action of the parties, shall become null and void such that neither party shall have any further rights or obligations under this Agreement, or (ii) elect to take title to each Property as it then is. If Home Properties fails to make either such election within five (5) days following the expiration of the Correction Period, Home Properties shall be deemed to have elected option (ii). Any exception to title (other than a Permitted Exception), or any other matter which does not conform to the requirements of this Agreement, to which the Home Properties does not object, as aforesaid, shall be deemed approved by Home Properties, and shall be deemed to be an additional Permitted Exception. Notwithstanding anything to the contrary contained herein, the Partnership shall be obligated to remove (or to cause the title company to affirmatively insure over) at the expense of the Partnership (a) any mortgages or deeds to secure debt regarding any financing obtained by any Partnership, other than the Bonds; (b) any mechanic's or materialman's lien for work done on any Property on behalf of the Partnership; and (c) any other monetary lien against any Property resulting from any act or omission of the Partnership. (f) If required by Home Properties, the Partnership shall obtain at Home Properties' sole expense, within thirty (30) days after issuance and closing of the Refunded Bonds, a current survey of the Property prepared by a duly licensed surveyor selected by Partnership. The survey shall be in form and substance reasonably satisfactory to Home Properties, but it shall not be required to meet the Minimum Standard Detail Requirements for ALTA/ACSM Land Title Surveys. 14. CLOSING DATE. If this Agreement shall not have been terminated by Home Properties, or the Partnership, for any of the reasons set forth in this Agreement, and within the time(s) herein limited, the closing of the transaction contemplated by this Agreement (the "Closing") shall occur within ten (10) days after the expiration of one hundred eighty (180) days after issuance and closing of the Refunded Bonds, but if Closing does not take place within one (1) year from the date of this Agreement, either party shall have the right to terminate this Agreement by giving written notice to the other party`, in which event neither party shall have any further obligation under this Agreement; provided, however, that if Closing does not take place within the time aforesaid due to breach of this Agreement by one of the parties, the other party may extend the time for Closing for an additional one hundred eighty (180) days and/or avail itself of any of its other rights under this Agreement (any such day upon which the Closing occurs being herein referred to as the "Closing Date"). Home Properties and HME agree to use commercially reasonable good faith efforts to expeditiously attempt to obtain all necessary approvals of the Bond Issuer. The Closing shall be held at the Partnership's office, at such time, or at such other place, as may be mutually agreed upon by the parties. 15. CLOSING DOCUMENTS. (a) At or prior to the Closing, the Partnership shall deliver to Home Properties the following, each of which shall be in form and substance satisfactory to Home properties: (1) An estoppel certificate from the Bond Issuer, the holder of the Refunded Bonds or some other person with knowledge, confirming that there is no default under the Bonds, and that there exists no event that with the passage of time or the giving of notice, or both, would constitute such a default (2) any and all affidavits, certificates or other documents reasonably and customarily required by the title company in order to cause it to issue the title policy regarding the Property in the form and condition required by this Agreement; (3) an update of the Rent Roll pertaining to the Property (including a listing of all delinquent and prepaid rents, and all security deposits (including all interest due to tenants pursuant to Maryland or other applicable laws), dated as of (or as close as reasonably practicable to) the Closing Date, and represented and certified by the Partnership to be true, accurate, complete and correct in all material respects; (4) to the extent in the possession of the Partnership all of the original Leases, Service Contracts and Equipment Leases (in the case of the Equipment Leases or Service Contracts, limited to those Equipment Leases or Service Contracts which Home Properties is required, or has elected, to assume under this Agreement (such materials shall remain at the rental office and need not be brought to Closing); (5) all keys to the Property in the possession of the Partnership, which shall be remain at the rental office and need not be brought to Closing; (6) duly executed certificates of title, and other transfer documents, with regard to any vehicle owned by the Partnership; (7) a certified copy of the Certificate of Limited Partnership of the Partnership, and such other evidence of the Partnership's power and authority as the title company may reasonably request; (8) a letter to each of the tenants in the Property advising them of the change of beneficial ownership of the Property, and the transfer of the Security Deposits, and directing that rentals or other payments thereafter be paid to a payee designated by Home Properties; (9) such existing maintenance records in regard to the Property which Home Properties may request not later than five (5) days prior to the Closing Date (which shall be delivered at the Property); (10) the currently effective Licenses regarding the Property, or other reasonably acceptable evidence of the right to use and occupy the Property; (11) signed notices to each utility service provider, advising of the change in beneficial ownership of the Property; (12) a signed counterpart of the Lock-Up Agreement; (13) a signed counterpart of the Registration Rights Agreement; (14) a signed counterpart of the Amendment to the Operating Partnership Agreement admitting the Unit Partners as limited partners of Home Properties (the "Amendment"); (15) a statement of the aggregate amount of the Security Deposits (with interest) as shown on the updated Rent Roll , which amount shall be adjusted as more fully provided in Section 16 (d); and (16) such additional documentation as Home Properties, or the title company, may reasonably deem necessary or desirable in order to effectuate the transaction contemplated by this Agreement. (17) a signed counterpart of the Escrow Agreement-Reserve Amount in form substantially similar to Exhibit H; (18) a signed counterpart of the Indemnification Agreement Amount in form substantially similar to Exhibit F; (19) an assignment of the Partnership interests in form and substance reasonably acceptable to Home Properties. (b) At the Closing, Home Properties shall deliver to the Partnership the following, each of which shall be in form and substance satisfactory to such Partnership: (1) proof of the issuance of the OP Units allocated to the Unit Partners (by and through the execution and delivery of the Amendment, which shall evidence and reflect the ownership of the OP Units by such Partners); (2) Intentionally Omitted; (3) a receipt for the Security Deposits and evidence that the Security Deposits have been placed into a segregated account as required by such Section; (4) a certificate of the Secretary of HME certifying that the Board of Directors of HME have duly adopted resolutions authorizing the transaction contemplated by this Agreement, and the execution of all of the Closing documents to be executed and delivered by Home Properties pursuant to this Agreement; (5) a sworn statement on behalf of HME certifying that the person signing documents in connection with the transaction contemplated by this Agreement on behalf of Home Properties is authorized to do so; (6) a signed counterpart of the Registration Rights Agreement; (7) a signed counterpart of the Lock-Up Agreement; (8) a signed counterpart of the Amendment; (9) signed counterparts of all other documents listed in Section 15(a) required to be signed by Home Properties; (10) a certified copy of the Operating Partnership Agreement; (11) on behalf of HME, a certificate of good standing from the Secretary of State of Maryland; (12) on behalf of Home Properties, a certificate of good standing from the Secretary of State of New York; and (13) such additional documentation as the Partnership may reasonably deem necessary to effectuate the transaction set forth in this Agreement. 16. ADJUSTMENTS. (a) The following items shall be adjusted between the Partnership and Home Properties as of the date of the Closing Date (it being understood that the Partnership shall have the benefit of monies received and expenses incurred on the date of Closing) and shall be paid in cash at Closing: (1) interest on the Refunded Bonds; (2) real estate and personal property taxes, (3) rents under the Leases for the relevant month, as and when collected; (4) coin operated laundry concession income; (5) charges for water, sewer, electricity, fuel, gas, telephone and other utilities, which are not metered or otherwise charged directly to tenants under the Leases; provided that if the consumption of any such utilities is measured by meters, at Closing the Partnership shall furnish a current reading of each meter, and provided, further, that if there is not a meter, or if the meter(s) cannot be read by the relevant utility prior to the Closing, the charges therefor shall be adjusted at the Closing on the basis of the charges for the prior period for which bills were issued, and shall be further adjusted when the bills for the period including the Closing Date are issued; (6) amounts paid or payable under the Service Contracts to be assigned to and assumed by Home Properties; (7) fees paid for assignable current Licenses; (8) insurance and tax escrows; prepaid real taxes; prepaid mortgage insurance; replacement reserve escrows; other expenses of operation. (9) any special assessment for public improvements or otherwise which is or may become payable with respect to the Property in annual installments; such other amounts as are customarily adjusted between parties to similar transactions in the local jurisdiction (b) Rents which are due and payable to the Partnership by any tenant but uncollected as of the Closing Date shall not be adjusted at the Closing. All rents collected by Home Properties after the Closing Date shall be applied first to any due but unpaid rentals accruing subsequent to the Closing Date, and then to any rents past due for the calendar month in which the Closing Date occurs (subject to adjustment), and then to any rents due and unpaid prior to the Closing Date. All rent collected after Closing for any period prior to the Closing shall belong to the Partnership, and if paid to Home Properties, Home Properties shall promptly send such rent to the General Partner for distribution to the former Partners of the Partnership pursuant to the agreement described in subparagraph (a) (6) of Section 10, less all reasonable expenses incurred by Home Properties, if any, in regard to the collection thereof. At the Closing, the Partnership shall deliver to Home Properties a schedule of all such past due, but uncollected rents owed by tenants. All rents collected by the Partnership, prior to Closing, for rental period(s) subsequent to the Closing shall be paid by the Partnership to Home Properties at the Closing or deducted as an adjustment at Closing. All rents collected by Home Properties or the Partnership for rental periods after the Closing shall belong to Home Properties, and if paid to the Partnership, the Partnership shall promptly send such rent to Home Properties. (c) Any adjustment estimated at the Closing shall be finally adjusted as soon as practicable after the Closing. Any error in the calculation of apportionments shall be corrected subsequent to the Closing with appropriate credits to be given based upon corrected adjustments; provided, however, that all adjustments (except as to errors caused by misrepresentation) shall be deemed final upon the expiration of ninety (90) days after the Closing Date. (d) Intentionally Omitted. (e) The Partnership shall be responsible for, and shall make arrangements for payment of, all amounts due to the Closing Date for employees, salaries, accrued vacation pay, withholding and payroll taxes, and other benefits, and any management fee affecting the Property (the General Partner may utilize one or more payroll periods after Closing to finalize these payments); Home Properties shall be responsible for all such expenses commencing upon the Closing Date. 17. POSSESSION. Upon completion of the Closing, the Partnership shall deliver to Home Properties full and complete possession of the Property, subject only to the Permitted Exceptions and such other agreements and matters as may be agreed to by the General Partner and Home Properties . 18. CONDEMNATION AND DESTRUCTION. (a) If, prior to the Closing Date, the Property, or any part of any Property, is taken by eminent domain (or is the subject of a pending or contemplated taking which has not been consummated), the Partnership shall notify Home Properties of such fact, and Home Properties shall have the option (which option shall be set forth in a notice from Home Properties to the Partnership given not later than fifteen (15) business days after receipt of the notice from the Partnership): (i) to terminate this Agreement, and, thereafter, this Agreement shall be deemed to be null, void and of no further force or effect between the parties; or (ii) to accept title to the Property (other than the portion so taken), without abatement of the Consideration, in which event the Partnership shall assign and turn over to Home Properties at the Closing, and Home Properties shall be entitled to receive and keep, all amounts awarded, or to be awarded, as the result of the taking. (b) If, prior to the Closing Date, all or any material part of any Property is damaged or destroyed by fire or other casualty, the Partnership shall notify Home Properties of such fact, and Home Properties shall have the option (which option shall be set forth in a notice from Home Properties to the Partnership given not later than fifteen (15) business days after receipt of the notice from the Partnership): (i) to terminate this Agreement, and, thereafter, this Agreement shall be deemed to be null, void and of no further force or effect between the parties; or (ii) to accept title to the relevant Property without abatement of the Consideration, in which event the Partnership shall assign to Home Properties, at the Closing, all of the right, title and interest of the Partnership in and to the insurance proceeds awarded or to be awarded to the Partnership as the result of such damage or destruction. (c) In the event there is damage to or destruction of an Immaterial (as hereinafter defined) part of the Property by fire or other casualty, such damage or destruction shall, subject to receipt of insurance proceeds, be repaired promptly by the Partnership, and in the event such damage or destruction cannot be fully repaired by the Closing Date, then at the option of Home Properties (i) the Closing shall be postponed until such repairs shall have been completed, or (ii) the Closing shall be held as scheduled, and Home Properties shall accept title to the Property without abatement of the Consideration, in which event the Partnership shall assign to Home Properties, at the Closing, all of the right, title and interest of the Partnership in and to the insurance proceeds awarded or to be awarded to the Partnership as the result of such damage or destruction. (d) An "Immaterial" part of the Property shall be deemed to have been damaged or destroyed if the cost of repair or replacement thereof shall be $250,000, or less, and a "Material" part thereof shall be deemed to have been damaged or destroyed if the cost of repair or replacement thereof shall be greater than $250,000. 20. BROKER'S COMMISSION. The Partnership and Home Properties each represent to the other than the transaction described in this Agreement was not brought about or assisted in any way by any broker, firm or salesman, or other person or persons acting or functioning as, or in a role similar to a broker (any such broker, firm or salesman, or other person, is herein referred to as a "Broker"). Each party agrees that should any claim be made for a commission or other compensation with regard to this transaction by any Broker claiming through that party, other than a Broker engaged in writing by the other party, such party shall have the sole responsibility for paying any such claim, and shall indemnify and hold harmless the other party from and against any such claim of any Broker, and all liabilities and expenses in connection therewith, including court costs and attorneys, fees and expenses. 21. Intentionally Omitted. 22. COOPERATION. At all times during the term and pendency of this Agreement, the Partnership will cooperate fully with Home Properties (but with no obligation to incur cost or expense in connection therewith) in all reasonable manner in providing books, records and other documentation for review, including, without limitation, all Leases and related documents, copies of documentation relating to the Existing Loan, working drawings, plans and specifications, surveys, appraisals, engineer's reports, environmental reports, insurance policies, service contracts, real estate tax receipts, copies of tax returns filed by the Partnership, and annual and monthly operating statements relating to the Property, and in the possession of, or reasonably available to the Partnership. Subject to existing tenant leases, the Partnership will provide access to the Property for all physical inspections required by Home Properties. The Partnership will provide access by the representatives of Home Properties to all financial and other information relating to the Property as is sufficient to enable such representatives to prepare audited financial statements, at the expense of Home Properties, in conformity with Regulation S-X of the Securities and Exchange Commission (the "Commission"), and any registration statement, report or disclosure statement required to be filed with the Commission. Home Properties shall conduct itself and its examinations in a manner to minimize disruption to the staff and tenants of the Partnership and Property. 23. DEFAULTS AND REMEDIES. (a) If the Partnership fails or refuses to perform in accordance with the terms of this Agreement, including, without limitation, the failure or refusal to perform any covenant or obligation on the part of the Partnership to perform, prior to the Closing, or if any of the representations, warranties and covenants of the Partnership contained in this Agreement shall not be true, complete and correct at Closing, Home Properties may terminate this Agreement, in which event Home Properties shall be entitled to reimbursement by the Partnership of the actual out-of- pocket due diligence costs incurred by Home Properties in connection with proposed acquisition of the Interests, up to the sum of $10,000 (after the payment of which, this Agreement shall be deemed null, void, and of no further force or effect between the parties). The parties agree and understand that in no event shall the Partnership be liable for any damages in excess of the aforesaid $10,000 and that the aforesaid limitation of liability is a material inducement for the Partnership to enter into this Agreement. (b) If Home Properties fails or refuses to perform in accordance with the terms of this Agreement, $50,000.00 ("Liquidated Damages Amount") shall be paid to the Partnership as liquidated damages (which shall be the sole and exclusive remedy of the Partnership against Home Properties), at which time this Agreement shall be deemed to be null, void and of no further force or effect between the parties. In that regard, the Partnership acknowledges and agrees that (i) the Liquidated Damages Amount is a reasonable estimate of, and bears a reasonable relationship to, the damages suffered and costs incurred by the Partnership as a result of having subjected the Interests to the terms of this Agreement; (ii) the actual damages suffered and costs incurred by the Partnership as a result of such failure of Home Properties to close under this Agreement would be extremely difficult and impractical to determine; (iii) Home Properties seeks to limit its liability under this Agreement to the amount of the Liquidated Damages Amount in the event this Agreement is terminated and the transaction contemplated by this Agreement does not close due to a default of Home Properties under this Agreement; and (iv) the Liquidated Damages Amount shall be and constitute valid liquidated damages. The foregoing limitation shall apply only in the event that Home Properties does not close the transaction contemplated by this Agreement, and such limitation shall not apply in the event that Home Properties closes and thereafter Home Properties or HME breaches one of its obligations hereunder after Closing 24. OTHER PROHIBITED ACTIVITIES. (a) During the term and pendency of this Agreement, the Partnership will cease to market the Property, and, in that regard, the Partnership will refrain from soliciting or accepting any offer from any third party, or, engaging in any discussion with any third party concerning the sale, refinancing or recapitalization of the Property. (b) Both Home Properties and the Partnership agree to keep this Agreement confidential, and not to disclose its contents to anyone except their respective lenders, legal counsel and accountants, and except to the Partners and except that HME may make such public announcement regarding the transaction contemplated by this Agreement, as may, in its judgment, be required by, or appropriate under, applicable securities laws. 25. RISK OF LOSS. Until the Closing, the risk of loss or damage to all or any part of any Property, from fire or other casualty, or from condemnation, shall be borne by the Partnership, subject to the terms of this Agreement. 26. NOTICES. (a) all notices, demands, or requests made and/or given pursuant to, under, or by virtue of this Agreement must be in writing and sent to the party to which the notice, demand or request is being made and/or given, by postage prepaid, certified or registered mail, return receipt requested, by nationally recognized courier service, or by personal delivery, as follows: (i) if to the Partnership: Old Friends Limited Partnership 14 Straw Hat Road Owings Mills, Maryland 21117 Attention: Herbert J. Siegel, General Partner With copy to: William D. Shaughnessy, Jr. Tydings & Rosenberg, LLP 100 E. Pratt St. Baltimore, MD 21201 and (ii) if to Home Properties: c/o Home Properties of New York, Inc. 850 Clinton Square Rochester, New York 14604 Attention: Norman P. Leenhouts, Chairman and Co-Chief Executive Officer (b) Any such notice, demand or request shall be deemed to have been rendered or given on the date of receipt, in the case of delivery by courier service or personal delivery, or three (3) business days after mailing. 27. ASSIGNMENT. Neither this Agreement nor any interest hereunder shall be assigned or transferred by the Partnership or by Home Properties. 28. GOVERNING LAW. The corporate laws of the State of Maryland will govern all questions concerning the relative rights and obligations of the parties with respect to any HME Common Shares acquired or acquirable by the holders of OP Units on account of their OP Units. Except as limited by the Operating Partnership Agreement, the laws of the State of New York will govern all other questions concerning the relative rights and obligations of the holders of OP Units as limited partners in Home Properties, or otherwise with respect to the OP Units. This Agreement shall, otherwise, be governed, construed and interpreted in accordance with the laws of the State of Maryland applicable to contracts made and to be performed wholly within the State of Maryland without giving effect to the conflicts-of-laws principles thereof. 29. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the various documents referred to herein contains, or incorporates, all of the terms agreed upon between the parties with respect to the subject matter, and supersedes any and all prior written or oral understandings. This Agreement may not be modified or amended except in, and by, a written instrument executed by the parties hereto. 30. Intentionally Omitted. 31. WAIVER. No waiver by either party of any failure or refusal of the other party to comply with any of the obligations of such party hereunder shall be deemed a waiver of any other or subsequent failure or refusal so to comply. 32. ARTICLE HEADINGS. The headings of the various sections of this Agreement have been inserted only for purposes of convenience, and are not part of this Agreement, and shall not be deemed in any manner to modify, explain, qualify or restrict any of the provisions of this Agreement. 33. CONDITION OF APARTMENTS. The Partnership will use commercially reasonable efforts, in accordance with its existing business practices, to ensure that at the time of the Closing the vacant apartment units are in rentable condition. The parties recognize that tenants at the Property move out at various times and that it may not be possible for all units to be fully prepared at the time of Closing. Accordingly, the Partnership shall be fully responsible for insuring that all units that have been vacated 30 or more days prior to Closing shall be in full rentable condition. In the event that any apartment unit vacant 30 or more days prior to Closing is not in rentable condition, Home Properties shall receive a closing credit equal to the amount reasonably necessary to bring that unit to rentable condition based on a standard typical for the Property. For units vacated within 30 days prior to Closing, the Partnership will continue to use commercially reasonable efforts, in accordance with its existing business practices, to prepare such units for subsequent tenancy, however, if any such units are not in full rentable condition at the time of Closing there shall be no credit given to Home Properties. The provisions of this Section are subject to the provisions of Section 7(a)(1). 34. MISCELLANEOUS. (a) Subject to existing tenant leases, upon reasonable notice and during business hours between the date of this Agreement and the Closing Date, Home Properties, and agents and representatives of Home Properties, shall have the right to enter upon any Property for the purpose of examining, inspecting and testing such Property, provided that Home Properties shall conduct itself in a manner to minimize disruption to tenants and staff at the Property. (b) The Partnership acknowledges that audited financial statements pertaining to the Property for a minimum of one, and a maximum of three, prior calendar year(s) of operation, and the portion of the calendar year in which the Closing occurs, up to the Closing Date, are required to be filed by Home Properties with the Securities and Exchange Commission after the Closing. Accordingly, the General Partner agrees to provide Home Properties, and its representatives, with access to the books and records of the Partnership pertaining to the Property after the Closing, upon reasonable advance notice, in order to conduct the required audit, at the expense of Home Properties. After the Closing, the General Partner will provide, or cause to be provided, a signed Representation Letter, in the form of EXHIBIT G attached hereto, with respect to the Property owned by the Partnership. (c) The parties hereto recognize that, at the Closing Date, the Partnership will terminate for federal income tax purposes. The General Partner hereby covenants to cause the tax returns to be prepared for the Partnership for the period up to the Closing Date. Home Properties shall make available to the General Partner (and his representatives) promptly upon request, all financial and other information relating to the Partnership which is necessary to permit the General Partner to file a tax return on behalf of the Partnership for its taxable year ended on the Closing Date, and for such other purposes as may be requested by the General Partner in order to wind up business affairs for the entity and the Partners. (d) Time is of the essence of this Agreement. In the computation of any period of time provided for in this Agreement, or by law, the day of the act or event from which the period of time runs shall be excluded, and the last day of such period shall be included, unless it is a Saturday, Sunday, or legal holiday, in which case the period shall be deemed to run until the end of the next day which is not a Saturday, Sunday, or legal holiday. (e) The General Partner shall cause tax returns for the Partnership for the period up to the Closing Date to be completed and filed when due; a copy of such final tax return shall be submitted to Home Properties promptly upon its filing with the IRS. No later than the later of (i) December 31, 1999 or (ii) thirty (30) days after Closing, the General Partner shall also provide Home Properties with a schedule showing: (i) the net book value of the Property and the Personal Property owned by the Partnership as of the Closing Date; and (ii) an updated Schedule 3 providing the actual information which was estimated in such Schedule. The obligation of Home Properties contained in Section 7.1(d) and the representations of Home Properties as contained in Section 9(a)(17) are conditioned upon the actual information updated pursuant to this Section 34(e) not being materially different from the estimated information. The information on the Schedule shall be calculated in a manner consistent with the calculations made for federal income tax depreciation purposes. (f) The date upon which this Agreement shall have been signed by both the Partnership and Home Properties shall be considered to be the date of this Agreement. (g) The Partnership and the General Partner agree that they will not trade in common stock of HME, or cause such stock to be traded on their behalf, prior to the Closing Date. (h) This Agreement may be executed in counterparts and by facsimile signatures. (i) HME will cause the manager of the Property to abide by, adhere to and act in all respects consistently, cooperatively and in conformance with, all of the provisions of this Agreement. IN WITNESS WHEREOF, the Partnership and Home Properties have executed this Agreement as at the day and year first above written. OLD FRIENDS LIMITED PARTNERSHIP By: Herbert J. Siegel, General Partner Date: Herbert J. Siegel, as General Partner, but only for purposes of acknowledging and agreeing to the provisions of subparagraph (a)(6) of Section 10, paragraph (b) of Section 16 and paragraphs (b), (c) and (e) of Section 34. Date: HOME PROPERTIES OF NEW YORK, L.P. By: Home Properties Of New York, Inc., General Partner By: Norman Leenhouts, Chairman and Co-Chief Executive Officer Date: HOME PROPERTIES OF NEW YORK, Inc. By: Norman Leenhouts, Chairman and Co-Chief Executive Officer Date: LIST OF SCHEDULES AND EXHIBITS SCHEDULES Schedule 1 - Schedule of Partners Schedule 2 - Schedule of Services Contracts and Equipment Leases Schedule 3 - Schedule of Tax-Related Information on Partnership Schedule 4 - Schedule of Liabilities EXHIBITS Exhibit A - Description of the Land Exhibit A-1 - Description of Personal Property not included Exhibit B - Lock-Up Agreement Exhibit C - Registration Rights Agreement Exhibit D - Rent Rolls Exhibit E - Operating Partnership Agreement Exhibit F - Indemnification Agreement Exhibit G - Representation Letter Exhibit H - Escrow Agreement - Reserve Amount AMENDMENT NO. 1 TO CONTRIBUTION AGREEMENT THIS AMENDMENT NO. 1 TO CONTRIBUTION AGREEMENT ("Amendment") made as of the ____ day of June, 1999, by and among OLD FRIENDS LIMITED PARTNERSHIP, a Maryland limited partnership ("Partnership") having its principal office at 20 Pleasant Ridge Drive, Suite A, Owings Mills, Maryland 21117 and HOME PROPERTIES OF NEW YORK, L.P., a New York limited partnership ("Home Properties") and HOME PROPERTIES OF NEW YORK, INC., a Maryland corporation ("HME"), both having their principal office at 850 Clinton Square, Rochester, New York 14604. W I T N E S S E T H: WHEREAS, the Partnership, Home Properties and HME executed a Contribution Agreement dated as of December 8, 1998 ("Contribution Agreement"). WHEREAS, the parties now desire to make certain changes to the Contribution Agreement. NOW, THEREFORE, the parties agree as follows: 1. Terms not defined herein shall have the meanings ascribed to them by the Contribution Agreement. 2. Section 2(b) of the Contribution Agreement shall be deleted and replaced with the following: Partnership shall provide evidence to Home Properties at Closing that cash and/or securities worth at least $400,000 are in place in Partnership accounts; however, Partnership shall receive a credit at Closing in an amount equal to the principal payments paid by the Partnership during the period between the Bond Closing and Closing pursuant to the promissory note and loan and financing agreement made in connection with the Refunded Bonds. 3. Section 23(b) of the Contribution Agreement shall be amended to add at the end of the Section the following: Notwithstanding the foregoing, in the event Home Properties fails to close the transaction contemplated by the Contribution Agreement, the Partnership shall have, as its sole additional remedy, the right to sue Home Properties for specific performance to require Home Properties to close as required by the Contribution Agreement. However, no default by Home Properties shall entitle the Partnership to receive any damages in excess of the Liquidated Damages Amount. 4. Louis J. Siegel and Andrew N. Siegel sign below as General Partners to ratify the Partnership's execution of the Contribution Agreement, as amended by this Amendment. 5. Except as modified by this Amendment, the Contribution Agreement remains unchanged and in full force and effect. OLD FRIENDS LIMITED PARTNERSHIP By: ____________________________ Herbert J. Siegel, General Partner Date: ____________________________ By: ____________________________ Louis J. Siegel, General Partner Date: ____________________________ By: ____________________________ Andrew N. Siegel, General Partner Date: ____________________________ HOME PROPERTIES OF NEW YORK, L.P. By: Home Properties of New York, Inc. General Partner By: ____________________________ Date: ____________________________ HOME PROPERTIES OF NEW YORK, INC. By: ____________________________ Date: ____________________________ AMENDMENT NO. 2 TO CONTRIBUTION AGREEMENT THIS AMENDMENT NO. 2 TO CONTRIBUTION AGREEMENT ("Amendment") made as of the ____ day of July, 1999, by and among OLD FRIENDS LIMITED PARTNERSHIP, a Maryland limited partnership ("Partnership") having its principal office at 20 Pleasant Ridge Drive, Suite A, Owings Mills, Maryland 21117 and HOME PROPERTIES OF NEW YORK, L.P., a New York limited partnership ("Home Properties") and HOME PROPERTIES OF NEW YORK, INC., a Maryland corporation ("HME"), both having their principal office at 850 Clinton Square, Rochester, New York 14604. W I T N E S S E T H: WHEREAS, the Partnership, Home Properties and HME executed a Contribution Agreement dated as of December 8, 1998 ("Contribution Agreement"). WHEREAS, the Contribution Agreement was amended by Amendment No. 1 to Contribution Agreement dated as of June 29, 1999. WHEREAS, the parties now desire to make certain changes to the Contribution Agreement. NOW, THEREFORE, the parties agree as follows: 1. Terms not defined herein shall have the meanings ascribed to them by the Contribution Agreement. 2. A new Section 35 shall be added to the Contribution Agreement as follows: 35. TRANSFER OF PARTNERSHIP INTERESTS. Notwithstanding anything to the contrary set forth in this Agreement, Home Properties hereby directs the Partners to assign 5% of the Partnership interests to Century Investors, LLC, a New York limited liability company owned by Home Properties. The remaining 95% of the Partnership interests shall be assigned to Home Properties. 3. Except as modified by this Amendment, the Contribution Agreement remains unchanged and in full force and effect. OLD FRIENDS LIMITED PARTNERSHIP By: ____________________________ Herbert J. Siegel, General Partner Date: ____________________________ By: ____________________________ Louis J. Siegel, General Partner Date: ____________________________ By: ____________________________ Andrew N. Siegel, General Partner Date: ____________________________ HOME PROPERTIES OF NEW YORK, L.P. By: Home Properties of New York, Inc. General Partner By: ____________________________ Date: ____________________________ HOME PROPERTIES OF NEW YORK, INC. By: ____________________________ Date: ____________________________ EX-2 3 0003.txt EXHIBIT 2.2 CONTRIBUTION AGREEMENT DEERFIELD WOODS THIS CONTRIBUTION AGREEMENT (this "AGREEMENT") is dated as of this 17th day of December, 1999, and is among HOME PROPERTIES OF NEW YORK, L.P., a limited partnership formed under the laws of New York, having its principal office at 850 Clinton Square, Rochester, New York 14604 ("HOME PROPERTIES"), Deerfield Woods Venture Limited Partnership, a limited partnership formed under the laws of Michigan, having its principal office at c/o Schostak Brothers & Company, Inc., 25800 Northwestern Highway, Suite 750, Southfield, Michigan 48075 (the "PARTNERSHIP"), and Deerfield Woods Home Properties LLC, a limited liability company formed under the laws of Michigan, having its principal office at c/o Schostak Brothers & Company, Inc., 25800 Northwestern Highway, Suite 750, Southfield, Michigan 48075 (the "COMPANY"). W I T N E S S E T H : This Agreement is made with reference to the following facts and objectives: A. The Company owns (or, prior to the Closing Date, shall own) a one hundred percent (100%) fee simple interest in a Michigan apartment property comprising 144 dwelling units known as Deerfield Woods Apartments (the "PROPERTY"). B. Upon the terms and conditions set forth in this Agreement, Home Properties desires to obtain one hundred percent (100%) of the member interests (the "INTERESTS") in the Company in exchange for assumption of the Existing Loan covering the Property and limited partnership interests (the "OP UNITS") in Home Properties issued to the Partnership. C. It is expected that the exchange of the Interests for OP Units will qualify for Federal income tax purposes, as a tax free transfer, pursuant to Section 721 of the Code, and the parties will file their tax returns and keep their books and records in a manner consistent with this expectation. D. As used in this Agreement with initial capital letters, the following terms, in each instance, shall have the meaning ascribed thereto: "AFFILIATED COMPANIES" shall mean Macomb Apartments Limited Partnership, a Michigan limited partnership, and Macomb Apartments Home Properties LLC, a Michigan limited liability company; "CODE" shall mean and refer to the Internal Revenue Code of 1986, as amended; "CLOSING DATE" shall have the meaning given to it in SECTION 5.2 below; "COMPANY" shall mean Deerfield Woods Home Properties LLC; "ENVIRONMENTAL LAWS" shall mean and refer to any Federal, state, county or municipal environmental, health, chemical use, safety or sanitation law, statute, ordinance or code relating to the protection of the environment, and/or governing the use, storage, treatment, generation, transportation, processing, handling, production or disposal of any Hazardous Materials. and the rules, regulations and orders promulgated and/or issued thereunder; "EXISTING LENDER" shall mean and refer to GE Financial Assurance; "EXISTING LOAN" shall mean the Note in favor of the Existing Lender, which had an original principal balance of Three Million Five Hundred Twenty-five Thousand Dollars 00/100 ($3,525,000.00) and which has a principal balance as of October 31, 1999 of Three Million Four Hundred Eighty-four Thousand Eight Hundred Eighty-six Dollars and 78/100 ($3,484,886.78) and which is secured by a mortgage or deed of trust on the Property; "GENERAL PARTNER" shall mean and refer to Seven Mile/Farmington, Inc.; "HAZARDOUS MATERIALS" shall mean and refer to any hazardous substances described or defined in (i) the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended; (ii) the Hazardous Materials Transportation Act, as amended; (iii) the Resource Conservation and Recovery Act, as amended; (iv) the Toxic Substances Control Act, as amended; and (v) any applicable Michigan Environmental Laws, and the regulations promulgated thereunder, in each case, as at the date of this Agreement; "HME" shall mean and refer to Home Properties of New York, Inc., a Maryland corporation (which operates as a self-administered, and self- managed, equity real estate investment trust); "HME COMMON SHARES" shall mean and refer to the shares of common stock in HME, which are traded on the New York Stock Exchange; "HOME PROPERTIES" shall mean and refer to Home Properties of New York, L.P., a New York limited partnership (in which HME is the sole general partner, and through which HME conducts its operational, management and investing activities); "INTERESTS" shall mean and refer to all of the member interests in the Company; "OP UNITS" shall mean and refer to limited partnership interests in Home Properties, which are, subject to restrictions, exchangeable, on a one-to-one basis, for HME Common Shares; "OPERATING PARTNERSHIP AGREEMENT" shall mean and refer to the Second Amended and Restated Agreement of Limited Partnership of Home Properties, as amended; "OPERATING PARTNERSHIP AMENDMENT" shall mean and refer to an amendment to the Operating Partnership Agreement whereby the Partnership is admitted as a limited partner to Home Properties; "PARTNERSHIP" shall mean and refer to Deerfield Woods Venture Limited Partnership, a Michigan limited partnership; "PROPERTY" shall mean and refer to the apartment project known as Deerfield Woods Apartments, including: (i) the land occupied by such apartment project (the "LAND"), as more particularly described on EXHIBIT A attached hereto, together with (a) all and singular the easements, rights- of-way, rights, privileges, benefits, tenements, hereditaments and appurtenances thereunto belonging or in anywise appertaining, and (b) all right, title and interest of the Company in and to any land lying in the bed of any street, road, avenue or alley, open or proposed, public or private, in front of, behind, or otherwise adjoining the Land, or any part of the Land, including, without limitation, all right, title and interest of the Company in and to (1) any award made after the date of this Agreement as a result of condemnation, or in lieu thereof, and (2) any unpaid award as at the date of this Agreement as a result of condemnation, or in lieu thereof; and (ii) all buildings, structures, fixtures, facilities, installations and other improvements of every kind and description now or hereafter in, on, over and under the Land (the "IMPROVEMENTS"), including, without limitation, any and all plumbing, air conditioning, heating, ventilating, mechanical, electrical and other utility systems, and fixtures, parking lots and facilities, landscaping, roadways, fences, mail boxes, sidewalks, maintenance buildings, swimming pools and other recreational facilities, security devices, signs and light fixtures. NOW, THEREFORE, in consideration of the foregoing, the mutual covenants, agreements and undertakings herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company, Partnership and Home Properties agree as follows: ARTICLE I. EXCHANGE 1.1 EXCHANGE. a. Subject to closing under this Agreement, the Partnership, as sole member of the Company, hereby agrees that it will exchange one hundred percent (100%) of the Interests in the Company for OP Units. b. Prior to the Closing Date, the Partnership shall convey to the Company all right, title and interest of the Partnership in and to the following, which shall remain the property of the Company as of and after the Closing Date: (i) the Property (ii) the Other Items (as hereinafter defined) (iii) all present and subsequent leases with tenants, and/or other occupancy agreements, together with all pending applications for tenancy (in each instance, the "LEASES"); (iv) all service and maintenance contracts, and equipment leases, used or useful in connection with the Property, and which are not to be terminated under this Agreement (in each instance, the "SERVICE CONTRACTS"), including, without limitation, natural gas purchase contracts, vehicle, communication and other equipment leases (the "EQUIPMENT LEASES," and the vehicles and equipment covered thereby being herein called the "LEASED EQUIPMENT"), coin-operated laundry concession leases, and pending purchase orders, all of which are listed on SCHEDULE 1 attached hereto; and (v) all trademarks, service marks, logos, trade, assumed or business names, and telephone numbers related to the use and operation of the Property (in each instance, the "TRADE NAMES"). ARTICLE II. CONSIDERATION 2.1. TOTAL CONSIDERATION. The aggregate consideration (the "CONSIDERATION") payable by Home Properties for the Interests shall be Five Million Seven Hundred Thousand Dollars ($5,700,000.00), payable in OP Units pursuant to SECTION 2.3, subject to adjustments at Closing pursuant to SECTION 2.6 and SECTION 2.7. 2.2. ASSIGNMENT OF MEMBER INTERESTS. (a) On the Closing Date, the Partnership, as sole member of the Company, shall assign the Interests to Home Properties in exchange for the assumption of the indebtedness under the Existing Loan and the Conversion Price and the Deferred Consideration Right as provided below. "CONVERSION PRICE" means the Consideration less the principal amount at the Closing Date of the Existing Loan less the Reserve Amount. (b) "RESERVE AMOUNT" means the sum of (a) an amount equal to the current liabilities of the Company as of the Closing Date (other than the principal amount of the Existing Loan) (the "LIABILITIES RESERVE") and (b) One Hundred Thousand and 00/100 Dollars ($100,000.00) (the "INDEMNITY RESERVE"). The Reserve Amount shall consist of OP Units, the number of which shall be calculated in accordance with the price formula set forth in SECTION 2.3(b) below. The Reserve Amount shall be held and disbursed by the Disbursing Agent (as defined in SECTION 2.3) as described in SECTIONS 2.4 and 2.8. "DEFERRED CONSIDERATION RIGHT" means the right to receive the Reserve Amount less all amounts used to satisfy the current liabilities of the Company ("LIABILITIES CLAIMS") and any amounts paid or subject to claims of Home Properties by reason of a material breach or material misrepresentation of any representations, warranties, covenants or agreements of the Company which survive Closing (but only during the period of such survival) ("INDEMNITY CLAIMS"). 2.3 PAYMENT OF THE CONVERSION PRICE. (a) At Closing, the Reserve Amount shall be delivered to the escrow offices of the Title Company (the "DISBURSING AGENT"), in accordance with the Escrow Agreement. (b) At Closing, the Conversion Price payable to the Partnership as sole member of the Company shall be paid by the issuance of OP Units. The number of OP Units to be issued to the Partnership shall be the Conversion Price divided by the "MARKET VALUE" of an OP Unit. The Market Value of an OP Unit shall be equal to the average closing price of a share of common stock of HME, as listed on the New York Stock Exchange, for twenty (20) consecutive trading days prior to, but not including, the day before the Closing Date; however, if the twenty (20) day average value of an OP Unit is less than Twenty-Six and 00/100 Dollars ($26.00), then the Market Value of an OP Unit shall be deemed to be Twenty-Six and 00/100 Dollars ($26.00), and if the twenty (20) day average value of an OP Unit is greater than Twenty-Eight and 00/100 Dollars ($28.00), then the Market Value of an OP Unit shall be deemed to be Twenty-Eight and 00/100 Dollars ($28.00). (c) Subject to the terms of a Lock-Up Agreement, in the form of EXHIBIT F attached hereto, to be dated the Closing Date, and to the terms of the Operating Partnership Agreement, the OP Units will be convertible into HME Common Shares, on a one-to-one basis, after the elapse of one (1) year from and after the Closing (the "LOCK-UP PERIOD"), during which the Partnership will be restricted from converting, or transferring, any of the OP Units, provided, however, that (i) during the Lock-Up Period the Partnership may transfer OP Units to Accredited Investors (as defined in Regulation D) who are permitted transferees under Section 6.05(c) of the Operating Partnership Agreement and (ii) this restriction shall not be applicable to estates of deceased owners of OP Units. (d) From and after the expiration of the Lock-Up Period, the Partnership shall have all of the transfer, exchange and conversion rights with regard to the OP Units as are set forth in the Operating Partnership Agreement, and the Partnership shall, within the four (4) year period following the expiration of the Lock-Up Period, distribute the OP Units to the partners of the Partnership in proportion to their respective interests. (e)Upon the terms and conditions of a Registration Rights Agreement, in the form of EXHIBIT D attached hereto, to be dated the Closing Date, the Partnership shall have registration rights and a listing commitment with regard to the shares of HME Common Shares into which the OP Units can be converted (the "REGISTRATION RIGHTS"), including demand and piggy back rights. The exercise of Registration Rights shall be without cost to the Partnership. In addition, within ten (10) months after the Closing, HME agrees to file and keep current at its sole cost and expense, a registration statement (the "REGISTRATION STATEMENT") with the SEC registering the resale of the HME Common Shares into which the OP Units may be converted and to use reasonable commercial efforts to have the registration promptly declared effective by the Securities and Exchange Commission ("SEC"). Notwithstanding anything to the contrary contained in this Agreement, in the event that HME has not filed the Registration Statement with the SEC by the date (the "OUTSIDE FILING DATE") which is eleven (11) months after the Closing Date, then for and with respect to each day during the period between the Outside Filing Date and the date on which the Registration Statement is filed with the SEC, Home Properties shall pay to the Partnership, as liquidated damages and not as a penalty, the sum of One Thousand and 00/100 Dollars ($1,000.00). 2.4 PAYMENT WITH RESPECT TO DEFERRED CONSIDERATION RIGHTS. (a) On the 90th day after the Closing Date, the Disbursing Agent shall distribute to the Partnership that portion of the Liabilities Reserve which has not been paid for the liabilities of the Company as provided in this Agreement, and one-half of that portion of the Indemnity Reserve that has not been paid or subject to Indemnity Claims. (b) On the 180th day after the Closing Date, the Disbursing Agent shall distribute to the Partnership that portion of the Indemnity Reserve that has not been paid, disbursed or subject to Indemnity Claims. (c) At any time, and from time to time, after the 180th day after the Closing Date that there is a Final Determination (as defined in EXHIBIT G) that any remaining portion, if any, of the Indemnity Reserve is no longer subject to Indemnity Claims, the Disbursing Agent shall distribute such remaining portion to the Partnership. 2.5 PRORATED DISTRIBUTION. The initial distribution payable with respect to OP Units issued as the Consideration shall be made on the date on which HME pays the dividend to the holders of its common stock that relates to the earnings for the calendar quarter in which the OP Units were issued and shall be pro-rated such that the Partnership shall receive a pro-rata distribution for the period from the date on which the OP Units were issued to and including the last day of the calendar quarter in which the OP Units were issued. 2.6 ADJUSTMENTS AT CLOSING. With respect to the Property, the following shall be adjusted and pro-rated between Home Properties and the Partnership as of the Closing Date as if Home Properties became the owner of the Property as of midnight of the night preceding the Closing Date and as if the Partnership was the owner of the Property prior thereto: (a) real estate and personal property taxes on the usual and customary "due date" basis; (b) water and sewer rents and charges; (c) fuel, electricity and other utilities; (d) charges under the service contracts; (e)laundry income; (f) interest, reserves and escrows with respect to the Existing Loan; and (g) rents. (i) All rent payments and other amounts (hereinafter collectively referred to in this SECTION 2.6 as "RENT") collected on or before the Closing Date for the month in which the Closing Date occurs shall be prorated as between the parties as of the Closing Date. (ii) All rent collected after the Closing Date shall be applied first to the rent due for the month in which such rent was collected and shall then be applied to the next most recent delinquent rent, including any rent which was not collected for any period prior to the Closing Date. Delinquent rent amounts collected with respect to any period prior to the Closing Date shall belong to the Partnership as the former member of the Company and, if paid to Home Properties, Home Properties shall promptly send such rent to the Partnership for distribution to the former partners of the Partnership pursuant to the agreement described in PARAGRAPH (e) of SECTION 7.1. (iii) All rent collected by the Company or the Partnership, prior to the Closing Date, for months subsequent to Closing Date shall be paid to Home Properties on the Closing Date. (iv) All rent collected for rental periods on or after the Closing Date shall belong to Home Properties and, if paid to the Company or the Partnership shall be promptly sent to Home Properties. Any error in the calculation of adjustments shall be corrected and any post-closing receipts or expenditures related to the period prior to Closing shall be prorated subsequent to the Closing Date with appropriate credits to be given based upon corrected adjustments, provided, however, that the adjustments (except if errors are caused by misrepresentations) shall be final upon expiration of the 90th day after the Closing Date. Amounts to be paid as an adjustment in favor of the Company or the Partnership shall be paid by Home Properties in cash at Closing. Amounts to be paid as an adjustment in favor of Home Properties shall, at the option of the Partnership, be paid in cash or charged against the Consideration. 2.7 COSTS. (a) Home Properties shall pay any assumption fees payable to the Existing Lender, all recording fees, the cost of the UCC Searches, the cost of obtaining a Survey map, its attorneys' fees and all other costs and expenses incidental to or in connection with closing this transaction customarily paid for by the purchaser of similar property. The Partnership shall pay its attorneys' fees, any Michigan state and local transfer tax, any recapture as a result of the assignment of the Interests due to the Michigan single business tax, and all other costs and expenses incidental to or in connection with closing this transaction customarily paid for by the seller of similar property. Home Properties and the Partnership shall share equally the costs of the premium for the title insurance policy, except that Home Properties shall be liable for the costs of any endorsements to the title insurance policy. (b) At the Partnership's election, some or all amounts payable pursuant to SECTION 2.7(a) by the Partnership may be charged against the Consideration, in which event Home Properties shall cause same to be paid, or paid in cash. 2.8 ESCROW AGREEMENT. The Reserve Amount shall be held and disbursed pursuant to the terms of an escrow agreement that shall be in form attached hereto as EXHIBIT G. 2.9 INSURANCE REFUND. On the Closing Date, Home Properties shall cause the cancellation of all insurance maintained by the Company and thereafter shall diligently seek to obtain such refunds as may be due on account of such cancellation. Upon receipt of such refunds, Home Properties shall pay them over to the Partnership as former member of the Company for distribution to the partners of the Partnership. ARTICLE III ARTICLE REPRESENTATIONS AND WARRANTIES 3.1 BY THE COMPANY. The Company hereby represents and warrants to Home Properties that each of the following is true, complete and accurate in all material respects as of the date hereof and as of the Closing Date. The phrase "to the best knowledge of the Company" as used in this Agreement shall mean the actual knowledge of David W. Schostak. (a) PROPERTY DESCRIPTION. The Property owned by the Partnership or the Company as of the date hereof and which shall be owned by the Company on the Closing Date shall include 144 apartments and is more particularly described on EXHIBIT A, attached hereto. (b) OTHER ITEMS. Except in nonmaterial respects, the following items now in or on the Property are owned by the Partnership or the Company as of the date hereof and shall be owned by the Company on the Closing Date: (i) all heating, plumbing and lighting fixtures; (ii) ranges, refrigerators, disposals and dishwashers, water heaters; (iii) any and all bathroom fixtures, wall-to-wall carpeting, traverse rods, exhaust fans, hoods, signs, screens, maintenance building, model unit furniture, fences, carpeting and runners, cabinets, mirrors, shelving, any humidifier and dehumidifier units, air conditioning units, mailboxes, office furniture, and related equipment in connection with the Project, but specifically excluding washers and dryers which are not owned by the Company; and (iv) any fixtures appurtenant to the Property and any other furniture or equipment used in connection with the operation and maintenance of the Property, including any vehicles used in connection with the operation and maintenance of the Property (hereinafter with the items listed in (l)- (3) above, collectively, the "OTHER ITEMS"). (c) CONDITION OF OTHER ITEMS. To the best knowledge of the Company, substantially all of the Other Items are in reasonable working order or condition. Except with respect to the Existing Loan, the Company has not subjected any of the Other Property to any security interests, liens, claims, charges or other encumbrances. (d) ORGANIZATION AND AUTHORIZATION. The Company is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Michigan and was formed under the laws of the State of Michigan. It has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. The Partnership is the sole member of the Company. (e) AUTHORITY RELATIVE TO THIS AGREEMENT. (i) the Company has full power and authority to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby; (ii) as of the Closing Date, all actions necessary to be taken by it or on its behalf to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby, will have been duly and validly taken; and (iii) this Agreement has been duly and validly executed and delivered by it and, assuming due execution and delivery by Home Properties, constitutes a valid and binding agreement enforceable against it in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting the enforcement of creditors' rights generally as at the time in effect and by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law. (f) CONSENTS AND APPROVALS; NO VIOLATION. To the best knowledge of the Company, neither the execution, delivery and performance of this Agreement nor the consummation of the transactions contemplated hereby will: (i) conflict with or will result in any breach of any provision of its Articles of Organization or Operating Agreement; (ii) require it to obtain any consent, approval, authorization or permit from, or file with or notify, any governmental or regulatory authority, except where the failure to obtain such consent, approval, authorization or permit, or to make such filing or notification, would not have a Material Adverse Effect (defined below); (iii) except to the extent that the consent of the Existing Lender is required for assumption of the Existing Loan, constitute a breach or will result in a default under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, contract, agreement or other instrument or obligation of any kind to which it is a party or by which it is bound, except for any such breach or default as would not have a Material Adverse Effect; or (iv) violate any order, writ, injunction, judgment, decree, law, statute, rule, regulation or governmental permit or license applicable to it, which violation would have a Material Adverse Effect, unless any waiver, consent, approval, authorization, permit, filing or notification necessary to prevent any such conflict, breach, default or violation has been obtained prior to the Closing Date. For purposes of this Agreement, "MATERIAL ADVERSE EFFECT" means a material adverse effect on the business, assets, financial condition or results of operation of the party making the representation or warranty to which such qualification is being applied. (g) LIABILITIES. Except (i) as disclosed in SCHEDULE 3.1(G) attached hereto, (ii) for liabilities and obligations incurred in the normal course of business of the Company including, without limitation, the Existing Loan, and (iii) as otherwise disclosed in this Agreement, the Company has no material liability or obligation of any nature which in any way materially affects or is related to the Property or the Other Items whether now due or to become due, absolute, contingent or otherwise, including liabilities for past due taxes (or any interest or penalties thereto). (h) LITIGATION. Except as disclosed in SCHEDULE 3.1(H) attached hereto, there is no litigation, proceeding or investigation which, to the best knowledge of the Company, is pending, or, to the best knowledge of the Company, threatened, against or affecting the Company or the Property that might affect or relate to the validity of this Agreement or any action taken or to be taken pursuant hereto, or that might have a Material Adverse Effect upon the Property or the Other Items or any part or the operation thereof, unless fully covered by insurance. (i) COMPLIANCE WITH LAWS. To the best knowledge of the Company, without additional investigation, except as disclosed in SCHEDULE 3.1(I) attached hereto, the Company has not received written notice, which remains outstanding that it has not complied with and is in default under, or in violation of, or received any written notice which remains outstanding that the Company, the Property or the Other Items may be in violation of, any law, ordinance, rule, regulation or code or condition in any approval or permit pursuant thereto (including without limitation, any zoning, sign, environmental, labor, safety, health or price or wage control, ordinance, rule, regulation or order of) applicable to the ownership, development, operation or maintenance of the Property or the Other Items. (j) LEASES. There are no written leases affecting the Property to which the Company is a party with a term greater than one (1) year. All leases affecting the Property have been, or will be prior to closing, assigned to the Company as landlord. The rent roll attached hereto as SCHEDULE 3.1(J) is true and correct as of the date of this Agreement. (k) CONDEMNATION. To the best of the knowledge of the Company, without additional investigation, the Company has not received written notice of pending condemnation of the Property, or any part thereof, or of any plans for improvements which might result in a special assessment against the Property. (l) SERVICE CONTRACTS. There are no Service Contracts with respect to the Property or the Other Items which will continue in effect after the Closing except as set forth on SCHEDULE 3.1(L) attached hereto. (m) EXECUTORY CONTRACTS. There are no executory contracts connected with the Property or the Other Items, except as set forth on SCHEDULE 3.1(M) attached hereto. (n) ONGOING PERFORMANCE. Until the Closing Date, the Company shall continue to fulfill all of its obligations under the terms of the Existing Mortgage, the leases encumbering the Property, the service contracts and the executory contracts, and the Company shall operate, and perform maintenance and repair with respect to, all landscaping, buildings, fixtures and facilities, including, without limitation, the Other Items, in a commercially reasonable manner and in accordance with its current practice. (o) APPLIANCES. All of the ranges and refrigerators in the Property are the property of the Company and not of the tenants. (p) ENVIRONMENTAL. To the best of the knowledge of the Company, without additional investigation, except as identified in the report described in SCHEDULE 3.1(P) attached hereto, the Company has received no notice of any violation of any applicable Environmental Laws. (q) TAXES. The Company has filed or will file when due all notices, reports and returns of Taxes (as defined below) required to be filed before the Closing Date and has paid or, if due after the date hereof and prior to the Closing Date, will pay, all Taxes and other charges for the periods shown to be due on such notices, reports and returns. "TAXES" shall mean all taxes, charges, fees, levies or other assessments, including, without limitation, income, excise, property, sale, gross receipts, employment and franchise taxes imposed by the United States, or any state, county, local or foreign government, or subdivision or agency thereof with respect to the assets or the business of the Company, and including any interest, penalties or additions attributable thereto. (r) (i) All of the representations and warranties of the Company set forth in this Agreement shall survive the Closing for a period of one (1) year following Closing, and shall not be deemed to have merged in any document delivered at the Closing. Any claim for any breach of any representation or warranty of the Company shall be brought, if at all, within one (1) year from the date of Closing or thereafter be forever barred except for any claim relating to an intentional and material misrepresentation or fraud, which claim shall not be subject to such time limit. (ii) The Company agrees to indemnify Home Properties, and hold harmless and defend Home Properties, from and against any and all losses, costs, claims, liabilities, damages and expenses, including, without limitation, reasonable attorneys' fees, arising as the result of a material breach of any of the representations and warranties of the Company, set forth in this Agreement. (iii)Except as expressly provided in this Agreement, the Company has made no representations and/or warranties regarding the Properties, and, except as expressly set forth in this Agreement, Home Properties shall, at Closing, accept each Property in "AS IS" condition, with all faults, and without any other representations or warranties of any kind, whether as to merchantability, or fitness for a particular purpose, or otherwise. 3.2 BY HOME PROPERTIES. Home Properties hereby represents and warrants to the Company that each of the following is true, complete and accurate as of the date hereof and as of the Closing Date and thereafter, as set forth in subparagraph 3.2(p) below. (a) ORGANIZATION AND AUTHORIZATION. Home Properties is a limited partnership duly organized, validly existing and in good standing under the laws of the State of New York and was formed under the New York Act. It has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. It is duly qualified or licensed to do business as a foreign limited partnership and in good standing in each jurisdiction in which the property owned, leased or operated by it makes such qualification or license necessary, except in each case in those jurisdictions where the failure to be so duly qualified or licensed and in good standing would not have a Material Adverse Effect. (b) AUTHORITY RELATIVE TO THIS AGREEMENT. Subject to receipt of approval of the Board of Directors of HME as provided by SECTION 7.1(d) below, (i) Home Properties has full power and authority to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby; (ii) all actions necessary to be taken by it or on its behalf to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby, have been duly and validly taken; and (iii) this Agreement has been duly and validly executed and delivered by it and, assuming due execution and delivery by the Company and the Partnership, constitutes a valid and binding agreement enforceable against it in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting the enforcement of creditors' rights generally as at the time in effect and by general principles of equity, regardless or whether such enforceability is considered in a proceeding in equity or at law. (c) CONSENTS AND APPROVALS; NO VIOLATIONS. To the best of Home Properties' knowledge, as of the Closing Date, neither the execution, delivery and performance of this Agreement, the Registration Rights Agreement, the Operating Partnership Amendment, or the other agreements contemplated by this Agreement, nor the issuance and delivery of the OP Units, nor the consummation of the transactions contemplated hereby will: (i) conflict with or will result in any breach of any provision of the Operating Partnership Agreement or Certificate of Limited Partnership; (ii) require it to obtain any consent, approval, authorization or permit from, or file with or notify, any governmental or regulatory authority, except where the failure to obtain such consent, approval, authorization or permit, or to make such filing or notification, would not have a Material Adverse Effect; (iii) constitute a breach or will result in a default under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, contract, agreement or other instrument or obligation of any kind to which it is a party or by which it is bound, except for any such breach or default as would not have a Material Adverse Effect; or (iv) violate any order, writ, injunction, judgment, decree, law, statute, rule, regulation or governmental permit or license applicable to it, which violation would have a Material Adverse Effect, unless, any waiver, consent, approval, authorization, permit, filing or notification necessary to prevent any such conflict, breach, default or violation has been obtained prior to the Closing Date. (d) PARTNERSHIP INTERESTS. On the Closing Date, the OP Units to be issued as provided in this Agreement shall be duly issued by Home Properties and the Partnership will be duly admitted as a limited partner of Home Properties. (e) OPERATING PARTNERSHIP AGREEMENT. A true, correct and complete copy of Operating Partnership Agreement is attached hereto as EXHIBIT B. Home Properties hereby agrees that, with the following exceptions, the Operating Partnership Agreement shall not be further amended on or prior to the Closing Date: (i) the Operating Partnership Amendment, (ii) amendments in connection with the issuance of additional shares of common stock by HME, and (iii) amendments to reflect the issuance of additional OP Units in connection with other transactions wherein additional OP Units are issued in connection with the acquisition of real property or of interests in entities which own real property. (f) LITIGATION. To the best knowledge of Home Properties, there is no litigation, proceeding or investigation pending, or threatened, against or affecting Home Properties, or HME, that might affect the validity of this Agreement, or any action taken, or to be taken, by Home Properties, or HME, pursuant to this Agreement, or that might have a material adverse effect on the business of Home Properties. (g) CONDITION OF TITLE TO OP UNITS. At the Closing, Home Properties shall deliver to the Partnership good and marketable title to the OP Units, free and clear of all liens, charges, encumbrances and restrictions, except as contained in the Operating Partnership Agreement, the Registration Rights Agreement, and the Lock-Up Agreement, and shall, by execution of the Operating Partnership Amendment, admit the Partnership as a limited partner in Home Properties. (h) ACCURACY OF FINANCIAL INFORMATION. All financial information heretofore or hereafter furnished by HME or Home Properties concerning such entities is, and shall be, true, complete and correct in all material respects as of the date therein specified. All of the information furnished and statements made by HME or Home Properties to the Company or the Partnership with respect to this Agreement, and in the periodic filings (as updated) by HME or Home Properties with the Securities and Exchange Commission, are true and correct in all material respects and do not misstate or fail to state any material fact. (i) FINANCIAL CONDITION. HME or Home Properties has not (A) made a general assignment for the benefit of creditors; (B) admitted in writing its inability to pay its debts as they mature; (C) had an attachment, execution or other judicial seizure of any property interest which remains in effect; or (D) become generally unable to meet its financial obligations as they mature. (j) DEBTOR PROCEEDINGS. There is not pending any case, proceeding or other action seeking reorganization, arrangement, adjustment, liquidation, dissolution or recomposition of HME or Home Properties, or the debts of HME or Home Properties, under any law relating to bankruptcy, insolvency, reorganization or the relief of debtors, or seeking the appointment of a receiver, trustee, custodian or other similar official for HME or Home Properties. (k) LIABILITIES. Except (A) as disclosed in writing to the Partnership; (B) for liabilities and obligations incurred in the normal course of business of HME or Home Properties; and (C) as otherwise disclosed in this Agreement or in periodic filings (as updated) by HME or Home Properties, HME and Home Properties has no material liability or obligation of any nature which in any way materially affects their financial statements, whether now due or to become due, absolute, contingent or otherwise, including liabilities for taxes (or any interest or penalties thereto). (l) TAX FILINGS. HME and Home Properties will file when due all notices, reports and returns of Taxes (as defined below) required to be filed after the Closing Date and will pay, all Taxes and other charges for the periods shown to be due on such notices, reports and returns arising after Closing. For purposes hereof, "taxes" shall mean all taxes, charges, fees, levies or other assessments, including, without limitation, income, excise, property, sale, gross receipts, employment and franchise taxes imposed by the United States, or any state, county, local or foreign government, or subdivision or agency thereof with respect to the assets or the business of the Company, and including any interest, penalties or additions attributable thereto, which arise after Closing. (m) ASSUMPTION OF LIABILITIES. HME and Home Properties will be responsible for all activities, operations, debts, liabilities of and claims against the Company which arise and result from occurrences from and after Closing. (n) INDEMNIFICATION. HME and Home Properties will promptly, timely and accurately make all announcements regarding this transaction to the public and as otherwise may be required by the applicable securities laws. HME and Home Properties will indemnify and save the Partnership and the Company from and against any and all liability, claims, damages, costs and expenses arising by or through HME or Home Properties with respect to the offering of OP Units pursuant to this Agreement and with respect to public statements regarding the transaction contemplated by this Agreement; provided, however, that such indemnity shall not apply to statements made or damages caused directly by the Partnership or the General Partner. (o) REIT. Home Properties shall use its reasonable efforts to cause HME to continue to be taxed as a real estate investment trust under the Code unless the Board of Directors of HME determines that it is in the best interest of the shareholders of HME to be taxed otherwise. (p) (i) All of the representations and warranties of Home Properties, and HME, set forth in this Agreement, including, without limitation, the following indemnity, shall survive the Closing for a period of one (1) year following Closing, except subparagraphs (h) and (m) and above which shall not be subject to the foregoing one (1) year limitation, and except subparagraph (o) which shall survive the Closing for a period of ten (10) years, and shall not be deemed to have merged in any document delivered at the Closing. Any claim for any breach of any representation or warranty of the Company shall be brought, if at all, within one (1) year from the date of Closing (except as to subparagraph (o) for which the time limit shall be 10 years) or thereafter be forever barred except for claims arising under subparagraphs (h) and (m), and except for any claim relating to an intentional and material misrepresentation or fraud, which claims shall not be subject to such time limit. (ii) Home Properties and HME agree to indemnify the Company and the Partnership, and hold harmless and defend each of the Company and the Partnership, from and against any and all losses, costs, claims, liabilities, taxes (including taxes on any indemnification amount), damages and expenses, including, without limitation, reasonable attorneys' fees, arising as the result of a breach of any of the obligations, covenants, representations and/or warranties of Home Properties and/or HME set forth in this Agreement. 3.3 BY THE PARTNERSHIP. The Partnership hereby represents and warrants to Home Properties that each of the following is true, complete and accurate in all material respects as of the date hereof and as of the Closing Date. The phrase "to the best knowledge of the Partnership" as used in this Agreement shall mean the actual knowledge of David W. Schostak. (a) CONSENTS. The Partnership has obtained any consents of its partners necessary to the prior transfer of the Property to the Company and to the transaction contemplated by this Agreement. (b) ORGANIZATION AND AUTHORIZATION. The Partnership is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Michigan and was formed under the laws of the State of Michigan. (c) AUTHORITY RELATIVE TO THIS AGREEMENT. (i) the Partnership has full power and authority to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby; (ii) as of the Closing Date, all actions necessary to be taken by it or on its behalf to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby, will have been duly and validly taken; and (iii) this Agreement has been duly and validly executed and delivered by it and, assuming due execution and delivery by Home Properties, constitutes a valid and binding agreement enforceable against it in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting the enforcement of creditors' rights generally as at the time in effect and by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law. (d) CONSENTS AND APPROVALS; NO VIOLATION. To the best knowledge of the Partnership, neither the execution, delivery and performance of this Agreement nor the consummation of the transactions contemplated hereby will: (i) conflict with or will result in any breach of any provision of its Partnership Agreement or Certificate of Limited Partnership; (ii) require it to obtain any consent, approval, authorization or permit from, or file with or notify, any governmental or regulatory authority, except where the failure to obtain such consent, approval, authorization or permit, or to make such filing or notification, would not have a Material Adverse Effect (defined above); (iii) except to the extent that the consent of the Existing Lender is required for assumption of the Existing Loan, constitute a breach or will result in a default under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, contract, agreement or other instrument or obligation of any kind to which it is a party or by which it is bound, except for any such breach or default as would not have a Material Adverse Effect; or (iv) violate any order, writ, injunction, judgment, decree, law, statute, rule, regulation or governmental permit or license applicable to it, which violation would have a Material Adverse Effect, unless any waiver, consent, approval, authorization, permit, filing or notification necessary to prevent any such conflict, breach, default or violation has been obtained prior to the Closing Date. (e) LITIGATION. Except as disclosed in SCHEDULE 3.3(E) attached hereto, there is no litigation, proceeding or investigation which, to the best knowledge of the Partnership, is pending, or, to the best knowledge of the Partnership, threatened, against or affecting the Partnership or the Property that might affect or relate to the validity of this Agreement or any action taken or to be taken pursuant hereto, or that might have a Material Adverse Effect upon the Property or the Other Items or any part of the operation thereof, unless fully covered by insurance. (f) COMPLIANCE WITH LAWS. To the best knowledge of the Partnership, without additional investigation, except as disclosed in SCHEDULE 3.3(F) attached hereto, the Partnership has not received written notice, which remains outstanding that it has not complied with and is in default under, or in violation of, or received any written notice which remains outstanding that the Partnership, the Property or the Other Items may be in violation of, any law, ordinance, rule, regulation or code or condition in any approval or permit pursuant thereto (including without limitation, any zoning, sign, environmental, labor, safety, health or price or wage control, ordinance, rule, regulation or order of) applicable to the ownership, development, operation or maintenance of the Property or the Other Items. (g) LEASES. As of the Closing, all leases affecting the Property shall have been assigned to the Company as landlord. (h) TAXES. The Partnership has filed, or will file when due, all notices, reports and returns of Taxes (as defined above) required to be filed before the Closing Date and has paid or, if due after the date hereof and prior to the Closing Date, will pay, all Taxes and other charges for the periods shown to be due on such notices, reports and returns. (i) (1) All of the representations and warranties of the Partnership set forth in this Agreement shall survive the Closing for a period of six (6) months following Closing, and shall not be deemed to have merged in any document delivered at the Closing. Any claim for any breach of any representation or warranty of the Partnership shall be brought, if at all, within six (6) months from the date of Closing or thereafter be forever barred except for any claim relating to an intentional and material misrepresentation or fraud, which claim shall not be subject to such time limit. (2) The Partnership agrees to indemnify Home Properties, and hold harmless and defend Home Properties, from and against any and all losses, costs, claims, liabilities, damages and expenses, including, without limitation, reasonable attorneys' fees, arising as the result of a material breach of any of the representations and warranties of the Partnership, set forth in this Agreement. (3) Except as expressly provided in this Agreement, the Partnership has made no representations and/or warranties regarding the Properties, and, except as expressly set forth in this Agreement, Home Properties shall, at Closing, accept each Property in "AS IS" condition, with all faults, and without any other representations or warranties of any kind, whether as to merchantability, or fitness for a particular purpose, or otherwise. (4) Notwithstanding anything to the contrary contained in this Agreement, neither the General Partner nor any other partners of the Partnership shall have any personal liability, and no action of any kind shall be maintained against any of them or their respective assets, with respect to this Agreement and/or the transactions described in this Agreement, and Home Properties, its successors and assigns, shall look solely to the assets of the Partnership and the cash or assets held by the Disbursing Agent pursuant to SECTION 2.2(b) above, for the payment of any claim against or the performance of any obligation of the Partnership. The foregoing limitation of liability shall not apply in the case of fraud or intentional and material misrepresentation; provided, however, that in no event shall any limited partner have any liability under this Agreement except in the event that such limited partner makes a fraudulent or intentional and material misrepresentation in any assignment or investor questionnaire regarding such limited partner's interest which will be conveyed to Home Properties at Closing. ARTICLE IV COVENANTS OF THE PARTIES 4.1 FURTHER ASSURANCE. Subject to the terms and conditions of this Agreement, each of the parties hereto will use reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary under applicable laws and regulations to consummate the transactions contemplated by this Agreement. 4.2 REPRESENTATIONS AND WARRANTIES. Each of the parties hereto shall give written notice to the other party promptly upon the occurrence of, or upon becoming aware of, either: (a) any condition or event which, if known on the date hereof, would have made any representation or warranty contained in this Agreement not true in any material respect; or (b) any material and adverse development in the condition (financial or otherwise) or operations of such party. 4.3 FINANCIAL ACCESS. (a) On the Closing Date, the Company and/or the Partnership will provide a signed representation letter substantially in the form of EXHIBIT C attached hereto. The Company and the Partnership will provide access to Home Properties' representative to all financial and other information relating to the Company, the Partnership and the Property as is sufficient to enable them to prepare audited and pro-forma financial statements, in conformity with Regulation S-X of the Securities and Exchange Commission (the "COMMISSION") and any registration Statement, report or disclosure statement to be filed with the Commission. (b) Prior to the Closing Date, Home Properties shall from time to time, promptly after request, supply to the Partnership, and certify to the Partnership the accuracy and completeness of, copies of any financial statements and records and other documents and information requested by the Partnership regarding Home Properties and HME which are available to the public. (c) The Parties hereto recognize that for federal income tax purposes: (i) the Company is disregarded as a separate entity; and (ii) the Partnership is deemed to own all of the assets actually owned by the Company. Accordingly, at the Closing Date, the Partnership will be treated for federal income tax purposes as having contributed all of the Company's assets to Home Properties in exchange for the Consideration. The parties hereto shall prepare their tax returns for their respective taxable years which include the Closing Date consistent with that characterization of the transaction. 4.4 NEGATIVE COVENANTS. The Company agrees that, prior to the Closing Date, it will not take any of the following actions without first obtaining Home Properties' prior written consent, which consent shall not be unreasonably withheld or delayed: (a) Create, incur or assume any indebtedness for money borrowed, including obligations in respect of capital leases, except: (i) purchase money mortgages granted in connection with the acquisition of property in the ordinary course of business consistent with past practice; and (ii) short-term indebtedness for borrowed money in accordance with loan agreements and lines of credit in effect as of the date hereof. (b) Assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person except in the ordinary course of business consistent with past practices. (c) Sell or otherwise dispose of or abandon any of its assets except in the ordinary course of business. (d) Increase the rate or terms of: (i) compensation payable or to become payable to any of its employees; or (ii) any bonus, insurance, pension or other employee benefit plan, payment or arrangement made to, for or with any employee, except salary increases to site employees not exceeding three percent (3%) occurring in the ordinary course of business in accordance with its customary practices (which shall include normal periodic performance reviews and related compensation and benefit increases). (e) Enter into any agreement, commitment or transaction (including, without limitation, any borrowing, capital expenditure or capital financing), material to the business, operations or financial condition of its business, except agreements, commitments or transactions in the ordinary course of business consistent with past practice. (f) Transfer, mortgage, pledge, grant any security interest in or permit the imposition of any lien or other encumbrance on any of its assets other than in the ordinary course of business consistent with past practice. 4.5 MANAGEMENT AGREEMENTS. On or prior to the Closing Date, the Company shall terminate any agreements pertaining to the management of the Property. 4.6 CLOSING DOCUMENTS. On the Closing Date, the Company shall deliver to Home Properties a certificate of title and any necessary transfer documents relating to any vehicles, a current rent roll ("RENT ROLL") certified as of the date of the Closing Date, which shall include a list of all tenants, all rental obligations of each tenant with respect to the Property and all security deposits (including all interest due to tenants pursuant to Michigan or other applicable laws). On the Closing Date, the Partnership shall either transfer to the Company an amount equal to the aggregate amount of the security deposits shown on the Rent Roll (including all interest due to tenants pursuant to Michigan or other applicable laws), or the OP Units payable to the Partnership shall be reduced by such amount, and, in either event, the Company shall assume all obligations related to the security deposits. On the Closing Date, the Company shall also deliver to Home Properties complete originals of each lease listed on the Rent Roll, to the extent available. On the Closing Date, the Partnership and Home Properties shall deliver to each other an assignment and assumption of the Interests, which shall include mutual indemnities related to the Company's liabilities with respect to the ownership of the Property prior to and after the Closing Date. 4.7 TAX PROVISIONS. Home Properties agrees to observe and comply with the following: (a) At all times for and during a period of ten (10) years from and after the Closing Date, Home Properties shall allocate to the Partnership or then-holders of OP Units originally issued to the Partnership ("UNIT HOLDERS"), for Federal Income tax purposes (i) pursuant to Section 752 of the Code and Section 1.752-3 of the Treasury Regulations, nonrecourse debt of Home Properties in an aggregate amount not less than the deficit in the Partnership's capital (i.e., the excess of the Partnership's debts over the adjusted tax basis of the Partnership's assets ("CAPITAL ACCOUNT DEFICIT"), as adjusted from time to time for income or loss allocated, and cash distributed, to the Partnership by Home Properties, and (ii) sufficient qualified nonrecourse financing (within the meaning of Section 465(b)(6) of the Code) to prevent the application of Subsection 465(e) of the Code to the Unit Holders. (b) The initial Capital Account Deficit shall be determined as at (just prior to) the contribution of the Partnership's interest in the Company to Home Properties on the Closing Date, and shall be based upon the estimated information set forth in SECTION <> and shall be updated based upon the information set forth in a schedule to be furnished by the accountant for the Partnership within the time required by SECTION 4.8(b) hereof. Thereafter, for a period of ten (10) years from and after the Closing Date, the Capital Account Deficit shall be adjusted annually to reflect income or loss allocated, and cash distributed, to the Partnership by Home Properties. Home Properties will use the traditional method (and not the curative or remedial method), as contemplated by Treasury Regulations Section 1.704-3(b) to allocate book- tax differences with respect to the assets which are deemed contributed to Home Properties by the Partnership. (c) Home Properties agrees that for a period of ten (10) years following the Closing Date, (i) Home Properties shall not prepay, additionally secure or otherwise restructure the debt allocable to and encumbering the Property in such manner as to cause a reduction in the amount of the Partnership's share (determined under Section 1.752-3 of the Treasury Regulations) of nonrecourse debt without the Partnership's prior written consent, and (ii) Home Properties will not dispose of any of its interest in the Property, unless such Property is exchanged for property of like kind ("REPLACEMENT PROPERTY") on a tax-deferred basis under Section 1031 of the Code, or otherwise is tax-deferred beyond the ten (10) year period referred to in SECTION 4.7(a) hereof. Replacement Property acquired by Home Properties pursuant to such tax- deferred, like-kind exchange shall remain subject to the restriction on disposition contained hereunder until the end of the aforesaid ten (10) year period. For a period of five (5) years following the expiration of the ten (10) year period after the Closing Date, Home Properties agrees that, in the event that it desires to sell, exchange, transfer or otherwise dispose of the Property or Replacement Property, it will use commercially reasonable efforts to effectuate such Property transfer in such manner as to be tax free to the Partnership or Unit Holders. (d) In the event that Home Properties takes any action prohibited by SECTION 4.7(a) or (c) hereof, Home Properties shall indemnify and save harmless the Partnership or the Unit Holders from and against any federal and state income tax liability, including but not limited to: (i) income taxes suffered as a result of all payments made under this subsection; and (ii) interest, penalties and the reasonable fees of attorneys and accountants. For this purpose, the Partnership or Unit Holders shall be conclusively deemed to be liable for (and Home Properties shall indemnify and save the Partnership or Unit Holders harmless from and against) tax on any income or gain of the Partnership or Unit Holders, and on any payments to the Partnership or Unit Holders made under this SECTION 4.7(b) in an amount equal to the product of such income, gain or payment and the highest combined rate of Federal and State of Michigan income tax applicable to individuals with respect to income or gain of the type in question. (e) Distributions with respect to the OP Units will be identical in amount and timing to the dividends on HME Common Shares, except that the initial distribution payable with respect to the OP Units shall be issued in accordance with SECTION 2.5. (f) Future transactions involving HME, or Home Properties, including, without limitation, merger(s), sale(s) of assets or similar transactions, shall be structured in such manner as to (i) not result in an amendment to the definition of "Conversion Factor" as it is currently included in the Operating Partnership Agreement; (ii) prevent, in the context of such a transaction, a different per unit value being assigned to the OP Units issued to the Partnership or Unit Holders than the value assigned per share to the then outstanding HME Common Shares; and (iii) for a period of ten (10) years from and after the Closing Date, not interfere with the tax deferred nature of the transaction contemplated by this Agreement with respect to the OP Units issued to the Partnership or Unit Holders. 4.8 PARTNERSHIP FINANCIAL INFORMATION. (a) The Partnership represents that, to the best of the Partnership's knowledge, as of December 31, 1999: (i) the adjusted basis of the Property for Federal income tax purposes (including adjustments to basis made pursuant to Sections 734 and 743 of the Code) will be Two Million Two Hundred Ninety-Five Thousand Nine Hundred Seventy-Three and 00/100 Dollars ($2,295,973.00); (ii) the amount of nonrecourse debt encumbering the Property will be Three Million Four Hundred Seventy-Five Thousand Nine Hundred Fifteen and 00/100 Dollars ($3,475,915.00), and (iii) the estimated initial Capital Account Deficit of the Partnership (computed on a tax basis and taking into account adjustments to basis made pursuant to Sections 734 and 743 of the Code and the tax basis of certain other assets to be transferred in the Property) will be One Million One Hundred Thousand and 00/100 Dollars ($1,000,000.00). (b) Within one hundred twenty (120) days of the Closing Date the Partnership shall also provide Home Properties with a schedule showing: (i) the net book value of the Property as of the Closing Date; and (ii) an update to SECTION 4.8(a) providing the actual information which was estimated in such Section and detail with respect to assets of the Partnership necessary to determine the initial Capital Account Deficit. To the extent (and only to the extent) that there is any inaccuracy in the information provided by the Partnership to Home Properties pursuant to SECTIONS 4.8(a) and (b) or if the update to SECTION 4.8(a) provided pursuant to this SECTION 4.8(b) is materially different from the information contained in SECTION 4.8(a), then Home Properties shall not be liable to the Partnership for the tax on any gain to the Partnership that results from such inaccuracy or material difference. Home Properties shall not be liable to the Partnership for the tax on any gain to the Partnership that results from Home Properties' inability to comply with the obligations of SECTION 4.7(a) of this Agreement as a result of the Partnership's failure to distribute OP Units as provided in SECTION 2.3(d) of this Agreement. The information in SECTION 4.7 shall be calculated in a manner consistent with the calculations made for federal income tax depreciation purposes. ARTICLE V. INSPECTION; CLOSING DATE 5.1 INSPECTION. Except as expressly provided in this Agreement, Home Properties acknowledges that it is acquiring the Property "AS IS" based on Home Properties' inspection. Subject to the rights of existing tenants at the Property, Home Properties shall have a period of thirty (30) days from and after the date of this Agreement (the "DUE DILIGENCE PERIOD") within which to cause one (1) or more surveyors, attorneys, engineers, auditors, architects, and/or other experts of its choice (a) to inspect any document related to any Property, including, without limitation, all Leases and related documents, documents pertaining to the Existing Loan, working drawings, plans and specifications, surveys, appraisals, engineer's reports, environmental reports, insurance policies, service contracts, real estate tax receipts and annual and monthly operating statements, and (b) to inspect, examine, survey, appraise and obtain engineering inspection and environmental reports with respect to the Property, documents pertaining to the Existing Loans, or all of the Property, and otherwise to do all that, which, in the opinion of Home Properties, is necessary to determine the condition and value of the Property for the uses intended by Home Properties; provided, however, that Home Properties shall not conduct any environmental study of any Property beyond a Phase 1 level without the consent of the Company, which consent shall not be unreasonably withheld. Home Properties may declare the Due Diligence Period ended at any earlier time. Home Properties must be satisfied in all respects (in the sole and absolute discretion of Home Properties) with the results of all reviews, inspections and investigations conducted by, or under, Home Properties during the Due Diligence Period. If Home Properties shall not be so satisfied, Home Properties may, within the Due Diligence Period, terminate this Agreement, in which event Home Properties shall have no obligation or liability under this Agreement, or with regard to the Company or the Property, and Home Properties shall be entitled to the immediate return of the Deposit, and this Agreement shall, thereafter, be null, void and of no further force or effect (other than with respect to the indemnities and agreements that expressly survive termination of this Agreement). If not so terminated by Home Properties, this Agreement shall continue in full force and effect according to its terms, and, subject to the closing conditions, Home Properties shall be deemed to have waived its right to object to the condition of, or any document pertaining to, the Property. Home Properties shall be responsible for payment of all of the costs of its due diligence activities, including, without limitation, all engineering and environmental reports, and all financial and Lease audits. Home Properties shall indemnify and hold the Company harmless from and against any and all loss, claims, damage and expense arising out of entry by Home Properties and its agents onto the Property and any testing performed thereon; Home Properties shall repair any damage which it may cause as a result of any such entry and testing; Home Properties shall cause its entry, inspections and testing (if any) to be conducted in a manner so as to minimize disruption to tenants at the Property. The indemnities in this SECTION 5.1 shall survive the Closing and/or the termination of this Agreement. 5.2 CLOSING DATE. If this Agreement has not been terminated by Home Properties, or the Partnership, for any of the reasons set forth in this Agreement, and within the time(s) herein limited, the closing of the transaction contemplated by this Agreement ("CLOSING") shall occur no later than fifteen (15) days following the later of (i) approval by the Existing Lender of the assumption of the Existing Loan and (ii) expiration of the Due Diligence Period, but in no event prior to January 14, 2000 ("CLOSING DATE"). Home Properties and HME agree to use commercially reasonable good faith efforts to expeditiously attempt to obtain all necessary approvals of the Existing Lender; provided, however, that if such approval cannot be obtained prior to the Closing Date, the Partnership or Home Properties may elect to postpone the Closing Date up to 30 days as necessary to obtain such approvals. The Closing shall be held at the offices of the Partnership's attorneys, at such time, or at such other place, as may be mutually agreed upon by the parties. ARTICLE VI. CONDITIONS TO THE OBLIGATIONS OF THE COMPANY 6.1 CONDITIONS TO PARTNERSHIP'S AND COMPANY'S OBLIGATIONS. The obligations of the Partnership and Company under this Agreement shall be subject to the satisfaction of the following conditions precedent ("PARTNERSHIP'S CONDITIONS"). (a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of Home Properties set forth herein shall be true and correct in all material respects as of the Closing Date, as certified in writing by the general partner of Home Properties. (b) COVENANTS. Home Properties has complied, in all material respects, with the covenants made by it in this Agreement to be complied with by it from the date hereof through the Closing Date. (c) REGISTRATION RIGHTS AGREEMENT. The Partnership and Home Properties shall have entered into a registration rights agreement in the form of EXHIBIT D attached hereto. (d) APPROVAL TO ASSUME LOAN. The Existing Lender shall have approved the assumption of the Existing Loan by the Company and Home Properties and the Existing Lender's counsel shall have prepared all necessary assumption documents and shall otherwise be prepared to close the assumption of the Existing Loan. (e) SIMULTANEOUS CLOSING. Closing hereunder shall occur simultaneously with closing pursuant to the Contribution Agreement which has been executed by and between the Affiliated Companies and Home Properties. (f) PARTNERSHIP INFORMATION. Home Properties has provided to the Partnership: (i) evidence acceptable to the Company of due formation, existence and good standing of Home Properties; (ii) certification that the person signing documents on behalf of Home Properties is authorized to do so; (iii) Secretary's Certificate certifying that the Board of Directors of HME has duly adopted resolutions authorizing the transaction contemplated by this Agreement, and the execution of the Closing documents to be executed and delivered by Home Properties pursuant to this Agreement; and (iv) a certified copy of the Operating Partnership Agreement. 6.2 EFFECT OF FAILURE TO SATISFY CONDITION. Subject to SECTION 9.11(b), if any of the Partnership's Conditions shall not have been fulfilled by Home Properties, or otherwise satisfied, or waived by the Partnership within the time provided, the Partnership shall have the right to terminate this Agreement by written notice to Home Properties, in which event the Deposit shall be returned to Home Properties, and this Agreement shall, thereafter, be deemed to be null and void and of no further force or effect, and no party shall have any further rights or obligations under this Agreement (other than with respect to those indemnities and agreements that expressly survive termination of this Agreement). ARTICLE VII. CONDITIONS TO THE OBLIGATIONS OF HOME PROPERTIES 7.1 CONDITIONS TO HOME PROPERTIES' OBLIGATIONS. The obligations of Home Properties under this Agreement shall be subject to the satisfaction of the following conditions precedent ("HOME PROPERTIES' CONDITIONS"). (a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Company and Partnership set forth in this Agreement shall be true and correct in all material respects as of the Closing Date, as certified in writing. (b) COVENANTS. The Company and Partnership have complied, in all material respects, with the covenants made by them in this Agreement to be complied with by them from the date hereof through the Closing Date. (c) CONDITION OF PROPERTY. Subject to SECTION 9.12, there has been no material adverse change in the condition of the Property from its condition at the expiration of the Due Diligence Period. (d) APPROVALS. Home Properties has obtained the requisite approval of the Board of Directors of HME to the transactions described in this Agreement on the terms and conditions described herein, including, without limitation, the Operating Partnership Amendments, within the Due Diligence Period, which such Board approval Home Properties agrees to use all good faith efforts to obtain. (e) PARTNERSHIP AGREEMENT. The Partnership shall have executed an agreement whereby it agrees that it will be responsible for making all final distributions to the partners of the Partnership and shall indemnify Home Properties from all claims relating thereto. (f) INSPECTION. Home Properties has been satisfied within the time provided in its sole discretion with the results of the inspection, or has not terminated this Agreement, as provided by SECTION 5.1. (g) PARTNERSHIP AND LLC INFORMATION. The Company, or the Partnership, as applicable, has provided to Home Properties: (i) evidence acceptable to Home Properties of due formation, existence and good standing of the Company and the Partnership; (ii) certification that the person signing documents on behalf of the Company and the Partnership is authorized to do so; and (iii) proof of consent of the partners of the Partnership, as required by the Partnership's partnership agreement to the prior transfer of the Property to the Company. (h) APPROVAL TO ASSUME LOAN. The Existing Lender shall have approved the assumption of the Existing Loan by the Company and Home Properties and the Existing Lender's counsel shall have prepared all necessary assumption documents and shall otherwise be prepared to close the assumption of the Existing Loan. (i) SIMULTANEOUS CLOSING. Closing hereunder shall occur simultaneously with the closing pursuant to the Contribution Agreement which has been executed by and between the Affiliated Companies and Home Properties. 7.2 EFFECT OF FAILURE TO SATISFY CONDITION. Subject to SECTION 9.11(a), if any of Home Properties' Conditions shall not have been fulfilled by the Company or the Partnership, or otherwise satisfied or waived by Home Properties within the time provided, Home Properties shall have the right to terminate this Agreement by written notice to the Company, in which event the Deposit shall be returned to Home Properties, and this Agreement, shall, thereafter, be deemed to be null and void and of no further force or effect, and no party shall have any further rights or obligations under this Agreement (other than with respect to those indemnities and agreements that expressly survive termination of this Agreement). ARTICLE VIII. TITLE MATTERS 8.1 TITLE CONDITION. At Closing, the Company will hold good and marketable fee simple title to the Property free and clear of all liens, charges and encumbrances, except the Permitted Exceptions (as defined in SECTION 8.6 below). 8.2 TITLE POLICY. Promptly upon execution of this Agreement by all parties, the Partnership shall order a commitment (the "TITLE COMMITMENT") for an ALTA Owner's Policy of Title Insurance (the "TITLE POLICY") regarding the Property in the amount of the Consideration and confirming good and marketable title to such Property, subject only to the Permitted Exceptions and other matters of record approved by Home Properties. The Title Policy shall be issued by First American Title Insurance Company or other title company mutually acceptable to Home Properties and the Company (the "TITLE COMPANY"). Home Properties and the Partnership shall share equally the cost of the expenses in connection with the Title Commitment and Title Policy, except that Home Properties shall be solely responsible for the cost of endorsements, if any. The Title Policy shall be issued as soon as practicable after the completion of the Closing on the Closing Date. 8.3 UCC SEARCHES. Promptly upon execution of this Agreement by all parties, Home Properties shall order written results of searches (the "UCC SEARCHES") of the records of the Michigan Secretary of State and of the County in which the Property is located for Uniform Commercial Code Financing Statements, tax liens, or the like, in either the name of the Company, the Partnership or the Property effective as of the date after the date of this Agreement, accompanied by copies of all documents disclosed by the UCC Searches. Home Properties shall bear all of the expenses of the UCC Searches. 8.4 SURVEY. Promptly upon execution of this Agreement by all parties, if desired by Home Properties, Home Properties shall order a survey of the Property (the "SURVEY"), which shall be by a competent Michigan surveyor dated after the date of this Agreement and certified as directed by Home Properties. Home Properties shall bear all of the expenses of obtaining the Survey, if any. 8.5 OBJECTIONS TO TITLE. If any Title Commitment, UCC Search or Survey discloses exceptions to title other than the Permitted Exceptions, or any other matter which does not conform to the requirements of this Agreement, Home Properties shall so notify the Partnership in writing, such notice to be furnished to the Partnership, if at all, within fifteen (15) days following receipt by Home Properties of the Title Commitment, the UCC Searches and Survey, and the Partnership shall have the right, but not the obligation, within fifteen (15) days from the date of the receipt of such notice by the Partnership (the "CORRECTION PERIOD"), to have each such unpermitted exception to title removed, or to correct each such other matter, in each case to the satisfaction of Home Properties. If, within the Correction Period, the Partnership fails to have each such unpermitted exception removed, or to correct each such other matter as aforesaid, Home Properties may, at its option, and as the sole and exclusive remedy of Home Properties, either: (i) terminate this Agreement, in which even this Agreement, without further action of the parties, shall become null and void such that neither party shall have any further rights or obligations under this Agreement (other than with respect to those indemnities and agreements that expressly survive termination of this Agreement), and Home Properties shall be entitled to the immediate return of the Deposit; or (ii) waive its rights under SECTION <> and elect to take title to the Property as it then is. If Home Properties fails to make either such election within five (5) days following the expiration of the Correction Period, Home Properties shall be deemed to have elected option (ii). Any exception to title (other than a Permitted Exception), or any other matter which does not conform to the requirements of this Agreement, to which Home Properties does not object, as aforesaid, shall be deemed approved by Home Properties, and shall be deemed to be an additional Permitted Exception. 8.6 PERMITTED EXCEPTIONS. The obligation of Home Properties to close is conditioned upon the ability of Home Properties to obtain title insurance with respect to the Property insuring that, as of the Closing Date, title to the Property is not subject to any liens, encumbrances or other title objections other than the lien of the mortgage securing the Existing Loan, any apartment leases for tenants of the Property and the title exceptions identified in EXHIBIT E attached hereto (collectively the "PERMITTED EXCEPTIONS"). 8.7 AFFIDAVIT OF TITLE. The Partnership agrees that, upon the request of Home Properties, it will provide an affidavit in such customary form AS shall allow Home Properties to obtain a non-imputation endorsement to the title policy purchased by Home Properties. ARTICLE IX. MISCELLANEOUS 9.1 AMENDMENT. This Agreement may be amended only by a writing executed by Home Properties, the Partnership and the Company. 9.2 WAIVER OF COMPLIANCE. Except as otherwise provided in this Agreement, any failure of any party to comply with any obligation, covenant, agreement or condition herein may be waived by the party entitled to the benefits thereof only by a written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. 9.3 ENTIRE AGREEMENT. This Agreement, including the documents, schedules, certificates and instruments referred to herein, embody the entire agreement and understanding of the parties hereto in respect of the transactions contemplated by this Agreement. There are no restrictions, promises, representations, warranties, covenants or undertakings, other than those expressly set forth or referred to herein or therein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such transactions. 9.4 ASSIGNMENT. This Agreement and all obligations and rights of the parties hereunder may not be assigned by any party. 9.5 GOVERNING LAW. The corporate laws of the State of Maryland will govern all questions concerning the relative rights and obligations of the parties with respect to any HME Common Shares acquired or acquirable by the holders of OP Units on account of their OP Units. Except as limited by the Operating Partnership Agreement, the laws of the State of New York will govern all other questions concerning the relative rights and obligations of the holders of OP Units as limited partners in Home Properties, or otherwise with respect to the OP Units. This Agreement shall otherwise be governed, construed and interpreted in accordance with the laws of the State of Michigan without giving effect to the conflicts-of-laws principles thereof. 9.6 INTERPRETATION. The article and section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the parties and shall not in any way affect the meaning or interpretation of this Agreement. Article and Section references which do not otherwise specify, are to the designated Article or Section of this Agreement. 9.7 SEVERABILITY. The invalidity or unenforceability of any particular provision of this Agreement shall be construed in all respects as if such invalid or unenforceable provision were omitted. All provisions of this Agreement shall be enforced to the full extent permitted by law. 9.8 NOTICES. All notices, demands or requests given pursuant to any provision of this Agreement shall be in writing and shall be effective only if delivered personally, or sent by registered or certified mail, postage prepaid or sent by nationally recognized overnight carrier, to the addresses set forth below: TO HOME PROPERTIES: Home Properties of New York, L.P. 850 Clinton Square Rochester, New York 14604 Attention: Mr. Norman Leenhouts WITH A COPY TO: Home Properties of New York, L.P. 850 Clinton Square Rochester, New York 14604 Attention: Kathleen S. Suher, Esq. TO THE COMPANY: Deerfield Woods Home Properties LLC c/o Schostak Brothers and Company, Inc. 25800 Northwestern Highway, Suite 750 Southfield, Michigan 48075 Attention: Mr. David Schostak WITH A COPY TO: Honigman, Miller, Schwartz and Cohn 2290 First National Building 660 Woodward Avenue Detroit, Michigan 48226 Attention: Lawrence D. McLaughlin, Esq. TO THE PARTNERSHIP: Deerfield Woods Venture Limited Partnership c/o Schostak Brothers and Company, Inc. 25800 Northwestern Highway, Suite 750 Southfield, Michigan 48075 Attention: Mr. David Schostak WITH A COPY TO: Honigman, Miller, Schwartz and Cohn 2290 First National Building 660 Woodward Avenue Detroit, Michigan 48226 Attention: Lawrence D. McLaughlin, Esq. Any such notice, demand or request shall be deemed to have been given on the date of receipt in the case of delivery in person, delivery by courier service, or national overnight delivery, or three (3) business days after mailing if sent by registered or certified mail, postage pre-paid. Notice shall be deemed delivered upon refusal of delivery by the recipient. 9.9 CONFIDENTIALITY. By execution of this Agreement and except as otherwise provided herein, prior to the Closing Date Home Properties agrees to keep any and all information obtained in or in connection with the due diligence process with respect to the Company, its operations, the Property and Other Items strictly confidential, and will not disclose any such information without the Company's prior written consent, except to the extent required by law or as may be appropriate under applicable laws, including the securities laws. In the event this Agreement is terminated, Home Properties agrees to promptly return to the Company all documents and materials provided to Home Properties, together with copies of any reports obtained by Home Properties. 9.10 BROKER'S COMMISSION. The Company, the Partnership and Home Properties each represent to the other that it did not employ any broker in connection with this sale other than Chase Securities, Inc., and the Partnership agrees that, pursuant to separate agreement, it will pay any fees and commissions. Home Properties agrees to indemnify the Company and the Partnership, and the Company and the Partnership agree to indemnify Home Properties, from any and all claims and expenses, including legal fees, if any other fee or commission is determined to be due by reason of the employment of any other broker by the indemnifying party. 9.11 DEFAULTS AND REMEDIES. (a) DEFAULT BY THE COMPANY. If the Partnership or the Company defaults hereunder at or prior to closing in any respect, Home Properties, as its sole remedies, may terminate this Agreement, in which event the Deposit shall be returned to Home Properties, or may seek specific performance of this Agreement, but not damages. Home Properties shall not have any right to seek any other remedy against the Company. In the event of a breach by the Partnership or the Company of the representations contained in SECTIONS 3.1 or 3.3 hereof, of which breach Home Properties does not have knowledge at or prior to Closing, Home Properties, as its sole remedy, may seek to recover only its actual damages that compensate Home Properties for direct, actual injury sustained by it, and nothing more. (b) DEFAULT BY HOME PROPERTIES. If Home Properties fails or refuses to perform in accordance with the terms of this Agreement, the Deposit shall be forfeited to the Partnership as liquidated damages (which shall be the sole and exclusive remedy of the Partnership against Home Properties), at which time this Agreement shall be deemed to be null, void and of no further force or effect between the parties (other than with respect to the indemnities and agreements that expressly survive termination of this Agreement). In that regard, the Partnership acknowledges and agrees that (i) the Deposit is a reasonable estimate of, and bears a reasonable relationship to, the damages suffered and costs incurred by the Partnership as a result of having subjected the Interests to the terms of this Agreement; (ii) the actual damages suffered and costs incurred by the Partnership as a result of such failure of Home Properties to close under this Agreement would be extremely difficult and impractical to determine; (iii) Home Properties seeks to limit its liability under this Agreement to the amount of the Deposit in the event this Agreement is terminated and the transaction contemplated by this Agreement does not close due to a default of Home Properties under this Agreement; and (iv) the Deposit shall be and constitute valid liquidated damages. The foregoing limitation shall apply only in the event that Home Properties does not close the transaction contemplated by this Agreement, and such limitation shall not apply in the event that Home Properties closes and thereafter Home Properties or HME breaches one (1) of its obligations hereunder after Closing. 9.12 CONDEMNATION AND DESTRUCTION. (a) If, prior to the Closing Date, the Property, or any material part of any Property, is taken by eminent domain (or is the subject of a pending or contemplated taking which has not been consummated), the Partnership shall notify Home Properties of such fact, and Home Properties shall have the option (which option shall be set forth in a notice from Home Properties to the Partnership given not later than fifteen (15) business days after receipt of the notice from the Partnership): (i) to terminate this Agreement, in which event, the Deposit shall be returned to Home Properties, and, thereafter, this Agreement shall be deemed to be null, void and of no further force or effect between the parties (other than with respect to the indemnities and agreements that expressly survive termination of this Agreement); or (ii) to accept the assignment of the Interests, without abatement of the Consideration, in which event the Partnership shall assign and turn over to Home Properties at the Closing, and Home Properties shall be entitled to receive and keep, the Partnership's Interests, if any, in all amounts awarded, or to be awarded, as the result of the taking. (b) If, prior to the Closing Date, all or any material part of any Property is damaged or destroyed by fire or other casualty, the Company shall notify Home Properties of such fact, and Home Properties shall have the option (which option shall be set forth in a notice from Home Properties to the Company given not later than fifteen (15) business days after receipt of the notice from the Company): (i) to terminate this Agreement, in which event, the Deposit shall be returned to Home Properties, and, thereafter, this Agreement shall be deemed to be null, void and of no further force or effect between the parties (other than with respect to the indemnities and agreements that expressly survive termination of this Agreement); or (ii) to accept the assignment of the Interests without abatement of the Consideration, in which event the Partnership shall assign to Home Properties, at the Closing, all of the right, title and interest of the Partnership, if any, in and to the insurance proceeds awarded or to be awarded to the Company as the result of such damage or destruction. (c) In the event there is damage to or destruction of an immaterial part of the Property by fire or other casualty, such damage or destruction shall, subject to receipt of insurance proceeds, be repaired promptly by the Company, and in the event such damage or destruction cannot be fully repaired by the Closing Date, then at the option of Home Properties (i) the Closing shall be postponed until such repairs shall have been completed, or (ii) the Closing shall be held as scheduled, and Home Properties shall accept the assignment of the Interests without abatement of the Consideration, in which event the Partnership shall assign to Home Properties, at the Closing, all of the right, title and interest of the Partnership, if any, in and to the insurance proceeds awarded or to be awarded to the Company as the result of such damage or destruction. (d) An "IMMATERIAL" part of the Property shall be deemed to have been damaged or destroyed if the cost of repair or replacement thereof shall be Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00), or less, and a "MATERIAL" part thereof shall be deemed to have been damaged or destroyed if the cost of repair or replacement thereof shall be greater than Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00). 9.13 NUMBER OF DAYS. In computing the number of days for purposes of this Agreement, all days shall be counted, including Saturdays, Sundays and holidays; provided, however, that if the final day of any time period falls on a Saturday, Sunday or holiday on which federal banks are or may elect to be closed, then the final day shall be deemed to be the next day which is not a Saturday, Sunday or such holiday. 9.14 DEPOSIT. (a) Upon the execution of this Agreement, Home Properties shall deposit with the Disbursing Agent in escrow the sum of Three Hundred Seventy-Five Thousand and 00/100 Dollars ($375,000.00 (the deposit, together with any interest earned thereon, is the "DEPOSIT"). If Closing is completed hereunder or if this Agreement is terminated by Home Properties pursuant to the exercise of any right of termination as provided in herein, the Disbursing Agent shall refund the Deposit to Home Properties. If this Agreement is terminated by the Partnership pursuant to the exercise of any right of termination as provided herein, the Disbursing Agent shall deliver the Deposit to the Partnership. Notwithstanding the above, the Disbursing Agent shall deliver the Deposit to Home Properties in the event that the Partnership terminates this Agreement as a result of the failure of the condition described in SECTION 6.1(d) hereof, and 6.1(f) if the failure to simultaneously close is caused by the Company or the Partnership. (b) Notwithstanding anything contained in this SECTION 9.14, if either party terminates this Agreement as a result of the other's default or pursuant to the exercise of any right of termination conferred by this Agreement, Disbursing Agent shall not disburse the Deposit until the earlier to occur of (i) receipt by Disbursing Agent of written instructions from the Partnership and Home Properties or (ii) entry of a final and unappealable adjudication determining which party is entitled to receive the Deposit, as applicable, at which time the Deposit shall be distributed in accordance with such written instructions or adjudication. Except to the extent of any dispute between them, the Partnership and Home Properties agree to act in good faith to provide the Disbursing Agent with the instructions described in (i) above in the event that the Agreement is terminated. (c) In the event of a dispute between Home Properties and the Partnership with respect to the Deposit, the Disbursing Agent may deposit the Deposit with a court of proper jurisdiction and commence an interpleader action. Upon notifying the Partnership and Home Properties of the commencement of such action, Disbursing Agent shall be released from all liability with respect to the Deposit, except to the extent of accounting for any moneys previously delivered by Disbursing Agent out of escrow. Disbursing Agent shall not be liable to either the Partnership or Home Properties, other than for performance of its duties under this Agreement or his gross negligence or intentional wrongdoing. Disbursing Agent may rely upon the genuineness or authenticity of any document tendered to it by either the Partnership or Home Properties, and shall be under no duty of independent inquiry with respect to any acts or circumstances recited in such document. The Partnership and Home Properties shall indemnify, defend and hold harmless Disbursing Agent from and against all cost, claims or liabilities arising from the performance by Disbursing Agent of his obligations under this Agreement, other than for his failure to comply herewith, gross negligence or intentional wrongdoing. (d) As used in this SECTION 9.14, the term "DEPOSIT" shall refer to the amount set forth at SECTION 9.14(a), together with all interest thereon. The Deposit shall be held by the Disbursing Agent in one (1) or more federally-insured money market accounts acceptable to both the Partnership and Home Properties, or in short-term United States government obligations having a maturity date which is acceptable to the General Partner and Home Properties or in one (1) or more interest- bearing deposit accounts of a bank or other financial institution acceptable to the General Partner and Home Properties. The Partnership's taxpayer identification number is 38-3136626; Home Properties' taxpayer identification number is 16-1455130. 9.15 PLANS. The Company agrees to provide Home Properties with all plans and architectural drawings in its possession for the improvements completed at the Property, including, without limitation, all "as built" plans in its possession and the Company further agrees that it will endeavor to make the same available to Home Properties for inspection at the Company's office or at the Property during the Due Diligence Period and to turn over the same to Home Properties at Closing. 9.16 SURVIVAL. The representations and warranties of HME and Home Properties, the Partnership and the Company will survive Closing for a period of one (1) year, except as otherwise specifically provided herein. 9.17 COUNTERPARTS. This Agreement may be executed in one (1) or more counterparts, each of which shall be deemed to be an original for all purposes and all of which, when taken together, shall constitute one (1) and the same instrument. ARTICLE X. CLOSING DOCUMENTS 10.1 CLOSING DOCUMENTS. (a) At the time of Closing, the Company and the Partnership shall deliver to Home Properties the following: (i) Properly executed Assignments to Home Properties of no less than one hundred percent (100%) of the Interests; (ii) A current rent roll ("RENT ROLL") certified, as of the date of Closing, which shall include a correct list of all tenants, all rental obligations of each tenant with respect to the Property and all security deposits along with a copy of all leases shown on the Rent Roll; (iii) A certificate of title and any other documentation necessary to transfer title to any vehicles, if any; (iv) Copies of the personnel files of all employees employed at the Property by the Company, if any, and remaining in the employment of Home Properties after the Closing; (v) An executed original of the Registration Rights Agreement and the Lock-Up Agreement in the form attached hereto as EXHIBIT D and EXHIBIT F, respectively; (vi) An estoppel certificate from the Existing Lender confirming that there is no default under the Existing Loan, and that there exists no event that with the passage of time or the giving of notice, or both, would constitute such a default; (vii) Any and all affidavits, certificates or other documents reasonably and customarily required by the Title Company in order to cause it to issue the title policy regarding the Property in the form and condition required by this Agreement; (ix) All keys to the Property in the possession of the Company, which shall remain at the rental office and need not be brought to Closing; (x) Such evidence of the Company's power and authority as the Title Company may reasonably request; (xi) A signed counterpart of the Escrow Agreement in form substantially similar to EXHIBIT G; and (xii) Any additional funds, documents and/or instruments as may be necessary for the proper performance by the Company of its obligations contemplated by this Agreement. (xiii) The representation letter substantially in the form of EXHIBIT C. (b) At the time of Closing, Home Properties shall deliver to the Partnership the following: (i) Evidence of organization, existence and authority of Home Properties and HME and the authority of each person executing documents on behalf of each, reasonably satisfactory to the Partnership; (ii) Such cash as may be required of Home Properties to pay closing costs or charges properly allocable to Home Properties; (iii) An Amendment to the Home Properties' Partnership Agreement in the form necessary to admit the Partnership as limited partners of Home Properties and evidencing the issuance of the OP Units required pursuant to this Agreement; (iv) An executed original of the Registration Rights Agreement in the form attached hereto as EXHIBIT D; and (v) Any additional funds, documents and/or instruments as may be necessary for the proper performance by Home Properties of its obligations contemplated by this Agreement. IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the date first above written. [END OF TEXT] SIGNATURE PAGE TO CONTRIBUTION AGREEMENT BETWEEN HOME PROPERTIES OF NEW YORK, L.P., DEERFIELD WOODS VENTURE LIMITED PARTNERSHIP AND DEERFIELD WOODS HOME PROPERTIES LLC COMPANY: Deerfield Woods Home Properties LLC, a Michigan limited liability company By: Deerfield Woods Venture Limited Partnership, a Michigan limited partnership Its: sole member By: ---------------------------------, a ---------------------------------- Its: General Partner By: ---------------------------------, Printed Name: ---------------- Its: ---------------------------------, SIGNATURE PAGE TO CONTRIBUTION AGREEMENT BETWEEN HOME PROPERTIES OF NEW YORK, L.P., DEERFIELD WOODS VENTURE LIMITED PARTNERSHIP AND DEERFIELD WOODS HOME PROPERTIES LLC PARTNERSHIP: DEERFIELD WOODS VENTURE LIMITED PARTNERSHIP, a Michigan limited liability company By: , ---------------------------------, a ---------------------------------- Its: General Partner By: ---------------------------------, Printed Name: -------------------- Its: ---------------------------------, SIGNATURE PAGE TO CONTRIBUTION AGREEMENT BETWEEN HOME PROPERTIES OF NEW YORK, L.P., DEERFIELD WOODS VENTURE LIMITED PARTNERSHIP AND DEERFIELD WOODS HOME PROPERTIES LLC HOME PROPERTIES: HOME PROPERTIES OF NEW YORK, L.P., a New York limited liability company By: Home Properties of New York, Inc., a New York corporation Its: General Partner By: ---------------------------------, Printed Name: -------------------- Its: ---------------------------------, SIGNATURE PAGE TO CONTRIBUTION AGREEMENT BETWEEN HOME PROPERTIES OF NEW YORK, L.P., DEERFIELD WOODS VENTURE LIMITED PARTNERSHIP AND DEERFIELD WOODS HOME PROPERTIES LLC DISBURSING AGENT: (Solely for the purpose of acknowledging receipt of this Agreement and its agreement to perform the obligations specifically provided herein to be performed by it): , ---------------------------------, a ------------------------------- By: ---------------------------------, Printed Name: ------------- Its: ---------------------------------, EX-2 4 0004.txt EXHIBIT 2.3 CONTRIBUTION AGREEMENT MACOMB MANOR THIS CONTRIBUTION AGREEMENT (this "AGREEMENT") is dated as of this 17th day of December, 1999, and is among HOME PROPERTIES OF NEW YORK, L.P., a limited partnership formed under the laws of New York, having its principal office at 850 Clinton Square, Rochester, New York 14604 ("HOME PROPERTIES"), MACOMB APARTMENTS LIMITED PARTNERSHIP, a limited partnership formed under the laws of Michigan, having its principal office at c/o Schostak Brothers & Company, Inc., 25800 Northwestern Highway, Suite 750, Southfield, Michigan 48075 (the "PARTNERSHIP"), and Macomb Apartments Home Properties LLC, a limited liability company formed under the laws of Michigan, having its principal office at c/o Schostak Brothers & Company, Inc., 25800 Northwestern Highway, Suite 750, Southfield, Michigan 48075 (the "COMPANY"). W I T N E S S E T H : This Agreement is made with reference to the following facts and objectives: A. The Company owns (or, prior to the Closing Date, shall own) a one hundred percent (100%) fee simple interest in a Michigan apartment property comprising 216 dwelling units known as Macomb Manor Apartments (the "PROPERTY"). B. Upon the terms and conditions set forth in this Agreement, Home Properties desires to obtain one hundred percent (100%) of the member interests (the "INTERESTS") in the Company in exchange for assumption of the Existing Loan covering the Property and limited partnership interests (the "OP UNITS") in Home Properties issued to the Partnership. C. It is expected that the exchange of the Interests for OP Units will qualify for Federal income tax purposes, as a tax free transfer, pursuant to Section 721 of the Code, and the parties will file their tax returns and keep their books and records in a manner consistent with this expectation. D. As used in this Agreement with initial capital letters, the following terms, in each instance, shall have the meaning ascribed thereto: "AFFILIATED COMPANIES" shall mean Deerfield Woods Venture Limited Partnership, a Michigan limited partnership, and Deerfield Woods Home Properties LLC, a Michigan limited liability company; "CODE" shall mean and refer to the Internal Revenue Code of 1986, as amended; "CLOSING DATE" shall have the meaning given to it in SECTION 5.2 below; "COMPANY" shall mean Macomb Apartments Home Properties LLC; "ENVIRONMENTAL LAWS" shall mean and refer to any Federal, state, county or municipal environmental, health, chemical use, safety or sanitation law, statute, ordinance or code relating to the protection of the environment, and/or governing the use, storage, treatment, generation, transportation, processing, handling, production or disposal of any Hazardous Materials. and the rules, regulations and orders promulgated and/or issued thereunder; "EXISTING LENDER" shall mean and refer to Eichler, Fayne & Associates; "EXISTING LOAN" shall mean the Note in favor of the Existing Lender, which had an original principal balance of Four Million Two Hundred Ninety Thousand and 00/100 Dollars ($4,290,000.00) and which has a principal balance as of October 31, 1999 of approximately Four Million One Hundred Two Thousand Two Hundred Six and 98/100 Dollars ($4,102,206.98) and which is secured by a mortgage or deed of trust on the Property; "GENERAL PARTNER" shall mean and refer to Macomb Apartments Venture, Inc.; "HAZARDOUS MATERIALS" shall mean and refer to any hazardous substances described or defined in (i) the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended; (ii) the Hazardous Materials Transportation Act, as amended; (iii) the Resource Conservation and Recovery Act, as amended; (iv) the Toxic Substances Control Act, as amended; and (v) any applicable Michigan Environmental Laws, and the regulations promulgated thereunder, in each case, as at the date of this Agreement; "HME" shall mean and refer to Home Properties of New York, Inc., a Maryland corporation (which operates as a self-administered, and self- managed, equity real estate investment trust); "HME COMMON SHARES" shall mean and refer to the shares of common stock in HME, which are traded on the New York Stock Exchange; "HOME PROPERTIES" shall mean and refer to Home Properties of New York, L.P., a New York limited partnership (in which HME is the sole general partner, and through which HME conducts its operational, management and investing activities); "INTERESTS" shall mean and refer to all of the member interests in the Company; "OP UNITS" shall mean and refer to limited partnership interests in Home Properties, which are, subject to restrictions, exchangeable, on a one-to-one basis, for HME Common Shares; "OPERATING PARTNERSHIP AGREEMENT" shall mean and refer to the Second Amended and Restated Agreement of Limited Partnership of Home Properties, as amended; "OPERATING PARTNERSHIP AMENDMENT" shall mean and refer to an amendment to the Operating Partnership Agreement whereby the Partnership is admitted as a limited partner to Home Properties; "PARTNERSHIP" shall mean and refer to Macomb Apartments Limited Partnership, a Michigan limited partnership; "PROPERTY" shall mean and refer to the apartment project known as Macomb Manor Apartments, including: (i) the land occupied by such apartment project (the "LAND"), as more particularly described on EXHIBIT A attached hereto, together with (a) all and singular the easements, rights- of-way, rights, privileges, benefits, tenements, hereditaments and appurtenances thereunto belonging or in anywise appertaining, and (b) all right, title and interest of the Company in and to any land lying in the bed of any street, road, avenue or alley, open or proposed, public or private, in front of, behind, or otherwise adjoining the Land, or any part of the Land, including, without limitation, all right, title and interest of the Company in and to (1) any award made after the date of this Agreement as a result of condemnation, or in lieu thereof, and (2) any unpaid award as at the date of this Agreement as a result of condemnation, or in lieu thereof; and (ii) all buildings, structures, fixtures, facilities, installations and other improvements of every kind and description now or hereafter in, on, over and under the Land (the "IMPROVEMENTS"), including, without limitation, any and all plumbing, air conditioning, heating, ventilating, mechanical, electrical and other utility systems, and fixtures, parking lots and facilities, landscaping, roadways, fences, mail boxes, sidewalks, maintenance buildings, swimming pools and other recreational facilities, security devices, signs and light fixtures. NOW, THEREFORE, in consideration of the foregoing, the mutual covenants, agreements and undertakings herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Company, Partnership and Home Properties agree as follows: ARTICLE I EXCHANGE 1.1 EXCHANGE. (a) Subject to closing under this Agreement, the Partnership, as sole member of the Company, hereby agrees that it will exchange one hundred percent (100%) of the Interests in the Company for OP Units. (b) Prior to the Closing Date, the Partnership shall convey to the Company all right, title and interest of the Partnership in and to the following, which shall remain the property of the Company as of and after the Closing Date: (i) the Property (ii) the Other Items (as hereinafter defined) (iii)all present and subsequent leases with tenants, and/or other occupancy agreements, together with all pending applications for tenancy (in each instance, the "LEASES"); (iv) all service and maintenance contracts, and equipment leases, used or useful in connection with the Property, and which are not to be terminated under this Agreement (in each instance, the "SERVICE CONTRACTS"), including, without limitation, natural gas purchase contracts, vehicle, communication and other equipment leases (the "EQUIPMENT LEASES," and the vehicles and equipment covered thereby being herein called the "LEASED EQUIPMENT"), coin-operated laundry concession leases, and pending purchase orders, all of which are listed on SCHEDULE 1 attached hereto; and (v) all trademarks, service marks, logos, trade, assumed or business names, and telephone numbers related to the use and operation of the Property (in each instance, the "TRADE NAMES"). ARTICLE II CONSIDERATION 2.1 TOTAL CONSIDERATION. The aggregate consideration (the "CONSIDERATION") payable by Home Properties for the Interests shall be Eight Million Five Hundred Fifty Thousand and 00/100 Dollars ($8,550,000.00), payable in OP Units pursuant to SECTION 2.3, subject to adjustments at Closing pursuant to SECTION 2.6 and SECTION 2.7. 2.2 ASSIGNMENT OF MEMBER INTERESTS. (a) On the Closing Date, the Partnership, as sole member of the Company, shall assign the Interests to Home Properties in exchange for the assumption of the indebtedness under the Existing Loan and the Conversion Price and the Deferred Consideration Right as provided below. "CONVERSION PRICE" means the Consideration less the principal amount at the Closing Date of the Existing Loan less the Reserve Amount. (b) "RESERVE AMOUNT" means the sum of (a) an amount equal to the current liabilities of the Company as of the Closing Date (other than the principal amount of the Existing Loan) (the "LIABILITIES RESERVE") and (b) One Hundred Thousand and 00/100 Dollars ($100,000.00) (the "INDEMNITY RESERVE"). The Reserve Amount shall consist of OP Units, the number of which shall be calculated in accordance with the price formula set forth in SECTION 2.3(b) below. The Reserve Amount shall be held and disbursed by the Disbursing Agent (as defined in SECTION 2.3) as described in SECTIONS 2.4 and 2.8. "DEFERRED CONSIDERATION RIGHT" means the right to receive the Reserve Amount less all amounts used to satisfy the current liabilities of the Company ("LIABILITIES CLAIMS") and any amounts paid or subject to claims of Home Properties by reason of a material breach or material misrepresentation of any representations, warranties, covenants or agreements of the Company which survive Closing (but only during the period of such survival) ("INDEMNITY CLAIMS"). 2.3 PAYMENT OF THE CONVERSION PRICE. (a) At Closing, the Reserve Amount shall be delivered to the escrow offices of the Title Company (the "DISBURSING AGENT"), in accordance with the Escrow Agreement. (b) At Closing, the Conversion Price payable to the Partnership as sole member of the Company shall be paid by the issuance of OP Units. The number of OP Units to be issued to the Partnership shall be the Conversion Price divided by the "MARKET VALUE" of an OP Unit. The Market Value of an OP Unit shall be equal to the average closing price of a share of common stock of HME, as listed on the New York Stock Exchange, for twenty (20) consecutive trading days prior to, but not including, the day before the Closing Date; however, if the twenty (20) day average value of an OP Unit is less than Twenty-Six and 00/100 Dollars ($26.00), then the Market Value of an OP Unit shall be deemed to be Twenty-Six and 00/100 Dollars ($26.00), and if the twenty (20) day average value of an OP Unit is greater than Twenty-Eight and 00/100 Dollars ($28.00), then the Market Value of an OP Unit shall be deemed to be Twenty-Eight and 00/100 Dollars ($28.00). (c) Subject to the terms of a Lock-Up Agreement, in the form of EXHIBIT F attached hereto, to be dated the Closing Date, and to the terms of the Operating Partnership Agreement, the OP Units will be convertible into HME Common Shares, on a one-to-one basis, after the elapse of one (1) year from and after the Closing (the "LOCK-UP PERIOD"), during which the Partnership will be restricted from converting, or transferring, any of the OP Units, provided, however, that (i) during the Lock-Up Period the Partnership may transfer OP Units to Accredited Investors (as defined in Regulation D) who are permitted transferees under Section 6.05(c) of the Operating Partnership Agreement and (ii) this restriction shall not be applicable to estates of deceased owners of OP Units. (d) From and after the expiration of the Lock-Up Period, the Partnership shall have all of the transfer, exchange and conversion rights with regard to the OP Units as are set forth in the Operating Partnership Agreement, and the Partnership shall, within the four (4) year period following the expiration of the Lock-Up Period, distribute the OP Units to the partners of the Partnership in proportion to their respective interests. (e) Upon the terms and conditions of a Registration Rights Agreement, in the form of EXHIBIT D attached hereto, to be dated the Closing Date, the Partnership shall have registration rights and a listing commitment with regard to the shares of HME Common Shares into which the OP Units can be converted (the "REGISTRATION RIGHTS"), including demand and piggy back rights. The exercise of Registration Rights shall be without cost to the Partnership. In addition, within ten (10) months after the Closing, HME agrees to file and keep current at its sole cost and expense, a registration statement (the "REGISTRATION STATEMENT") with the SEC registering the resale of the HME Common Shares into which the OP Units may be converted and to use reasonable commercial efforts to have the registration promptly declared effective by the Securities and Exchange Commission ("SEC"). Notwithstanding anything to the contrary contained in this Agreement, in the event that HME has not filed the Registration Statement with the SEC by the date (the "OUTSIDE FILING DATE") which is eleven (11) months after the Closing Date, then for and with respect to each day during the period between the Outside Filing Date and the date on which the Registration Statement is filed with the SEC, Home Properties shall pay to the Partnership, as liquidated damages and not as a penalty, the sum of One Thousand and 00/100 Dollars ($1,000.00). 2.4 PAYMENT WITH RESPECT TO DEFERRED CONSIDERATION RIGHTS. (a) On the 90th day after the Closing Date, the Disbursing Agent shall distribute to the Partnership that portion of the Liabilities Reserve which has not been paid for the liabilities of the Company as provided in this Agreement, and one-half of that portion of the Indemnity Reserve that has not been paid or subject to Indemnity Claims. (b) On the 180th day after the Closing Date, the Disbursing Agent shall distribute to the Partnership that portion of the Indemnity Reserve that has not been paid, disbursed or subject to Indemnity Claims. (c) At any time, and from time to time, after the 180th day after the Closing Date that there is a Final Determination (as defined in EXHIBIT G) that any remaining portion, if any, of the Indemnity Reserve is no longer subject to Indemnity Claims, the Disbursing Agent shall distribute such remaining portion to the Partnership. 2.5 PRORATED DISTRIBUTION. The initial distribution payable with respect to OP Units issued as the Consideration shall be made on the date on which HME pays the dividend to the holders of its common stock that relates to the earnings for the calendar quarter in which the OP Units were issued and shall be pro-rated such that the Partnership shall receive a pro-rata distribution for the period from the date on which the OP Units were issued to and including the last day of the calendar quarter in which the OP Units were issued. 2.6 ADJUSTMENTS AT CLOSING. With respect to the Property, the following shall be adjusted and pro-rated between Home Properties and the Partnership as of the Closing Date as if Home Properties became the owner of the Property as of midnight of the night preceding the Closing Date and as if the Partnership was the owner of the Property prior thereto: (a) real estate and personal property taxes on the usual and customary "due date" basis; (b) water and sewer rents and charges; (c) fuel, electricity and other utilities; (d) charges under the service contracts; (e) laundry income; (f) interest, reserves and escrows with respect to the Existing Loan; and (g) rents. (i) All rent payments and other amounts (hereinafter collectively referred to in this SECTION 2.6 as "RENT") collected on or before the Closing Date for the month in which the Closing Date occurs shall be prorated as between the parties as of the Closing Date. (ii) All rent collected after the Closing Date shall be applied first to the rent due for the month in which such rent was collected and shall then be applied to the next most recent delinquent rent, including any rent which was not collected for any period prior to the Closing Date. Delinquent rent amounts collected with respect to any period prior to the Closing Date shall belong to the Partnership as the former member of the Company and, if paid to Home Properties, Home Properties shall promptly send such rent to the Partnership for distribution to the former partners of the Partnership pursuant to the agreement described in PARAGRAPH (e) of SECTION 7.1. (iii) All rent collected by the Company or the Partnership, prior to the Closing Date, for months subsequent to Closing Date shall be paid to Home Properties on the Closing Date. (iv) All rent collected for rental periods on or after the Closing Date shall belong to Home Properties and, if paid to the Company or the Partnership shall be promptly sent to Home Properties. Any error in the calculation of adjustments shall be corrected and any post-closing receipts or expenditures related to the period prior to Closing shall be prorated subsequent to the Closing Date with appropriate credits to be given based upon corrected adjustments, provided, however, that the adjustments (except if errors are caused by misrepresentations) shall be final upon expiration of the 90th day after the Closing Date. Amounts to be paid as an adjustment in favor of the Company or the Partnership shall be paid by Home Properties in cash at Closing. Amounts to be paid as an adjustment in favor of Home Properties shall, at the option of the Partnership, be paid in cash or charged against the Consideration. 2.7 COSTS. (a) Home Properties shall pay any assumption fees payable to the Existing Lender, all recording fees, the cost of the UCC Searches, the cost of obtaining a Survey map, its attorneys' fees and all other costs and expenses incidental to or in connection with closing this transaction customarily paid for by the purchaser of similar property. The Partnership shall pay its attorneys' fees, any Michigan state and local transfer tax, any recapture as a result of the assignment of the Interests due to the Michigan single business tax, and all other costs and expenses incidental to or in connection with closing this transaction customarily paid for by the seller of similar property. Home Properties and the Partnership shall share equally the costs of the premium for the title insurance policy, except that Home Properties shall be liable for the costs of any endorsements to the title insurance policy. (b) At the Partnership's election, some or all amounts payable pursuant to SECTION 2.7(a) by the Partnership may be charged against the Consideration, in which event Home Properties shall cause same to be paid, or paid in cash. 2.8 ESCROW AGREEMENT. The Reserve Amount shall be held and disbursed pursuant to the terms of an escrow agreement that shall be in form attached hereto as EXHIBIT G. 2.9 INSURANCE REFUND. On the Closing Date, Home Properties shall cause the cancellation of all insurance maintained by the Company and thereafter shall diligently seek to obtain such refunds as may be due on account of such cancellation. Upon receipt of such refunds, Home Properties shall pay them over to the Partnership as former member of the Company for distribution to the partners of the Partnership. ARTICLR III REPRESENTATIONS AND WARRANTIES 3.1 BY THE COMPANY. The Company hereby represents and warrants to Home Properties that each of the following is true, complete and accurate in all material respects as of the date hereof and as of the Closing Date. The phrase "to the best knowledge of the Company" as used in this Agreement shall mean the actual knowledge of David W. Schostak. (a) PROPERTY DESCRIPTION. The Property owned by the Partnership or the Company as of the date hereof and which shall be owned by the Company on the Closing Date shall include 216 apartments and is more particularly described on EXHIBIT A, attached hereto. (b) OTHER ITEMS. Except in nonmaterial respects, the following items now in or on the Property are owned by the Partnership or the Company as of the date hereof and shall be owned by the Company on the Closing Date: (i) all heating, plumbing and lighting fixtures; (ii) ranges, refrigerators, disposals and dishwashers, water heaters; (iii)any and all bathroom fixtures, wall-to-wall carpeting, traverse rods, exhaust fans, hoods, signs, screens, maintenance building, fences, carpeting and runners, cabinets, mirrors, shelving, any humidifier and dehumidifier units, air conditioning units, mailboxes, office furniture, and related equipment in connection with the Project, but specifically excluding washers and dryers which are not owned by the Company; and (iv) any fixtures appurtenant to the Property and any other furniture or equipment used in connection with the operation and maintenance of the Property, including any vehicles used in connection with the operation and maintenance of the Property (hereinafter with the items listed in (l)- (3) above, collectively, the "OTHER ITEMS"). (c) CONDITION OF OTHER ITEMS. To the best knowledge of the Company, substantially all of the Other Items are in reasonable working order or condition. Except with respect to the Existing Loan, the Company has not subjected any of the Other Property to any security interests, liens, claims, charges or other encumbrances. (d) ORGANIZATION AND AUTHORIZATION. The Company is a limited liability company duly organized, validly existing and in good standing under the laws of the State of Michigan and was formed under the laws of the State of Michigan. It has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. The Partnership is the sole member of the Company. (e) AUTHORITY RELATIVE TO THIS AGREEMENT. (i) the Company has full power and authority to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby; (ii) as of the Closing Date, all actions necessary to be taken by it or on its behalf to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby, will have been duly and validly taken; and (iii) this Agreement has been duly and validly executed and delivered by it and, assuming due execution and delivery by Home Properties, constitutes a valid and binding agreement enforceable against it in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting the enforcement of creditors' rights generally as at the time in effect and by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law. (f) CONSENTS AND APPROVALS; NO VIOLATION. To the best knowledge of the Company, neither the execution, delivery and performance of this Agreement nor the consummation of the transactions contemplated hereby will: (i) conflict with or will result in any breach of any provision of its Articles of Organization or Operating Agreement; (ii) require it to obtain any consent, approval, authorization or permit from, or file with or notify, any governmental or regulatory authority, except where the failure to obtain such consent, approval, authorization or permit, or to make such filing or notification, would not have a Material Adverse Effect (defined below); (iii) except to the extent that the consent of the Existing Lender is required for assumption of the Existing Loan, constitute a breach or will result in a default under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, contract, agreement or other instrument or obligation of any kind to which it is a party or by which it is bound, except for any such breach or default as would not have a Material Adverse Effect; or (iv) violate any order, writ, injunction, judgment, decree, law, statute, rule, regulation or governmental permit or license applicable to it, which violation would have a Material Adverse Effect, unless any waiver, consent, approval, authorization, permit, filing or notification necessary to prevent any such conflict, breach, default or violation has been obtained prior to the Closing Date. For purposes of this Agreement, "MATERIAL ADVERSE EFFECT" means a material adverse effect on the business, assets, financial condition or results of operation of the party making the representation or warranty to which such qualification is being applied. (g) LIABILITIES. Except (i) as disclosed in SCHEDULE 3.1(G) attached hereto, (ii) for liabilities and obligations incurred in the normal course of business of the Company including, without limitation, the Existing Loan, and (iii) as otherwise disclosed in this Agreement, the Company has no material liability or obligation of any nature which in any way materially affects or is related to the Property or the Other Items whether now due or to become due, absolute, contingent or otherwise, including liabilities for past due taxes (or any interest or penalties thereto). (h) LITIGATION. Except as disclosed in SCHEDULE 3.1(H) attached hereto, there is no litigation, proceeding or investigation which, to the best knowledge of the Company, is pending, or, to the best knowledge of the Company, threatened, against or affecting the Company or the Property that might affect or relate to the validity of this Agreement or any action taken or to be taken pursuant hereto, or that might have a Material Adverse Effect upon the Property or the Other Items or any part or the operation thereof, unless fully covered by insurance. (i) COMPLIANCE WITH LAWS. To the best knowledge of the Company, without additional investigation, except as disclosed in SCHEDULE 3.1(I) attached hereto, the Company has not received written notice, which remains outstanding that it has not complied with and is in default under, or in violation of, or received any written notice which remains outstanding that the Company, the Property or the Other Items may be in violation of, any law, ordinance, rule, regulation or code or condition in any approval or permit pursuant thereto (including without limitation, any zoning, sign, environmental, labor, safety, health or price or wage control, ordinance, rule, regulation or order of) applicable to the ownership, development, operation or maintenance of the Property or the Other Items. (j) LEASES. There are no written leases affecting the Property to which the Company is a party with a term greater than one (1) year. All leases affecting the Property have been, or will be prior to closing, assigned to the Company as landlord. The rent roll attached hereto as SCHEDULE 3.1(J) is true and correct as of the date of this Agreement. (k) CONDEMNATION. To the best of the knowledge of the Company, without additional investigation, the Company has not received written notice of pending condemnation of the Property, or any part thereof, or of any plans for improvements which might result in a special assessment against the Property. (l) SERVICE CONTRACTS. There are no Service Contracts with respect to the Property or the Other Items which will continue in effect after the Closing except as set forth on SCHEDULE 3.1(L) attached hereto. (m) EXECUTORY CONTRACTS. There are no executory contracts connected with the Property or the Other Items, except as set forth on SCHEDULE 3.1(M) attached hereto. (n) ONGOING PERFORMANCE. Until the Closing Date, the Company shall continue to fulfill all of its obligations under the terms of the Existing Mortgage, the leases encumbering the Property, the service contracts and the executory contracts, and the Company shall operate, and perform maintenance and repair with respect to, all landscaping, buildings, fixtures and facilities, including, without limitation, the Other Items, in a commercially reasonable manner and in accordance with its current practice. (o) APPLIANCES. All of the ranges and refrigerators in the Property are the property of the Company and not of the tenants. (p) ENVIRONMENTAL. To the best of the knowledge of the Company, without additional investigation, except as identified in the report described in SCHEDULE 3.1(P) attached hereto, the Company has received no notice of any violation of any applicable Environmental Laws. (q) TAXES. The Company has filed or will file when due all notices, reports and returns of Taxes (as defined below) required to be filed before the Closing Date and has paid or, if due after the date hereof and prior to the Closing Date, will pay, all Taxes and other charges for the periods shown to be due on such notices, reports and returns. "TAXES" shall mean all taxes, charges, fees, levies or other assessments, including, without limitation, income, excise, property, sale, gross receipts, employment and franchise taxes imposed by the United States, or any state, county, local or foreign government, or subdivision or agency thereof with respect to the assets or the business of the Company, and including any interest, penalties or additions attributable thereto. (r) (i) All of the representations and warranties of the Company set forth in this Agreement shall survive the Closing for a period of one (1) year following Closing, and shall not be deemed to have merged in any document delivered at the Closing. Any claim for any breach of any representation or warranty of the Company shall be brought, if at all, within one (1) year from the date of Closing or thereafter be forever barred except for any claim relating to an intentional and material misrepresentation or fraud, which claim shall not be subject to such time limit. (ii) The Company agrees to indemnify Home Properties, and hold harmless and defend Home Properties, from and against any and all losses, costs, claims, liabilities, damages and expenses, including, without limitation, reasonable attorneys' fees, arising as the result of a material breach of any of the representations and warranties of the Company, set forth in this Agreement. (iii)Except as expressly provided in this Agreement, the Company has made no representations and/or warranties regarding the Properties, and, except as expressly set forth in this Agreement, Home Properties shall, at Closing, accept each Property in "AS IS" condition, with all faults, and without any other representations or warranties of any kind, whether as to merchantability, or fitness for a particular purpose, or otherwise. 3.2 BY HOME PROPERTIES. Home Properties hereby represents and warrants to the Company that each of the following is true, complete and accurate as of the date hereof and as of the Closing Date and thereafter, as set forth in subparagraph <> below. (a) ORGANIZATION AND AUTHORIZATION. Home Properties is a limited partnership duly organized, validly existing and in good standing under the laws of the State of New York and was formed under the New York Act. It has all requisite power and authority to own, lease and operate its properties and to carry on its business as now being conducted. It is duly qualified or licensed to do business as a foreign limited partnership and in good standing in each jurisdiction in which the property owned, leased or operated by it makes such qualification or license necessary, except in each case in those jurisdictions where the failure to be so duly qualified or licensed and in good standing would not have a Material Adverse Effect. (b) AUTHORITY RELATIVE TO THIS AGREEMENT. Subject to receipt of approval of the Board of Directors of HME as provided by SECTION 7.1(d) below, (i) Home Properties has full power and authority to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby; (ii) all actions necessary to be taken by it or on its behalf to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby, have been duly and validly taken; and (iii) this Agreement has been duly and validly executed and delivered by it and, assuming due execution and delivery by the Company and the Partnership, constitutes a valid and binding agreement enforceable against it in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting the enforcement of creditors' rights generally as at the time in effect and by general principles of equity, regardless or whether such enforceability is considered in a proceeding in equity or at law. (c) CONSENTS AND APPROVALS; NO VIOLATIONS. To the best of Home Properties' knowledge, as of the Closing Date, neither the execution, delivery and performance of this Agreement, the Registration Rights Agreement, the Operating Partnership Amendment, or the other agreements contemplated by this Agreement, nor the issuance and delivery of the OP Units, nor the consummation of the transactions contemplated hereby will: (i) conflict with or will result in any breach of any provision of the Operating Partnership Agreement or Certificate of Limited Partnership; (ii) require it to obtain any consent, approval, authorization or permit from, or file with or notify, any governmental or regulatory authority, except where the failure to obtain such consent, approval, authorization or permit, or to make such filing or notification, would not have a Material Adverse Effect; (iii) constitute a breach or will result in a default under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, contract, agreement or other instrument or obligation of any kind to which it is a party or by which it is bound, except for any such breach or default as would not have a Material Adverse Effect; or (iv) violate any order, writ, injunction, judgment, decree, law, statute, rule, regulation or governmental permit or license applicable to it, which violation would have a Material Adverse Effect, unless, any waiver, consent, approval, authorization, permit, filing or notification necessary to prevent any such conflict, breach, default or violation has been obtained prior to the Closing Date. (d) PARTNERSHIP INTERESTS. On the Closing Date, the OP Units to be issued as provided in this Agreement shall be duly issued by Home Properties and the Partnership will be duly admitted as a limited partner of Home Properties. (e) OPERATING PARTNERSHIP AGREEMENT. A true, correct and complete copy of Operating Partnership Agreement is attached hereto as EXHIBIT B. Home Properties hereby agrees that, with the following exceptions, the Operating Partnership Agreement shall not be further amended on or prior to the Closing Date: (i) the Operating Partnership Amendment, (ii) amendments in connection with the issuance of additional shares of common stock by HME, and (iii) amendments to reflect the issuance of additional OP Units in connection with other transactions wherein additional OP Units are issued in connection with the acquisition of real property or of interests in entities which own real property. (f) LITIGATION. To the best knowledge of Home Properties, there is no litigation, proceeding or investigation pending, or threatened, against or affecting Home Properties, or HME, that might affect the validity of this Agreement, or any action taken, or to be taken, by Home Properties, or HME, pursuant to this Agreement, or that might have a material adverse effect on the business of Home Properties. (g) CONDITION OF TITLE TO OP UNITS. At the Closing, Home Properties shall deliver to the Partnership good and marketable title to the OP Units, free and clear of all liens, charges, encumbrances and restrictions, except as contained in the Operating Partnership Agreement, the Registration Rights Agreement, and the Lock-Up Agreement, and shall, by execution of the Operating Partnership Amendment, admit the Partnership as a limited partner in Home Properties. (h) ACCURACY OF FINANCIAL INFORMATION. All financial information heretofore or hereafter furnished by HME or Home Properties concerning such entities is, and shall be, true, complete and correct in all material respects as of the date therein specified. All of the information furnished and statements made by HME or Home Properties to the Company or the Partnership with respect to this Agreement, and in the periodic filings (as updated) by HME or Home Properties with the Securities and Exchange Commission, are true and correct in all material respects and do not misstate or fail to state any material fact. (i) FINANCIAL CONDITION. HME or Home Properties has not (A) made a general assignment for the benefit of creditors; (B) admitted in writing its inability to pay its debts as they mature; (C) had an attachment, execution or other judicial seizure of any property interest which remains in effect; or (D) become generally unable to meet its financial obligations as they mature. (j) DEBTOR PROCEEDINGS. There is not pending any case, proceeding or other action seeking reorganization, arrangement, adjustment, liquidation, dissolution or recomposition of HME or Home Properties, or the debts of HME or Home Properties, under any law relating to bankruptcy, insolvency, reorganization or the relief of debtors, or seeking the appointment of a receiver, trustee, custodian or other similar official for HME or Home Properties. (k) LIABILITIES. Except (A) as disclosed in writing to the Partnership; (B) for liabilities and obligations incurred in the normal course of business of HME or Home Properties; and (C) as otherwise disclosed in this Agreement or in periodic filings (as updated) by HME or Home Properties, HME and Home Properties has no material liability or obligation of any nature which in any way materially affects their financial statements, whether now due or to become due, absolute, contingent or otherwise, including liabilities for taxes (or any interest or penalties thereto). (l) TAX FILINGS. HME and Home Properties will file when due all notices, reports and returns of Taxes (as defined below) required to be filed after the Closing Date and will pay, all Taxes and other charges for the periods shown to be due on such notices, reports and returns arising after Closing. For purposes hereof, "taxes" shall mean all taxes, charges, fees, levies or other assessments, including, without limitation, income, excise, property, sale, gross receipts, employment and franchise taxes imposed by the United States, or any state, county, local or foreign government, or subdivision or agency thereof with respect to the assets or the business of the Company, and including any interest, penalties or additions attributable thereto, which arise after Closing. (m) ASSUMPTION OF LIABILITIES. HME and Home Properties will be responsible for all activities, operations, debts, liabilities of and claims against the Company which arise and result from occurrences from and after Closing. (n) INDEMNIFICATION. HME and Home Properties will promptly, timely and accurately make all announcements regarding this transaction to the public and as otherwise may be required by the applicable securities laws. HME and Home Properties will indemnify and save the Partnership and the Company from and against any and all liability, claims, damages, costs and expenses arising by or through HME or Home Properties with respect to the offering of OP Units pursuant to this Agreement and with respect to public statements regarding the transaction contemplated by this Agreement; provided, however, that such indemnity shall not apply to statements made or damages caused directly by the Partnership or the General Partner. (o) REIT. Home Properties shall use its reasonable efforts to cause HME to continue to be taxed as a real estate investment trust under the Code unless the Board of Directors of HME determines that it is in the best interest of the shareholders of HME to be taxed otherwise. (p) (i) All of the representations and warranties of Home Properties, and HME, set forth in this Agreement, including, without limitation, the following indemnity, shall survive the Closing for a period of one (1) year following Closing, except subparagraphs (h) and (m) above which shall not be subject to the foregoing one (1) year limitation, and except subparagraph (o) which shall survive the Closing for a period of ten (10) years, and shall not be deemed to have merged in any document delivered at the Closing. Any claim for any breach of any representation or warranty of the Company shall be brought, if at all, within one (1) year from the date of Closing (except as to subparagraph (o) for which the time limit shall be 10 years) or thereafter be forever barred except for claims arising under subparagraphs (h) and (m), and except for any claim relating to an intentional and material misrepresentation or fraud, which claims shall not be subject to such time limit. (ii) Home Properties and HME agree to indemnify the Company and the Partnership, and hold harmless and defend each of the Company and the Partnership, from and against any and all losses, costs, claims, liabilities, taxes (including taxes on any indemnification amount), damages and expenses, including, without limitation, reasonable attorneys' fees, arising as the result of a breach of any of the obligations, covenants, representations and/or warranties of Home Properties and/or HME set forth in this Agreement. 3.3 BY THE PARTNERSHIP. The Partnership hereby represents and warrants to Home Properties that each of the following is true, complete and accurate in all material respects as of the date hereof and as of the Closing Date. The phrase "to the best knowledge of the Partnership" as used in this Agreement shall mean the actual knowledge of David W. Schostak. (a) CONSENTS. The Partnership has obtained any consents of its partners necessary to the prior transfer of the Property to the Company and to the transaction contemplated by this Agreement. (b) ORGANIZATION AND AUTHORIZATION. The Partnership is a limited partnership duly organized, validly existing and in good standing under the laws of the State of Michigan and was formed under the laws of the State of Michigan. (c) AUTHORITY RELATIVE TO THIS AGREEMENT. (i) the Partnership has full power and authority to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby; (ii) as of the Closing Date, all actions necessary to be taken by it or on its behalf to execute, deliver and perform this Agreement and to consummate the transactions contemplated hereby, will have been duly and validly taken; and (iii) this Agreement has been duly and validly executed and delivered by it and, assuming due execution and delivery by Home Properties, constitutes a valid and binding agreement enforceable against it in accordance with its terms, except to the extent that enforceability may be limited by applicable bankruptcy, reorganization, insolvency, moratorium or similar laws affecting the enforcement of creditors' rights generally as at the time in effect and by general principles of equity, regardless of whether such enforceability is considered in a proceeding in equity or at law. (d) CONSENTS AND APPROVALS; NO VIOLATION. To the best knowledge of the Partnership, neither the execution, delivery and performance of this Agreement nor the consummation of the transactions contemplated hereby will: (i) conflict with or will result in any breach of any provision of its Partnership Agreement or Certificate of Limited Partnership; (ii) require it to obtain any consent, approval, authorization or permit from, or file with or notify, any governmental or regulatory authority, except where the failure to obtain such consent, approval, authorization or permit, or to make such filing or notification, would not have a Material Adverse Effect (defined above); (iii) except to the extent that the consent of the Existing Lender is required for assumption of the Existing Loan, constitute a breach or will result in a default under any of the terms, conditions or provisions of any note, bond, mortgage, indenture, license, contract, agreement or other instrument or obligation of any kind to which it is a party or by which it is bound, except for any such breach or default as would not have a Material Adverse Effect; or (iv) violate any order, writ, injunction, judgment, decree, law, statute, rule, regulation or governmental permit or license applicable to it, which violation would have a Material Adverse Effect, unless any waiver, consent, approval, authorization, permit, filing or notification necessary to prevent any such conflict, breach, default or violation has been obtained prior to the Closing Date. (e) LITIGATION. Except as disclosed in SCHEDULE 3.3(E) attached hereto, there is no litigation, proceeding or investigation which, to the best knowledge of the Partnership, is pending, or, to the best knowledge of the Partnership, threatened, against or affecting the Partnership or the Property that might affect or relate to the validity of this Agreement or any action taken or to be taken pursuant hereto, or that might have a Material Adverse Effect upon the Property or the Other Items or any part of the operation thereof, unless fully covered by insurance. (f) COMPLIANCE WITH LAWS. To the best knowledge of the Partnership, without additional investigation, except as disclosed in SCHEDULE 3.3(F) attached hereto, the Partnership has not received written notice, which remains outstanding that it has not complied with and is in default under, or in violation of, or received any written notice which remains outstanding that the Partnership, the Property or the Other Items may be in violation of, any law, ordinance, rule, regulation or code or condition in any approval or permit pursuant thereto (including without limitation, any zoning, sign, environmental, labor, safety, health or price or wage control, ordinance, rule, regulation or order of) applicable to the ownership, development, operation or maintenance of the Property or the Other Items. (g) LEASES. As of the Closing, all leases affecting the Property shall have been assigned to the Company as landlord. (h) TAXES. The Partnership has filed, or will file when due, all notices, reports and returns of Taxes (as defined above) required to be filed before the Closing Date and has paid or, if due after the date hereof and prior to the Closing Date, will pay, all Taxes and other charges for the periods shown to be due on such notices, reports and returns. (i) (1) All of the representations and warranties of the Partnership set forth in this Agreement shall survive the Closing for a period of six (6) months following Closing, and shall not be deemed to have merged in any document delivered at the Closing. Any claim for any breach of any representation or warranty of the Partnership shall be brought, if at all, within six (6) months from the date of Closing or thereafter be forever barred except for any claim relating to an intentional and material misrepresentation or fraud, which claim shall not be subject to such time limit. (2) The Partnership agrees to indemnify Home Properties, and hold harmless and defend Home Properties, from and against any and all losses, costs, claims, liabilities, damages and expenses, including, without limitation, reasonable attorneys' fees, arising as the result of a material breach of any of the representations and warranties of the Partnership, set forth in this Agreement. (3) Except as expressly provided in this Agreement, the Partnership has made no representations and/or warranties regarding the Properties, and, except as expressly set forth in this Agreement, Home Properties shall, at Closing, accept each Property in "AS IS" condition, with all faults, and without any other representations or warranties of any kind, whether as to merchantability, or fitness for a particular purpose, or otherwise. (4) Notwithstanding anything to the contrary contained in this Agreement, neither the General Partner nor any other partners of the Partnership shall have any personal liability, and no action of any kind shall be maintained against any of them or their respective assets, with respect to this Agreement and/or the transactions described in this Agreement, and Home Properties, its successors and assigns, shall look solely to the assets of the Partnership and the cash or assets held by the Disbursing Agent pursuant to SECTION 2.2(b) above, for the payment of any claim against or the performance of any obligation of the Partnership. The foregoing limitation of liability shall not apply in the case of fraud or intentional and material misrepresentation; provided, however, that in no event shall any limited partner have any liability under this Agreement except in the event that such limited partner makes a fraudulent or intentional and material misrepresentation in any assignment or investor questionnaire regarding such limited partner's interest which will be conveyed to Home Properties at Closing. ARTICLE IV COVENANTS OF THE PARTIES 4.1 FURTHER ASSURANCE. Subject to the terms and conditions of this Agreement, each of the parties hereto will use reasonable efforts to take, or cause to be taken, all actions, and to do, or cause to be done, all things necessary under applicable laws and regulations to consummate the transactions contemplated by this Agreement. 4.2 REPRESENTATIONS AND WARRANTIES. Each of the parties hereto shall give written notice to the other party promptly upon the occurrence of, or upon becoming aware of, either: (a) any condition or event which, if known on the date hereof, would have made any representation or warranty contained in this Agreement not true in any material respect; or (b) any material and adverse development in the condition (financial or otherwise) or operations of such party. 4.3 FINANCIAL ACCESS. (a) On the Closing Date, the Company and/or the Partnership will provide a signed representation letter substantially in the form of EXHIBIT C attached hereto. The Company and the Partnership will provide access to Home Properties' representative to all financial and other information relating to the Company, the Partnership and the Property as is sufficient to enable them to prepare audited and pro-forma financial statements, in conformity with Regulation S-X of the Securities and Exchange Commission (the "COMMISSION") and any registration Statement, report or disclosure statement to be filed with the Commission. (b) Prior to the Closing Date, Home Properties shall from time to time, promptly after request, supply to the Partnership, and certify to the Partnership the accuracy and completeness of, copies of any financial statements and records and other documents and information requested by the Partnership regarding Home Properties and HME which are available to the public. (c) The Parties hereto recognize that for federal income tax purposes: (i) the Company is disregarded as a separate entity; and (ii) the Partnership is deemed to own all of the assets actually owned by the Company. Accordingly, at the Closing Date, the Partnership will be treated for federal income tax purposes as having contributed all of the Company's assets to Home Properties in exchange for the Consideration. The parties hereto shall prepare their tax returns for their respective taxable years which include the Closing Date consistent with that characterization of the transaction. 4.4 NEGATIVE COVENANTS. The Company agrees that, prior to the Closing Date, it will not take any of the following actions without first obtaining Home Properties' prior written consent, which consent shall not be unreasonably withheld or delayed: (a) Create, incur or assume any indebtedness for money borrowed, including obligations in respect of capital leases, except: (i) purchase money mortgages granted in connection with the acquisition of property in the ordinary course of business consistent with past practice; and (ii) short-term indebtedness for borrowed money in accordance with loan agreements and lines of credit in effect as of the date hereof. (b) Assume, guarantee, endorse or otherwise become liable or responsible (whether directly, contingently or otherwise) for the obligations of any other person except in the ordinary course of business consistent with past practices. (c) Sell or otherwise dispose of or abandon any of its assets except in the ordinary course of business. (d) Increase the rate or terms of: (i) compensation payable or to become payable to any of its employees; or (ii) any bonus, insurance, pension or other employee benefit plan, payment or arrangement made to, for or with any employee, except salary increases to site employees not exceeding three percent (3%) occurring in the ordinary course of business in accordance with its customary practices (which shall include normal periodic performance reviews and related compensation and benefit increases). (e) Enter into any agreement, commitment or transaction (including, without limitation, any borrowing, capital expenditure or capital financing), material to the business, operations or financial condition of its business, except agreements, commitments or transactions in the ordinary course of business consistent with past practice. (f) Transfer, mortgage, pledge, grant any security interest in or permit the imposition of any lien or other encumbrance on any of its assets other than in the ordinary course of business consistent with past practice. 4.5 MANAGEMENT AGREEMENTS. On or prior to the Closing Date, the Company shall terminate any agreements pertaining to the management of the Property. 4.6 CLOSING DOCUMENTS. On the Closing Date, the Company shall deliver to Home Properties a certificate of title and any necessary transfer documents relating to any vehicles, a current rent roll ("RENT ROLL") certified as of the date of the Closing Date, which shall include a list of all tenants, all rental obligations of each tenant with respect to the Property and all security deposits (including all interest due to tenants pursuant to Michigan or other applicable laws). On the Closing Date, the Partnership shall either transfer to the Company an amount equal to the aggregate amount of the security deposits shown on the Rent Roll (including all interest due to tenants pursuant to Michigan or other applicable laws), or the OP Units payable to the Partnership shall be reduced by such amount, and, in either event, the Company shall assume all obligations related to the security deposits. On the Closing Date, the Company shall also deliver to Home Properties complete originals of each lease listed on the Rent Roll, to the extent available. On the Closing Date, the Partnership and Home Properties shall deliver to each other an assignment and assumption of the Interests, which shall include mutual indemnities related to the Company's liabilities with respect to the ownership of the Property prior to and after the Closing Date. 4.7 TAX PROVISIONS. Home Properties agrees to observe and comply with the following: (a) At all times for and during a period of ten (10) years from and after the Closing Date, Home Properties shall allocate to the Partnership or then-holders of OP Units originally issued to the Partnership ("UNIT HOLDERS"), for Federal Income tax purposes (i) pursuant to Section 752 of the Code and Section 1.752-3 of the Treasury Regulations, nonrecourse debt of Home Properties in an aggregate amount not less than the deficit in the Partnership's capital (i.e., the excess of the Partnership's debts over the adjusted tax basis of the Partnership's assets ("CAPITAL ACCOUNT DEFICIT"), as adjusted from time to time for income or loss allocated, and cash distributed, to the Partnership by Home Properties, and (ii) sufficient qualified nonrecourse financing (within the meaning of Section 465(b)(6) of the Code) to prevent the application of Subsection 465(e) of the Code to the Unit Holders. (b) The initial Capital Account Deficit shall be determined as at (just prior to) the contribution of the Partnership's interest in the Company to Home Properties on the Closing Date, and shall be based upon the estimated information set forth in SECTION 4.8(a) and shall be updated based upon the information set forth in a schedule to be furnished by the accountant for the Partnership within the time required by SECTION 4.8(b) hereof. Thereafter, for a period of ten (10) years from and after the Closing Date, the Capital Account Deficit shall be adjusted annually to reflect income or loss allocated, and cash distributed, to the Partnership by Home Properties. Home Properties will use the traditional method (and not the curative or remedial method), as contemplated by Treasury Regulations Section 1.704-3(b) to allocate book- tax differences with respect to the assets which are deemed contributed to Home Properties by the Partnership. (c) Home Properties agrees that for a period of ten (10) years following the Closing Date, (i) Home Properties shall not prepay, additionally secure or otherwise restructure the debt allocable to and encumbering the Property in such manner as to cause a reduction in the amount of the Partnership's share (determined under Section 1.752-3 of the Treasury Regulations) of nonrecourse debt without the Partnership's prior written consent, and (ii) Home Properties will not dispose of any of its interest in the Property, unless such Property is exchanged for property of like kind ("REPLACEMENT PROPERTY") on a tax-deferred basis under Section 1031 of the Code, or otherwise is tax-deferred beyond the ten (10) year period referred to in SECTION 4.7(a) hereof. Replacement Property acquired by Home Properties pursuant to such tax- deferred, like-kind exchange shall remain subject to the restriction on disposition contained hereunder until the end of the aforesaid ten (10) year period. For a period of five (5) years following the expiration of the ten (10) year period after the Closing Date, Home Properties agrees that, in the event that it desires to sell, exchange, transfer or otherwise dispose of the Property or Replacement Property, it will use commercially reasonable efforts to effectuate such Property transfer in such manner as to be tax free to the Partnership or Unit Holders. (d) In the event that Home Properties takes any action prohibited by SECTION 4.7(a) or (c) hereof, Home Properties shall indemnify and save harmless the Partnership or the Unit Holders from and against any federal and state income tax liability, including but not limited to: (i) income taxes suffered as a result of all payments made under this subsection; and (ii) interest, penalties and the reasonable fees of attorneys and accountants. For this purpose, the Partnership or Unit Holders shall be conclusively deemed to be liable for (and Home Properties shall indemnify and save the Partnership or Unit Holders harmless from and against) tax on any income or gain of the Partnership or Unit Holders, and on any payments to the Partnership or Unit Holders made under this SECTION 4.7(b) in an amount equal to the product of such income, gain or payment and the highest combined rate of Federal and State of Michigan income tax applicable to individuals with respect to income or gain of the type in question. (e) Distributions with respect to the OP Units will be identical in amount and timing to the dividends on HME Common Shares, except that the initial distribution payable with respect to the OP Units shall be issued in accordance with SECTION 2.5. (f) Future transactions involving HME, or Home Properties, including, without limitation, merger(s), sale(s) of assets or similar transactions, shall be structured in such manner as to (i) not result in an amendment to the definition of "Conversion Factor" as it is currently included in the Operating Partnership Agreement; (ii) prevent, in the context of such a transaction, a different per unit value being assigned to the OP Units issued to the Partnership or Unit Holders than the value assigned per share to the then outstanding HME Common Shares; and (iii) for a period of ten (10) years from and after the Closing Date, not interfere with the tax deferred nature of the transaction contemplated by this Agreement with respect to the OP Units issued to the Partnership or Unit Holders. 4.8 PARTNERSHIP FINANCIAL INFORMATION. (a) The Partnership represents that, to the best of the Partnership's knowledge, as of December 31, 1999: (i) the adjusted basis of the Property for Federal income tax purposes (including adjustments to basis made pursuant to Sections 734 and 743 of the Code) will be One Million Four Hundred Thirty-Four Thousand Nine Hundred Fifteen and 00/100 Dollars ($1,434,915.00); (ii) the amount of nonrecourse debt encumbering the Property will be Four Million Ninety-One Thousand Three Hundred Thirty and 00/100 Dollars ($4,091,330.00), and (iii) the estimated initial Capital Account Deficit of the Partnership (computed on a tax basis and taking into account adjustments to basis made pursuant to Sections 734 and 743 of the Code and the tax basis of certain other assets to be transferred with the Property) will be Two Million Four Hundred Thousand and 00/100 Dollars ($2,400,000.00). (b) Within one hundred twenty (120) days of the Closing Date the Partnership shall also provide Home Properties with a schedule showing: (i) the net book value of the Property as of the Closing Date; and (ii) an update to SECTION 4.8(a) providing the actual information which was estimated in such Section and detail with respect to assets of the Partnership necessary to determine the initial Capital Account Deficit. To the extent (and only to the extent) that there is any inaccuracy in the information provided by the Partnership to Home Properties pursuant to SECTIONS 4.8(a) and (b) or if the update to SECTION 4.8(a) provided pursuant to this SECTION 4.8(b) is materially different from the information contained in SECTION 4.8(a), then Home Properties shall not be liable to the Partnership for the tax on any gain to the Partnership that results from such inaccuracy or material difference. Home Properties shall not be liable to the Partnership for the tax on any gain to the Partnership that results from Home Properties' inability to comply with the obligations of SECTION 4.7(a) of this Agreement as a result of the Partnership's failure to distribute OP Units as provided in SECTION 2.3(d) of this Agreement. The information in SECTION 4.7 shall be calculated in a manner consistent with the calculations made for federal income tax depreciation purposes. ARTICLE V INSPECTION; CLOSING DATE 5.1 INSPECTION. Except as expressly provided in this Agreement, Home Properties acknowledges that it is acquiring the Property "AS IS" based on Home Properties' inspection. Subject to the rights of existing tenants at the Property, Home Properties shall have a period of thirty (30) days from and after the date of this Agreement (the "DUE DILIGENCE PERIOD") within which to cause one (1) or more surveyors, attorneys, engineers, auditors, architects, and/or other experts of its choice (a) to inspect any document related to any Property, including, without limitation, all Leases and related documents, documents pertaining to the Existing Loan, working drawings, plans and specifications, surveys, appraisals, engineer's reports, environmental reports, insurance policies, service contracts, real estate tax receipts and annual and monthly operating statements, and (b) to inspect, examine, survey, appraise and obtain engineering inspection and environmental reports with respect to the Property, documents pertaining to the Existing Loans, or all of the Property, and otherwise to do all that, which, in the opinion of Home Properties, is necessary to determine the condition and value of the Property for the uses intended by Home Properties; provided, however, that Home Properties shall not conduct any environmental study of any Property beyond a Phase 1 level without the consent of the Company, which consent shall not be unreasonably withheld. Home Properties may declare the Due Diligence Period ended at any earlier time. Home Properties must be satisfied in all respects (in the sole and absolute discretion of Home Properties) with the results of all reviews, inspections and investigations conducted by, or under, Home Properties during the Due Diligence Period. If Home Properties shall not be so satisfied, Home Properties may, within the Due Diligence Period, terminate this Agreement, in which event Home Properties shall have no obligation or liability under this Agreement, or with regard to the Company or the Property, and Home Properties shall be entitled to the immediate return of the Deposit, and this Agreement shall, thereafter, be null, void and of no further force or effect (other than with respect to the indemnities and agreements that expressly survive termination of this Agreement). If not so terminated by Home Properties, this Agreement shall continue in full force and effect according to its terms, and, subject to the closing conditions, Home Properties shall be deemed to have waived its right to object to the condition of, or any document pertaining to, the Property. Home Properties shall be responsible for payment of all of the costs of its due diligence activities, including, without limitation, all engineering and environmental reports, and all financial and Lease audits. Home Properties shall indemnify and hold the Company harmless from and against any and all loss, claims, damage and expense arising out of entry by Home Properties and its agents onto the Property and any testing performed thereon; Home Properties shall repair any damage which it may cause as a result of any such entry and testing; Home Properties shall cause its entry, inspections and testing (if any) to be conducted in a manner so as to minimize disruption to tenants at the Property. The indemnities in this SECTION 5.1 shall survive the Closing and/or the termination of this Agreement. 5.2 CLOSING DATE. If this Agreement has not been terminated by Home Properties, or the Partnership, for any of the reasons set forth in this Agreement, and within the time(s) herein limited, the closing of the transaction contemplated by this Agreement ("CLOSING") shall occur no later than fifteen (15) days following the later of (i) approval by the Existing Lender of the assumption of the Existing Loan and (ii) expiration of the Due Diligence Period, but in no event prior to January 14, 2000 ("CLOSING DATE"). Home Properties and HME agree to use commercially reasonable good faith efforts to expeditiously attempt to obtain all necessary approvals of the Existing Lender; provided, however, that if such approval cannot be obtained prior to the Closing Date, the Partnership or Home Properties may elect to postpone the Closing Date up to 30 days as necessary to obtain such approvals. The Closing shall be held at the offices of the Partnership's attorneys, at such time, or at such other place, as may be mutually agreed upon by the parties. ARTICLE VI CONDITIONS TO THE OBLIGATIONS OF THE COMPANY 6.1 CONDITIONS TO PARTNERSHIP'S AND COMPANY'S OBLIGATIONS. The obligations of the Partnership and Company under this Agreement shall be subject to the satisfaction of the following conditions precedent ("PARTNERSHIP'S CONDITIONS"). (a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of Home Properties set forth herein shall be true and correct in all material respects as of the Closing Date, as certified in writing by the general partner of Home Properties. (b) COVENANTS. Home Properties has complied, in all material respects, with the covenants made by it in this Agreement to be complied with by it from the date hereof through the Closing Date. (c) REGISTRATION RIGHTS AGREEMENT. The Partnership and Home Properties shall have entered into a registration rights agreement in the form of EXHIBIT D attached hereto. (d) APPROVAL TO ASSUME LOAN. The Existing Lender shall have approved the assumption of the Existing Loan by the Company and Home Properties and the Existing Lender's counsel shall have prepared all necessary assumption documents and shall otherwise be prepared to close the assumption of the Existing Loan. (e) SIMULTANEOUS CLOSING. Closing hereunder shall occur simultaneously with closing pursuant to the Contribution Agreement which has been executed by and between the Affiliated Companies and Home Properties. (f) PARTNERSHIP INFORMATION. Home Properties has provided to the Partnership: (i) evidence acceptable to the Company of due formation, existence and good standing of Home Properties; (ii) certification that the person signing documents on behalf of Home Properties is authorized to do so; (iii) Secretary's Certificate certifying that the Board of Directors of HME has duly adopted resolutions authorizing the transaction contemplated by this Agreement, and the execution of the Closing documents to be executed and delivered by Home Properties pursuant to this Agreement; and (iv) a certified copy of the Operating Partnership Agreement. 6.2 EFFECT OF FAILURE TO SATISFY CONDITION. Subject to SECTION 9.11(b), if any of the Partnership's Conditions shall not have been fulfilled by Home Properties, or otherwise satisfied, or waived by the Partnership within the time provided, the Partnership shall have the right to terminate this Agreement by written notice to Home Properties, in which event the Deposit shall be returned to Home Properties, and this Agreement shall, thereafter, be deemed to be null and void and of no further force or effect, and no party shall have any further rights or obligations under this Agreement (other than with respect to those indemnities and agreements that expressly survive termination of this Agreement). ARTICLE VII CONDITIONS TO THE OBLIGATIONS OF HOME PROPERTIES 7.1 CONDITIONS TO HOME PROPERTIES' OBLIGATIONS. The obligations of Home Properties under this Agreement shall be subject to the satisfaction of the following conditions precedent ("HOME PROPERTIES' CONDITIONS"). (a) REPRESENTATIONS AND WARRANTIES. The representations and warranties of the Company and Partnership set forth in this Agreement shall be true and correct in all material respects as of the Closing Date, as certified in writing. (b) COVENANTS. The Company and Partnership have complied, in all material respects, with the covenants made by them in this Agreement to be complied with by them from the date hereof through the Closing Date. (c) CONDITION OF PROPERTY. Subject to SECTION 9.12, there has been no material adverse change in the condition of the Property from its condition at the expiration of the Due Diligence Period. (d) APPROVALS. Home Properties has obtained the requisite approval of the Board of Directors of HME to the transactions described in this Agreement on the terms and conditions described herein, including, without limitation, the Operating Partnership Amendments, within the Due Diligence Period, which such Board approval Home Properties agrees to use all good faith efforts to obtain. (e) PARTNERSHIP AGREEMENT. The Partnership shall have executed an agreement whereby it agrees that it will be responsible for making all final distributions to the partners of the Partnership and shall indemnify Home Properties from all claims relating thereto. (f) INSPECTION. Home Properties has been satisfied within the time provided in its sole discretion with the results of the inspection, or has not terminated this Agreement, as provided by SECTION 5.1. (g) PARTNERSHIP AND LLC INFORMATION. The Company, or the Partnership, as applicable, has provided to Home Properties: (i) evidence acceptable to Home Properties of due formation, existence and good standing of the Company and the Partnership; (ii) certification that the person signing documents on behalf of the Company and the Partnership is authorized to do so; and (iii) proof of consent of the partners of the Partnership, as required by the Partnership's partnership agreement to the prior transfer of the Property to the Company. (h) APPROVAL TO ASSUME LOAN. The Existing Lender shall have approved the assumption of the Existing Loan by the Company and Home Properties and the Existing Lender's counsel shall have prepared all necessary assumption documents and shall otherwise be prepared to close the assumption of the Existing Loan. (i) SIMULTANEOUS CLOSING. Closing hereunder shall occur simultaneously with the closing pursuant to the Contribution Agreement which has been executed by and between the Affiliated Companies and Home Properties. 7.2 EFFECT OF FAILURE TO SATISFY CONDITION. Subject to SECTION 9.11(a), if any of Home Properties' Conditions shall not have been fulfilled by the Company or the Partnership, or otherwise satisfied or waived by Home Properties within the time provided, Home Properties shall have the right to terminate this Agreement by written notice to the Company, in which event the Deposit shall be returned to Home Properties, and this Agreement, shall, thereafter, be deemed to be null and void and of no further force or effect, and no party shall have any further rights or obligations under this Agreement (other than with respect to those indemnities and agreements that expressly survive termination of this Agreement). ARTICLE VIII TITLE MATTERS 8.1 TITLE CONDITION. At Closing, the Company will hold good and marketable fee simple title to the Property free and clear of all liens, charges and encumbrances, except the Permitted Exceptions (as defined in SECTION 8.6 below). 8.2 TITLE POLICY. Promptly upon execution of this Agreement by all parties, the Partnership shall order a commitment (the "TITLE COMMITMENT") for an ALTA Owner's Policy of Title Insurance (the "TITLE POLICY") regarding the Property in the amount of the Consideration and confirming good and marketable title to such Property, subject only to the Permitted Exceptions and other matters of record approved by Home Properties. The Title Policy shall be issued by First American Title Insurance Company or other title company mutually acceptable to Home Properties and the Company (the "TITLE COMPANY"). Home Properties and the Partnership shall share equally the cost of the expenses in connection with the Title Commitment and Title Policy, except that Home Properties shall be solely responsible for the cost of endorsements, if any. The Title Policy shall be issued as soon as practicable after the completion of the Closing on the Closing Date. 8.3 UCC SEARCHES. Promptly upon execution of this Agreement by all parties, Home Properties shall order written results of searches (the "UCC SEARCHES") of the records of the Michigan Secretary of State and of the County in which the Property is located for Uniform Commercial Code Financing Statements, tax liens, or the like, in either the name of the Company, the Partnership or the Property effective as of the date after the date of this Agreement, accompanied by copies of all documents disclosed by the UCC Searches. Home Properties shall bear all of the expenses of the UCC Searches. 8.4 SURVEY. Promptly upon execution of this Agreement by all parties, if desired by Home Properties, Home Properties shall order a survey of the Property (the "SURVEY"), which shall be by a competent Michigan surveyor dated after the date of this Agreement and certified as directed by Home Properties. Home Properties shall bear all of the expenses of obtaining the Survey, if any. 8.5 OBJECTIONS TO TITLE. If any Title Commitment, UCC Search or Survey discloses exceptions to title other than the Permitted Exceptions, or any other matter which does not conform to the requirements of this Agreement, Home Properties shall so notify the Partnership in writing, such notice to be furnished to the Partnership, if at all, within fifteen (15) days following receipt by Home Properties of the Title Commitment, the UCC Searches and Survey, and the Partnership shall have the right, but not the obligation, within fifteen (15) days from the date of the receipt of such notice by the Partnership (the "CORRECTION PERIOD"), to have each such unpermitted exception to title removed, or to correct each such other matter, in each case to the satisfaction of Home Properties. If, within the Correction Period, the Partnership fails to have each such unpermitted exception removed, or to correct each such other matter as aforesaid, Home Properties may, at its option, and as the sole and exclusive remedy of Home Properties, either: (i) terminate this Agreement, in which even this Agreement, without further action of the parties, shall become null and void such that neither party shall have any further rights or obligations under this Agreement (other than with respect to those indemnities and agreements that expressly survive termination of this Agreement), and Home Properties shall be entitled to the immediate return of the Deposit; or (ii) waive its rights under SECTION <> and elect to take title to the Property as it then is. If Home Properties fails to make either such election within five (5) days following the expiration of the Correction Period, Home Properties shall be deemed to have elected option (ii). Any exception to title (other than a Permitted Exception), or any other matter which does not conform to the requirements of this Agreement, to which Home Properties does not object, as aforesaid, shall be deemed approved by Home Properties, and shall be deemed to be an additional Permitted Exception. 8.6 PERMITTED EXCEPTIONS. The obligation of Home Properties to close is conditioned upon the ability of Home Properties to obtain title insurance with respect to the Property insuring that, as of the Closing Date, title to the Property is not subject to any liens, encumbrances or other title objections other than the lien of the mortgage securing the Existing Loan, any apartment leases for tenants of the Property and the title exceptions identified in EXHIBIT E attached hereto (collectively the "PERMITTED EXCEPTIONS"). 8.7 AFFIDAVIT OF TITLE. The Partnership agrees that, upon the request of Home Properties, it will provide an affidavit in such customary form AS shall allow Home Properties to obtain a non-imputation endorsement to the title policy purchased by Home Properties. ARTICLE IX MISCELLANEOUS 9.1 AMENDMENT. This Agreement may be amended only by a writing executed by Home Properties, the Partnership and the Company. 9.2 WAIVER OF COMPLIANCE. Except as otherwise provided in this Agreement, any failure of any party to comply with any obligation, covenant, agreement or condition herein may be waived by the party entitled to the benefits thereof only by a written instrument signed by the party granting such waiver, but such waiver or failure to insist upon strict compliance with such obligation, covenant, agreement or condition shall not operate as a waiver of, or estoppel with respect to, any subsequent or other failure. 9.3 ENTIRE AGREEMENT. This Agreement, including the documents, schedules, certificates and instruments referred to herein, embody the entire agreement and understanding of the parties hereto in respect of the transactions contemplated by this Agreement. There are no restrictions, promises, representations, warranties, covenants or undertakings, other than those expressly set forth or referred to herein or therein. This Agreement supersedes all prior agreements and understandings between the parties with respect to such transactions. 9.4 ASSIGNMENT. This Agreement and all obligations and rights of the parties hereunder may not be assigned by any party. 9.5 GOVERNING LAW. The corporate laws of the State of Maryland will govern all questions concerning the relative rights and obligations of the parties with respect to any HME Common Shares acquired or acquirable by the holders of OP Units on account of their OP Units. Except as limited by the Operating Partnership Agreement, the laws of the State of New York will govern all other questions concerning the relative rights and obligations of the holders of OP Units as limited partners in Home Properties, or otherwise with respect to the OP Units. This Agreement shall otherwise be governed, construed and interpreted in accordance with the laws of the State of Michigan without giving effect to the conflicts-of-laws principles thereof. 9.6 INTERPRETATION. The article and section headings contained in this Agreement are solely for the purpose of reference, are not part of the agreement of the parties and shall not in any way affect the meaning or interpretation of this Agreement. Article and Section references which do not otherwise specify, are to the designated Article or Section of this Agreement. 9.7 SEVERABILITY. The invalidity or unenforceability of any particular provision of this Agreement shall be construed in all respects as if such invalid or unenforceable provision were omitted. All provisions of this Agreement shall be enforced to the full extent permitted by law. 9.8 NOTICES. All notices, demands or requests given pursuant to any provision of this Agreement shall be in writing and shall be effective only if delivered personally, or sent by registered or certified mail, postage prepaid or sent by nationally recognized overnight carrier, to the addresses set forth below: TO HOME PROPERTIES: Home Properties of New York, L.P. 850 Clinton Square Rochester, New York 14604 Attention: Mr. Norman Leenhouts WITH A COPY TO: Home Properties of New York, L.P. 850 Clinton Square Rochester, New York 14604 Attention: Kathleen S. Suher, Esq. TO THE COMPANY: Macomb Apartments Home Properties LLC c/o Schostak Brothers and Company, Inc. 25800 Northwestern Highway, Suite 750 Southfield, Michigan 48075 Attention: Mr. David Schostak WITH A COPY TO: Honigman, Miller, Schwartz and Cohn 2290 First National Building 660 Woodward Avenue Detroit, Michigan 48226 Attention: Lawrence D. McLaughlin, Esq. TO THE PARTNERSHIP: Macomb Apartments Limited Partnership c/o Schostak Brothers and Company, Inc. 25800 Northwestern Highway, Suite 750 Southfield, Michigan 48075 Attention: Mr. David Schostak WITH A COPY TO: Honigman, Miller, Schwartz and Cohn 2290 First National Building 660 Woodward Avenue Detroit, Michigan 48226 Attention: Lawrence D. McLaughlin, Esq. Any such notice, demand or request shall be deemed to have been given on the date of receipt in the case of delivery in person, delivery by courier service, or national overnight delivery, or three (3) business days after mailing if sent by registered or certified mail, postage pre-paid. Notice shall be deemed delivered upon refusal of delivery by the recipient. 9.9 CONFIDENTIALITY. By execution of this Agreement and except as otherwise provided herein, prior to the Closing Date Home Properties agrees to keep any and all information obtained in or in connection with the due diligence process with respect to the Company, its operations, the Property and Other Items strictly confidential, and will not disclose any such information without the Company's prior written consent, except to the extent required by law or as may be appropriate under applicable laws, including the securities laws. In the event this Agreement is terminated, Home Properties agrees to promptly return to the Company all documents and materials provided to Home Properties, together with copies of any reports obtained by Home Properties. 9.10 BROKER'S COMMISSION. The Company, the Partnership and Home Properties each represent to the other that it did not employ any broker in connection with this sale other than Chase Securities, Inc., and the Partnership agrees that, pursuant to separate agreement, it will pay any fees and commissions. Home Properties agrees to indemnify the Company and the Partnership, and the Company and the Partnership agree to indemnify Home Properties, from any and all claims and expenses, including legal fees, if any other fee or commission is determined to be due by reason of the employment of any other broker by the indemnifying party. 9.11 DEFAULTS AND REMEDIES. (a) DEFAULT BY THE COMPANY. If the Partnership or the Company defaults hereunder at or prior to closing in any respect, Home Properties, as its sole remedies, may terminate this Agreement, in which event the Deposit shall be returned to Home Properties, or may seek specific performance of this Agreement, but not damages. Home Properties shall not have any right to seek any other remedy against the Company. In the event of a breach by the Partnership or the Company of the representations contained in SECTIONS 3.1 or 3.3 hereof, of which breach Home Properties does not have knowledge at or prior to Closing, Home Properties, as its sole remedy, may seek to recover only its actual damages that compensate Home Properties for direct, actual injury sustained by it, and nothing more. (b) DEFAULT BY HOME PROPERTIES. If Home Properties fails or refuses to perform in accordance with the terms of this Agreement, the Deposit shall be forfeited to the Partnership as liquidated damages (which shall be the sole and exclusive remedy of the Partnership against Home Properties), at which time this Agreement shall be deemed to be null, void and of no further force or effect between the parties (other than with respect to the indemnities and agreements that expressly survive termination of this Agreement). In that regard, the Partnership acknowledges and agrees that (i) the Deposit is a reasonable estimate of, and bears a reasonable relationship to, the damages suffered and costs incurred by the Partnership as a result of having subjected the Interests to the terms of this Agreement; (ii) the actual damages suffered and costs incurred by the Partnership as a result of such failure of Home Properties to close under this Agreement would be extremely difficult and impractical to determine; (iii) Home Properties seeks to limit its liability under this Agreement to the amount of the Deposit in the event this Agreement is terminated and the transaction contemplated by this Agreement does not close due to a default of Home Properties under this Agreement; and (iv) the Deposit shall be and constitute valid liquidated damages. The foregoing limitation shall apply only in the event that Home Properties does not close the transaction contemplated by this Agreement, and such limitation shall not apply in the event that Home Properties closes and thereafter Home Properties or HME breaches one (1) of its obligations hereunder after Closing. 9.12 CONDEMNATION AND DESTRUCTION. (a) If, prior to the Closing Date, the Property, or any material part of any Property, is taken by eminent domain (or is the subject of a pending or contemplated taking which has not been consummated), the Partnership shall notify Home Properties of such fact, and Home Properties shall have the option (which option shall be set forth in a notice from Home Properties to the Partnership given not later than fifteen (15) business days after receipt of the notice from the Partnership): (i) to terminate this Agreement, in which event, the Deposit shall be returned to Home Properties, and, thereafter, this Agreement shall be deemed to be null, void and of no further force or effect between the parties (other than with respect to the indemnities and agreements that expressly survive termination of this Agreement); or (ii) to accept the assignment of the Interests, without abatement of the Consideration, in which event the Partnership shall assign and turn over to Home Properties at the Closing, and Home Properties shall be entitled to receive and keep, the Partnership's Interests, if any, in all amounts awarded, or to be awarded, as the result of the taking. (b) If, prior to the Closing Date, all or any material part of any Property is damaged or destroyed by fire or other casualty, the Company shall notify Home Properties of such fact, and Home Properties shall have the option (which option shall be set forth in a notice from Home Properties to the Company given not later than fifteen (15) business days after receipt of the notice from the Company): (i) to terminate this Agreement, in which event, the Deposit shall be returned to Home Properties, and, thereafter, this Agreement shall be deemed to be null, void and of no further force or effect between the parties (other than with respect to the indemnities and agreements that expressly survive termination of this Agreement); or (ii) to accept the assignment of the Interests without abatement of the Consideration, in which event the Partnership shall assign to Home Properties, at the Closing, all of the right, title and interest of the Partnership, if any, in and to the insurance proceeds awarded or to be awarded to the Company as the result of such damage or destruction. (c) In the event there is damage to or destruction of an immaterial part of the Property by fire or other casualty, such damage or destruction shall, subject to receipt of insurance proceeds, be repaired promptly by the Company, and in the event such damage or destruction cannot be fully repaired by the Closing Date, then at the option of Home Properties (i) the Closing shall be postponed until such repairs shall have been completed, or (ii) the Closing shall be held as scheduled, and Home Properties shall accept the assignment of the Interests without abatement of the Consideration, in which event the Partnership shall assign to Home Properties, at the Closing, all of the right, title and interest of the Partnership, if any, in and to the insurance proceeds awarded or to be awarded to the Company as the result of such damage or destruction. (d) An "IMMATERIAL" part of the Property shall be deemed to have been damaged or destroyed if the cost of repair or replacement thereof shall be Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00), or less, and a "MATERIAL" part thereof shall be deemed to have been damaged or destroyed if the cost of repair or replacement thereof shall be greater than Two Hundred Fifty Thousand and 00/100 Dollars ($250,000.00). 9.13 NUMBER OF DAYS. In computing the number of days for purposes of this Agreement, all days shall be counted, including Saturdays, Sundays and holidays; provided, however, that if the final day of any time period falls on a Saturday, Sunday or holiday on which federal banks are or may elect to be closed, then the final day shall be deemed to be the next day which is not a Saturday, Sunday or such holiday. 9.14 DEPOSIT. (a) Upon the execution of this Agreement, Home Properties shall deposit with the Disbursing Agent in escrow the sum of Three Hundred Seventy-Five Thousand and 00/100 Dollars ($375,000.00) (the deposit, together with any interest earned thereon, is the "DEPOSIT"). If Closing is completed hereunder or if this Agreement is terminated by Home Properties pursuant to the exercise of any right of termination as provided in herein, the Disbursing Agent shall refund the Deposit to Home Properties. If this Agreement is terminated by the Partnership pursuant to the exercise of any right of termination as provided herein, the Disbursing Agent shall deliver the Deposit to the Partnership. Notwithstanding the above, the Disbursing Agent shall deliver the Deposit to Home Properties in the event that the Partnership terminates this Agreement as a result of the failure of the condition described in SECTION 6.1(d) hereof, and 6.1(f) if the failure to simultaneously close is caused by the Company or the Partnership. (b) Notwithstanding anything contained in this SECTION 9.14, if either party terminates this Agreement as a result of the other's default or pursuant to the exercise of any right of termination conferred by this Agreement, Disbursing Agent shall not disburse the Deposit until the earlier to occur of (i) receipt by Disbursing Agent of written instructions from the Partnership and Home Properties or (ii) entry of a final and unappealable adjudication determining which party is entitled to receive the Deposit, as applicable, at which time the Deposit shall be distributed in accordance with such written instructions or adjudication. Except to the extent of any dispute between them, the Partnership and Home Properties agree to act in good faith to provide the Disbursing Agent with the instructions described in (i) above in the event that the Agreement is terminated. (c) In the event of a dispute between Home Properties and the Partnership with respect to the Deposit, the Disbursing Agent may deposit the Deposit with a court of proper jurisdiction and commence an interpleader action. Upon notifying the Partnership and Home Properties of the commencement of such action, Disbursing Agent shall be released from all liability with respect to the Deposit, except to the extent of accounting for any moneys previously delivered by Disbursing Agent out of escrow. Disbursing Agent shall not be liable to either the Partnership or Home Properties, other than for performance of its duties under this Agreement or his gross negligence or intentional wrongdoing. Disbursing Agent may rely upon the genuineness or authenticity of any document tendered to it by either the Partnership or Home Properties, and shall be under no duty of independent inquiry with respect to any acts or circumstances recited in such document. The Partnership and Home Properties shall indemnify, defend and hold harmless Disbursing Agent from and against all cost, claims or liabilities arising from the performance by Disbursing Agent of his obligations under this Agreement, other than for his failure to comply herewith, gross negligence or intentional wrongdoing. (d) As used in this SECTION 9.14, the term "DEPOSIT" shall refer to the amount set forth at SECTION 9.14(a), together with all interest thereon. The Deposit shall be held by the Disbursing Agent in one (1) or more federally-insured money market accounts acceptable to both the Partnership and Home Properties, or in short-term United States government obligations having a maturity date which is acceptable to the General Partner and Home Properties or in one (1) or more interest-bearing deposit accounts of a bank or other financial institution acceptable to the General Partner and Home Properties. The Partnership's taxpayer identification number is 38-1721029; Home Properties' taxpayer identification number is 16-1455130. 9.15 PLANS. The Company agrees to provide Home Properties with all plans and architectural drawings in its possession for the improvements completed at the Property, including, without limitation, all "as built" plans in its possession and the Company further agrees that it will endeavor to make the same available to Home Properties for inspection at the Company's office or at the Property during the Due Diligence Period and to turn over the same to Home Properties at Closing. 9.16 SURVIVAL. The representations and warranties of HME and Home Properties, the Partnership and the Company will survive Closing for a period of one (1) year, except as otherwise specifically provided herein. 9.17 COUNTERPARTS. This Agreement may be executed in one (1) or more counterparts, each of which shall be deemed to be an original for all purposes and all of which, when taken together, shall constitute one (1) and the same instrument. ARTICLE X CLOSING DOCUMENTS 10.1 CLOSING DOCUMENTS. (a) At the time of Closing, the Company and the Partnership shall deliver to Home Properties the following: (i) Properly executed Assignments to Home Properties of no less than one hundred percent (100%) of the Interests; (ii) A current rent roll ("RENT ROLL") certified, as of the date of Closing, which shall include a correct list of all tenants, all rental obligations of each tenant with respect to the Property and all security deposits along with a copy of all leases shown on the Rent Roll; (iii)A certificate of title and any other documentation necessary to transfer title to any vehicles, if any; (iv) Copies of the personnel files of all employees employed at the Property by the Company, if any, and remaining in the employment of Home Properties after the Closing; (v) An executed original of the Registration Rights Agreement and the Lock-Up Agreement in the form attached hereto as EXHIBIT D and EXHIBIT F, respectively; (vi) An estoppel certificate from the Existing Lender confirming that there is no default under the Existing Loan, and that there exists no event that with the passage of time or the giving of notice, or both, would constitute such a default; (vii)Any and all affidavits, certificates or other documents reasonably and customarily required by the Title Company in order to cause it to issue the title policy regarding the Property in the form and condition required by this Agreement; (viii)All keys to the Property in the possession of the Company, which shall remain at the rental office and need not be brought to Closing; (ix) Such evidence of the Company's power and authority as the Title Company may reasonably request; (x) A signed counterpart of the Escrow Agreement in form substantially similar to EXHIBIT G; and (xi) Any additional funds, documents and/or instruments as may be necessary for the proper performance by the Company of its obligations contemplated by this Agreement. (xii)The representation letter substantially in the form of EXHIBIT C. (b) At the time of Closing, Home Properties shall deliver to the Partnership the following: (i) Evidence of organization, existence and authority of Home Properties and HME and the authority of each person executing documents on behalf of each, reasonably satisfactory to the Partnership; (ii) Such cash as may be required of Home Properties to pay closing costs or charges properly allocable to Home Properties; (iii)An Amendment to the Home Properties' Partnership Agreement in the form necessary to admit the Partnership as limited partners of Home Properties and evidencing the issuance of the OP Units required pursuant to this Agreement; (iv) An executed original of the Registration Rights Agreement in the form attached hereto as EXHIBIT D; and (v) Any additional funds, documents and/or instruments as may be necessary for the proper performance by Home Properties of its obligations contemplated by this Agreement. IN WITNESS WHEREOF, the undersigned have caused this Agreement to be executed as of the date first above written. [END OF TEXT] SIGNATURE PAGE TO CONTRIBUTION AGREEMENT BETWEEN HOME PROPERTIES OF NEW YORK, L.P., MACOMB APARTMENTS LIMITED PARTNERSHIP AND MACOMB APARTMENTS HOME PROPERTIES LLC COMPANY: MACOMB APARTMENTS HOME PROPERTIES LLC, a Michigan limited liability company By: Macomb Apartments Limited Partnership, a Michigan limited partnership Its: sole member By: , a Its: General Partner By: Printed Name: Its: SIGNATURE PAGE TO CONTRIBUTION AGREEMENT BETWEEN HOME PROPERTIES OF NEW YORK, L.P., MACOMB APARTMENTS LIMITED PARTNERSHIP AND MACOMB APARTMENTS HOME PROPERTIES LLC PARTNERSHIP: MACOMB APARTMENTS LIMITED PARTNERSHIP, a Michigan limited liability company By: , a Its: General Partner By: Printed Name: Its: SIGNATURE PAGE TO CONTRIBUTION AGREEMENT BETWEEN HOME PROPERTIES OF NEW YORK, L.P., MACOMB APARTMENTS LIMITED PARTNERSHIP AND MACOMB APARTMENTS HOME PROPERTIES LLC HOME PROPERTIES: HOME PROPERTIES OF NEW YORK, L.P., a New York limited liability company By: Home Properties of New York, Inc., a New York corporation Its: General Partner By: Printed Name: Its: SIGNATURE PAGE TO CONTRIBUTION AGREEMENT BETWEEN HOME PROPERTIES OF NEW YORK, L.P., MACOMB APARTMENTS LIMITED PARTNERSHIP AND MACOMB APARTMENTS HOME PROPERTIES LLC DISBURSING AGENT: (Solely for the purpose of acknowledging receipt of this Agreement and its agreement to perform the obligations specifically provided herein to be performed by it): , a By: Printed Name: Its: EX-2 5 0005.txt Exhibit 2.4 CONTRIBUTION AGREEMENT This Contribution Agreement ("Agreement"), made as of the 22nd day of May, 2000 by and among HOME PROPERTIES OF NEW YORK, L.P., a New York limited partnership, having its principal office at 850 Clinton Square, Rochester, New York 14604, ("Home Properties"); and ELMWOOD VENTURE LIMITED PARTNERSHIP, a Maryland limited partnership (the "Partnership"), having its principal office at 200-A Monroe Street, Suite 105, Rockville, MD 20850 W I T N E S S E T H: WHEREAS, the Partnership owns a certain apartment complex and adjacent land located in the State of Maryland, all as more particularly described on EXHIBIT A; WHEREAS, the Partnership desires to cause each of its partners (the "Partners") to contribute each of the partnership interests in the Partnership (the "Interests") to Home Properties in exchange for limited partnership interests in Home Properties (the "Units"), cash, or a combination of both Units and cash, to be allocated among the Partners in accordance with SCHEDULE 1 attached hereto; WHEREAS, Home Properties desires to obtain 100% of the Interests in the Partnership and thus a 100% of the interests in the entity that owns fee simple title to the Property (as hereinafter defined), together with the related Other Items (as hereinafter defined), in exchange for Units, cash, or a combination of both Units and cash, all as more particularly described herein; NOW, THEREFORE, in consideration, of the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency whereof being hereby acknowledged, the parties hereby agree as follows: 1. REAL PROPERTY DESCRIPTION. The Real Property owned by the Partnership consists of an apartment complex commonly known as Elmwood Terrace Apartments, which includes ___ apartments (the "Project"), located in Frederick, Maryland, on land more particularly described on EXHIBIT A attached hereto, together and including all buildings and other improvements thereon, including but not limited to, the ____ apartment units and all rights in and to any and all streets, roads, highways, alleys, driveways, easements and rights of way appurtenant thereto (the foregoing are hereafter collectively referred to as the "Property"). 2. OTHER ITEMS. The transfer, exchange, conveyance and acquisition of the Interests shall include all of the right, title and interest of the Partnership in and to the following items now or at the Closing (hereinafter defined) in or on the Property and owned by the Partnership: A. all heating, air-conditioning, plumbing and lighting fixtures, B. ranges, refrigerators and disposals (one of each for each apartment unit), C. water heaters, D. any and all pools and pool equipment, bathroom fixtures, exhaust fans, hoods, signs, screens, maintenance building, fences, cabinets, mirrors, shelving, mail boxes, office furniture and equipment, including but not limited to computers, and any and all related equipment in connection with the Property, E. any fixtures appurtenant to the Property and any other furniture or equipment used in connection with the operation and maintenance of the Property, including any vehicles used in connection with the operation and maintenance of the Property, F. all tenant security deposits (and interest thereon if required by law or contract to be earned thereon) (hereinafter with the items listed in A through E above, collectively, the "Other Items"). At Closing, the Other Items will be free and clear of all liens and encumbrances, subject only to the Existing Loan and Permitted Exceptions (as each such terms are hereinafter defined). Notwithstanding anything set forth herein to the contrary, the transfer, exchange, conveyance and acquisition of the Interests shall specifically exclude any right, title or interest of the Partnership in or to: (i) any tax, insurance or other escrows held by any Existing Lender (hereinafter defined) and (ii) any working capital, capital reserves or any other cash accounts held or maintained by the Partnership (other than tenant security deposits described in subparagraph F. hereinabove) (collectively, the "Excluded Items"). Subject to the obligation to establish and fund the Reserve Amount (hereinafter defined), on or before the Closing, the Excluded Items shall be transferred by the Partnership to its General Partner (hereinafter defined) to be held for distribution to the Partners. 3. EXCHANGE. A. Promptly after the expiration of the Due Diligence Period (if this Agreement has not been previously terminated), Home Properties shall make an offer (the "Offer") to each of the Partners to exchange the Partners' Interests in the Partnership for: (i) cash, (ii) Units or (iii) a combination of both cash and Units, as each such Partner may, subject to Paragraph 3.C., elect to receive, and having a value, in each instance, equal to the Exchange Price (hereinafter defined). The Partnership agrees that it will use its reasonable efforts to solicit acceptance from the Partners of the Offer, whether in exchange for cash, Units, or a combination of both cash and Units. Upon and subject to the terms and conditions set forth in this Agreement, Home Properties agrees that on the Closing Date (as hereinafter defined), it shall accept an assignment of the Interests from the Partners and will issue Units, pay cash, or pay and issue a combination of both cash and Units to the Partners, as each such Partner shall have elected, and as more particularly provided herein. B. Subject to the satisfaction or waiver of the closing conditions to the Partnership's obligations to close the transaction contemplated by this Agreement SS Associates, LLC (the "General Partner") hereby agrees that it will accept the Offer with respect to all of its Interests. 4. CONSIDERATION AND MANNER OF PAYMENT. A. The aggregate consideration payable by Home Properties for 100% of the Interests shall be Twenty Million Five Hundred Thousand and No/100 Dollars ($20,500,000) (the "Consideration"). B. On the Closing Date, each of the Partners who has accepted the Offer shall assign their Interests to Home Properties in exchange for the Exchange Price. As used herein, the term "Exchange Price" means the Consideration less the principal amount on the Closing Date of the Existing Loan (as hereinafter defined), multiplied by the percentage interest of the relevant Partner's Interest in the Partnership as set forth on SCHEDULE 1. C. At Closing, the General Partner shall establish from Partnership funds otherwise distributable to the Partners a "Reserve Amount". As used herein, the term "Reserve Amount" means the sum of: (a) an amount equal to the current accrued and unpaid monetary liabilities of the Partnership on the Closing Date (other than the principal amount of the Existing Loan), together with such other amounts as the General Partner may reasonably determine are necessary or prudent to retain to satisfy any Partnership Claims (hereinafter defined) (the "Liabilities Reserve") and (b) the sum of $120,000 (the "Indemnity Reserve"). The Reserve Amount shall be held and disbursed by the Disbursing Agent (as defined in Paragraph D of this Section 4) as described in Paragraph D of this Section 4 and in Paragraphs A and B of Section 5. The Reserve Amount shall initially be used to pay all amounts required to satisfy the accrued and unpaid monetary liabilities of the Partnership on the Closing Date (other than the principal amount of the Existing Loan) and any liabilities of or claims against the Partnership accrued before the Closing Date (other than the principal amount of the Existing Loan) that Home Properties has not specifically agreed to assume as provided herein ("Liabilities Claims") and any amounts paid or subject to claims of Home Properties by reason of a material breach or material misrepresentation of any representations, warranties, covenants or agreements of the Partnership which survive Closing (but only during the period of such survival) ("Indemnity Claims", together with Liabilities Claims herein referred to collectively as "Partnership Claims"). Notwithstanding the above, if the Partnership can establish to Home Properties' reasonable satisfaction that after Closing, the General Partner or its agents will have retained sufficient Partnership funds to pay all Liabilities Claims, then no Liabilities Reserve will be required to be established. D. At Closing, the General Partner shall deliver in immediately available funds from monies otherwise distributable to the partners of the Partnership (but not from proceeds of Consideration) to the Title Company as "Disbursing Agent" the Reserve Amount. The Reserve Amount shall be held and disbursed pursuant to the terms of an escrow agreement that shall be in form and substance substantially similar to that attached hereto as EXHIBIT B. E. Home Properties shall pay the Partners who are Non-Accredited Investors or Accredited Cash Payees their Exchange Price in cash at the Closing, F. Partners who are accredited under applicable securities laws and who have elected to receive Units in exchange for their Interests (each a "Unit Partner" and collectively the "Unit Partners") shall be paid their Exchange Price by the issuance of Units. The number of Units to be issued to each Unit Partner shall be the Exchange Price divided by the "Designated Value" of a Unit. The Designated Value of a Unit shall be equal to $27.00. G. The initial distribution payable with respect to Units issued hereunder shall be made on the date on which HME pays the dividend to the holders of its common stock that relates to the earnings for the calendar quarter in which the Units were issued and shall be pro-rated such that the Unit Partners shall receive a pro-rata distribution for the period from the date on which the Units were issued to and including the last day of the calendar quarter in which the Units were issued. H. Subject to the terms of a Registration Rights and Lock-Up Agreement, in the form of EXHIBIT C attached hereto, to be dated as of the Closing Date and entered into between HME and each Unit Partner, and to the terms of that certain Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership, as amended (the "Operating Partnership Agreement"), the Units will be convertible into HME common stock, on a one-to-one basis, after the elapse of one (1) year from and after the Closing Date (the "Lock-Up Period"), during which time the Unit Partners will be restricted, to the extent provided in the Registration Rights and Lock-Up Agreement and the Operating Partnership Agreement, from converting, or transferring, any of the Units. From and after the expiration of the Lock-Up Period, the Unit Partners shall have all of the transfer, exchange and conversion rights with regard to the Units as are set forth in the Operating Partnership Agreement and the Registration Rights and Lock-Up Agreement. I. Upon the expiration of the Due Diligence Period (as hereinafter defined) and provided Home Properties has not exercised its right to terminate this Agreement, Home Properties shall deposit the sum of $100,000 with Wheeler & Korpeck (the "Title Company") as a good faith deposit hereunder (the "Deposit"). The Title Company shall invest the Deposit in an FDIC or FSLIC insured money market account and shall be held and disbursed as provided in the Escrow Agreement attached hereto as EXHIBIT D. Any interest earned on such investment shall be reported to Home Properties Federal tax identification number. The Deposit shall be refunded to Home Properties at Closing in the event Home Properties consummates the transaction contemplated hereby, upon termination of this Agreement by Home Properties expressly permitted hereunder, or upon the Partnership's default and resulting termination of this Agreement by Home Properties expressly permitted hereunder. In the event Home Properties fails to acquire the Interests other than by reason of a termination by Home Properties expressly permitted hereunder or the Partnership's default, the Deposit shall be forfeited to the Partnership as liquidated damages. Any and all sums deposited hereunder shall be applied or refunded as provided herein. (All references to "Deposit" shall be deemed to include all accrued interest thereon). 5. RELEASE OF RESERVES. A. On the 180{th} day after the Closing Date, the parties hereto shall jointly instruct the Disbursing Agent to disburse to the General Partner that portion of the Reserve Amount that has not been paid, disbursed or otherwise required to be paid on account of Liability Claims or Indemnity Claims. The General Partner may then elect: (i) to continue to hold such disbursed amounts for up to 360 days after the Closing Date, in trust for the benefit of the Partnership and the Partners, as a fund against which to pay unanticipated Partnership Claims (the "Contingency Reserve"); or (ii) to distribute such sums pro rata to the Partners. B. At any time, and from time to time, after the 180{th} day after the Closing Date that there is a Final Determination (as defined in EXHIBIT C) that any remaining portion, if any, of the Reserve Amount is no longer subject to Liability Claims or Indemnity Claims, the parties hereto shall instruct the Disbursing Agent to distribute such remaining portion of the Reserve Amount to the General Partner. The General Partner may then elect: (i) to continue to hold such disbursed amounts for up to 360 days after the Closing Date, in trust for the benefit of the Partners, as a Contingency Reserve; or (ii) to distribute such sums pro rata to the Partners in accordance with their percentage interests. C. Not later than 360 days after the Closing Date (provided that there have been no unanticipated Partnership Claims), the General Partner shall distribute any balance remaining in the Contingency Reserve pro rata to the Partners in accordance with their percentage interests. In the event that at the end of the 360 day period following Closing there are unanticipated Partnership Claims pending or asserted, or the General Partner has reason to believe that such unanticipated Partnership Claims may be asserted, the General Partner may continue to hold the Contingency Reserve until such time as the General Partner deems prudent, after which time any undisbursed amount remaining in the Contingency Reserve shall be disbursed by the General Partner pro rata to the Partners in accordance with their percentage interests. 6. EXISTING LOANS. Home Properties acknowledges that the Property is currently subject to mortgage financing having a principal balance as of December 31, 1999 of approximately $4,691,852 (the "Existing Loan") and held by John Hancock Life Insurance Company of America (the "Existing Lender"). Subject to the consent of the Existing Lender, Home Properties agrees that at the time it acquires the Interests, the Property will remain subject to the Existing Loan. The costs involved in connection with obtaining the Existing Lender's consent to that transaction (the "Assumption"), including any assumption fees, shall be paid by Home Properties. 7. ADJUSTMENTS AT CLOSING. The following shall be adjusted and prorated between Home Properties and the Partnership at Closing as if Home Properties was the owner of the Property as of the Closing Date (the Closing Date being a day of income and expense to Home Properties). All such adjustments and prorations between Home Properties and the Partnership shall be settled in cash and shall not increase or decrease the Consideration, as the case may be. A. All ad valorem real estate and personal property taxes with respect to the Property for the calendar year or other applicable tax period in which the Closing is consummated. If the amount of such taxes is not known at Closing, proration of such taxes will be made upon the basis of the most recently ascertainable taxes. In such event, Home Properties and the General Partner on behalf of the former partners of the Partnership agree to re-prorate/adjust the taxes between themselves after the Closing, based upon the full amount of the actual taxes for the Property when the actual amount of such taxes is known. B. Water charges. C. Sewer charges. D. Fuel, electricity and other utilities. E. All tenant security deposits (and interest thereon if required by law or contract to be earned thereon) shall remain in the Partnership whose Interests are conveyed to Home Properties at Closing. At Closing, Home Properties shall assume the Partnership's obligations related to tenant security deposits to the extent they remain part of the Other Items. Alternatively, in lieu of the assumption of the security deposit accounts at Closing, Home Properties may elect to receive a credit at Closing of an amount equal to the aggregate amount of the security deposits with interest as required by law. Home Properties agrees that it will indemnify, defend, hold the Partnership harmless and will indemnify the Partnership against all demands, claims, losses, costs, damages, expenses or liabilities, including, but not limited to, attorneys' fees, arising out of or in connection with the transfer or disposition of such security deposits if and to the extent such demands, claims, losses, costs, damages, expenses or liabilities relate to the period after the Closing Date. F. Charges under the service contracts assumed by Home Properties, including a pro rata credit to Home Properties for any signing bonus or other sum paid by a service company in connection with any service or laundry contract. G. Laundry income. H. Any other charges incurred with respect to the Property which the Partnership or the Partners are obligated to pay. I. Accrued and unpaid interest on the Existing Loan. J. Rents. (1) All rent payments collected as of the Closing Date for the month of Closing shall be prorated as between the parties as of the Closing Date. (2) All rent collected after Closing for any period prior to Closing shall belong to the Partnership and, if paid to Home Properties, Home Properties shall promptly send such rent to the General Partner for distribution to the Partners. (3) All rent collected by the Partnership prior to the Closing for rental periods subsequent to Closing shall be paid to Home Properties at Closing. (4) All rent collected by Partnership or Home Properties for rental periods after the Closing shall belong to Home Properties and, if paid to the Partnership, the Partnership shall promptly send such rent to Home Properties. (5) Home Properties will make reasonable efforts to collect all rents due for the month of the Closing and any past due rents, but shall not be required to bring suit to collect such rents. Any rent received from any tenant after Closing shall first be applied to pay any rent owing by that tenant for the month of the Closing and then to pay rent owing for the then current month and thereafter in reverse order of delinquency. Any rents due for the month of Closing (and accruing prior to the Closing Date) and past due rents not collected by Home Properties within the period of 180 days following the Closing Date shall be assigned to the General Partner without recourse who may pursue such remedies for collection thereof for its own account. Any error in the calculation of adjustments shall be corrected subsequent to Closing with appropriate credits to be given based upon corrected adjustments, provided, however, that the adjustments (except if errors are caused by misrepresentations and except for actual taxes) shall be final upon expiration of ninety (90) days after Closing. 8. COSTS. Home Properties shall pay all recording fees, its attorneys' fees, one-half of any applicable transfer and recordation taxes, if any, the costs of obtaining any title commitment and title policy, one-half of the closing charges of the Title Company, and all other incidental costs and expenses, if any, incurred in connection with closing this transaction customarily paid for by the transferee of similar property. The Partnership shall pay one-half of any applicable transfer and recordation taxes, if any, attorneys' fees incurred by them in connection with this transaction, one-half of the closing charges of the Title Company and all other incidental costs and expenses, if any, incurred in connection with closing this transaction customarily paid for by the transferor of similar property. 9. EVIDENCE OF TITLE. The Partnership shall furnish to Home Properties, at the Partnership's expense, and within ten (10) days from the execution hereof, a copy of the most recent title policy relating to the Property along with the most recent instrument survey of the Property, in each case, to the extent in its possession or control. At the time of the Closing, as a condition to Home Properties' obligation to close, the Property shall be subject only to: (i) all zoning and building laws, ordinances, resolutions and regulations of all governmental authorities having jurisdiction which affect the Property and the use and improvement thereof; (ii) all leases identified in the Rent Roll (hereinafter defined); (iii) ad valorem real estate taxes for the current year and subsequent years which are not yet due and payable; and (iv) easements, covenants, restrictions, agreements and/or reservations of record, so long as they do not interfere with the use of the Property as a rental apartment complex, if any, (v) private, public and utility easements and roads and highways, if any, (vi) the documents evidencing or securing the Existing Loan; and (vii) and any other exceptions not objected to or waived by Home Properties under Section 12 herein (collectively, the "Permitted Exceptions"). 10. CLOSING DOCUMENTS. A. At the time of Closing, the Partnership shall deliver to Home Properties the following: (1) Properly executed Assignments to Home Properties of no less than 100% of the Interests; (2) A current rent roll ("Rent Roll") certified, as of the date of Closing, which shall include a correct list of all tenants, all rental obligations of each tenant with respect to the Property and all security deposits along with a copy of all leases shown on the Rent Roll; (3) A certificate of title and any other documentation necessary to transfer title to any vehicles, if any; (4) Copies of the personnel files of all employees employed at the Property by the Partnership, if any, and remaining in the employment of Home Properties after the Closing; (5) An executed original of the Registration Rights and Lock-Up Agreement in the form attached hereto as EXHIBIT C; (6) An estoppel certificate from the Existing Lender confirming that there is no default under the Existing Loan, and that there exists no event that with the passage of time or the giving of notice, or both, would constitute such a default; (7) Any and all affidavits, certificates or other documents reasonably and customarily required by the Title Company in order to cause it to issue the title policy regarding the Property in the form and condition required by this Agreement and any affidavits as may be necessary in order for Home Properties to obtain a non-imputation endorsement; (8) All keys to the Property in the possession of the Partnership, which shall remain at the rental office and need not be brought to Closing; (9) A certified copy of the Certificate of Limited Partnership of the Partnership, and such other evidence of the Partnership's power and authority as the Title Company may reasonably request; (10) A signed counterpart of the Escrow Agreement-Reserve Amount in form substantially similar to EXHIBIT B; and, (11) Any additional funds, documents and or instruments as may be necessary for the proper performance by the Partnership of its obligations contemplated by this Agreement. B. At the time of Closing, Home Properties shall deliver to the Partnership the following: (1) Evidence of organization, existence and authority of Home Properties and HME and the authority of each person executing documents on behalf of each, reasonably satisfactory to the Partnership; (2) Such cash as may be required of Home Properties to pay closing costs or charges properly allocable to Home Properties; (3) An Amendment to the Home Properties' Partnership Agreement in the form necessary to admit the Unit Partners as limited partners of Home Properties and evidencing the issuance of the Units required pursuant to this Agreement; (4) Subject to the limitation set forth in Section 3.C. herein, cash in an amount sufficient to pay Partners required to be paid, or electing to be paid their share of the Exchange Value in cash; (5) An executed original of the Registration Rights and Lock-Up Agreement in the form attached hereto as EXHIBIT C; and, (6) Any additional funds, documents and or instruments as may be necessary for the proper performance by Home Properties of its obligations contemplated by this Agreement. 11. INSPECTION. For a period ending on June 21, 2000 (the "Due Diligence Period"), the Partnership agrees that Home Properties and its authorized representatives shall have the right and privilege to enter upon the Property and the Partnership's offices, upon reasonable notice, during regular business hours, for the purpose of gathering such information and conducting such environmental and engineering studies or other tests and reviews as Home Properties may deem appropriate and necessary, including but not limited to a review of the Partnership's books and records pertaining to the Property and the Other Items, matters relating to zoning compliance and compliance by the Property and the Other Items with other applicable governmental regulations, the markets in which the Property operates, any service or other contracts relating to the Property, the tax assessment on the Property and on comparable properties, the documents pertaining to the Existing Loan and such other matters as Home Properties shall deem reasonably necessary or appropriate in connection with the Property and the Other Items. All such inspections, studies, tests and reviews shall be at Home Properties' sole expense. The Partnership agrees to cooperate with Home Properties by making available to Home Properties such records, plans, drawings or other data as may be in the Partnership's possession or control relating to the Property and its operation; excluding however, any files containing confidential documents such as personnel documents, tax returns, appraisals, market analyses, projections, internal communications, or correspondence between the property manager and the Partnership. Home Properties agrees that it will provide the Partnership with a copy of any third party reports received by Home Properties with respect to its due diligence activities pursuant to this paragraph. Home Properties hereby agrees to indemnify, defend and hold the Partnership, the Partnership's tenants, agents, employees, partners and the Property harmless from and against all claims, losses, costs, damages, expenses or liabilities, including, but not limited to, mechanic's and materialmen's liens and attorneys' fees arising out of or in connection with Home Properties' access to or entry upon the Property. If any inspection or test disturbs the Property, Home Properties will restore the Property, at Home Properties' own cost and expense, to the same condition as existed prior to any inspection or test. Home Properties agrees that prior to any physical inspection or testing at the Property, it or its agents will provide the Partnership with appropriate evidence of insurance reasonably satisfactory to the Partnership. Home Properties agrees that its rights under this Section 11 shall be subject to the rights of the residents at the Property and that it will use its reasonable efforts to minimize any disruption to those residents. Home Properties shall have the right to terminate this Agreement if it determines that it does not wish to purchase the Property as a result of its findings during the Due Diligence Period and notifies the Partnership in writing of such decision on or before June 26, 2000 (the "Termination Notice"). In such event, this Agreement shall be null and void and neither party shall have any further rights or obligations under this Agreement, other than the obligations expressly surviving any such termination, and Home Properties shall be entitled to the prompt return of the Deposit. Home Properties' failure to deliver the Termination Notice on or before June 26, 2000 shall be deemed to be a waiver by Home Properties of its right to terminate the Agreement as provided in this Section 11. The provisions of this Section 11 shall survive indefinitely any termination of this Agreement. 12. TITLE; TITLE EXAMINATION; OBJECTIONS TO TITLE. Promptly upon execution of this Agreement by all of the parties, Home Properties shall order from the Title Company a commitment ("Title Commitment") for an ALTA owner's policy insuring the Partnership's title to the Property in an amount equal to the Consideration. No later than May 31, 2000, Home Properties shall deliver to the Partnership a statement (a "Statement of Title Defects") of defects, encumbrances or objections to title or survey matters ("Title Defects"). If Home Properties fails to deliver a Statement of Title Defects within such time period as aforesaid, such failure shall be deemed to be a waiver of any such Title Defects and the Partnership shall convey title in accordance with this Agreement and such Title Defects will be additional Permitted Exceptions. Upon receipt of Home Properties' Statement of Title Defects, the Partnership shall have five (5) business days to determine whether it wishes to attempt to cure any matters shown on such statement. If the Partnership is unable or unwilling to cure or attempt to cure any such matters, the Partnership shall give notice to Home Properties within such five (5) day period, but if no such notice is given, the Partnership shall be deemed to be unwilling to cure any such Title Defects. If the Partnership does not agree to attempt such cure, Home Properties shall have ten (10) days after the expiration of the foregoing five (5) business day period to terminate this Agreement, in which case it shall have the right to the return of the Deposit, or to give the Partnership notice that it has elected to take title to the Property subject to the Title Defects without abatement of the Consideration and such Title Defects will be additional Permitted Exceptions. If no notice is given by Home Properties within the ten (10) day period, Home Properties shall be deemed to have terminated this Agreement. Home Properties agrees that the Partnership shall be under no obligation whatsoever to commence any proceedings, suits or actions to clear title or eliminate any Title Defects or expend any funds in connection therewith. 13. CLOSING DATE. Unless this Agreement is terminated as provided herein, the Closing shall occur upon the later of: (a) July 13, 2000; and (b) ten (10) days after receipt of the consent of the Existing Lender to the Assumption. In the event that the consent of the Existing Lender is not received on or before July 31, 2000, either Home Properties or the Partnership may terminate this Contribution Agreement in which event this Agreement shall be null and void and neither party shall have any further rights or obligations under this Agreement, other than the obligations expressly surviving any such termination, and Home Properties shall be entitled to a return of the Deposit. 14. POSSESSION. Home Properties shall have possession and occupancy of the Property from and after the Closing Date subject only to the Permitted Exceptions and to the rights of tenants shown on the Rent Roll delivered to Home Properties at Closing. 15. BROKER'S COMMISSION. Home Properties and the Partnership each represent to the other that there are no fees or commissions due as a result of their employment of any Broker in connection with the transactions described herein. Home Properties and the Partnership each agree to indemnify the other for any and all claims and expenses, including legal fees, if any other fees or commission is determined to be due by reason of the employment of any broker by the indemnifying party. The representations and provisions of this Section 15 shall survive indefinitely any termination or Closing of this Agreement. 16. RISK OF LOSS. Risk of loss resulting from any eminent domain proceeding which is commenced prior to Closing, and risk of loss to the Property due to fire or any other casualty prior to Closing shall remain with the Partnership. If prior to the Closing the Property or any portion thereof is destroyed or damaged in excess of $250,000, or if the Property or any portion thereof shall is subjected to a BONA FIDE threat of condemnation or becomes the subject of any proceedings, judicial, administrative or otherwise, with respect to the taking by eminent domain or condemnation, the Partnership shall notify Home Properties thereof within a reasonable time after receipt of actual notice thereof by the Partnership, but in any event prior to Closing, and, at its option, Home Properties may, within 5 days after receipt of such notice, elect to cancel this Agreement in which event this Agreement shall terminate and the Deposit shall be returned to Home Properties. If the Closing Date is within the aforesaid 5-day period, then Closing shall be extended to the next business day following the end of said 5-day period. If no such election is made, and in any event if the destruction or damage is not in excess of $250,000, this Agreement shall remain in full force and effect and the contribution contemplated herein, less any interest taken by eminent domain or condemnation, shall be effected with no further adjustment, and upon the Closing of this contribution, the Partnership shall assign, transfer and set over to Home Properties all of the right, title and interest of the Partnership in and to any awards that have been or that may thereafter be made for such taking, and the Partnership shall assign, transfer and set over to Home Properties any insurance proceeds that may have been or that may thereafter be made for such damage or destruction giving Home Properties a credit at Closing for any deductible under such policies. The Partnership hereby agrees that it shall keep all insurance policies presently existing which relate to the Property in effect through the Closing Date. 17. CONDITIONS PRECEDENT TO HOME PROPERTIES' OBLIGATION TO CLOSE. A. It shall be a condition to Home Properties' obligation to consummate the Closing that there are at Closing ___ apartment units in rentable condition and with respect to all of which the Partnership has received no notice from any governmental authority or agency having jurisdiction over the Partnership, the Property and the Other Items stating that the Partnership, the Property or the Other Items are in violation of any federal, state, county or local laws, ordinances, rules and regulations. In the event that the Partnership has received any such notice, then at its election, the Partnership shall, for up to sixty (60) days after the receipt of such notice, have the right, but not the obligation, to cure any violation set forth therein and the Closing Date shall be extended to that date which is five days after the violation has been cured, but such extension is not to be for more than 65 days. If the Partnership fails to notify Home Properties that it has elected to cure any such violation within 10 days of the receipt of any such notice, then the Partnership shall be deemed to have elected not to cure any such violation. B. It shall be a condition to Home Properties' obligation to consummate the Closing that Home Properties has not exercised its right to terminate this Agreement as provided herein. C. It shall be a condition to Home Properties' obligation to consummate the Closing that on the Closing Date the Title Company is prepared to issue a title policy insuring the Partnership's fee interest in the Property in the amount of the Consideration subject only to the Permitted Exceptions. D. It shall be a condition to Home Properties' obligation to close that, as at the Closing Date, the Existing Loan shall be in full force and effect and no default or right to accelerate shall be occurring under the Existing Loan. E. It shall be a condition to Home Properties' obligation to close that the sole member of the General Partner shall have executed an agreement whereby it agrees that it will be responsible for making all final distributions to the former Partners of the Partnership from: (i) any amounts remaining in the Reserve Amount and/or Contingency Account (as the case may be) at the time of expiration of such Accounts; and (ii) and from any other Partnership funds that the General Partner holds, and shall indemnify Home Properties for all claims relating thereto. It is understood that the conditions set forth Paragraphs A through E in this Section 17 are for Home Properties' benefit and may be waived by Home Properties at any time. If any of the above conditions are not satisfied or waived by Home Properties, Home Properties shall have the right to terminate this Agreement by written notice to the Partnership. In the event of such a termination, this Agreement shall be null and void and neither party shall have any further rights or obligations under this Agreement, other than the obligations expressly surviving any such termination, and Home Properties shall have the right to the return of its Deposit. 18. CONDITIONS TO THE PARTIES' OBLIGATIONS TO CLOSE. In addition to all other conditions set forth herein, the obligation of Home Properties, on the one hand, and Partnership, on the other hand, to consummate the Closing contemplated hereunder shall be contingent upon the following: A. The other party's representations and warranties contained herein shall be true and correct as of the date of this Agreement and the Closing Date. B. As of the Closing Date, the other party shall have performed its obligations hereunder and all deliveries to be made at Closing have been tendered; C. There shall exist no pending or threatened actions, suits, arbitrations, claims, attachments, proceedings, assignments for the benefit of creditors, insolvency, bankruptcy, reorganization or other proceedings, against the other party that would materially and adversely affect the other party's ability to perform its obligations under this Agreement; D. There shall exist no pending or threatened action, suit or proceeding with respect to the other party before or by any court or administrative agency which seeks to restrain or prohibit, or to obtain damages or a discovery order with respect to, this Agreement or the consummation of the transactions contemplated hereby; E. Partners owning not less than 100% of the Partnership Interests shall have agreed in writing on or before the Closing Date to exchange their Interests in the Partnership for cash, Units, or a combination of both cash and Units, and assignments for such interests shall have been received by Closing. F. All of the provisions of the partnership agreement of the Partnership shall have been complied with or properly waived by the necessary parties in order for Home Properties to acquire the Interests and be substituted as a partner of the Partnership. G. The Existing Lender shall have consented to or approved the transfer of interests in the Partnership to Home Properties and the Existing Lender's counsel shall have prepared the necessary assumption documents and shall otherwise be ready to close. So long as a party is not in default hereunder, if any condition to such party's obligation to proceed with the Closing hereunder has not been satisfied as of the Closing Date, such party may, in its sole discretion, (i) terminate the Agreement by delivering written notice of termination to the other party on or before the Closing Date specifying the unsatisfied condition entitling the non-defaulting party to terminate this Agreement and provided the other party fails to satisfy the condition specified in the notice within five days after receipt of the notice; (ii) elect to extend the Closing for up to 60 days until such condition is satisfied, and (iii) elect to consummate the transaction, notwithstanding the non-satisfaction of such condition, in which event such party shall be deemed to have waived any such condition. In the event such party elects to close, notwithstanding the non-satisfaction of such condition, there shall be no liability on the part of any other party hereto for breaches of representations and warranties of which the party electing to close had actual knowledge at the Closing. Notwithstanding the foregoing, the failure of a condition due to the breach of a party shall not relieve such breaching party from any liability it would otherwise have hereunder. So long as Home Properties is not in default hereunder, upon termination of this Agreement as provided above, Home Properties shall have the right to the return of its Deposit. 19. REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP. The Partnership makes the following representations and warranties to Home Properties as of the date hereof and as of Closing: A. To the best of the Partnership's knowledge, the leases (the "Leases") listed on the rent roll attached hereto as EXHIBIT E and the contracts listed on the attached EXHIBIT F (the "Contracts") comprise all of the leases and rights to the property and all of the contracts to which Home Properties will be subject on the Closing Date. B. All of the Partnership's obligations under the Leases and Contracts are fully performed and, to the best of the Partnership's knowledge, except as set forth on the attached Exhibits and except for delinquencies in the payment of rent for the current month, there is no default under any of the Leases and Contracts by any party thereto or no event which, with the giving of notice or passage of time, or both, would constitute a default thereunder. There are no other security deposits (the "Security Deposits") except as identified on EXHIBIT E. C. Other than to the Existing Lender, the Partnership has made no prior assignment or conveyance of the Leases, Security Deposits and Contracts and the Partnership is the valid holder of landlord's interest in the Leases. D. To the best of the Partnership's knowledge, there is no litigation, proceeding or investigation pending, or to the knowledge of the Partnership threatened, against or affecting the Partnership that might affect or relate to the validity of this Agreement, any action taken or to be taken pursuant hereto, or the Property or the Other Items or any part or the operation thereof, whether or not fully covered by insurance. E. To the best of the Partnership's knowledge, the Partnership has not received any written notices from any governmental authority or agency having jurisdiction over the Partnership or the Property that the Partnership, the Property or the Other Items are in violation of, any law, ordinance, rule, regulation or code or condition in any approval or permit pursuant thereto (including without limitation, any zoning, sign, environmental, labor, safety, health or price or wage control, ordinance, rule, regulation or order of) applicable to the ownership, development, operation or maintenance of the Property or the Other Items. Promptly upon receipt of any such notice, the Partnership shall provide Home Properties with a copy. F. The Partnership is a limited partnership, duly organized, validly existing, and in good standing under the laws of the State of Maryland, and, subject to consent of the Partners and the consent of the Existing Lender, the Partnership has full power and authority to enter into, and to fully perform and comply with the terms of this Agreement and to own, lease and operate its properties and to carry on its business as it is now being conducted. G. Subject to consent of the Partners and the consent of Existing Lender, the execution and delivery of this Agreement, and its performance by the Partnership, will not conflict with, or result in the breach of, any contract, agreement, law, rule or regulation to which the Partnership is a party, or by which the Partnership is bound. H. Subject to consent of the Partners and consent of Existing Lender, to the best knowledge of the Partnership this Agreement is valid and enforceable against the Partnership in accordance with its terms, and each instrument to be executed by the Partnership pursuant to this Agreement, or in connection herewith, will, when executed and delivered, be valid and enforceable against the Partnership in accordance with its terms, except as such enforcement may be limited by bankruptcy and other laws affecting creditors' rights generally. I. To the best knowledge of the Partnership, the tax-related information set forth on SCHEDULE 2 attached hereto is true, complete and accurate in all material aspects as at the date set forth therein. The obligations of Home Properties contained in Paragraph (A)(ii) of Section 29 are based upon and limited to, the information set forth on SCHEDULE 2. J. SCHEDULE 1 hereto lists the current holders of all outstanding Partner Interests of the Partnership together with the percentage Interest held by each Partner. In the event that any Partner listed on SCHEDULE 1 transfers any Interests prior to the Closing Date, the Partnership shall use good faith reasonable efforts to promptly provide written notice to Home Properties of such transfer, and such notice shall include the names of the transferor and the transferee, the address of the transferee and the percentage of Interests transferred. K. To the best knowledge of the Partnership, except: (i) as disclosed in SCHEDULE 3 attached hereto; (ii) for liabilities and obligations incurred in the normal course of business of the Partnership; and (iii) as otherwise disclosed in this Agreement, the Partnership has no material liability or obligation of any nature which in any way materially affects the Partnership, the Property or the Other Items whether now due or to become due, absolute, contingent or otherwise, including liabilities for taxes (or any interest or penalties thereto). L. To the best knowledge of the Partnership, the Partnership has filed or will file when due all notices, reports and returns of Taxes (as defined below) required to be filed before the Closing Date and has paid or, if due and payable between the date hereof and the Closing Date, will pay, all Taxes and other charges for the periods shown to be due on such notices, reports and returns. "Taxes" shall mean all taxes, charges, fees, levies or other assessments, including, without limitation, income, excise, property, sale, gross receipts, employment and franchise taxes imposed by the United States, or any state, country, local or foreign government, or subdivision or agency thereof with respect to the assets or the business of the Partnership, and including any interest, penalties or additions attributable thereto. Home Properties acknowledges, understands and agrees that, except as provided in this Agreement to the contrary, Home Properties' acquisition of the Property and Other Items and any other rights and interests to be contributed, conveyed, transferred and/or assigned is on an "AS IS" "WHERE IS" PHYSICAL BASIS, WITHOUT REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH REGARD TO PHYSICAL CONDITION OR COMPLIANCE WITH ANY LEGAL REQUIREMENTS OR TITLE EXCEPTIONS OF THE PROPERTY, INCLUDING WITHOUT LIMITATION ANY LATENT OR PATENT DEFECTS, CONDITION OF SOILS (INCLUDING SURFACE AND SUBSURFACE CONDITIONS), EXISTENCE OR NON EXISTENCE OF HAZARDOUS SUBSTANCES OR POLLUTANTS, QUALITY OF CONSTRUCTION, STATE OF REPAIR, WORKMANSHIP, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OR AS TO THE PHYSICAL MEASUREMENTS OR USABLE SPACE THEREOF, TITLE TO THE PROPERTY, THE ASSIGNABILITY, ASSUMABILITY OR TRANSFERABILITY OR VALIDITY OF ANY LICENSES, PERMITS, GOVERNMENT APPROVALS, WARRANTIES OR GUARANTIES RELATING TO THE PROPERTY OR THE USE OR OPERATION THEREOF, ZONING, BUILDING CODE, ACCESS, ENVIRONMENTAL, FIRE OR LIFE SAFETY, SUBDIVISION OR OTHER ORDINANCES, LAWS, CODES OR REGULATIONS, OF ANY KIND, PRIOR OR CURRENT OPERATIONS CONDUCTED ON THE PROPERTY AND SURROUNDING PROPERTY, OR ANY COVENANTS, CONDITIONS, RESTRICTIONS OR DECLARATIONS OF RECORD AND ALL OTHER MATTERS OR THINGS AFFECTING OR RELATING TO THE PROPERTY. THE PROVISIONS OF THIS PARAGRAPH SHALL SURVIVE INDEFINITELY ANY CLOSING OR TERMINATION OF THIS AGREEMENT AND SHALL NOT BE MERGED INTO THE CLOSING DOCUMENTS. Notwithstanding the foregoing Paragraphs A. through L. of this Section 19, if Home Properties or its representatives has actual knowledge on the Closing Date that any of the Partnership's representations or warranties in this Contribution Agreement are not true as of the Closing Date and Home Properties elects nonetheless to close, Home Properties shall be deemed to have waived any claim for breach of such representation or warranty, to the extent that Purchaser or its representatives had actual knowledge that the same was not true. The representations and warranties contained herein shall survive the Closing and shall not be deemed to have merged in any document delivered at Closing, but each such representation and warranty shall terminate on, and be of no further force after the 180th day following the Closing Date. Notwithstanding the foregoing sentence, any claim relating to any intentional, material breach of a representation and warranty shall survive indefinitely. Any claim based upon a misrepresentation or a breach of a representation or warranty contained in this Contribution Agreement shall be actionable or enforceable only if the amount of damages or losses as a result of such claim suffered exceeds $25,000. 20. REPRESENTATIONS AND WARRANTIES OF HOME PROPERTIES. Home Properties represents and warrants to the Partnership as of the date hereof and as of the Closing as follows: A. Home Properties is and will be as of the date of Closing duly organized, validly existing and in good standing under the laws of the State of New York and has all the requisite power and authority to enter into and carry out this Agreement according to its terms. B. This Agreement has been duly authorized, executed and delivered and constitutes a legal and binding obligation of Home Properties, enforceable in accordance with its terms, except as may be limited by bankruptcy and other laws affecting creditors' rights generally. C. To the best of its knowledge after due inquiry, there is no litigation, proceeding or investigation pending, or to the knowledge of Home Properties threatened, against or affecting Home Properties or the partners of Home Properties that might affect or relate to the validity of this Agreement or any action taken or to be taken pursuant hereto, or that might have a material adverse effect on the business or operations of Home Properties. D. HME has been organized in conformity with the requirements for qualification as a real estate investment trust under the Internal Revenue Code of 1986 (the "Code") and its method of operation is expected to enable it to continue to satisfy the requirements for taxation as a real estate investment trust under the Code for the fiscal year ending December 31, 2000 and in the future. E. Home Properties is classified as a partnership and not as an association or publicly traded partnership taxable as a corporation for federal income tax purposes. F. (i) HME, Home Properties, each subsidiary of HME or Home Properties and each partnership or limited liability company in which HME or Home Properties owns an interest (any such subsidiary, partnership or limited liability company being herein referred to as a "Subsidiary") have filed or caused to be filed all federal, state, local, foreign and other tax returns, reports, information returns and statements required to be filed by them; (ii) HME, Home Properties and each Subsidiary have paid or caused to be paid all taxes (including interest and penalties) that are shown as due and payable on such returns or claimed by any taxing authority to be due and payable with respect to such returns, except those which are being contested by them in good faith by appropriate proceedings and in respect of which adequate reserves are being maintained on their books in accordance with generally accepted accounting principles consistently applied; (iii) HME Home Properties and each Subsidiary do not have any material liabilities for taxes other than those incurred in the ordinary course of business and in respect of which adequate reserves are being maintained by them in accordance with generally accepted accounting principles consistently applied; (iv) as of the date of this Agreement, Federal and state income tax returns for HME and Home Properties have not been audited by the Internal Revenue Service or state authorities; (v) as of the date of this Agreement, no deficiency, assessment with respect to, or proposed adjustment of, HME's or Home Properties' federal, state, local, foreign or other tax returns is pending or, to the best of Home Properties' knowledge, threatened; and (vi) as of the date of this Agreement, there is no tax lien, whether imposed by any federal, state, local or other tax authority, outstanding against the assets, properties or business of HME, Home Properties or any Subsidiary. G. Home Properties has delivered to the Partnership a complete and correct copy of: (i) the Articles of Incorporation and by-laws of HME; and (ii) the Second Amended and Restated Agreement of Limited Partnership of Home Properties, in each case, as amended. H. Home Properties has previously made available to the Partnership as requested in writing by the Partnership complete and correct copies of: (i) the annual report on Form 10-K/A for HME for the period ending December 31, 1999; (ii) all quarterly reports on Form 10-Q for HME for each of the quarters in 1999 and first quarter of 2000; (iii) definitive proxy statement for HME for the 2000 Shareholders' Meeting; (iv) any current reports on Form 8-K filed by HME since December 31, 1999; and (v) any other form, report, schedule and statement filed by HME with the Securities and Exchange Commission ("SEC") under the Exchange Act, since January 1, 2000 (collectively, the "SEC Documents"). As of their respective dates, each of the SEC Documents complied in all material respects with the requirements of the Exchange Act to the extent applicable to such SEC Documents, and none of such SEC Documents (as of their respective dates) contained an untrue statement of a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except as the same was corrected or superseded in a subsequent document duly filed with the SEC. HME is not aware of any reports or filings required to be filed under the Exchange Act with the SEC under the rules and regulations of the SEC that have not been filed. I. Home Properties is receiving the Interests delivered pursuant to this Agreement for investment purposes for its own account, and not with the view to or in connection with any distribution thereof. Home Properties understands that the Interests may not be sold, assigned, offered for sale, pledged or otherwise transferred unless such transaction is registered under the Securities Act of 1933, as amended, and applicable state securities laws, or exemptions from such registration requirements. The representations and warranties of Home Properties contained in this Agreement, the statements in any Exhibit or Schedules attached to this Agreement, or other instruments furnished to the Partnership at or prior to Closing pursuant to this Agreement, or in connection with the transactions contemplated pursuant to this Agreement, do not contain any untrue statements or a material fact, or fail to state a material fact necessary to make it not misleading. The representations and warranties contained herein shall survive the Closing and shall not be deemed to have merged in any document delivered at Closing. 21. ASSIGNMENT. This Agreement, and all or any portion of the rights of Home Properties hereunder, may not be assigned by Home Properties without the prior written consent of the Partnership, which may be granted or withheld in its sole discretion. Notwithstanding the foregoing, if necessary in order to preserve the existence of the Partnership upon acquisition of the Interests by Home Properties, Home Properties may require that up to 5% of the Interests be assigned to an entity in which Home Properties, directly or indirectly, holds 100% of the equity interests, provided such entity is either disregarded as a separate entity for Federal income tax purposes or treated as a partnership for such purposes. 22. NOTICE. All notices given pursuant to any provisions of this Agreement shall be in writing and shall be effective upon receipt and then only if delivered personally, or sent by registered or certified mail, postage prepaid or sent by a national over-night carrier, or by telecopy with confirmation of receipt to the addresses set forth below: To the Partnership: ELMWOOD VENTURE LIMITED PARTNERSHIP Attn: Sanford Slavin 200-A Monroe Street Suite 105 Rockville, MD 20850 Telecopy No.: ___________ To Home Properties: HOME PROPERTIES OF NEW YORK, L.P.s Attn: Norman Leenhouts, Chairman and Kathleen K. Suher, Esq. 850 Clinton Square Rochester, New York 14604 Telecopy No.: (716) 232-3147 23. PLANS. The Partnership agrees to provide Home Properties with all plans and architectural drawings in their possession for the improvements completed at the Property, including, without limitation, all "as built" plans in their possession and the Partnership further agrees that it will endeavor to turn over the same to Home Properties at the Property during the Due Diligence Period. 24. APPLICABLE LAW. The corporate laws of the State of Maryland will govern all questions concerning the relative rights and obligations of the parties with respect to any HME Common Shares acquired or acquirable by the holders of Units on account of their Units. Except as limited by the Operating Partnership Agreement, the laws of the State of New York will govern all other questions concerning the relative rights and obligations of the holders of Units as limited partners in Home Properties, or otherwise with respect to the Units. This Agreement shall, otherwise, be governed, construed and interpreted in accordance with the laws of the State of Maryland applicable to contracts made and to be performed wholly within the State of Maryland without giving effect to the conflicts-of-laws principles thereof. 25. ENTIRE AGREEMENT. This Agreement shall constitute the entire agreement between the parties, and any and all prior understandings or agreements, whether written or oral, are hereby merged into this Agreement. This Agreement cannot be modified except by a written instrument signed by the parties hereto. 26. BINDING AGREEMENT. This Agreement shall not be binding or effective until properly executed by the Partnership and Home Properties. 27. CONFIDENTIALITY. By execution of this Agreement and except as otherwise provided herein, prior to the Closing Home Properties and the Partnership agree to keep any and all information with respect to the transactions contemplated by this Agreement strictly confidential, and will not disclose any such information, without the other's prior written consent, unless such disclosure is required by, or appropriate under, applicable law or judicial process. Home Properties may disclose the existence of this Agreement to the extent necessary to conduct its due diligence with respect to the Property and the Partnership may disclose the existence and terms of this Agreement to the extent necessary to consummate the transactions contemplated hereby. Home Properties agrees that it will obtain the consent of the Partnership, which shall not be unreasonably withheld or delayed, with respect to the content of any press releases to be issued by Home Properties relating to the transaction described herein. The provisions of this Section 27 shall survive indefinitely any termination of this agreement. 28. PARTNERSHIP COVENANTS. A. Upon the request of Home Properties, the Partnership will provide, or cause to be provided, a signed representation letter substantially in the form attached hereto as EXHIBIT I. The Partnership will provide access by Home Properties' representatives, to all financial and other information relating to the Property as is sufficient to enable them to prepare audited financial statements, at Home Properties' expense, in conformity with Regulation S-X of the Securities and Exchange Commission (the "Commission") and any registration statement, report or disclosure statement required to be filed with the Commission. B. Prior to the Closing Date, the Partnership shall continue to fulfill all of its obligations under the terms of the leases encumbering the Property and under the service contracts and the Partnership shall operate, maintain and repair all landscaping, buildings, fixtures and facilities in accordance with its current practices. C. The Partnership will cease to market the Property during the term and pendency of the Contribution Agreement. In that regard, the Partnership will refrain from soliciting or accepting any offer from any third party, or initiating any discussions with any third party concerning the sale, refinancing or recapitalization of the Property, until such time as either Home Properties or the Partnership shall have terminated this Contribution Agreement. D. The General Partner hereby covenants to cause the tax returns to be prepared for the Partnership for the period up to the Closing Date. Home Properties shall make available to the General Partner (and its representatives) promptly upon request, all financial and other information relating to the Partnership which is necessary to permit the General Partner to file any tax returns on behalf of the Partnership for its taxable year ended on the Closing Date, and for such other purposes as may be requested by the General Partner in order to wind up business affairs for the entity and the Partners, and shall otherwise cooperate reasonably with the General Partner with respect to any pre-Closing tax matters. E. The General Partner shall cause tax returns for the Partnership for the period up to the Closing Date to be completed within one hundred twenty (120) days of the Closing Date. A copy of such final tax returns shall be submitted to Home Properties promptly upon their filing with the relevant governmental authority. Within one hundred twenty (120) days of the Closing Date, the General Partner shall also provide Home Properties with a schedule showing: (i) the net book value of the Property and the Other Items owned by the Partnership as of the Closing Date; and (ii) an updated SCHEDULE 2 providing the actual information which was estimated in such Schedule. The obligation of Home Properties contained in Section 29.A.(2) is limited by the estimated information originally provided in SCHEDULE 2. The information on the Schedule shall be calculated in a manner consistent with the calculations made for federal income tax depreciation purposes. 29. HOME PROPERTIES' COVENANTS. A. Home Properties hereby covenants to the Partnership and the Unit Partners as follows: (1) For a period of ten (10) years from and after the Closing Date, Home Properties shall not sell, exchange, transfer or otherwise dispose of the Property unless such transaction occurs in a manner as to be tax free to the Partners receiving Units. For a period of five (5) years following the aforementioned ten (10) year period, Home Properties will use commercially reasonable efforts to effect any disposition of all or part of the Property through a 1031 tax-free exchange or other transaction which does not cause federal income tax gain to be incurred by the Partners receiving Units and their respective successors and assigns. In the event that Home Properties breaches any of its obligations set forth in this Section 29(A)(I), Home Properties shall indemnify, defend and hold harmless each of the Partners receiving Units and their respective successors and assigns (each an "Indemnified Party" and collectively the "Indemnified Parties") from and against the aggregate federal, state and local income taxes incurred by such Indemnified Party as a result thereof (collectively, "Taxes") plus the Taxes incurred by such Indemnified Party as a result of the receipt of the Indemnity Payment (the "Tax Indemnity Amount"). Any such Taxes shall be deemed to be the amount of gain or income recognized by the relevant Indemnified Party multiplied by the highest actual rate or rates imposed upon such Indemnified Party for such gain or income (assuming it is the last dollar of income or gain) for the year in which such gain or income is recognized. In determining the Tax Indemnity Amount, no effect shall be given to the Indemnified Parties' tax deductions, tax credits, tax carry forwards nor to any other of their tax benefits or tax attributes. The Tax Indemnity Amount shall be payable by Home Properties to each Indemnified Party not later than thirty (30) days following the filing of tax returns for the Indemnified Party for the year in question. (2) For a period of ten (10) years from and after the Closing Date, Home Properties shall allocate to the Partners receiving Units, for federal income tax purposes, pursuant to Section 752 of the Code, nonrecourse liabilities of Home Properties in an aggregate amount necessary to prevent gain recognition under Section 731(a)(1) of the Internal Revenue Code (the "Code") by the Partners receiving Units with negative capital accounts as a result of a deemed distribution of money to such persons pursuant to Section 752(b) of the Code. (3) Home Properties shall utilize the "traditional method" under Section 704(c) of the Code without curative allocations in accordance with Treasury Regulation Section 1.7043(b)(1) to adjust for discrepancies between the agreed-upon value of the various components of the contributed Property (or for any property received in exchange for any contributed Property in a like-kind exchange) and the adjusted tax basis of such components. (4) Home Properties covenants and agrees that it shall use its reasonable commercial efforts to cause HME to continue to be taxed as a real estate investment trust under the Code unless the Board of Directors of HME determines that it is in the best interests of shareholders of HME to be taxed otherwise. (5) Home Properties shall cooperate fully, as and to the extent reasonably requested by the General Partner, in connection with the filing of any tax return, statement, report or form, and any audit litigation or other proceeding with respect to Taxes. Such cooperation shall include, without limitation, the retention and (upon request) the provision of records and information which are reasonably relevant to any such audit, litigation or other proceeding. Home Properties agrees to retain all books and records with respect to Tax matters pertinent to the Partnership relating to any pre-Closing tax period until the expiration of the applicable statute of limitations (taking into account waivers or extensions) or, if sooner, such time as a final determination shall have been made with respect to such Taxes for such period, and to abide by all record retention agreements entered into with any taxing authority. 30. DEFAULT. In the event that Home Properties fails to acquire the Interests pursuant to this Agreement other than by reason of a termination by Home Properties expressly permitted hereunder or the Partnership's default, the Partnership agrees that the Partnership's sole remedies shall be (i) to have the Title Company deliver the Deposit to the Partnership as liquidated damages to recompense the Partnership for time spent, labor and services performed, and loss of its bargain and to terminate this Agreement; or (ii) to seek specific performance. Home Properties acknowledges that in the event of such a failure by Home Properties, the damages suffered by the Partnership will be difficult to ascertain with certainty. Therefore, Home Properties and the Partnership agree that in the event of such a failure by Home Properties, and if the Partnership does not elect to seek specific performance, then the sum of $100,000 is a good faith estimate of the Partnership's damages and at the Partnership's election said sum shall be promptly paid to the Partnership in the form of the Deposit. In such event the Partnership agrees to accept the Deposit as the Partnership's total damages and relief hereunder in the event of Home Properties' default hereunder. In the event that Home Properties does so default and this Agreement is terminated, Home Properties shall have no further right, title, or interest in the Property or the Interests. In the event the Partnership fails to sell the Property to Home Properties pursuant to this Agreement other than by reason of a termination by the Partnership expressly permitted hereunder or Home Properties' default, Home Properties' sole remedies shall be (i) cancellation of this Agreement in which event Home Properties shall be entitled to the return by the Title Company to Home Properties of the Deposit, or (ii) to seek specific performance. In no event shall either party be entitled to any remedies or damages for breach of this Agreement, except as set forth hereinabove. And in no event shall any party be entitled to punitive or consequential damages for the breach of this Agreement. 31. RECORDATION. Neither party may record this Contribution Agreement; and any recordation shall render the contract void. Also, neither party may file a lis pendens against the Property. 32. ARBITRATION. Except for any action for specific performance, any controversy or claim arising out of or relating to this Agreement, or the breach or the validity thereof shall be settled by final and binding arbitration in accordance with the most current Commercial Arbitration Rules (the "Rules") of the American Arbitration Association ("AAA"). The arbitration shall be conducted by a tribunal of three (3) arbitrators (the "Tribunal"). Each party shall appoint an arbitrator within ten (10) days from the filing of the Demand and Submission in accordance with Paragraph 7 of the Rules and the two (2) arbitrators shall jointly appoint the third arbitrator, within fifteen (15) days from their appointment, in accordance with Paragraph 7 of the Rules. If the two (2) appointed arbitrators fail to agree upon a third arbitrator within said fifteen (15) days and fail to agree to an extension of such period, the third arbitrator shall be appointed by the AAA in accordance with Paragraph 15 of the Rules. The place of arbitration shall be Alexandria, Virginia and the Award shall be issued at the place of arbitration. The Tribunal may, however, call and conduct hearings and meetings at such other places as the parties may agree. The law applicable to the arbitration procedure shall be the Federal Arbitration Act (the "Act") as supplemented by any law of the place of arbitration which is not inconsistent with the Act. The decision of the Tribunal (the "Award") shall be made within ninety (90) days of the appointment of the Tribunal pursuant to the provisions hereof, and the parties hereby agree that any such decision need not be accompanied by a reasoned opinion. The Award may, except as limited by Section 30 of this Agreement, include (i) recovery of actual damages for violation of any obligations under this Agreement or of governing law, including the recovery of attorneys' fees to the prevailing party (ii) injunctive relief against threatened or actual violations of any obligation under the Agreement or of governing law or (iii), if and to the extent permitted under the terms of the Agreement, the remedy of specific performance. The Award shall be final and binding on the parties. Judgment upon the Award may be entered in any court having jurisdiction thereof or having jurisdiction over one or more of the parties or their assets. The parties specifically waive any right they may enjoy to apply to any court for relief from the provisions of this Agreement or from any decision of the Tribunal made prior to the Award. 33. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected thereon as the signatories. 34. SIGNATURE BY FACSIMILE. The parties may execute and deliver this Agreement by forwarding signed facsimile copies of their signature page to this Agreement and delivering an original of the same by overnight courier. Such facsimile signatures shall have the same binding effect as original signatures, and the parties hereby waive any defense to validity based on any such copies or signatures. 35. EMPLOYEES. The Partnership shall be responsible for, and shall make arrangements for payment of, all amounts due, up to the Closing Date, as management fees under any management agreement relating to the Project as well as for salaries, accrued vacation pay and withholding and payroll taxes, if any, accruing prior to the Closing Date to the employees of the Partnership. The Partners hereby indemnify Home Properties for any and all expenses and costs Home Properties may incur relating to claims by employees of the Partnership for payment of any salaries or other benefits due to such employees for periods prior to the Closing Date. Any such claims shall be deemed to be Indemnity Claims as described in Section 4C above. IN WITNESS WHEREOF, the parties hereto have caused this Instrument to be executed as of the day and date first above written. HOME PROPERTIES OF NEW YORK, L.P. By: Home Properties of New York, Inc., General Partner By: ------------------------------ Title: ------------------------------ ELMWOOD VENTURE LIMITED PARTNERSHIP By: SS Associates, LLC, a Maryland limited liability company, General Partner By: ------------------------------ Sanford Slavin, sole member EX-2 6 0006.txt EXHIBIT 2.5 SALE, PURCHASE AND ESCROW AGREEMENT This Agreement, dated as of July 6, 2000, is made by and between Bank of America, Trustee ("Seller"), under the provisions of Virginia Land Trust Agreement NST-1, dated as of December 30, 1980 (the "Land Trust"), and HOME PROPERTIES OF NEW YORK, L.P., a New York limited partnership ("Buyer") and constitutes (I) a contract of sale and purchase between the parties and (II) an escrow agreement between Seller, Buyer and FIRST AMERICAN TITLE INSURANCE COMPANY OF NEW YORK ("Escrow Agent"), the consent of which appears at the end hereof. 1.1. Seller owns and holds fee title to that certain land (the "Land") described in EXHIBIT A, together with all improvements (the "Improvements") located thereon known as East Meadow Apartments and located at 4023 Majestic Lane, Fairfax, Virginia (collectively, the "Real Property"). 1.2. In connection with the Real Property, Seller has (I) obtained certain governmental permits and approvals, (II) obtained certain contractual rights and other intangible assets, and (III) acquired certain other items of tangible personal property more completely described in EXHIBIT B (collectively, the "Personal Property"). The Real Property and the Personal Property are collectively referred to as the "Property." 1.3. Seller now desires to sell and Buyer now desires to purchase all of Seller's right, title and interest in and to the Property, upon the terms and covenants and subject to the conditions set forth below. 2.1. In consideration of the covenants herein contained, Seller hereby agrees to sell and Buyer hereby agrees to purchase the Property for a total purchase price of $13,000,000.00 (the "Purchase Price"), which shall be paid by Buyer as follows: 2.1.1 DEPOSIT. Buyer has, concurrently herewith, delivered to Escrow Agent by bank wire of immediately available funds the sum of $250,000 (the "Deposit"). 2.1.2 ADDITION TO DEPOSIT. Buyer shall, on or before July 27, 2000 (the last day of the Investigation Period - as defined in Section 5.3.2), deliver to Escrow Agent, by bank wire transfer of immediately available funds, an additional $250,000, such money to become part of the Deposit, for an aggregate Deposit of $500,000. 2.1.3 BALANCE OF PURCHASE PRICE. Buyer shall, at or before the Closing (as defined in Section 6.1), deliver to Escrow Agent, by bank wire transfer of immediately available funds, a sum equal to the balance of the Purchase Price. The balance of the Purchase Price delivered to Escrow Agent by Buyer and that received by Seller at Closing shall each be adjusted to reflect prorations and other adjustments pursuant to Section 7.1 and Section 2.3. Following the collection of the Deposit, Escrow Agent shall invest the Deposit in an interest-bearing account of a banking institution whose principal office is in New York City. Any interest earned on the Deposit shall be credited and delivered to the party receiving the Deposit, except however, if the transaction closes, at Closing any interest earned on the Deposit shall be credited to Buyer. 3.1 Buyer's obligation to purchase is expressly conditioned upon each of the following: 3.1.1 PERFORMANCE BY SELLER. Performance in all material respects of the obligations and covenants of, and deliveries required of, Seller hereunder. 3.1.2 TITLE INSURANCE. Subject to receipt of the payment of the premium by Buyer, delivery at the Closing of a standard 1992 form of American Land Title Association owner's policy of title insurance (or a signed marked binder thereof) (the "Title Policy") with liability in the amount of the Purchase Price issued by FIRST AMERICAN TITLE INSURANCE COMPANY (the "Title Company"), insuring that fee title to the Real Property vests in Buyer subject to the Permitted Encumbrances (as defined in Section 4.2.1) (At its option, Buyer may direct the Title Company to issue additional title insurance endorsements, if Buyer pays for the extra cost of such additional endorsements, provided that the Title Company's failure to issue any such additional endorsements shall not affect Buyer's obligations under this Agreement). 3.1.3 SELLER'S REPRESENTATIONS. The representations and warranties by Seller set forth in Section 11.1 being true and correct in all material respects as of the Closing except as modified by notice (in accordance with Section 11.1) to which Buyer does not object in writing by the later of (I) three business days after receipt thereof or (II) the end of the Investigation Period. 3.2. Seller's obligation to sell is expressly conditioned upon each of the following: 3.2.1 PERFORMANCE BY BUYER. Performance in all material respects of the obligations and covenants of, and deliveries required of, Buyer hereunder. 3.2.2 RECEIPT OF PURCHASE PRICE. Receipt of the Purchase Price and any adjustments due Seller under Article VII at the Closing in the manner herein provided. 4.1 Buyer shall, at or before the Closing, deliver to Escrow Agent each of the following: 4.1.1 PURCHASE PRICE. The Purchase Price as set forth in Article II. 4.1.2 ASSIGNMENT OF LEASES AND CONTRACTS. Four executed counterparts of the Assignment and Assumption of Leases, Contracts and Other Property Interests (the "Assignment of Leases and Contracts") in the form of EXHIBIT C. 4.1.3 BILL OF SALE. Four executed counterparts of a bill of sale (the "Bill of Sale") in the form of EXHIBIT D. 4.1.4 CLOSING STATEMENT. An executed settlement statement reflecting the prorations and adjustments required under Article VII. 4.1.5 CASH - PRORATIONS. The amount, if any, required of Buyer under Article VII. 4.2. Seller shall, at or before the Closing, deliver to Escrow Agent each of the following: 4.2.1 DEED. A special or limited warranty deed (the "Deed") with respect to the Real Property, executed and acknowledged by Seller, pursuant to which Seller shall convey title to the Real Property subject to the following (collectively, the "Permitted Encumbrances"): (1) Non-delinquent real property taxes and all assessments and unpaid installments thereof which are not delinquent. (2) The residential leases currently affecting the Property and any new residential leases executed in accordance with this Agreement after the date hereof (collectively, the "Leases"), and the rights of the tenants thereunder. (3) Any other lien, encumbrance, easement or other exception or matter voluntarily imposed or consented to by Buyer prior to or as of the Closing. (4) All exceptions to title contained or disclosed in the Title Report (as defined in Section 5.1.1) other than Title Objections (as defined in Section 5.3.1) identified and not thereafter waived by Buyer. 4.2.2 ASSIGNMENT OF LEASES AND CONTRACTS. Four executed counterparts of the Assignment of Leases and Contracts, together with original executed counterparts (or copies if originals are not in Seller's possession) of the Leases and the service contracts, equipment leases, maintenance agreements and other contracts affecting the Property enumerated in EXHIBIT E (the "Contracts") assigned thereby. Schedule B of the Assignment of Leases and Contracts shall list all of the Contracts except those Contracts which Buyer notifies Seller during the Investigation Period that it would like terminated (provided, however, that such Contracts are terminable by the Final Closing Date at no cost to Seller should Seller give notice to the applicable vendor at the end of the Investigation Period). 4.2.3 BILL OF SALE. Four executed counterparts of the Bill of Sale. 4.2.4 NOTICES TO TENANTS. Four executed notices to tenants signed by Seller (or Seller's manager for the Improvements) in the form of EXHIBIT F. 4.2.5 FIRPTA CERTIFICATE. Four executed copies of a certificate in the form of EXHIBIT G, with respect to the Foreign Investment in Real Property Tax Act. 4.2.6 MISCELLANEOUS. Originals or copies of any additional documents, instruments or records in the possession of Seller or its agents which are necessary for the ownership and operation of the Property. 4.2.7 CLOSING STATEMENT. An executed settlement statement reflecting the prorations and adjustments required under Article VII. 4.2.8 CASH - PRORATIONS. The amount, if any, required of Seller under Article VII. 4.3. The failure of Buyer or Seller to make any delivery required above by and in accordance with this Article IV shall constitute a default hereunder by such party. 5.1. Seller shall deliver, cause to be delivered, or make available to Buyer the following: 5.1.1 PRELIMINARY TITLE REPORT. A current preliminary title report covering the Real Property issued by the Title Company, together with copies of all documents referred to as exceptions therein (collectively, the "Title Report"). 5.1.2 SURVEY. A recent survey of the Real Property prepared by a licensed surveyor (the "Survey"). 5.1.3 LEASES AND CONTRACTS. Copies of the Leases and the Contracts. 5.1.4 BOOKS AND RECORDS. Copies of the managing agent's rent collection records and tax bills and utility bills and other financial and profit and loss statements regarding the Property for the 1999 calendar year and year to date, it being acknowledged that the foregoing shall not include any financial analyses, budgets, projections, appraisals, or confidential materials. 5.1.5 PLANS AND SPECIFICATIONS. Copies of all plans and specifications for the Improvements which are in Seller's possession. 5.1.6 PERMITS. Copies of all govern-mental permits, certificates of occupancy and approvals, in each case regarding the Property, which are in Seller's possession. 5.1.7 ENVIRONMENTAL REPORTS. Copies of all Phase I Environmental Reports or other environmental reports or documents regarding the Property, which are in Seller's possession. 5.1.8 OTHER. To the extent in Seller's possession, such other documents, reports and information relating to the Property requested by Buyer in writing to Seller as may be reasonably necessary for Buyer's investigation of the Property. If requested by Seller, Buyer shall provide written verification of its receipt of those items listed in this Section 5.1 which are delivered to Buyer. 5.2. Prior to the expiration of the Investigation Period, Buyer and Buyer's representatives, agents and designees shall have the right at reasonable times and upon reasonable notice to Seller to enter upon the Real Property, at Buyer's sole cost, solely for the purpose of conducting such non-destructive physical inspections, non-destructive soil and engineering tests and a non-destructive Phase I environmental site assessment as Buyer may elect to make or obtain, PROVIDED that Buyer promptly repairs any damage to the reasonable satisfaction of Seller. Buyer acknowl-edges and agrees that the inspection, testing and survey of the Real Property by Buyer and Buyer's representatives, agents and designees shall be subject to the rights of the tenants under the Leases and shall be performed in such a manner as to not interfere with the rights of such tenants. Buyer shall give Seller reasonable prior notice of any inspection, test or survey so that Seller will have the opportunity to have a representative present thereat, which right Seller reserves. 5.2.1 NO COMMUNICATION WITH TENANTS. Neither Buyer nor Buyer's representatives, agents and designees shall communicate with any tenants without the prior written approval of Seller. Seller reserves the right to have a representative be present at any meeting with any tenant. 5.2.2 INDEMNITY AND INSURANCE. Buyer hereby agrees to indemnify and hold harmless Seller, The Edwin E. Hollenback III 1991 Trust ("the Land Trust Beneficiary"), the trustee and the beneficiary of the Land Trust Beneficiary, and their respective employees, agents, successors and assigns, from and against any mechanics' lien or claim therefor, any claim, cause of action, lawsuit, damage, liability, loss, cost or expense (including, without limitation, attorneys' fees) arising out of any such entry by Buyer or its representatives, agents or designees or out of any such inspections, tests or survey conducted by Buyer, its representa-tives, agents or designees. Prior to any entry upon the Real Property, Buyer shall, or shall cause its agents to, maintain and deliver to Seller, for Seller's reasonable approval, policies of commercial general liability insurance in such amounts, covering such risks and in such form as is customary and appropriate with respect to such entry, inspections, tests and surveys. The provisions of the preceding two sentences shall survive the termination of this Agreement or the Closing hereunder. 5.3. Buyer shall have the right to make the following investigations. 5.3.1 TITLE AND SURVEY. Buyer shall have until July 17, 2000 at 4:00 P.M. New York City Time to notify Seller of any objections (the "Title Objections") with respect to the Title Report and the Survey based on its review thereof. If Buyer does not give such notice, such failure shall be conclusively deemed to be full and complete approval of the Title Report and the Survey and any matter disclosed therein. If Buyer does give such notice, Seller shall have five business days after receipt thereof to notify Buyer that Seller (a) will cause or (b) elects not to cause any or all Title Objections to be removed or insured over by the Title Company. Seller's failure to notify Buyer within such five business day period as to any Title Objection shall be deemed an election by Seller not to remove or have the Title Company insure over such Title Objection. If Seller notifies or is deemed to have notified Buyer that Seller shall not remove nor have the Title Company insure over any or all of the Title Objections, Buyer shall have until the end of the Investigation Period to (I) terminate this Agreement or (II) waive such Title Objections and proceed to closing without any abatement or reduction in the Purchase Price on account of such Title Objections. If Buyer does not give such notice, Buyer shall be deemed to have elected to waive such Title Objections. 5.3.2 GENERAL INVESTIGATION. In addition, Buyer shall have from the date hereof until July 27, 2000 at 4:00 P.M. New York City Time (the "Investigation Period") to notify Seller that as a result of Buyer's review of the documents set forth in Section 5.1 (other than the Title Report or the Survey which are covered in Section 5.3.1 above) or Buyer's investigation of the Real Property pursuant to Section 5.2 it (I) disapproves of any matter or item affecting the Property (which disapproval may be in Buyer's sole discretion) or (II) it has not been able to obtain (after using commercially reasonable efforts to do so) the approval of the Board of Directors of its general partner, Home Properties of New York, Inc., and thus has elected to terminate this Agreement. If Buyer fails to give such notice of disapproval and termination prior to the expiration of the Investigation Period, such failure shall be conclusively deemed to be a waiver of Buyer's right to terminate this Agreement under this Section 5.3.2. 5.4. If Buyer terminates this Agreement in accordance with Section 5.3, then all further rights and obligations of the parties shall cease and terminate without any further liability of either party to the other (except those obligations which are specifically provided to survive such termination as provided in this Agreement). 5.5. Nothing contained in this Agreement or otherwise shall require Seller to render its title marketable or to remove or correct any exception or matter disapproved by Buyer or to spend any money or incur any expense in order to do so. Escrow Agent shall close the escrow (the "Closing") as soon as all conditions to closing contained in this Agreement have been satisfied which shall in any event be not later than August 3, 2000 (the "Final Closing Date"), time being of the essence (subject only to Seller's cure rights under Section 13.6, in which event Seller will give Buyer not less than three business days notice of the date of Closing), by recording and delivering all documents and funds as set forth in Article VIII. 7.1. Prior to the Closing, Seller shall determine the amounts of the prorations in accordance with this Agreement and notify Buyer thereof. Buyer shall review and approve such determination promptly and prior to the Closing, such approval not to be unreasonably withheld or delayed. Thereafter, Buyer and Seller shall each inform Escrow Agent of such amounts. 7.1.1 CERTAIN ITEMS PRORATED. In accordance with the notifications, Escrow Agent shall prorate between the parties (and the parties shall deposit funds therefor with Escrow Agent or shall instruct Escrow Agent to debit against sums held by Escrow Agent owing to such party), as of 11:59 p.m. the day prior to the Closing, all income and expenses with respect to the Property and payable to or by the owner of the Property, including, without limitation: (I) all real property taxes on the basis of the fiscal period for which assessed (if the Closing shall occur before the tax rate is fixed, the apportionment of taxes shall be based on the tax rate for the preceding period applied to the latest assessed valuation, and after the Closing, when the actual real property taxes are finally fixed, Seller and Buyer shall promptly make a recalculation of such proration, and the appropriate party shall make the applicable payment reflecting the recalculation to the other party); (II) rents, other tenant payments and tenant reimbursements (collectively, "Tenant Payments") if any, received under the Leases; (III) charges for water, sewer, electricity, gas, fuel and other utility charges, all of which shall be read promptly before Closing, unless Seller elects to close its own applicable account, in which event Buyer shall open its own account and the respective charges shall not be prorated; (IV) the cost, based on the invoices of Seller's suppliers, of all building supplies (but not building materials) all in unopened containers, in accordance with an inventory to be made by Seller as of a date not more than ten days preceding the Closing; (V) amounts prepaid and amounts accrued but unpaid on the Contracts which are to be assumed by Buyer; and (VI) periodic fees for licenses, permits or other authori-zations with respect to the Property. The adjustment obligation in item (I) above shall survive the Closing. 7.1.2 LEASING COMMISSIONS. At the Closing Buyer shall pay or reimburse Seller for all reasonable & customary leasing commissions, tenant improvement costs and other charges payable by reason of or in connection with any Lease entered into after the date of this Agreement, any renewal or extension of an existing Lease after such date and any new lease referred to Section 13.4. 7.1.3 TAXES. Real property tax refunds and credits received after the Closing which are attributable to a fiscal tax year prior to the Closing shall belong to Seller. Any such refunds and credits attributable to the fiscal tax year during which the Closing occurs shall be apportioned between Seller and Buyer after deducting the reasonable out-of-pocket expenses of collection thereof. This apportionment obligation shall survive the Closing. 7.1.4 SECURITY AND OTHER DEPOSITS. At the Closing, Seller shall deliver to (or credit) Buyer all unapplied refundable security deposits (plus interest accrued thereon to the extent required to be paid by the applicable Lease or applicable law) required to be held by Seller under the Leases and Buyer shall pay Seller an amount equal to all utility and contract deposits then held by third parties with respect to the Property. 7.1.5 DELINQUENT RENTALS. Delinquent Tenant Payments, if any, shall not be prorated and all rights thereto shall be re-tained by Seller, who reserves the right to collect and retain such delinquent Tenant Payments, and Buyer agrees to cooperate with Seller in Seller's efforts to collect such Tenant Payments, including, if necessary, joining in any legal action instituted by Seller. If at any time after the Closing Buyer shall receive any such delinquent Tenant Payments (all of which Buyer shall use its best efforts to obtain), Buyer shall immediately remit such Tenant Payments to Seller, provided that any monies received by Buyer from a delinquent tenant shall be applied first to current rents then due and payable and then to delinquent rents in the inverse order in which they became due and payable. This Section 7.1.5 shall survive the Closing. 7.1.6 ADDITIONAL PAYMENTS. If the Tenant Payments required to be made by any tenants include utility pass throughs, capital expenditure pass throughs, additional rent or escalation charges or other charges ("Additional Payments"), Seller and Buyer shall at the Closing reasonably estimate the unpaid amount thereof attributable to any period prior to the Closing and Buyer shall pay such amount to Seller at the Closing. 7.1.7 TRUE UP. If either Seller or Buyer party notifies the other on or before October 3, 2000 that due to an erroneous estimate or otherwise that one or more prorations or credits under this Article VII was incorrectly calculated or credited, then, provided that such errors in the aggregate exceed $5,000 in favor of either party, the Seller and Buyer shall promptly make such adjustments and the applicable party shall promptly pay to the other such amount. The failure of a party to obtain any previously unavailable information or discover an error or omission with respect to any proration or credit and to notify the other party as provided above by October 3, 2000 shall be deemed a waiver to its right to "true-up" as provided in this paragraph. This Section 7.1.7 shall survive the Closing. 7.2. Seller shall pay (I) the "Grantor's tax", in the amount Escrow Agent determines to be required by law, (II) one-half of Escrow Agent's escrow fee or escrow termination charge and (III) Seller's own attorneys' fees. 7.3. Buyer shall pay (I) all state and local transfer taxes other than the "Grantor's tax", in the amount Escrow Agent determines to be required by law, (II) one-half of Escrow Agent's escrow fee or escrow termination charge, (III) the cost of the Title Report, the title premium for the Title Policy and the cost of any other title insurance endorsements ordered by Buyer, (IV) the cost of the Survey and any update thereof, (V) transfer fees, recording charges and any other costs incurred in recording the Deed or any other instruments other than the taxes referred to above, (VI) any costs incurred in connection with Buyer's investigation of the Property pursuant to Article V and (VII) Buyer's own attorneys' fees. 8.1. At the Closing, Escrow Agent shall deliver the Purchase Price to Seller, and the transaction shall not be considered closed until such delivery occurs. 8.2. Escrow Agent shall, at the Closing, hold for personal pickup or arrange for wire transfer, (I) to Seller, or order, as instructed by Seller, all sums and any proration or other credits to which Seller is entitled less any appropriate proration or other charges and (II) to Buyer, or order, any excess funds theretofore delivered to Escrow Agent by Buyer and all sums and any proration or other credits to which Buyer is entitled less any appropriate proration or other charges. 8.3. Escrow Agent shall cause the Deed and any other documents that Seller or Buyer desires to record to be recorded with the appropriate county recorder and, after recording, returned to the grantee, beneficiary or person acquiring rights under said document or for whose benefit said document was acquired. 8.4. Escrow Agent shall at the Closing deliver by overnight express delivery to Buyer the following: (1) one conformed copy of the Deed; (2) two originals of the Assignment of Leases and Contracts; (3) two originals of the Bill of Sale; (4) two originals of the Notice to Tenants; (5) two originals of the FIRPTA Affidavit; (6) one original of the Closing Statement; and (7) one original of the Title Policy. 8.5. Escrow Agent shall at the Closing deliver by overnight express delivery to Seller, the following: (1) one conformed copy of the Deed; (2) two originals of the Assignment of Leases and Contracts; (3) two originals of the Bill of Sale; (4) two originals of the Notice to Tenants; (5) two originals of the FIRPTA Affidavit; and (6) one original of the Closing Statement. 8.6. Escrow Agent shall at the Closing deliver by overnight express delivery, each other document received hereunder by Escrow Agent to the person acquiring rights under said document or for whose benefit said document was acquired. 9.1. If escrow or this Agreement is terminated for any reason, Buyer shall, within five days following such termination, deliver to Seller all documents and materials relating to the Property previously delivered to Buyer by Seller. Escrow Agent shall deliver all documents and materials deposited by Seller and then in Escrow Agent's possession to Seller. 9.2. If escrow or this Agreement is terminated for any reason, Escrow Agent shall deliver all documents and materials deposited by Buyer and then in Escrow Agent's possession to Buyer. 9.3. If escrow or this Agreement is terminated (I) pursuant to Section 5.3, Section 10.2 or Article XII or (II) due to the failure of a condition set forth in Section 3.1, then Buyer shall be entitled to obtain the return of the Deposit. If the closing of title does not take place and escrow or this Agreement is terminated for any other reason, Seller shall be entitled to the Deposit, and Escrow Agent shall deliver the Deposit to Seller. 9.4. If Escrow Agent receives a notice from either party instructing Escrow Agent to deliver the Deposit to such party, Escrow Agent shall deliver a copy of the notice to the other party within three days after receipt of the notice. If the other party does not object to the delivery of the Deposit as set forth in the notice within three business days after receipt of the copy of the notice, Escrow Agent shall, and is hereby authorized to, deliver the Deposit to the party requesting it pursuant to the notice. Any objection hereunder shall be by notice setting forth the nature and grounds for the objection and shall be sent to Escrow Agent and to the party requesting the Deposit. 9.5. The return of documents and monies as set forth above shall not affect the right of either party to seek such legal or equitable remedies as such party may have under Article X with respect to the enforcement of this Agreement. The obligations under this Article IX shall survive termination of this Agreement. 10.1. If, for any reason whatsoever (other than the failure of a condition set forth in Section 3.1 and other than a termination of this Agreement pursuant to Section 5.3, Section 10.2 or Article XII), Buyer fails to complete the acquisition as herein provided, Seller shall be released from any further obligations hereunder (and, upon demand of Seller, Buyer shall promptly deliver to Seller an instrument confirming such release). Insofar as it would be extremely impracticable and difficult to estimate the damage and harm which Seller would suffer due to such failure, and insofar as a reasonable estimate of the total net detriment that Seller would suffer from such failure is the amount of the Deposit, Seller shall be entitled to the Deposit, and Escrow Agent shall deliver the Deposit to Seller, which amount is not intended to be and is not a penalty, and which shall be Seller's sole remedy for damages arising from Buyer's failure to complete the acquisition. 10.2. If the sale is not completed as herein provided solely by reason of any material default of Seller, Buyer shall be entitled to (I) terminate this Agreement (by delivering notice to Seller which includes a waiver of any right, title or interest of Buyer in the Property) and obtain the return of the Deposit or (II) treat this Agreement as being in full force and effect and pursue only the specific performance of this Agreement. Buyer waives any right to pursue any other remedy at law or equity for such default of Seller, including, without limitation, any right to seek, claim or obtain damages, punitive damages or consequential damages. 11.1. The matters set forth in this Section 11.1 constitute representations and warranties by Seller which are now and (subject to matters contained in any notice given pursuant to the next succeeding sentence) shall, in all material respects, at the Closing be true and correct. If Seller learns of, or has a reason to believe that any of the following representations and warranties may cease to be true, Seller shall give prompt notice to Buyer (which notice shall include copies of the instrument, correspondence, or document, if any, upon which Seller's notice is based). As used in this Section 11.1, the phrase "to the extent of Seller's actual knowledge" shall mean the actual knowledge of V. Thomas Crockett of CANTEX Management Corporation, Seller's management company for the Property, and Dorothy Fischer, Seller's on-site manager responsible for the Property. There shall be no duty imposed or implied to investigate, inspect, or audit any such matters, and there shall be no personal liability on the part of Mr. Crockett and/or Ms. Fischer. To the extent Buyer has or acquires actual knowledge or is deemed to know prior to the expiration of the Investigation Period that these representations and warranties are inaccurate, untrue or incorrect in any way, such representations and warranties shall be deemed modified to reflect Buyer's knowledge or deemed knowledge. Buyer shall be deemed to know a representation or warranty is untrue, inaccurate or incorrect if this Agreement or any files, documents, materials, analyses, studies, tests, or reports disclosed or made available to Buyer prior to the expiration of the Investigation Period contains information which is inconsistent with such representation or warranty. 11.1.1 NO BROKER. Seller has not engaged or dealt with any broker or finder in connection with the sale contemplated by this Agreement, except Transwestern Carey Winston, LLC (the "Broker"). Seller shall pay all brokerage commissions to the Broker, as the Broker may be entitled thereto. Seller shall indemnify and hold harmless Buyer from any claims, costs, damages or liabilities (including attorneys' fees) arising from any breach of the representation contained in this Section 11.1.1 or if the same shall be based on any statement, representation or agreement by Seller with respect to the payment of any brokerage commissions or finders fees. 11.1.2 POWER AND AUTHORITY. Seller has the legal power, right and authority to enter into this Agreement and to consummate the transactions contemplated hereby. 11.1.3 PROCEEDINGS. To the extent of Seller's actual knowl-edge, there is no pending or threatened condemnation or similar proceeding affecting any part of the Real Property. 11.1.4 CONTRAVENTION. Seller is not prohibited from consummating the transactions contemplated by this Agreement by any law, regulation, agreement, instrument, restriction, order, or judgment. 11.1.5 LEASES AND CONTRACTS. The Leases and Contracts comprise all of the existing leases and contracts which will affect the Property on and after the Closing. 11.1.6 COMPLIANCE. Seller has not received writ-ten notice from any governmental authority that the Real Property is not in material compliance with all applicable laws, except for such failures to comply, if any, which have been remedied. 11.1.7 LITIGATION. To the extent of Seller's actual knowledge, there is no material litigation affecting the Property actually known to Seller which litigation is not covered by insurance. 11.2. The matters set forth in this Section 11.2 constitute representations and warranties by Buyer which are now and shall, at the Closing, be true and correct. 11.2.1 NO BROKER. Except for the Broker, Buyer has not engaged or dealt with any broker or finder in connection with the sale contemplated by this Agreement. Buyer shall indemnify and hold Seller harmless from any claims, costs, damages or liabilities (including attorneys' fees) arising from any breach of the representation contained in this Section 11.2.1 or if the same shall be based on any statement, representation or agreement by Buyer with respect to the payment of any brokerage commissions or finders fees. 11.2.2 POWER AND AUTHORITY. Buyer has the legal power, right and authority to enter into this Agreement and, subject to the approval of the Board of Directors of its general partner, Home Properties of New York, Inc., (which will have been obtained should Buyer not terminate this Agreement prior to the end of the Investigation Period) Buyer has the legal power, right and authority to consummate the transactions contemplated hereby. 11.2.3 INDEPENDENT INVESTIGATION. The consummation of this transaction shall con-stitute Buyer's acknowledgment that it has independently inspected and investigated the Property and has made and entered into this Agreement based upon such inspection and investigation and its own examination of the condition of the Property. 11.2.4 BUYER RELIANCE. Buyer is experienced in and knowledgeable about the ownership and management of multi-family residential rental real estate properties, and it has relied and will rely exclusively (except as expressly set forth in Section 11.1) on its own consultants, advisors, counsel, employees, agents, principals and/or studies, investigations and/or inspections with respect to the Property, its condition, value and potential. Buyer agrees that, notwithstanding the fact that it has received certain information from Seller or its agents or consultants, Buyer has relied solely upon and will continue to rely solely upon its own analysis and will not rely on any information provided by Seller or its agents or consultants, except as expressly set forth in Section 11.1. 11.3. EXCEPT AS SPECIFICALLY SET FORTH IN THIS ARTICLE XI, NEITHER SELLER NOR BUYER HAVE MADE, MAKE OR HAVE AUTHORIZED ANYONE TO MAKE, ANY WARRANTY OR REPRESENTATION OF ANY KIND OR CHARACTER, EXPRESS OR IMPLIED, AS TO THE LEASES; THE CONTRACTS; ANY WRITTEN MATERIALS DELIVERED TO BUYER; THE PERSONS PREPARING SUCH MATERIALS; THE PRESENT OR FUTURE PHYSICAL CONDITION, HABITABILITY, MERCHANTABILITY, DEVELOPMENT POTENTIAL OR FITNESS FOR A PARTICULAR PURPOSE OF THE PROPERTY; ZONING, BUILDING OR LAND USE LAW OR COMPLIANCE OF THE PROPERTY THEREWITH (INCLUDING, WITHOUT LIMITATION, THE AMERICANS WITH DISABILITIES ACT); OPERATION, INCOME GENERATED BY, OR ANY OTHER MATTER OR THING AFFECTING OR RELATING TO THE PROPERTY OR TO THIS AGREEMENT. BUYER EXPRESSLY ACKNOWLEDGES THAT NO SUCH WARRANTY OR REPRESENTATION HAS BEEN MADE AND THAT BUYER IS NOT RELYING ON ANY WARRANTY OR REPRESENTATION WHATSOEVER OTHER THAN AS IS EXPRESSLY SET FORTH IN THIS ARTICLE XI. BUYER SHALL ACCEPT THE PROPERTY "AS IS, WHERE IS, WITH ALL FAULTS" IN ITS CONDITION ON THE DATE OF CLOSING SUBJECT ONLY TO THE EXPRESS PROVISIONS OF THIS AGREEMENT. BUYER ALSO ACKNOWLEDGES THAT THE PURCHASE PRICE REFLECTS AND TAKES INTO ACCOUNT THAT THE PROPERTY IS BEING SOLD "AS-IS." 11.3.1 NO ENVIRONMENTAL REPRESENTATIONS. Seller makes no representations or warranties as to whether the Property contains asbestos, radon or any hazardous materials or harmful or toxic substances, or pertaining to the extent, location or nature of same, if any. Further, to the extent that Seller has provided to Buyer information from any inspection, engineering or environmental reports concerning asbestos, radon or any hazardous materials or harmful or toxic substances, Seller makes no representations or warranties with respect to the accuracy or completeness, methodology of preparation or otherwise concerning the contents of such reports. 11.3.2 RELEASE OF CLAIMS. Buyer acknowledges and agrees that Seller makes no representation or warranty as to, and Buyer waives and releases Seller, the Land Trust Beneficiary, and the trustee of the Land Trust Beneficiary from any present or future claims arising from or relating to, the presence or alleged presence of asbestos, radon or any hazardous materials or harmful or toxic substances in, on, under or about the Property, including without limitation any claims under or on account of (I) the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as the same may have been or may be amended from time to time, and similar state statutes, and any regulations promulgated thereunder, (II) any other federal, state or local law, ordinance, rule or regulation, now or hereafter in effect, that deals with or otherwise in any manner relates to, environmental matters of any kind, (III) this Agreement, or (IV) the common law. Promptly upon learning thereof, Seller shall give Buyer written notice of any condemnation, damage or destruction of the Real Property occurring prior to the Closing. If prior to the Closing all or a material portion of the Real Property is condemned, damaged or destroyed, Buyer shall have the option of either (I) applying the proceeds of any condemnation award or payment under any insurance policies toward the payment of the Purchase Price to the extent such condemnation awards or insurance payments have been received by Seller, receiving from Seller an amount equal to any applicable deductible under any such insurance policy and receiving an assignment from Seller of Seller's right, title and interest in any such awards or payments, or (II) terminating this Agreement by delivering written notice of such termination to Seller and Escrow Agent within ten days after Buyer has received written notice from Seller of such material condemnation, damage or destruction. If prior to the Closing an immaterial portion of the Real Property is condemned, damaged or destroyed, the proceeds of any condemnation award or payment and any applicable deductible under any insurance policies shall be applied toward the payment of the Purchase Price to the extent such condemnation awards or insurance payments have been received by Seller and Seller shall assign to Buyer all of Seller's right, title and interest in any such awards or payments. 12.1. From and after the date hereof, Seller shall operate the Property in accordance with its standard business procedures. 12.2. Seller shall not, without the prior written approval of Buyer, which approval will not be unreasonably withheld or delayed: (I) make any material structural alterations or additions to the Real Property except as (a) in the ordinary course of operating the Real Property, (b) required for maintenance and repair or (c) required by any of the Leases or the Contracts; (II) sell, transfer, encumber or change the status of title of all or any portion of the Real Property; (III) change or attempt to change, directly or indirectly, the current zoning of the Real Property in a manner materially adverse to it; or (IV) cancel, amend or modify, in a manner materially adverse to the Real Property, any license or permit held by Seller with respect to the Real Property or any part thereof which would be binding upon Buyer after the Closing. 12.3. Prior to the expiration of the Investigation Period, Seller may cancel, amend and modify any of the Leases and any of the Contracts, PROVIDED notice is given to Buyer within five business days after such action and in any event at least two business days prior to the expiration of the Investigation Period. After the expiration of the Investigation Period, Seller may not cancel, amend, or modify any material Contracts or Leases, in a manner binding upon Buyer after the Closing, unless Seller gives Buyer notice within five business days after such action and PROVIDED such action is (I) in the ordinary course of operating the Property, ( II) required by any of the Leases or any of the Contracts or (III) approved by Buyer which approval will not be unreasonably withheld or delayed. 12.4. Prior to the expiration of the Investigation Period, Seller may enter into any new lease or contract, PROVIDED notice is given to Buyer within 5 business days after such action. After the expiration of the Investigation Period, Seller may enter into any new lease in the ordinary course of business. After the expiration of the Investigation Period, Seller may not enter into any new contract without Buyer's consent, which consent will not be unreasonably withheld or delayed. Notwithstanding the preceding sentence, after the expiration of the Investigation Period, Seller may enter into any new contracts without Buyer's consent if doing so is in the ordinary course of operating the Property and the contract (I) will not be binding on Buyer or (II) is cancelable on 30 days or less notice without penalty or premium. If Seller shall request Buyer's approval to any of the foregoing matters, Buyer shall have five days from its receipt of such request to give Seller notice of its approval or disapproval of such matter. If Buyer does not give such notice, such matter shall be deemed approved by Buyer. 12.5. Seller and Buyer shall, prior to the Closing, maintain the confidentiality of this sale and purchase and shall not, except as required by law or governmental regulation applicable to Seller or Buyer, disclose the terms of this Agreement or of such sale and purchase to any third parties whomsoever other than the principals of the Broker, Escrow Agent, the Title Company and such other persons whose assistance is required in carrying out the terms of this Agreement. Neither Seller nor Buyer shall at any time, prior to the Closing, issue a press release or otherwise communicate with media representatives regarding this sale and purchase unless such release or communication has received the prior approval of the other party hereto. Buyer agrees that all documents and information regarding the Property of whatsoever nature made available to it by Seller or Seller's agents and the results of all tests and studies of the Property (collectively, the "Proprietary Information") are confidential and Buyer shall not disclose any Proprietary Information to any other person except those assisting it with the analysis of the Property, and only after procuring such person's agreement to abide by these confidentiality restrictions. This Section 13.5 shall survive the Closing or termination of the Agreement. 12.6. If any title defect or other matter which would entitle Buyer to terminate this Agreement shall first arise or be disclosed after Buyer notifies Seller of its Title Objections pursuant to Section 5.3.1, Seller may elect, by written notice to Buyer, to cure such defect or other matter by causing it to be removed, insured over or bonded and Seller may adjourn the Closing for up to thirty days to do so. Nothing contained in this Section 13.6 shall require Seller to cure any such title defect or other matter or to incur any liability or expense to do so. All notices, demands or other communications given hereunder shall be in writing and shall be deemed to have been duly delivered upon the receipt by facsimile transmission as evidenced by receipt transmission report, or upon the delivery by overnight express delivery service, addressed as follows: If to Buyer, to: Home Properties of New York, L.P. 850 Clinton Square Rochester, New York 14604 Attention: Norman Leenhouts, Chairman Telephone: (716) 546-4900 Facsimile: (716) 232-3147 with a copy to: Home Properties of New York, L.P. 850 Clinton Square Rochester, New York 14604 Attention: Kathleen K. Suher, Esq. Telephone: (716) 262-9335 Facsimile: (716) 232-3147 If to Seller, to the Land Trust Beneficiary: The Edwin E. Hollenback III 1991 Trust c/o Hans Bertram-Nothnagel, trustee Debevoise & Plimpton 875 Third Avenue New York, New York 10022 Telephone: (212) 909-6471 Facsimile: (212) 909-6836 with a copy to: Debevoise & Plimpton 875 Third Avenue New York, New York 10022 Attention: Mark Marmer, Esq. Telephone: (212) 909-7211 Facsimile: (212) 909-6836 If to Escrow Agent, to: First American Title Insurance Company of New York 228 East 45{th} Street New York, New York 10017 Attention: Mindy Haas, Esq. Telephone: (212) 850-0623 Facsimile: (212) 922-0881 or to such other address or to such other person as any party shall designate to the others for such purpose in the manner hereinabove set forth. 13.1. Captions in this Agreement are inserted for convenience of reference only and do not define, describe or limit the scope or the intent of this Agreement or any of the terms hereof. 13.2. All exhibits referred to herein and attached hereto are a part hereof. 13.3. This Agreement contains the entire agreement between the parties relating to the transaction contemplated hereby and all prior or contemporaneous agreements, understandings, representations and statements, oral or written, are merged herein. 13.4. No modification, waiver, amendment, discharge or change of this Agreement shall be valid unless the same is in writing and signed by the party against which the enforcement of such modification, waiver, amendment, discharge or change is or may be sought. 13.5. Should any party hereto employ an attorney for the purpose of enforcing or construing this Agreement, or any judgment based on this Agreement, in any legal proceeding whatsoever, including insolvency, bankruptcy, arbitration, declaratory relief or other litigation, the prevailing party shall be entitled to receive from the other party or parties thereto reimbursement for all reasonable attorneys' fees and all costs, including but not limited to service of process, filing fees, court and court reporter costs, investigative costs, expert witness fees and the cost of any bonds, whether taxable or not, and such reimbursement shall be included in any judgment, decree or final order issued in that proceeding. The "prevailing party" means the party in whose favor a judgment, decree, or final order is rendered. 13.6. This Agreement shall be construed and enforced in accordance with the laws of the State in the Commonwealth of Virginia. 13.7. Time is of the essence to this Agreement and to all dates and time periods set forth herein. 13.8. Only the warranties and representations contained in Sections 11.1 and 11.2 and the provisions of Section 11.3 shall survive the Closing, the delivery of the Deed and the payment of the Purchase Price, PROVIDED that (I) such represen-tations and warranties (but not such provisions) shall cease and terminate three (3) months after the date of Closing, except to the extent that Buyer or Seller, as the case may be, shall have commenced, on or before such three (3) month period has expired, a legal proceeding based on the breach thereof as of the date of Closing, and (II) the maximum total liability for which Seller shall be responsible with respect to all representations and warranties shall not exceed $250,000 in the aggregate. Unless otherwise expressly herein stated to survive, all other representations, covenants, conditions and agreements contained herein shall merge into and be superseded by the various documents executed and delivered at Closing and shall not survive the Closing. Seller shall have no liability to Buyer after Closing for any matter disclosed by Seller or learned by Buyer prior to Closing. 13.9. Buyer may not assign its rights under this Agreement, except, however, Buyer may, provided it notifies Seller at least 5 business days in advance of the Closing , assign its rights, but not its obligations hereunder, to an affiliate or subsidiary of Buyer which is owned or controlled by Buyer. 13.10. If any term, covenant, condition, provision or agreement herein contained is held to be invalid, void or otherwise unenforceable by any court of competent jurisdiction, the fact that such term, covenant, condition, provision or agreement is invalid, void or otherwise unenforceable shall in no way affect the validity or enforceability of any other term, covenant, condition, provision or agreement herein contained. 13.11. All terms of this Agreement shall be binding upon, inure to the benefit of and be enforceable by, the parties hereto and their respective legal representatives, successors and assigns (subject to Section 15.9). 13.12. Seller and Buyer acknowledge each to the other that both they and their counsel have reviewed and revised this Agreement and that the normal rule of construction to the effect that any ambiguities are to be resolved against the drafting party shall not be employed in the interpretation of this Agreement or any amendments or exhibits hereto. 13.13. This Agreement may be executed in any number of counterparts, each of which so executed shall be deemed original; such counterparts shall together constitute but one agreement. 13.14. This Agreement may not be recorded and any attempt to do so shall be of no effect whatsoever. 13.15. In any action brought to enforce the obligations of Seller under this agreement, the judgment or decree shall be subject to the provisions of Section 15.8 and shall, in any event, be enforceable against Seller only to the extent of its interest in the Property, including any proceeds there-of, and no other property or assets of Seller shall be subject to levy, execution or lien for the satisfaction of any remedies against Seller. 13.16. It is expressly understood and agreed by the parties hereto that (a) this Agreement is executed and delivered by Bank of America solely as trustee of the Land Trust, in the exercise of the powers and authority conferred and vested in it under the trust agreement creating the Land Trust, (b) each of the representations, undertakings and agreements herein made on the part of Seller is made and intended not as personal representations, undertakings and agreements by Bank of America or the trustee of the Land Trust Beneficiary, but is made and intended for the purpose of binding only the Land Trust and (c) under no circumstances shall Bank of America or the trustee of the Land Trust Beneficiary be personally liable for the payment of any indebtedness or expenses of the Land Trust or be liable for the breach or failure of any obligation, representation, warranty or covenant made or undertaken by Seller under this Agreement or the transactions contemplated thereby. Escrow Agent shall not be bound in any way by any other agreement or contract between Seller and Buyer, whether or not Escrow Agent has knowledge thereof. Escrow Agent's only duties and responsibilities shall be to hold the Deposit and other documents delivered to it as agent and to dispose of the Deposit and such documents in accordance with the terms of this Agreement. With-out limiting the generality of the foregoing, Escrow Agent shall have no responsibility to protect the Deposit and shall not be responsible for any failure to demand, col-lect or enforce any obligation with respect to the Deposit or for any diminution in value of the Deposit from any cause, other than Escrow Agent's gross negligence or willful misconduct. Escrow Agent may, at the expense of Seller and Buyer, consult with counsel and ac-coun-tants in connection with its duties under this Agree-ment. Escrow Agent shall be fully protected in any act taken, suffered or permitted by it in good faith in accor-dance with the advice of counsel and account-ants. Escrow Agent shall not be obligated to take any action hereunder that may, in its reasonable judgment, involve it in any liability unless Escrow Agent shall have been furnished with rea-sonable indemnity satisfactory in amount, form and substance to Escrow Agent. Escrow Agent is acting as a stake-holder only with respect to the Deposit. If there is any dispute as to whether Escrow Agent is obligated to de-liver the Deposit or as to whom the Deposit is to be delivered, Escrow Agent shall not make any deliv-ery, but shall hold the Deposit until receipt by Escrow Agent of an authorization in writing, signed by all the parties having an interest in the dispute, directing the disposi-tion of the Deposit, or, in the absence of authoriza-tion, Escrow Agent shall hold the Deposit until the final determination of the rights of the parties in an appropri-ate proceeding. Escrow Agent shall have no responsi-bility to determine the authenticity or validity of any notice, instruction, instrument, document or other item delivered to it, and it shall be fully protected in acting in accor-dance with any written notice, direction or instruction given to it under this Agreement and believed by it to be authentic. If written authorization is not given, or proceedings for a determination are not begun, within thirty (30) days after the date scheduled for the closing of title and diligently continued, Escrow Agent may, but is not required to, bring an appropriate action or proceeding for leave to deposit the Deposit with a court of the State of New York or the Commonwealth of Virginia pending a determination. Escrow Agent shall be reimbursed for all costs and expenses of any action or proceeding, including, without limita-tion, attorneys' fees and disbursements incurred in its capacity as Escrow Agent, by the party determined not to be entitled to the Deposit. Upon making delivery of the Deposit in the manner provided in this Agreement, Escrow Agent shall have no further liabil-ity hereunder. In no event shall Escrow Agent be under any duty to insti-tute, defend or participate in any proceeding that may arise between Seller and Buyer in connection with the Deposit. IN WITNESS WHEREOF, this Agreement has been executed as of the date first set forth above. SELLER: BANK OF AMERICA, solely as trustee, under the provisions of Virgina Land Trust Agreement NST-1, dated as of December 30, 1980 By: ----------------------------- Name: Title: BUYER: HOME PROPERTIES OF NEW YORK, L.P. By: Home Properties of New York, Inc., its general partner By: ----------------------------- NAME: TITLE: CONSENT AND AGREEMENT OF ESCROW AGENT THE UNDERSIGNED ESCROW AGENT HEREBY AGREES TO (I) accept the foregoing Agreement, (II) be escrow agent under said Agreement, and (III) be bound by said Agreement in the performance of its duties as escrow agent. FIRST AMERICAN TITLE INSURANCE COMPANY OF NEW YORK By: ----------------------------- NAME: TITLE: EX-2 7 0007.txt Exhibit 2.6 CONTRIBUTION AGREEMENT This Contribution Agreement ("Agreement"), made as of the 22nd day of June, 2000 by and between HOME PROPERTIES OF NEW YORK, L.P., a New York limited partnership, having its principal office at 850 Clinton Square, Rochester, New York 14604, (herein called "Buyer"), HOME PROPERTIES OF NEW YORK, INC., a Maryland corporation, having its principal office at 850 Clinton Square, Rochester, New York 14604, (herein called "HME") and S & S Realty, a New York general partnership having its principal office at 124 Cedarhurst Ave., Cedarhurst, New York 11516 (herein the "Contributor"). W I T N E S S E T H: WHEREAS, the Contributor owns a certain apartment complex and adjacent land located in the State of New York, all as more particularly described on EXHIBIT A; WHEREAS, the Contributor wishes to contribute its interest in the Property (as hereinafter defined) in exchange for limited partnership interests in the Buyer; WHEREAS, Buyer desires to acquire the Property upon the happening of certain events; NOW, THEREFORE, in consideration of the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency whereof being hereby acknowledged, the parties hereby agree as follows: I.REAL PROPERTY DESCRIPTION. The Real Property owned by the Contributor consists of an apartment complex commonly known as South Bay Manor, which includes 61 apartments (the " Project"), located in the Town of Islip at Sayville, County of Suffolk, State of New York, on land more particularly described on EXHIBIT A, attached hereto, together and including all buildings and other improvements thereon, including but not limited to, the 60 apartment units plus the superintendent's residence, and all rights in and to any and all streets, roads, highways, alleys, driveways, easements and rights-of-way appurtenant thereto (the foregoing are hereafter collectively referred to as the "Property"). II.OTHER ITEMS. The following items owned by Contributor now in or on the Property, are included in this Agreement and shall be conveyed to Buyer at Closing (as hereafter defined): A. all heating, air-conditioning, plumbing and lighting fixtures, B. ranges and refrigerators (one of each for each apartment unit), C. boiler, D. any bathroom fixtures, wall-to-wall carpeting, exhaust fans, hoods, signs, screens, maintenance building, fences, carpeting and runners, cabinets, mirrors, shelving, ceiling fans, mail boxes, any and all related equipment used by the Contributor in connection with the operation and maintenance of the Property, and E. any fixtures appurtenant to the Property and any other furniture or equipment used by the Contributor in connection with the operation and maintenance of the Property, including any vehicles used in connection with the operation and maintenance of the Property (hereinafter with the items listed in A-D above, collectively the "Other Items"). The Other Items are being sold "as is," but will be conveyed to Buyer by Bill of Sale free and clear of all liens and encumbrances. III.PRICE AND MANNER OF PAYMENT. A. The Aggregate Contribution Value for the contribution by the Contributor to the Buyer shall be Three Million Fifty Thousand and no/100 ($3,050,000) (the "Aggregate Contribution Value"). The net contribution value (the "Net Contribution Value") for the contribution shall be an amount equal to the Aggregate Contribution Value less principal and accrued interest upon the existing financing with respect to the Property on the Closing Date (the "Existing Loan") and other adjustments as provided for herein. The Net Contribution Value shall be payable by issuance to the Contributor, or to the partners of the Contributor as designated in writing by the Contributor (collectively, the "Designees" and individually, a "Designee"), of limited partnership interests in the Buyer (collectively, the "Units" and each one of the Units, a "Unit") having a value, determined as described in paragraph D below, equal to the Net Contribution Value. Notwithstanding the above, the Contributor may only designate individuals or entities to be Designees who have established to the reasonable satisfaction of the Buyer that they are accredited investors under applicable securities laws. B. The Buyer shall deposit into an escrow account with Blackwell Sanders Peper Martin, with escrow instructions in the form of EXHIBIT B hereto: (i) Earnest Money in the amount of $150,000.00 not later than three (3) days following the date of this Agreement (the "Initial Earnest Money"); and (ii) additional Earnest Money in the amount of $150,000.00 not later than three (3) days following the end of the Due Diligence Period in the event that Buyer does not terminate this Agreement as provided in Section 14A (the "Additional Earnest Money"). In the event that Buyer does not terminate this Agreement as provided in Section 14A and Buyer does not deposit the Additional Earnest Money prior to the expiration of the three (3) day period following the Due Diligence Period, this Agreement will automatically terminate and the Contributor shall be entitled to the Initial Earnest Money. The Initial Earnest Money and the Additional Earnest Money, together with interest, if any, earned thereon, shall be referred to herein as the Earnest Money. The Earnest Money shall be refundable in full until the end of the Due Diligence Period, at which time the Earnest Money shall thereupon become non-refundable. The Earnest Money shall be returned by the Contributor to Buyer at Closing and not applied against the Net Contribution Value, except that at Contributor's option, up to $100,000.00 of the Earnest Money may be applied against the Net Contribution Value at Closing. Upon termination of this Agreement by the Buyer prior to the expiration of the Due Diligence Period or pursuant to Section 9 as permitted hereunder or upon the Contributor's default, the Earnest Money shall be returned to the Buyer. C. At Closing, the Buyer shall pay all accrued interest and the principal balance of the Existing Loan to the holder of the Existing Loan. That payment shall be deemed a payment by Buyer in that amount towards the Aggregate Contribution Value. D. The total number of Units to be issued to the Contributor and the Designees will be equal to the Net Contribution Value divided by the "Market Value" of a Unit. The Market Value of a Unit shall be equal to the average closing price for 20 consecutive trading days prior to, but not including, the Closing Date of a share of common stock of Home Properties of New York, Inc., ("HME") as listed on the New York Stock Exchange, provided that if during such 20-day period either: (i) a dividend or distribution is declared or paid in the form of common stock of HME; or (ii) the common stock of HME is subdivided or combined, the Market Value will be equitably adjusted. E. The initial distribution payable with respect to Units issued hereunder shall be made on the date on which HME pays the dividend to the holders of its common stock that relates to the earnings for the calendar quarter in which the Units were issued and shall be pro-rated such that the Contributor and/or the Designees receiving Units shall receive a pro-rata distribution for the period from the date on which the Units were issued to and including the last day of the calendar quarter in which the Units were issued. The obligations of this subparagraph 3(E) shall survive Closing hereunder. F. Upon the terms and conditions of a Registration Rights Agreement, in the form of EXHIBIT C attached hereto (the "Registration Rights Agreement"), to be dated the Closing Date, the Contributor or Designees shall have registration rights and a listing commitment with regard to the shares of HME into which the Units can be converted (the "Registration Rights"), including demand and piggy back rights. The exercise of Registration Rights shall be without cost to the Contributor or Designees. IV. ADJUSTMENTS AT CLOSING. The following shall be adjusted and prorated between the Contributor and the Buyer at Closing as if the Buyer was the owner of the Property as of the Closing Date: The adjustments shall be made in cash or as an adjustment to the Contribution Value, at the option of the Contributor. A. current fiscal year real estate taxes, B. water charges, C. sewer charges, D. fuel, electricity and other utilities, E. security deposits pursuant to the leases (including interest thereon), unless the security deposits are assigned to the Buyer, F. charges under the service contracts assumed by Buyer (the "Service Contracts"), G. laundry income, H. any other charges incurred with respect to the Property which the Contributor is obligated to pay, I. Rents. 1.All rent payments collected as of the Closing Date for the month of Closing shall be prorated as between the parties as of the Closing Date. 2.All rent collected after Closing, for any period prior to Closing, shall belong to Contributor and, if paid to Buyer, Buyer shall promptly send such rent to the Contributor. 3.All rent collected by the Contributor, prior to the Closing, for rental periods subsequent to the month of the Closing shall be paid to Buyer at Closing. 4.All rent collected by Buyer or the Contributor for rental periods after the month of the Closing shall belong to Buyer and, if paid to the Contributor, the Contributor shall promptly send such rent to Buyer. 5. All rent collected after Closing shall be applied first to any rental delinquencies predating Closing. The foregoing sentence shall survive Closing hereunder. Any error in the calculation of adjustments shall be corrected subsequent to Closing with appropriate credits to be given based upon corrected adjustments, provided, however, that the adjustments (except if errors are caused by misrepresentations) shall be final upon expiration of the sixtieth day after Closing. The Buyer agrees to use reasonable efforts after the Closing to collect rental delinquencies owed to the Contributor, provided that nothing herein shall require Buyer to institute legal proceeding against any resident whose rental payments are delinquent. Any rents collected after Closing which are applicable to arrearages which arose prior to Closing shall be paid by Buyer to Contributor, net of the expenses of collection. If Buyer fails to collect any rents due to Contributor within 90 days following the Closing, the Contributor may proceed to collect the same in their own name. Nothing herein shall make the Buyer liable to the Contributor for any failure to collect arrearages. V. COSTS. Buyer shall pay all recording fees, Buyer's attorneys' fees, the costs of obtaining the Title Commitment (hereinafter defined) and title policy, the cost of an updated survey, and all other costs and expenses incidental to or in connection with closing this transaction customarily paid for by the purchaser of similar property. The Contributor shall pay any applicable transfer and recordation taxes, attorneys' fees, if any, incurred by it in connection with this transaction, and all other costs and expenses incidental to or in connection with closing this transaction customarily paid for by the seller of similar property. VI. CONTRIBUTOR'S RECORDS. All records and other information relating to the Property, whether furnished to Buyer in writing or orally, shall be held in confidence by Buyer, and shall not be used for any purpose other than the evaluation of the Property by Buyer and Buyer's attorneys, employees, agents, engineers, consultants and representatives ("Buyer's Agents"), and shall not be disclosed, divulged or otherwise furnished to any person or entity except Buyer's Agents and only for such limited purpose. Buyer shall take reasonable precautions, contractural or otherwise, to prevent unauthorized disclosure or misuse of the records by Buyer, Buyer's Agents or by any other person having access to the records. If this Agreement is terminated for any reason, Buyer shall endeavor in good faith to return promptly to Contributor all records (whether available to the public or not), including all copies of all or any portions thereof, and any extracts, summaries or analyses furnished by Contributor to Buyer or Buyer's Agents. This Section shall survive the termination of this Agreement for any reason, notwithstanding any other provision herein to the contrary. VII. CLOSING DOCUMENTS. A. At the time of Closing, the Contributor shall deliver to Buyer the following: (1) A bargain and sale deed without covenants in the form provided for under the laws of the State of New York (the "Deed"). Such Deed shall convey the Property to the Buyer subject to: (i) all zoning and building laws, ordinances, resolutions and regulations of all governmental authorities having jurisdiction which affect the Property and the use and improvement thereof; (ii) all leases identified in the Rent Roll (hereinafter defined) and others entered into in the ordinary course of business; (iii) ad valorem real estate taxes for the current year and subsequent years which are not yet due and payable; and (iv) easements, covenants, restrictions, agreements and/or reservations of record, so long as they do not interfere with the use of the Property as a rental apartment complex, if any, (v) private, public and utility easements and roads and highways, if any, and (vi) and any other exceptions not objected to or waived by Buyer under Section 9 of this Agreement (collectively, the "Permitted Exceptions"); (2) A Bill of Sale; (3) A current rent roll ("Rent Roll") certified, as of the date of Closing, which shall include a correct list of all tenants, all rental obligations of each tenant with respect to the Property and all security deposits (with interest) along with a copy of all leases shown on the Rent Roll; (4) An executed assignment of leases, security deposits and contracts (the "Assignment") in the form attached hereto as EXHIBIT D. In lieu of an assignment of the security deposits, the Contributor may provide Buyer with a credit at Closing for all security held by Contributor (including any accrued interest, if required by law or contract to be earned thereon) with respect to all leases encumbering the Property; (5) Contributor's affidavit stating Contributor's federal taxpayer identification number and certifying that Contributor is not a foreign person, corporation, partnership, trust or estate as defined in the Internal Revenue Code and Regulations thereunder pursuant to the Foreign Investment in Real Property Tax Act of 1980; (6) Copies of the personnel files of all employees employed at the Property and remaining in the employment of the Buyer after the Closing; (7) An executed counterpart of the Registration Rights Agreement; and (8) Any additional funds, documents and/or instruments as may be necessary for the proper performance by the Contributor of its obligations contemplated by this Agreement. (9) Such other instruments as are customarily executed by Seller in the county and state where the Property is located to effectuate the sale of property similar to the Property and the issuance of the Units and payment of the consideration, or as may be required under any applicable federal or state securities laws. B. At the time of Closing, Buyer shall deliver to Contributor the following: (1) An executed counterpart of the Assignment; (2) Evidence of organization, existence and authority of Buyer and HME and the authority of each person executing documents on behalf of each, reasonably satisfactory to Contributor; (3) An Amendment to the Buyer's Partnership Agreement in the form necessary to admit Contributor and Designees as limited partners of the Buyer and evidencing the issuance of the Units required pursuant to this Agreement; (4) An executed counterpart of the Registration Rights Agreement executed by HME; (5) Any additional funds, documents and or instruments as may be necessary for the proper performance by Buyer of its obligations contemplated by this Agreement; (6) An opinion of Buyer's counsel in a form reasonably acceptable to Contributor; (7) Such other instruments as are customarily executed by Buyer in the county and state where the Property is located to effectuate the acquisition of property similar to the Property, the issuance of the Units and the payment of the Net Contribution Value, or as may be required under any applicable federal or state securities laws. VIII. INSPECTION. Upon and after acceptance of this Agreement by the Contributor and subject to the remaining provisions of this section, the Contributor agrees that Buyer and its authorized representatives shall have the right and privilege to enter upon the Property and the Contributor's offices, upon reasonable notice, during regular business hours, subject to the rights of tenants under their leases, for the purpose of gathering such information and conducting such environmental and engineering studies or other tests and reviews as Buyer may deem appropriate and necessary. The Contributor agrees to cooperate with Buyer by making available to Buyer such records, plans, drawings or other data as may be in their possession or control relating to the Property and their operation, including but not limited to prior environmental and engineering studies. Notwithstanding anything provided herein to the contrary, any investigation of the Property and or the records by Buyer and/or Buyer's Agents shall be performed at the sole expense of Buyer and Buyer shall be solely responsible for the acts of any of Buyer's Agents brought on or to the Property by Buyer. At least two business days in advance of any physical inspections, Buyer shall provide Contributor with evidence of insurance coverage protecting the Property and Contributor against any loss or liability in connection with the inspection which insurance shall be reasonably acceptable to Contributor. Furthermore, Buyer hereby indemnifies, defends and holds Contributor, its partners, officers, directors, employees, agents, tenants and invitees harmless from and against any and all claims, demands, liens, expenses, losses, damages, costs (including, but not limited to, attorneys fees, disbursements and court costs) and liabilities arising from, or as a result of, any act or omission of Buyer and/or Buyer's Agents (unless caused by the willful misconduct or gross negligence of Contributor) during the Due Diligence Period or any disclosure of confidential information. Buyer's investigation of Property and the records shall be performed during reasonable business hours upon reasonable advance notice to Contributor. Buyer or Buyer's Agents shall not, disrupt: (i) the operation and/or management of the Property; or (ii) any tenant of the Property. In the event that Buyer or Buyer's Agents causes any damage to the Property (which is not attributable to Contributor's willful misconduct or gross negligence), Buyer shall, at its sole expense, immediately restore the Property, to the satisfaction of Contributor, to the same condition as it existed prior to such damage. The provisions of this Section shall survive the Closing or the termination of this Agreement, as the case may be. Buyer shall provide to Contributor any third-party reports, tests, studies or reviews received by Buyer with respect to the Property. IX. TITLE; TITLE EXAMINATION; OBJECTIONS TO TITLE. A. Promptly upon execution of this Agreement by all parties, the Buyer shall order a title commitment (the "Title Commitment") from a nationally recognized title insurer (the "Title Company"). B. Contributor shall convey the Property to Buyer by Deed, subject to the Permitted Exceptions. Title to all Other Items purchased herein, if any, shall be conveyed to Buyer by bill of sale, free and clear of all security interests, liens and encumbrances, but subject to any Permitted Exceptions. C. Within ten (10) days after Buyer's receipt of the Title Commitment, Buyer shall deliver to Contributor a statement (a "Statement of Title Defects") of defects, encumbrances or objections to title or survey matters ("Title Defects"). If Buyer fails to deliver a Statement of Title Defects on or before the end of the Due Diligence Period (as hereinafter defined), such failure shall be deemed to be a waiver of any such Title Defects and Contributor shall convey title in accordance with this Agreement and such Title Defects will be additional Permitted Exceptions. Upon receipt of Buyer's Statement of Title Defects, Contributor shall have five (5) business days to determine whether it wishes to attempt to cure any matters shown on such statement. If Contributor is unable or unwilling to cure or attempt to cure any such matters, Contributor shall give notice to Buyer within such five (5) day period, but if no such notice is given, Contributor shall be deemed to be unwilling to cure any such Title Defects. If Contributor does not agree to attempt such cure, Buyer shall have ten (10) days after the expiration of the foregoing five (5) business day period to terminate this Agreement or to give Contributor notice that it has elected to take title to the Property subject to the Title Defects without abatement of the Contribution Value and such Title Defects will be additional Permitted Exceptions. If no notice is given by the Buyer within the ten (10) day period, the Buyer shall be deemed to have terminated this Agreement. In the event of a termination of this Agreement under this Section, the Earnest Money shall be promptly returned to the Buyer, this Agreement shall be null and void and neither party shall have any further rights and obligations under this Agreement, except for those that expressly survive termination. X. CLOSING DATE. Unless this Agreement is terminated as provided herein, the Closing shall occur within 15 days after the end of the Due Diligence Period (the "Closing" or "Closing Date") at the Contributor's office, at the offices of the Title Company, or by mail, time being of the essence. XI. POSSESSION. Buyer shall have possession and occupancy of the Property from and after the date of delivery of the Deed, subject to the rights of tenants under their leases. XII. BROKER'S COMMISSION. The Buyer represents to Contributor that it did not employ any broker in connection with this sale. The Contributor represents that it employed Select Investors Realty Advisor, as broker (the "Broker"). Buyer agrees to pay a brokerage commission to the Broker in the amount of $80,000 The Contributor and Buyer each agree to indemnify the other for any and all claims and expenses, including legal fees, if any other fees or commission is determined to be due by reason of the employment of any other broker by the indemnifying party. This representation and indemnity shall survive the Closing. XIII.RISK OF LOSS. The risk of loss or damage to all or part of the Property by fire or other casualty or by taking by eminent domain, until Closing, shall be assumed by the Contributor and upon the happening of such event, Buyer shall have the election of terminating this Agreement without further liability hereunder, or of completing this purchase and receiving the Contributor's share of insurance monies, collectible for such loss or damage, or the award for such taking by eminent domain. XIV. CONDITIONS PRECEDENT. A. Buyer shall have thirty (30) days after the date of this Agreement (the "Due Diligence Period") within which to review and inspect the Property and the Other Items (including, but not limited to, performing engineering and Phase I environmental studies), the Contributor's books and records pertaining to the Property and the Other Items, matters relating to zoning compliance and compliance by the Property and the Other Items with other applicable governmental regulations, the markets in which the Property operates, any service or other contracts relating to the Property, the tax assessment on the Property and on comparable properties and such other matters as Buyer shall deem reasonably necessary or appropriate in connection with the Property and the Other Items. If Buyer determines that it does not wish to purchase the Property as a result of its findings during the Due Diligence Period and notifies the Contributors of such decision within the Due Diligence Period, the Earnest Money and any interest thereon shall be promptly returned to the Buyer, this Agreement shall be null and void and neither party shall have any further rights or obligations under this Agreement, except for those that expressly survive termination. Buyer's failure to object within the Due Diligence Period shall be deemed a waiver by Buyer of the condition contained in this Section 14(A). B. It shall also be a condition to Buyer's obligation to close that during the Due Diligence Period, the Buyer shall obtain the approval of the Board of Directors (the "Board") of its general partner - HME, - to the acquisition of the Property on the terms and conditions described herein. If Buyer does not obtain the Board's approval within the Due Diligence Period, the Buyer shall promptly notify the Contributor in which event the Earnest Money and any interest thereon shall be promptly returned to the Buyer, this Agreement shall be null and void and neither party shall have any further rights or obligations under this Agreement, except for those that expressly survive termination. Buyer's failure to notify the Contributor within the Due Diligence Period of its failure to obtain Board approval shall be deemed a waiver by Buyer of the conditions contained in this Section 14(B). It is understood that the contingencies set forth in Sections 14(A) and (B) above are for Buyer's benefit and may be waived by Buyer before expiration of the Due Diligence Period. If the foregoing contingencies are not satisfied or waived by the Buyer before expiration of the Due Diligence Period, the Buyer shall have the right to terminate this Agreement by written notice to the Contributor. In the event of a termination under this Section 14, this Agreement shall be null and void and neither party shall have any further rights or obligations under this Agreement, except for those that expressly survive termination. XV. ENVIRONMENTAL CERTIFICATION. By acceptance of this Agreement, the Contributor represents, warrants, and certifies to Buyer that except with respect to remediation of some oil following removal of an underground storage tank (Spill No. 88-04319) ] it has no knowledge of any violation, and has received no notice of any violation of any applicable Environmental Laws (below defined). Except as set forth above, to the best of Contributor's knowledge, Contributor has not, nor has any other person, used, generated, stored, dumped, released, buried, dispersed or emitted any Hazardous Substance on the Property in violation of Environmental Laws nor are there any underground tanks on the Property, nor is there a violation of any Environmental Laws with respect to the current use of the Property. "Environmental Laws" shall mean all federal, state and local environmental, health, chemical use, safety and sanitation laws, statutes, ordinances and codes relating to the protection of the environment and/or governing the use, storage, treatment, generation, transportation, processing, handling, production or disposal of any Hazardous Substance and the rules, regulations, and orders with respect thereto. "Hazardous Substance" means, without limitation, any flammable, explosive or radioactive material, polychlorinated biphenyl, petroleum or petroleum product, methane, hazardous materials, hazardous wastes, hazardous or toxic substances or related materials, as defined in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. Sections 9601, ET SEQ.), the Hazardous Materials Transportation Act, as amended (49 U.S.C. Appendix Sections 1801, ET SEQ.), the Resource Conservation and Recovery Act, as amended (42 U.S.C. Sections 6901, et seq.), the Toxic Substances Control Act, as amended (15 U.S.C. Sections 2601, et seq.), or any other Environmental Law and the regulations promulgated thereunder applicable on the effective date of this Agreement. From the date of acceptance hereof to and including the date of Closing, the Contributor shall immediately provide Buyer with a copy of any notice, citation, complaint or other directive from any person, entity or governmental authority whereby the Contributor's compliance with Environmental Laws is called into question, and immediately notify Buyer of any new information or other developments which could tend to supplement or modify the information contained herein. XVI. REPRESENTATIONS AND WARRANTIES OF CONTRIBUTOR. The Contributor represents and warrants to Buyer as of the date hereof and until the Closing, that: A. To the best of the Contributor's knowledge, the Contributor has no liability or obligation of any nature which in any way affects or is related to the Property or the Other Items whether now due or to become due, absolute, contingent or otherwise, including liabilities for taxes (or any interest or penalties thereto), which would become a liability or obligation of Buyer upon Closing pursuant to this Agreement other than disclosed in this Agreement. B. To the best of the Contributor's knowledge, there is no litigation, proceeding or investigation pending, or to the knowledge of the Contributor threatened, against or affecting the Contributor that might affect or relate to the validity of this Agreement, any action taken or to be taken pursuant hereto, or the Property or the Other Items or any part or the operation thereof, whether or not fully covered by insurance, except "slip and fall" and similar litigation covered by insurance, which shall remain Contributor's responsibility after Closing. C. To the best of the Contributor's knowledge, except as set forth on Exhibit E, the Contributor has complied with and is not in default under, or in violation of, or received any notice that has not been complied with that the Contributor, the Property or the Other Items may be in violation of, any law, ordinance, rule, regulation or code or condition in any approval or permit pursuant thereto (including without limitation, any zoning, sign, environmental, labor, safety, health or price or wage control, ordinance, rule, regulation or order of) applicable to the ownership, development, operation or maintenance of the Property or the Other Items. D. To the best of the Contributor's knowledge, there are no written leases affecting the Property with a term greater than one (1) year. E. To the best of the Contributor's knowledge, there is no pending condemnation of the Property, or any part thereof, or of any plans for improvements which might result in a special assessment against the Property. F. Security deposits held by the Contributor will be correctly identified as of Closing with respect to the Property. G. This Agreement has been duly authorized, executed and delivered by Contributor and constitutes a legal and binding obligation of the Contributor, enforceable against Contributor in accordance with its terms, except as may be limited by bankruptcy and other laws affecting creditors' rights generally. H. Neither the entry into this Agreement, nor the carrying out of the transactions contemplated herein has resulted or will result in any violation of, or be in conflict with, or result in the creation of, any mortgage, lien, encumbrance or charge (other than those contemplated hereby) upon any of the properties or assets of the Contributor pursuant to, or constitute a default under, any certificate of incorporation, by-law, partnership agreement, or mortgage, indenture, contract, agreement, instrument, franchise, permit, judgment, decree, order, statute, rule or regulation applicable to the Contributor or the Property. I. To the best of the Contributor's knowledge, no consent or approval by, or authorization of, or filing, registration or qualification with, any federal, state or local governmental authority, bureau, department or agency, or any corporation, person or other entity is required as of the Closing either for the execution, delivery or performance of this Agreement by the Contributor, or in connection with the consummation by the Contributor of the transactions contemplated by this Agreement. The representations and warranties of the Contributor contained in this Agreement, the statements in any Exhibit or Schedules attached to this Agreement, or other instruments furnished to Buyer at or prior to Closing pursuant to this Agreement, or in connection with the transactions contemplated pursuant to this Agreement, do not contain any untrue statements of a material fact, or fail to state a material fact necessary to make it not misleading. In the event that Contributor is unable to represent and warrant the foregoing as of Closing, whether due to an unanticipated event occurring after the date of this Agreement and prior to Closing or otherwise, then Buyer shall have the right to terminate this Agreement by written notice to the Contributor. Buyer's termination right shall be Buyer's sole remedy for Contributor's failure to make the foregoing representations and warranties as of Closing. In the event of such a termination, this Agreement shall be null and void, the Deposit and any interest thereon shall be promptly returned to the Buyer, and neither party shall have any further rights or obligations under this Agreement. The representations of Contributor contained herein are in the nature of conditions as to which Buyer will satisfy itself during the Due Diligence Period and none of such representations will survive the Closing. If Buyer, prior to the Closing Date determines that any of the Contributor's representations are untrue and in the Buyer's reasonable judgment materially affects the value of the transaction contemplated under this Agreement, then, the Buyer may either: (i) elect to terminate this Agreement by notice given to Contributor; or (ii) to waive any such untrue representation and proceed to close. If Buyer elects to close on this Agreement, the representations will be deemed waived at the Closing. Contributor shall not be liable or bound for any verbal or written statements, representations, real estate brokers' set-ups or information pertaining to the Property furnished by any real estate broker, agent, employee, servant or any other person unless the same are specifically set forth herein. The representations and warranties contained herein shall not survive delivery of the deed and shall merge therein. XVII.REPRESENTATIONS AND WARRANTIES OF BUYER AND OF HME. Buyer and HME represent and warrant to the Contributor as of the date hereof until the Closing: A. Buyer is and will be as of the date of Closing duly organized, validly existing and in good standing under the laws of the State of New York and has all the requisite power and authority to enter into and carry out this Agreement according to its terms. B. Subject to the receipt of the approval of the Board as referenced in Section 14B of this Agreement, this Agreement has been duly authorized, executed and delivered and constitutes a legal and binding obligation of Buyer, enforceable in accordance with its terms, except as may be limited by bankruptcy and other laws affecting creditors' rights generally. C. To the best of its knowledge after due inquiry, there is no litigation, proceeding or investigation pending, or to the knowledge of Buyer threatened, against or affecting Buyer or the partners of Buyer that might affect or relate to the validity of this Agreement or any action taken or to be taken pursuant hereto, or that might have a material adverse effect on the business or operations of the Buyer. D. With respect to this Agreement, the Registration Rights Agreement and an amendment to the Second Amended and Restated Agreement of Limited Partnership of Buyer to be executed at Closing whereby the Contributor and/or its designees are admitted as limited partners to Buyer (the "Partnership Agreement Amendment") (this Agreement, the Registration Rights Agreement and the Partnership Agreement Amendment are collectively, the "Acquisition Agreements") i. no provision of the Acquisition Agreements nor the performance of any obligation thereunder by Buyer or HME ("Buyer" and "HME" are collectively the "Entities") is barred, limited, restricted, or rendered incapable of performance by any provision of law or of governmental regulation, or by the by-laws or certificate of incorporation of HME or by the Partnership Agreement of Buyer; nor upon due inquiry, to the best of Buyer's knowledge, by the provisions of any indenture, agreement or other instrument to which either of the Entities is party or is otherwise bound; ii. upon due inquiry, to the best of Buyer's knowledge, no unobtained consent, authorization or approval or any court, or of any federal, state or local governmental or quasi-governmental authority, body, board or administrative agency is necessary to authorize or approve the execution, delivery and performance of the Acquisition Agreements by the Entities, or the consummation of the transactions contemplated thereby; and iii. the execution and delivery of the Acquisition Agreements, the performance of the terms therein set forth and the consummation of the transactions thereby contemplated, are not in conflict with and do not constitute a breach of, or a default under, the certificate of incorporation or by-laws or Partnership Agreement of the Entities, as the case may be, or any material agreement, indenture, mortgage, deed of trust or other instrument known to Buyer to which the Entities are a party or by which either of them is bound, or any law, administrative regulation or order of any court of governmental agency or authority known to Buyer applicable to the Entities. E. Buyer and HME have obtained each and every consent, approval, permit or order of, and have made each and every filing with, any individual, partnership, corporation, trust or other entity, government agency or political subdivision required to be obtained or made in connection with (A) their execution, delivery and performance of this Agreement and (B) their consummation of the transactions contemplated hereby. This Agreement is the legal, valid and binding obligation of the Buyer and HME, enforceable in accordance with its terms, except as such enforceability may be limited by applicable bankruptcy, insolvency, reorganization, moratorium, fraudulent conveyance or similar laws affecting the enforcement thereof or relating to creditors' rights generally. F. HME has filed all forms, reports, schedules, proxy materials, registration statements and related prospectuses and supplements and other documents required to be filed by HME with the Securities and Exchange Commission ("SEC") pursuant to the Securities Exchange Act of 1934, as amended (the "Exchange Act"), for the year ended December 31, 1996 and 1997 and for calendar years 1998 and 1999 through the date hereof (collectively, the "SEC Documents") and will cause to be delivered to Contributor copies of such additional documents as may be filed with the SEC by HME between the date hereof and the Closing Date. The SEC documents were, and those additional documents filed between the date hereof and the Closing Date will be, prepared and filed in all material respects in compliance with the rules and regulations promulgated by the SEC, and do not and will not contain any untrue statement of a material fact or omit to state any material fact required to be stated therein in order to make the statements contained therein, in light of the circumstances under which they were made, not misleading. No material event has occurred since the date of HME's most recent report filed with the SEC which would be required to be disclosed in a document filed with the SEC. G. The consolidated financial statements included in the SEC Documents have been prepared in accordance with generally accepted accounting principles applied on a consistent basis during the period involved (except as may be indicated in the notes thereto or, in the case of unaudited statements, as permitted by Form 10-Q) and present fairly (subject in the case of unaudited statements, to normal, recurring year-end audit adjustments) the consolidated financial position of the Buyer or HME, as applicable, at the dates thereof and the consolidated results of operations and cash flows for the periods then ended. H. Since March 31, 2000 there has not been: i. any material adverse change in the financial condition or results of operations of HME from that reflected in the financial statements as of March 31, 2000 included in the SEC Documents referred to herein, or any material adverse change in the business, assets or prospects of HME (including the imposition of any material adverse regulatory requirements or the loss of any material permits licenses or franchises); ii. there has not been any material damage, destruction or other casualty loss with respect to property owned or lease by HME not covered by insurance; and iii. HME has not conducted its business otherwise than in the ordinary course. I. Since March 31, 2000: i. There has not been any material adverse change in the financial position or results of operations of the Buyer from that reflected in the financial statements as of March 31, 2000, or any material adverse change in the business, assets or prospects of Buyer (including the imposition of any material adverse regulatory requirements or the loss of any material permits licenses or franchises); ii. there has not been any material damage, destruction or other casualty loss with respect to property owned or lease by Buyer not covered by insurance; and iii. Buyer has not conducted its business otherwise than in the ordinary course. J. HME is a corporation duly organized, validly existing and in good standing under the laws of the State of Maryland, has full right, power and authority to enter into this Agreement and to assume and perform all of its obligation and is duly qualified to do business in the states in which it is required to do so. Subject to Board approval as referenced in Section 14B, the execution and delivery of this Agreement and the performance by HME of its obligations under this Agreement will require no further action or approval of HME's shareholders or Board of Directors, or of any other individuals or entities in order to constitute this Agreement as a binding and enforceable obligation of HME. K. The entry into, performance of, or compliance with this Agreement by HME has not resulted, and will not result, in any violation of, default under, or acceleration of any provision of the bylaws or declaration of trust of HME or any provision of, or result in the acceleration of or entitle any party to accelerate (whether after the filing of notice or lapse of time or both) any obligation under, or result in the creation or imposition of any lien, charge, pledge, security interest or other encumbrance upon any of the property of HME pursuant to any provision of any mortgage, lien, lease, agreement, license or instrument, or violate any law, regulation, order, arbitration award, judgment or decree to which HME is a party or by which it or its property is bound or violate or conflict with any other material restriction of any kind or character to which HME is subject. L. As of June 1, 2000, the authorized shares of common stock of all classes of HME consisted of 80,000,000 shares of par value $.01 per share, and all of such shares are initially classified as "Common Shares" and the issued and outstanding Common Shares of HME consisted of 20,503,054 Common Shares. M. As of the Closing, the Common Shares issuable upon conversion of the Units will have been duly and validly authorized by HME and will have been duly reserved for issuance upon such conversion. The Common Shares issuable upon conversion of the Units, when issued upon such conversion in accordance with their terms, will be validly issued, fully prepaid and nonassessable. The holders of outstanding shares of capital stock of HME are not entitled to any preemptive or other rights to subscribe for Common Shares or securities convertible into Common Shares, except that certain parties have been given the right to acquire additional shares of HME's Series C and Series D Preferred Stock, which is convertible into Common Shares. The representations and warranties of the Buyer and of HME contained in this Agreement, the statements in any Exhibit or Schedules attached to this Agreement, or other instruments furnished to Contributor at or prior to Closing pursuant to this Agreement, or in connection with the transactions contemplated pursuant to this Agreement, do not contain any untrue statements of a material fact, or fail to state a material fact necessary to make it not misleading. In the event that Buyer and HME are unable to represent and warrant the foregoing as of Closing, whether due to an unanticipated event occurring after the date of this Agreement and prior to Closing or otherwise, then Contributor shall have the right to terminate this Agreement by written notice to the Buyer and to retain the Earnest Money unless the inability to make a representation as of Closing relates to subparagraphs (C) (relating to litigation that might have a material adverse effect on the Buyer only), (H) and (I) above in this Section 17, in which event upon termination by the Contributor the Earnest Money shall be promptly returned to the Buyer. Contributor's termination right and retention of the Earnest Money as described in the preceding sentence shall be Contributor's sole remedy for Buyer's and HME's failure to make the foregoing representations and warranties as of Closing. In the event of such a termination, this Agreement shall be null and void and neither party shall have any further rights or obligations under this Agreement. The representations and warranties contained herein shall not survive delivery of the deed and shall merge therein. XVIII. ASSIGNMENT. This Agreement, and all or any portion of the rights of Buyer hereunder, may not be assigned by Buyer. Notwithstanding the above, this Agreement, and all or any portion of the rights of Buyer hereunder, may be assigned by Buyer to an entity wholly owned by Buyer with the prior written consent of the Contributor, which shall not be unreasonably withheld. XIX. NOTICE. All notices given pursuant to any provisions of this Agreement shall be in writing and shall be effective only if delivered personally, or sent by registered or certified mail, postage prepaid or sent by a national over-night carrier, or by telecopy with confirmation of receipt to the addresses set forth below: To the Contributor: S & S Realty c/o Steven A. Schneider 124 Cedarhurst Ave. Cedarhurst, New York 11516 Telecopy No: (516) 374-7697 With a copy to: Marvin Levine, Esq. Blackwell Sanders Peper Martin 13710 FNB Parkway Omaha, Nebraska 68154 Telecopy No: (402) 964-5115 To Buyer: HOME PROPERTIES OF NEW YORK, L.P. Attn: Norman Leenhouts, Chairman 850 Clinton Square Rochester, New York 14604 Telecopy No.: (716) 546-5433 With a copy to: Robin L. Stein, Esq. Home Properties of New York, L.P. 850 Clinton Square Rochester, New York 14604 Telecopy No.: (716) 232-3147 Notices shall be deemed delivered upon actual delivery or refusal of delivery by the recipient. XX. PLANS. The Contributor agrees to provide Buyer with all plans and architectural drawings in its possession for the improvements completed at the Property, including, without limitation, all "as-built" plans in its possession and the Contributor further agrees that it will endeavor to make the same available to Buyer for inspection at the Contributor's office or at the Property during the Due Diligence Period and to turn over the same to Buyer at Closing. XXI. APPLICABLE LAW. This Agreement shall be construed and governed in accordance with the laws of the State of New York. XXII. ENTIRE AGREEMENT. This Agreement shall constitute the entire agreement between the parties, and any and all prior understandings or agreements, whether written or oral, are hereby merged into this Agreement. This Agreement cannot be modified except by a written instrument signed by the parties hereto. XXIII. BINDING AGREEMENT. This Agreement shall not be binding or effective until properly executed by Buyer and the Contributor. XXIV. CONFIDENTIALITY. By execution of this Agreement and except as otherwise provided herein, prior to the Closing and in the event of a termination without Closing, each of the Contributor and Buyer agree to keep any and all information with respect to the transactions contemplated by this Agreement strictly confidential, and will not disclose any such information, without the other's prior written consent. Buyer may disclose the existence of this Agreement to the extent necessary to conduct its due diligence with respect to the Property. This Agreement shall not be recorded. XXV. CONTRIBUTOR COVENANTS. A. After Closing, Contributor will reasonably cooperate in Buyer's efforts to comply with SEC reporting requirements. The Contributor will provide access by Buyer's representatives, to all financial and other information relating to the Property as is sufficient to enable them to prepare audited financial statements, at Buyer's expense, in conformity with Regulation S-X of the Securities and Exchange Commission (the "Commission") and any registration statement, report or disclosure statement required to be filed with the Commission. B. Prior to the Closing Date, the Contributor shall continue to fulfill all of its obligations under the terms of the leases encumbering the Property and under the Service Contracts and the Contributor shall operate, maintain and repair all landscaping, buildings, fixtures and facilities in accordance with normally accepted business principles and operate the Property in a commercially reasonable manner with standards and procedures of no less quality than those currently in place. C. The Contributor covenants that it shall not sell, transfer or assign the Units or the shares of common stock into which the Units can be converted for a period of one (1) year following the Closing Date (the "Lock-Up Period") and that any Designees shall agree to be bound by this restriction. The obligations of this subparagraph 25(C) shall survive Closing hereunder. XXVI.PRE-TRANSFER LIABILITIES. Buyer agrees to assume only those liabilities with respect to the Property as are specifically described herein, including the Permitted Exceptions. XXVII. BUYER COVENANTS. A. For a period of ten (10) years from and after the Closing Date (the "Restricted Period"), the Buyer shall permit Contributor, upon demand, from time to time to provide a "bottom guaranty" of some of the Buyer's non-recourse debt, such guaranty to be in an amount up to $1,400,000. The "bottom" portion means that portion of the non- recourse debt that is first satisfied from repayment following default, pursuant to foreclosure, or deed in lieu of foreclosure, or otherwise. The initial non-recourse debt with respect to which Contributor may provide a bottom guaranty shall be that Multifamily Note, dated April 26, 2000 in the original principal amount of $15,400,000 from the Buyer to Manufacturers and Traders Trust Company. The Buyer agrees that in the event the initial non-recourse debt is paid off during the Restricted Period, the substitute non-recourse debt made available to Contributor for a bottom guaranty shall have a loan to value ratio of not more than 60% and the substitution non-recourse debt shall have a principal balance of no less than $10.0 million at the time the substitute bottom guaranty shall be provided. B. In the event that Contributor: (i) obtains a tax free step-up in the basis of its Units for federal income tax purposes; (ii) sells, transfers or otherwise disposes of its Units in a taxable transaction; (iii) receives a tax payment from Buyer in reimbursement of taxes triggered to Contributor as the result of the sale, transfer, or other disposition of all of the Property during the Restricted Period or as a result of the Buyer's failure to provide the Contributor with non-recourse debt on which to provide a bottom guaranty in an amount up to $1,400,000; or (v) receives an allocation under Treasury Reg. Section 1.704-3(b) using the traditional method without curative allocations that reduces the amount of Built-in-Gain (as defined below), then the bottom guaranty shall be commensurately reduced. For purposes of this Agreement, Built-in-Gain shall mean with respect to the Property the amount of gain that would be allocated to the Contributor under Section 704(c) of the Internal Revenue Code if the Property were disposed of in a fully taxable transaction. The obligations of this subparagraph 27(A) shall survive Closing hereunder. C. During the Restricted Period, the Buyer covenants that it shall not sell, exchange, transfer or otherwise dispose of the Property unless such transaction occurs in a manner as to be tax free to the Contributor and any Designees. The obligations of this subparagraph 27(B) shall survive Closing hereunder. XXVIII. HME COVENANTS. As further consideration for Contributor entering into this Agreement, and for the benefit of Home Properties and HME, HME covenants that HME shall at all times reserve and keep available out of its authorized but unissued Common Shares such number of its Common Shares as shall from time to time be sufficient to effect the conversion of the Units in accordance with the terms hereof. If at any time the number of authorized but unissued Common Shares shall not be sufficient to effect the conversion of all Units into Common Shares, HME will take such action as may be necessary to increase its authorized but unissued Common Shares to such number of shares as shall be sufficient for such purpose. XXIX.EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected thereon as the signatories. IN WITNESS WHEREOF, the parties hereto have caused this Instrument to be executed as of the day and date first above written. BUYER: HOME PROPERTIES OF NEW YORK, L.P. By: Home Properties of New York, Inc. Its general partner By: ------------------------------------------ HME: HOME PROPERTIES OF NEW YORK, INC. By: ------------------------------------------ CONTRIBUTOR: S & S REALTY By: ------------------------------------------ Carol Schneider By: Julius Schneider Testamentary Trust By: ------------------------------------------ Steven Schneider, Trustee By: ------------------------------------------ Ethel Schneider, Trustee By: ------------------------------------------ Arthur Fishman, Trustee FIRST AMENDMENT TO CONTRIBUTION AGREEMENT THE FIRST AMENDMENT TO CONTRIBUTION AGREEMENT (this "FIRST AMENDMENT") is dated as of September ______, 2000 by and between S & S REALTY, a New York general partnership ("CONTRIBUTOR"), HOME PROPERTIES OF NEW YORK, L.P., a New York limited partnership ("BUYER"), and HOME PROPERTIES OF NEW YORK, INC., a Maryland corporation ("HME"). RECITALS WHEREAS, Contributor, Buyer, and HME are the parties to that certain Contribution Agreement dated June 22, 2000 (the "CONTRACT") wherein Contributor agreed to contribute its interest in that certain real property described in EXHIBIT A attached hereto and incorporated herein by reference (the "PROPERTY") in exchange for limited partnership interests in the Buyer; and WHEREAS, Contributor, Buyer, and HME desire to modify certain terms of the Contribution Agreement as more fully set forth herein. NOW, THEREFORE, in consideration of the Contribution Agreement, of the mutual promises and covenants set forth herein, and for other good and valuable consideration, the receipt and sufficiency of which is hereby mutually acknowledged, Buyer, Contributor, and HME do hereby agree as follows: I. INCORPORATION OF RECITALS. The above Recitals are hereby incorporated and made a part of this First Amendment as if more fully set forth herein. II. CONTRIBUTION VALUE. The Aggregate Contribution Value, as defined in section 3(A) of the Contribution Agreement, is hereby reduced to Two Million Nine Hundred Fifty Thousand and No/100 Dollars ($2,950,000.00). III. ADDITIONAL EARNEST MONEY. Buyer hereby agrees to deposit the Additional Earnest Money, in the manner required by Section 3(B) of the Contribution Agreement, not later than three days following the execution of this First Amendment. IV. CONDITION OF PROPERTY. Buyer shall accept possession of the Property on the Closing Date "As Is," with no right of set-off or reduction in the Aggregate Contribution Value, with respect to: (i) Property's environmental condition and compliance with applicable city, county, state or federal statutes, codes or ordinances; (ii) any violations referenced in that certain "Violations Search" prepared by the town of Islip, New York, and dated June 26, 2000, which is attached hereto as EXHIBIT B and incorporated herein by reference; and (iii) the absence of an effective Building Division Rental Permit issued by the Town of Islip, New York. With respect to the above, Buyer specifically acknowledges that Buyer is NOT relying on any representations or warranties of any kind whatsoever, express or implied, from the contributor. Buyer is relying solely upon its own inspection of the Property with regard to the above- referenced matters, and not upon any representations made to it by any person whomsoever concerning such matters. V. RATIFICATION. Except as amended hereby, the Contract remains in full force and effect and is hereby confirmed and ratified by Contributor, Buyer, and HME. VI. DEFINED TERMS. Any capitalized term used herein but not defined herein shall have the meaning therefore specified in the Contract. VII. EXECUTION. To facilitate execution of this First Amendment, this document may be circulated by facsimile. A facsimile copy shall be considered an original signature. VIII. COUNTERPARTS. This First Amendment may be executed in counterparts and it is the intention of the parties hereto that any executed counterpart shall constitute the agreement of the parties and that all of the counterparts shall together constitute one and the same agreement of the parties. [THE REMAINDER OF THIS PAGE HAS BEEN INTENTIONALLY LEFT BLANK] IN WITNESS WHEREOF, Contributor, Buyer, and HME have executed this First Amendment as of the date first above written. CONTRIBUTOR: S & S REALTY, a New York general partnership, By: ------------------------------------- Carol Schneider By: Julius Schneider Testamentary Trust By: ------------------------------------- Steven Schneider, Trustee By: ------------------------------------- Ethel Schneider, Trustee By: ------------------------------------- Arthur Fishman, Trustee BUYER: HOME PROPERTIES OF NEW YORK, L.P., a New York limited partnership By: Home Properties of New York, Inc., a Maryland corporation By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- HME: HOME PROPERTIES OF NEW YORK, INC., a Maryland corporation By: ------------------------------------- Name: ------------------------------------- Title: ------------------------------------- EX-2 8 0008.txt Exhibit 2.7 CONTRIBUTION AGREEMENT THIS CONTRIBUTION AGREEMENT ("this Agreement") made as of the ____ day of June, 2000, by and between Hampton Glen Apartments Limited Partnership, a Michigan limited partnership (the "Partnership"), having its principal office at 7001 Orchard Lake Road, Suite 200, W. Bloomfield, MI 48322 and Home Properties of New York, L.P., a New York limited partnership ("Home Properties") and Home Properties of New York, Inc., a Maryland Corporation ("HME"), both having their principal office at 850 Clinton Square, Rochester, New York 14604. W I T N E S S E T H: This Agreement is made with reference to the following facts and objectives: (a) The Partnership owns a 100% fee simple interest in a Michigan apartment property known as Hampton Court Apartments (the "Property"). (b) The Property comprises 182 dwelling units and is situated upon land owned in fee simple by the Partnership. (c) Upon the terms and conditions set forth in this Agreement, Home Properties desires to obtain 100% of the partnership interests (the "Interests" and each an "Interest") in the Partnership, which will own in fee simple the Land and Improvements comprising the Property, together with the related Personal Property, Service Contracts and Trade Names (all as hereinafter defined), in exchange for limited partnership interests (the "OP Units") in Home Properties and cash. (d) The Consideration (as herein defined), whether in OP Units or cash, is to be allocated among the various partners of the Partnership (the "Partners") in accordance with SCHEDULE 1 attached hereto. (e) It is expected that the exchange of the Interests for OP Units (but not the cash portion of the Consideration) will qualify for Federal income tax purposes, as a tax free transfer, pursuant to Section 721 of the Code. (f) As used in this Agreement with initial capital letters, the following terms, in each instance, shall have the meaning ascribed thereto: "Capital Account Deficit" shall mean and refer to the negative Capital Account amount of each Unit Partner (as hereinafter defined) for Federal income tax purposes, as at the relevant date; "Code" shall mean and refer to the Internal Revenue Code of 1986, as amended; "Environmental Law" shall mean and refer to any Federal, state, county or municipal environmental, health, chemical use, safety or sanitation law, statute, ordinance or code currently in effect relating to the protection of the environment, and/or governing the use, storage, treatment, generation, transportation, processing, handling, production or disposal of any Hazardous Materials, and the rules, regulations and orders promulgated and/or issued thereunder; "Existing Lender" shall mean and refer to Morgan Guaranty Trust Company of New York; "Existing Loan" shall mean the Mortgage Note in favor of the Existing Lender, which has a principal balance as of April 30, 2000 of approximately $3,639,604.00 and which is secured by a mortgage or deed of trust on the Property; "General Partner" shall mean and refer to Harry Shapiro and Gary Shapiro "Hazardous Materials" shall mean and refer to any hazardous substances described or defined in (i) the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended; (ii) the Hazardous Materials Transportation Act, as amended; (iii) the Resource Conservation and Recovery Act, as amended; (iv) the Toxic Substances Control Act, as amended; and (v) any applicable Michigan Environmental Laws, and the regulations promulgated thereunder, in each case, as at the date of this Agreement; "HME" shall mean and refer to Home Properties of New York, Inc., a Maryland corporation (which operates as a self-administered, and self-managed, equity real estate investment trust); "HME Common Shares" shall mean and refer to the shares of common stock in HME, which are traded on the New York Stock Exchange; "Home Properties" shall mean and refer to Home Properties of New York, L.P., a New York limited partnership (in which HME is the sole general partner, and through which HME conducts its operational, management and investing activities); "OP Units" shall mean and refer to limited partnership interests in Home Properties, which are, subject to restrictions, exchangeable, on a one-to-one basis, for HME Common Shares; "Partner" shall mean each and every one of the partners of the Partnership and "Partners" shall refer to all of the partners of the Partnership; "Partnership" shall mean and refer to Hampton Glen Apartments Limited Partnership, a Michigan limited partnership; "Property" shall mean and refer to the apartment project known as Hampton Court Apartments, including: (i) the land occupied by such apartment project (the "Land"), as more particularly described on Exhibit A attached hereto, together with (a) all and singular the easements, rights-of-way, rights, privileges, benefits, tenements, hereditaments and appurtenances thereunto belonging or in anywise appertaining, and (b) all right, title and interest of the Partnership in and to any land lying in the bed of any street, road, avenue or alley, open or proposed, public or private, in front of, behind, or otherwise adjoining the Land, or any part of the Land, including, without limitation, all right, title and interest of the Partnership in and to (1) any award made after the date of this Agreement as a result of condemnation, or in lieu thereof, and (2) any unpaid award as at the date of this Agreement as a result of condemnation, or in lieu thereof subject to the terms of Section 19(a) hereof; and (ii) all buildings, structures, fixtures, facilities, installations and other improvements of every kind and description now or hereafter in, on, over and under the Land (the "Improvements"), including, without limitation, any and all plumbing, air conditioning, heating, ventilating, mechanical, electrical and other utility systems, and fixtures, parking lots and facilities, landscaping, roadways, fences, mail boxes, sidewalks, maintenance buildings, clubhouse, office, swimming pools and other recreational facilities, security devices, signs and light fixtures; and "Unit Partners" shall mean the Partners who are entitled to elect and who, in fact, elect to receive OP Units in exchange for their Interests and "Unit Partner" shall mean each of the Unit Partners. NOW, THEREFORE, in consideration of the foregoing, the mutual covenants, agreements and undertakings herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Partnership and Home Properties agree as follows: 1. EXCHANGE. (a) Home Properties agrees that it shall make an offer (the "Offer") to each of the Partners to exchange the Partner's Interests in the Partnership for cash and/or OP Units. The Offer shall be subject to the prior approval of the Partnership, which shall not be unreasonably withheld or delayed. Home Properties and the Partnership will coordinate with each other in terms of the timing of making the Offer and the materials and information the Partnership intends to furnish the Partners in connection with the Offer. The substance of the Offer shall be that each Partner may exchange his or her Partnership Interest for its share (as set forth on Schedule 1) of the Net Consideration as set forth in Section 2. The Partnership agrees that it will use its reasonable efforts to solicit acceptance from the Partners of the Offer, whether in exchange for cash or OP Units. Upon and subject to the terms and conditions set forth in this Agreement, Home Properties agrees that on the Closing Date (as hereinafter defined), it shall accept an assignment of the Interests from the Partners who have accepted the Offer and will issue OP Units or pay cash to the Partners as each Partner shall elect and as provided herein. (b) Subject to closing under this Agreement, the General Partner hereby agrees that it will accept the Offer with respect to all of its Interests. (c) By acquiring all of the Interests, Home Properties will also obtain through its interest in the Partnership all of the right, title and interest of the Partnership in and to the following: (1) all furniture, furnishings, equipment, machinery and other tangible personal property and fixtures of every kind and description owned by the Partnership, and used in connection with the Property (in each instance, the "Personal Property"), including, without limitation, all ranges, refrigerators, disposals, dishwashers, water heaters, furnaces, air conditioning units and equipment, carpeting, traverse rods, drapes and other window treatments, exhaust fans, range hoods, screens, model unit furniture, clubhouse and related furniture and equipment, tools, parts, motors, supplies, pool and other recreational equipment, cabinets, mirrors, shelving, computers and other office equipment, stationery and other office supplies, normal levels of inventory, and all replacements of, and/or substitutions for, any of the foregoing; but specifically excluding (A) cash (including cash in bank accounts), cash equivalents, accounts receivable and securities assets, which shall belong to the partners of the Partnership, (B) any personal property described in EXHIBIT A-1 attached hereto, and (C) any refunds on insurance which has been pre-paid by the Partnership (items (A)-(C), the "Excluded Assets"); (2) all present and subsequent leases with tenants, and/or other occupancy agreements, together with all pending applications for tenancy (in each instance, the "Leases"); (3) all service and maintenance contracts, and equipment leases, used or useful in connection with the Property, (in each instance, the "Service Contracts"), including, without limitation, natural gas purchase contracts, communication and other equipment leases (the "Equipment Leases"), and the equipment covered thereby being herein called the "Leased Equipment"), coin-operated laundry concession leases, and pending purchase orders, all of which are listed on SCHEDULE 2 attached hereto; and (4) all trademarks, service marks, logos, trade, assumed or business names and telephone numbers related to the use and operation of the Property (in each instance, the "Trade Names"), except that the Partnership makes no representation or warranty of title or usage with respect to such Trade Names. 2. CONSIDERATION. (a) The aggregate consideration (the "Consideration") payable by Home Properties for 100% of the Interests shall be Five Million Eight Hundred Twenty-Four Thousand and No/100 Dollars ($5,824,000), subject to adjustments at Closing pursuant to Section 17. (b) On the Closing Date, each of the Partners shall assign their Interests to Home Properties in exchange for their share (as set forth on Schedule 1) of the Net Consideration. "Net Consideration" means the Consideration less: (i) the principal amount on the Closing Date of the Existing Loan; (ii) the amount specified by the General Partner pursuant to paragraph (f) of Section 3 of this Agreement; and (iii) the Reserve Amount. "Reserve Amount" means the sum of: (a) an amount equal to the current liabilities of the Partnership on the Closing Date (other than the principal amount of the Existing Loan and any other liabilities permitted to be retained within the Partnership pursuant to the terms hereof or credited for the benefit of Home Properties), together with such other amounts as the General Partner may reasonably require (the "Liabilities Reserve") and (b) $150,000 (the "Indemnity Reserve"). The Indemnity Reserve shall be held and disbursed by the Disbursing Agent (as defined in Paragraph (c) of this Section 2) as described in Paragraph (c) of this Section 2 and in Paragraphs (a) and (b) of Section 3. The Liabilities Reserve shall be held and disbursed by the General Partner as described in Paragraph (c) of this Section 2 and in Paragraph (a) and (b) of Section 3. The Liabilities Reserve shall be used to pay all amounts used to satisfy the current liabilities of the Partnership and the liabilities of the Partnership that Home Properties has not specifically agreed to assume as provided herein ("Liabilities Claims"). The Indemnity Reserve shall be used to pay any amounts paid or subject to claims of Home Properties by reason of a material breach or material misrepresentation of any representations, warranties, covenants or agreements of the Partnership which survive Closing (but only during the period of such survival) ("Indemnity Claims"). If and to the extent that the Liabilities Reserve or the Indemnity Reserve is exhausted, Home Properties shall be entitled to make a claim against any Reserve Amount remaining for either a Liability Claim or an Indemnity Claim. (c) At Closing, the General Partner shall deliver in immediately available funds and OP Units to Metropolitan Title Company (the "Disbursing Agent") the Indemnity Reserve. The Indemnity Reserve shall be held and disbursed pursuant to the terms of an escrow agreement that shall be in form and substance substantially similar to that attached hereto as EXHIBIT H. At Closing, the General Partner shall retain in immediately available funds and OP Units an amount equal to the Liabilities Reserve and deposit it in a separate account. The Liabilities Reserve shall be held and disbursed pursuant to the terms of an escrow agreement that shall be in form and substance substantially similar to that attached hereto as EXHIBIT I. (d) Partners who have elected to receive cash in exchange for their Interests shall be paid their portion of the Net Consideration at the Closing by wire transfer of immediately available federal funds. (e) Partners who are "accredited" investors under Regulation D of the applicable securities laws and who have elected to receive OP Units in exchange for their Interests shall be paid their portion of the Net Consideration by the issuance of OP Units. The number of OP Units to be issued to each Unit Partner shall be their portion of the Net Consideration divided by $28.50 ("Market Price"). 3. RELEASE OF RESERVES; CLOSING COSTS. (a) On the 90th day after the Closing Date: (i) the Disbursing Agent shall disburse to the General Partner that portion of the Indemnity Reserve that has not been paid, disbursed or subject to Liability or Indemnity Claims; and (ii) the General Partner shall no longer be required to hold that portion of the Liability Reserve that has not been paid, disbursed or subject to Liability or Indemnity Claims. The General Partner may then elect (x) to continue to hold such remaining amounts for the benefit of the holders of Interests immediately prior to the Closing Date (the "Holders"), as a fund against which to pay unanticipated claims (the "Contingency Reserve"), or (y) to distribute to the Holders in accordance with Schedule 1 attached hereto. (b) At any time, and from time to time, after the 90th day after the Closing Date that there is a Final Determination (as defined in EXHIBITS H AND I) that any remaining portion, if any, of the Reserve Amount is no longer subject to Liability or Indemnity Claims, the Disbursing Agent shall distribute the remaining portion of the Indemnity Reserve to the General Partner and the General Partner shall no longer be required to hold the Liability Reserve. The General Partner may then elect (i) to continue to hold such remaining amounts for the benefit of the Holders, as a Contingency Reserve, or (ii) to distribute pro rata to the Holders in accordance with Schedule 1 attached hereto. (c) The General Partner may continue to hold the Contingency Reserve until such time as the General Partner deems prudent, after which any undisbursed amount remaining in the Contingency Reserve shall be disbursed by the General Partner to the Holders in accordance with Schedule 1 attached hereto. (d) Home Properties shall pay all recording fees, its attorneys' fees, the costs of any environmental surveys and studies, the costs of any desired title endorsements, the costs and fees incurred in connection with the assumption by Home Properties of the Existing Loan or the substitution of Home Properties as General Partner and all other costs and expenses incidental to or in connection with closing this transaction customarily paid for by the purchaser of similar property. The Partnership shall pay its attorneys' fees, the costs of obtaining a binder or commitment from a title insurance company, the premium for the title insurance policy, the costs for updating and recertifying the existing survey of the Property and all other costs and expenses incidental to or in connection with closing this transaction customarily paid for by the seller of similar property. (e) On, or at any time prior to, the Closing Date, the General Partner shall have the right to spend on behalf of the Partnership and/or distribute to the partners of the Partnership any and all of the Excluded Assets held by the Partnership, it being specifically agreed and understood that Home Properties is not purchasing the Excluded Assets of the Partnership. (f) On the Closing Date, the Partnership shall be entitled to direct that a portion of the Net Consideration be utilized by Home Properties to pay, on behalf of the Partnership, the closing costs of the Partnership and/or to satisfy certain other liabilities of the Partnership. 4. OP UNITS. (a) Distributions with respect to the OP Units will be identical in amount and timing to the dividends on HME Common Shares, except that the initial distribution payable with respect to the OP Units issued to the Unit Partners shall be made on the date on which HME shall pay the dividend to holders of HME Common Shares that relates to the earnings for the calendar quarter in which the OP Units were issued to the Unit Partners, and shall be prorated such that the Unit Partners will receive a pro-rata distribution for the period from the date on which the OP Units were issued to the Unit Partners, which shall be the Closing Date to, and including, the last day of the calendar quarter in which the OP Units were so issued. (b) Subject to the terms of a Lock-Up Agreement, in the form of EXHIBIT B attached hereto, to be dated the Closing Date, and to the terms of the Second Amended and Restated Agreement of Limited Partnership of the operating Partnership, as amended (the "Operating Partnership Agreement"), the OP Units will be convertible into HME Common Shares, on a one-to-one basis, after the elapse of one (1) year from and after the Closing Date (the "Lock-Up Period"), during which the Unit Partners will be restricted from converting, or transferring, any of the OP Units. (c) From and after the expiration of the Lock-Up Period, the Unit Partners shall have all of the transfer, exchange and conversion rights with regard to the OP Units as are set forth in the Operating Partnership Agreement. (d) Upon the terms and conditions of a Registration Rights Agreement, in the form of EXHIBIT C attached hereto, to be dated the Closing Date, the Unit Partners shall have registration rights and a listing commitment with regard to the shares of HME Common Shares into which the OP Units can be converted (the "Registration Rights"), including demand and piggy back rights. The exercise of Registration Rights shall be without cost to the Partners. In addition, within 9 months of the Closing Date, HME agrees to file at its sole cost and expense a registration statement (the "Registration Statement") with the SEC registering the resale of the shares of common stock of HME into which the OP Units may be converted and to use reasonable commercial efforts to have the registration promptly declared effective by the Securities and Exchange Commission ("SEC"). HME agrees that the Registration Statement shall be kept current at its sole cost and expense until all HME Common Shares received upon conversion of OP Units received pursuant to this Agreement have been sold pursuant to the Registration Statement or are eligible for sale pursuant to Rule 144(k) promulgated under the Securities Act of 1933. Notwithstanding anything to the contrary contained in this Agreement, in the event that HME has not filed the Registration Statement with the SEC by the date (the "Outside Filing Date") which is 11 months after the Closing Date, then for and with respect to each day during the period between the Outside Filing Date and the date on which the Registration Statement is filed with the SEC, Home Properties shall pay to the Unit Partners, as liquidated damages and not as a penalty, the sum of $1,000, which sum shall be apportioned pro rata among the Unit Partners. 5. EXISTING LOAN. Home Properties shall be responsible for payment of any assumption fees in connection with the assumption of Existing Loan or substituting Home Properties as the General Partner with respect to such Existing Loan. Home Properties and HME agree to use commercially reasonable good faith efforts to expeditiously attempt to obtain all necessary approvals of the holder of the Existing Loan. 6. PERMITTED EXCEPTIONS. The Property at Closing shall be subject only to the following (the "PERMITTED EXCEPTIONS"): (a) the Existing Loan; (b) the lien of real estate taxes and assessments not yet due and payable; (c) the Leases; (d) the Service Contracts and Equipment Leases; (e) easements, rights-of-way, covenants, restrictions and other matters of record which do not materially adversely affect the use and operation of the Property; (a) all items and matters shown on the survey of the Property obtained pursuant to the terms hereof, provided such items and matters do not materially adversely affect the use and operation of the Property; and (g) such other agreements and matters as may be agreed to by the General Partner and Home Properties. 7. OBLIGATIONS AND COVENANTS OF THE PARTNERSHIP. (a) From the date of this Agreement to the Closing Date, the Partnership shall: (1) Maintain, manage and operate the Property in substantially the same condition and manner as such Property is now maintained, managed and operated by the Partnership, and keep the Property, including, without limitation, the Improvements and Personal Property, in substantially the same good condition and repair as such Property is now maintained, ordinary wear and tear excepted; (2) Maintain the Existing Loan in full force and effect, timely make all payments, and observe and perform in all material respects all covenants to be paid, observed or performed by the mortgagor thereunder, and promptly deliver to the Home Properties any notice of default received thereunder; (3) Promptly provide Home Properties with a copy of any written notice, citation, complaint or other directive from any person, entity or governmental authority whereby compliance with any Environmental Law is called into question; (4) maintain in full force and effect all of the existing insurance policies regarding the Property; (5) Promptly deliver notice to Home Properties of, and, if appropriate, defend, at the Partnership's expense, all actions, suits, claims and other proceedings affecting the Property, or the use, possession or occupancy thereof; (6) Promptly deliver to Home Properties any written notice of actual or threatened condemnation of the Property, or any portion thereof; (7) Maintain all Licenses in full force and effect; (8) Maintain all Service Contracts in full force and effect; timely make all payments, and observe and perform all material obligations to be paid, observed or performed by the Partnership thereunder; and promptly notify Home Properties of any receipt of any notice of default thereunder; (9) Provide all services, repairs and other work required to be provided by the landlord under the Leases; (10) Reasonably cooperate with Home Properties in connection with (i) the consummation of the transaction contemplated by this Agreement, and (ii) the preparation of the Closing documents and apportionments hereunder; (11) Promptly deliver to Home Properties a copy of any written notice of required work from any company insuring the Property against casualty loss; (12) Terminate all management agreements pertaining to the Property, effective as of the completion of the Closing on the Closing Date; (13) Promptly deliver to Home Properties a copy of any written notice of any violation (or alleged violation) of any law, ordinance, order, requirement or regulation of any Federal, state, county, municipal or other governmental department, agency or authority relating to the Property; and (14) Promptly give written notice to Home Properties of the occurrence of any condition or event which materially and adversely affects the truth or accuracy of any representation or warranty made by the Partnership under or pursuant to this Agreement. (b) From the date of the expiration of the Due Diligence Period to the Closing Date, the Partnership shall not: (1) Except with the consent or in conjunction with Home Properties, modify, amend, renew, extend, terminate or otherwise alter the Existing Loan, or any document or documents relating thereto; (2) Increase any wage or fringe benefit payable to any employee at the Property, other than periodic increases and bonuses customarily provided such employees, without the prior written consent of Home Properties, in each instance, which consent shall not be unreasonably withheld, conditioned or delayed; (3) Remove from the Property any article of Personal Property, except the Excluded Assets or as may be necessary for repairs, or the discarding of worn out or useless items, provided, however, that any such article removed for repairs shall be returned to the Property promptly upon its repair, and shall remain a part of the Personal Property, whether or not such article shall be located on the Property at the time of the Closing, and any such article so discarded and required for the normal operation of the Property shall be replaced with a new or replacement article of similar quality and utility prior to Closing; (4) Except in the ordinary course of business, modify, amend, renew, extend, terminate or otherwise materially alter any of the Service Contracts, or enter into any new service or maintenance contract, equipment lease or any purchase order affecting the Property, without the prior written consent of Home Properties, in each instance, which consent shall not be unreasonably withheld, conditioned or delayed; (5) Except in the ordinary course of business, terminate any Lease. Ordinary course of business shall be deemed to include, without limitation, non-renewals of problem tenants, commencement of summary ejectment proceeding where a tenant is more than ten (10) days delinquent in the payment of rent, cases of any Lease where the tenant is more than thirty (30) days delinquent in the payment of rent, or in which there has been a material violation of the obligations of tenant; (6) Except in the ordinary course of business, enter into any new Lease, or renew or extend any existing Lease, for a term in excess of twelve months, or at a monthly rental less than the relevant rental rate set forth in the rental schedule for the Property approved by Home Properties; (7) Modify or amend the present form of lease in use by the Partnership, without the prior written consent of Home Properties unless required by law or any insurance carrier; (8) Except in the ordinary course of business, enter into any new license, franchise, concession or easement agreement affecting the Property, without the prior written consent of Home Properties, in each instance, which consent shall not be unreasonably withheld, conditioned or delayed; (9) Except in the ordinary course of business of the Partnership, apply any Security Deposits against rent delinquencies or other Lease defaults, other than in the case of tenants who have vacated their apartments, or are currently involved in litigation with the Partnership; (10) Undertake or commence any material renovations or alterations at the Property, except those necessary to comply with any of the provisions of this Agreement, without the prior written consent of Home Properties, in each instance, which consent shall not be unreasonably withheld, conditioned or delayed; (11) Sell, mortgage, pledge, hypothecate or otherwise transfer or dispose of all or any part of the Property, or the Personal Property, or any interest therein, except in the case of the sale or other disposition of items of Personal Property to be replaced hereunder; and (12) Initiate, consent to, approve or otherwise take any action with respect to the zoning, or any other governmental rule or regulation, presently applicable to all or any part of the Property. 8. OBLIGATIONS AND COVENANTS OF HOME PROPERTIES AND HME. Home Properties and HME covenant and agree with the Partnership, both before and after Closing as follows: (a) Distributions with respect to the OP Units will be identical in amount and timing to the dividends on HME Common Shares, except that the initial distribution payable with respect to the OP Units issued to the Unit Partners shall be made on the date on which HME shall pay the dividend to holders of HME Common Shares that relates to the earnings for the calendar quarter in which the OP Units were issued to the Unit Partners, and shall be prorated such that the Unit Partners will receive a pro-rata distribution for the period from the date on which the OP Units were issued to the Unit Partners, which shall be the Closing Date to, and including, the last day of the calendar quarter in which the OP Units were so issued. (b) The General Partner may retain copies of any and all books and records pertaining to the Partnership and the operation of the Property so that the General Partner may wind up the affairs of the previously conducted business. (c) At the Closing, Home Properties shall deliver to each Unit Partner good and marketable title to the OP Units allocated to such Unit Partner, free and clear of all liens, charges, encumbrances and restrictions, except as contained in the Operating Partnership Agreement, the Registration Rights Agreement, and the Lock-Up Agreement, and shall, by execution of the Amendment, admit each Unit Partner as a limited partner in Home Properties. (d) At all times for and during a period of ten (10) years from and after the Closing Date, Home Properties shall allocate to each Unit Partner, for Federal Income tax purposes, pursuant to Section 752 of the Code, qualified nonrecourse debt of Home Properties in an aggregate amount not less than the Capital Account Deficit of such Partner, as adjusted from time to time. Notwithstanding the foregoing, the covenant set forth in this subparagraph (d) shall be limited for the following partners as follows: (i) Gary Shapiro, six (6) years; (ii) Harry Shapiro, seven (7) years; (iii) Gerald Timmis, three (3) years. (e) The initial tax basis Capital Account Deficit of each Unit Partner in the Property, shall be determined by reference to each such Unit Partners Capital Account Deficit in the Partnership as at (just prior to) the contribution of such Partner's interest in the Partnership to Home Properties on the Closing Date, and shall be based upon the estimated information set forth in Schedule 3 attached hereto and shall be updated based upon the information set forth in a schedule to be furnished by the accountant for the General Partner within the time required by Section 34(e) hereof. Thereafter, for a period of ten (10) years from and after the Closing Date or earlier period as provided in Section 8(d), the Capital Account Deficit of each Unit Partner shall be adjusted annually to reflect changes occasioned at the level of Home Properties, including, without limitation, distributions made by Home Properties. During this period Home Properties shall monitor the Capital Account Deficit of the Unit Partners to fulfill the obligations of the immediately preceding paragraph. At the end of such ten (10) year period or earlier period as provided in Section 8(d), Home Properties shall cooperate with each Unit Partner by providing each Unit Partner with the right to execute an agreement obligating such Unit Partner to restore any portion of a deficit balance in such Unit Partner's capital account and/or provide the opportunity to each Unit Partner to enter into a "bottom-tier guaranty" with respect to the debt of the Home Properties. Furthermore, in complying with Section 4.04 of the Operating Partnership Agreement, Home Properties agrees that the methodology chosen under Section 704(c) of the Internal Revenue Code shall be the "traditional" method. (f) For a period of ten (10) years from and after the Closing Date, Home Properties shall not sell, exchange, transfer or otherwise dispose of the Property, or any replacement of the Property (in any event, a "Property Transfer"), unless such Property Transfer occurs in such manner as to be wholly tax free to the Unit Partners. (g) Future transactions involving HME, or Home Properties, including, without limitation, merger(s), sale(s) of assets or similar transactions, shall be structured in such manner as to (i) not result in an amendment to the definition of Conversion Factor as it is currently included in the Operating Partnership Agreement; (ii) prevent, in the context of such a transaction, a different per unit value being assigned to the OP Units issued to the Unit Partners than the value assigned per share to the then outstanding HME Common Shares; and (iii) for a period of ten (10) years from and after the Closing Date, not accelerate or interfere with the tax deferred nature of the transaction contemplated by this Agreement with respect to the OP Units issued to the Unit Partners. 9. REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP. (a) The Partnership represents and warrants that each of the following is true, complete and accurate in all material respects as of the date of this Agreement (and, except as designated in writing by the Partnership at or before Closing, will be true, complete and accurate in all material respects as of the Closing Date) with regard to such Partnership and the Property: (1) To the best knowledge of the Partnership, the Partnership is the sole owner of the Property. (2) To the best knowledge of the Partnership, the Partnership owns legal and beneficial title to the Personal Property, other than the Leased Equipment, free and clear of all liens, charges and encumbrances, except the Permitted Exceptions. (3) There are no agreements with regard to the Leased Equipment other than the Equipment Leases set forth in SCHEDULE 2 attached hereto, and true and complete copies of all Equipment Leases have been or will be delivered to Home Properties. (4) To the best knowledge of the Partnership, each of the Equipment Leases is in full force and effect; none of the parties thereto is in material default of any of its obligations thereunder; and no event has occurred that, with the giving of notice, or the passage of time, or both, would constitute a material default thereunder. (5) To the best knowledge of the Partnership: the Existing Loan is in full force and effect the Partnership has no notice of any material default by the Partnership thereunder; and no event has occurred that with the giving of notice, or the passage of time, or both, would constitute a material default by the Partnership thereunder. (6) To the best knowledge of the Partnership, true, complete and accurate copies of the Existing Loan documents have been or will be made available to Home Properties. (7) The Partnership is a limited partnership, duly organized, validly existing, and in good standing under the laws of the State of Michigan, and subject to consent of Existing Lender, has full power and authority to enter into, and to fully perform and comply with the terms of this Agreement and to own, lease and operate its properties and to carry on its business as it is now being conducted. (8) Subject to consent of Existing Lender and consent of parties to the Equipment Leases, the execution and delivery of this Agreement, and its performance by the Partnership, will not conflict with, or result in the breach of, any contract, agreement, law, rule or regulation to which the Partnership is a party, or by which the Partnership is bound. (9) Subject to consent of Existing Lender, to the best knowledge of the Partnership this Agreement is valid and enforceable against the Partnership in accordance with its terms, and each instrument to be executed by the Partnership pursuant to this Agreement, or in connection herewith, will, when executed and delivered, be valid and enforceable against the Partnership in accordance with its terms, except as such enforcement may be limited by bankruptcy and other laws affecting creditors, rights generally. (10) Except as disclosed in Schedule 5 attached hereto, no written notice has been received by the Partnership from any insurer, the Existing Lender or from any governmental or municipal authority, with respect to any defect which affects the Property, or the use or operation thereof, which remains uncured or uncorrected. (11) To the best knowledge of the Partnership and except as set forth on tax bills for the Property or the Title Commitment, there are no special or other assessments for public improvements or otherwise now affecting the Property, nor has the Partnership received written notice of any pending or threatened special assessments affecting the Property. (12) To the best knowledge of the Partnership, except as disclosed in Schedule 5 attached hereto, the Partnership has not received any written notice from any party that the Property, or the current use, occupation or condition thereof, violate(s) any governmental statute, law ordinance, rule or regulation applicable (or allegedly applicable) to the Property, or any order of any governmental agency relating to the Property and/or the use and/or legal occupancy thereof, or any applicable deed restrictions or other covenant, easement or agreement pertaining to the Property (including, without limitation, any of the Permitted Exceptions), or any approval pertaining to the Property. (13) To the best knowledge of the Partnership, all certificates of occupancy, operating permits and licenses (the "Licenses") required by any relevant governmental authority for the lawful use, operation and occupancy of the Property have been issued, and are in full force and effect. (14) Except as disclosed in Schedule 5 attached hereto, the Partnership has received no written notice that the current use, operation or occupancy of any part, or all, of the Property violates any of the Licenses. (15) Except as disclosed in Schedule 5 attached hereto, there is no action, proceeding or investigation pending, or, to the best knowledge of the Partnership, threatened, against the Partnership, or the Property, by or before any court or governmental department, commission, board, agency or instrumentality, and the Partnership does not know of any basis for any such action, proceeding or investigation. Any liability sustained under any action, proceeding or investigation disclosed on Schedule 5 is being defended by the insurance carrier for the Partnership and the Partnership shall provide Home Properties with proof of insurance. Home Properties shall undertake no obligation with respect to any such action, proceeding or investigation as a result of the transaction contemplated by this Agreement. (16) The Partnership has not received written notice of any Federal, state, county or municipal plan to restrict or change access from any public highway or road to the Property, or of any pending or threatened condemnation or eminent domain proceedings relating to or affecting the Property. (17) The Partnership has not (i) made a general assignment for the benefit of its creditors; (ii) admitted in writing its inability to pay its debts as they mature; (iii) had an attachment, execution or other judicial seizure of any property interest which remains in effect; or (iv) become generally unable to meet its financial obligations as they mature. (18) To the best knowledge of the Partnership, there is not pending any case, proceeding or other action seeking reorganization, arrangement, adjustment, liquidation, dissolution or recomposition of the Partnership, or the debts of the Partnership, under any law relating to bankruptcy, insolvency, reorganization or the relief of debtors, or seeking the appointment of a receiver, trustee, custodian or other similar official for the Partnership or the Property. (19) To the best knowledge of the Partnership, and except for lead paint, asbestos, Hazardous Materials customarily used in the operation and management of residential rental communities, and except as identified in environmental reports or surveys furnished to the Partnership or obtained by or furnished to Home Properties, there are no Hazardous Materials on, in or under the Property in violation of the Environmental Laws, and the Property has never been used by the Partnership to generate, treat, store, dump, release, emit, use, transport or in any manner deal with Hazardous Materials in violation of the Environmental Laws. (20) To the best knowledge of the Partnership, the present use and occupation of the Property does not violate any Environmental Law. (21) To the best knowledge of the Partnership, the tax-related information set forth on SCHEDULE 3 attached hereto is true, complete and accurate in all material aspects as at the date set forth therein. The obligations of Home Properties contained in Section 8(d) and the representations of Home Properties contained in Section 10(a)(13) are conditioned upon the material accuracy of the representations of this Paragraph and the attached SCHEDULE 3. (22) To the best knowledge of the Partnership, the summaries of Leases affecting the Property attached as EXHIBIT D to this Agreement (the "Rent Roll") are, in all material ways true, complete and accurate as at the date set forth therein. (23) True and complete copies of all Leases have been or will be made available to Home Properties at the principal office of the Property. (24) Except for the Existing Loan, the Partnership has not assigned, mortgaged, pledged, hypothecated or otherwise encumbered any of its rights or interests under any of the Leases. (25) To the best knowledge of the Partnership, the Rent Roll attached as EXHIBIT D accurately includes each tenant's name, a description of the dwelling unit leased by such tenant, the amount of rent due monthly from such tenant, the amount of the security deposit, if any, paid by such tenant (collectively, the "Security Deposits"), and the expiration date of the term of such Lease. (26) To the best knowledge of the Partnership, except as indicated on the Rent Roll, each Lease is in full force and effect. (27) To the best knowledge of the Partnership, except as indicated on the Rent Roll, all rents are being paid and are current (within 30 days of their due date). (28) To the best knowledge of the Partnership, except as indicated on the Rent Roll, no tenant has paid any rent for more than one month in advance. (29) To the best knowledge of the Partnership, except as indicated on the Rent Roll, no tenant is entitled to any free rent, abatement of rent or similar concession except in accordance with the past practice of the Partnership. (30) To the best knowledge of the Partnership, as of the date of this Agreement, the Security Deposits under the Leases are as set forth in the Rent Roll. (31) To the best knowledge of the Partnership, except for commissions payable to the management agent of the Property and any outside locater service, no brokerage commission or other compensation is payable (or will, with the passage of time, or occurrence of any event, or both, be payable) with respect to any Lease. The Partnership acknowledges that any commission payable to the management agent shall be its responsibility to pay and shall not be assumed by Home Properties. Home Properties hereby agrees that it shall assume the responsibility to pay any commission due to the outside locater service that is earned but not payable as of the Closing Date. (32) True and complete copies of the Service Contracts have been or will be made available to Home Properties at the principal office of the Property. (33) To the best knowledge of the Partnership: each of the Service Contracts is in full force and effect; none of the parties thereto is in material default of any of its obligations thereunder; and no event has occurred that, with the giving of notice, or the passage of time, or both, would constitute a material default thereunder. (34) SCHEDULE 1 hereto lists the current holders of all outstanding Partner Interests of the Partnership together with the percentage interest held by each Partner. In the event that any Partner listed on SCHEDULE 1 transfers any Interests prior to the Closing Date, the Partnership shall use good faith reasonable efforts to promptly provide written notice to Home Properties of such transfer, and such notice shall include the names of the transferor and the transferee, the address of the transferee and the number of units transferred. (35) To the best knowledge of the Partnership, except: (i) as disclosed in SCHEDULE 4 attached hereto or the financial statements of the Partnership furnished to Home Properties; (ii) for liabilities and obligations under the Existing Loan, Equipment Leases, Service Contracts and Leases and incurred in the normal course of business of the Partnership; and (iii) as otherwise disclosed in this Agreement, the Partnership has no material liability or obligation of any nature which is any way materially and adversely affects or is related to the Property or Personal Property whether now due or to become due, absolute, contingent or otherwise, including liabilities for taxes (or any interest or penalties thereto). (36) Except as previously disclosed to Home Properties, all of the ranges and refrigerators in the Property are the property of the Partnership and not of the tenants. (37) To the best knowledge of the Partnership, the Partnership has filed or will file when due (as such due date may be extended) all notices, reports and returns of Taxes (as defined below) required to be filed before the Closing Date and has paid or, if due after the date hereof and prior to the Closing Date, will pay, all Taxes and other charges for the periods shown to be due on such notices, reports and returns. "Taxes" shall mean all taxes, charges, fees, levies or other assessments, including, without limitation, income, excise, property, sale, gross receipts, employment and franchise taxes imposed by the United States, or any state, county, local or foreign government, or subdivision or agency thereof with respect to the assets or the business of the Partnership, and including any interest, penalties or additions attributable thereto. (b) To the best knowledge of the Partnership, all of the representations and warranties of the Partnership, set forth in this Agreement shall be true and correct in all material respects at the date of this Agreement, and (except as disclosed in writing by the Partnership at or before Closing), all shall be deemed to be repeated at, and as of the Closing Date, and shall be true and correct in all material respects as at the Closing Date. (c) Notwithstanding anything to the contrary set forth in this Agreement, if, prior to Closing, Home Properties or HME acquires knowledge (through the provision of any written documentation delivered by or at the direction of the Partnership or General Partner, or received from the Partnership or General Partner, or through the delivery to Home Properties or HME of a written report or other written acknowledgment from any third party engaged to perform any of the tests, studies, investigations and inspections contemplated under this Agreement, including, without limitation: (i) all written reports from environmental consultants and engineers retained in connection with the transaction described herein; (ii) the Leases; (iii) the Title Commitment; (iv) and items delivered pursuant to Section 13 hereof) of the breach of any or all of the Partnership's representations and warranties made in this Agreement, and Home Properties and HME nevertheless elect to close under this Agreement, then Home Properties and HME shall be deemed to have waived the breach(es) in question, and shall have no right, at any time after Closing, to assert a claim, of any nature whatsoever, against the Partnership with respect to that breach. (d) All of the representations and warranties of the Partnership, set forth in this Agreement, including, without limitation, the following indemnity, shall survive the Closing for a period of six (6) months following Closing, and shall not be deemed to have merged in any document delivered at the Closing. Any claim for any breach of any representation or warranty of the Partnership shall be brought by delivery of written notice to the General Partner, if at all, within six (6) months from the date of Closing or thereafter be forever barred except in the case of fraud or intentional and material misrepresentation by the Partnership. (e) The Partnership agrees to indemnify Home Properties, and hold harmless and defend Home Properties, from and against any and all losses, costs, claims, liabilities, damages and expenses, including, without limitation, reasonable attorneys, fees, arising as the result of a material breach of any of the representations and warranties of the Partnership set forth in this Agreement. Notwithstanding anything to the contrary contained in this Agreement, neither the General Partner nor any other partners of the Partnership shall have any personal liability, and no action of any kind shall be maintained against any of them or their respective assets, with respect to this Agreement and/or the transactions described in this Agreement, and Home Properties, its successors and assigns, shall look solely to the assets of the Partnership and the cash or assets held by the Disbursing Agent and the General Partner pursuant to Paragraph (c) of Section 2 above, for the payment of any claim against or the performance of any obligation of the Partnership. The foregoing limitation of liability as it relates to the Partnership and the General Partner shall not apply in the case of fraud or intentional and material misrepresentation. (f) Except as expressly provided in this Agreement, the Partnership, has made no representations and/or warranties regarding the Property and the Partnership Interests, and, except as expressly set forth in this Agreement, Home Properties shall, at Closing, accept the Property and the Partnership Interests in "AS IS" condition, with all faults, and without any other representations or warranties of any kind, whether as to merchantability, or fitness for a particular purpose, or otherwise. 10. REPRESENTATIONS AND WARRANTIES OF HOME PROPERTIES AND HME. (a) Home Properties and HME, jointly and severally, represent and warrant to the Partnership and to each Partner that each of the following is true, complete and accurate as of the date of this Agreement, and will be true, complete and accurate as of the Closing Date: (1) Home Properties and HME are duly organized, validly existing and in good standing (under the laws of the State of New York and the State of Maryland, respectively), and each has all the requisite power and authority to enter into and carry out and fully perform and comply with this Agreement, according to its terms, and to own, lease and carry on its business as it is now being conducted. Home Properties and HME each are duly qualified to conduct business in the State of Michigan and in all other states where the failure to so qualify would have a material and adverse effect on its business. HME is the sole general partner of Home Properties. (2) Neither the execution and delivery of this Agreement, nor the performance of this Agreement by Home Properties, nor the execution, delivery and performance of the Registration Rights Agreement by HME, nor the execution and delivery of the Lock-Up Agreement by HME and Home Properties, nor the execution and delivery of the Amendment (as hereinafter defined) by Home Properties, nor the execution, delivery and performance of all other agreements contemplated by this Agreement, nor the issuance and delivery of the OP Units by Home Properties, will conflict with, or result in any breach of, any contract, agreement, law, rule or regulation to which either HME or Home Properties is a party, or by which either HME or Home Properties is bound. (3) This Agreement has been duly authorized, executed and delivered, and constitutes a legal and binding obligation of Home Properties and HME, enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy and other laws affecting creditors rights generally. (4) Each instrument to be executed and delivered by Home Properties and/or HME pursuant to this Agreement, or in connection herewith, including, without limitation, the Registration Rights Agreement, Lock-Up Agreement and Amendment (as hereinafter defined) will, when executed and delivered, be valid and enforceable against Home Properties and/or HME in accordance with its terms, except as such enforcement may be limited by bankruptcy and other laws affecting creditors, rights generally. (5) There is no litigation, proceeding or investigation pending, or to the best knowledge of Home Properties, threatened, against or affecting Home Properties, or HME by or before any court or governmental department, commission, board, agency or instrumentality that might affect the validity of this Agreement, or any action taken, or to be taken, by Home Properties, or HME, pursuant to this Agreement, or that might have a material adverse effect on the business of Home Properties. (6) At the Closing, Home Properties shall deliver to each Unit Partner good and marketable title to the OP Units allocated to such Unit Partner, free and clear of all liens, charges, encumbrances and restrictions, except as contained in the Operating Partnership Agreement, the Registration Rights Agreement, and the Lock-Up Agreement, and shall, by execution of the Amendment, admit each Unit Partner as a limited partner in Home Properties. When issued pursuant to this Agreement, the OP Units to be issued to the Unit Partners will have been duly authorized, validly issued, fully paid and non-assessable. (7) The Operating Partnership Agreement attached as EXHIBIT E, to this Agreement is true, complete and accurate as at the date of this Agreement, and shall not be further amended prior to the Closing Date, except for (i) amendments in connection with the issuance of additional common shares by HME; (ii) amendments in connection with mergers or other transactions wherein additional OP Units are issued in connection with the acquisition of real property, or of interests in entities which own real property; and (iii) amendments that do not negatively affect the rights of the holders of OP units. An updated version of the Operating Partnership Agreement will be furnished to the Partnership at Closing, certified as a true, complete and accurate copy thereof. (8) All financial information heretofore or hereafter furnished by HME or Home Properties concerning such entities is, and shall be, true, complete and correct in all material respects as of the date therein specified. All of the information furnished and statements made by HME or Home Properties to the Partnership or the Partners with respect to this Agreement or the Offer, and in the periodic filings (as updated) by HME or Home Properties with the Securities and Exchange Commission, are true and correct in all material respects and do not misstate or fail to state any material fact. There has not been any material adverse change in the financial condition or business of Home Properties or HME since the date of such financial information and periodic filings, as the case may be, other than any change that may occur with respect to the market price for HME Common Shares. (9) HME or Home Properties has not (i) made a general assignment for the benefit of creditors; (ii) admitted in writing its inability to pay its debts as they mature; (iii) had an attachment, execution or other judicial seizure of any property interest which remains in effect; or (iv) become generally unable to meet its financial obligations as they mature. (10) There is not pending any case, proceeding or other action seeking reorganization, arrangement, adjustment, liquidation, dissolution or recomposition of HME or Home Properties, or the debts of HME or Home Properties, under any law relating to bankruptcy, insolvency, reorganization or the relief of debtors, or seeking the appointment of a receiver, trustee, custodian or other similar official for HME or Home Properties. (11) Except: (i) as disclosed in writing to the Partnership; (ii) for liabilities and obligations incurred in the normal course of business of HME or Home Properties; and (iii) as otherwise disclosed in this Agreement, the Offer or in periodic filings (as updated) by HME or Home Properties, HME and Home Properties has no material liability or obligation of any nature which is any way materially affects their financial statements, whether now due or to become due, absolute, contingent or otherwise, including liabilities for taxes (or any interest or penalties thereto). (12) HME and Home Properties will file when due all notices, reports and returns of Taxes (as defined below) required to be filed after the Closing Date and will pay, all Taxes and other charges for the periods shown to be due on such notices, reports and returns arising after Closing. "Taxes" shall mean all taxes, charges, fees, levies or other assessments, including, without limitation, income, excise, property, sale, gross receipts, employment and franchise taxes imposed by the United States, or any state, county, local or foreign government, or subdivision or agency thereof with respect to the assets or the business of the Partnership, and including any interest, penalties or additions attributable thereto, which arise after closing. (13) The provisions of Section 4 (a), (b), (c) and (d) of this Agreement, and the provisions of Section 8 (d), (e), (f) and (g) of this Agreement, are incorporated by reference herein as if recited at length as a representation and warranty of HME and Home Properties. (14) HME and Home Properties will be responsible for all activities, operations, debts, liabilities of and claims against the Partnership which arise and result from occurrences from and after Closing. (15) Home Properties is treated as a partnership for federal income tax purposes and not as an association taxable as a corporation or a "publicly-traded partnership" taxable as a corporation. (16) Subject to the Lock-Up Agreement, the OP Units are redeemable for HME Common Shares or cash in accordance with the redemption procedures described in the Operating Partnership Agreement, and such redemption obligations are enforceable against Home Properties in accordance with the terms of the Operating Partnership Agreement. (17) The HME Common Shares will be duly authorized and, to the extent delivered upon redemption of the OP Units, will have been validly issued, fully paid, nonassessable and free and clear of any liens, encumbrances, claims, rights of others, and preemptive or similar rights, other than the Lock-Up Agreement. HME has a sufficient number of authorized but unissued shares of common stock to permit the issuance of the HME Common Shares upon conversion of the OP units. (18) HME: (i) has, in its federal income tax return for its tax year ended December 31, 1994, elected to be taxed as a "real estate investment trust" within the meaning of Section 856 of the Code, which election remains in effect and is currently intended to continue to remain in effect for each of HME taxable years; (ii) has operated, and intends to continue to operate, in such manner as to qualify as a real estate investment trust for each of its taxable years; and (iii) will not be rendered unable to qualify as a real estate investment trust for federal income tax purposes as a consequence of the transaction contemplated hereby. (b) All of the representations and warranties of Home Properties and HME, set forth in this Agreement, including, without limitation, the following indemnity, shall survive the Closing without limitation as to the term thereof and shall not be deemed to have merged in any document delivered at the Closing. (c) Home Properties and HME agree, jointly and severally, to indemnify the Partnership and each Partner, and hold harmless and defend the Partnership and each Partner, from and against any and all losses, costs, claims, liabilities, taxes (including taxes on any indemnification amount), damages and expenses, including, without limitation, reasonable attorneys' fees, arising as the result of a breach of any of the obligations, covenants, representations and/or warranties of Home Properties and/or HME set forth in this Agreement, and in any agreement, instrument and document executed and delivered by Home Properties and HME pursuant to this Agreement or in connection herewith. 11. CONDITIONS TO THE OBLIGATIONS OF HOME PROPERTIES. (a) Without limiting any of the rights of Home Properties elsewhere set forth in this Agreement, it is agreed that the obligations of Home Properties under this Agreement shall be subject to the satisfaction of the conditions set forth following ("Home Properties' Conditions"): (1) All of the representations and warranties of the Partnership set forth in this Agreement shall be true, accurate and correct in all material respects as of the Closing Date (as if made on the Closing Date). (2) On or before the Closing Date, all of the management agreements pertaining to the Property shall have been terminated (effective as at the completion of the Closing on the Closing Date), without cost or expense to Home Properties. (3) As at the Closing Date, the Existing Loan shall be in full force and effect, with no default or right to accelerate occurring thereunder. (4) The Partnership shall have delivered to Home Properties all of the documents and other items required to be delivered by the Partnership to Home Properties under the terms of this Agreement. (5) The General Partner shall have executed an agreement whereby it agrees that it will be responsible for making all final distributions to the former Partners of the Partnership from (i) any amounts remaining in the Reserve Account and/or Contingency Account (as the case may be) at the time of expiration of such Accounts, and (ii) from any other Partnership funds that the General Partner holds, and shall indemnify Home Properties for all claims relating thereto. (6) No less than 100% of the interests of the Partners shall have agreed in writing prior to Closing to exchange their Interests in the Partnership for cash or OP Units and assignments for such interests and documentation from each Unit Partner showing that each is an "accredited" investor shall have been received by Closing, except that this condition shall not apply in the event of an asset transfer pursuant to Section 35 below. (7) Within 60 days after the date of this Agreement, the Existing Lender shall have approved the assumption of the Existing Loan by Home Properties (or substitution of Home Properties as General Partner of the Partnership) and agreed to the substitution of Home Properties as guarantor under any carve-out or similar exceptions to non- recourse guarantees and the release of the General Partner from all personal liability arising under or in connection with the Existing Loan except that the General Partner agrees, if required by Existing Lender: (i) to remain liable for environmental hazards during the period of the Partnership's ownership of the Property; and (ii) to remain liable for the representations and warranties made by the Partnership and contained in any loan assumption agreement. (8) The Partnership shall have obtained from the relevant municipality any Certificate of Occupancy or similar proof of right to occupy as may be required by that municipality to be delivered by the seller of real property as a condition to transfer of title to the Property and shall have paid all costs, fees, charges and expenses in connection therewith. (9) The fulfillment by the Partnership of such other conditions to Closing as are set forth in this Agreement. (b) Each of Home Properties' Conditions is for the benefit of Home Properties, and, accordingly, any such condition may be waived by Home Properties at any time. (c) If any Home Properties' Conditions shall not have been satisfied, or waived, by Home Properties and Home Properties has otherwise performed its obligations in connection therewith, Home Properties shall have the right to terminate this Agreement by written notice to the Partnership, in which event the Earnest Money Deposit shall be returned to Home Properties, and this Agreement shall, thereafter, be deemed to be null, void and of no further force or effect, and neither party shall have any further rights or obligations under this Agreement, but subject to the provisions of Section 23 of this Agreement. 12. CONDITIONS TO THE OBLIGATIONS OF THE PARTNERSHIP. (a) Without limiting any of the rights of the Partnership elsewhere set forth in this Agreement, it is agreed that the obligations of the Partnership under this Agreement shall be subject to the satisfaction of the conditions set forth following (the "Partnership's Conditions"): (1) All of the representations and warranties of Home Properties, and HME, set forth in this Agreement shall be true, accurate and correct as of the Closing Date (as if made on the Closing Date). (2) Home Properties shall have delivered to the Partnership all of the documents and other items required to be delivered by Home Properties under the terms of this Agreement. (3) No less than 100% of the interests of the Partners shall have agreed in writing prior to Closing, to exchange their Interests in the Partnership for cash and/or OP Units and assignments for such interests shall have been received by Closing, except that this condition shall not apply in the event of an asset transfer pursuant to Section 35 below. (4) Within 60 days after the date of this Agreement, the Existing Lender shall have approved the assumption of the Existing Loan by Home Properties (or substitution of Home Properties as General Partner of the Partnership) and agreed to the substitution of Home Properties as guarantor under any carve-out or similar exceptions to non- recourse guarantees and the release of the General Partner from all personal liability arising under or in connection with the Existing Loan except that the General Partner agrees, if required by Existing Lender: (i) to remain liable for environmental hazards during the period of the Partnership's ownership of the Property; and (ii) to remain liable for the representations and warranties made by the Partnership contained in any loan assumption agreement. (5) The fulfillment by Home Properties of such other conditions to Closing as are set forth in this Agreement. (b) Each of the Partnership's Conditions is for the benefit of the Partnership, and, accordingly, any such condition may be waived by the Partnership at any time. (c) If any of the Partnership's Conditions shall not have been satisfied, or waived by the Partnership and the Partnership has otherwise performed its obligations in connection therewith, the Partnership shall have the right to terminate this Agreement by written notice to Home Properties, in which event the Earnest Money Deposit shall be returned to Home Properties, and this Agreement shall, thereafter, be deemed to be null, void and of no further force or effect, and neither party shall have any further rights or obligations under this Agreement, but subject to the provisions of Section 23 of this Agreement. 13. INSPECTION PERIOD. Subject to the rights of existing tenants at the Property, Home Properties shall have a period of thirty (30) days from and after the date of this Agreement (the "DUE DILIGENCE PERIOD") within which to cause one or more surveyors, attorneys, engineers, auditors, architects, and/or other experts of its choice (i) to inspect any document related to any Property, including, without limitation, all Leases and related documents, documents pertaining to the Existing Loan, working drawings, plans and specifications, surveys, appraisals, engineer's reports, environmental reports, insurance policies, service contracts, real estate tax receipts and annual and monthly operating statements, and (ii) to inspect, examine, survey, appraise and obtain engineering inspection and environmental reports with respect to the Property, documents pertaining to the Existing Loan, or all of the Property, and otherwise to do all that, which, in the opinion of HME, is necessary to determine the condition and value of the Property for the uses intended by Home Properties, provided, however, that Home Properties shall not conduct any environmental study of any Property beyond a Phase 1 level without the consent of the Partnership, which consent shall not be unreasonably withheld. Home Properties may declare the Due Diligence Period ended at any earlier time by written notice to the Partnership. Home Properties must be satisfied in all respects (in the sole and absolute discretion of Home Properties) with the results of all reviews, inspections and investigations conducted by, or under, Home Properties during the Due Diligence Period. If Home Properties shall not be so satisfied, Home Properties may, within the Due Diligence Period, terminate this Agreement, in which event Home Properties shall have no obligation or liability under this Agreement, or with regard to the Partnership or the Property, and Home Properties shall be entitled to the immediate return of the Earnest Money Deposit, and this Agreement shall, thereafter, be null, void and of no further force or effect. If not so terminated by Home Properties, this Agreement shall continue in full force and effect according to its terms. Home Properties shall be responsible for payment of all of the costs of its due diligence activities, including, without limitation, all engineering and environmental reports, and all financial and Lease audits. Home Properties and HME shall jointly and severally indemnify, defend and hold the Partnership harmless from and against any and all loss, claims, damage and expense arising out of entry by Home Properties and its agents, contractors and employees onto the Property or any testing performed thereon; Home Properties and HME shall repair any damage which it may cause as a result of any such entry and testing; Home Properties and HME shall cause their entry, inspections and testing (if any) to be conducted in a manner so as to minimize disruption to tenants at the Property. The obligations of Home Properties and HME under the foregoing sentence shall survive any termination of this Agreement, notwithstanding anything to the contrary contained herein. 14. TITLE. (a) At Closing, the Partnership will hold good, marketable and insurable fee simple title to the Property, free and clear of all liens, charges and encumbrances, except the Permitted Exceptions. (b) The Partnership will provide an ALTA Owner's Policy of Title Insurance (the "Title Policy"), preceded by a Commitment (the "Title Commitment"), regarding the Property in the amount of the Consideration, confirming good and marketable title to such Property in the Partnership, subject only to the Permitted Exceptions. The Title Policy shall be issued by Metropolitan Title Company (the "Title Company"). The Partnership shall bear all of the expenses in connection with the Title Policy, provided all required endorsements shall be the obligation of Home Properties. The Title Commitment shall be delivered to Home Properties within twenty (20) days after the date of this Agreement, and shall be accompanied by copies of all recorded instruments referred to in the Title Commitment. The Title Policy shall be issued as soon as practicable after the completion of the Closing on the Closing Date. (c) Within twenty (20) days after the date of this Agreement, the Partnership shall furnish to Home Properties written results of searches (the "UCC Searches") of the records of the Michigan Secretary of State, and of the County in which the Property is located, conducted by the Partnership's legal counsel, for Uniform Commercial Code Financing Statements, tax liens, or the like, in either the name of the Partnership, or the Property, effective as of a date after the date of this Agreement, accompanied by copies of all documents disclosed by the UCC Searches. The Partnerships shall bear all of the expenses of the UCC Searches. (d) Within twenty (20) days after the date of this Agreement, the Partnership shall deliver to Home Properties a copy of the currently existing survey pertaining to the Property, which shall have been updated and certified to Home Properties (the "Survey"). The Partnership shall bear all of the expenses of providing the Survey. (e) If the Title Commitment, UCC Search or Survey discloses exceptions to title other than the Permitted Exceptions, or any other matter which does not conform to the requirements of this Agreement, Home Properties shall so notify the Partnership in writing, such notice to be furnished to the Partnership, if at all, within ten (10) days following receipt by Home Properties of the Title Commitment, the UCC Searches and Survey, and the Partnership shall have the right, but not the obligation, within fifteen (15) days from the date of the receipt of such notice by the Partnership (the "Correction Period"), to have each such unpermitted exception to title removed, or to correct each such other matter, in each case to the satisfaction of Home Properties. If, within the Correction Period, the Partnership fails to have each such unpermitted exception removed, or to correct each such other matter as aforesaid, Home Properties may, at its option, and as the sole and exclusive remedy of Home Properties either: (i) terminate this Agreement, in which event this Agreement, without further action of the parties, shall become null and void such that neither party shall have any further rights or obligations under this Agreement, and Home Properties shall be entitled to the immediate return of the Earnest Money Deposit; or (ii) elect to take title to the Property as it then is. If Home Properties fails to make either such election within five (5) days following the expiration of the Correction Period, Home Properties shall be deemed to have elected option (ii). Any exception to title (other than a Permitted Exception), or any other matter which does not conform to the requirements of this Agreement, to which Home Properties does not object, as aforesaid, shall be deemed approved by Home Properties, and shall be deemed to be an additional Permitted Exception. Notwithstanding anything to the contrary contained herein, the Partnership shall be obligated to remove (or to cause the Title Company to affirmatively insure over) at the expense of the Partnership: (a) any mortgages or deeds to secure debt regarding any financing obtained by any Partnership, other than the Existing Loan; (b) any mechanic's or materialsman's lien for work done on any Property on behalf of the Partnership; and (c) any other monetary lien against any Property resulting from any act or omission of the Partnership. 15. CLOSING DATE. If this Agreement shall not have been terminated by Home Properties, or the Partnership, for any of the reasons set forth in this Agreement, and within the time(s) herein limited, the closing of the transaction contemplated by this Agreement (the "Closing") shall occur within fifteen (15) days after receipt of approval of the Existing Lender of the assumption of the loan (any such day upon which the Closing occurs being herein referred to as the "Closing Date"). The Closing shall be held at the Partnership's attorney's office, at such time, or at such other place, as may be mutually agreed upon by the parties. 16. CLOSING DOCUMENTS. (a) At or prior to the Closing, the Partnership shall deliver to Home Properties the following, each of which shall be in form and substance satisfactory to Home properties: (1) an estoppel certificate from the Existing Lender confirming that there is no default under the Existing Loan, and that there exists no event that with the passage of time or the giving of notice, or both, would constitute such a default; (2) any and all affidavits, certificates or other documents reasonably and customarily required by the Title Company in order to cause it to issue the title policy regarding the Property in the form and condition required by this Agreement; (3) an update of the Rent Roll pertaining to the Property (including a listing of all delinquent and prepaid rents, and all security deposits (including all interest due to tenants pursuant to Michigan or other applicable laws), dated as of (or as close as reasonably practicable to) the Closing Date, and represented and certified by the Partnership to be true,accurate, complete and correct in all material respects; (4) to the extent in the possession of the Partnership all of the original Leases, Service Contracts and Equipment Leases (such materials shall remain at the rental office and need not be brought to closing); (5) all keys to the Property in the possession of the Partnership, which shall be remain at the rental office and need not be brought to closing; (6) duly executed certificates of title, and other transfer documents, with regard to any vehicle owned by the Partnership; (7) a certified copy of the Certificate of Limited Partnership of the Partnership, and such other evidence of the Partnership's power and authority as the title company may reasonably request; (8) a letter to each of the tenants in the Property advising them of the transfer of the Security Deposits, and directing that rentals or other payments thereafter be paid to a payee designated by Home Properties; (9) such existing maintenance records in the Partnership's possession or control in regard to the Property which Home Properties may request not later than five (5) days prior to the Closing Date (which shall be delivered at the Property); (10) the currently effective Licenses regarding the Property, or other reasonably acceptable evidence of the right to use and occupy the Property; (11) signed notices to each utility service provider, advising of the change in address for billing purposes; (12) a signed counterpart of the Lock-Up Agreement; (13) a signed counterpart of the Registration Rights Agreement; (14) a signed counterpart of the Amendment to the Operating Partnership Agreement admitting the Unit Partners as limited partners of Home Properties (the "Amendment"); (15) a statement of the aggregate amount of the Security Deposits (with interest) as shown on the updated Rent Roll, which amount shall be adjusted as more fully provided in Section 17 (d); (16) such additional documentation as Home Properties, or the Title Company, may reasonably deem necessary or desirable in order to effectuate the transaction contemplated by this Agreement; (17) a signed counterpart of the Escrow Agreement-Reserve Amount in form substantially similar to EXHIBIT H and (18) a signed counterpart of the Escrow Agreement - Liabilities Reserve in the form substantially similar to EXHIBIT I. (b) At the Closing, Home Properties shall deliver to the Partnership the following, each of which shall be in form and substance satisfactory to such Partnership: (1) proof of the issuance of the OP Units allocated to the Unit Partners (by and through the execution and delivery of the Amendment, which shall evidence and reflect the ownership of the OP Units by such Partners); (2) proof of the payment of cash allocated to the Partners who have elected to receive cash in exchange for their Interests; (3) a receipt for the Security Deposits [acknowledged by the deduction described in Section 17 (d)] ; (4) a certificate of the Secretary of HME certifying that the Board of Directors of HME have duly adopted resolutions authorizing the transaction contemplated by this Agreement, and the execution of all of the Closing documents to be executed and delivered by Home Properties pursuant to this Agreement; (5) a sworn statement on behalf of HME certifying that the person signing documents in connection with the transaction contemplated by this Agreement on behalf of Home Properties is authorized to do so; (6) a signed counterpart of the Registration Rights Agreement; (7) a signed counterpart of the Lock-Up Agreement; (8) a signed counterpart of the Amendment; (9) signed counterparts of all other documents listed in Section 16(a) required to be signed by Home Properties; (10) a certified copy of the Operating Partnership Agreement; (11) on behalf of HME, a certificate of good standing from the Secretary of State of Maryland; (12) on behalf of Home Properties, a certificate of good standing from the Secretary of State of New York; and (13) such additional documentation as the Partnership may reasonably deem necessary to effectuate the transaction set forth in this Agreement. 17. ADJUSTMENTS. (a) The following items shall be adjusted between the Partnership and Home Properties as of the date of the Closing Date (it being understood that the Partnership shall have the benefit of monies received and expenses incurred on the date of Closing) and shall be paid at Closing, either in cash or as an adjustment to the Net Consideration, at the Partnership's option: (1) interest on the Existing Loan; (2) real estate and personal property taxes on the usual and customary "due date" basis, (3) rents, charges for carports and other charges under the Leases for the relevant month, as and when collected; (4) coin operated laundry concession income; (5) charges for water, sewer, electricity, fuel, gas, telephone and other utilities, which are not metered or otherwise charged directly to tenants under the Leases; provided that if the consumption of any such utilities is measured by meters, at Closing the Partnership shall furnish a current reading of each meter, and provided, further, that if there is not a meter, or if the meter(s) cannot be read by the relevant utility prior to the Closing, the charges therefor shall be adjusted at the Closing on the basis of the charges for the prior period for which bills were issued, and shall be further adjusted when the bills for the period including the Closing Date are issued; (6) amounts paid or payable under the Service Contracts to be assumed by Home Properties, including a pro rata credit to Home Properties for any signing bonus or similar upfront payment made by any service company; (7) fees paid for current Licenses; (8) insurance and tax escrows; prepaid real taxes; prepaid mortgage insurance; replacement reserve escrows; other expenses of operation; (9) any special assessment for public improvements or otherwise which is or may become payable with respect to the Property in annual installments; and (10) such other amounts as are customarily adjusted between parties to similar transactions in the local jurisdiction. (b) Rents which are due and payable to the Partnership by any tenant but uncollected as of the Closing Date shall not be adjusted at the Closing. All rents collected by Home Properties after the Closing Date shall be applied first to any due but unpaid rentals accruing subsequent to the Closing Date, and then to any rents past due for the calendar month in which the Closing Date occurs (subject to adjustment), and then to any rents due and unpaid prior to the Closing Date. Notwithstanding the preceding sentence, any rents collected by Home Properties during the month in which the Closing Date occurs shall be applied first to any rentals due for that month (subject to adjustment). All rent collected after Closing for any period prior to the Closing shall belong to the Holders, and if paid to Home Properties, Home Properties shall promptly send such rent to the General Partner for distribution to the former Partners of the Partnership pursuant to the agreement described in subparagraph (a) (5) of Section 11, less all reasonable expenses incurred by Home Properties, if any, in regard to the collection thereof. At the Closing, the Partnership shall deliver to Home Properties a schedule of all such past due, but uncollected rents owed by tenants. All rents collected by the Partnership, prior to Closing, for rental period(s) subsequent to the Closing shall be paid by the Partnership to Home Properties at the Closing or deducted as an adjustment at Closing. All rents collected by Home Properties or the Partnership for rental periods after the Closing shall belong to Home Properties, and if paid to the Partnership, the Partnership shall promptly send such rent to Home Properties. (c) Any adjustment estimated at the Closing shall be finally adjusted as soon as practicable after the Closing. Any error in the calculation of apportionments shall be corrected subsequent to the Closing with appropriate credits to be given based upon corrected adjustments; provided, however, that all adjustments (except as to errors caused by misrepresentation) shall be deemed final upon the expiration of ninety (90) days after the Closing Date. (d) In lieu of the Partnership delivering Security Deposit accounts, there shall be an adjustment at Closing of an amount equal to the aggregate amount of the Security Deposits (with interest if required under Michigan law) shown on the updated Rent Roll provided by the Partnership. (e) The Partnership shall be responsible for, and shall make arrangements for payment of, all amounts due to the Closing Date for employees, salaries, accrued vacation pay, withholding and payroll taxes, and other benefits, and any management fee affecting the Property (the General Partner may utilize one or more payroll periods after Closing to finalize these payments); Home Properties shall be responsible for all such expenses commencing upon the Closing Date. 18. POSSESSION. Upon completion of the Closing, the Partnership shall retain full and complete possession of the Property, subject only to the Permitted Exceptions and such other agreements and matters as may be agreed to by the General Partner and Home Properties. 19. CONDEMNATION AND DESTRUCTION. (a) If, prior to the Closing Date, the Property, or any part of any Property, is taken by eminent domain (or is the subject of a pending or contemplated taking which has not been consummated), the Partnership shall notify Home Properties of such fact, and Home Properties shall have the option (which option shall be exercised by a notice from Home Properties to the Partnership given not later than fifteen (15) business days after receipt of the notice from the Partnership): (i) to terminate this Agreement, in which event, the Earnest Money Deposit shall be returned to Home Properties, and, thereafter, this Agreement shall be deemed to be null, void and of no further force or effect between the parties; or (ii) to accept title to the Property (other than the portion so taken), without abatement of the Consideration, in which event the Partnership shall assign and turn over to Home Properties at the Closing, and Home Properties shall be entitled to receive and keep, all amounts awarded, or to be awarded, as the result of the taking. Notwithstanding the above, Home Properties shall have no right to terminate this Agreement unless the taking by eminent domain of a portion of the Property shall affect the number of apartment units available to lease or shall have a material adverse effect on access to or parking on the Property. (b) If, prior to the Closing Date, all or any material part of any Property is damaged or destroyed by fire or other casualty, the Partnership shall notify Home Properties of such fact, and Home Properties shall have the option (which option shall be exercised by a notice from Home Properties to the Partnership given not later than fifteen (15) business days after receipt of the notice from the Partnership): (i) to terminate this Agreement, in which event, the Earnest Money Deposit shall be returned to Home Properties, and, thereafter, this Agreement shall be deemed to be null, void and of no further force or effect between the parties; or (ii) to accept title to the relevant Property without abatement of the Consideration, in which event the Partnership shall assign to Home Properties, at the Closing, all of the right, title and interest of the Partnership in and to the insurance proceeds awarded or to be awarded to the Partnership as the result of such damage or destruction. (c) In the event there is damage to or destruction of an immaterial part of the Property by fire or other casualty, such damage or destruction shall, subject to receipt of insurance proceeds, be repaired promptly by the Partnership, and in the event such damage or destruction cannot be fully repaired by the Closing Date, then at the option of Home Properties (i) the Closing shall be postponed until such repairs shall have been completed, or (ii) the Closing shall be held as scheduled, and Home Properties shall accept title to the Property without abatement of the Consideration, in which event the Partnership shall assign to Home Properties, at the Closing, all of the right, title and interest of the Partnership in and to the insurance proceeds awarded or to be awarded to the Partnership as the result of such damage or destruction. (d) An "Immaterial" part of the Property shall be deemed to have been damaged or destroyed if the cost of repair or replacement thereof shall be $250,000, or less, and a "Material" part thereof shall be deemed to have been damaged or destroyed if the cost of repair or replacement thereof shall be greater than $250,000. 20. BROKER'S COMMISSION. The Partnership and Home Properties each represent to the other than the transaction described in this Agreement was not brought about or assisted in any way by any broker, firm or salesman, or other person or persons acting or functioning as, or in a role similar to a broker (any such broker, firm or salesman, or other person, is herein referred to as a "Broker"), except Dietz Organization, to whom, pursuant to separate agreement, the Partnership shall pay a real estate brokerage commission immediately prior to, and in conjunction with the Closing of the transaction under this Agreement. Each of the parties agree that should any claim be made for a commission or other compensation with regard to this transaction by any broker claiming through it, that party shall have the sole responsibility for paying any such claim, and shall indemnify and hold harmless the other party from and against any such claim of any broker, and all liabilities and expenses in connection therewith, including court costs and attorneys, fees and expenses. 21. EARNEST MONEY. Concurrently with the execution of this Agreement by both Home Properties and the Partnership, Home Properties will deposit $60,000 in cash (the "Earnest Money Deposit") with the Disbursing Agent, to be held in an interest bearing account, at an insured institution acceptable to Home Properties pursuant to the terms of an Escrow Agreement in the form of EXHIBIT F attached hereto. At Closing, the Earnest Money Deposit, shall be returned to Home Properties, and shall not be applied to the Consideration payable for the Interests. If this Agreement shall not have been properly terminated by Home Properties pursuant to the provisions of this Agreement, the Earnest Money Deposit shall be refundable to Home Properties in the event only that the Partnership defaults, or is unable to close for any reason other than the default of Home Properties or HME hereunder. In the event Home Properties does not close for any reason other than as a result of the permitted termination of this Agreement by Home Properties, or the default of the Partnership, or the inability of the Partnership to close, the Earnest Money Deposit, shall be paid to the Partnership. As used anywhere in this Agreement, the term "Earnest Money Deposit" includes all earnings thereon, if any. 22. COOPERATION. At all times during the term and pendency of this Agreement, the Partnership will cooperate fully with Home Properties (but with no obligation to incur cost or expense in connection therewith) in all reasonable manner in providing books, records and other documentation for review, including, without limitation, all Leases and related documents, copies of documentation relating to the Existing Loan, working drawings, plans and specifications, surveys, appraisals, engineer's reports, environmental reports, insurance policies, service contracts, real estate tax receipts, copies of tax returns filed by the Partnership, and annual and monthly operating statements relating to the Property, and in the possession of, or reasonably available to the Partnership. The Partnership will promptly provide Home Properties with a copy of any existing environmental report and prior to Closing will provide Home Properties with a copy of certificates of occupancy (if available) or other effective evidence of the right to occupy the Property as a multifamily apartment community. Subject to existing tenant leases, the Partnership will provide access to the Property for all physical inspections required by Home Properties. The Partnership will provide access by the representatives of Home Properties to all financial and other information relating to the Property as is sufficient to enable such representatives to prepare audited financial statements, at the expense of Home Properties, in conformity with Regulation S- X of the Securities and Exchange Commission (the "Commission"), and any registration statement, report or disclosure statement required to be filed with the Commission. Home Properties shall conduct itself and its examinations in a manner to minimize disruption to the staff and tenants of the Partnership and Property. 23. DEFAULTS AND REMEDIES. (a) If the Partnership fails or refuses to perform in accordance with the terms of this Agreement, including, without limitation, the failure or refusal to perform any covenant or obligation on the part of the Partnership to perform, prior to the Closing, or if any of the representations, warranties and covenants of the Partnership contained in this Agreement shall not be true, complete and correct at Closing in all material respects, Home Properties may, at its option: (i) bring an action against the Partnership for specific performance of this Agreement; or (ii) terminate this Agreement, in which event the Earnest Money Deposit shall be returned to Home Properties, and Home Properties shall, in addition, be entitled to reimbursement by the Partnership of the actual out-of-pocket due diligence costs incurred by Home Properties in connection with proposed acquisition of the Interests, up to the sum of $25,000 (after the payment of which, this Agreement shall be deemed null, void, and of no further force or effect between the parties). (b) If Home Properties or HME fails or refuses to perform in accordance with the terms of this Agreement, including, without limitation, the failure or refusal to perform any covenant or obligation on the part of Home Properties to perform, prior to the Closing, or if any of the representations, warranties and covenants of Home Properties or HME contained in this Agreement shall not be true, complete and correct at Closing in all material respects, the Earnest Money Deposit shall be forfeited to the Partnership as liquidated damages (which shall be the sole and exclusive remedy of the Partnership against Home Properties), at which time this Agreement shall be deemed to be null, void and of no further force or effect between the parties. In that regard, the Partnership acknowledges and agrees that (i) the Earnest Money Deposit is a reasonable estimate of, and bears a reasonable relationship to, the damages suffered and costs incurred by the Partnership as a result of having subjected the Interests to the terms of this Agreement; (ii) the actual damages suffered and costs incurred by the Partnership as a result of such failure of Home Properties to close under this Agreement would be extremely difficult and impractical to determine; (iii) Home Properties seeks to limit its liability under this Agreement to the amount of the Earnest Money Deposit in the event this Agreement is terminated and the transaction contemplated by this Agreement does not close due to a default of Home Properties under this Agreement; and (iv) the Earnest Money Deposit shall be and constitute valid liquidated damages. The foregoing limitation shall apply only in the event that Home Properties does not close the transaction contemplated by this Agreement, and such limitation shall not apply in the event that Home Properties closes and thereafter Home Properties or HME breaches any of its obligations hereunder after Closing, or to the indemnifications of Home Properties and HME contained herein. 24. OTHER PROHIBITED ACTIVITIES. (a) During the term and pendency of this Agreement, the Partnership will cease to market the Property, and, in that regard, the Partnership will refrain from soliciting or accepting any offer from any third party, or, engaging in any discussion with any third party concerning the sale, refinancing or recapitalization of the Property. (b) Prior to Closing, Home Properties and the Partnership agree to keep this Agreement confidential, and not to disclose its contents to anyone except their respective lenders, legal counsel and accountants, and except to the Partners in connection with the Offer. Notwithstanding the above, HME may make such public announcement regarding the transaction contemplated by this Agreement, as may, in its judgment, be required by, or appropriate under, applicable securities laws, provided that, prior to the publication, it shall supply a copy of any proposed announcement to the Partnership for its approval, which shall not be unreasonably withheld or delayed. Prior to Closing, Home Properties and HME agree that they will keep confidential all information and materials supplied to them by the Partnership, except Home Properties and HME may disclose such information and materials to their advisors and consultants. 25. RISK OF LOSS. Until the Closing, the risk of loss or damage to all or any part of any Property, from fire or other casualty, or from condemnation, shall be borne by the Partnership, subject to the terms of this Agreement. 26. NOTICES. (a) all notices, demands, or requests made and/or given pursuant to, under, or by virtue of this Agreement must be in writing and sent to the party to which the notice, demand or request is being made and/or given, by postage prepaid, certified or registered mail, return receipt requested, by nationally recognized courier service, by telecopy with confirmation of receipt, or by personal delivery, as follows: (i) if to the Partnership: Hampton Glen Apartments Limited Partnership 7001 Orchard Lake Road, Suite 200 West Bloomfield, MI 48322 Telecopy No.: (248) 851-7230 With copy to: Cecil Raitt, Esq. Jaffe, Raitt, Hauer & Weiss One Woodward, Suite 2400 Detroit, Michigan 48226 Telecopier No.: (313) 961-8358 and (ii) if to Home Properties: c/o Home Properties of New York, Inc. 850 Clinton Square Rochester, New York 14604 Attention: Norman P. Leenhouts, Chairman and Co-Chief Executive Officer and Kathleen K. Suher, Esq. Telecopier No.: (716) 232-3147 (b) Any such notice, demand or request shall be deemed to have been rendered or given on the date of receipt, in the case of delivery by courier service, telecopy or personal delivery, or three (3) business days after mailing. 27. ASSIGNMENT. Neither this Agreement nor any interest hereunder shall be assigned or transferred by the Partnership or by Home Properties. 28. GOVERNING LAW. The corporate laws of the State of Maryland will govern all questions concerning the relative rights and obligations of the parties with respect to any HME Common Shares acquired or acquirable by the holders of OP Units on account of their OP Units. Except as limited by the Operating Partnership Agreement, the laws of the State of New York will govern all other questions concerning the relative rights and obligations of the holders of OP Units as limited partners in Home Properties, or otherwise with respect to the OP Units. This Agreement shall, otherwise, be governed, construed and interpreted in accordance with the laws of the State of Michigan applicable to contracts made and to be performed wholly within the State of Michigan without giving effect to the conflicts-of-laws principles thereof. 29. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the various documents referred to herein contains, or incorporates, all of the terms agreed upon between the parties with respect to the subject matter, and supersedes any and all prior written or oral understandings. This Agreement may not be modified or amended except in, and by, a written instrument executed by the parties hereto. 30. WAIVER. No waiver by either party of any failure or refusal of the other party to comply with any of the obligations of such party hereunder shall be deemed a waiver of any other or subsequent failure or refusal so to comply. 31. ARTICLE HEADINGS. The headings of the various sections of this Agreement have been inserted only for purposes of convenience, and are not part of this Agreement, and shall not be deemed in any manner to modify, explain, qualify or restrict any of the provisions of this Agreement. 32. CONDITION OF APARTMENTS. The Partnership will use commercially reasonable efforts, in accordance with its existing business practices, to ensure that at the time of the Closing the apartment units are in rentable condition. The parties recognize that tenants at the Property move out at various times and that it may not be possible for all units to be fully prepared at the time of Closing. Accordingly, the Partnership shall be fully responsible for insuring that all units that have been vacated 30 or more days prior to Closing shall be in full rentable condition. In the event that any apartment unit vacant 30 or more days prior to Closing is not in rentable condition, Home Properties shall receive a closing credit equal to the amount reasonably necessary to bring that unit to rentable condition based on a standard typical for the Property, but not less than $500 per vacant unit not in full rentable condition. For units vacated within 30 days prior to Closing, the Partnership will continue to use commercially reasonable efforts, in accordance with its existing business practices, to prepare such units for subsequent tenancy, however, if any such units are not in full rentable condition at the time of Closing there shall be no credit given to Home Properties. 33. MISCELLANEOUS. (a) Subject to existing tenant leases, upon reasonable notice and during business hours between the date of this Agreement and the Closing Date, Home Properties, and agents and representatives of Home Properties, shall have the right to enter upon any Property for the purpose of examining, inspecting and testing such Property, provided that Home Properties shall conduct itself in a manner to minimize disruption to tenants and staff at the Property. (b) Home Properties has disclosed to the Partnership that audited financial statements pertaining to the Property for a minimum of one, and a maximum of three, prior calendar year(s) of operation, and the portion of the calendar year in which the Closing occurs, up to the Closing Date, may be required to be filed by Home Properties with the Securities and Exchange Commission after the Closing. Accordingly, the General Partner agrees to provide Home Properties, and its representatives, with access to the books and records of the Partnership pertaining to the Property after the Closing, upon reasonable advance notice, in order to conduct the required audit, at the expense of Home Properties. After the Closing, the General Partner will provide, or cause to be provided, a signed Representation Letter, in the form of EXHIBIT G attached hereto, with respect to the Property owned by the Partnership. (c) The parties hereto recognize that, at the Closing Date, the Partnership will terminate for federal income tax purposes. The General Partner hereby covenants to cause the tax returns to be prepared for the Partnership for the period up to the Closing Date. Home Properties shall make available to the General Partner (and his representatives) promptly upon request, all financial and other information relating to the Partnership which is necessary to permit the General Partner to file a tax return on behalf of the Partnership for its taxable year ended on the Closing Date, and for such other purposes as may be requested by the General Partner in order to wind up business affairs for the entity and the Partners. (d) Time is of the essence of this Agreement. In the computation of any period of time provided for in this Agreement, or by law, the day of the act or event from which the period of time runs shall be excluded, and the last day of such period shall be included, unless it is a Saturday, Sunday, or legal holiday, in which case the period shall be deemed to run until the end of the next day which is not a Saturday, Sunday, or legal holiday. (e) The General Partner shall cause tax returns for the Partnership for the period up to the Closing Date to be completed within one hundred twenty (120) days of the Closing Date; a copy of such final tax return shall be submitted to Home Properties promptly upon its filing with the IRS. Within one hundred twenty (120) days of the Closing Date the General Partner shall also provide Home Properties with a schedule showing: (i) the net book value of the Property and the Personal Property owned by the Partnership as of the Closing Date; and (ii) an updated Schedule 3 providing the actual information which was estimated in such Schedule. In the event that the actual information updated pursuant to this Section 34(e) is materially different from the estimated information and would impose an obligation to Home Properties to allocate additional debt to the Unit Partners, then, the obligation of Home Properties contained in Section 8(d) shall be based on and limited to the information contained within Schedule 3. The information on the Schedule shall be calculated in a manner consistent with the calculations made for federal income tax depreciation purposes. (f) This Agreement may be executed in counterparts and by facsimile signatures. 34. PARTNER APPROVAL. The Partnership shall have a period of thirty (30) days after expiration of the Due Diligence Period to obtain written agreements from 100% of the Partners to exchange their Interests in the Partnership for cash and/or OP Units. In the event that the Partnership is unable to obtain 100% written consent by the end of the Due Diligence Period, then the parties agree that the Partnership shall convey the Property to Home Properties in an asset purchase and sale in exchange for the OP Units issued to the Partnership. The number of OP Units to be issued shall be determined by taking the Net Consideration (as defined in Section 2(b) above) divided by the Market Price. In that event, the parties agree to amend and restate this Agreement as a Purchase and Sale Agreement ("Amended and Restated Agreement") with all necessary and appropriate changes as agreed to by both parties. The Partnership anticipates that the OP Units will be distributed to the Partners upon liquidation of the Partnership, shortly after Closing. The Amended and Restated Agreement will provide that only Partners who are accredited under applicable securities laws will be able to retain their OP Units. Unaccredited Partners will receive cash in exchange for their interest in the Partnership upon liquidation. In addition, the Amended and Restated Agreement will provide that accredited Partners will have 15 days following the Closing in which to elect to exchange their OP Units for cash at the Market Price. IN WITNESS WHEREOF, the Partnership and Home Properties have executed this Agreement as at the day and year first above written. [COUNTERPART SIGNATURE PAGES FOLLOW] [SIGNATURE PAGE] HAMPTON GLEN APARTMENTS LIMITED PARTNERSHIP By: ------------------------------ Harry Shapiro, By: ------------------------------ Gary Shapiro, Date: ------------------------------ The Undersigned, as General Partner, but only for purposes of acknowledging and agreeing to the provisions of subparagraph (a)(5) of Section 11, paragraph (b) of Section 17 and paragraphs (b), (c) and (e) of Section 34. ------------------------------ Harry Shapiro ------------------------------ Gary Shapiro HOME PROPERTIES OF NEW YORK, L.P. By: Home Properties of New York, Inc. General Partner By: ------------------------------ Date: ------------------------------ HOME PROPERTIES OF NEW YORK, INC. By: ------------------------------ Date: ------------------------------ EX-2 9 0009.txt Exhibit 2.3 CONTRIBUTION AGREEMENT THIS CONTRIBUTION AGREEMENT ("this Agreement") made as of the 3rd day of August, 2000, by and between Axtell Road Limited Partnership, a Michigan limited partnership (the "Partnership"), having its principal office at 1301 West Long Lake Road, Suite 190, Troy, Michigan 48098 and Home Properties of New York, L.P., a New York limited partnership ("Home Properties") and Home Properties of New York, Inc., a Maryland Corporation ("HME"), both having their principal office at 850 Clinton Square, Rochester, New York 14604. W I T N E S S E T H: This Agreement is made with reference to the following facts and objectives: (a) The Partnership owns a 100% fee simple interest in a Michigan apartment property known as Bayberry Place Apartments (the "Property"). (b) The Property comprises 120 dwelling units and is situated upon land owned in fee simple by the Partnership. (c) Upon the terms and conditions set forth in this Agreement, Home Properties desires to obtain 100% of the partnership interests (the "Interests" and each an "Interest") in the Partnership, which will own in fee simple the Land and Improvements comprising the Property, together with the related Personal Property, Service Contracts and Trade Names (all as hereinafter defined), in exchange for limited partnership interests (the "OP Units") in Home Properties and cash. (d) The Consideration (as herein defined), whether in OP Units or cash, is to be allocated among the various partners of the Partnership (the "Partners") in accordance with SCHEDULE 1 attached hereto. (e) It is expected that the exchange of the Interests for OP Units (but not the cash portion of the Consideration) will qualify for Federal income tax purposes, as a tax free transfer, pursuant to Section 721 of the Code. (f) As used in this Agreement with initial capital letters, the following terms, in each instance, shall have the meaning ascribed thereto: "Capital Account Deficit" shall mean and refer to the negative Capital Account amount of each Unit Partner (as hereinafter defined) for Federal income tax purposes, as at the relevant date; "Code" shall mean and refer to the Internal Revenue Code of 1986, as amended; "Environmental Law" shall mean and refer to any Federal, state, county or municipal environmental, health, chemical use, safety or sanitation law, statute, ordinance or code currently in effect relating to the protection of the environment, and/or governing the use, storage, treatment, generation, transportation, processing, handling, production or disposal of any Hazardous Materials, and the rules, regulations and orders promulgated and/or issued thereunder; "Existing Lender" shall mean and refer to IDS Life Insurance Company; "Existing Loan" shall mean the Mortgage Note in favor of the Existing Lender, which has a principal balance as of June 15, 2000 of approximately $2,500,000 and which is secured by a mortgage or deed of trust on the Property; "General Partner" shall mean and refer to Jonathan P. Rye. "Hazardous Materials" shall mean and refer to any hazardous substances described or defined in (i) the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended; (ii) the Hazardous Materials Transportation Act, as amended; (iii) the Resource Conservation and Recovery Act, as amended; (iv) the Toxic Substances Control Act, as amended; and (v) any applicable Michigan Environmental Laws, and the regulations promulgated thereunder, in each case, as at the date of this Agreement; "HME" shall mean and refer to Home Properties of New York, Inc., a Maryland corporation (which operates as a self-administered, and self-managed, equity real estate investment trust); "HME Common Shares" shall mean and refer to the shares of common stock in HME, which are traded on the New York Stock Exchange; "Home Properties" shall mean and refer to Home Properties of New York, L.P., a New York limited partnership (in which HME is the sole general partner, and through which HME conducts its operational, management and investing activities); "OP Units" shall mean and refer to limited partnership interests in Home Properties, which are, subject to restrictions, exchangeable, on a one-to-one basis, for HME Common Shares; "Partner" shall mean each and every one of the partners of the Partnership and "Partners" shall refer to all of the partners of the Partnership; "Partnership" shall mean and refer to Axtell Road Limited Partnership, a Michigan limited partnership; "Property" shall mean and refer to the apartment project known as Bayberry Place Apartments, including: (i) the land occupied by such apartment project (the "Land"), as more particularly described on Exhibit A attached hereto, together with (a) all and singular the easements, rights-of-way, rights, privileges, benefits, tenements, hereditaments and appurtenances thereunto belonging or in anywise appertaining, and (b) all right, title and interest of the Partnership in and to any land lying in the bed of any street, road, avenue or alley, open or proposed, public or private, in front of, behind, or otherwise adjoining the Land, or any part of the Land, including, without limitation, all right, title and interest of the Partnership in and to (1) any award made after the date of this Agreement as a result of condemnation, or in lieu thereof, and (2) any unpaid award as at the date of this Agreement as a result of condemnation, or in lieu thereof subject to the terms of Section 19(a) hereof; and (ii) all buildings, structures, fixtures, facilities, installations and other improvements of every kind and description now or hereafter in, on, over and under the Land (the "Improvements"), including, without limitation, any and all plumbing, air conditioning, heating, ventilating, mechanical, electrical and other utility systems, and fixtures, parking lots and facilities, landscaping, roadways, fences, mail boxes, sidewalks, maintenance buildings, clubhouse, office, swimming pools and other recreational facilities, security devices, signs and light fixtures; and "Unit Partners" shall mean the Partners who are entitled to elect and who, in fact, elect to receive OP Units in exchange for their Interests and "Unit Partner" shall mean each of the Unit Partners. NOW, THEREFORE, in consideration of the foregoing, the mutual covenants, agreements and undertakings herein contained, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Partnership and Home Properties agree as follows: 1. EXCHANGE. (a) Home Properties agrees to exchange the Partner's Interests in the Partnership for cash and/or OP Units on the terms and conditions set forth herein. Each Partner shall exchange his Partnership Interest for his share (as set forth on Schedule 1) of the Net Consideration as set forth in Section 2. Upon and subject to the terms and conditions set forth in this Agreement, Home Properties agrees that on the Closing Date (as hereinafter defined), it shall accept an assignment of the Interests from the Partners and will issue OP Units or pay cash to the Partners as each Partner shall elect and as provided herein. (b) By acquiring all of the Interests, Home Properties will also obtain through its interest in the Partnership all of the right, title and interest of the Partnership in and to the following: (1) all furniture, furnishings, equipment, machinery and other tangible personal property and fixtures of every kind and description owned by the Partnership, and used in connection with the Property (in each instance, the "Personal Property"), including, without limitation, all ranges, refrigerators, disposals, dishwashers, water heaters, furnaces, air conditioning units and equipment, carpeting, traverse rods, drapes and other window treatments, exhaust fans, range hoods, screens, model unit furniture, clubhouse and related furniture and equipment, tools, parts, motors, supplies, pool and other recreational equipment, cabinets, mirrors, shelving, computers and other office equipment, stationery and other office supplies, normal levels of inventory, and all replacements of, and/or substitutions for, any of the foregoing; but specifically excluding (A) cash (including cash in bank accounts), cash equivalents, accounts receivable and securities assets, which shall belong to the partners of the Partnership, (B) any personal property described in EXHIBIT A-1 attached hereto, and (C) any refunds on insurance which has been pre-paid by the Partnership (items (A)-(C), the "Excluded Assets"); (2) all present and subsequent leases with tenants, and/or other occupancy agreements, together with all pending applications for tenancy (in each instance, the "Leases"); (3) all service and maintenance contracts, and equipment leases, used or useful in connection with the Property, (in each instance, the "Service Contracts"), including, without limitation, natural gas purchase contracts, communication and other equipment leases (the "Equipment Leases"), and the equipment covered thereby being herein called the "Leased Equipment"), coin-operated laundry concession leases, and pending purchase orders, all of which are listed on SCHEDULE 2 attached hereto; and (4) all trademarks, service marks, logos, trade, assumed or business names and telephone numbers related to the use and operation of the Property (in each instance, the "Trade Names"), except that the Partnership makes no representation or warranty of title or usage with respect to such Trade Names. 2. CONSIDERATION. (a) The aggregate consideration (the "Consideration") payable by Home Properties for 100% of the Interests shall be Five Million Six Hundred Fifty Thousand and No/100 Dollars ($5,650,000), subject to adjustments at Closing pursuant to Section 17. (b) On the Closing Date, each of the Partners shall assign their Interests to Home Properties in exchange for their share (as set forth on Schedule 1) of the Net Consideration. "Net Consideration" means the Consideration less: (i) the principal amount on the Closing Date of the Existing Loan; (ii) the amount specified by the General Partner pursuant to paragraph (f) of Section 3 of this Agreement; and (iii) the Reserve Amount. "Reserve Amount" means the sum of: (a) an amount equal to the current liabilities of the Partnership on the Closing Date (other than the principal amount of the Existing Loan and any other liabilities permitted to be retained within the Partnership pursuant to the terms hereof or credited for the benefit of Home Properties), together with such other amounts as the General Partner may reasonably require (the "Liabilities Reserve") and (b) $150,000 (the "Indemnity Reserve"). The Indemnity Reserve shall be held and disbursed by the Disbursing Agent (as defined in Paragraph (c) of this Section 2) as described in Paragraph (c) of this Section 2 and in Paragraphs (a) and (b) of Section 3. The Liabilities Reserve shall be held and disbursed by the General Partner as described in Paragraph (c) of this Section 2 and in Paragraph (a) and (b) of Section 3. The Liabilities Reserve shall be used to pay all amounts used to satisfy the current liabilities of the Partnership and the liabilities of the Partnership that Home Properties has not specifically agreed to assume as provided herein ("Liabilities Claims"). The Indemnity Reserve shall be used to pay any amounts paid or subject to claims of Home Properties by reason of a material breach or material misrepresentation of any representations, warranties, covenants or agreements of the Partnership which survive Closing (but only during the period of such survival) ("Indemnity Claims"). If and to the extent that the Liabilities Reserve or the Indemnity Reserve is exhausted, Home Properties shall be entitled to make a claim against any Reserve Amount remaining for either a Liability Claim or an Indemnity Claim. (c) At Closing, the General Partner shall deliver in immediately available funds and OP Units to __________________ (the "Disbursing Agent") the Indemnity Reserve. The Indemnity Reserve shall be held and disbursed pursuant to the terms of an escrow agreement that shall be in form and substance substantially similar to that attached hereto as EXHIBIT H. At Closing, the General Partner shall retain in immediately available funds and OP Units an amount equal to the Liabilities Reserve and deposit it in a separate account. The Liabilities Reserve shall be held and disbursed pursuant to the terms of an escrow agreement that shall be in form and substance substantially similar to that attached hereto as EXHIBIT I. (d) Partners who have elected to receive cash in exchange for their Interests shall be paid their portion of the Net Consideration at the Closing by wire transfer of immediately available federal funds. (e) Partners who are "accredited" investors under Regulation D of the applicable securities laws and who have elected to receive OP Units in exchange for their Interests shall be paid their portion of the Net Consideration by the issuance of OP Units. The number of OP Units to be issued to each Unit Partner shall be their portion of the Net Consideration divided by $28.50 ("Market Price"). 3. RELEASE OF RESERVES; CLOSING COSTS. (a) On the 90th day after the Closing Date: (i) the Disbursing Agent shall disburse to the General Partner that portion of the Indemnity Reserve that has not been paid, disbursed or subject to Liability or Indemnity Claims; and (ii) the General Partner shall no longer be required to hold that portion of the Liability Reserve that has not been paid, disbursed or subject to Liability or Indemnity Claims. The General Partner may then elect (x) to continue to hold such remaining amounts for the benefit of the holders of Interests immediately prior to the Closing Date (the "Holders"), as a fund against which to pay unanticipated claims (the "Contingency Reserve"), or (y) to distribute to the Holders in accordance with Schedule 1 attached hereto. (b) At any time, and from time to time, after the 90th day after the Closing Date that there is a Final Determination (as defined in EXHIBITS H AND I) that any remaining portion, if any, of the Reserve Amount is no longer subject to Liability or Indemnity Claims, the Disbursing Agent shall distribute the remaining portion of the Indemnity Reserve to the General Partner and the General Partner shall no longer be required to hold the Liability Reserve. The General Partner may then elect (i) to continue to hold such remaining amounts for the benefit of the Holders, as a Contingency Reserve, or (ii) to distribute pro rata to the Holders in accordance with Schedule 1 attached hereto. (c) The General Partner may continue to hold the Contingency Reserve until such time as the General Partner deems prudent, after which any undisbursed amount remaining in the Contingency Reserve shall be disbursed by the General Partner to the Holders in accordance with Schedule 1 attached hereto. (d) Home Properties shall pay all recording fees, its attorneys' fees, the costs of any environmental surveys and studies, the costs of any desired title endorsements, the costs and fees incurred in connection with the assumption by Home Properties of the Existing Loan or the substitution of Home Properties as General Partner and all other costs and expenses incidental to or in connection with closing this transaction customarily paid for by the purchaser of similar property. The Partnership shall pay its attorneys' fees, the costs of obtaining a binder or commitment from a title insurance company, the premium for the title insurance policy, the costs for updating and recertifying the existing survey of the Property and all other costs and expenses incidental to or in connection with closing this transaction customarily paid for by the seller of similar property. (e) On, or at any time prior to, the Closing Date, the General Partner shall have the right to spend on behalf of the Partnership and/or distribute to the partners of the Partnership any and all of the Excluded Assets held by the Partnership, it being specifically agreed and understood that Home Properties is not purchasing the Excluded Assets of the Partnership. (f) On the Closing Date, the Partnership shall be entitled to direct that a portion of the Net Consideration be utilized by Home Properties to pay, on behalf of the Partnership, the closing costs of the Partnership and/or to satisfy certain other liabilities of the Partnership. 4. OP UNITS. (a) Distributions with respect to the OP Units will be identical in amount and timing to the dividends on HME Common Shares, except that the initial distribution payable with respect to the OP Units issued to the Unit Partners shall be made on the date on which HME shall pay the dividend to holders of HME Common Shares that relates to the earnings for the calendar quarter in which the OP Units were issued to the Unit Partners, and shall be prorated such that the Unit Partners will receive a pro-rata distribution for the period from the date on which the OP Units were issued to the Unit Partners, which shall be the Closing Date to, and including, the last day of the calendar quarter in which the OP Units were so issued. (b) Subject to the terms of a Lock-Up Agreement, in the form of EXHIBIT B attached hereto, to be dated the Closing Date, and to the terms of the Second Amended and Restated Agreement of Limited Partnership of the operating Partnership, as amended (the "Operating Partnership Agreement"), the OP Units will be convertible into HME Common Shares, on a one-to-one basis, after the elapse of one (1) year from and after the Closing Date (the "Lock-Up Period"), during which the Unit Partners will be restricted from converting, or transferring, any of the OP Units. (c) From and after the expiration of the Lock-Up Period, the Unit Partners shall have all of the transfer, exchange and conversion rights with regard to the OP Units as are set forth in the Operating Partnership Agreement. (d) Upon the terms and conditions of a Registration Rights Agreement, in the form of EXHIBIT C attached hereto, to be dated the Closing Date, the Unit Partners shall have registration rights and a listing commitment with regard to the shares of HME Common Shares into which the OP Units can be converted (the "Registration Rights"), including demand and piggy back rights. The exercise of Registration Rights shall be without cost to the Partners. In addition, within 9 months of the Closing Date, HME agrees to file at its sole cost and expense a registration statement (the "Registration Statement") with the SEC registering the resale of the shares of common stock of HME into which the OP Units may be converted and to use reasonable commercial efforts to have the registration promptly declared effective by the Securities and Exchange Commission ("SEC"). HME agrees that the Registration Statement shall be kept current at its sole cost and expense until all HME Common Shares received upon conversion of OP Units received pursuant to this Agreement have been sold pursuant to the Registration Statement or are eligible for sale pursuant to Rule 144(k) promulgated under the Securities Act of 1933. Notwithstanding anything to the contrary contained in this Agreement, in the event that HME has not filed the Registration Statement with the SEC by the date (the "Outside Filing Date") which is 11 months after the Closing Date, then for and with respect to each day during the period between the Outside Filing Date and the date on which the Registration Statement is filed with the SEC, Home Properties shall pay to the Unit Partners, as liquidated damages and not as a penalty, the sum of $1,000, which sum shall be apportioned pro rata among the Unit Partners. 5. EXISTING LOAN. Home Properties shall be responsible for payment of any assumption fees in connection with the assumption of Existing Loan or substituting Home Properties as the General Partner with respect to such Existing Loan. Home Properties and HME agree to use commercially reasonable good faith efforts to expeditiously attempt to obtain all necessary approvals of the holder of the Existing Loan. 6. PERMITTED EXCEPTIONS. The Property at Closing shall be subject only to the following (the "PERMITTED EXCEPTIONS"): (a) the Existing Loan; (b) the lien of real estate taxes and assessments not yet due and payable; (c) the Leases; (d) the Service Contracts and Equipment Leases; (e) easements, rights-of-way, covenants, restrictions and other matters of record which do not materially adversely affect the use and operation of the Property; (a) all items and matters shown on the survey of the Property obtained pursuant to the terms hereof, provided such items and matters do not materially adversely affect the use and operation of the Property; and (g) such other agreements and matters as may be agreed to by the General Partner and Home Properties. 7. OBLIGATIONS AND COVENANTS OF THE PARTNERSHIP. (a) From the date of this Agreement to the Closing Date, the Partnership shall: (1) Maintain, manage and operate the Property in substantially the same condition and manner as such Property is now maintained, managed and operated by the Partnership, and keep the Property, including, without limitation, the Improvements and Personal Property, in substantially the same good condition and repair as such Property is now maintained, ordinary wear and tear excepted; (2) Maintain the Existing Loan in full force and effect, timely make all payments, and observe and perform in all material respects all covenants to be paid, observed or performed by the mortgagor thereunder, and promptly deliver to the Home Properties any notice of default received thereunder; (3) Promptly provide Home Properties with a copy of any written notice, citation, complaint or other directive from any person, entity or governmental authority whereby compliance with any Environmental Law is called into question; (4) maintain in full force and effect all of the existing insurance policies regarding the Property; (5) Promptly deliver notice to Home Properties of, and, if appropriate, defend, at the Partnership's expense, all actions, suits, claims and other proceedings affecting the Property, or the use, possession or occupancy thereof; (6) Promptly deliver to Home Properties any written notice of actual or threatened condemnation of the Property, or any portion thereof; (7) Maintain all certificates of occupancy, operating permits and licenses, if any (the "Licenses") in full force and effect; (8) Maintain all Service Contracts in full force and effect; timely make all payments, and observe and perform all material obligations to be paid, observed or performed by the Partnership thereunder; and promptly notify Home Properties of any receipt of any notice of default thereunder; (9) Provide all services, repairs and other work required to be provided by the landlord under the Leases; (10) Reasonably cooperate with Home Properties in connection with (i) the consummation of the transaction contemplated by this Agreement, and (ii) the preparation of the Closing documents and apportionments hereunder; (11) Promptly deliver to Home Properties a copy of any written notice of required work from any company insuring the Property against casualty loss; (12) Terminate all management agreements pertaining to the Property, effective as of the completion of the Closing on the Closing Date; (13) Promptly deliver to Home Properties a copy of any written notice of any violation (or alleged violation) of any law, ordinance, order, requirement or regulation of any Federal, state, county, municipal or other governmental department, agency or authority relating to the Property; and (14) Promptly give written notice to Home Properties of the occurrence of any condition or event which materially and adversely affects the truth or accuracy of any representation or warranty made by the Partnership under or pursuant to this Agreement. (b) From the date of the expiration of the Due Diligence Period to the Closing Date, the Partnership shall not: (1) Except with the consent or in conjunction with Home Properties, modify, amend, renew, extend, terminate or otherwise alter the Existing Loan, or any document or documents relating thereto; (2) Increase any wage or fringe benefit payable to any employee at the Property, other than periodic increases and bonuses customarily provided such employees, without the prior written consent of Home Properties, in each instance, which consent shall not be unreasonably withheld, conditioned or delayed; (3) Remove from the Property any article of Personal Property, except the Excluded Assets or as may be necessary for repairs, or the discarding of worn out or useless items, provided, however, that any such article removed for repairs shall be returned to the Property promptly upon its repair, and shall remain a part of the Personal Property, whether or not such article shall be located on the Property at the time of the Closing, and any such article so discarded and required for the normal operation of the Property shall be replaced with a new or replacement article of similar quality and utility prior to Closing; (4) Except in the ordinary course of business, modify, amend, renew, extend, terminate or otherwise materially alter any of the Service Contracts, or enter into any new service or maintenance contract, equipment lease or any purchase order affecting the Property, without the prior written consent of Home Properties, in each instance, which consent shall not be unreasonably withheld, conditioned or delayed; (5) Except in the ordinary course of business, terminate any Lease. Ordinary course of business shall be deemed to include, without limitation, non-renewals of problem tenants, commencement of summary ejectment proceeding where a tenant is more than ten (10) days delinquent in the payment of rent, cases of any Lease where the tenant is more than thirty (30) days delinquent in the payment of rent, or in which there has been a material violation of the obligations of tenant; (6) Except in the ordinary course of business, enter into any new Lease, or renew or extend any existing Lease, for a term in excess of twelve months, or at a monthly rental less than the relevant rental rate set forth in the rental schedule for the Property approved by Home Properties; (7) Modify or amend the present form of lease in use by the Partnership, without the prior written consent of Home Properties unless required by law or any insurance carrier; (8) Except in the ordinary course of business, enter into any new license, franchise, concession or easement agreement affecting the Property, without the prior written consent of Home Properties, in each instance, which consent shall not be unreasonably withheld, conditioned or delayed; (9) Except in the ordinary course of business of the Partnership, apply any Security Deposits against rent delinquencies or other Lease defaults, other than in the case of tenants who have vacated their apartments, or are currently involved in litigation with the Partnership; (10) Undertake or commence any material renovations or alterations at the Property, except those necessary to comply with any of the provisions of this Agreement, without the prior written consent of Home Properties, in each instance, which consent shall not be unreasonably withheld, conditioned or delayed; (11) Sell, mortgage, pledge, hypothecate or otherwise transfer or dispose of all or any part of the Property, or the Personal Property, or any interest therein, except in the case of the sale or other disposition of items of Personal Property to be replaced hereunder; and (12) Initiate, consent to, approve or otherwise take any action with respect to the zoning, or any other governmental rule or regulation, presently applicable to all or any part of the Property. 8. OBLIGATIONS AND COVENANTS OF HOME PROPERTIES AND HME. Home Properties and HME covenant and agree with the Partnership, both before and after Closing as follows: (a) Distributions with respect to the OP Units will be identical in amount and timing to the dividends on HME Common Shares, except that the initial distribution payable with respect to the OP Units issued to the Unit Partners shall be made on the date on which HME shall pay the dividend to holders of HME Common Shares that relates to the earnings for the calendar quarter in which the OP Units were issued to the Unit Partners, and shall be prorated such that the Unit Partners will receive a pro-rata distribution for the period from the date on which the OP Units were issued to the Unit Partners, which shall be the Closing Date to, and including, the last day of the calendar quarter in which the OP Units were so issued. (b) The General Partner may retain copies of any and all books and records pertaining to the Partnership and the operation of the Property so that the General Partner may wind up the affairs of the previously conducted business. (c) At the Closing, Home Properties shall deliver to each Unit Partner good and marketable title to the OP Units allocated to such Unit Partner, free and clear of all liens, charges, encumbrances and restrictions, except as contained in the Operating Partnership Agreement, the Registration Rights Agreement, and the Lock-Up Agreement, and shall, by execution of the Amendment, admit each Unit Partner as a limited partner in Home Properties. (d) At all times for and during a period of ten (10) years from and after the Closing Date, Home Properties shall allocate to each Unit Partner, for Federal Income tax purposes, pursuant to Section 752 of the Code, qualified nonrecourse debt of Home Properties in an aggregate amount not less than the Capital Account Deficit of such Partner, as adjusted from time to time. (e) The initial tax basis Capital Account Deficit of each Unit Partner in the Property, shall be determined by reference to each such Unit Partners Capital Account Deficit in the Partnership as at (just prior to) the contribution of such Partner's interest in the Partnership to Home Properties on the Closing Date, and shall be based upon the estimated information set forth in Schedule 3 attached hereto and shall be updated based upon the information set forth in a schedule to be furnished by the accountant for the General Partner within the time required by Section 33(e) hereof. Thereafter, for a period of ten (10) years from and after the Closing Date or earlier period as provided in Section 8(d), the Capital Account Deficit of each Unit Partner shall be adjusted annually to reflect changes occasioned at the level of Home Properties, including, without limitation, distributions made by Home Properties. During this period Home Properties shall monitor the Capital Account Deficit of the Unit Partners to fulfill the obligations of the immediately preceding paragraph. At the end of such ten (10) year period or earlier period as provided in Section 8(d), Home Properties shall cooperate with each Unit Partner by providing each Unit Partner with the right to execute an agreement obligating such Unit Partner to restore any portion of a deficit balance in such Unit Partner's capital account and/or provide the opportunity to each Unit Partner to enter into a "bottom-tier guaranty" with respect to the debt of the Home Properties. Furthermore, in complying with Section 4.04 of the Operating Partnership Agreement, Home Properties agrees that the methodology chosen under Section 704(c) of the Internal Revenue Code shall be the "traditional" method. (f) For a period of ten (10) years from and after the Closing Date, Home Properties shall not sell, exchange, transfer or otherwise dispose of the Property, or any replacement of the Property (in any event, a "Property Transfer"), unless such Property Transfer occurs in such manner as to be wholly tax free to the Unit Partners. (g) Future transactions involving HME, or Home Properties, including, without limitation, merger(s), sale(s) of assets or similar transactions, shall be structured in such manner as to (i) not result in an amendment to the definition of Conversion Factor as it is currently included in the Operating Partnership Agreement; (ii) prevent, in the context of such a transaction, a different per unit value being assigned to the OP Units issued to the Unit Partners than the value assigned per share to the then outstanding HME Common Shares; and (iii) for a period of ten (10) years from and after the Closing Date, not accelerate or interfere with the tax deferred nature of the transaction contemplated by this Agreement with respect to the OP Units issued to the Unit Partners. 9. REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP. (a) The Partnership represents and warrants that each of the following is true, complete and accurate in all material respects as of the date of this Agreement (and, except as designated in writing by the Partnership at or before Closing, will be true, complete and accurate in all material respects as of the Closing Date) with regard to such Partnership and the Property: (1) To the best knowledge of the Partnership, the Partnership is the sole owner of the Property. (2) To the best knowledge of the Partnership, the Partnership owns legal and beneficial title to the Personal Property, other than the Leased Equipment, free and clear of all liens, charges and encumbrances, except the Permitted Exceptions. (3) There are no agreements with regard to the Leased Equipment other than the Equipment Leases set forth in SCHEDULE 2 attached hereto, and true and complete copies of all Equipment Leases have been or will be delivered to Home Properties. (4) To the best knowledge of the Partnership, each of the Equipment Leases is in full force and effect; none of the parties thereto is in material default of any of its obligations thereunder; and no event has occurred that, with the giving of notice, or the passage of time, or both, would constitute a material default thereunder. (1) To the best knowledge of the Partnership: the Existing Loan is in full force and effect the Partnership has no notice of any material default by the Partnership thereunder; and no event has occurred that with the giving of notice, or the passage of time, or both, would constitute a material default by the Partnership thereunder. (2) To the best knowledge of the Partnership, true, complete and accurate copies of the Existing Loan documents have been or will be made available to Home Properties. (7) The Partnership is a limited partnership, duly organized, validly existing, and in good standing under the laws of the State of Michigan, and subject to consent of Existing Lender, has full power and authority to enter into, and to fully perform and comply with the terms of this Agreement and to own, lease and operate its properties and to carry on its business as it is now being conducted. (8) Subject to consent of Existing Lender and consent of parties to the Equipment Leases, the execution and delivery of this Agreement, and its performance by the Partnership, will not conflict with, or result in the breach of, any contract, agreement, law, rule or regulation to which the Partnership is a party, or by which the Partnership is bound. (9) Subject to consent of Existing Lender, to the best knowledge of the Partnership this Agreement is valid and enforceable against the Partnership in accordance with its terms, and each instrument to be executed by the Partnership pursuant to this Agreement, or in connection herewith, will, when executed and delivered, be valid and enforceable against the Partnership in accordance with its terms, except as such enforcement may be limited by bankruptcy and other laws affecting creditors, rights generally. (10) Except as disclosed in Schedule 5 attached hereto, no written notice has been received by the Partnership from any insurer, the Existing Lender or from any governmental or municipal authority, with respect to any defect which affects the Property, or the use or operation thereof, which remains uncured or uncorrected. (11) To the best knowledge of the Partnership and except as set forth on tax bills for the Property or the Title Commitment, there are no special or other assessments for public improvements or otherwise now affecting the Property, nor has the Partnership received written notice of any pending or threatened special assessments affecting the Property. (12) To the best knowledge of the Partnership, except as disclosed in Schedule 5 attached hereto, the Partnership has not received any written notice from any party that the Property, or the current use, occupation or condition thereof, violate(s) any governmental statute, law ordinance, rule or regulation applicable (or allegedly applicable) to the Property, or any order of any governmental agency relating to the Property and/or the use and/or legal occupancy thereof, or any applicable deed restrictions or other covenant, easement or agreement pertaining to the Property (including, without limitation, any of the Permitted Exceptions), or any approval pertaining to the Property. (13) Except as disclosed in Schedule 5 attached hereto, the Partnership has received no written notice that the current use, operation or occupancy of any part, or all, of the Property violates any of the Licenses. (14) Except as disclosed in Schedule 5 attached hereto, there is no action, proceeding or investigation pending, or, to the best knowledge of the Partnership, threatened, against the Partnership, or the Property, by or before any court or governmental department, commission, board, agency or instrumentality, and the Partnership does not know of any basis for any such action, proceeding or investigation. Any liability sustained under any action, proceeding or investigation disclosed on Schedule 5 is being defended by the insurance carrier for the Partnership and the Partnership shall provide Home Properties with proof of insurance. Home Properties shall undertake no obligation with respect to any such action, proceeding or investigation as a result of the transaction contemplated by this Agreement. (15) The Partnership has not received written notice of any Federal, state, county or municipal plan to restrict or change access from any public highway or road to the Property, or of any pending or threatened condemnation or eminent domain proceedings relating to or affecting the Property. (16) The Partnership has not (i) made a general assignment for the benefit of its creditors; (ii) admitted in writing its inability to pay its debts as they mature; (iii) had an attachment, execution or other judicial seizure of any property interest which remains in effect; or (iv) become generally unable to meet its financial obligations as they mature. (17) To the best knowledge of the Partnership, there is not pending any case, proceeding or other action seeking reorganization, arrangement, adjustment, liquidation, dissolution or recomposition of the Partnership, or the debts of the Partnership, under any law relating to bankruptcy, insolvency, reorganization or the relief of debtors, or seeking the appointment of a receiver, trustee, custodian or other similar official for the Partnership or the Property. (18) To the best knowledge of the Partnership, and except for lead paint, asbestos, Hazardous Materials customarily used in the operation and management of residential rental communities, and except as identified in environmental reports or surveys furnished to the Partnership or obtained by or furnished to Home Properties, there are no Hazardous Materials on, in or under the Property in violation of the Environmental Laws, and the Property has never been used by the Partnership to generate, treat, store, dump, release, emit, use, transport or in any manner deal with Hazardous Materials in violation of the Environmental Laws. (19) To the best knowledge of the Partnership, the present use and occupation of the Property does not violate any Environmental Law. (20) To the best knowledge of the Partnership, the tax-related information set forth on SCHEDULE 3 attached hereto is true, complete and accurate in all material aspects as at the date set forth therein. The obligations of Home Properties contained in Section 8(d) and the representations of Home Properties contained in Section 10(a)(13) are conditioned upon the material accuracy of the representations of this Paragraph and the attached SCHEDULE 3. (21) To the best knowledge of the Partnership, the summaries of Leases affecting the Property attached as EXHIBIT D to this Agreement (the "Rent Roll") are, in all material ways true, complete and accurate as at the date set forth therein. (22) True and complete copies of all Leases have been or will be made available to Home Properties at the principal office of the Property. (23) Except for the Existing Loan, the Partnership has not assigned, mortgaged, pledged, hypothecated or otherwise encumbered any of its rights or interests under any of the Leases. (24) To the best knowledge of the Partnership, the Rent Roll attached as EXHIBIT D accurately includes each tenant's name, a description of the dwelling unit leased by such tenant, the amount of rent due monthly from such tenant, the amount of the security deposit, if any, paid by such tenant (collectively, the "Security Deposits"), and the expiration date of the term of such Lease. (25) To the best knowledge of the Partnership, except as indicated on the Rent Roll, each Lease is in full force and effect. (26) To the best knowledge of the Partnership, except as indicated on the Rent Roll, all rents are being paid and are current (within 30 days of their due date). (27) To the best knowledge of the Partnership, except as indicated on the Rent Roll, no tenant has paid any rent for more than one month in advance. (28) To the best knowledge of the Partnership, except as indicated on the Rent Roll, no tenant is entitled to any free rent, abatement of rent or similar concession except in accordance with the past practice of the Partnership. (29) To the best knowledge of the Partnership, as of the date of this Agreement, the Security Deposits under the Leases are as set forth in the Rent Roll. (30) To the best knowledge of the Partnership, except for commissions payable to the management agent of the Property and any outside locater service, no brokerage commission or other compensation is payable (or will, with the passage of time, or occurrence of any event, or both, be payable) with respect to any Lease. The Partnership acknowledges that any commission payable to the management agent shall be its responsibility to pay and shall not be assumed by Home Properties. Home Properties hereby agrees that it shall assume the responsibility to pay any commission due to the outside locater service that is earned but not payable as of the Closing Date. (31) True and complete copies of the Service Contracts have been or will be made available to Home Properties at the principal office of the Property. (32) To the best knowledge of the Partnership: each of the Service Contracts is in full force and effect; none of the parties thereto is in material default of any of its obligations thereunder; and no event has occurred that, with the giving of notice, or the passage of time, or both, would constitute a material default thereunder. (33) SCHEDULE 1 hereto lists the current holders of all outstanding Partner Interests of the Partnership together with the percentage interest held by each Partner. In the event that any Partner listed on SCHEDULE 1 transfers any Interests prior to the Closing Date, the Partnership shall use good faith reasonable efforts to promptly provide written notice to Home Properties of such transfer, and such notice shall include the names of the transferor and the transferee, the address of the transferee and the number of units transferred. (34) To the best knowledge of the Partnership, except: (i) as disclosed in SCHEDULE 4 attached hereto or the financial statements of the Partnership furnished to Home Properties; (ii) for liabilities and obligations under the Existing Loan, Equipment Leases, Service Contracts and Leases and incurred in the normal course of business of the Partnership; and (iii) as otherwise disclosed in this Agreement, the Partnership has no material liability or obligation of any nature which is any way materially and adversely affects or is related to the Property or Personal Property whether now due or to become due, absolute, contingent or otherwise, including liabilities for taxes (or any interest or penalties thereto) other than as a result of this transaction. (35) Except as previously disclosed to Home Properties, all of the ranges and refrigerators in the Property are the property of the Partnership and not of the tenants. (36) To the best knowledge of the Partnership, the Partnership has filed or will file when due (as such due date may be extended) all notices, reports and returns of Taxes (as defined below) required to be filed before the Closing Date and has paid or, if due after the date hereof and prior to the Closing Date, will pay, all Taxes and other charges for the periods shown to be due on such notices, reports and returns. "Taxes" shall mean all taxes, charges, fees, levies or other assessments, including, without limitation, income, excise, property, sale, gross receipts, employment and franchise taxes imposed by the United States, or any state, county, local or foreign government, or subdivision or agency thereof with respect to the assets or the business of the Partnership, and including any interest, penalties or additions attributable thereto. (b) To the best knowledge of the Partnership, all of the representations and warranties of the Partnership, set forth in this Agreement shall be true and correct in all material respects at the date of this Agreement, and (except as disclosed in writing by the Partnership at or before Closing), all shall be deemed to be repeated at, and as of the Closing Date, and shall be true and correct in all material respects as at the Closing Date. (c) Notwithstanding anything to the contrary set forth in this Agreement, if, prior to Closing, Home Properties or HME acquires knowledge (through the provision of any written documentation delivered by or at the direction of the Partnership or General Partner, or received from the Partnership or General Partner, or through the delivery to Home Properties or HME of a written report or other written acknowledgment from any third party engaged to perform any of the tests, studies, investigations and inspections contemplated under this Agreement, including, without limitation: (i) all written reports from environmental consultants and engineers retained in connection with the transaction described herein; (ii) the Leases; (iii) the Title Commitment; (iv) and items delivered pursuant to Section 13 hereof) of the breach of any or all of the Partnership's representations and warranties made in this Agreement, and Home Properties and HME nevertheless elect to close under this Agreement, then Home Properties and HME shall be deemed to have waived the breach(es) in question, and shall have no right, at any time after Closing, to assert a claim, of any nature whatsoever, against the Partnership with respect to that breach. (d) All of the representations and warranties of the Partnership, set forth in this Agreement, including, without limitation, the following indemnity, shall survive the Closing for a period of six (6) months following Closing, and shall not be deemed to have merged in any document delivered at the Closing. Any claim for any breach of any representation or warranty of the Partnership shall be brought by delivery of written notice to the General Partner, if at all, within six (6) months from the date of Closing or thereafter be forever barred except in the case of fraud or intentional and material misrepresentation by the Partnership. (e) The Partnership agrees to indemnify Home Properties, and hold harmless and defend Home Properties, from and against any and all losses, costs, claims, liabilities, damages and expenses, including, without limitation, reasonable attorneys, fees, arising as the result of a material breach of any of the representations and warranties of the Partnership set forth in this Agreement. Notwithstanding anything to the contrary contained in this Agreement, neither the General Partner nor any other partners of the Partnership shall have any personal liability, and no action of any kind shall be maintained against any of them or their respective assets, with respect to this Agreement and/or the transactions described in this Agreement, and Home Properties, its successors and assigns, shall look solely to the assets of the Partnership and the cash or assets held by the Disbursing Agent and the General Partner pursuant to Paragraph (c) of Section 2 above, for the payment of any claim against or the performance of any obligation of the Partnership. The foregoing limitation of liability as it relates to the Partnership and the General Partner shall not apply in the case of fraud or intentional and material misrepresentation. (f) Except as expressly provided in this Agreement, the Partnership, has made no representations and/or warranties regarding the Property and the Partnership Interests, and, except as expressly set forth in this Agreement, Home Properties shall, at Closing, accept the Property and the Partnership Interests in "AS IS" condition, with all faults, and without any other representations or warranties of any kind, whether as to merchantability, or fitness for a particular purpose, or otherwise. 10. REPRESENTATIONS AND WARRANTIES OF HOME PROPERTIES AND HME. (a) Home Properties and HME, jointly and severally, represent and warrant to the Partnership and to each Partner that each of the following is true, complete and accurate as of the date of this Agreement, and will be true, complete and accurate as of the Closing Date: (1) Home Properties and HME are duly organized, validly existing and in good standing (under the laws of the State of New York and the State of Maryland, respectively), and each has all the requisite power and authority to enter into and carry out and fully perform and comply with this Agreement, according to its terms, and to own, lease and carry on its business as it is now being conducted. Home Properties and HME each are duly qualified to conduct business in the State of Michigan and in all other states where the failure to so qualify would have a material and adverse effect on its business. HME is the sole general partner of Home Properties. (2) Neither the execution and delivery of this Agreement, nor the performance of this Agreement by Home Properties, nor the execution, delivery and performance of the Registration Rights Agreement by HME, nor the execution and delivery of the Lock-Up Agreement by HME and Home Properties, nor the execution and delivery of the Amendment (as hereinafter defined) by Home Properties, nor the execution, delivery and performance of all other agreements contemplated by this Agreement, nor the issuance and delivery of the OP Units by Home Properties, will conflict with, or result in any breach of, any contract, agreement, law, rule or regulation to which either HME or Home Properties is a party, or by which either HME or Home Properties is bound. (3) Subject to receipt of Board approval, this Agreement has been duly authorized, executed and delivered, and constitutes a legal and binding obligation of Home Properties and HME, enforceable in accordance with its terms, except as such enforcement may be limited by bankruptcy and other laws affecting creditors rights generally. (4) Each instrument to be executed and delivered by Home Properties and/or HME pursuant to this Agreement, or in connection herewith, including, without limitation, the Registration Rights Agreement, Lock-Up Agreement and Amendment (as hereinafter defined) will, when executed and delivered, be valid and enforceable against Home Properties and/or HME in accordance with its terms, except as such enforcement may be limited by bankruptcy and other laws affecting creditors, rights generally. (5) There is no litigation, proceeding or investigation pending, or to the best knowledge of Home Properties, threatened, against or affecting Home Properties, or HME by or before any court or governmental department, commission, board, agency or instrumentality that might affect the validity of this Agreement, or any action taken, or to be taken, by Home Properties, or HME, pursuant to this Agreement, or that might have a material adverse effect on the business of Home Properties. (6) At the Closing, Home Properties shall deliver to each Unit Partner good and marketable title to the OP Units allocated to such Unit Partner, free and clear of all liens, charges, encumbrances and restrictions, except as contained in the Operating Partnership Agreement, the Registration Rights Agreement, and the Lock-Up Agreement, and shall, by execution of the Amendment, admit each Unit Partner as a limited partner in Home Properties. When issued pursuant to this Agreement, the OP Units to be issued to the Unit Partners will have been duly authorized, validly issued, fully paid and non-assessable. (7) The Operating Partnership Agreement attached as EXHIBIT E, to this Agreement is true, complete and accurate as at the date of this Agreement, and shall not be further amended prior to the Closing Date, except for (i) amendments in connection with the issuance of additional common shares by HME; (ii) amendments in connection with mergers or other transactions wherein additional OP Units are issued in connection with the acquisition of real property, or of interests in entities which own real property; and (iii) amendments that do not negatively affect the rights of the holders of OP units. An updated version of the Operating Partnership Agreement will be furnished to the Partnership at Closing, certified as a true, complete and accurate copy thereof. (8) All financial information heretofore or hereafter furnished by HME or Home Properties concerning such entities is, and shall be, true, complete and correct in all material respects as of the date therein specified. All of the information furnished and statements made by HME or Home Properties to the Partnership or the Partners with respect to this Agreement or the Offer, and in the periodic filings (as updated) by HME or Home Properties with the Securities and Exchange Commission, are true and correct in all material respects and do not misstate or fail to state any material fact. There has not been any material adverse change in the financial condition or business of Home Properties or HME since the date of such financial information and periodic filings, as the case may be, other than any change that may occur with respect to the market price for HME Common Shares. (9) HME or Home Properties has not (i) made a general assignment for the benefit of creditors; (ii) admitted in writing its inability to pay its debts as they mature; (iii) had an attachment, execution or other judicial seizure of any property interest which remains in effect; or (iv) become generally unable to meet its financial obligations as they mature. (10) There is not pending any case, proceeding or other action seeking reorganization, arrangement, adjustment, liquidation, dissolution or recomposition of HME or Home Properties, or the debts of HME or Home Properties, under any law relating to bankruptcy, insolvency, reorganization or the relief of debtors, or seeking the appointment of a receiver, trustee, custodian or other similar official for HME or Home Properties. (11) Except: (i) as disclosed in writing to the Partnership; (ii) for liabilities and obligations incurred in the normal course of business of HME or Home Properties; and (iii) as otherwise disclosed in this Agreement, the Offer or in periodic filings (as updated) by HME or Home Properties, HME and Home Properties has no material liability or obligation of any nature which is any way materially affects their financial statements, whether now due or to become due, absolute, contingent or otherwise, including liabilities for taxes (or any interest or penalties thereto). (12) HME and Home Properties will file when due all notices, reports and returns of Taxes (as defined below) required to be filed after the Closing Date and will pay, all Taxes and other charges for the periods shown to be due on such notices, reports and returns arising after Closing. "Taxes" shall mean all taxes, charges, fees, levies or other assessments, including, without limitation, income, excise, property, sale, gross receipts, employment and franchise taxes imposed by the United States, or any state, county, local or foreign government, or subdivision or agency thereof with respect to the assets or the business of the Partnership, and including any interest, penalties or additions attributable thereto, which arise after closing. (13) The provisions of Section 4 (a), (b), (c) and (d) of this Agreement, and the provisions of Section 8 (d), (e), (f) and (g) of this Agreement, are incorporated by reference herein as if recited at length as a representation and warranty of HME and Home Properties. (14) HME and Home Properties will be responsible for all activities, operations, debts, liabilities of and claims against the Partnership which arise and result from occurrences from and after Closing. (15) Home Properties is treated as a partnership for federal income tax purposes and not as an association taxable as a corporation or a "publicly-traded partnership" taxable as a corporation. (16) Subject to the Lock-Up Agreement, the OP Units are redeemable for HME Common Shares or cash in accordance with the redemption procedures described in the Operating Partnership Agreement, and such redemption obligations are enforceable against Home Properties in accordance with the terms of the Operating Partnership Agreement. (17) The HME Common Shares will be duly authorized and, to the extent delivered upon redemption of the OP Units, will have been validly issued, fully paid, nonassessable and free and clear of any liens, encumbrances, claims, rights of others, and preemptive or similar rights, other than the Lock-Up Agreement. HME has a sufficient number of authorized but unissued shares of common stock to permit the issuance of the HME Common Shares upon conversion of the OP units. (18) HME: (i) has, in its federal income tax return for its tax year ended December 31, 1994, elected to be taxed as a "real estate investment trust" within the meaning of Section 856 of the Code, which election remains in effect and is currently intended to continue to remain in effect for each of HME taxable years; (ii) has operated, and intends to continue to operate, in such manner as to qualify as a real estate investment trust for each of its taxable years; and (iii) will not be rendered unable to qualify as a real estate investment trust for federal income tax purposes as a consequence of the transaction contemplated hereby. (b) All of the representations and warranties of Home Properties and HME, set forth in this Agreement, including, without limitation, the following indemnity, shall survive the Closing without limitation as to the term thereof and shall not be deemed to have merged in any document delivered at the Closing. (c) Home Properties and HME agree, jointly and severally, to indemnify the Partnership and each Partner, and hold harmless and defend the Partnership and each Partner, from and against any and all losses, costs, claims, liabilities, taxes (including taxes on any indemnification amount), damages and expenses, including, without limitation, reasonable attorneys' fees, arising as the result of a breach of any of the obligations, covenants, representations and/or warranties of Home Properties and/or HME set forth in this Agreement, and in any agreement, instrument and document executed and delivered by Home Properties and HME pursuant to this Agreement or in connection herewith. 11. CONDITIONS TO THE OBLIGATIONS OF HOME PROPERTIES. (a) Without limiting any of the rights of Home Properties elsewhere set forth in this Agreement, it is agreed that the obligations of Home Properties under this Agreement shall be subject to the satisfaction of the conditions set forth following ("Home Properties' Conditions"): (1) All of the representations and warranties of the Partnership set forth in this Agreement shall be true, accurate and correct in all material respects as of the Closing Date (as if made on the Closing Date). (2) On or before the Closing Date, all of the management agreements pertaining to the Property shall have been terminated (effective as at the completion of the Closing on the Closing Date), without cost or expense to Home Properties. (3) As at the Closing Date, the Existing Loan shall be in full force and effect, with no default or right to accelerate occurring thereunder. (4) The Partnership shall have delivered to Home Properties all of the documents and other items required to be delivered by the Partnership to Home Properties under the terms of this Agreement. (5) The General Partner shall have executed an agreement whereby it agrees that it will be responsible for making all final distributions to the former Partners of the Partnership from (i) any amounts remaining in the Reserve Account and/or Contingency Account (as the case may be) at the time of expiration of such Accounts, and (ii) from any other Partnership funds that the General Partner holds, and shall indemnify Home Properties for all claims relating thereto. (6) No less than 100% of the Partners shall have agreed in writing prior to Closing to exchange their Interests in the Partnership for cash or OP Units and assignments for such Interests, in form reasonably acceptable to Home Properties, and documentation from each Unit Partner showing that each is an "accredited" investor shall have been received at or prior to Closing. (7) Within 60 days after the date of this Agreement, the Existing Lender shall have approved the assumption of the Existing Loan by Home Properties (or substitution of Home Properties as General Partner of the Partnership) and agreed to the substitution of Home Properties as guarantor or obligor under any environmental indemnity (except as provided below) or under any carve-out or similar exceptions to non- recourse guarantees and the release of the General Partner from all personal liability arising under or in connection with the Existing Loan except that the General Partner agrees, if required by Existing Lender: (i) to remain liable for environmental hazards during the period of the Partnership's ownership of the Property; and (ii) to remain liable for the representations and warranties made by the Partnership and contained in any loan assumption agreement. (8) The Partnership shall have obtained from the relevant municipality any Certificate of Occupancy or similar proof of right to occupy as may be required by that municipality to be delivered by the seller of real property as a condition to transfer of title to the Property and shall have paid all costs, fees, charges and expenses in connection therewith. (9) The Board of Directors of HME (the "Board") shall have approved the acquisition of the Property as described in this Agreement prior to the end of the Due Diligence Period (as hereinafter defined) (the "Board Approval"). (10) The fulfillment by the Partnership of such other conditions to Closing as are set forth in this Agreement. (b) Each of Home Properties' Conditions is for the benefit of Home Properties, and, accordingly, any such condition may be waived by Home Properties at any time. (c) If any Home Properties' Conditions shall not have been satisfied, or waived, by Home Properties and Home Properties has otherwise performed its obligations in connection therewith, Home Properties shall have the right to terminate this Agreement by written notice to the Partnership, in which event the Earnest Money Deposit shall be returned to Home Properties, and this Agreement shall, thereafter, be deemed to be null, void and of no further force or effect, and neither party shall have any further rights or obligations under this Agreement, but subject to the provisions of Section 23 of this Agreement. 12. CONDITIONS TO THE OBLIGATIONS OF THE PARTNERSHIP. (a) Without limiting any of the rights of the Partnership elsewhere set forth in this Agreement, it is agreed that the obligations of the Partnership under this Agreement shall be subject to the satisfaction of the conditions set forth following (the "Partnership's Conditions"): (1) All of the representations and warranties of Home Properties, and HME, set forth in this Agreement shall be true, accurate and correct as of the Closing Date (as if made on the Closing Date). (2) Home Properties shall have delivered to the Partnership all of the documents and other items required to be delivered by Home Properties under the terms of this Agreement. (3) No less than 100% of the Partners shall have agreed in writing prior to Closing, to exchange their Interests in the Partnership for cash and/or OP Units and assignments for such Interests shall have been received at or prior to Closing. (4) Within 60 days after the date of this Agreement, the Existing Lender shall have approved the assumption of the Existing Loan by Home Properties (or substitution of Home Properties as General Partner of the Partnership) and agreed to the substitution of Home Properties as guarantor or obligor under any environmental indemnity (except as provided below) or under any carve-out or similar exceptions to non- recourse guarantees and the release of the General Partner from all personal liability arising under or in connection with the Existing Loan except that the General Partner agrees, if required by Existing Lender: (i) to remain liable for environmental hazards during the period of the Partnership's ownership of the Property; and (ii) to remain liable for the representations and warranties made by the Partnership contained in any loan assumption agreement. (5) The fulfillment by Home Properties of such other conditions to Closing as are set forth in this Agreement. (6) Board Approval shall have been obtained by the end of Due Diligence Period. (b) Each of the Partnership's Conditions is for the benefit of the Partnership, and, accordingly, any such condition may be waived by the Partnership at any time. (c) If any of the Partnership's Conditions shall not have been satisfied, or waived by the Partnership and the Partnership has otherwise performed its obligations in connection therewith, the Partnership shall have the right to terminate this Agreement by written notice to Home Properties, in which event the Earnest Money Deposit shall be returned to Home Properties, and this Agreement shall, thereafter, be deemed to be null, void and of no further force or effect, and neither party shall have any further rights or obligations under this Agreement, but subject to the provisions of Section 23 of this Agreement. 13. INSPECTION PERIOD. Subject to the rights of existing tenants at the Property, Home Properties shall have a period of thirty (30) days from and after the date of this Agreement (the "DUE DILIGENCE PERIOD") within which to cause one or more surveyors, attorneys, engineers, auditors, architects, and/or other experts of its choice (i) to inspect any document related to any Property, including, without limitation, all Leases and related documents, documents pertaining to the Existing Loan, working drawings, plans and specifications, surveys, appraisals, engineer's reports, environmental reports, insurance policies, service contracts, real estate tax receipts and annual and monthly operating statements, and (ii) to inspect, examine, survey, appraise and obtain engineering inspection and environmental reports with respect to the Property, documents pertaining to the Existing Loan, or all of the Property, and otherwise to do all that, which, in the opinion of HME, is necessary to determine the condition and value of the Property for the uses intended by Home Properties, provided, however, that Home Properties shall not conduct any environmental study of any Property beyond a Phase 1 level without the consent of the Partnership, which consent shall not be unreasonably withheld. Home Properties may declare the Due Diligence Period ended at any earlier time by written notice to the Partnership. Home Properties must be satisfied in all respects (in the sole and absolute discretion of Home Properties) with the results of all reviews, inspections and investigations conducted by, or under, Home Properties during the Due Diligence Period. If Home Properties shall not be so satisfied, Home Properties may, within the Due Diligence Period, terminate this Agreement, in which event Home Properties shall have no obligation or liability under this Agreement, or with regard to the Partnership or the Property, and Home Properties shall be entitled to the immediate return of the Earnest Money Deposit, and this Agreement shall, thereafter, be null, void and of no further force or effect. If not so terminated by Home Properties, this Agreement shall continue in full force and effect according to its terms. Home Properties shall be responsible for payment of all of the costs of its due diligence activities, including, without limitation, all engineering and environmental reports, and all financial and Lease audits. Home Properties and HME shall jointly and severally indemnify, defend and hold the Partnership harmless from and against any and all loss, claims, damage and expense arising out of entry by Home Properties and its agents, contractors and employees onto the Property or any testing performed thereon; Home Properties and HME shall repair any damage which it may cause as a result of any such entry and testing; Home Properties and HME shall cause their entry, inspections and testing (if any) to be conducted in a manner so as to minimize disruption to tenants at the Property. The obligations of Home Properties and HME under the foregoing sentence shall survive any termination of this Agreement, notwithstanding anything to the contrary contained herein. 14. TITLE. (a) At Closing, the Partnership will hold good, marketable and insurable fee simple title to the Property, free and clear of all liens, charges and encumbrances, except the Permitted Exceptions. (b) The Partnership will provide an ALTA Owner's Policy of Title Insurance (the "Title Policy"), preceded by a Commitment (the "Title Commitment"), regarding the Property in the amount of the Consideration, confirming good and marketable title to such Property in the Partnership, subject only to the Permitted Exceptions. The Title Policy shall be issued by ________________________(the "Title Company"). The Partnership shall bear all of the expenses in connection with the Title Policy, provided all required endorsements shall be the obligation of Home Properties. The Title Commitment shall be delivered to Home Properties within twenty (20) days after the date of this Agreement, and shall be accompanied by copies of all recorded instruments referred to in the Title Commitment. The Title Policy shall be issued as soon as practicable after the completion of the Closing on the Closing Date. (c) Within twenty (20) days after the date of this Agreement, the Partnership shall furnish to Home Properties written results of searches (the "UCC Searches") of the records of the Michigan Secretary of State, and of the County in which the Property is located, conducted by the Partnership's legal counsel, for Uniform Commercial Code Financing Statements, tax liens, or the like, in either the name of the Partnership, or the Property, effective as of a date after the date of this Agreement, accompanied by copies of all documents disclosed by the UCC Searches. The Partnerships shall bear all of the expenses of the UCC Searches. (d) Within twenty (20) days after the date of this Agreement, the Partnership shall deliver to Home Properties a copy of the currently existing survey pertaining to the Property, which shall have been updated and certified to Home Properties (the "Survey"). The Partnership shall bear all of the expenses of providing the Survey. (e) If the Title Commitment, UCC Search or Survey discloses exceptions to title other than the Permitted Exceptions, or any other matter which does not conform to the requirements of this Agreement, Home Properties shall so notify the Partnership in writing, such notice to be furnished to the Partnership, if at all, within ten (10) days following receipt by Home Properties of the Title Commitment, the UCC Searches and Survey, and the Partnership shall have the right, but not the obligation, within fifteen (15) days from the date of the receipt of such notice by the Partnership (the "Correction Period"), to have each such unpermitted exception to title removed, or to correct each such other matter, in each case to the satisfaction of Home Properties. If, within the Correction Period, the Partnership fails to have each such unpermitted exception removed, or to correct each such other matter as aforesaid, Home Properties may, at its option, and as the sole and exclusive remedy of Home Properties either: (i) terminate this Agreement, in which event this Agreement, without further action of the parties, shall become null and void such that neither party shall have any further rights or obligations under this Agreement, and Home Properties shall be entitled to the immediate return of the Earnest Money Deposit; or (ii) elect to take title to the Property as it then is. If Home Properties fails to make either such election within five (5) days following the expiration of the Correction Period, Home Properties shall be deemed to have elected option (ii). Any exception to title (other than a Permitted Exception), or any other matter which does not conform to the requirements of this Agreement, to which Home Properties does not object, as aforesaid, shall be deemed approved by Home Properties, and shall be deemed to be an additional Permitted Exception. Notwithstanding anything to the contrary contained herein, the Partnership shall be obligated to remove (or to cause the Title Company to affirmatively insure over) at the expense of the Partnership: (a) any mortgages or deeds to secure debt regarding any financing obtained by any Partnership, other than the Existing Loan; (b) any mechanic's or materialsman's lien for work done on any Property on behalf of the Partnership; and (c) any other monetary lien against any Property resulting from any act or omission of the Partnership. 15. CLOSING DATE. If this Agreement shall not have been terminated by Home Properties, or the Partnership, for any of the reasons set forth in this Agreement, and within the time(s) herein limited, the closing of the transaction contemplated by this Agreement (the "Closing") shall occur within fifteen (15) days after receipt of approval of the Existing Lender of the assumption of the loan (any such day upon which the Closing occurs being herein referred to as the "Closing Date"), but no earlier than the end of the Due Diligence Period. The Closing shall be held at the Partnership's attorney's office, at such time, or at such other place, as may be mutually agreed upon by the parties. 16. CLOSING DOCUMENTS. (a) At or prior to the Closing, the Partnership shall deliver to Home Properties the following, each of which shall be in form and substance satisfactory to Home properties: (1) an estoppel certificate from the Existing Lender confirming that there is no default under the Existing Loan, and that there exists no event that with the passage of time or the giving of notice, or both, would constitute such a default; (2) any and all affidavits, certificates or other documents reasonably and customarily required by the Title Company in order to cause it to issue the title policy regarding the Property in the form and condition required by this Agreement; (3) an update of the Rent Roll pertaining to the Property (including a listing of all delinquent and prepaid rents, and all security deposits (including all interest due to tenants pursuant to Michigan or other applicable laws), dated as of (or as close as reasonably practicable to) the Closing Date, and represented and certified by the Partnership to be true, accurate, complete and correct in all material respects; (4) to the extent in the possession of the Partnership all of the original Leases, Service Contracts and Equipment Leases (such materials shall remain at the rental office and need not be brought to closing); (5) all keys to the Property in the possession of the Partnership, which shall be remain at the rental office and need not be brought to closing; (6) duly executed certificates of title, and other transfer documents, with regard to any vehicle owned by the Partnership; (7) a certified copy of the Certificate of Limited Partnership of the Partnership, and such other evidence of the Partnership's power and authority as the title company may reasonably request; (8) a letter to each of the tenants in the Property advising them of the transfer of the Security Deposits, and directing that rentals or other payments thereafter be paid to a payee designated by Home Properties; (9) such existing maintenance records in the Partnership's possession or control in regard to the Property which Home Properties may request not later than five (5) days prior to the Closing Date (which shall be delivered at the Property); (10) the currently effective Licenses regarding the Property, or other reasonably acceptable evidence of the right to use and occupy the Property; (11) signed notices to each utility service provider, advising of the change in address for billing purposes; (12) a signed counterpart of the Lock-Up Agreement; (13) a signed counterpart of the Registration Rights Agreement; (14) a signed counterpart of the Amendment to the Operating Partnership Agreement admitting the Unit Partners as limited partners of Home Properties (the "Amendment"); (15) a statement of the aggregate amount of the Security Deposits (with interest) as shown on the updated Rent Roll, which amount shall be adjusted as more fully provided in Section 17 (d); (16) such additional documentation as Home Properties, or the Title Company, may reasonably deem necessary or desirable in order to effectuate the transaction contemplated by this Agreement; (1) a signed counterpart of the Escrow Agreement-Reserve Amount in form substantially similar to EXHIBIT H and (18) a signed counterpart of the Escrow Agreement - Liabilities Reserve in the form substantially similar to EXHIBIT I. (b) At the Closing, Home Properties shall deliver to the Partnership the following, each of which shall be in form and substance satisfactory to such Partnership: (1) proof of the issuance of the OP Units allocated to the Unit Partners (by and through the execution and delivery of the Amendment, which shall evidence and reflect the ownership of the OP Units by such Partners); (2) proof of the payment of cash allocated to the Partners who have elected to receive cash in exchange for their Interests; (3) a receipt for the Security Deposits [acknowledged by the deduction described in Section 17 (d)] ; (4) a certificate of the Secretary of HME certifying that the Board of Directors of HME have duly adopted resolutions authorizing the transaction contemplated by this Agreement, and the execution of all of the Closing documents to be executed and delivered by Home Properties pursuant to this Agreement; (5) a sworn statement on behalf of HME certifying that the person signing documents in connection with the transaction contemplated by this Agreement on behalf of Home Properties is authorized to do so; (6) a signed counterpart of the Registration Rights Agreement; (7) a signed counterpart of the Lock-Up Agreement; (8) a signed counterpart of the Amendment; (9) signed counterparts of all other documents listed in Section 16(a) required to be signed by Home Properties; (10)a certified copy of the Operating Partnership Agreement; (11)on behalf of HME, a certificate of good standing from the Secretary of State of Maryland; (12)on behalf of Home Properties, a certificate of good standing from the Secretary of State of New York; and (13) such additional documentation as the Partnership may reasonably deem necessary to effectuate the transaction set forth in this Agreement. 17. ADJUSTMENTS. (a) The following items shall be adjusted between the Partnership and Home Properties as of the date of the Closing Date (it being understood that the Partnership shall have the benefit of monies received and expenses incurred on the date of Closing) and shall be paid at Closing, either in cash or as an adjustment to the Net Consideration, at the Partnership's option: (1) interest on the Existing Loan; (2) real estate and personal property taxes on the usual and customary "due date" basis, (3) rents, charges for carports and other charges under the Leases for the relevant month, as and when collected; (4) coin operated laundry concession income, including any lump sum payments made to the Partnership; (5) charges for water, sewer, electricity, fuel, gas, telephone and other utilities, which are not metered or otherwise charged directly to tenants under the Leases; provided that if the consumption of any such utilities is measured by meters, at Closing the Partnership shall furnish a current reading of each meter, and provided, further, that if there is not a meter, or if the meter(s) cannot be read by the relevant utility prior to the Closing, the charges therefor shall be adjusted at the Closing on the basis of the charges for the prior period for which bills were issued, and shall be further adjusted when the bills for the period including the Closing Date are issued; (6) amounts paid or payable under the Service Contracts to be assumed by Home Properties, including a pro rata credit to Home Properties for any signing bonus or similar upfront payment made by any service company; (7) fees paid for current Licenses; (8) insurance and tax escrows; prepaid mortgage insurance; replacement reserve escrows; other expenses of operation; (9) any special assessment for public improvements or otherwise which is or may become payable with respect to the Property in annual installments; and (10) such other amounts as are customarily adjusted between parties to similar transactions in the local jurisdiction. (b) Rents which are due and payable to the Partnership by any tenant but uncollected as of the Closing Date shall not be adjusted at the Closing. All rents collected by Home Properties after the Closing Date shall be applied first to any due but unpaid rentals accruing subsequent to the Closing Date, and then to any rents past due for the calendar month in which the Closing Date occurs (subject to adjustment), and then to any rents due and unpaid prior to the Closing Date. Notwithstanding the preceding sentence, any rents collected by Home Properties during the month in which the Closing Date occurs shall be applied first to any rentals due for that month (subject to adjustment). All rent collected after Closing for any period prior to the Closing shall belong to the Holders, and if paid to Home Properties, Home Properties shall promptly send such rent to the General Partner for distribution to the former Partners of the Partnership pursuant to the agreement described in subparagraph (a) (5) of Section 11, less all reasonable expenses incurred by Home Properties, if any, in regard to the collection thereof. At the Closing, the Partnership shall deliver to Home Properties a schedule of all such past due, but uncollected rents owed by tenants. All rents collected by the Partnership, prior to Closing, for rental period(s) subsequent to the Closing shall be paid by the Partnership to Home Properties at the Closing or deducted as an adjustment at Closing. All rents collected by Home Properties or the Partnership for rental periods after the Closing shall belong to Home Properties, and if paid to the Partnership, the Partnership shall promptly send such rent to Home Properties. (c) Any adjustment estimated at the Closing shall be finally adjusted as soon as practicable after the Closing. Any error in the calculation of apportionments shall be corrected subsequent to the Closing with appropriate credits to be given based upon corrected adjustments; provided, however, that all adjustments (except as to errors caused by misrepresentation) shall be deemed final upon the expiration of ninety (90) days after the Closing Date. (d) In lieu of the Partnership delivering Security Deposit accounts, there shall be an adjustment at Closing of an amount equal to the aggregate amount of the Security Deposits (with interest if required under Michigan law) shown on the updated Rent Roll provided by the Partnership. (e) The Partnership shall be responsible for, and shall make arrangements for payment of, all amounts due to the Closing Date for employees, salaries, accrued vacation pay, withholding and payroll taxes, and other benefits, and any management fee affecting the Property (the General Partner may utilize one or more payroll periods after Closing to finalize these payments); Home Properties shall be responsible for all such expenses commencing upon the Closing Date. 18. POSSESSION. Upon completion of the Closing, the Partnership shall retain full and complete possession of the Property, subject only to the Permitted Exceptions and such other agreements and matters as may be agreed to by the General Partner and Home Properties. 19. CONDEMNATION AND DESTRUCTION. (a) If, prior to the Closing Date, the Property, or any part of any Property, is taken by eminent domain (or is the subject of a pending or contemplated taking which has not been consummated), the Partnership shall notify Home Properties of such fact, and Home Properties shall have the option (which option shall be exercised by a notice from Home Properties to the Partnership given not later than fifteen (15) business days after receipt of the notice from the Partnership): (i) to terminate this Agreement, in which event, the Earnest Money Deposit shall be returned to Home Properties, and,thereafter, this Agreement shall be deemed to be null, void and of no further force or effect between the parties; or (ii) to accept title to the Property (other than the portion so taken), without abatement of the Consideration, in which event the Partnership shall assign and turn over to Home Properties at the Closing, and Home Properties shall be entitled to receive and keep, all amounts awarded, or to be awarded, as the result of the taking. Notwithstanding the above, Home Properties shall have no right to terminate this Agreement unless the taking by eminent domain of a portion of the Property shall affect the number of apartment units available to lease or shall have a material adverse effect on access to or parking on the Property. (b) If, prior to the Closing Date, all or any material part of any Property is damaged or destroyed by fire or other casualty, the Partnership shall notify Home Properties of such fact, and Home Properties shall have the option (which option shall be exercised by a notice from Home Properties to the Partnership given not later than fifteen (15) business days after receipt of the notice from the Partnership): (i) to terminate this Agreement, in which event, the Earnest Money Deposit shall be returned to Home Properties, and,thereafter,this Agreement shall be deemed to be null, void and of no further force or effect between the parties; or (ii) to accept title to the relevant Property without abatement of the Consideration, in which event the Partnership shall assign to Home Properties, at the Closing, all of the right, title and interest of the Partnership in and to the insurance proceeds awarded or to be awarded to the Partnership as the result of such damage or destruction. (c) In the event there is damage to or destruction of an immaterial part of the Property by fire or other casualty, such damage or destruction shall, subject to receipt of insurance proceeds, be repaired promptly by the Partnership, and in the event such damage or destruction cannot be fully repaired by the Closing Date, then at the option of Home Properties (i) the Closing shall be postponed until such repairs shall have been completed, or (ii) the Closing shall be held as scheduled, and Home Properties shall accept title to the Property without abatement of the Consideration, in which event the Partnership shall assign to Home Properties, at the Closing, all of the right, title and interest of the Partnership in and to the insurance proceeds awarded or to be awarded to the Partnership as the result of such damage or destruction. (d) An "Immaterial" part of the Property shall be deemed to have been damaged or destroyed if the cost of repair or replacement thereof shall be $250,000, or less, and a "Material" part thereof shall be deemed to have been damaged or destroyed if the cost of repair or replacement thereof shall be greater than $250,000. 20. BROKER'S COMMISSION. The Partnership and Home Properties each represent to the other than the transaction described in this Agreement was not brought about or assisted in any way by any broker, firm or salesman, or other person or persons acting or functioning as, or in a role similar to a broker (any such broker, firm or salesman, or other person, is herein referred to as a "Broker"), except Dietz Organization, to whom Home Properties shall pay a real estate brokerage commission not to exceed $70,000 immediately prior to, and in conjunction with the Closing of the transaction under this Agreement. Any commission due Dietz Organization in excess of $70,000 shall be the responsibility of the Partnership. Each of the parties agree that should any claim be made for a commission or other compensation with regard to this transaction by any broker claiming through it, that party shall have the sole responsibility for paying any such claim, and shall indemnify and hold harmless the other party from and against any such claim of any broker, and all liabilities and expenses in connection therewith, including court costs and attorneys, fees and expenses. 21. EARNEST MONEY. Concurrently with the execution of this Agreement by both Home Properties and the Partnership, Home Properties will deposit $100,000 in cash (the "Earnest Money Deposit") with the Disbursing Agent, to be held in an interest bearing account, at an insured institution acceptable to Home Properties pursuant to the terms of an Escrow Agreement in the form of EXHIBIT F attached hereto. At Closing, the Earnest Money Deposit, shall be returned to Home Properties, and shall not be applied to the Consideration payable for the Interests. If this Agreement shall not have been properly terminated by Home Properties pursuant to the provisions of this Agreement, the Earnest Money Deposit shall be refundable to Home Properties in the event only that the Partnership defaults, or is unable to close for any reason other than the default of Home Properties or HME hereunder. In the event Home Properties does not close for any reason other than as a result of the permitted termination of this Agreement by Home Properties, or the default of the Partnership, or the inability of the Partnership to close, the Earnest Money Deposit, shall be paid to the Partnership. As used anywhere in this Agreement, the term "Earnest Money Deposit" includes all earnings thereon, if any. 22. COOPERATION. At all times during the term and pendency of this Agreement, the Partnership will cooperate fully with Home Properties (but with no obligation to incur cost or expense in connection therewith) in all reasonable manner in providing books, records and other documentation for review, including, without limitation, all Leases and related documents, copies of documentation relating to the Existing Loan, working drawings, plans and specifications, surveys, appraisals, engineer's reports, environmental reports, insurance policies, service contracts, real estate tax receipts, copies of tax returns filed by the Partnership, and annual and monthly operating statements relating to the Property, and in the possession of, or reasonably available to the Partnership. The Partnership will promptly provide Home Properties with a copy of any existing environmental report and prior to Closing will provide Home Properties with a copy of certificates of occupancy (if available) or other effective evidence of the right to occupy the Property as a multifamily apartment community. Subject to existing tenant leases, the Partnership will provide access to the Property for all physical inspections required by Home Properties. The Partnership will provide access by the representatives of Home Properties to all financial and other information relating to the Property as is sufficient to enable such representatives to prepare audited financial statements, at the expense of Home Properties, in conformity with Regulation S- X of the Securities and Exchange Commission (the "Commission"), and any registration statement, report or disclosure statement required to be filed with the Commission. Home Properties shall conduct itself and its examinations in a manner to minimize disruption to the staff and tenants of the Partnership and Property. 23. DEFAULTS AND REMEDIES. (a) If the Partnership fails or refuses to perform in accordance with the terms of this Agreement, including, without limitation, the failure or refusal to perform any covenant or obligation on the part of the Partnership to perform, prior to the Closing, or if any of the representations, warranties and covenants of the Partnership contained in this Agreement shall not be true, complete and correct at Closing in all material respects, Home Properties may, at its option: (i) bring an action against the Partnership for specific performance of this Agreement; or (ii) terminate this Agreement, in which event the Earnest Money Deposit shall be returned to Home Properties, and Home Properties shall, in addition, be entitled to reimbursement by the Partnership of the actual out-of-pocket due diligence costs incurred by Home Properties in connection with proposed acquisition of the Interests, up to the sum of $25,000 (after the payment of which, this Agreement shall be deemed null, void, and of no further force or effect between the parties). (b) If Home Properties or HME fails or refuses to perform in accordance with the terms of this Agreement, including, without limitation, the failure or refusal to perform any covenant or obligation on the part of Home Properties to perform, prior to the Closing, or if any of the representations, warranties and covenants of Home Properties or HME contained in this Agreement shall not be true, complete and correct at Closing in all material respects, the Earnest Money Deposit shall be forfeited to the Partnership as liquidated damages (which shall be the sole and exclusive remedy of the Partnership against Home Properties), at which time this Agreement shall be deemed to be null, void and of no further force or effect between the parties. In that regard, the Partnership acknowledges and agrees that (i) the Earnest Money Deposit is a reasonable estimate of, and bears a reasonable relationship to, the damages suffered and costs incurred by the Partnership as a result of having subjected the Interests to the terms of this Agreement; (ii) the actual damages suffered and costs incurred by the Partnership as a result of such failure of Home Properties to close under this Agreement would be extremely difficult and impractical to determine; (iii) Home Properties seeks to limit its liability under this Agreement to the amount of the Earnest Money Deposit in the event this Agreement is terminated and the transaction contemplated by this Agreement does not close due to a default of Home Properties under this Agreement; and (iv) the Earnest Money Deposit shall be and constitute valid liquidated damages. The foregoing limitation shall apply only in the event that Home Properties does not close the transaction contemplated by this Agreement, and such limitation shall not apply in the event that Home Properties closes and thereafter Home Properties or HME breaches any of its obligations hereunder after Closing, or to the indemnifications of Home Properties and HME contained herein. 24. OTHER PROHIBITED ACTIVITIES. (a) During the term and pendency of this Agreement, the Partnership will cease to market the Property, and, in that regard, the Partnership will refrain from soliciting or accepting any offer from any third party, or, engaging in any discussion with any third party concerning the sale, refinancing or recapitalization of the Property. (b) Prior to Closing, Home Properties and the Partnership agree to keep this Agreement confidential, and not to disclose its contents to anyone except their respective lenders, legal counsel and accountants, and except to the Partners in connection with the Offer. Notwithstanding the above, HME may make such public announcement regarding the transaction contemplated by this Agreement, as may, in its judgment, be required by, or appropriate under, applicable securities laws, provided that, prior to the publication, it shall supply a copy of any proposed announcement to the Partnership for its approval, which shall not be unreasonably withheld or delayed. Prior to Closing, Home Properties and HME agree that they will keep confidential all information and materials supplied to them by the Partnership, except Home Properties and HME may disclose such information and materials to their advisors and consultants. 25. RISK OF LOSS. Until the Closing, the risk of loss or damage to all or any part of any Property, from fire or other casualty, or from condemnation, shall be borne by the Partnership, subject to the terms of this Agreement. 26. NOTICES. (a) all notices, demands, or requests made and/or given pursuant to, under, or by virtue of this Agreement must be in writing and sent to the party to which the notice, demand or request is being made and/or given, by postage prepaid, certified or registered mail, return receipt requested, by nationally recognized courier service, by telecopy with confirmation of receipt, or by personal delivery, as follows: (i) if to the Partnership: Axtell Road Limited Partnership 1301 West Long Lake Road Suite 190 Troy, Michigan 48098 Attn: Jonathan P. Rye Telecopy No.: (248) 267-6770 With copy to: David Raitt, Esq. Jaffe, Raitt, Hauer & Weiss One Woodward, Suite 2400 Detroit, Michigan 48226 Telecopier No.: (313) 961-8358 and (ii) if to Home Properties: c/o Home Properties of New York, Inc. 850 Clinton Square Rochester, New York 14604 Attention: Norman P. Leenhouts, Chairman and Co-Chief Executive Officer and Ann M. McCormick, Esq. Telecopier No.: (716) 232-3147 (b) Any such notice, demand or request shall be deemed to have been rendered or given on the date of receipt, in the case of delivery by courier service, telecopy or personal delivery, or three (3) business days after mailing. 27. ASSIGNMENT. Neither this Agreement nor any interest hereunder shall be assigned or transferred by the Partnership or by Home Properties. 28. GOVERNING LAW. The corporate laws of the State of Maryland will govern all questions concerning the relative rights and obligations of the parties with respect to any HME Common Shares acquired or acquirable by the holders of OP Units on account of their OP Units. Except as limited by the Operating Partnership Agreement, the laws of the State of New York will govern all other questions concerning the relative rights and obligations of the holders of OP Units as limited partners in Home Properties, or otherwise with respect to the OP Units. This Agreement shall, otherwise, be governed, construed and interpreted in accordance with the laws of the State of Michigan applicable to contracts made and to be performed wholly within the State of Michigan without giving effect to the conflicts-of-laws principles thereof. 29. ENTIRE AGREEMENT; AMENDMENT. This Agreement and the various documents referred to herein contains, or incorporates, all of the terms agreed upon between the parties with respect to the subject matter, and supersedes any and all prior written or oral understandings. This Agreement may not be modified or amended except in, and by, a written instrument executed by the parties hereto. 30. WAIVER. No waiver by either party of any failure or refusal of the other party to comply with any of the obligations of such party hereunder shall be deemed a waiver of any other or subsequent failure or refusal so to comply. 31. ARTICLE HEADINGS. The headings of the various sections of this Agreement have been inserted only for purposes of convenience, and are not part of this Agreement, and shall not be deemed in any manner to modify, explain, qualify or restrict any of the provisions of this Agreement. 32. CONDITION OF APARTMENTS. The Partnership will use commercially reasonable efforts, in accordance with its existing business practices, to ensure that at the time of the Closing the apartment units are in rentable condition. The parties recognize that tenants at the Property move out at various times and that it may not be possible for all units to be fully prepared at the time of Closing. Accordingly, the Partnership shall be fully responsible for insuring that all units that have been vacated 30 or more days prior to Closing shall be in full rentable condition. In the event that any apartment unit vacant 30 or more days prior to Closing is not in rentable condition, Home Properties shall receive a closing credit equal to the amount reasonably necessary to bring that unit to rentable condition based on a standard typical for the Property, but not less than $500 per vacant unit not in full rentable condition. For units vacated within 30 days prior to Closing, the Partnership will continue to use commercially reasonable efforts, in accordance with its existing business practices, to prepare such units for subsequent tenancy, however, if any such units are not in full rentable condition at the time of Closing there shall be no credit given to Home Properties. 33. MISCELLANEOUS. (a) Subject to existing tenant leases, upon reasonable notice and during business hours between the date of this Agreement and the Closing Date, Home Properties, and agents and representatives of Home Properties, shall have the right to enter upon any Property for the purpose of examining, inspecting and testing such Property, provided that Home Properties shall conduct itself in a manner to minimize disruption to tenants and staff at the Property. (b) Home Properties has disclosed to the Partnership that audited financial statements pertaining to the Property for a minimum of one, and a maximum of three, prior calendar year(s) of operation, and the portion of the calendar year in which the Closing occurs, up to the Closing Date, may be required to be filed by Home Properties with the Securities and Exchange Commission after the Closing. Accordingly, the General Partner agrees to provide Home Properties, and its representatives, with access to the books and records of the Partnership pertaining to the Property after the Closing, upon reasonable advance notice, in order to conduct the required audit, at the expense of Home Properties. After the Closing, the General Partner will provide, or cause to be provided, a signed Representation Letter, in the form of EXHIBIT G attached hereto, with respect to the Property owned by the Partnership. (c) The parties hereto recognize that, at the Closing Date, the Partnership will terminate for federal income tax purposes. The General Partner hereby covenants to cause the tax returns to be prepared for the Partnership for the period up to the Closing Date. Home Properties shall make available to the General Partner (and his representatives) promptly upon request, all financial and other information relating to the Partnership which is necessary to permit the General Partner to file a tax return on behalf of the Partnership for its taxable year ended on the Closing Date, and for such other purposes as may be requested by the General Partner in order to wind up business affairs for the entity and the Partners. (d) Time is of the essence of this Agreement. In the computation of any period of time provided for in this Agreement, or by law, the day of the act or event from which the period of time runs shall be excluded, and the last day of such period shall be included, unless it is a Saturday, Sunday, or legal holiday, in which case the period shall be deemed to run until the end of the next day which is not a Saturday, Sunday, or legal holiday. (e) The General Partner shall cause tax returns for the Partnership for the period up to the Closing Date to be completed within one hundred twenty (120) days of the Closing Date; a copy of such final tax return shall be submitted to Home Properties promptly upon its filing with the IRS. Within one hundred twenty (120) days of the Closing Date the General Partner shall also provide Home Properties with a schedule showing: (i) the net book value of the Property and the Personal Property owned by the Partnership as of the Closing Date; and (ii) an updated Schedule 3 providing the actual information which was estimated in such Schedule. In the event that the actual information updated pursuant to this Section 34(e) is materially different from the estimated information and would impose an obligation to Home Properties to allocate additional debt to the Unit Partners, then, the obligation of Home Properties contained in Section 8(d) shall be based on and limited to the information contained within Schedule 3. The information on the Schedule shall be calculated in a manner consistent with the calculations made for federal income tax depreciation purposes. (f) This Agreement may be executed in counterparts and by facsimile signatures. IN WITNESS WHEREOF, the Partnership and Home Properties have executed this Agreement as at the day and year first above written. [COUNTERPART SIGNATURE PAGES FOLLOW] [SIGNATURE PAGE] AXTELL ROAD LIMITED PARTNERSHIP By: ------------------------------ Jonathan P. Rye, sole general partner Date: ------------------------------ The Undersigned, as General Partner, but only for purposes of acknowledging and agreeing to the provisions of subparagraph (a)(5) of Section 11, paragraph (b) of Section 17 and paragraphs (b), (c) and (e) of Section 33 ------------------------------ Jonathan P. Rye HOME PROPERTIES OF NEW YORK, L.P. By: Home Properties of New York, Inc. General Partner By: ------------------------------ Date: ------------------------------ HOME PROPERTIES OF NEW YORK, INC. By: ------------------------------ Date: ------------------------------ EX-2 10 0010.txt EXHIBIT 2.9 PURCHASE AND SALE AGREEMENT between BLACKHAWK APARTMENTS LIMITED PARTNERSHIP, as SELLER and HOME PROPERTIES OF NEW YORK, L.P. as BUYER DATED: April 17, 2000 PURCHASE AND SALE AGREEMENT THIS PURCHASE AND SALE AGREEMENT (this "Agreement") is entered into by and between BLACKHAWK APARTMENTS LIMITED PARTNERSHIP, an Illinois limited partnership ( Seller"), and HOME PROPERTIES OF NEW YORK, L.P., a New York limited partnership ("Buyer"). RECITALS: A. Seller is owner and operator of a residential apartment complex commonly known as Blackhawk Apartments, located at 926 Congdon Avenue, Elgin, Illinois 60120. B. Buyer desires to purchase that property, and Seller desires to sell that property, on the terms and conditions contained in this Agreement. NOW, THEREFORE, in consideration of the mutual covenants and agreements contained in this Agreement, Buyer and Seller agree as follows: 1. PURCHASE AND SALE. 1.1 AGREEMENT TO BUY AND SELL . Subject to all of the terms and conditions of this Agreement, Seller hereby agrees to sell and convey to Buyer and Buyer hereby agrees to acquire and purchase from Seller the following (collectively, the "Property"): 1.1.1 All of Seller's right, title and interest in and to that certain parcel of real property described on EXHIBIT A attached hereto, together with all of Seller's right, title and interest in and to all easements, privileges and other rights, including but not limited to development rights, air rights and water rights appurtenant thereto (collectively, the "Land"); 1.1.2 All of Seller's right, title and interest in and to all improvements, structures, equipment and fixtures located on or under the Land, including, but not limited to, the apartment buildings containing 371 apartment units and the adjoining parking area (collectively, the "Improvements") (the Land and Improvements are herein collectively called the "Project"); 1.1.3 All of Seller's right, title and interest in and to all tangible personal property, if any, located on or affixed to the Project and used in connection with the ownership, operation or maintenance of the Project, and all intangible property, if any, owned or held by Seller that pertains to the ownership, maintenance, use or operation of the Project (collectively, "Personal Property"); and 1.1.4 All of Seller's interest in any leases or other agreements demising space in or providing for the use or occupancy of any portion of the Project (collectively, the "Leases"). 1.2 EXISTING FINANCING. The Property is presently subject to that certain Mortgage, dated September 1, 1996, and recorded on September 10, 1996 as document number 96690160 with the Recorder of Cook County, Illinois, securing a note and related loan documents, a list of which is attached as EXHIBIT B, in favor of PFC Corporation, a Delaware corporation (the "Existing Financing"). 1.3 ACCEPTANCE DATE. This Agreement shall be deemed effective on the date of its execution by Seller (the "Acceptance Date"). Seller shall provide Buyer with written notice of Seller's acceptance of this Agreement on the Acceptance Date or the next business day. 1.4 PURCHASE PRICE . The purchase price to be paid by Buyer to Seller for the Property shall be the sum of Seventeen Million Five Hundred Thousand and no 00/100 Dollars ($17,500,000.00) (the "Purchase Price"), subject to prorations and credits, including, if appropriate, a credit for the amount of the Outstanding Balance (as defined below). 1.5 PAYMENT OF PURCHASE PRICE. The Purchase Price shall be payable as follows: 1.5.1 Concurrently with the Opening of Escrow (as defined below), Buyer shall deposit into Escrow (as defined below), into an interest bearing account, Fifty Thousand Dollars ($50,000) (which amount, together with all accrued interest thereon, is referred to herein as the "Initial Deposit"), by certified check or wire transfer of federal funds or in another immediately available form. Unless Buyer exercises its right to terminate this Agreement as provided in Section 3.3, on or before 5:00 p.m. Central Time on the 30th day after the Acceptance Date (the "Decision Date"), Buyer shall, on or before the Decision Date, deposit the additional sum of Two Hundred Fifty Thousand Dollars ($250,000) (which amount, together with all accrued interest thereon, is referred to herein as the "Additional Deposit") with the Escrow Holder (as defined below). The Initial Deposit and the Additional Deposit shall hereinafter be referred to as the "Deposit." Escrow Holder shall deposit the Deposit in an interest-bearing account in an FDIC or FSLIC institution. The Deposit shall be applied toward the Purchase Price upon Closing. 1.5.2 The balance of the Purchase Price shall be satisfied at Closing (i) by Buyer's assumption of the Existing Financing, if appropriate; and (ii) by Buyer's payment of the remainder by certified check or wire transfer to an account designated by Seller. 2. OPENING OF ESCROW. 2.1 ESCROW; ESCROW HOLDER . Within three (3) days after the Acceptance Date, an escrow (the "Escrow") shall be opened (the "Opening of Escrow") with Chicago Title and Trust Company, at 171 North Clark Street, Chicago, Illinois 60601, Attention: Ms. Nancy Castro ("Escrow Holder"). 2.2 ESCROW INSTRUCTIONS . The terms and conditions set forth in this Agreement shall constitute both an agreement between Seller and Buyer and escrow instructions for Escrow Holder. Seller and Buyer shall promptly execute and deliver to Escrow Holder any separate or additional escrow instructions requested by Escrow Holder which are consistent with the terms of this Agreement. Any separate or additional instructions shall not modify or amend the provisions of this Agreement unless otherwise expressly set forth by mutual consent of Buyer and Seller. As used in this Agreement, "Closing" shall mean the date and time on which both the Title Company (as defined below) is committed to issue to Buyer the Owner's Policy (as defined below) and Escrow Holder is prepared to disburse to Seller the Purchase Price. 2.3 CLOSING DATE . Escrow shall close ten (10) business days after the satisfaction or waiver of all conditions precedent in Article 3 of this Agreement or the date determined under Section 3.6 or 3.7 as applicable, but in any event, no later than one hundred twenty (120) days after the Decision Date (the "Closing Date"). 3. ACTIONS PENDING CLOSING. 3.1 DELIVERIES BY SELLER . Within five (5) days after the Acceptance Date, Seller shall deliver to Buyer, or make available for inspection at the Property, those documents and reports listed on EXHIBIT C attached hereto, and copies of the loan documents listed on EXHIBIT B attached hereto. Buyer acknowledges that Buyer will rely solely on studies, if any, performed under Buyer's direction. Seller assumes no duty to furnish Buyer with any other existing information, reports or updates of such materials. Except for a claim of breach of a representation or warranty set forth in SECTION 4.1, Buyer hereby waives any and all claims against Seller arising out of the accuracy, completeness, conclusions or statements expressed in materials so furnished, and any and all claims arising out of any duty of Seller or acquire, seek or obtain such materials. 3.1.1 BUYER'S REVIEW OF TITLE . (a) Buyer acknowledges that it has received a current commitment for title insurance issued by Chicago Title Insurance Company (the "Title Company") showing the condition of title to the Property (the "Title Commitment"). (b) Buyer must deliver to Seller written notice of Buyer's disapproval of title as shown on the Title Commitment (those disapproved title matters as so identified by Buyer are hereafter called the "Disapproved Title Exceptions") within fifteen (15) days after the Acceptance Date (the "Notice Date"). Buyer's failure to provide such notice on or before such date shall constitute Buyer's approval of the condition of title as shown on the Title Commitment. (c) If Buyer timely notifies Seller of its Disapproved Title Exceptions, Seller shall notify Buyer in writing within five (5) days after the Notice Date that: (i) Seller will remove such Disapproved Title Exceptions from title as of or before Closing; or (ii) Seller will not remove any or certain specified Disapproved Title Exceptions from title. (d) If , within five (5) days after the Notice Date, (i) Seller does not provide Buyer with written notice that it shall remove all Disapproved Title Exceptions from title or (ii) if Seller notifies Buyer that Seller will not remove any Disapproved Title Exceptions, Buyer shall have the right to terminate this Agreement by delivery of written notice of termination on or before the Decision Date and to receive the return of the Deposit, as Buyer's sole and exclusive remedy. Buyer's failure to provide such notice of termination on or before the Decision Date shall constitute Buyer's waiver of its disapproval of the Disapproved Title Exceptions. In the case of Buyer's waiver (or deemed waiver) of Disapproved Title Exceptions, Seller shall have no obligation to remove or otherwise address such Disapproved Title Exceptions from title, and such waived Disapproved Title Exceptions shall be deemed approved. If Buyer elects to terminate this Agreement pursuant to this SECTION 3.1.1(D), the provisions of SECTION 3.3 shall apply. Except for the Disapproved Title Exceptions Seller removes or covenants to remove, the exceptions to title shown by the Title Commitment and any encumbrance arising from the acts of Buyer plus, if applicable, the Rental Use Agreement (hereinafter described) are called the "Permitted Exceptions" in this Agreement. 3.1.2 BUYER'S REVIEW OF SURVEY. (a) Buyer acknowledges that it has received a copy of an ALTA/ACSM survey of the Property, recertified August 27, 1996, as #962157, revised September 6, 1996 as #962379 prepared by Gremley & Biedermann (the "Survey") depicting the Property and any matters of record affecting the Property. (b) Buyer must deliver to Seller written notice of Buyer's disapproval of any matter shown on the Survey on or before the Notice Date (those disapproved survey matters are hereafter called the "Disapproved Survey Exceptions"). Buyer's failure to provide such notice on or before such date shall constitute Buyer's approval of the condition of the Property as shown on the Survey. (c) If Buyer timely notifies Seller of its Disapproved Survey Exceptions, Seller shall notify Buyer in writing within five (5) days after the Notice Date that: (i) Seller will remove such Disapproved Survey Exceptions from title at or before Closing; or (ii) Seller will not remove any or certain specified Disapproved Survey Exceptions from title. (d) If , within five (5) days after the Notice Date, (i) Seller does not provide Buyer with written notice that it shall remove all Disapproved Survey Exceptions from the Survey or (ii) Seller notifies Buyer that Seller will not remove any Disapproved Survey Exceptions (including amendments to the Disapproved Survey Exceptions pursuant to SECTION 3.1.2(E) below), Buyer shall have the right to terminate this Agreement by delivery of written notice of termination on or before the Decision Date and to receive the return of the Deposit, as Buyer's sole and exclusive remedy. Buyer's failure to provide such notice of termination on or before the Decision Date shall constitute Buyer's waiver of its disapproval of the Disapproved Survey Exceptions. In the case of Buyer's waiver (or deemed waiver) of the Disapproved Survey Exceptions, Seller shall have no obligation to remove or otherwise address such Disapproved Survey Exceptions, and such waived Disapproved Survey Exceptions shall be deemed approved. If Buyer elects to terminate this Agreement pursuant to this SECTION 3.1.2(D), the provisions of SECTION 3.3 shall apply. Except for the Disapproved Survey Exceptions Seller removes or covenants to remove, the exceptions to title shown by the Survey and any encumbrance arising from the acts of Buyer are also "Permitted Exceptions." (e) At least ten (10) business days prior to Closing, Buyer will be provided with an updated and recertified ALTA/ACSM Survey of the Property at Seller's sole cost and expense. 3.2 INSPECTION PERIOD. Prior to the Decision Date, Buyer shall have the opportunity and sole responsibility to make such investigations and studies of the Property, at its sole cost and expense, as it deems necessary in its sole discretion. Pursuant to and subject to the requirements of SECTION 3.5 of this Agreement, Buyer may enter onto the Property for the purpose of conducting its inspection (the "Inspection") of the Property; provided, however, without first obtaining Seller's prior written consent, Buyer shall only conduct a visual inspection, with no right to conduct any physical testing, boring, sampling or removal (collectively "Physical Testing") of any portion of the Property. If Buyer wishes to conduct any Physical Testing of the Property, Buyer shall submit a work plan to Seller prior to the Decision Date for Seller's prior written approval, which work plan Seller may modify, limit or disapprove in its sole and absolute discretion. Prior to the Decision Date, Buyer may seek ratification of the Agreement and the necessary authorization to complete the transaction contemplated hereby from its general partner's Board of Directors. If, on the basis of the review and the Inspection described in this SECTION 3.2, Buyer determines in its sole discretion that the Property is not suitable for Buyer's intended use, or Buyer is unable to secure the approval of its general partner's Board of Directors, then on or before the Decision Date, Buyer may terminate this Agreement in accordance with SECTION 3.3 below. Buyer's failure to provide such notice on or before the Decision Date shall constitute Buyer's approval of the aforementioned items and of condition of the Property, and the ratification of this Agreement and authority to complete the transaction by Buyer's general partner's Board of Directors. 3.3 BUYER'S TERMINATION . If Buyer elects to terminate this Agreement in accordance with SECTION 3.1 OR 3.2 then, on or before the Decision Date, Buyer shall give Seller and Escrow Holder written notice that Buyer elects to terminate this Agreement. Buyer's failure to provide such termination notice pursuant to SECTIONS 3.1 OR 3.2 on or before the Decision Date, shall constitute Buyer's waiver of Buyer's right to terminate this Agreement. In the event Buyer elects to terminate this Agreement pursuant to this SECTION 3.3, Escrow Holder shall return to Buyer any funds and interest thereon accrued while in Escrow and materials previously placed in Escrow and remaining in Escrow; and neither party shall thereafter have any further rights or obligations under this Agreement unless expressly provided otherwise herein. Unless Buyer terminates this Agreement as set forth above, or as otherwise provided in Section 3.6 or unless Seller shall be in default of the terms of this Agreement, the Deposit shall be non-refundable to Buyer. 3.4 NO PROCESSING . Prior to the Decision Date, Buyer shall not make any application to any governmental agency, including without limitation, HUD, for any permit, approval, license or other entitlement for the Property or the use or development thereof, nor shall Buyer or Buyer's Agents disclose to any governmental agency the results, findings, opinions or conclusions of Buyer's Inspection or Physical Testing except as required by law. If Buyer has advised Seller that it is terminating this Agreement as a result of unsatisfactory results of its studies of the physical condition of the Property, then Buyer shall deliver to Seller copies of any studies received by Buyer relating to such physical condition. 3.5 ACCESS TO PROPERTY. 3.5.1 Subject to the rights of existing tenants of the Property ("Tenants"), whom Buyer hereby agrees not to interview or question without having provided Seller with at least two (2) days prior written notice of its intention to do so and an opportunity for Seller's representative to accompany Buyer or its representative during such interview, Seller hereby grants to Buyer a nonexclusive license to enter onto the Property solely for the purpose of conducting Buyer's Inspection. Any Inspection work shall be at the sole cost and expense of Buyer. The license created under this SECTION 3.5.1 shall expire on the Closing Date or the Termination Date. At least forty-eight (48) hours prior to any entry and Inspection, Buyer shall: (a) deliver to Seller written notice of its intention to enter the Property to conduct such Inspection and the proposed date and time of such entry (Buyer may enter only on the dates and at the times contained in such notices, and Seller shall have the right to have one or more of its agents or representatives accompany Buyer and Buyer's Agents at all times while Buyer or Buyer's Agents are on the Property); and (b) provide Seller with sufficient evidence to show that Buyer and Buyer's Agents, who are to enter upon the Property, are adequately covered by policies of insurance issued by a carrier reasonably acceptable to Seller insuring Buyer and Seller against any and all liability arising out of Buyer's or Buyer's Agents' entry upon and Inspection of the Property, including without limitation any loss or damage to the Property, with coverage in the amount of not less than $1,000,000 per occurrence. 3.5.2 Buyer agrees to keep the Property free from any liens arising out of any work performed, materials furnished or obligations incurred by or on behalf of Buyer or Buyer's Agents with respect to any Inspection or Physical Testing of the Property. If any such lien shall at any time be filed, Buyer shall cause the same to be discharged of record within twenty (20) days thereafter by satisfying the same or, if Buyer in its discretion and in good faith determines that such lien should be contested, by providing reasonable security to Seller in the form of cash, letter of credit or bond. 3.5.3 Buyer shall, at its sole cost and expense, comply with all applicable federal, state and local laws, statutes, rules, regulations, ordinances, or policies in conducting the Inspection and the Physical Testing. 3.5.4 Buyer hereby agrees to hold harmless, protect, defend and indemnify, and hereby releases, Seller and its trustees, officers, directors, employees, contractors, agents, subsidiaries and affiliates, and its and their respective successors and assigns (collectively, the "Indemnitees") and the Property from and against any and all claims, demands, causes of action, suits, sums paid in settlement of any of the foregoing, judgments, losses, damages, injuries, liabilities, penalties, enforcement actions, fines, taxes, liens, encumbrances, costs or expenses (including without limitation reasonable attorneys' fees, litigation, arbitration and/or administrative proceeding costs, expert and consultant fees and laboratory costs), whether direct or indirect, known or unknown (collectively, "Claims"), arising out of, connected with or incidental to: (a) any injuries to persons (including death) or property (real or personal), or (b) any mechanics', workers' or other liens on the Property, by reason of or relating to the work or activities conducted on the Property by Buyer or Buyer's Agents. The provisions of this SECTION 3.5.4 shall not be limited in any way by any other terms of this Agreement, including, but not limited to, SECTION 5.5 of this Agreement. 3.5.5 In no event shall Buyer or Buyer's Agents have the right to place any materials or equipment on the Property (including, without limitation, signs or other advertising material) until after the Closing has occurred. 3.5.6 Buyer shall, at its sole cost and expense, clean up and repair the Property, in whatever manner necessitated by or resulting from entry thereon by Buyer or its agents, employees, representatives or contractors ("Buyer's Agents"), so that the Property shall be returned to the same condition that existed prior to Buyer's or Buyer's Agents' entry thereon. 3.5.7 The parties agree to keep information, materials and data in connection with the transaction (the "Information") confidential, and each party represents, warrants and agrees that without the prior written consent of the other, which consent may be withheld in the other's sole and absolute discretion, they will: (a) keep the Information confidential, unless such Information is in the public domain or such Information must be disclosed under applicable law, or unless a party may have received such Information from sources other than the other party; (b) use its best efforts to safeguard the Information from unauthorized disclosure; and (c) not disclose to any person (i) that the Information has been made available to Buyer, (ii) that Buyer has inspected any portion of the Information, (iii) that discussions with respect to the sale of the Property are taking place, or (iv) any other facts with respect to such discussions, including the status thereof. Each party shall indemnify the other from and against any and all Claims resulting from, arising out of or in connection with its breach of its obligations under this SECTION 3.5.7. Notwithstanding the foregoing, if this Agreement is terminated, other than as a result of Seller's default, this Section 3.5.7 shall not be applicable to Seller thereafter. 3.6 ASSUMPTION OF FINANCING. In the event that Buyer has not terminated this Agreement on or before the Decision Date, Buyer shall have One Hundred Twenty (120) days after the Decision Date (the "Consent Date") to secure the consent of PFC Corporation and the Federal Housing Administration of the U.S. Department of Housing and Urban Development ("HUD") to the assumption of the Existing Financing. Buyer agrees that it shall act diligently and in good faith by timely completing appropriate applications and providing any documents and information requested by PFC Corporation and/or HUD. Seller agrees to cooperate in good faith with Buyer to obtain the necessary consents to the assumption of the Existing Financing. Buyer shall be responsible for any and all costs associated with the assumption, including without limitation, fees for a new appraisal, any assumption fees, and any title endorsements. In the event that Buyer has not obtained the required consents to the assumption of the Existing Financing by the Consent Date and Seller has not elected to pay in full the Existing Financing pursuant to Section 3.7, Buyer shall have the right to terminate this Agreement by delivery of written notice of termination on or before the Consent Date as Buyer's sole and exclusive remedy. If Buyer elects to terminate this Agreement, pursuant to this Section 3.6, Buyer and Seller agree that Escrow Holder shall be authorized to release after the Consent Date the Earnest Money and any interest thereon to Buyer upon receipt of Buyer's certificate stating that Buyer has terminated this Agreement pursuant to this Section 3.6. The Escrow Holder shall notify Seller not less than 3 days prior to any such release. After such termination, neither party shall have any further rights or obligations under this Agreement unless expressly provided otherwise herein. Buyer's failure to provide such termination notice pursuant to this SECTION 3.6 on or before the Consent Date shall constitute Buyer's waiver of its right to terminate this Agreement under this SECTION 3.6. In the event that Buyer pays off the Existing Financing, Buyer shall be solely responsible for any and all prepayment fees or penalties incurred in such payoff. If Buyer receives such consent to the assumption of the Existing Financing and the other conditions in Article 3 have been satisfied or waived, the Closing shall occur ten (10) business days after such receipt, but in any event no later than one hundred twenty (120) days after the Decision Date. Buyer shall give Seller notice of its receipt of such consent contemporaneously with such receipt. 3.7 SELLER'S PAYMENT OF EXISTING LOAN. On or prior to three (3) business days after the Decision Date, Seller may give to Buyer and the Escrow Holder notice of its irrevocable election to pay off in full the Existing Financing from the proceeds of the Purchase Price. If Seller gives the notice pursuant to this Section 3.7, (a) Seller shall at Closing cause the Escrow Holder to pay in full from the proceeds of the Purchase Price, the Existing Financing, including any prepayment fees or penalties due on the Existing Financing (or, if at Closing, HUD has not yet issued its consent to the prepayment of the Existing Financing, Seller shall cause the Escrow Holder to hold in escrow after Closing such amounts as the Title Company may require in order to omit or affirmatively insure over all references to the Existing Financing from the Owner's title policy, such amount to held by the Escrow Agent until HUD has consented to the prepayment of the Existing Financing, at which time the Existing Financing shall be paid in full), (b) a Rental Use Agreement in form acceptable to HUD (the "Rent Use Agreement") recorded against title to the Project shall become a Permitted Exception, (c) this Agreement shall not be terminable under Section 3.6, and Section 3.6 shall no longer apply, (d) Buyer shall not assume the Existing Financing, (e) the Agreement shall continue in full force and effect and (f) the Closing Date shall be ten (10) business days after delivery of Seller's notice under this Section 3.7 provided the other conditions of Article 3 have been satisfied or waived. If Seller does not give such notice pursuant to this Section 3.7, then Section 3.6 shall apply. 4. ADDITIONAL AGREEMENTS OF THE PARTIES. 4.1 SELLER'S REPRESENTATIONS AND WARRANTIES . The words "to Seller's knowledge" or other references in this Agreement or in any certificate or other document delivered pursuant to this Agreement to Seller's knowledge, means the actual knowledge of the Designated Persons (as defined below), after Inquiry (as defined below), it being understood that the Designated Persons shall not personally be liable for an inaccurate or incomplete statement or information. The "Designated Persons" are Albert Frank and Kenneth Rodeck. "Inquiry" means that Seller has delivered a copy of SECTION 4.1 of this Agreement to the Designated Persons and this Agreement reflects the knowledge of said individuals with respect to the matters covered by said representations and warranties. No claim for a breach of representation or warranty of Seller shall be actionable or payable if the breach in question results from or is based on a condition, state of facts or other matter which was known to Buyer prior to Closing. Except as expressly provided herein, Seller's representations and warranties in this Agreement shall not survive the Closing. Seller hereby represents, warrants and covenants to and agrees with Buyer as follows: 4.1.1 SELLER'S AUTHORITY . Seller has the power and authority to own the Property and to consummate the transactions contemplated by this Agreement. This Agreement and all instruments, documents and agreements to be executed by Seller in connection herewith are, or when delivered shall be, duly authorized, executed and delivered by Seller and are, or when delivered shall be, valid, binding and enforceable obligations of Seller. 4.1.2 TITLE. Seller has good and insurable fee simple title to the Property and has good title to the Personal Property free and clear of all leases, liens and encumbrances, other than those revealed by the Title Commitment and subject to the rights of the Tenants. 4.1.3 LEASES. To Seller's knowledge, (a) the rent roll ("Rent Roll") attached as EXHIBIT D is true and correct in all material respects as of the date thereof, (b) Seller is not materially in default in the performance of any material covenant to be performed by the landlord under the Leases and the Tenants under the Leases have no material claims or offsets against Seller pursuant to the Leases, and (c) the copies of the Leases delivered or to be delivered by Seller to Buyer are accurate and complete copies of the Leases. 4.1.4 NON-FOREIGN STATUS. Seller is not a "foreign person" as defined in Section 1445 of the Internal Revenue Code of 1986, as amended, and the Income Tax Regulations thereunder. 4.1.5 SERVICE CONTRACTS. At the request of Buyer, Seller shall terminate all service and maintenance contracts, which are terminable without the payment of a premium, and all leasing or listing agreements with brokers and property management agreements as of the Closing Date (collectively, the "Service Contracts"). The copies of the Service Contracts delivered or to be delivered by Seller to Buyer are accurate and complete copies of the Service Contracts. 4.1.6 DOCUMENTS AND REPORTS. To Seller's knowledge, the documents and reports listed on EXHIBIT C are not misleading in any material respect with respect to the subject matter thereof; provided, however, Seller makes no representation or warranty with respect to any such document or report to the extent that any specialized education or training (such as an engineering degree or training) is necessary in order to conclude that such document or report is not misleading in any material respect. 4.1.7 EXISTING FINANCING. Seller agrees to keep the Existing Financing in good standing and otherwise to perform the covenants of the mortgagor therein contained at all times prior to Closing. Seller shall not modify or prepay the Existing Financing prior to Closing, and shall deliver to Purchaser prior to Closing an appropriate estoppel letter or, if Section 3.7 is applicable, a loan payoff letter from the holder of the Existing Financing confirming the outstanding balance as of the Closing Date (the "Outstanding Balance"). 4.1.8 NO VIOLATIONS. Seller has not received a written notice from any governmental agency that the Project is in violation of any applicable law, ordinance, rule, regulation or code. To Seller's knowledge, there are no violations of any applicable law, ordinance, rule, regulation or code with respect to the Project which have not been cured. 4.1.9 ENVIRONMENTAL MATTERS. (a) Seller has not received a written notice from any governmental agency that any such agency has determined or is claiming that there is a violation of any applicable environmental laws, ordinances or regulations, (b) to Seller's knowledge, there are no underground storage tanks on the Project, and (c) to Seller's knowledge, with respect to the Project and during Seller's ownership of the Project, Seller has not used, transported or disposed of any Hazardous Material (as defined below) except in accordance with applicable laws, ordinances and regulations. "Hazardous Material(s)" means any chemical, substance, material, controlled substance, object, condition, waste, living organisms or combination thereof which is or may be hazardous to human health or safety or to the environment due to its radioactivity, ignitability, corrosivity, reactivity, explosivity, toxicity, carcinogenicity, mutagenicity, phytotoxicity, infectiousness or other harmful or potentially harmful properties or effects, including, without limitation, petroleum hydrocarbons and petroleum products, lead (except as disclosed in the Aspen Environmental, Inc. Lead Based Paint Inspection and Analysis Report dated March 18, 1996 and Lead Based Paint Clearance Sampling Report dated August 29, 1996), asbestos, radon, polychlorinated biphenyls (PCBs) and all of those chemicals, substances, materials, controlled substances, objects, conditions, wastes, living organisms or combinations thereof which are now or become in the future listed, defined or regulated in any manner by any federal, state or local law based upon, directly or indirectly, such properties or effects. 4.2 BUYER'S REPRESENTATIONS AND WARRANTIES. Buyer hereby represents, warrants and covenants to and agrees with Seller as follows: 4.2.1 BUYER'S INVESTIGATION. Except as explicitly set forth herein: (a) there are no representations or warranties of any kind whatsoever, express or implied, made by Seller in connection with this Agreement, the purchase of the Property by Buyer, the physical condition of the Property or whether the Property complies with applicable laws or is appropriate for Buyer's intended use; (b) on or prior to the Decision Date, Buyer will have (or will have chosen not to have) fully investigated the Property and all matters pertaining thereto except for any matters arising after the Decision Date; (c) except as set forth in Section 4.1, Buyer is not relying on any statement or representation of Seller, its agents or its representatives nor on any information supplied by Seller, its agents or its representatives; (d) Buyer, in entering into this Agreement and in completing its purchase of the Property, is relying entirely on its own investigation of the Property based on its extensive experience in and knowledge of real property in the areas where the Property is located; (e) Buyer's decision of whether to purchase the Property on the terms and conditions hereof shall be made solely and exclusively in reliance on Buyer's own review, inspection and investigation of the Property and of materials, documents, information and studies relating to the Property (including, without limitation, Buyer's Inspection or Physical Testing); and (f) except as set forth herein, Buyer shall purchase the Property in its "AS IS, WHERE IS" condition as of the date of Closing. 4.2.2 AUTHORITY. Buyer has the power and authority to own the Property and to consummate the transactions contemplated by this Agreement, subject to the approval contemplated in Section 3.2. This Agreement and all instruments, documents and agreements to be executed by Buyer in connection herewith are or when delivered shall be duly authorized, executed and delivered by Buyer and are valid, binding and enforceable obligations of Buyer. Each individual executing this Agreement on behalf of Buyer represents and warrants to Seller that he or she is duly authorized to do so. 4.2.3 CONSENTS. Buyer is not required to obtain any consents or approvals to consummate the transactions contemplated in this Agreement, except for the approval contemplated in Section 3.2 and Section 3.6. 4.2.4 SINGLE PURPOSE ENTITY. Buyer is a limited partnership formed in the State of New York. At Buyer's option or if required for the approvals under Section 3.6, Buyer shall direct Seller to convey the Property to an affiliate of Buyer who is controlled by Buyer, whose sole purpose is to own, operate, and manage the Property (the "Grantee"). Buyer agrees to provide any reasonable documentation required to evidence Grantee's status as a single purpose entity formed solely for the purpose of acquiring the Property. 4.2.5 PRIOR HUD TRANSACTION. Neither Buyer nor any person, controlling or controlled by or under common control with Buyer has (a) defaulted on any HUD loans to which it is now or may previously have been a party (b) filed for bankruptcy in connection with any property subject to a HUD loan or (c) committed fraud upon HUD. 4.3 REAFFIRMATION . The representations and warranties of Seller and Buyer set forth in SECTIONS 4.1 and 4.2, respectively, are true and correct as of the date of this Agreement and shall be true and correct as of the Closing. The Closing shall constitute Seller's and Buyer's reaffirmation of those representations and warranties as of the Closing. Each party shall be entitled to rely upon the other's representations and warranties, notwithstanding any inspection or investigation of the Property which was made or could have been made by the other. 4.4 SURVIVAL. Except as expressly provided herein, Buyer's representations and warranties in this Agreement shall not survive the Closing. 4.5 CASUALTY; CONDEMNATION . If, prior to Closing, Seller has actual knowledge that all of the Property or any material portion thereof is destroyed or damaged or if the Property or any material portion thereof shall be subjected to a bona fide threat of condemnation or becomes the subject of any proceedings, judicial, administrative or otherwise, with respect to the taking by eminent domain or condemnation, Seller shall notify Buyer thereof within a reasonable time after receipt by Seller of such actual notice thereof but in any event prior to Closing. In such event, Buyer shall have the option to be exercised in writing written 30 days after such notice to: (i) terminate this Agreement upon written notice to Seller, in which event the Deposit shall be returned to Buyer, and, thereafter this Agreement shall be deemed to be null, void and of no further force and effect; or (ii) accept title to the Property with no adjustment of the Purchase Price, and upon the Closing, Seller shall assign, transfer and set over to Buyer all of the right, title and interest of Seller in and to any awards that have been or that may thereafter be made for such taking, and Seller shall assign, transfer and set over to Buyer any insurance proceeds that may have been or that may thereafter be made for such damage or destruction, giving Buyer a credit at Closing for any deductible under such policies. If written notice is not given by Buyer within such time, Buyer shall be deemed to have elected (ii) above. In the event an immaterial part of the Property is damaged, destroyed or taken, this Agreement shall remain in full force and effect with no adjustment of the Purchase Price, and upon the Closing, Seller shall assign, transfer and set over to Buyer all of the right, title and interest of Seller in and to any awards that have been or that may thereafter be made for such taking, and Seller shall assign, transfer and set over to Buyer any insurance proceeds that may have been or that may thereafter be made for such damage or destruction, giving Buyer a credit at Closing for any deductible under such policies. For purposes of this Section, a "material portion" shall mean a portion whose fair market value is not less than One Million Dollars ($1,000,000). 4.6 Intentionally Omitted. 4.7 INDEMNITY . Buyer agrees to hold harmless, indemnify, protect and defend Seller from and against any and all claims whether direct or indirect, known or unknown, arising out of, related in any way to, or resulting from or in connection with the Property occurring after the Closing (except to the extent and only to the extent such claims arise from any act, conduct or omission of Seller), or in any way related to or arising from any act, conduct, omission, contract or commitment of Buyer and/or Buyer's Agents, or resulting from any inaccuracy in or breach of any representation or warranty of Buyer or resulting from any breach or default by Buyer under this Agreement. In the event Seller receives notice of a claim against which it is entitled to indemnification pursuant to this SECTION , Seller shall give written notice thereof to Buyer. Buyer shall immediately thereupon take such measures as may be reasonably required to properly and effectively defend such claim with counsel approved in writing in advance by Seller. If Buyer fails to properly and effectively defend such claim, then Seller may defend such claim with counsel of its own choosing at Buyer's cost and expense. The provisions of this SECTION shall survive the Closing Date. Seller agrees to hold harmless, indemnify, protect and defend Buyer from and against any and all claims whether direct or indirect, known or unknown, arising out of, related in any way to, or resulting from or in connection with the Property occurring before the Closing (except to the extent and only to the extent such claims arise from any act, conduct or omission of Buyer), or in any way related to or arising from any act, conduct, omission, contract or commitment of Seller, or resulting from any inaccuracy in or breach of any representation or warranty of Seller or resulting from any breach or default by Seller under this Agreement. In the event Buyer receives notice of a claim against which it is entitled to indemnification pursuant to this SECTION , Buyer shall give written notice thereof to Seller. Seller shall immediately thereupon take such measures as may be reasonably required to properly and effectively defend such claim with counsel approved in writing in advance by Buyer. If Seller fails to properly and effectively defend such claim, then Buyer may defend such claim with counsel of its own choosing at Seller's cost and expense. The provisions of this SECTION shall survive the Closing Date. 4.8 OPERATION OF THE PROJECT . Seller agrees to operate the Project in the ordinary course of business and with all due regard to the proper maintenance and repair of the Property, including without limitation, (a) maintaining hazard and liability insurance policies on the Property, and (b) (i) executing any additional leases affecting the Project, (ii) amending, modifying, renewing, extending or terminating any of the Leases, or (iii) consenting to any assignment or sublease requested by any Tenant under any of the Leases. Seller agrees to provide Buyer with copies of any new leases, amendments, terminations, assignments or subleases entered into after the Acceptance Date and prior to Closing. Prior to Closing, Seller agrees to use reasonable good faith efforts to cause to be filed a petition for tax division covering PIN 06-07-107-001 and 06-07-107-002 (the "Combined Parcels"), which PINs affect portions of the Land and other property not the subject of this Agreement. If filed and accepted by the Cook County Assessor on or before October 31, 2000, such division shall be effective January 1, 2001 for the 2001 real estate taxes payable in 2002. Seller shall pay all costs and expenses, including attorneys' fees, incurred in connection with the filing of such petition. Seller agrees to indemnify and hold Buyer harmless from any and all claims for reimbursement of real estate taxes (and interest thereon) which were paid by any third party on behalf of Seller and which relate to the portions of the Combined Parcels which were owned by Seller. The indemnity in this Section 4.8 shall survive Closing. 5. CLOSING. 5.1.1 At Closing, Seller shall deliver: (a) A special warranty deed conveying the Property to Buyer (the "Deed") subject to the exceptions set forth in the Title Commitment and, if applicable, the Permitted Exception under Section 3.7 and, if the Existing Financing is paid pursuant to Section 3.7, deleting title exceptions securing the Existing Financing. (b) An affidavit or qualifying statement which satisfies the requirements of Section 1445 of the Internal Revenue Code of 1986, as amended, and the regulations thereunder (the "Non-Foreign Affidavit"). (c) Two original counterparts of a bill of sale and assignment (the "Bill of Sale"), duly executed by Seller, assigning and conveying to Buyer all of Seller's right, title and interest in and to the Personal Property. The Bill of Sale shall be in the form of EXHIBIT F attached hereto. (d) Two original counterparts of an assignment and assumption agreement (the "Assignment and Assumption Agreement") duly executed by Seller assigning all of Seller's right, title and interest in and to the Leases, security deposits and in and to all warranties applicable to the Project, if any. The Assignment and Assumption Agreement shall be in the form of EXHIBIT "G" attached hereto. (e) Two original counterparts of an assignment and assumption agreement (the "Assignment and Assumption of Service Contracts") duly executed by Seller assigning all of Seller's right, title and interest in and to the Service Contracts. The Assignment and Assumption of Service Contracts shall be in the form of EXHIBIT "H" attached hereto. (f) Such documents as may be required by PFC Corporation and HUD to evidence the assumption of the Existing Financing or, if applicable, to pay in full the Existing Financing pursuant to Section 3.7. (g) Such other documents as may be reasonably required by the Title Company, in a form reasonably acceptable to Seller (provided, however, in no event shall Seller be obligated to indemnify the Title Company or Buyer from or against any claims except as may be set forth herein). (h) Copies of the personnel files of all employees employed at the Property and becoming employees of Buyer after the Closing. (i) A termination of any management agreements relating to the Property and a termination of any Service Contracts which by their terms are terminable without premium and which Buyer elects not to assume. (j) A current Rent Roll certified as of the date of Closing which shall include a correct list of all Tenants, all rental obligations of each Tenant with respect to the Property and all security deposits (with interest as required by applicable law or the Leases). 5.1.2 At Closing, Buyer shall deliver: (a) Funds in accordance with the provisions of SECTION 1.3. (b) Two original counterparts of the Bill of Sale duly executed by Buyer. (c) Two original counterparts of the Assignment and Assumption Agreement duly executed by Buyer. (d) Two original counterparts of the Assignment and Assumption of Service Contracts duly executed by Buyer. (e) Such documents as may be required by PFC Corporation and HUD to evidence the assumption of the Existing Financing unless the Existing Financing is paid pursuant to Section 3.7. 5.1.3 Seller and Buyer shall each deliver such other instruments and funds as are reasonably required by Escrow Holder or otherwise required to close Escrow and consummate the sale of the Property in accordance with the terms of this Agreement, including but not limited to documents required under SECTION 5.4.1. 5.2 PRORATIONS. 5.2.1 All revenues, including without limitation, rentals, prepaid rentals and prepaid payments (collectively, "Rent"), shall be prorated on the basis that Buyer shall receive a credit for all Rent which Seller has actually received before the Closing which is allocable to the period after the Closing and for all security deposits held by Seller (including interest thereon, as required by law). Seller shall not receive a credit for any Rent Seller has not received as of the Closing which is allocable to the period prior to the Closing. If, after Closing, Buyer collects any Rent applicable to periods prior to Closing, such Rent shall first be applied to Rent due for the current period, if any, and the balance shall be promptly paid by Buyer to Seller. If, after Closing, Seller collects any Rent applicable to rental periods after the Closing, Seller shall promptly pay the same to Buyer. For such purposes, the period for which Rent is applicable shall be the one designated in writing by the person paying such Rent or, if there is no such designation, the Rent shall be applied first to Rent due for the current period, if any, with the balance applied in the inverse order of the Rent payments due from such Tenant. 5.2.2 All expenses, including without limitation, utilities and all other expenses to operate the Property shall be prorated as of the Closing. 5.2.3 Real estate taxes shall be prorated at the Closing on the basis of 100% of the most recent tax bills for the Property. Taxes will then be reprorated upon receipt of actual bills for the applicable periods and the responsible party will promptly pay the difference to the other party. This provision will survive Closing. 5.2.4 Unless the Existing Financing is paid as provided in Section 3.7, an amount equal to payments of interest and deposits due under the Existing Financing, including without limitation, the repair escrow, the replacement reserve escrow fund, the real estate tax escrow, the hazard insurance escrow, and the mortgage insurance escrow, shall be paid to Seller at Closing. 5.2.5 With respect to any of Seller's employees that Buyer chooses to hire, Seller agrees to pay those employees for any accrued vacation or sick time they have earned prior to Closing. 5.2.6 All prorations under this SECTION 5.2 shall be adjusted, if necessary, and completed after the Closing as soon as final information becomes available. Seller and Buyer agree to cooperate and use their best efforts to complete such prorations no later than sixty (60) days (except with respect to real estate taxes) after the Closing Date. 5.2.7. If the Existing Financing is to be paid in full pursuant to Section 3.7, the Escrow Holder shall pay the Existing Financing from the sums otherwise payable to Seller hereunder. 5.3 PAYMENT OF CLOSING COSTS . 5.3.1 CLOSING COSTS BORNE BY SELLER. Seller shall bear and Escrow Holder shall discharge on Seller's behalf out of the sums payable to Seller hereunder: (a) all costs and expenses of the Owner's Policy (as defined below) including, without limitation, any additional premium charged for an extended coverage policy, (b) state and county transfer taxes, (c) one-half of Escrow Holder's fee, (d) the cost of the Survey of the Project, and (e) any additional costs and charges customarily charged to sellers in accordance with common practice in Cook County, Illinois. 5.3.2 CLOSING COSTS BORNE BY BUYER. Buyer shall deposit with Escrow Holder for disbursement by Escrow Holder: (a) municipal transfer taxes, if any, (b) all costs associated in obtaining the consent of PFC Corporation and HUD in connection with the assignment of the Existing Financing or in prepaying the Existing Financing, (c) one-half of Escrow Holder's fee, (d) the recording fees required in connection with the transfer of the Property to Buyer, and (e) any additional charges customarily charged to buyers in accordance with common practice in Cook County, Illinois. 5.4 CLOSING OF ESCROW. 5.4.1 Pursuant to Section 6045 of the Internal Revenue and Taxation Code, Escrow Holder shall be designated the "closing agent" hereunder and shall be solely responsible for complying with the tax reform act of 1986 with regard to reporting all settlement information to the Internal Revenue Service. 5.4.2 Escrow Holder shall hold the Closing on the Closing Date if: (i) it has received in a timely manner all the funds and materials required to be delivered into Escrow by Buyer and Seller; and (ii) it has received assurances satisfactory to it that, effective as of the Closing, the Title Company will issue to Buyer its extended coverage title insurance policy in the amount of the Purchase Price, insuring Buyer as the owner of the Property, subject only to the exceptions in the Title Commitment, the Permitted Exception under Section 3.7, if applicable, and the Existing Financing unless paid in full pursuant to Section 3.7 (the "Owner's Policy"). 5.4.3 To close the Escrow, Escrow Holder shall: (a) Cause the Deed to be recorded and thereafter mailed to Buyer, and deliver the Owner's Policy, Bill of Sale, Assignment and Assumption Agreement and Non-Foreign Affidavit to Buyer. (b) Deliver to Seller the Bill of Sale, the Assignment and Assumption Agreement and, by wire transfer of federal funds, funds in the amount of the Purchase Price, less the amount of the Deposit to the extent released to Seller and plus or less any net debit or credit to Seller by reason of the prorations and allocations of closing costs provided for in this Agreement. (c) Unless the Existing Financing is paid in full as provided in Section 3.7, cause the appropriate documents evidencing the assumption of the Existing Financing to be recorded and delivered to PFC Corporation and HUD, as appropriate. (d) If Seller has executed its rights under Section 3.7, pay in full the Existing Financing. 5.5 LIQUIDATION DAMAGE s. Buyer and Seller agree that in the event of a material default or breach hereunder by Buyer (including, without limitation, any default or breach by Buyer which results in the failure of escrow to Close), the damages to Seller would be extremely difficult and impracticable to ascertain, and that therefore, in the event of a material default or breach hereunder by Buyer, if occurring after the Decision Date, the sum of the Deposit plus all interest accrued thereon is a reasonable estimate of the damages to Seller, such damages including costs of negotiating and drafting of this Agreement, costs of cooperating in satisfying conditions to Closing, costs of seeking another buyer upon Buyer's default, opportunity costs in, and carrying cost associated with, keeping the Property out of the market place, and other costs incurred in connection herewith. Accordingly, Buyer and Seller agree that, except for any damages, costs and expenses incurred in connection with or resulting from Buyer's default or breach of its obligations under SECTIONS 3.5.4, 3.5.7, 4.2, 4.7, 6.13, 6.14 AND 6.16 (which damages, costs and expenses shall survive any Closing or termination of this Agreement and are not limited by this SECTION 5.5), receipt and retention of the specified sum shall be the sole damages of Seller in the event of any breach or default by Buyer hereunder. 5.6 POSSESSION . Subject to the Leases, possession of the Property (including, without limitation, all keys to the Property in Seller's possession) shall be delivered to Buyer upon Closing. 6. GENERAL PROVISIONS. 6.1 COUNTERPARTS . This Agreement may be executed in counterparts, each of which shall be deemed an original, but all of which, taken together, shall constitute one and the same instrument. 6.2 ENTIRE AGREEMENT . This Agreement contains the entire integrated agreement between the parties respecting the subject matter of this Agreement and supersedes all prior and contemporaneous understandings and agreements, whether oral or in writing, between the parties respecting the subject matter of this Agreement. There are no representations, agreements, arrangements or understandings, oral or in writing, between or among the parties to this Agreement relating to the subject matter of this Agreement which are not fully expressed in this Agreement. The terms of this Agreement are intended by the parties as a final expression of their agreement with respect to those terms and they may not be contradicted by evidence of any prior agreement or of any contemporaneous agreement. The parties further intend that this Agreement constitute the complete and exclusive statement of its terms and that no extrinsic evidence whatsoever may be introduced in any judicial proceeding involving this Agreement. 6.3 LEGAL ADVICE; NEUTRAL INTERPRETATION; HEADINGS . Each party has received independent legal advice from its attorneys with respect to the advisability of executing this Agreement and the meaning of the provisions hereof. The provisions of this Agreement shall be construed as to their fair meaning, and not for or against any party based upon any attribution to such party as the source of the language in question. Headings used in this Agreement are for convenience of reference only and shall not be used in construing this Agreement. 6.4 CHOICE OF LAW . This Agreement shall be governed by the laws of the State of Illinois. 6.5 SEVERABILITY . If any term, covenant, condition or provision of this Agreement, or the application thereof to any person or circumstance, shall to any extent be held by a court of competent jurisdiction to be invalid, void or unenforceable, the remainder of the terms, covenants, conditions or provisions of this Agreement, or the application thereof to any person or circumstance, shall remain in full force and effect and shall in no way be affected, impaired or invalidated thereby. 6.6 WAIVER OF COVENANTS, CONDITIONS OR REMEDIES. The waiver by one party of the performance of any covenant, condition or promise under this Agreement shall not invalidate this Agreement nor shall it be considered a waiver by it of any other covenant, condition or promise under this Agreement. The waiver by either or both parties of the time for performing any act under this Agreement shall not constitute a waiver of the time for performing any other act or an identical act required to be performed at a later time. The exercise of any remedy provided in this Agreement shall not be a waiver of any consistent remedy provided by law, and the provision in this Agreement for any remedy shall not exclude other consistent remedies unless they are expressly excluded. 6.7 EXHIBITS . All exhibits to which reference is made in this Agreement are deemed incorporated in this Agreement, whether or not actually attached. 6.8 AMENDMENT . This Agreement may be amended at any time by the written agreement of Buyer and Seller. All amendments, changes, revisions and discharges of this Agreement, in whole or in part, and from time to time, shall be binding upon the parties despite any lack of legal consideration, so long as the same shall be in writing and executed by the parties hereto. 6.9 RELATIONSHIP OF PARTIES . The parties agree that their relationship is that of seller and buyer, and that nothing contained herein shall constitute either party the agent or legal representative of the other for any purpose whatsoever, nor shall this Agreement be deemed to create any form of business organization between the parties hereto, nor is either party granted any right or authority to assume or create any obligation or responsibility on behalf of the other party, nor shall either party be in any way liable for any debt of the other. 6.10 NO THIRD PARTY BENEFIT . This Agreement is intended to benefit only the parties hereto and no other person or entity has or shall acquire any rights hereunder. 6.11 TIME OF THE ESSENCE . Time shall be of the essence as to all dates and times of performance, whether contained herein or contained in any escrow instructions to be executed pursuant to this Agreement, and all escrow instructions shall contain a provision to this effect. 6.12 FURTHER ACTS . Each party agrees to perform any further acts and to execute, acknowledge and deliver any documents which may be reasonably necessary to carry out the provisions of this Agreement. 6.13 NO RECORDATION . Buyer shall not record this Agreement, any memorandum of this Agreement, any assignment of this Agreement or any other document which would cause a cloud on the title to the Property. 6.14 ASSIGNMENT . Buyer shall not assign Buyer's rights or delegate its obligations hereunder without the prior written consent of Seller in each instance, which consent Seller may withhold in Seller's sole and absolute discretion, and any such assignment or delegation without the prior written consent of Seller shall be null and void and the purported assignee shall not have any rights hereunder. Notwithstanding anything to the contrary herein, Buyer shall have the right to assign this Agreement, upon providing Seller with prior written notice, to Grantee. Subject to the foregoing, this Agreement shall be binding upon and shall inure to the benefit of the successors and assigns of the parties to this Agreement. Buyer's failure to obtain such consent or the change of control of Grantee shall constitute a material breach hereunder, and Seller may terminate this Agreement with delivery of prior written notice to Buyer. 6.15 ATTORNEYS' FEES . In the event of any litigation involving the parties to this Agreement to enforce any provision of this Agreement, to enforce any remedy available upon default under this Agreement, or seeking a declaration of the rights of either party under this Agreement, the prevailing party shall be entitled to recover from the other such attorneys' fees and costs as may be reasonably incurred, including the costs of reasonable investigation, preparation and professional or expert consultation incurred by reason of such litigation. All other attorneys' fees and costs relating to this Agreement and the transactions contemplated hereby shall be borne by the party incurring the same. 6.16 BROKER . Buyer and Seller each represent and warrant to the other that, except for Draper and Kramer, Incorporated ("Broker"), (a) they have not dealt with any brokers or finders in connection with the purchase and sale of the Property, and (b) insofar as such party knows, no broker or other person is entitled to any commission or finder's fee in connection with the purchase and sale of the Property. Seller agrees that it shall pay all amounts owing to the Broker at Closing. Seller and Buyer each agree to indemnify and hold harmless the other against any Claim incurred by reason of any brokerage fee, commission or finder's fee which is payable or alleged to be payable to any broker or finder, other than the Broker, because of any agreement, act, omission or statement of the indemnifying party. The provisions of this SECTION 6.16 shall not be limited in any way by any terms of this Agreement including, but not limited to, SECTION 5.6 of this Agreement. 6.17 MANNER OF GIVING NOTICE . All notices and demands which either party is required or desires to give to the other shall be given in writing by personal delivery, express courier service, certified mail, return receipt requested, or by telecopy followed by next day delivery of a hard copy to the address or telecopy number set forth below for the respective party, provided that if any party gives notice of a change of name, address or telecopy number, notices to that party shall thereafter be given as demanded in that notice. All notices and demands so given shall be effective upon receipt by the party to whom notice or a demand is being given. Any notice or other communication under this Agreement may be given on behalf of a party by the attorney for such party. To Buyer: Home Properties of New York, L.P. 850 Clinton Square Rochester, New York 14604 Attn: Norman P. Leenhouts Telephone: (716) 546-4900 Facsimile: (716) 546-5433 with copies to: Home Properties of New York, L.P. 850 Clinton Square Rochester, NY 14604 Attn: Robin L. Stein Telephone: (716) 246-4151 Facsimile: (716) 232-3147 To Seller: Blackhawk Apartments Limited Partnership 111 North Canal Street, Suite 900 Chicago, Illinois 60606 Attn: Kenneth Rodeck Telephone:(312) 899-0990 Facsimile: (312) 899-0036 With copies to: Pedersen & Houpt 161 North Clark Street, Suite 3100 Chicago, Illinois 60601 Attn: Herbert J. Linn Telephone: (312) 261-2104 Facsimile: (312) 261-1104 6.18 SURVIVAL . Except as otherwise provided in SECTION 4.1, the provisions of this Agreement shall survive the Closing and the consummation of the transactions contemplated by this Agreement or the termination of this Agreement for any reason without the conveyance of the Property to Buyer. 6.19 MUTUAL WAIVERS OF JURY TRIAL AND CERTAIN DAMAGES . Seller and Buyer each hereby expressly, irrevocably, fully and forever releases, waives and relinquishes any and all right to trial by jury and all right to receive punitive, exemplary and consequential damages from the other (or any past, present or future board member, trustee, director, officer, employee, agent, representative, or advisor of the other) in any Claim in which Seller and Buyer are parties, which in any way (directly or indirectly) arises out of, results from or relates to any of the following, in each case whether now existing or hereafter arising and whether based on contract or tort or any other legal basis: This Agreement; any past, present or future act, omission, conduct or activity with respect to this Agreement; any transaction, event or occurrence contemplated by this Agreement; the performance of any obligation or the exercise of any right under this Agreement; or the enforcement of this Agreement. Seller and Buyer each agrees that this Agreement constitutes written consent that trial by jury shall be waived in any such claim, demand, action, suit, proceeding or other cause of action and agrees that each shall have the right at any time to file this Agreement with the clerk or judge of any court in which any such Claim may be pending as statutory written consent to waiver of trial by jury. 6.20 LIKE-KIND EXCHANGE. Seller desires to exchange other property of like kind and qualifying use within the meaning of Section 1031 of the Internal Revenue Code of 1986, as amended, and the regulations promulgated thereunder, for fee title in the Property which is the subject of this Agreement. Seller expressly reserves the right to assign its rights, but not its obligations, hereunder to a Qualified Intermediary as provided in IRS Reg. 1.1031 (k)-1(g)(4) on or before the date of the Closing. Buyer agrees to cooperate with Seller's "Like Kind Exchange," provided that such exchange causes no delay in the Closing, and all costs or expenses arising out of such exchange shall be the responsibility of Seller. It is acknowledged and agreed between the parties that any delay in Closing that affects Seller's ability to perform a Like-Kind Exchange will not result in a breach of this Agreement and Seller will perform in accordance herewith and Buyer shall have no responsibility economic or otherwise. IN WITNESS WHEREOF, the parties have duly executed this Agreement as of the day and year written below, and this Agreement is deemed effective as of the day and year written below Seller's signature. SELLER: BLACKHAWK APARTMENTS LIMITED PARTNERSHIP, an Illinois limited partnership By: FDF Corporation, an Illinois corporation Its: General Partner By:_______________________________ Name: ____________________________ Its:________________________________ Acceptance Date: _______________ BUYER: HOME PROPERTIES OF NEW YORK, L.P., a New York limited partnership By: Home Properties of New York, Inc., a Maryland corporation Its: General Partner By:_______________________________ Name:_____________________________ Its:________________________________ Date: ______________ LIST OF EXHIBITS Exhibit A - Property Description Exhibit B - List of Financing Documents Exhibit C - List of Documents and Reports Exhibit D - Rent Roll Exhibit E - Intentionally omitted Exhibit F - Bill of Sale and Assignment Exhibit G - Assignment and Assumption Agreement Exhibit H - Assignment and Assumption of Service Contracts EX-2 11 0011.txt PURCHASE AND SALE AGREEMENT This Purchase and Sale Agreement ("Agreement"), made as of the 24th day of July, 2000 by and between HOME PROPERTIES OF NEW YORK, L.P., a New York limited partnership, having its principal office at 850 Clinton Square, Rochester, New York 14604, (herein called "Buyer"), and CAESAR FIGONI, having an office at 234 River Avenue, Patchogue, New York 11772 (herein called the "Seller"). W I T N E S S E T H: WHEREAS, Seller is the fee owner of certain residential apartment complexes and adjacent land located in the Towns of Patchogue and East Patchogue, State of New York, all as more particularly described below; WHEREAS, Seller desires to sell said property to Buyer, and Buyer desires to purchase that property from Seller, upon the happening of certain events; NOW, THEREFORE, in consideration of the property, mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency whereof being hereby acknowledged, the parties hereby agree as follows: I.REAL PROPERTY DESCRIPTION. The Real Property to be conveyed consists of the parcels of land known as Bayview Apartments (96 units), Colonial Apartments (64 units), East Winds Apartments (96 units), Maple Avenue Apartments (84 units), Rider Avenue Apartments (24 units) and Terry Apartments (65 units) more particularly described on Exhibits "A-F", attached hereto, together and including all buildings and other improvements thereon, including but not limited to, the 429 apartment units, and all rights of Seller in and to any and all streets, roads, highways, alleys, driveways, easements and rights-of-way appurtenant thereto (the foregoing are hereafter collectively referred to as the "Property"). II.OTHER ITEMS. The following items now in or on the Property, are included in this sale and shall become the property of Buyer at Closing (as hereafter defined): A.heating, plumbing and lighting fixtures, B.ranges, refrigerators and dishwashers (except as otherwise indicated in tenant leases), C water heaters, D any and all bathroom fixtures, wall-to-wall carpeting, exhaust fans, hoods, signs, screens, maintenance building, fences, carpeting, cabinets, mirrors, shelving, any humidifier and dehumidifier units, air conditioning units other than such units owned by tenants, mail boxes, office furniture, and related equipment, if any, in connection with the Property, E any fixtures appurtenant to the Property and any other furniture or equipment, including two vehicles (1982 and 1988 Ford pick-up trucks), used in connection with the operation and maintenance of the Property (hereinafter with the items listed in A-D above, collectively, the "Other Items"). III.EXCEPTIONS. Buyer agrees to accept title to the Property subject only to the following: A. Restrictive covenants of record common to the tract or subdivision, provided same have not been violated, unless said violations have been released under Section 2001 of the Real Property Actions and Proceedings Law. B. Water line, sanitary sewer, drainage, gas line and main, electrical, telephone easements and other easements of record provided that, no building or other improvements, including project signage, are located over the area covered by such easement or are adversely affected. C. The mortgages and other documents as listed on the attached "Schedule 4". IV.PRICE AND MANNER OF PAYMENT. A. The purchase price for the Property shall be a total of Twenty Six Million Five Hundred Thousand and NO/100 ($26,500,000) (the "Purchase Price") payable as follows: (i) by payment of $100,000 as a deposit ("Deposit") upon execution of the agreement by both parties; (ii) by credit against the Purchase Price equal to the unpaid principal balances of the Existing Loans (as hereinafter defined) assumed by Buyer as of the Closing (but not including any Disapproved Loans (as hereinafter defined) which Seller pays off at Closing); and (iii) the remainder payable at Closing by certified or bank check or by wire transfer to an account designated by Seller, at Seller's option. B. The Deposit shall be paid to Jay L. Yackow, Esq. (the "Escrow Agent"), who shall deposit that amount in an interest bearing account. The term "Deposit" shall include all interest earned thereon. The Deposit (with interest) shall be paid to Buyer by separate check from Escrow Agent upon delivery of a W-9 by Buyer. The Deposit shall be forfeited to Seller as Seller's sole remedy and as liquidated damages if Buyer fails to complete this transaction for any reason other than a termination of this Agreement as permitted herein. In the event of such a termination, Seller shall promptly instruct the Escrow Agent to refund the Deposit (with interest) to Buyer and upon the return of the Deposit this Agreement shall wholly cease and terminate and neither party shall have any further claim against the other by reason of this Agreement. 5. ADJUSTMENTS AT CLOSING. The following shall be adjusted and prorated between the parties at Closing as if the Buyer was the owner of the Property as of midnight of the night preceding the Closing Date: A.current fiscal year real estate taxes, B.water charges, C.fuel and gas, D.electricity, E.all rentals and security deposits (including interest thereon) pursuant to the leases, F.charges under the Service Contracts (hereinafter defined), G.laundry income, H interest on the Existing Loans, I insurance and tax escrows and other escrows with respect to the Existing Loans, if any, J any other charges incurred with respect to the Property which Seller is obligated to pay, and K Rents. 1. All rent payments collected for the month of Closing shall be prorated as between the parties as of the Closing. 2. All rent collected after Closing, for any period prior to Closing, shall belong to Seller and, if paid to Buyer, Buyer shall promptly send such rent to Seller. 3. All rent collected by Seller, prior to the Closing, for rental periods subsequent to Closing shall be paid to Buyer at Closing. 4. All rent collected by Buyer or Seller for rental periods after the Closing shall belong to Buyer and, if paid to Seller, Seller shall promptly send such rent to Buyer. Any error in the calculation of adjustments shall be corrected subsequent to Closing with appropriate credits to be given based upon corrected adjustments, provided, however, that the adjustments (except if errors are caused by misrepresentations) shall be final upon expiration of one year after Closing. 6. COSTS. Buyer shall pay all recording fees, Buyer's attorneys' fees, the costs of obtaining a binder or commitment from a title insurance company, the premium for Buyer's title insurance policy, legal fees charged by the Existing Lenders in connection with the assumption of the Existing Loans and the costs of any appraisals, surveys or environmental reports required by Existing Lenders in connection with the assumption of the Existing Loans (collectively, Buyer's Loan Costs") and all other costs and expenses incidental to or in connection with closing this transaction customarily paid for by the purchaser of similar property. Seller shall pay the transfer tax, attorneys' fees, if any, incurred by Seller in connection with this transaction, all expenses associated with the assumption of the Existing Loans, including but not limited to any assumption fees charged by the Existing Lenders (hereinafter defined), and all other costs and expenses incidental to or in connection with closing this transaction customarily paid for by the seller of similar property, but excluding any of Buyer's Loan Costs. At Closing, Seller shall reimburse Buyer for any and all application fees charged by Existing Lenders. 7. REPORTS AND SURVEY. The Seller shall deliver to Buyer within five (5) days after the date of this Agreement a copy of the most recent environmental reports, title policies in his possession and instrument survey(s) pertaining to the Property. 8. INSPECTION. Upon and after acceptance of this Agreement by Seller, Seller agrees that Buyer and its authorized representatives shall have the right and privilege to enter upon the Property and Seller's offices, upon reasonable notice, during regular business hours, for the purpose of gathering such information and conducting such environmental and engineering studies or other tests and reviews as Buyer may deem appropriate and necessary. All such inspections, studies, tests and reviews shall be at Buyer's sole expense. Seller agree to cooperate with Buyer by making available to Buyer such records, plans, drawings or other data as may be in Seller's possession or control relating to the Property and its operation; provided, however, that Buyer agrees to indemnify Seller of and from any loss or damage occasioned by such entry, including reasonable legal fees awarded by a court and agrees further to restore to its original condition, at Buyer's own cost and expense, any property disturbed by such entry. Buyer agrees to provide Seller with a copy of any reports issued by third parties as a result of any such inspections, studies, tests or reviews. 9. TITLE DOCUMENTS. At the time of Closing, Seller shall deliver to Buyer the following with respect to each of the five apartment complexes that comprise the Property: A. A warranty deed conveying good and marketable title to the Property. B. A Bill of Sale conveying good title, free of all encumbrances, to the Other Items. C. A current rent roll ("Rent Roll") certified, as of the date of Closing, which shall include a list of all tenants, all rental obligations of each tenant with respect to the Property and all security deposits (with interest). D. Complete originals of each lease (or lost lease affidavit) listed on the Rent Roll, together with an assignment of all leases encumbering the Property to Buyer. E. An assignment, assumption, and indemnity agreement of all of Seller's rights and obligations to all contracts affecting the Property (the "Service Contracts). F. An assignment, assumption, and indemnity agreement whereby the security deposits (including interest thereon) are transferred to the Buyer, who shall assume the responsibility therefor. In lieu of an assignment of the security deposits, the Seller may provide Purchaser with a credit at Closing for all security deposits (with interest thereon) held by Seller with respect to all leases encumbering the Property. G Certificates of title and any other documentation necessary to transfer title to the vehicles described in Section 2, free of all encumbrances. 10. TITLE EXAMINATION; OBJECTIONS TO TITLE. A Within twenty (20) days after the date of this Agreement, Buyer agrees to furnish to Seller's attorneys a specification in writing of any objection to title that Buyer believes it is not required to take title subject to, which shall not include the exceptions permitted in Section 3 of this Agreement. Seller may, but shall not be required to, bring any action or proceedings or take such other action as may be appropriate to render title to the Property marketable. B Seller shall have ten (10) days from receipt of notice, if any, from Buyer of its title objections within which it must notify Buyer in writing if it can cure. C In the absence of such notice from Seller, Seller shall not be obligated to cure the title objections, if any, made by Buyer. If Seller is unable to convey good and marketable title to the property described above, subject to and in accordance with the provisions of this contract, or is not able or unwilling to obtain a commitment for title insurance and thereafter pay the premium for said title insurance to insure the exception(s) on behalf of the Buyer then Buyer may elect, by written notice to Seller, to either: 1. terminate this Agreement by notice delivered to the Seller within five (5) banking days after the end of the notice period specified in subparagraph B above if Buyer has not received the notice of cure from Seller in which event this Agreement shall wholly cease and terminate, and neither party shall have any further claim against the other by reason of this Agreement except Buyer shall have the right to the return of the Deposit; or 2. Notwithstanding anything to the contrary contained herein, Buyer may accept such title as Seller may be able to convey, without reduction of the Purchase Price or any credit or allowance against the same and without any other liability on the part of Seller. The acceptance of the deed by Buyer shall be deemed to be a full performance and discharge of every agreement and obligation on the part of Seller to be performed pursuant to the provisions of this Agreement, except those, if any, which are herein specifically stated to survive the delivery of the deed. D. If a search of the title discloses judgments, bankruptcies or other returns against other persons having names the same as or similar to that of Seller, Seller will on request deliver to Buyer an affidavit showing that such judgments, bankruptcies or other returns are not against Seller. 11. USE OF PROPERTY. Seller represents that the Property and any improvement thereon are in full compliance with restrictive covenants, statutes, ordinances, regulations, and/or other administrative enactments including, but not limited to building codes and zoning ordinances for the present use as multi residential dwellings. 12. CLOSING DATE. Provided that neither party has exercised its right to terminate this Agreement as provided herein, the Closing shall occur on November 1, 2000 (as hereinafter defined) (the "Closing" or "Closing Date") at the offices of the Seller or the Seller's counsel or at such other time and in such other manner as may be mutually agreed upon. 13. POSSESSION. Buyer shall have possession and occupancy of the Property from and after the date of delivery of the deed, subject only to matters herein provided for. 14. BROKER'S COMMISSION. Buyer represents to Seller that it did not employ any broker in connection with this sale. Seller represents to Buyer that it did not employ any broker in connection with this sale except for Select Investment Realty Advisors. Seller and Buyer shall be responsible for the payment of fees and commissions to that broker pursuant to a separate written agreement. Seller and Buyer each agree to indemnify the other for any and all claims and expenses, including legal fees, if any other fees or commission is determined to be due by reason of the employment of any other broker by the indemnifying party. This representation and indemnity shall survive the Closing. 15. RISK OF LOSS. The risk of loss or damage to all or part of the Property by fire or other casualty or by taking by eminent domain, until Closing, shall be assumed by the Seller. If prior to the Closing the Property or any portion thereof is destroyed or damaged in excess of $500,000, or if the Property or any portion thereof is subjected to a bona fide threat of condemnation or becomes the subject of any proceedings, judicial, administrative or otherwise, with respect to the taking by eminent domain or condemnation, Seller shall notify Buyer thereof within a reasonable time after receipt of actual notice thereof by Seller, but in any event prior to Closing, and, at its option, Buyer may, within 5 days after receipt of such notice, elect to cancel this Agreement in which event this Agreement shall terminate and the Deposit (with interest) shall be returned to Buyer. If the Closing Date is within the aforesaid 5-day period, then Closing shall be extended to the next business day following the end of said 5-day period. If no such election is made, and in any event if the destruction or damage is not in excess of $500,000 this Agreement shall remain in full force and effect and the sale contemplated herein, less any interest taken by eminent domain or condemnation, shall be effected with no further adjustment, and upon the Closing of this sale, Seller shall assign, transfer and set over to Buyer all of the right, title and interest of Seller in and to any awards that have been or that may thereafter be made for such taking, and Seller shall assign, transfer and set over to Buyer any insurance proceeds that may have been or that may thereafter be made for such damage or destruction giving Buyer a credit at Closing for any deductible under such policies. Seller hereby agrees that it shall keep all insurance policies presently existing which relate to the Property in effect through the Closing Date. 16. CONDITIONS PRECEDENT. A It shall be a condition to Buyer's obligations to close that all of the representations and warranties of the Seller are true and correct as of the Closing; B It shall be a condition to Buyer's obligation to close that there are at Closing 429 apartment units in rentable condition (painted, cleaned and with carpets cleaned, but excepting any apartment units vacated within 5 days prior to the Closing Date), which are all in compliance with federal, state, county or local laws, ordinances, rules and regulations; C It shall be a condition to Buyer's obligation to close that on or before the Closing Date, all of the furnaces at Bayview Apartments and Colonial Apartments shall have been replaced. D Buyer shall have thirty (30) days after the date of this Agreement (the "Due Diligence Period") within which to review and inspect the Property and the Other Items (including, but not limited to, performing engineering and environmental studies), the Seller's books and records pertaining to the Property and the Other Items, matters relating to zoning compliance and compliance by the Property and the Other Items with other applicable governmental regulations, the market in which the Property operates, the tax assessment on the Property as it relates to the purchase price and to the assessment on comparable properties and such other matters as Buyer shall deem reasonably necessary or appropriate in connection with the Property and the Other Items. At Buyer's option, the Due Diligence Period may be a period of less than thirty (30) days. If Buyer determines that it does not wish to purchase the Property and the Other Items as a result of its findings during the Due Diligence Period and notifies Seller of such decision within the Due Diligence Period, this Agreement shall be null and void and neither party shall have any further rights or obligations under this Agreement. Buyer's failure to object within the Due Diligence Period shall be deemed a waiver by Buyer of the condition contained in this Section 8(C). E Any management agreement pertaining to the Property shall be terminated on or prior to the Closing Date. F It shall be a condition to Buyer's obligation to close that on or before the Closing Date, all repairs required by the Existing Lenders as set forth in the Repair Escrow Agreements referenced in Schedule 4 attached hereto shall have been completed, and Seller shall provide a letter or other written acknowledgement wherein the Existing Lender shall have approved such repairs as satisfying the requirements of the Repair Escrow Agreements and shall have approved the refunding of the repair escrows to Seller. It is understood that the contingencies set forth herein are for Buyer's benefit and may be waived by Buyer at any time. If the above contingencies are not satisfied or waived by the Buyer, the Buyer shall have the right to terminate this Agreement by written notice to Seller given at or prior to the end of the Due Diligence Period except for the contingencies sets forth in subsections A, B, C, E and F, for which notice must be given prior to Closing. In the event of such a termination, this Agreement shall be null and void and neither party shall have any further rights or obligations under this Agreement, except that Buyer shall have the right to the return of the Deposit. 17. ENVIRONMENTAL CERTIFICATION. By acceptance of this Agreement, Seller represents, warrants, and certifies to Buyer that Seller has no knowledge of any violation, and has received no notice of any violation of any applicable Environmental Laws (below defined). To the best of Seller's knowledge, Seller has not, nor has any other person, used, generated, stored, dumped, released, buried, dispersed or emitted any Hazardous Substance on the Property nor are there any transformers or underground tanks on the Property, except for three (3) underground storage tanks at Colonial Apartments, two (2) underground storage tanks at Bayview Apartments and one (1) underground storage tank at Terry Apartments, nor is there a violation of any Environmental Laws with respect to the current use of the Property. "Environmental Laws" shall mean all federal, state and local environmental, health, chemical use, safety and sanitation laws, statutes, ordinances and codes relating to the protection of the environment and/or governing the use, storage, treatment, generation, transportation, processing, handling, production or disposal of any Hazardous Substance and the rules, regulations, and orders with respect thereto. "Hazardous Substance" means, without limitation, any flammable, explosive or radioactive material, polychlorinated biphenyl, petroleum or petroleum product, methane, hazardous materials, hazardous wastes, hazardous or toxic substances or related materials, as defined in the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended (42 U.S.C. Sections 9601, ET SEQ.), the Hazardous Materials Transportation Act, as amended (49 U.S.C. Appendix Sections 1801, ET SEQ.), the Resource Conservation and Recovery Act, as amended (42 U.S.C. Sections 6901, et seq.), the Toxic Substances Control Act, as amended (15 U.S.C. Sections 2601, et seq.), Articles 15 and 27 of the New York State Environmental Conservation Law or any other Environmental Law and the regulations promulgated thereunder applicable on the effective date of this Agreement. From the date of acceptance hereof to and including the date of Closing, Seller shall immediately provide Buyer with a copy of any notice, citation, complaint or other directive from any person, entity or governmental authority whereby Seller's compliance with Environmental Laws is called into question, and immediately notify Buyer of any new information or other developments which could tend to supplement or modify the information contained herein. 18. REPRESENTATIONS AND WARRANTIES OF SELLER. Seller represents and warrants to Buyer as of the date hereof and as of Closing, that: A To the best of Seller's knowledge after due inquiry, Seller has no liability or obligation of any nature which in any way affects or is related to the Property or the Other Items whether now due or to become due, absolute, contingent or otherwise, including liabilities for taxes (or any interest or penalties thereto) other than disclosed in this Agreement. B To the best of Seller's knowledge, after due inquiry, there is no litigation, proceeding or investigation pending, or to the knowledge of Seller threatened, against or affecting Seller that might affect or relate to the validity of this Agreement, any action taken or to be taken pursuant hereto, or the Property, the Other Item or any part or the operation thereof, whether or not fully covered by insurance, except "slip and fall" and similar litigation which is fully covered by insurance and which shall remain Seller's responsibility after Closing, or any proceeding pending for the increase or decrease of the assessed valuation of all or a portion of the Property. C To the best of Seller's knowledge after due inquiry, Seller has complied with and is not in default under, or in violation of, or received any notice that the Seller, the Property or the Other Items may be in violation of, any law, ordinance, rule, regulation or code or condition in any approval or permit pursuant thereto (including without limitation, any zoning, sign, environmental, labor, safety, healthor price or wage control, ordinance, rule, regulation or order of) applicable to the ownership, development, operation or maintenance of the Property or the Other Items. D There are no written leases affecting the Property with a term greater than one (1) year, except as reflected on the rent roll. E To the best of Seller's knowledge after due inquiry, there is no pending condemnation of the Property, or any part thereof, or of any plans for improvements which might result in a special assessment against the Property. F Seller has not received any written notice or request from any insurance company, Board of Fire Underwriters (or organization exercising functions similar thereto) requesting the performance of any work or alteration in respect of the Property or the Other Items. G Security deposits held by Seller will be correctly identified by Seller as of Closing with respect to the Property. H There are no Service Contracts with respect to the Property or the Other Items which will continue in effect after the Closing except as set forth on SCHEDULE "1" attached hereto. I There are no executory contracts connected with the Property or the Other Items, except as set forth on SCHEDULE "2" attached hereto. Seller and Seller's employees and agents have not let, and will not let any contracts for improvements to the Property which will not be fully completed and fully paid for prior to Closing. J Until Closing, Seller shall continue to fulfill all of its obligations under the terms of the Leases encumbering the Property, and under the Service Contracts, shall operate, maintain and repair at Seller's expense, all landscaping, buildings, fixtures and facilities, in accordance with normally accepted business principles, and shall continue to operate the Property in a commercially reasonable manner. K The Rent Roll to be given by Seller to Buyer at Closing will be true and correct. The rent roll attached hereto as SCHEDULE "3" is true and correct as of the date of shown thereon and indicates all apartment units which are the subject of Section 8 contracts. L The financial information previously provided to Buyer with respect to the Property is substantially accurate. M Except as indicated in the tenant leases, all of the ranges and refrigerators located within the apartment units are the property of the Seller and not of the tenants. N This Agreement has been duly authorized, executed and delivered and constitutes a legal and binding obligation of Seller, enforceable in accordance with its terms, except as may be limited by bankruptcy and other laws affecting creditors' rights generally. O Except the Disapproved Loans (as defined below), neither the entry into this Agreement, nor the carrying out of the transactions contemplated herein has resulted or will result in any violation of, or be in conflict with, or result in the creation of, any mortgage, lien, encumbrance or charge (other than those contemplated hereby) upon any of the properties or assets of Seller pursuant to, or constitute a default under, any mortgage, indenture, contract, agreement, instrument, franchise, permit, judgment, decree, order, statute, rule or regulation applicable to Seller or the Property. P Seller has completed any and all repairs required by the Existing Lender as set forth in the Repair Escrow Agreements referenced in Schedule 4 attached hereto and the relevant Existing Lender has approved such repairs. Q To the best of Seller's knowledge, no consent or approval by, or authorization of, or filing, registration or qualification with, any federal, state or local governmental authority, bureau, department or agency, or any corporation, person or other entity is required as of the Closing either for the execution, delivery or performance of this Agreement by Seller, or in connection with the consummation by Seller of the transactionscontemplated by this Agreement, except for such consents, approvals, authorizations, filings, registrations or qualifications as have been obtained by Seller as of the date hereof and disclosed and accepted by Buyer. R Seller shall permit Buyer to examine and copy all of the leases encumbering the Property, including all additions, amendments or modifications thereto as provided herein. Seller shall not accept any prepayment in excess of one month of any rent due under any leases with respect to the Property. S The documents listed on "SCHEDULE 4" constitute all of the material agreements associated with the Existing Loans except for usual loan documents executed at Closing. The representations and warranties of Seller contained in this Agreement, the statements in any Exhibit or Schedules attached to this Agreement, or other instruments furnished to Buyer at or prior to Closing pursuant to this Agreement, or in connection with the transactions contemplated by Seller pursuant to this Agreement, do not contain any untrue statements of a material fact, or fail to state a material fact necessary to make it not misleading. Seller acknowledges that each of the representations made by it in this paragraph 18 and elsewhere in this Agreement is material to Buyer hereunder. As to any representation or warranty set forth herein, Seller shall indemnify, defend and hold Buyer safe and harmless from and against any and all loss, damage, claim, counterclaim, cause of action, cost or expense, including, without limitation, reasonable attorneys' fees and disbursements at both trial and appellate levels, suffered, paid or incurred by, or asserted against Buyer, directly or indirectly, whether foreseen or unforeseen, and whether for personal injury or death or for property damage or otherwise by reason of Seller's breach of any warranty or obligation under this Agreement or if any representation of Seller in this Agreement is wholly or partially untrue. The representations, warranties and indemnities contained herein shall not survive delivery and recording of the deed, but shall be merged therein. 19. REPRESENTATIONS AND WARRANTIES OF BUYER. Buyer represents and warrants to Seller as of the date hereof and as of the Closing: (a) Buyer is and will be as of the date of Closing duly organized, validly existing and in good standing under the laws of the State of New York and has all the requisite power and authority to enter into and carry out this Agreement according to its terms. (b) This Agreement has been duly authorized, executed and delivered and constitutes a legal and binding obligation of Buyer, enforceable in accordance with its terms, except as may be limited by bankruptcy and other laws affecting creditors' rights generally. (c) To the best of its knowledge after due inquiry, there is no litigation, proceeding or investigation pending, or to the knowledge of Buyer threatened, against or affecting Buyer or the partners of Buyer that might affect or relate to the validity of this Agreement or any action taken or to be taken pursuant hereto, or that might have a material adverse effect on the business or operations of the Buyer. 20. ASSIGNMENT. This Agreement, and all rights of Buyer hereunder, may not be assigned by Buyer without Seller's prior consent, except Seller does agree that, upon no less than five (5) days prior written notice, it will at the Closing deliver the deed and other title documents to Buyer's assignee or designee. Any assignment by the Buyer shall not relieve the Buyer of any obligation of the Buyer created by this Agreement. Seller may convey its interest in the Property to an affiliate without the Buyer's prior written consent, provided that the assignee shall agree in writing to be subject to the terms of this Agreement. 21. NOTICE. All notices given pursuant to any provisions of this Agreement shall be in writing and shall be effective only if delivered personally, or sent by registered or certified mail, postage prepaid or sent by a national over-night carrier, to the addresses set forth below: To Seller: Mr. Caesar Figoni 234 River Avenue Patchogue, New York 11772 with a copy to: Jay L. Yackow, Esq. One Old Country Road Carle Place, New York 11514 To Buyer: HOME PROPERTIES OF NEW YORK, L.P. Attn: Norman Leenhouts, Chairman 850 Clinton Square Rochester, New York 14604 22. WARRANTIES AND GUARANTIES. Seller shall assign to Buyer at Closing any and all guaranties and warranties Seller has with respect to the new furnaces referenced in paragraph C of Section 16 of this Agreement. 23. APPLICABLE LAW. This Agreement shall be construed and governed in accordance with the laws of the State of New York. 24. ENTIRE AGREEMENT. This Agreement shall constitute the entire agreement between the parties, and any and all prior understandings or agreements, whether written or oral, are hereby merged into this Agreement. This Agreement cannot be modified except by a written instrument signed by the parties hereto. 25. BINDING AGREEMENT. This Agreement shall not be binding or effective until properly executed by Buyer and Seller. 26. CONFIDENTIALITY. By execution of this Agreement and except as otherwise provided herein, prior to the Closing each of Seller and Buyer agree to keep any and all information with respect to the transactions contemplated by this Agreement strictly confidential, and will not disclose any such information, without the other's prior written consent. Buyer may disclose the existence of this Agreement to the extent necessary to conduct its due diligence with respect to the Property. 27. FINANCIAL ACCESS. Seller will provide a signed representation letter in substantially the form attached hereto as Exhibit G to enable an Independent Public Accountant to render an opinion on such financial statements. Seller will provide access by Buyer's representatives, to all financial and other information relating to the Property as is sufficient to enable them to prepare audited financial statements, at Buyer's expense, in conformity with Regulation S-X of the Securities and Exchange Commission (the "Commission") and any registration statement, report or disclosure statement required to be filed with the Commission. 28. LENDER APPROVAL. It shall be a condition to each party's obligation to close that, prior to the Closing Date, the holders (collectively, the "Existing Lenders" and each an "Existing Lender") of the loans set forth on the attached Schedule "4" (collectively, the "Existing Loans" and individually an "Existing Loan") shall have approved the assumption of their respective Existing Loan by the Buyer and the release of the Seller from all obligations thereunder (the "Assumption"). Buyer shall apply for approval of each of the Existing Lenders within ten days after Buyer's receipt of: (a) a fully executed Agreement; and (b) a letter by Seller to each Existing Lender authorizing the Existing Lender to review the Assumption requests. If any Existing Lender fails to approve the Assumption at or prior to the Closing Date, then either party will have the right to terminate this Agreement upon written notice to the other given prior to the Closing Date. In such event, this Agreement shall be null and void and neither party shall have any further rights or obligations under this Agreement, except that Buyer shall have the right to the return of the Deposit. Notwithstanding the foregoing, in the event any Existing Lender fails to approve the Assumption ("Disapproved Loan"), Seller shall have the right to pay off and discharge the Disapproved Loans, in which event Buyer shall not have the right to terminate this Agreement, this Agreement shall continue in full force and effect and Seller shall pay off the Disapproved Loans at Closing. Buyer and Seller agree to work together in good faith to obtain the approval of the Assumption by the Existing Lender. 29. TAX DEFERRED EXCHANGE. Seller has advised Buyer of its intention to seek to effect a tax deferred exchange pursuant to Section 1031 of the Internal Revenue Code, in connection with the conveyance of the Property (or any one or several of them). If Seller is able to negotiate terms acceptable to Seller for the acquisition of an exchange property or properties, then Buyer agrees to accommodate Seller in seeking to effect a tax deferred exchange for that property or properties. Seller shall have the right, expressly reserved here, to transfer the Property in exchange for such exchange property or exchange properties so identified by Seller so that Seller shall become the owner of the exchange property or properties and the owner of the exchange property or properties shall become the owner of the Property subject to all obligations of Seller hereunder. The owner of the exchange property then shall complete this Contract. In the alternative, Buyer agrees to cooperate with Seller with respect to such exchange and agrees to execute all documentation required to effectuate such exchange. Buyer makes no warranty whatsoever with respect to the qualification of the transaction for tax deferred exchange treatment under Section 1031 and Buyer shall have no responsibility, obligation or liability with respect to the tax consequences to Seller. IN WITNESS WHEREOF, the parties hereto have caused this Instrument to be executed as of the day and date first above written. HOME PROPERTIES OF NEW YORK, L.P. By: Home Properties of New York, Inc. General Partner By: ----------------------------- Title: ----------------------------- ----------------------------- Caesar Figoni EX-2 12 0012.txt Exhibit 2.11 REAL ESTATE PURCHASE AGREEMENT by and between SMITH PROPERTY HOLDINGS ORLEANS L.L.C., OWNER and HOME PROPERTIES OF NEW YORK, L.P., a New York limited partnership, BUYER August 9, 2000 ORLEANS APARTMENTS, FAIRFAX COUNTY, VIRGINIA THIS REAL ESTATE PURCHASE AGREEMENT (this "AGREEMENT"), dated as of August 9, 2000 (the "EXECUTION DATE"), by HOME PROPERTIES OF NEW YORK, L.P., a New York limited partnership ("BUYER") and SMITH PROPERTY HOLDINGS ORLEANS, L.L.C. ("OWNER"). WHEREAS, Buyer and Owner desire to enter into an agreement providing for the sale by Owner to Buyer of certain property described below on the terms and conditions hereinafter set forth; NOW, THEREFORE, in consideration of the mutual covenants and agreements set forth below, Buyer and Owner agree as follows: 1. ACQUISITION OF PROPERTY BY BUYER. Subject to the terms and conditions in this Agreement, Owner will sell and Buyer will buy the Property defined below. 1.1 REAL PROPERTY The apartment project known as "Orleans Apartments", located in Fairfax County, Virginia (the "IMPROVEMENTS"), on land (the "LAND") more particularly described on EXHIBIT A, including all right, title and interest of Owner in and to all the tenements, hereditaments, improvements, appurtenances, rights, easements and rights of way incident thereto. The Land and Improvements are together referred to as the "REAL PROPERTY". 1.2 PERSONAL PROPERTY. All furniture, fixtures, furnishings, machinery, equipment and other tangible personal property that is owned by Owner, located on the Real Property, and used primarily in connection with the ownership, operation and/or maintenance of the Real Property, excluding property owned by the management company, venders and tenants, but including the tangible personal property listed in the inventory to be delivered to Buyer pursuant to the terms of this Agreement (together, the "PERSONAL PROPERTY"), and subject to the provisions of this Agreement including provisions regarding closing prorations, the following intangible property (the "INTANGIBLE PROPERTY"): (i) all Tenant Leases, and all Service Contracts and Equipment Leases to be assumed by Buyer in accordance with this Agreement to be entered into prior to the Closing Date, (ii) all security deposits with respect to all tenants having leases or possession at Closing, and any interest accrued thereon to the extent the interest is required by law or by the terms of the Tenant Leases to paid to the tenants, (iii) all transferable permits, licenses, authorizations and approvals related to the operation of the Property (the "PERMITS"), (iv) all right, title and interest of Owner in all books and operating records (including copies of all electronically-stored data but excluding (A) software, (B) any documents regarding the physical or environmental condition of the Property by the Owner or any affiliate of Owner, and (C) Owner partnership records), trade names (including Owner's rights, if any, to any the trade name used by the Owner exclusively in connection with the Property) and development rights related to the Real Property or any part thereof, and (v) all transferable warranties and guaranties of any portion of the Improvements and Personal Property (the "WARRANTIES"). The Real Property, the Personal Property and the Intangible Property are collectively referred to below as the "PROPERTY." 2. CONSIDERATION. 2.1 PURCHASE PRICE. In exchange for the conveyance of the Property to Buyer, Buyer shall pay Owner the sum of $67,000,000 (the "PURCHASE PRICE") in immediately available funds on the Closing Date. 2.2 DEPOSIT. On the Execution Date, Buyer shall deposit $1,000,000 (this deposit, any additional deposit and any interest on the deposit(s) are referred to as the "DEPOSIT") with Walker Title & Escrow Company, Inc. ("ESCROW AGENT"), as escrow agent, to be held in an interest bearing account, in accordance with this Agreement and any additional customary escrow agreement reasonably requested by the Escrow Agent from Buyer and Owner, which Deposit shall be increased by an additional $2,000,000, for a total aggregate principal Deposit of $3,000,000 no later than the date of expiration of the Study Period (as defined herein). The Deposit shall be in the form of cash or an irrevocable "clean sight" letter of credit expiring after January 31, 2001, from a financial institution and in form and substance reasonably satisfactory to the Owner, but the Escrow Agent is hereby irrevocably authorized to convert any letter of credit to cash in the event that such letter of credit is ever within 14 days of expiration without the Buyer modifying such letter of credit or replacing such letter of credit with an expiration date of not less than 30 days from the date of delivery of such modification or letter of credit. 3. GENERAL REPRESENTATIONS BY OWNER. 3.1 NO IMPLIED REPRESENTATIONS. Except for the representations, warranties, and covenants of Owner specifically set forth in (i) this Agreement or (ii) in any closing document executed by Owner pursuant to this Agreement and delivered to Buyer at Closing (the "EXPRESS WARRANTIES"), the sale of the Property is and will be made on an "as is" basis, without representations and warranties of any kind. Without limiting the generality of this disclaimer, apart from the Express Warranties, Owner makes no representation or warranty, implied or otherwise, including, but not limited to, any representation or warranty concerning title to the Property, the physical condition of the Property (including, but not limited to, the condition of the soil or the Improvements), the environmental condition of the Property (including, but not limited to, the presence or absence of hazardous substances on or respecting the Property), the compliance of the Property with applicable laws and regulations (including, but not limited to, zoning and building codes or the status of development or use rights respecting the Property), the financial condition of the Property or any other implied representation or warranty respecting any income, expenses, charges, liens or encumbrances, rights or claims on, affecting or pertaining to the Property or any part thereof. Buyer acknowledges that, during the Study Period, Buyer will examine, review and inspect all matters which in Buyer's judgment bear upon the Property and its value and suitability for Buyer's purposes. Buyer acknowledges that Buyer, through its principals, is a sophisticated buyer, experienced in purchasing properties similar to the Property and, except as to matters addressed by Express Warranties, Buyer will acquire the Property solely on the basis of its own physical, financial and other examinations, reviews and inspections and the title insurance protection afforded by the Title Policy as hereinafter defined. Subject to the foregoing, to induce Buyer to enter into this Agreement and to consummate the transactions contemplated herein Owner makes the following Express Warranties. 3.2 STATUS AND AUTHORITY. Owner is an entity duly organized and validly existing under the laws of the state of its purported formation, and has the full power and authority to enter into and carry out the terms of this Agreement. Subject to approval by the Board of Directors or executive committee thereof, as applicable, of the corporate member of the Owner, the execution, delivery and performance by Owner of this Agreement and the performance hereof by Owner have been duly and validly authorized and approved by all requisite actions of Owner. Owner shall (a) not be obligated to seek such Board or executive committee approval until expiration of the Study Period (as defined herein below) and (b) have the right to terminate this Agreement if such Board or executive committee approval is not obtained by September 14, 2000, by giving written notice to Buyer on the next business day, in which case the Deposit shall be returned to Buyer. 3.3 BINDING OBLIGATION. This Agreement constitutes, and all other agreements, documents and instruments to be executed by Owner pursuant hereto, when duly executed and delivered by Owner, will each constitute, valid and binding obligations of Owner. 3.4 NO CONFLICTS. Neither the execution, delivery or performance by Owner of this Agreement, the fulfillment of and compliance with the respective terms and provisions hereof by Owner, nor the consummation of the transactions contemplated hereby by Owner, will: (i) conflict with, or result in a breach of, any of the terms, conditions or provisions of, or constitute a default under, or give rise to any right of termination, acceleration, or cancellation under, any agreement or other instrument or other obligation to which Owner is a party or is subject, or to which the Property or any part thereof are subject; (ii) to Owner's knowledge, constitute a violation of any code, resolution, law, statute, regulation, ordinance, rule, judgment, decree, determination, writ or order ("LEGAL REQUIREMENT") applicable to Owner or the Property; (iii) require the consent of any court, any third party or entity; or (iv) violate the terms of Owner's organizational documents. 3.5 TITLE TO REAL PROPERTY. (a) "ENCUMBRANCES" means any liens, mortgages, deeds of trust, security interests, encroachments, reservations, judgments, rights of way, easements, covenants, leases, subleases, or other encumbrances against the Real Property. (b) Owner has no knowledge of any Encumbrances other than those Encumbrances as may be disclosed by the Title Commitment or that are matters of public record. 3.6 TITLE TO PERSONAL PROPERTY. Owner is the owner of the Personal Property that is listed in an inventory which Owner will deliver prior to the expiration of the Study Period to Buyer, free and clear of all liens or encumbrances other than the Permitted Encumbrances. The inventory shall also list any and all equipment leases pursuant to which Owner holds any Personal Property (collectively, the "EQUIPMENT LEASES"), including, without limitation, any laundry lease. Accurate copies of all Equipment Leases shall be delivered to Buyer prior to the expiration of the Study Period. Buyer will accept an assignment and assume all Equipment Leases on such list, and indemnify Owner for all claims under the Equipment Leases accruing after closing. 3.7 SERVICE CONTRACTS. Owner has delivered to Buyer an accurate list and copy of each service contract or similar agreement that Owner desires Buyer to assume affecting the operation of the Property (the "SERVICE CONTRACTS"), including, without limitation, any laundry lease. Buyer will accept an assignment and assume all Service Contracts on such list, and indemnify Owner for all claims under the Service Contracts accruing after closing. 3.8 SURVEYS. Buyer acknowledges that Owner has deliver to Buyer a copy of the most recent owners or lenders title insurance policy, and the most recent survey of the Real Property, in the possession of Owner. 3.9 LEGAL COMPLIANCE. To Owner's knowledge, Owner has received no written notice from a local or federal authority having jurisdiction over the Property of a material legal violation at the Property within the last year that has not been cured. 3.10 NO MECHANICS' LIENS. At or prior to the Closing, Owner shall pay in full, or otherwise make appropriate provision for payment for all work done at, and materials supplied to, the Property by or on behalf of Owner, including without limitation any work in progress on the date hereof, and any labor performed or material furnished through Closing by or on behalf of Owner, or Owner shall otherwise cause the Title Company to issue the Title Policy without exception for, or insuring over,*filed and unfiled mechanics or materialman liens. 3.11 No Condemnation Proceedings. There are no condemnation or eminent domain proceedings currently pending against the Real Property or any part threreof. 3.12 Tenant Leases. Owner shall deliver a rent roll (the Rent Roll") for the Property to Buyer in Owner's customary form, containing a listing, which Owner warrants will be materially accurate, to Owner's knowledge, in all material respects as of the date shown on the Rent Roll, of all leases, tenancies, licenses and other rights of occupancy or use for any portion of the Property in effect on the date of this Agreement, including the lease of the laundry spaces to a laundry service company (collectively, the "Tenant Leases"). Owner shall either deliver to Buyer or otherwise make available for Buyer's review at the Property the Owner's lease files. Owner has no knowledge of any leasing or other commissions or fees due or to become due in connection with the operation of the Real Property other than leasing commissions or fees that will be paid in full by Owner on or before the Closing Date. Buyer will accept an assignment and assume all Tenant Leases on such list, and indemnify Owner for all claims under the Tenant Leases accruing after closing. 3.13 Insurance. Until Closing, Owner will maintain its existing insurance with respect to the Property. 3.14 Litigation. Except as may be disclosed on a list to be delivered by Buyer prior to the expiration of the Study Period, there are no material actions, suits, claims, arbitrations, proceedings, orders, judgments or investigations pending or, to Owner's knowledge, threatened against Owner that question the validity of this Agreement at law or in equity, or before or by any federal, state, municipal or other governmental department, commission, board, bureau, agency or instrumentality. 3.15 Taxes. Buyer acknowledges that Owner has delivered to Buyer copies of the most recent real estate tax bills for the Property. 3.16 Hazardous Materials. (a) For the purposes of this Agreement, "Hazardous Materials" means any of the following on, under, from or affecting the Property or any soil, water, vegetation, buildings, personal property, persons or animals located thereon or any neighboring areas (other than any such items introduced to the Property following the Closing Date): asbestos-containing materials, polychlorinated biphenyls (PCBs), flammable materials, explosives, radioactive materials, petroleum products, and any materials, wastes, substances, or chemicals that are deemed hazardous, toxic, a pollutant or a contaminant under the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section 9601, et seq.), the Hazardous Materials Transportation Act as amended (49 U.S.C. Section 1801, et seq.), the Resource Conservation and Recovery Act of 1976, as amended (42 U.S.C. Section 6901, et seq.), in the regulations adopted or publications promulgated pursuant thereto, or in any other applicable federal, state or local laws, ordinances, rules or regulations in effect on the Closing Date relating to protection of public health, safety or the environment; provided, however, that the term "Hazardous Materials" shall not include (i) fuel or heating oil, (ii) motor oil and gasoline contained in vehicles not used primarily for the transport of motor oil or gasoline, or (iii) cleaning and painting supplies and other materials that are or have been used in the ordinary course of operating and maintaining the Property. Buyer hereby expressly waives any claim or right of recovery or contribution under the Agreement or under any environmental law including without limitation the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, as amended (42 U.S.C. Section 9601, et seq.), the Hazardous Materials Transportation Act as amended (49 U.S.C. Section 1801, et seq.), the Resource Conservation and Recovery Act of 1976, as amended (42 U.S.C. Section 6901, et seq.) (the "Environmental Laws"), arising out of the presence of Hazardous Materials at, on, under, or in the Property. (b) Owner has not received written notice in the year prior to the date hereof from any governmental agency of a material violation of an Environmental Law at the Property, unless disclosed in an environmental report delivered to the Buyer prior to the expiration of the Study Period. The Buyer acknowledges that the Property contains lead paint, asbestos and two underground storage tanks, at least one of which has leaked in the past. 3.17 Knowledge. The term "knowledge" as to Owner shall mean the actual knowledge, at time that the applicable representation or warranty is made, of Ernest Gerardi, Jr., the President of the corporate general partner of Owner's parent partnership, Gregory Weingast, Vice President thereof, and Louis Kovalsky, a Vice President thereof responsible for a group of properties that includes the Property, without inquiry or investigation except inquiry of the on-site manager of the Property, and does not include constructive or imputed knowledge. 3.18 Survival. Owner's representations and warranties in this Section 3 shall not be merged into the Deed or otherwise impaired by the Closing, and shall survive Closing for a period of 30 days, at which time any claim or cause of action of which Owner has not been given written notice by Buyer citing this Section shall terminate. To the extent the Buyer has knowledge prior to Closing of an inaccuracy in a representation or warranty by Owner, then Buyer shall, by Closing, be deemed to have waived such inaccuracy. 4. Representations, Warranties and Covenants of Buyer. To induce Owner to enter into this Agreement and to consummate the transactions contemplated hereby, Buyer makes the following representations, warranties and covenants: 4.1 Status and Authority. Buyer is an entity duly organized, validly existing and in good standing under the laws of the state of its purported formation and is duly qualified and authorized to transact the business that it presently conducts. Buyer has the full power and authority to carry on its business as it is now being conducted to enter into and carry out the terms of this Agreement. The execution, delivery and performance by Buyer of this Agreement, the fulfillment of and the compliance with the respective terms and provisions hereof by Buyer, and the due consummation of the transactions contemplated hereby by Buyer have been duly and validly authorized and approved by all requisite corporate actions of Buyer. 4.2 Binding Obligation. This Agreement constitutes, and all other agreements, documents and instruments to be executed by Buyer pursuant hereto, when duly executed and delivered by Buyer, will each constitute, valid and binding obligations of Buyer. 4.3 No Conflicts. Neither the execution, delivery or performance by Buyer of this Agreement or any other agreement contemplated hereby, the fulfillment of and compliance with the respective terms and provisions hereof or thereof by Buyer, nor the consummation of the transactions contemplated hereby or thereby by Buyer, will: (i) conflict with, or result in a breach of, any of the terms, conditions or provisions of, or constitute a default under, or give rise to any right of termination, acceleration, or cancellation under, any material agreement or other material instrument or other material obligation to which Buyer is a party or is subject; (ii) to the knowledge of Buyer, constitute a violation of any code, law, statute, regulation, ordinance, rule, judgment, decree, writ or order applicable to Buyer; or (iii) require the consent of any court, any governmental authority or any third person or entity; or (iv) violate the terms of Buyer's organizational documents. Disclosure. Owner previously delivered to Buyer (or to the extent not previously delivered, Owner will deliver within three (3) business days of the date hereof) a copy of (a) Owner's title policy and the survey prepared for Owner when it acquired the Property, and (b) any environmental appraisals or engineering reports, if any, that were to Owner's knowledge prepared for Owner by parties unrelated to Owner and its management company ("Third- Party Reports"), provided (i) that such delivery will not be made if barred by confidentiality agreement or similar restriction, (ii) that Owner makes no representation or warranty as to the accuracy or completeness of any Third Party Report, and (iii) that Buyer will use any Third Party Reports delivered to it for its information and convenience but will not have any right or claim against the preparer. Buyer may also at any time on or after the Execution Date inspect and make copies of Owner's files located at the Property related to operation and maintenance of the Property (but not off the Property, and Owner has no responsibility to determine whether the files at the Property are sufficient) as well as any information required to be delivered at Closing. Buyer represents and warrants that, except with respect to Express Warranties, it is not relying on Owner (or any party preparing any Third-Party Reports or environmental reports for Owner and not for Buyer) or any information furnished by Owner with respect to environmental matters, structural or mechanical matters, or what improvements and/or repairs may be necessary at the Property. Notwithstanding any other provision of this Agreement, Buyer agrees that, except as may be expressly required in this Agreement, for example furnishing copies of Third Party Reports, Owner will not supply to Buyer any information, recommendation or advice with respect to the physical condition of the Property and/or any repairs or improvements thereto, and Buyer will not rely on any such information, recommendation or advice if any is or was provided. In particular, Buyer acknowledges that Owner will not provide any engineering or environmental reports or data prepared by Owner or any of its affiliates, predecessors, or related entities. 4.5 Survival. Buyer's representations and warranties in this Section 4 shall not be impaired by the Closing but shall survive for a period of 30 days, at which time any claim or cause of action of which Buyer has not been given written notice by Owner citing this Section shall terminate. To the extent the Owner has knowledge prior to Closing of an inaccuracy in a representation or warranty by Buyer, then Owner shall, by Closing, be deemed to have waived such inaccuracy. 5. Obligations Pending Closing. Between the date hereof and the Closing, Owner covenants and agrees to perform each of the obligations and comply with each of the requirements described below. Title Insurance Following the Execution Date and during the Study Period, Buyer shall obtain from Walker Title & Escrow Company, Inc. (the "Title Company") a commitment (the "Title Commitment") showing all matters affecting title to the Real Property, together with copies of the instruments referred to therein, and binding the Title Company to issue at Closing an owners' policy of title insurance for the Real Property (the "Title Policy"). Owner hereby agrees to furnish the Title Company with such affidavits as may be reasonably required by the Title Company (and reasonably acceptable to Owner) in order to issue the Title Policy at the Closing with protection against (or without exception for) both filed and unfiled mechanics' and materialmen's liens, violations by Owner of Permitted Encumbrances, and rights of parties in possession other than under Tenant Leases. Such requirements by the Title Company shall not expand Owner's obligation to deliver title to the Property in the condition required by this Agreement. Following the Execution Date and during the Study Period, Buyer shall have the right to obtain a current, as-built survey of the Real Property (the "Survey"). At least seven business days prior to the end of the Study Period, Buyer shall notify Owner in writing specifying any objections that Buyer may have to any matter that would be a Permitted Encumbrance. Owner shall notify Buyer in writing at least three business day prior to the end of the Study Period whether Owner is willing in its sole discretion to remove any such matter to which Buyer objected. If Owner agrees in writing to remove the matter to which Buyer objected, it shall not be a Permitted Encumbrance. If Owner does not so agree, and Buyer does not terminate this Agreement during the Study Period, the matter shall be a Permitted Encumbrance. All Encumbrances that are shown on the Title Commitment, all Tenant Leases, all matters recorded in the land records on the Effective Date, and all matters that would be disclosed by an accurate survey of the Property, are collectively referred to as the "Permitted Encumbrances"; provided that the Permitted Encumbrances shall not include (i) any matter to which Buyer objected in writing and which Owner agrees as described above in writing during the Study Period to remove, (ii) any mortgage, deed of trust, mechanic's or materialman's *lien, or other lien created by Owner, or (iii) any matter that Owner *creates after the Effective Date in violation of this Agreement. 5.2 Certificates of Governmental Authorities. Owner shall cooperate with Buyer in the transfer or issuance of any and all Permits necessary to permit the lawful, uninterrupted operation of the Property by Buyer following the Closing. Buyer shall pay any applicable municipal, county, or state fee or cost for such transfer or issuance. 5.3 Maintenance and Operation of Property. Owner shall cause the Property to be maintained in its present order and condition, normal wear and tear excepted, subject to destruction by casualty or other events beyond the control of Owner (with respect to condemnation and casualty, Owner's obligations are governed by Sections 7.8 and 7.9) and provided that Owner shall not, in order to keep the Property in its present order and condition, be obligated incur any extraordinary capital items. To the extent an extraordinary capital item is required, Owner shall proceed with the item if Buyer agrees to pay at Closing the share of the excess allocable to periods post-Closing, based on the number of months in the useful life of the item as determined by Owner and approved by Buyer in its reasonable discretion. If Buyer does not agree to pay such share where Owner reasonably deems that Owner must proceed with the item (for example, if the item is necessary for continued operation of the Property), then Owner may terminate this Agreement and Buyer shall receive the Deposit. Owner shall cause the continuation of the normal operation of the Property, including, without limitation, the purchase and replacement of supplies and equipment, leasing and marketing to residential tenants in the ordinary course of business, the maintenance of its beneficial relations with suppliers and others having business dealings with Owner, and the continuation of Owner's past practice with respect to maintenance and repairs, so that, except for normal wear and tear that remains uncorrected in the ordinary course of business, the Property shall be in substantially the same condition on the Closing Date as on the Execution Date. Owner shall not knowingly commit any default under any Tenant Lease, Service Contract, Equipment Lease, Permit or other agreement that Buyer will assume and Owner shall pursue, to the extent of good business practices, remedies available to Owner on account of any default thereunder by any other party. 5.4 Modification to Warranties, Equipment Leases and Service Contracts. Owner shall not materially modify or terminate (except for default by vendor) any of the Warranties, Equipment Leases or Service Contracts that would bind Buyer after closing, without the prior written consent of Buyer in each instance (which consent shall not be unreasonably withheld, conditioned or delayed). Unless, within ten (10) days after receipt by Buyer of written notice, mentioning this Section, of such a proposed modification or termination (such notice to include a copy of all proposed documentation relating thereto), Buyer shall notify Owner in writing of a reasonable objection thereto, Buyer shall be deemed to have consented thereto. Buyer shall assume all Service Contracts on the list delivered to Buyer as provided in Section 3.7. 5.5 Leasing. Without the prior written consent of Buyer in each instance: (i) except for renewals permitted below, none of the Tenant Leases will be modified or amended, or terminated except in the ordinary course of business or in the event of a material breach by the tenant thereunder; (ii) none of the Tenant Leases will be renewed or extended for a term other than as a hold- over tenant at will or for one (1) year or less, and then only for rent and other charges not less than the rate charged by Owner for similar units, except for legal limits and concessions that Owner deems necessary in light of market conditions; and (iii) no new lease of any portion of the Property will be made for more than one (1) year and then only for rent and other charges not less than those payable under leases for a comparable apartment as shown on the Rent Roll (subject to legal limitations and subject to the foregoing exception for concessions). 5.6 Encumbrances. Owner shall not grant or permit any new liens, mortgages, deeds of trust, security interests, encroachments, rights of way, reservations, easements, or covenants on or about the Property, or amend any of the same as now exist, without prior written consent of Buyer, except utility and other development easements regarding the adjacent Ryland Homes development, upon the Buyer's consent thereto, which consent shall not be unreasonably withheld, conditioned nor delayed. 5.7 Other Agreements. Without the prior written consent of Buyer in each instance, or as may be expressly authorized under other sections of this Agreement, or as may be required by law or by the instrument itself if Buyer has agreed the instrument may survive Closing, Owner shall not enter into, modify, renew or terminate any material agreement or other instrument relating to the Property or the operations thereof that will survive Closing. 5.8 Deliveries. To the extent Section 3 above requires the delivery of lists or documents to Buyer, or requires information or documentation to be made available to Buyer, all such lists or documents shall be delivered, and all such information shall be made available, prior to the expiration of the Study Period. 6. Conditions Precedent to Closing. Notwithstanding any other provision of this Agreement, Buyer's obligations are conditioned upon the satisfaction of the conditions set forth in Sections 6.1(a), 6.2 and 6.3 and the obligations of Owner are conditioned upon the satisfaction of Sections 6.1(b) and 6.2. 6.1 Accuracy of Representations and Warranties. (a) All of the representations and warranties made by Owner in this Agreement (including the attached Exhibits) or in any related document delivered by Owner pursuant to this Agreement shall be true, accurate and complete in every material respect as of the Closing Date. (b) All representations and warranties made by Buyer in this Agreement shall be true, accurate and complete in every material respect as of the Closing Date. Buyer shall have made the Deposit when required by this Agreement. 6.2 Performance by the Other Party All actions required to have been taken by the other party shall have been completed and the other party shall have complied with each of the material requirements imposed upon it by this Agreement. 6.3 Clear Title. Owner shall be prepared to deliver title to the Property subject only to the Permitted Encumbrances. 6.4 Failure of Condition. In the event of the failure of any condition precedent set forth above to Buyer's obligations, Buyer, at its sole election, may (a) terminate this Agreement (and receive a return of the Deposit) and (b) waive the condition and proceed to the Closing. If a failure of condition to Owner's obligations constitutes Buyer's breach of this Agreement, Owner may avail itself of its remedies as provided in Section 10.1. Where either party exercises its right provided above to require the other party to remedy a failure of condition, the remedying party shall not be required to incur any material obligation or liability in excess of those imposed by this Agreement. 7. Closing. 7.1 Date and Time. The delivery of the Deed and Purchase Price (the "Closing") shall take place on the date ("Closing Date") chosen by Owner upon 5 days notice to Buyer prior to December 31, 2000, time being of the essence as to the Closing Date selected by Owner so as to allow Owner to consummate a 1031 tax free exchange of real estate. The Closing shall take place at the offices of Charles E. Smith Residential Realty L.P., 2345 Crystal Drive, 10th Floor, Arlington, Virginia 22202, or at such other place as may be agreed by Owner and Buyer. The delivery of the Deed and the payment of the Purchase Price may be accomplished through appropriate escrow arrangements among Owner, Buyer and the Title Company, the form of which shall be reasonably acceptable to the parties in order to carry out this Agreement. 7.2 Deliveries by Owner. Owner shall deliver, or cause to be delivered, to Buyer at the Closing the following documents: (a) An executed Special Warranty Deed to the Property dated the Closing Date in a form agreed upon during the Study Period (the "Deed"). (b) An executed blanket bill of sale, assignment and assumption dated the Closing Date in a form agreed upon during the Study Period, in mutually agreed form, providing for Owner's transfer to Buyer of the Personal Property and Intangible Property, and the Owner's assignment of, and Buyer's assumption of all Tenant Leases, Service Contracts and Equipment Leases. (c) The originals of all the Tenant Leases and all tenant files. (d) The originals of all Equipment Leases, Service Contracts and Permits, to the extent they are in effect and available to Owner. (e) All books and records pertaining to the operation of the Property, but not Engineering Reports or internal partnership or financial records of Owner. (f) An affidavit in form reasonably satisfactory to Owner and the Title Company, stating that all bills have been paid or otherwise provided for with respect to any improvements to the Real Property, together with such other customary affidavits, indemnities and closing documents as may be reasonably required by Buyer's Title Company without expanding Owner's obligation to deliver title in the condition required by this Agreement. (g) All plans and specifications and mechanical drawings for the Improvements in Owner's possession or control. (h) The originals or accurate copies of any Service Contracts and (except to the extent provided elsewhere in this Agreement) all books and records pertaining to the operation and management of the Property. (i) A statement of Owner in mutually agreed form that Owner is not a "foreign person" and containing such information as shall be required by Internal Revenue Code Section 1445 and the regulations issued thereunder. (j) Possession and occupancy of the Property (together with all keys, including, without limitation, keys for all security systems and offices), in accordance with this Agreement, subject only to the Permitted Encumbrances. (k) A Rent Roll, updated and re-certified by Owner as accurate to Owner's knowledge in all material respects through the close of business on the day prior to Closing. (l) Notices ("Transfer Notices") to tenants, and service providers executed by Owner and informing such tenants, and service providers of the conveyance to Buyer of the Property and containing such other information as Buyer reasonably requests. (m) Evidence of the due organization of Owner and the due authorization and execution of this Agreement and the documents to be delivered by Owner hereunder, together with such other documents as Buyer or the Title Company may reasonably request as necessary to complete the conveyance of the Property to Buyer (provided such other documents do not impose liabilities or obligations not called for by this Agreement). (n) The post-closing consulting agreement in the form attached hereto as Exhibit B. 7.3 Deliveries by Buyer. Buyer shall deliver to Owner at the Closing the following items: (a) The Purchase Price required under Section 2 above. (b) Transfer Notices executed by Buyer. (c) Evidence of the due organization of Buyer and the due authorization and execution of this Agreement and the documents to be delivered by Buyer hereunder, together with such other documents as Owner or the Title Company may reasonably request as necessary to effectuate the transactions contemplated herein (provided such other documents do not impose additional liabilities or obligations not otherwise contemplated herein). (d) The post-closing consulting agreement in the form attached hereto as Exhibit B. 7.4 Closing Costs. Each party shall pay its own attorneys and other advisors. Examination of title, title insurance, survey, preparation of conveyance documents for the Real Property and grantee's recording tax shall be the sole cost of Buyer. Owner shall pay the cost to satisfy any deeds of trust, mortgages, judgments, or other monetary liens on the Property that were created by Owner or that Owner agreed in writing during the Study Period to cure prior to Closing and the grantor's recording tax with respect to the Deed. 7.5 Brokers' Commissions. Each party represents and warrants to the other that it has not involved any brokers in this transaction. Each party will indemnify the other for damages resulting from a breach by the indemnifying party of this representation and warranty. The indemnity contained herein shall survive the Closing or earlier termination of this Agreement. 7.6 Payment of Taxes. All assessments, taxes and other similar charges (general and special, ordinary and extraordinary) for which a bill has been issued on or before the Closing Date, whether or not the same are then past due or are payable thereafter (in installments or otherwise), shall be paid in full by Owner at the Closing. All ad valorem taxes for the tax year in which the Closing occurs, and all assessments paid in installments, shall be prorated at Closing, and the amount accruing through the day preceding Closing shall be paid by Owner to Buyer at Closing, and Buyer shall assume the entire obligation for such taxes. Such proration of taxes shall be based on the most recent tax bill, and shall be subject to further adjustment upon receipt of the final bill, whereupon either Owner or Buyer, as the case may be, shall pay promptly to the other any final adjustment amounts due. 7.7 Prorations. (a) Prorations shall be based on Owner bearing all expenses of the Property, and receiving all revenue from the Property, up to and including the day preceding Closing, and Buyer bearing all expenses of the Property, and receiving all revenue from the Property, accruing on and after the Closing Date. (b) All prorations shall be based on the actual number of days in the period for which the prorated item is paid. (c) In addition to the tax proration described above, at the Closing, the following other items shall also be prorated as of the Closing Date: (i) fixed rental payments and all other fixed charges under any Equipment Leases expressly assumed by Buyer; (ii) charges for public utilities serving the Property; (iii) fixed payments under the Service Contracts; (iv) all charges, if any, under any reciprocal easement and similar agreements affecting the Property; and (v) all other charges and fees customarily prorated and adjusted in similar transactions. Owner shall receive a credit, based on Owner's most recent cost, for any fuel oil at the Property at Closing. (d) Security deposits (including interest to the extent the tenant has any claim to such interest), without deduction, for each unit in which a tenant is in possession or holds a lease on th Closing Date shall, if separately escrowed, be assigned, or if not escrowed, shall be adjusted in cash at the Closing. (e) Rent shall be prorated as follows. All rent received through the close of business on the day prior to Closing (the "Cutoff Date") shall be established. The amount of rent received by Owner or its agents through the Cutoff Date for periods after the Cutoff Date, including the prorated balance of the current month, is referred to as the "Prepaid Rent". Buyer shall receive a credit for the Prepaid Rent. Rents accrued for periods through the Cutoff Date, and unpaid under any lease as of the close of business on the Cutoff Date ("Unpaid Rent") shall remain the property of Owner but Buyer shall have the exclusive right to collect the same and shall use reasonable efforts to do so. To the extent that within six months after Closing, Buyer collects Unpaid Rent from any tenant, the amount of such Unpaid Rent (after crediting such collections first against the cost of collection and then against all rents for the applicable lease payable for periods from and after Closing) shall belong to Owner. Buyer shall pay Owner the aggregate amount, if any, of Unpaid Rent to which Owner is entitled as provided above in a single payment to be made within seven months after Closing. With respect to delinquent rents (and any other amounts or other rights of any kind) respecting tenants who are no longer tenants of the Property as of the Closing Date, Owner shall retain all rights relating thereto. After Closing, Owner may not commence litigation against any tenant who is in place at Closing. (f) If accurate prorations and other adjustments cannot be made at the Closing because current bills are not obtainable (as, for example, in the case of utility bills), the parties shall prorate on the best available information, subject to adjustment upon receipt of the final bill, whereupon either Owner or Buyer, as the case may be, shall pay promptly to the other any final adjustment amounts due. Owner shall use its best efforts to have all utility meters read on the Closing Date so as to determine accurately its share of current utility bills. 7.8 Condemnation or Casualty. (a) Owner shall bear all risk of loss to the Property until the delivery of the Deed to Buyer (including delivery through the Escrow Agent). If, prior to the Closing, (i) condemnation proceedings are commenced against all or any material portion of the Property, or (ii) the Property is materially damaged by fire or other casualty (i.e., to the extent that the cost of repairing such damage shall be $3,000,000 or more), Owner shall promptly notify Buyer of the applicable event and the extent of any insurance coverage, and Buyer shall have the right, upon notice in writing to Owner delivered within the earlier of five days (A) after actual notice of such condemnation, fire or other casualty or (B) the Closing Date, to terminate this Agreement, whereupon the Deposit shall be returned immediately to Buyer, and neither party shall have any further liability to the other hereunder. If Buyer does not elect to terminate this Agreement, the Closing shall proceed (and the Purchase Price shall be reduced as hereinafter set forth) but Buyer shall be entitled to an assignment of all of Owner's share of the proceeds of fire or other casualty insurance and rent insurance proceeds (if any) payable with respect to the period after Closing or of the condemnation award, as the case may be, and Owner shall have no obligation to repair or restore the Property; provided, however, that the Purchase Price shall be reduced by the sum of (1) the deductible applied by Owner's insurer with respect to such fire or casualty; (2) the amount by which the proceeds of such insurance will be reduced by reason of the application of any co-insurance clause in Owner's insurance policy; and (3) any other uninsured portion of the casualty, provided that if such uninsured portion (other than the deductible or coinsurance amount) exceeds $100,000, then unless Buyer agrees to bear such excess uninsured amount, Owner may terminate this Agreement whereupon the Deposit shall be returned to Buyer. (b) If this Agreement is not terminated in connection with a casualty, (i) Buyer shall be permitted to participate in any negotiations or proceedings related to such events, and Owner shall not compromise, settle or adjust any claims to such proceeds or awards, without Buyer's prior written consent (which shall not be unreasonably withheld or unduly delayed) and (ii) Owner shall have no responsibility for the restoration and repair of that portion of the Property condemned, destroyed or damaged. Owner shall promptly provide to Buyer written notice of any such condemnation, fire or other casualty, or litigation. 7.9 Insubstantial Events. If, prior to Closing, condemnation proceedings commence against an immaterial portion of the Real Property, the Closing shall proceed and at Closing Owner shall pay or assign to Buyer, as applicable, the respective condemnation proceeds. If the Property or any part thereof is damaged by fire or other casualty to the extent that the cost of repairing the same shall be less than $3,000,000, Owner need not make repairs (except to the extent necessary to properly operate the Property and to comply with applicable law) and the Closing shall proceed but Owner shall assign to Buyer all insurance proceeds (except to the extent of funds applied by Owner to required repairs prior to Closing) and the Purchase Price shall be reduced in the manner provided in Section 7.8 to reflect any amount not to be paid by Owner's insurance. Parking Additions. The Buyer acknowledges that the Owner is in the process of redeveloping the south pool area of the Property to additional surface paved parking area for approximately 55 vehicle parking spaces. In the event such redevelopment has not been completed prior to the Closing, the Owner shall assign to Buyer, and Buyer shall accept and assume all contracts related to such redevelopment, and receive a credit against the Purchase Price in the amount equal to the cost and expense of such redevelopment not then paid by the Owner, with a reciprocal indemnity agreement with respect to any claims, expenses and liabilities under such contracts. 8. Indemnification. Mutual Indemnity for Obligations Under Service Contracts. (a) Owner shall indemnify and hold Buyer and its partners, and any officer, director, employee or agent of any of them and their respective successors and assigns (individually, each a "Buyer Indemnitee" and collectively, the "Buyer Indemnitees") from all claims and causes of action that accrue prior to the Closing Date under any Service Contract or Equipment Leases. (b) Buyer hereby indemnifies and agrees to defend and hold harmless Owner and its partners, and any officer, director, employee or agent of any of them and their respective successors and assigns (individually, each a "Owner Indemnitee" and collectively, the "Owner Indemnitees") from all claims and causes of action accruing from and after the Closing Date under any Service Contract or Equipment Leases. 8.2 Indemnification Terms. Each indemnification under this Agreement shall be subject to the following provisions: The indemnitee shall notify indemnitor of any such claim against indemnitee within 30 days after it has notice of such claim, but failure to notify indemnitor shall in no case prejudice the rights of indemnitee under this Agreement unless indemnitor shall be prejudiced by such failure and then only to the extent of such prejudice. Should indemnitor fail to discharge or undertake to defend indemnitee against such liability within thirty (30) days after the indemnitee gives the indemnitor written notice of the same, then indemnitee may settle such liability on such terms as it may deems appropriate in good faith, and such settlement shall not impair the indemnitor's liability. 8.3 Limitations of Liability. (a) The aggregate liability of Owner for damages for a breach of its representations, warranties, indemnifications, covenants or other obligations under or relating to this Agreement (or any document executed or delivered in connection herewith) shall not exceed five percent (5%) of the Purchase Price. (b) After Closing, except for any final closing pro-rations and other post- closing adjustments provided for in Section 7.6 and 7.7, neither party shall have any liability pursuant to or in connection with the representations, warranties, indemnifications, covenants or other obligations (whether express or implied) of that party under this Agreement (or any document executed or delivered in connection herewith) unless and until such liabilities, in the aggregate, exceed $50,000. 9. Tests and Studies Contingency. 9.1 Study Period. (a) During the Study Period (and thereafter to the extent reasonably necessary), Buyer shall have the right, upon reasonable notice to Owner, at its own risk, cost and expense and at any date or dates during normal business hours prior to the Closing, to enter, or cause its agents or representatives to enter, upon the Property for the purpose of making surveys or other tests, test borings, inspections, investigations and/or studies of the Property, including air quality tests, asbestos, environmental, soil contamination and other tests; provided, however, (i) Owner shall have the right to have a representative present at all such inspections, and (ii) in no event shall any intrusive testing (such as test borings or the like) be undertaken without Owner's prior written approval of appropriate arrangements to mitigate disruption to tenants and to repair any damage. In addition, Buyer may conduct such architectural, environmental, economic and other studies of the Property as Buyer, in its sole and absolute discretion, may deem desirable. Regardless of whether Closing occurs, Buyer shall indemnify Owner against liability for any personal injury or property damage arising out of Buyer's, its agents', or its contractors' activities on the Property under this right of access, and Buyer shall restore the Property from any damage caused by such tests and studies. Buyer's indemnity and restoration obligations in this Section shall survive the Closing or earlier termination of this Agreement. Buyer shall have no liability for the consequence of discovery by Buyer of harmful or dangerous conditions present on, under or about the Property. Buyer shall have complete access to, and may photocopy, all documentation, agreements and other information about the Property in the possession of Owner or Owner's agents related to the Property (but not Engineering Reports or internal partnership or financial records of Owner), and Owner shall instruct its agents accordingly, but no such agent shall have any obligation or liability to Buyer. (b) If, during the period ending at 5pm eastern time on August 31, 2000 (the "Study Period"), Buyer gives Owner written notification ("Study Termination Notice") that Buyer elects for any reason whatsoever not to consummate the acquisition of the Property pursuant to this Agreement, this Agreement shall terminate, Buyer shall receive the Deposit and neither party shall have any further right or liability to the other under this Agreement, except as provided in Section 9.1(a) or in Section 7.5. If Buyer does not give the Study Termination Notice on or before expiration of the Study Period, this Agreement shall remain in effect. 10. Defaults. 10.1 Remedies on Buyer's Failure to Close. (a) Buyer and Owner acknowledge that it would be extremely impracticable and difficult to ascertain the actual damages which would be suffered by Owner if Buyer fails to consummate the transactions contemplated herein for any reason other than the failure of any of the conditions to Buyer's obligations. Buyer and Owner have considered carefully the loss to Owner occasioned by taking the Property off the market as a consequence of the negotiation and execution of this Agreement, the expenses of Owner incurred in connection with the preparation of this Agreement and Owner's performance hereunder, and the other damages, general and special, which Buyer and Owner realize and recognize Owner would sustain but which Owner cannot at this time calculate with absolute certainty. Based on all those considerations, Owner agrees that all damages to Owner would reasonably be expected to amount to the Deposit and Owner hereby waives all actual, consequential and other damages in excess of the Deposit. (b) Accordingly, if Owner is not in material default hereunder and Buyer fails or refuses to consummate the transactions contemplated herein as and when required, then Escrow Agent shall pay the entire Deposit (not just the Anon-refundable portion) to Owner as full and complete liquidated damages. Upon proper payment of the Deposit to Owner, no party to this Agreement shall have any liability to any other party to this Agreement, other than under Sections 9.1(a) and 7.5, and this Agreement shall be terminated. (c) The prevailing party in any litigation over entitlement to the Deposit shall be entitled to recover its reasonable attorneys' fees in such litigation. 10.2 Owner's Default. If Buyer is not in material default and Owner fails to convey the Property to Buyer when, if, and in the condition required by this Agreement, Buyer shall as its sole remedy either (i) hold Owner in default and terminate this Agreement, in which case the Deposit shall be returned to Buyer free and clear of claims of Owner and Buyer may institute any action it determines necessary at law or equity to recover its actual damages which shall be limited to $1,500,000 or (ii) seek specific performance of this Agreement, together with Buyer's reasonable attorneys' fees, or (iii) as to breach of Owner's covenants with respect to the condition of, or title to, the Property, proceed to Closing and waive the breach except for a mutually acceptable reduction in the Purchase Price. "Actual damages" means Buyer's out-of-pocket costs and shall exclude incidental and consequential damages. In no event shall Buyer be entitled to any damages other than actual damages. 10.3 Grace Period. Neither party shall be entitled to terminate this Agreement for the other party's default until the defaulting party has been given written notice of, and ten (10) days' opportunity to cure, the default; provided, however, that such grace period shall not cause an extension or other delay of the Closing Date. 11. Miscellaneous. 11.1 Further Assurances. Each party agrees that it will, at any time, prior to, at or after the Closing, duly execute and deliver to the other any additional conveyances, assignments, documents and instruments, and shall take or cause to be taken such further actions (including the making of filings), which the parties may reasonably agree are necessary to the proper consummation of the transactions contemplated herein; provided, however, neither party will be obliged to incur liability or obligations not contemplated herein. 11.2 Notices. (a) If, under this Agreement, the consent of a party is required, the consent shall be in writing and shall be executed by a duly authorized officer or agent. (b) All notices, demands, requests or other communications which may be or are required to be given, served or sent by either party to the other party pursuant to this Agreement shall be in writing and shall be either hand delivered, sent by recognized overnight delivery service or mailed by first-class, registered or certified mail, return receipt requested, postage prepaid, addressed as follows: (i) If to Owner: c/o Smith Realty Companies 2345 Crystal Drive, 11th Floor Arlington, Virginia 22202 Attention: Mr. Gregory M. Weingast, Vice President with a copy (which shall not constitute notice) to: Smith Realty Companies 2345 Crystal Drive, 10th Floor Arlington, Virginia 22202 Attention: Mr. Gerald R. Best, Assistant General Counsel (ii) If to Buyer: Home Properties of New York 850 Clinton Square Rochester, NY 14604 Attention: Mr. John Smith, Head of Acquisitions with a copy (which shall not constitute notice) to: Home Properties of New York 850 Clinton Square Rochester, NY 14604 Attention: Ms. Ann M. McCormick, Esquire Any party may designate by notice in writing a new address to which any notice, demand, request or communication may thereafter be so given, served or sent. Each notice, demand, request, or communication which shall be mailed or delivered in the manner described above, shall be deemed sufficiently given, served, sent or received for all purposes at such time as it is delivered to the addressee (with the delivery or return receipt being deemed conclusive evidence of such delivery), or at such time as delivery is refused by the addressee upon presentation. 11.3 Severability. If fulfillment of any provision of this Agreement, or performance of any transaction related hereto, at the time such fulfillment or performance shall be due, shall involve transcending the limit of validity prescribed by law, then the obligation to be fulfilled or performed shall be reduced to the limit of such validity; and if any clause or provision contained in this Agreement operates or would operate prospectively to invalidate this Agreement in whole or in part, then, if possible without substantially diminishing either party's rights hereunder, such clause or provision only shall be held ineffective, as though not herein contained, and the remainder of this Agreement shall remain operative and in full force and effect. 11.4 Time of Essence. Time is of the essence of this agreement. 11.5 Cumulative Remedies. Except as otherwise provided in this Agreement, the rights, benefits, and remedies provided to Buyer by this Agreement, or any document executed pursuant to this Agreement, are cumulative, and shall not be exclusive of any other rights, remedies and benefits allowed to Buyer by this Agreement, at law or in equity. Any claim of Owner in the event the Closing does not occur shall be subject to the liquidated damages provisions of Section 10.1. 11.6 Waiver. Neither the waiver by either of the parties hereto of a breach of or a default under any of the provisions of this Agreement, nor the failure of either of the parties, on one or more occasions, to enforce any of the provisions of this Agreement or to exercise any right or privilege hereunder shall thereafter be construed as a waiver of any subsequent breach or default of a similar nature, or as a waiver of any of such provisions, rights, or privileges hereunder. 11.7 Successors and Assigns. Subject to any provisions hereof restricting assignment, this Agreement shall be binding upon and inure to the benefit of the parties hereto, and their respective successors and assigns. 11.8 Assignment. If Buyer so elects, Buyer may assign this Agreement to an entity in which Buyer has complete and effective management control (a "Subsidiary") which will assume Buyer's obigations hereunder but Buyer will not be relieved of any liability hereunder under an assignment agreement in form reasonably acceptable to Owner. Otherwise, neither party shall assign or transfer or permit the assignment or transfer of its rights or obligations under this Agreement without the prior written consent of the other. 11.9 Amendment. No amendment, modification or discharge of this Agreement, and no waiver hereunder, shall be valid or binding unless set forth in writing and duly executed by the party against whom enforcement of the amendment, modification, discharge or waiver is sought. 11.10 Construction. Each party hereto hereby acknowledges that all parties hereto participated equally in the negotiation and drafting of this Agreement and that, accordingly, no court construing this Agreement shall construe it more stringently against one party than against the other. 11.11 Entire Agreement. This Agreement and the Exhibits attached hereto (which are incorporated herein by this reference) constitute the entire agreement between the parties hereto with respect to the transactions contemplated herein, and this Agreement supersedes all prior oral or written agreements, commitments or understandings (including without limitation any letter of intent or term sheet with respect to the Property) with respect to the matters provided for herein. No representations or warranties have been made by Buyer or Owner except as specifically set forth in this Agreement, and in particular, no oral or written expression, or nonverbal conduct of a person intended by such person as a substitute for oral or written expression, will be attributed to Buyer or Owner as a warranty or representation, except as specifically set forth in this Agreement. 11.12 Pronouns. All pronouns and any variations thereof shall be deemed to refer to the masculine, feminine, neuter, singular or plural, as the identity of the person or entity may require. 11.13 No Negotiations. Except as otherwise required by law, so long as this Agreement is in full force and effect, Owner shall not (i) consider any offer from any other person or entity for the purchase or other acquisition, directly or indirectly, of the Property or any part thereof or interest therein, or (ii) solicit any offer from any person or entity or enter into any negotiations with respect to any such purchase or other acquisition, directly or indirectly, of the Property or any part thereof or interest therein. 11.14 Headings. Section and subsection headings contained in this Agreement are inserted for convenience of reference only, shall not be deemed to be a part of this Agreement for any purpose, and shall not in any way define or affect the meaning, construction or scope of any of the provisions hereof. 11.15 Tax Free Exchange. The Buyer shall reasonably cooperate with Owner, at Owner expense for any out of pocket expense (excluding attorneys' fees) incurred by Buyer at the request of the Owner, to structure the transactions contemplated by this Agreement as either a simultaneous or deferred 1031 tax free exchange of real estate. 11.16 Governing Law. This Agreement, the rights and obligations of the parties hereto, and any claims or disputes relating thereto shall be governed by and construed under the laws of the jurisdiction where the Land is located (but not including the choice of law rules thereof). 11.17 Waiver of Jury Trial. Owner and Buyer each hereby waives any right to jury trial in the event any party files an action relating to this Agreement or to the transactions or obligations contemplated hereunder. 11.18 Counterparts. To facilitate execution, this Agreement may be executed in as many counterparts as may be required; and it shall not be necessary that the signatures of, or on behalf of, each party, or that the signatures of all persons required to bind any party, appear on each counterpart; but it shall be sufficient that the signature of, or on behalf of, each party, or that the signatures of the persons required to bind any party, appear on one or more of the counterparts. All counterparts shall collectively constitute a single agreement. 11.19 Confidentiality. Until the Closing, the parties shall keep the existence and terms of this Agreement confidential except for disclosures that in Buyer's or Owner's reasonable opinion are required by law or reasonably necessary to the accomplishment of the transactions, including without limitation disclosures to tenants, lenders, engineers, consultants, and third parties involved in financing Buyer*s acquisition of the Property. If this Agreement is terminated prior to Closing, Buyer shall not disclose (except to the extent Buyer, in its reasonable discretion, deems required by applicable law) information provided by Owner to Buyer in connection with this Agreement. Each party acknowledges that, after Closing, the other party may publicly disclose the material terms of this Agreement, and that prior to Closing, such party may publicly disclose information about this transaction to the extent that such party deems reasonably necessary to ensure legal compliance. 11.20 Financial Information. Buyer has disclosed to Owner that audited financial statements pertaining to the Property for a minimum of one, and a maximum of three, prior calendar year(s) of operation, and the portion of the calendar year in which the Closing occurs, up to the Closing Date, will be required to be filed by Buyer with the Securities and Exchange Commission after the Closing. Accordingly, the Owner agrees to provide Buyer, and its accountant, with access to the books and records of the Owner pertaining to the Property after the Closing, upon reasonable advance notice, in order for Buyer's accountant to conduct the required audit, at the expense of Buyer. After the Closing, the Owner will provide, or cause to be provided to Buyer's accountant, a signed Representation Letter, in the form substantially attached as Exhibit C. IN WITNESS WHEREOF, the undersigned have executed this Agreement, or have caused this Agreement to be duly executed on their behalf, as of the day and year specified below. SIGNATURE PAGE REAL ESTATE PURCHASE AGREEMENT ORLEANS APARTMENTS FAIRFAX COUNTY, VIRGINIA SMITH PROPERTY HOLDING ORLEASN, L.L.C. By: Charles E. Smith Residential Realty, L.P. sole member By: Charles E. Smith Reisdential Realty, Inc., sole general partner By: _______________________ Name: ______________________ Title: _____________________ HOME PROPERTIES OF NEW YORK, L.P., a New York limited partnership By: Home Properties of New York, Inc., a Maryland corporation By: ______________________ Name: ____________________ Title: ____________________ -----END PRIVACY-ENHANCED MESSAGE-----