-----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, HAkHqSQR443j19HM3CEWgw5bEIfKOi0BV7tik05qhNx6I7cKvo/ogXC5f1/PMFQg YSTIeI8eURl9+8kZhGfUWw== 0000923118-97-000011.txt : 19970327 0000923118-97-000011.hdr.sgml : 19970327 ACCESSION NUMBER: 0000923118-97-000011 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 17 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970326 SROS: NYSE 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: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 001-13136 FILM NUMBER: 97563971 BUSINESS ADDRESS: STREET 1: 850 CLINTON SQUARE CITY: ROCHESTER STATE: NY ZIP: 14604 BUSINESS PHONE: 7165464900 MAIL ADDRESS: STREET 1: 850 CLINTON SQUARE CITY: ROCHESTER STATE: NY ZIP: 14604 10-K 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) (X) ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1996 ------------------------------------------- OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number 1-13136 ------------------------------ HOME PROPERTIES OF NEW YORK, INC. (Exact name of Registrant as specified in its Charter) MARYLAND 16-1455126 (State or other jurisdiction (I.R.S. Employer of 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 Securities registered pursuant to Section 12(b) of the Act: Name of Each Exchange on Title of each class Which Registered - ---------------------------- ------------------------ Common Stock, $.01 par value New York Stock Exchange Indicate by check mark whether registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. YES x No Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained to the best of Registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. The aggregate market value of the shares of common stock held by non-affiliates (based upon the closing sale price on the New York Stock Exchange) on February 24, 1997 was approximately $150,465,527. As of February 24, 1997, there were 6,228,236.418 shares of common stock, $.01 par value outstanding. DOCUMENTS INCORPORATED BY REFERENCE None HOME PROPERTIES OF NEW YORK, INC. TABLE OF CONTENTS PART I. Item 1. Business Item 2. Properties Item 3. Legal Proceedings Item 4. Submission of Matters to a Vote of Security Holders Item X. Executive Officers and Key Employees PART II. Item 5. Market of the Registrant's Common Equity and Related Shareholder Matters Item 6. Selected Financial and Operating Information Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Item 8. Financial Statements and Supplementary Data Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure PART III. Item 10. Directors and Executive Officers of the Registrant Item 11. Executive Compensation Item 12. Security Ownership of Certain Beneficial Owners and Management Item 13. Certain Relationships and Related Transactions PART IV. Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K PART I Item 1. Business The Company Home Properties of New York, Inc. ("Home Properties" or the "Company") is a self-administered and self-managed real estate investment trust ("REIT") that specializes in the ownership, management, acquisition, and development of apartment communities in the Northeast. It was formed to continue and expand the operations of Home Leasing Corporation ("Home Leasing"). The Company completed an initial public offering of 5,408,000 shares of common stock (the "IPO") on August 4, 1994. The Company conducts its business through Home Properties of New York, L.P. (the "Operating Partnership"), a New York limited partnership in which the Company held a 68.2% general partnership interest as of December 31, 1996 (89.8% at December 31, 1995) and two management companies (the "Management Companies") - Home Properties Management, Inc. ("HP Management") and Conifer Realty Corporation ("Conifer Realty"), both of which are Maryland corporations. Effective January 1, 1996, the Company combined its operations (the "Conifer Transaction") with those of Conifer Realty, Inc. and Conifer Development, Inc. (collectively, "Conifer"). Conifer was another large owner and operator of multifamily properties throughout New York State with whom the Company has previously participated in several joint venture development projects. Home Properties, through its affiliates described above, and as of December 31, 1996, owned and managed 28 communities with 7,176 apartment units and one community containing 202 manufactured home sites (the "Owned Properties"). The Operating Partnership also holds general partnership interests in an additional 3,738 apartment units and it and the Management Companies manage 662 apartment units for affiliates, 992 apartment units for third parties and approximately 1.6 million square feet of commercial space for other owners (primarily affiliates) (collectively, the "Managed Properties"). The Management Companies are also involved in the development and redevelopment of government- assisted apartment communities and certain other development activities. The Owned Properties and the Managed Properties (collectively, the "Properties") are concentrated in the following market areas:
MANAGING FEE MANAGED GENERAL FOR FEE MANAGED MARKET AREA TOTAL OWNED PARTNER AFFILIATES FOR OTHERS Buffalo, NY 2,223 2,067 156 - - Rochester, NY 4,064 1,953 1,339 439 333 Syracuse, NY 3,115 1,584 1,271 199 61 Hudson Valley, NY 726 584 142 - - Albany, NY 764 - 254 - 510 Watertown, NY 688 - 576 24 88 Columbus, OH 604 604 - - - Bethlehem, PA 384 384 - - - TOTAL 12,568 Units 7,176 Units 3,738 Units 662 Units 992 Units
Page 1 The Company's mission is to provide investors with dependable, above average returns and to be the first choice of renters in its chosen markets. The Company's strategy for accomplishing its mission is to: (i) acquire, reposition and operate multi-family apartment properties in the Company's target markets; (ii) continue the development and redevelopment of apartment communities utilizing various forms of government assistance programs; and (iii) maintain its focus on customer satisfaction by serving the Company's residents with integrity and respect and providing value and service that exceeds expectations. Structure The Company was formed in November 1993 as a Maryland corporation and is the general partner of the Operating Partnership. On December 31, 1996, it owned a 68.2% general partner interest in the Operating Partnership. The limited partner interests (the "Units") in the Operating Partnership are owned by the officers of the Company and certain individuals who acquired Units in the Operating Partnership as partial consideration for their interests in entities purchased by the Operating Partnership. In addition, on December 30, 1996, the State of Michigan Retirement Systems acquired an 18.5% Class A limited partnership interest in the Operating Partnership. The Operating Partnership is a New York limited partnership formed in December, 1993. Holders of Units in the Operating Partnership may redeem a Unit for one share of the Company's common stock or cash equal to the fair market value at the time of the redemption, at the option of the Company. The Company currently anticipates that it will issue shares of common stock rather than pay cash in connection with such redemptions. The Class A limited partnership interest issued to the State of Michigan Retirement Systems has some features, such as a preferred return and anti-dilution rights, that are distinct from the features of the other Units. Management plans to aggressively pursue the use of Units as consideration for acquisition properties. Both of the Management Companies were formed to comply with the technical requirements of the federal income tax laws. Both are Maryland corporations. HP Management was formed in January, 1994 and Conifer Realty was formed in December, 1995. The Operating Partnership holds 99% of the economic interest in both Management Companies, with Nelson and Norman Leenhouts (the "Leenhoutses") holding the remaining one percent interest in HP Management and the Leenhoutses and Richard J. Crossed, the former President of Conifer, holding the remaining one percent interest in Conifer Realty. The Management Companies manage, for a fee, certain of the residential, commercial and development activities of the Company and provide construction, development and redevelopment services for the Company. Including the former employees of Conifer and certain contract employees, the Company currently has approximately 700 employees and its executive offices are located at 850 Clinton Square, Rochester, New York 14604. Its telephone number is (716) 546-4900. Operating Strategies The Company will continue to focus on enhancing the investment returns of its Properties by: (i) continuing to utilize its written "Pledge" of customer satisfaction that is the foundation on which the Company is building its name- brand recognition; (ii) reinforcing its decentralized company orientation by encouraging employees' personal improvement and by providing extensive training; (iii) readily adopting new technology so that the time spent on administration can be decreased and the time spent attracting and serving residents Page 2 can be increased; (iv) enhancing the quality of living for the Company's residents by improving the quality of service and physical amenities available at each community every year; and (v) engaging in aggressive cost controls and taking advantage of volume discounts, thus benefiting from economies of scale while constantly improving the level of customer service. Acquisition and Development Strategies The Company's strategy is to make acquisitions in geographic regions that have similar climates, easy access to the Company's headquarters, enough apartments available for acquisition to achieve a critical mass and minimal investment ownership by other apartment REITs. Targeted markets also possess other characteristics similar to the Company's existing markets, including a limited amount of new construction, acquisition opportunities below replacement costs, a mature housing stock and a stable or growing job market. The Company expects that its growth will be primarily in select metropolitan areas within the Northeastern United States. The Company may also acquire equity ownership in other public or private entities that own portfolios of apartment communities. Those acquisitions may be part of a strategy to acquire all of the equity ownership in those other entities or some or all of their apartment portfolio. In addition, the Company intends to continue to develop and re-develop apartment communities utilizing various government programs. These activities are expected to generate development fees, ongoing management and incentive management fees and participation in residual value for the Company. They also increase the Company's volume purchasing abilities and provide a pipeline for future acquisitions and re-development opportunities. Financing and Capital Strategies The Company intends to adhere to the following financing policies: (i) maintaining a ratio of debt-to-total market capitalization (total debt of the Company as a percentage of the market value of outstanding common stock and Units plus total debt) of approximately 50% or less; (ii) utilizing primarily fixed rate debt; (iii) varying debt maturities to avoid significant exposure to interest rate changes upon refinancing; and (iv) maintaining a line of credit so that it can respond quickly to acquisition opportunities. On December 31, 1996, the Company's debt was $105.2 million and the debt to total capitalization ratio was 34% based on the year-end closing price of the Company's stock at $22.50. The weighted average interest rate on the Company's mortgage debt as of December 31, 1996 was 7.7% and the weighted average maturity was 8 years. Debt maturities are staggered. As of December 31, 1996, the Company had an unsecured line of credit of $25 million for acquisition and other corporate purposes with an interest rate of LIBOR plus 1.75%. As of December 31, 1996, there were no borrowings under the line of credit. As of March 5, 1997, the line of credit had been increased to $35 million with $11.7 million available. The major use of the line of credit since December 31, 1996 was to acquire the Lake Grove Apartments. The Company also intends to continue to structure creative private equity transactions to raise capital with limited transaction costs. On December 30, 1996, $35 million was raised through the private sale of a Class A limited partnership interest to the State of Michigan Retirement Systems. Page 3 In addition, in 1996 approximately $14.7 million was raised through the sale of newly issued stock under the Company's Dividend Reinvestment, Stock Purchase, Resident Stock Purchase and Employee Stock Purchase Plan (the "Stock Purchase Plan"). This $14.7 million includes approximately $4 million from the sale of stock to the Company's officers and directors in transactions where the Company loaned 50% of the stock purchase price. The Stock Purchase Plan provides a 3% discount from the current market price for existing shareholders and has provided a steady source of capital to fund the Company's continued growth. In addition, management expects to continue to fund a significant portion of its continued growth by taking advantage of its UPREIT structure and using Units as currency in acquisition transactions. The Company utilized approximately $10 million worth of Units as partial consideration in acquisition transactions during 1996. Competition The Company competes with other multifamily developers and other real estate companies in seeking properties for acquisition, potential residents and land for development. The Company's Properties are primarily in developed areas where there are other properties of the same type which directly compete for residents. The Company, however, believes that its focus on service and resident satisfaction and its focus on attracting senior residents will enable it to maintain its historic occupancy levels. The Company also believes that the minimal increase in new construction of multifamily properties in its markets in 1996 will not have a material adverse effect on its turnover rates or ability to increase rents and minimize operating expenses. To date, the Company has faced little competition in acquiring properties from other REIT's or other operators from outside the region, although the Company may encounter competition from others as it seeks attractive properties in New York State and other states within the Northeastern quadrant. Regulation Many laws and governmental regulations are applicable to the Properties and changes in the laws and regulations, or their interpretation by agencies and the courts, occur frequently. Under the Americans with Disabilities Act of 1990 (the "ADA"), all places of public accommodation are required to meet certain federal requirements related to access and use by disabled persons. In addition, the Fair Housing Amendments Act of 1988 (the "FHAA") requires apartment communities first occupied after March 13, 1990 to be accessible to the handicapped. Non-compliance with the ADA or the FHAA could result in the imposition of fines or an award of damages to private litigants. Management believes that the owned Properties are substantially in compliance with present ADA and FHAA requirements. Under various laws and regulations relating to the protection of the environment, an owner of real estate may be held liable for the costs of removal or remediation of certain hazardous or toxic substances located on or in its property. These laws often impose liability without regard to whether the owner was responsible for, or even knew of, the presence of such substances. The presence of such substances may adversely affect the owner's ability to rent or sell the property or use the property as collateral. Independent environmental consultants have conducted "Phase I" environmental audits (which involve visual inspection but not soil or groundwater analysis) on substantially all of the Owned Properties. Phase I audit reports did not reveal any environmental liability that would have an Page 4 adverse effect on the Company. In addition, the Company is not aware of any environmental liability that management believes would have a material adverse effect on the Company. There is no assurance that Phase I reports would reveal all environmental liabilities or that environmental conditions not known to the Company may exist now or in the future which would result in liability to the Company for remediation or fines, either under existing laws and regulations or future changes to such requirements. Under the Federal Fair Housing Act and state fair housing laws, discrimination on the basis of certain protected classes is prohibited. Violation of these laws can result in the award of significant damage award to victims. The Company has a strong policy against any kind of discriminatory behavior and trains its employees to avoid discrimination or the appearance of discrimination. There is no assurance, however, that an employee will not violate the Company's policy against discrimination and thus violate fair housing laws. This could subject the Company to legal actions and the possible imposition of damage awards. Item 2. Properties As of December 31, 1996, the Owned Properties consisted of 28 multifamily residential properties containing 7,176 apartment units, one manufactured home community containing 202 home sites and a 35,000 square foot ancillary shopping center located adjacent to a multifamily property. At the time of the IPO, Home Properties owned 11 multifamily properties containing 3,065 apartment units. Simultaneous with the closing of the IPO, it acquired an additional four properties containing 926 units. In 1994, Home Properties purchased two additional communities having 472 units, in 1995 it purchased three communities having 1,061 apartment units and in 1996 purchased ten additional communities having 1,652 apartment units. From the time of the IPO to December 31, 1996, this represents a 234% increase in the number of apartment units owned by Home Properties. In addition, on February 3, 1997, the Operating Partnership acquired Lake Grove Apartments, a 368 unit apartment community located in Lake Grove, Long Island, New York. The Owned Properties are located in established markets and are well-maintained and well-leased. Average economic occupancy at the Owned Properties held throughout 1995 and 1996 was 94.3% for 1996. The Owned Properties are generally two and three story garden style apartment buildings in landscaped settings and a majority are of brick or other masonry construction. The Company believes that its strategic focus on appealing to mature residents and the quality of the services it provides to such residents result in low turnover. The turnover at the Owned Properties owned as of December 31, 1996 was approximately 37.9% for 1996, which is significantly below the national average for garden apartments. Management believes the Company was able to increase occupancies and achieve rental rate growth in excess of inflationary levels in 1996 due to physical upgrades made to the Owned Properties, increased marketing efforts and repositioning activities undertaken at its recent acquisitions. Resident leases are generally for one year terms and security deposits equal to one month's rent are generally required. The table on the next page illustrates certain of the important characteristics of the Owned Properties as of December 31, 1996. Page 5 Community Characteristics (Communities Wholly Owned and Managed by Home Properties)
December Average (1) (2) (3) Average Mthly Age Apt % Mature Average % % Resident Rent Rate/ # of in Year Size Residents Occupancy Turnover Occup Apt Community Regional Area Apts Years Acq (Sq Ft) 1996 1996 1995 1996 1995 1996 1995 CORE PORTFOLIO (4) Garden Village Buffalo, NY 315 25 1994 850 73% 96.2% 98.0% 28.6% 17.1% $574 $554 Raintree Island Buffalo, NY 504 25 1985 704 40% 94.1% 95.1% 37.7% 33.3% 572 557 Williamstowne Buffalo, NY 528 25 1985 708 99% 97.3% 96.9% 15.7% 16.5% 585 567 Retirement Village 1600 Elmwood Rochester, NY 210 37 1983 891 19% 93.0% 93.9% 51.9% 38.1% 739 705 Brook Hill Rochester, NY 192 25 1994 999 20% 94.8% 96.5% 44.3% 35.9% 731 697 Finger Lakes Manor Rochester, NY 153 26 1983 924 65% 92.4% 89.3% 35.9% 36.6% 665 659 Newcastle Rochester, NY 197 22 1982 873 40% 92.8% 87.6% 46.7% 44.2% 651 611 Apartments Northgate Manor Rochester, NY 224 34 1994 800 42% 92.6% 89.3% 26.8% 33.9% 568 554 Perinton Manor Rochester, NY 224 27 1982 928 66% 94.2% 93.6% 24.6% 29.9% 690 677 Riverton Knolls Rochester, NY 240 23 1983 911 11% 93.2% 88.0% 75.0% 61.3% 678 651 Spanish Gardens Rochester, NY 220 23 1994 1030 34% 92.8% 88.0% 25.5% 40.9% 582 585 Springcreek Rochester, NY 82 24 1984 913 95% 94.4% 96.8% 39.0% 35.4% 527 515 The Meadows Rochester, NY 113 26 1984 890 52% 93.0% 95.8% 28.3% 30.0% 587 572 Conifer Village Syracuse, NY 199 18 1994 499 97% 99.9% 100.0% 17.6% 17.1% 563 547 Fairview Heights Syracuse, NY 210 33 1985 798 13% 92.0% 92.7% 51.4% 57.0% 705 676 Village Green Syracuse, NY 248 8 1994 908 16% 90.6% 87.8% 52.4% 70.0% 598 575 Wedgewood Village Columbus, OH 604 39 1986 710 51% 95.5% 94.7% 44.7% 43.3% 417 406 Total/Weighted Average 4,463 27 811 51% 94.3% 93.5% 37.2% 36.6% 593 574 1995 Acquisitions Idylwood Buffalo, NY 720 27 1995 700 13% 93.5% 88.5% 45.7% 45.0% 524 513 Harborside Manor Syracuse, NY 281 24 1994 823 17% 92.6% 90.3% 38.8% 40.0% 540 527 Pearl Street (5) Syracuse, NY 60 26 1995 855 21% 93.5% 95.1% 5.0% N/A 449 425 Total/Weighted Average 1,061 26 741 15% 93.3% 89.3% 41.6% 43.6% 524 512 1996 Acquisitions Valley Park South Bethlehem, PA 384 24 1996 987 28% 92.6% N/A N/A N/A 701 N/A Carriage Hill Hudson Valley, NY 140 24 1996 845 20% 92.6% N/A N/A N/A 719 N/A Cornwall Park Hudson Valley, NY 75 30 1996 1320 26% 92.0% N/A N/A N/A 821 N/A Lakeshore Villas Hudson Valley, NY 152 22 1996 956 13% 90.8% N/A N/A N/A 603 N/A Sunset Gardens Hudson Valley, NY 217 26 1996 662 53% 87.2% N/A N/A N/A 562 N/A Hamlet Court Rochester, NY 98 26 1996 696 64% 95.9% N/A 13.3% N/A 589 N/A Candlewood Gardens Syracuse, NY 126 26 1995 855 39% 96.0% N/A 43.7% N/A 446 N/A Conifer Court Syracuse, NY 20 34 1996 720 6% 90.6% N/A 35.0% N/A 531 N/A The Fairways at Syracuse, NY 200 11 1996 908 15% 78.7% N/A N/A N/A 589 N/A Village Green (6) Westminster Place Syracuse, NY 240 25 1996 913 12% 93.3% N/A 41.7% N/A 575 N/A Total/Weighted Average 1,652 23 894 28% 90.4% N/A 36.2% N/A 621 N/A TOTAL/WEIGHTED AVERAGE 7,176 26 819 40% 93.7% 92.8% 37.9% 37.9% $589 $562
(1)"% Mature Residents" is the percentage of residents 55 years or older as of December 31, 1996. (2)"Average % Occupancy" is the economic occupancy. For the core portfolio this is a twelve month average. For communities acquired during 1995 or 1996, this is the average occupancy from the date of acquisition. (3)"% Resident Turnover" reflects, on an annual basis, the number of move-outs divided by the total number of apartment units. (4)Core Portfolio = Properties owned prior to 1995. (5)For most other reporting purposes, Pearl Street is included within the description of Harborside Manor, which is located immediately adjacent to it and with which it is jointly operated. (6)For most other reporting purposes, The Fairways at Village Green is included within the description of Village Green Apartments, which is located immediately adjacent to it and with which it is jointly operated. Page 6 Property Development Management believes that new construction of market-rate multi-family apartments is not economically feasible in most of its markets. Therefore, Home Properties' development and redevelopment activities are expected to be focused on government-assisted multifamily residential housing. Management believes that the Company's expertise in the full continuum of government-assisted and market rate housing provides the Company with the flexibility to react to changing economic conditions and the opportunity to flourish through all phases of economic cycles. In 1980, traditional government-assisted housing programs which provided direct rental subsidies (Section 8) began to be phased out. In 1986, however, the Low-Income Housing Tax Credit Program (LIHTC) was introduced. It provides an indirect federal subsidy for the production of low-income housing. The program is administered by each state. The LIHTC offsets income tax liabilities dollar for dollar because it is a tax credit and not a tax deduction. In exchange for receiving the credit, the project owner must agree to rent to income qualified individuals at reduced rental rates. Theoretically, the credit is designed to provide the additional return that is necessary to compensate project owners for the reduced rental income. Since the Company does not directly benefit from tax credits, its transactions are structured with the Operating Partnership serving as a one percent managing general partner. Limited partners contribute substantial equity in exchange for tax credits. The key benefits that Home Properties receives are: (i) development fee income; (ii) receipt of 75% to 90% of the project cash flow as incentive management fees; (iii) control of the real estate as the managing general partner; (iv) property management fees; and (v) participation in future equity build-up. With respect to existing projects, none of these benefits would be impacted retroactively if the LIHTC program were modified or eliminated. Through it predecessors, the Company has been developing affordable housing for over 20 years. Management anticipates that this experience, coupled with the financial and property management strengths of the Company, will enable the Company to remain a regional leader in the affordable housing arena. As the only public REIT that serves as a sponsor for LIHTC partnerships, management plans to continue to focus on this very important sector of the housing market. In 1996, Home Properties developed or re-developed 775 units in seven apartment communities financed in part through the LIHTC Program. The Company also previously purchased 3 vacant sites for development of government-assisted housing and has a number of other sites and developed properties under option pending allocation of LIHTC funds or the provision of other assistance through government programs. Property Management As of December 31, 1996, the Managed Properties consist of: (i) 3,738 apartment units where Home Properties is the general partner of the entity that owns the property; (ii) 1,654 apartment units, 662 of which are owned by entities that Home Leasing, Conifer or their affiliates serve as general partner; (iii) commercial properties which contain approximately 1.6 million square feet of gross leasable area; (iv) a master planned community known as Gananda, including an 18-hole private golf course and country club; (v) a 140 lot Planned Unit Development known as College Greene; (vi) a 202 lot Planned Page 7 Unit Development known as Riverton; (vii) a homeowners' association for a 58 unit condominium development; (viii) a nursing home which is leased to a hospital for which the Company provides limited management services; and (ix) 153 acres of vacant land in Old Brookside, the development of which, if it occurs, will be managed by HP Management. All of the Managed Properties other than 992 of the apartment units are owned or controlled by an affiliate of Home Properties, Home Leasing or Conifer. Management fees are based on a percentage of rental revenues or costs and, in certain cases, revenues from sales. The Company may pursue the management of additional properties not owned by the Company, but will only do so when such additional properties can be effectively and efficiently managed in conjunction with other properties owned or managed by Home Properties. The commercial properties consist of: (i) approximately 950,000 square feet of office space; (ii) approximately 400,000 square feet of retail space; (iii) approximately 75,000 square feet of industrial space; and (iv) approximately 164,000 square feet of warehouse space. Supplemental Property Information At December 31, 1996, none of the Properties have an individual net book value equal to or greater than ten percent of the total assets of the Company or would have accounted for ten percent or more of the Company's aggregate gross revenues for 1996. Item 3. Legal Proceedings The Company is a party to a variety of legal proceedings arising in the ordinary course of business. All such proceedings, taken together, are not expected to have a material adverse effect on the Company. Most of such proceedings are covered by liability insurance. To management's knowledge, no material litigation is threatened against the Company. Item 4. Submission of Matters to Vote of Security Holders None. Page 8 Item X. Executive Officers and Key Employees The following table sets forth the six executive officers and certain of the key employees of the Company, together with their respective ages (as of February 28, 1997), positions and offices. Name Age Position Norman P. Leenhouts 61 Chairman, Co-Chief Executive Officer and Director of Home Properties, Chairman and Director of HP Management and Director of Conifer Realty Nelson B. Leenhouts 61 President, Co-Chief Executive Officer and Director of Home Properties, President, Chief Executive Officer and Director of HP Management and Director of Conifer Realty. Richard J. Crossed 57 Executive Vice President and Director of Home Properties and President, Chief Executive Officer and Director of Conifer Realty Amy L. Tait 38 Executive Vice President and Director of Home Properties and Director of HP Management David P. Gardner 41 Vice President, Chief Financial Officer and Treasurer of Home Properties, Conifer Realty and HP Management Ann M. McCormick 40 Vice President, General Counsel and Secretary of Home Properties and HP Management William E. Beach 50 Vice President, Commercial Property Management of Home Properties and HP Management Lawrence R. Brattain 45 Vice President, Residential Property Management of Home Properties and Conifer Realty C. Terence Butwid 52 Vice President, Development of Home Properties and Executive Vice President of Conifer Realty Kathleen M. Dunham 51 Vice President, Residential Property Management of Home Properties and Conifer Realty Johanna A. Falk 32 Vice President, Marketing of Home Properties John H. Fennessey 58 Vice President, Development of Home Properties and Conifer Realty Page 9 Name Age Position Timothy A. Florczak 41 Vice President, Residential Property Management of Home Properties Thomas L. Fountain 38 Vice President, Commercial Property Management of Home Properties and Conifer Realty Timothy Fournier 36 Vice President, Development of Home Properties and Executive Vice President of Conifer Realty Robert J. Luken 32 Vice President and Controller of Home Properties Paul O'Leary 44 Vice President, Residential Property Management of Home Properties John Oster 47 Vice President, Development of Home Properties and Conifer Realty Dale C. Prunoske 45 Vice President, Development of Home Properties and Conifer Realty Richard J. Struzzi 43 Vice President, Development of Home Properties and HP Management Robert C. Tait 39 Vice President, Commercial Property Management of Home Properties and HP Management Laurie L. Willard 40 Vice President, Residential Property Marketing of Home Properties Information regarding Richard Crossed, Nelson and Norman Leenhouts and Amy Tait is set forth below under "Board of Directors" in Item 10. David P. Gardner has served as Vice President and Chief Financial Officer of the Company, HP Management and Conifer Realty since their inception. Mr. Gardner joined Home Leasing Corporation in 1984 as Vice President and Controller. In 1989, he was named Treasurer of Home Leasing and Chief Financial Officer in December, 1993. From 1977 until joining Home Leasing, Mr. Gardner was an accountant at Cortland L. Brovitz & Co. Mr. Gardner is a graduate of the Rochester Institute of Technology and is a Certified Public Accountant. Ann M. McCormick has served as Vice President, General Counsel and Secretary of the Company and HP Management since their inception. Mrs. McCormick joined Home Leasing in 1987 and was named Vice President, Secretary and General Counsel in 1991. Prior to joining Home Leasing, she was an associate with the law firm of Nixon, Hargrave, Devans & Doyle. Mrs. McCormick is a graduate of Colgate University and holds a Juris Doctor from Cornell University. Page 10 William E. Beach has served as Vice President of the Company and HP Management since their inception. He joined Home Leasing in 1972 as a Vice President. Mr. Beach is a graduate of Syracuse University and is a Certified Property Manager (CPM) as designated by the Institute of Real Estate Management. Lawrence R. Brattain has served as Vice President of the Company and Conifer Realty since 1996. He joined Conifer in 1990 as a Vice President. Mr. Brattain is a graduate of Assumption College and is a Certified Property Manager as designated by the Institute of Real Estate Management. C. Terence Butwid has served as Vice President of the Company and Executive Vice President of Conifer Realty since 1996. He joined Conifer in 1990 as a Vice President. Prior to joining Conifer, Mr. Butwid was employed by Chase Lincoln First Bank as Vice President and Manager of Corporate Banking National Accounts. He was also President of Ontario Capital Management. Mr. Butwid is a graduate of Bowling Greene State University. He has an MBA from American University and graduated from The National School of Credit and Financial Management at Dartmouth College. Kathleen M. Dunham has served as Vice President of the Company and Conifer Realty since 1996. She joined Conifer in 1980 and was named Vice President in 1990. Ms. Dunham is a Certified Property Manager (CPM) candidate with the Institute of Real Estate Management. Johanna A. Falk has served as a Vice President of the Company since 1997. She joined the Company in 1995 as an investor relations specialist. Prior to joining the Company, Mrs. Falk was employed as a marketing manager at Bausch & Lomb Incorporated and Champion Products, Inc. and as a financial analyst at Kidder Peabody. She is a graduate of Cornell University and holds a Masters Degree in Business Administration from the Wharton School of The University of Pennsylvania. John H. Fennessey has served as Vice President of the Company and Conifer Realty since 1996. He joined Conifer in 1975 as a founder and Vice President, responsible for the operation of Conifer's Syracuse office. Prior to joining Conifer, he was a Project Director with the New York State Urban Development Corporation. Mr. Fennessey is a graduate of Harpur College and holds a Masters Degree in regional planning from the Maxwell School, Syracuse University. He is a Charter Member of the American Institute of Certified Planners (AICP). Timothy A. Florczak has served as a Vice President of the Company since its inception. He joined Home Leasing in 1985 as a Vice President. Prior to joining Home Leasing, Mr. Florczak was Vice President of Accounting of Marc Equity Corporation. Mr. Florczak is a graduate of the State University of New York at Buffalo. Thomas L. Fountain, Jr. has served as a Vice President of the Company and Conifer Realty since 1996. He joined Conifer in 1994 as the Director of Commercial Properties. Prior to joining Conifer, Mr. Fountain was the Leasing Manager for Faber Management Services, Inc. and Vice President of Asset Management for Realty Diversified Services, Inc. Mr. Fountain is a graduate of West Virginia University. Page 11 Timothy Fournier has served as Vice President of Home Properties and Executive Vice President of Conifer Realty since 1996. He joined Conifer in 1986 as Vice President of Finance. Prior to joining Conifer, Mr. Fournier was an accountant at Coopers & Lybrand. Mr. Fournier is a graduate of New Hampshire College and is a Certified Public Accountant. Robert J. Luken has served as Controller of the Company since 1996 and as a Vice President since 1997. Prior to joining the Company, he was the Controller of Bell Corp. of Rochester and an Audit Supervisor for Coopers & Lybrand. Mr. Luken is a graduate of St. John Fisher College and is a Certified Public Accountant. Paul O'Leary has served as a Vice President of the Company since its inception. He joined Home Leasing in 1974 and has served as Vice President of Home Leasing since 1978. Mr. O'Leary is a graduate of Syracuse University and is a Certified Property Manager (CPM) as designated by the Institute of Real Estate Management. John Oster has served as Vice President of the Company and Conifer Realty since 1996. He joined Conifer as a Vice President in 1988. Before joining Conifer, Mr. Oster was Director of Operations for the New York State Division of Housing and Community Renewal. He is a graduate of Hamilton College. Dale C. Prunoske has served as a Vice President of the Company and Conifer Realty since 1996. He joined Conifer in 1994 as a Vice President. Prior to joining Conifer, he worked for Continuing Development Services. He is a graduate of and holds a Master of Public Administration Degree from the State University of New York at Brockport. Richard J. Struzzi has served as a Vice President of the Company and HP Management since their inception. He joined Home Leasing in 1983 as a Vice President. Mr. Struzzi is a graduate of the State University of New York at Potsdam and holds a Masters Degree in Public School Administration from St. Lawrence University. He is the son-in-law of Nelson Leenhouts. Robert C. Tait has served as a Vice President of the Company and HP Management since their inception. He joined Home Leasing in 1989 and served as a Vice President of Home Leasing since 1992. Prior to joining Home Leasing, he was a manufacturing/industrial engineer with Moscom Corp. Mr. Tait is a graduate of Princeton University and holds a Masters Degree in Business Administration from Boston University. Married to Amy L. Tait, he is the son-in-law of Norman Leenhouts. Laurie L. Willard has served as a Vice President of the Company since its inception. She joined Home Leasing in 1987 and has served as a Vice President since 1992. Mrs. Willard is a graduate of the University of Rochester. She is the daughter of Norman Leenhouts. Page 12 PART II Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters The Common Stock has been traded on the New York Stock Exchange ("NYSE") under the symbol "HME" since July 28, 1994. The following table sets forth for the previous two years the quarterly high and low sales prices per share reported on the NYSE, as well as all distributions paid.
1995 First Quarter $20 $17 $.4125 Second Quarter $19 $16-3/4 $.4125 Third Quarter $18-1/2 $16-7/8 $.4125 Fourth Quarter $17-3/4 $16-1/2 $.42 1996 First Quarter $20-5/8 $17-1/8 $.42 Second Quarter $21 $19-1/4 $.42 Third Quarter $20-5/8 $19-3/8 $.42 Fourth Quarter $22-5/8 $19-7/8 $.43 1997 January 1, 1997 to February 24, 1997 $25-1/4 $22 $.43
Page 13 Item 6. Selected Financial Data The following table sets forth selected financial and operating data on a historical basis for the Company and the Original Properties and should be read in conjunction with the financial statements appearing elsewhere in this Form 10-K.
COMPANY ORIGINAL PROPERTIES --------------------------- --------------------------- 8/4/94 1/1/94 Through Through 1996 1995 12/31/94 8/3/94 1993 1992 (in thousands, except per share and property data) Revenues: Rental Income $42,214 $31,705 $10,995 $11,526 $19,189 $18,748 Other Income 3,456 2,596 948 494 783 743 Property management income (1) - 834 1,448 1,358 ------- ------- ------- ------- ------- ------- TOTAL REVENUES 45,670 34,301 11,943 12,854 21,420 20,849 ------- ------- ------- ------- ------- ------- Expenses: Operating and maintenance 21,859 15,911 5,267 6,329 10,035 9,886 Property management (1) - - - 625 1,139 1,047 General & administrative 1,482 1,200 400 407 680 663 Interest 9,208 6,432 1,444 3,126 5,113 5,300 Depreciation & amortization 8,077 6,258 2,191 1,584 2,656 2,729 ------- ------- ------- ------- ------- ------- TOTAL EXPENSES 40,626 29,801 9,302 12,071 19,623 19,625 ------- ------- ------- ------- ------- ------- Income before minority interest and extraordinary item 5,044 4,500 2,641 783 1,797 1,224 Minority interest 897 455 256 - - - ------- ------- ------- ------- ------- ------- Income before extraordinary item 4,147 4,045 2,385 783 1,797 1,224 Extraordinary item, prepayment penalties, net of allocation to - (1,249) (2,498) - - - minority interest ------- ------- ------- ------- ------- ------- Net income (loss) $4,147 $2,796 $(113) $783 $1,797 $1,224 ======= ======= ======= ======= ======= ======= Net income (loss) per common share $ .74 $ .52 $ (.02) N/A N/A N/A ======= ======= ======= Cash dividends declared per common share $ 1.69 $ 1.66 $ .26 N/A N/A N/A ======= ======= ======= Balance Sheet Data: Real estate, before accumulated $261,773 $198,203 $162,991 $77,371 $76,646 $75,296 depreciation Total assets 248,631 181,462 148,709 60,014 59,490 60,732 Total debt 105,176 91,119 52,816 57,952 58,583 59,622 Stockholders' equity/Owners' 83,030 75,780 81,941 (2,741) (2,591) (2,546) (deficit) Other Data: Funds from Operations (2) $13,384 $11,025 $4,822 $2,348 $4,402 $3,892 Cash available for distribution (3) $11,022 $ 9,348 $4,369 $1,885 $3,608 $3,098 Net cash provided by (used in) operating activities $14,241 $9,811 $3,151 $2,527 $4,188 $4,153 Net cash provided by (used in) investing activities $(25,641) $(21,348) $(71,110) $(1,168) $(1,350) $(690) Net cash provided by (used in) financing activities $12,111 $10,714 $68,315 $(1,689) $(2,881) $(2,819) Weighted average number of shares outstanding 5,601,027 5,408,474 5,408,230 N/A N/A N/A Total communities owned, at end of period 28 20 19 12 12 12 Total apartment units owned, at end of period 7,176 5,650 4,744 3,065 3,065 3,065
Page 14 Item 6. Selected Financial Data (continued) (1) Property management income and expense represents the management activities of Home Leasing Corporation prior to the formation of HP Management. (2) Management considers Funds from Operations to be an appropriate measure of the performance of an equity REIT. Effective January 1, 1996, the Company has adopted NAREIT's revised White Paper definition of calculating funds from operations (New FFO). All prior periods presented have been restated to conform to New FFO. "Funds from Operations" is generally defined by NAREIT as net income (loss) before gains (losses) from the sale of property plus real estate depreciation, including adjustments for unconsolidated partnerships and joint ventures. Funds from Operations does not represent cash generated from operating activities in accordance with GAAP and is not necessarily indicative of cash available to fund cash needs. Funds from Operations should not be considered as an alternative to net income as an indication of the Company's performance or to cash flow as a measure of liquidity. Funds from Operations does not actually represent the cash made available to investors in the periods presented. Funds from Operations is calculated as follows:
8/4/94 1/1/94 Through Through 1996 1995 12/31/94 8/3/94 1993 1992 Net income (loss) $4,147 $2,796 ($113) $783 $1,797 $1,224 Depreciation - real property* 8,332 6,525 2,181 1,565 2,605 2,668 Loss on sale of property 8 - - - - - Minority interest 897 455 256 - - - Extraordinary item (prepayment penalties) - 1,249 2,498 - - - ------- ------- ------- ------- ------- ------ Funds from Operations $13,384 $11,025 $4,822 $2,348 $4,402 $3,892 ======= ======= ======= ======= ======= ====== Weighted average shares/units 6,813.2 6,015.1 5,983.6 N/A N/A N/A
*Includes amounts passed through from unconsolidated investments. The FFO presentation above may not be comparable to other similarly titled measures of FFO of other REITs. Quarterly information on Funds from Operations for the two most recent years is as follows:
1995 1st 2nd 3rd 4th Total Funds from Operations before minority interest $2,326 $2,555 $2,991 $3,153 $11,025 Weighted Average Shares/Units 5,998.6 6,020.5 6,020.5 6,020.6 6,015.1 1996 Funds from Operations before minority interest $2,749 $3,078 $3,647 $3,910 $13,384 Weighted Average Shares/Units 6,612.8 6,617.6 6,849.4 7,168.4 6,813.2
(3) Cash Available for Distribution is defined as Funds from Operations less an annual reserve for anticipated recurring, non-revenue generating capitalized costs of $350 ($300 for 1992-1995) per apartment unit, $94 per manufactured home site and $.25 per square foot for the 35,000 square foot ancillary convenient shopping area at Wedgewood. It is the Company's policy to fund its investing activities and financing activities with the proceeds of its Line of Credit or new debt. Page 15 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations Overview The following discussion is based primarily on the Consolidated and Combined Financial Statements of Home Properties of New York, Inc. and the Original Properties. This should be read in conjunction with the financial statements appearing elsewhere in this report. The Company is engaged primarily in the ownership, management, acquisition and development of residential apartment communities. On August 4, 1994, the Company completed an initial public offering of 5,408,000 shares of common stock (the "IPO") and engaged in formation transactions designed to enable the Company to continue and expand the multifamily residential operations of Home Leasing Corporation. Certain capitalized terms, as used herein, are defined in the Notes to the Consolidated and Combined Financial Statements. Results of Operations Comparison of year ended December 31, 1996 to year ended December 31, 1995. The Company owned 18 properties consisting of 4,463 apartment units acquired prior to January 1, 1995 where comparable operating results are available for the years presented (the "Core Properties"). For the year ending December 31, 1996, the Core Properties showed an increase in rental revenues of 4.2% and a net operating income increase of 3.3% over the 1995 year-end period. Property level operating expense increases were 5.3%, primarily attributable to significant increased utility costs associated with severe winter weather during the first two quarters of 1996. Average economic occupancy for the Core Properties increased to 94.3% from 93.5%, with average monthly rental rates increasing 3.3% to $583. During 1996, the Company acquired a total of 1,652 apartment units in ten new communities (the "1996 Communities"). In addition, the Company experienced full year results for the 1,061 apartment units in three new apartment communities (the "1995 Communities") acquired during 1995. The inclusion of these acquired communities generally accounted for the significant changes in operating results for the year ended December 31, 1996. For the year ended December 31, 1996, operating income increased by $544,000 when compared to the year ended December 31, 1995. The increase was primarily attributable to the following factors: an increase in rental income of $10,509,000, and an increase in other income of $860,000. These changes were partially offset by an increase in operating and maintenance expense of $5,948,000, an increase in general and administrative expense of $282,000, an increase in interest expense of $2,776,000 and an increase in depreciation and amortization of $1,819,000. Of the $10,509,000 increase in rental income, $4,106,000 is attributable to the 1995 Communities and $5,176,000 is attributable to the 1996 Communities. The balance is a 4.2% increase from the Core Properties due primarily to an increase of 3.3% in weighted average rental rates, plus an increase in occupancy from 93.5% to 94.3%. Page 16 Other income increased in 1996 by $897,000. Of this increase, $322,000 is from development fee income from eight apartment communities developed under the Low Income Housing Tax Credit Program where the Company is a general partner. In addition, other significant components include $179,000 from increased interest income, $168,000 from increased management fees from residential properties and $107,000 from the increase of the net results from the Management Companies. Of the $5,948,000 increase in operating and maintenance expenses, $2,370,000 is attributable to the 1995 Communities and $2,821,000 is attributable to the 1996 Communities. The balance for the Core Properties, or $757,000, represents a 5.3% increase over 1995. The major area of increase in the Core Properties occurred in utilities, personnel and snow removal costs due to the severe Winter weather and a cooler Spring experienced in 1996 compared to an unusually mild 1995. The operating expense ratio (the ratio of operating and maintenance expense compared to rental and property other income) for the Core Properties was 48.6% and 48.2% for 1996 and 1995 respectively. In general, the Company's operating expense ratio is higher than that experienced in other parts of the country due to relatively high real estate taxes in New York State and the practice in its markets of typically including heating expenses in base rent. General and administrative expenses increased in 1996 by $282,000, or 24% from $1,200,000 in 1995 to $1,482,000 in 1996. These increases are primarily due to increased corporate personnel. However, general and administrative expenses as a percentage of total revenues decreased from 3.5% in 1995 to 3.2% in 1996 as a result of increased efficiencies from the economies of scale Interest expense increased in 1996 by $2,776,000 as a result of the acquisition of the 1996 Communities and full year interest expense for the 1995 Communities. The 1995 Communities, costing in excess of $25,000,000, were acquired substantially with assumed or new debt. The 1996 Communities, costing in excess of $54,000,000, were acquired with $44,000,000 of assumed new debt, in addition to the use of Operating Partnership Units ("UPREIT" units). Amortization relating to interest rate reduction agreements of $335,000 was included in interest expense during 1996 and 1995. In addition, amortization from deferred charges relating to the financing of properties totaling $255,000 and $321,000 was included in interest expense for 1996 and 1995, respectively. Comparison of year ended December 31, 1995 to year ended December 31, 1994. During 1995, the Company acquired a total of 1,061 apartment units in three new communities (the "1995 Communities"). In addition, the Company experienced full year results for the 1,398 apartment units in six new apartment communities (the "1994 Communities") acquired from August 4, 1994 to December 31, 1994. The inclusion of these acquired communities generally accounted for the significant changes in operating results for the year ended December 31, 1995. For the year ended December 31, 1995, operating income increased by $1,076,000 when compared to the year ended December 31, 1994. The increase was primarily attributable to the following factors: an increase in rental income of $9,184,000, and an increase in other income of $1,154,000. These changes were partially offset by an increase in operating and maintenance expense of $4,315,000, an increase in general and administrative expense of $393,000, an increase in interest expense of $1,862,000 and an increase in depreciation and amortization of $2,483,000. Page 17 For the year ended December 31, 1995 and 1994, the Company incurred prepayment penalties of $1,390,000 and $2,763,000 on the paydown of certain debt instruments. These penalties have been accounted for as extraordinary items. The 1995 paydowns totaled $39,080,000 from six debt instruments, and were financed by three new borrowings in excess of $40,000,000. The 1994 paydowns totaled $29,796,000 from seven debt instruments and were financed from the proceeds of the IPO. Of the $9,184,000 increase in rental income, $6,178,000 is attributable to the 1994 Communities and $2,655,000 is attributable to the 1995 Communities. The balance of this increase, which is from the Original Properties, was due primarily to an increase of 2.9% in weighted average rental rates, offset by a decrease in occupancy from 94.7% to 93.5% Other income increased in 1995 by $930,000. Of this increase, $430,000 is from development fee income from four apartment communities developed under the Low Income Housing Tax Credit Program where the Company is a general partner. In addition, $382,000 is from increased interest income, $86,000 is from increased management fees from residential properties and $32,000 is from other miscellaneous increases. Of the large increase in interest income, $230,000 is from a construction loan outstanding to College Greene Rental Associates, L.P. This advance was repaid in February, 1996. Of the $4,315,000 increase in operating and maintenance expenses, $3,101,000 is attributable to the 1994 Communities and $1,529,000 is attributable to the 1995 Communities. The balance for the Original Properties, or ($315,000), represents a 3.0% decrease over 1994. The two main areas of savings were in real estate taxes ($236,000) and utilities ($69,000). The tax savings were a result of management's successful efforts in getting assessments reduced at various properties. The utility savings were from a combination of an unusually severe winter experienced in the first quarter of 1994 compared to an extraordinarily mild winter in the first quarter of 1995. General and administrative expenses increased in 1995 by $393,000, or 49% from $807,000 in 1994 to $1,200,000 in 1995. Of this increase, $131,000 was due primarily to costs associated with becoming a public company for a full year versus five months in 1994. The balance, representing a 32% increase, was due primarily to increased payroll and payroll expense of $165,000 (mostly from new positions), increased travel of $29,000 and increased legal and accounting of $33,000. These increases occurred during a period when the weighted average portfolio of apartment units owned (including general partnerships) increased by 61%. Interest expense increased in 1995 by $1,862,000 as a result of the acquisition of the 1995 Communities and full year interest expense for the 1994 Communities. The 1995 Communities, costing in excess of $25,000,000, were acquired substantially with assumed or new debt. Amortization relating to interest rate reduction agreements of $335,000 and $137,000 was included in interest expense during 1995 and 1994, respectively. In addition, amortization from deferred charges relating to the financing of properties totaling $321,000 and $161,000 was included in interest expense for 1995 and 1994, respectively. Page 18 Liquidity and Capital Resources The Company's principal liquidity demands are expected to be distributions to stockholders, capital improvements and repairs and maintenance for the properties, acquisition of additional properties, property development and debt repayments. The Company may also engage in transactions whereby it acquires equity ownership in other public or private companies that own portfolios of apartment communities. Those transactions may be part of a strategy to acquire all of the equity ownership in those other companies. The Company intends to meet its short-term liquidity requirements through net cash flows provided by operating activities and the line of credit. The Company considers its ability to generate cash to continue to be adequate to meet all operating requirements and make distributions to its stockholders in accordance with the provisions of the Internal Revenue Code, as amended, applicable to REITs. To the extent that the Company does not satisfy its long- term liquidity requirements through net cash flows provided by operating activities and the line of credit, it intends to satisfy such requirements through the issuance of UPREIT units, proceeds from the Dividend Reinvestment Plan, property debt financing, or issuing additional common shares or shares of the Company's preferred stock. As of February 28, 1997, the Company's Form S-3 Registration Statement has been declared effective relating to the issuance of up to $100 million of shares of common stock or other securities. On December 30, 1996, capital was raised in a private placement through the sale of a $35,000,000 Class A Limited Partnership Interest to a state pension fund. The interest, which can be converted into 1,666,667 shares of common stock, will receive a preferred return equal to the greater of: (a) 9.25% on the original investment during the first two years declining to 9.0% thereafter; or (b) the actual dividends paid to common shareholders on 1,666,667 shares. Any unconverted interest can be redeemed without premium by the Company after ten years. Proceeds of the transaction, which are anticipated to be used to fund future acquisitions, were used to repay floating rate debt on an interim basis. Another source of capital results from the issuance of UPREIT units for property acquisitions. The Company successfully completed acquisitions during 1996 using UPREIT units totaling approximately $10,000,000. In November, 1995, the Company established a Dividend Reinvestment Plan. The Plan provides the stockholders of the Company an opportunity to automatically invest their cash dividends at a discount of 3% from the market price. In addition, eligible participants may make monthly payments or other voluntary cash investments in shares of common stock. During 1996, over $14,700,000 was raised through this program, including over $4,100,000 from officers and directors financed by a Company loan of $2,061,000 and bank loans guaranteed by the Company which total $1,874,000 at December 31, 1996. The Company has an unsecured line of credit of $25 million, all available at December 31, 1996. Borrowings under the line bear interest at 1.75% over the one-month LIBOR rate. The line of credit expires on August 22, 1997. The Company intends to either renew the line for another year or establish a new or additional line with a different institution. As of March 5, 1997, the line of credit has been increased to $35 million, with $11.7 million available. The major use of the line since December 31, 1996, was to acquire Lake Grove Apartments. Page 19 As of December 31, 1996, the weighted average rate of interest on the Company's mortgage debt is 7.7% and the weighted average maturity of such indebtedness is 8 years. Floating rate debt has been reduced at year end to only 3% of outstanding debt at December 31, 1996. This limits the exposure to changes in interest rates, minimizing the effect on results of operations and financial condition. Floating rate debt represented 21% of outstanding debt on March 5, 1997. The Company's net cash provided by operating activities increased from $9,811,000 for the year ended December 31, 1995 to $14,241,000 for the year ended December 31, 1996. The increase was principally due to the acquisition of the 1995 and 1996 Communities, offset by the prepayment penalties incurred in 1995 accounted for as extraordinary items. Net cash used in investing activities increased from $21,348,000 in 1995 to $25,641,000 in 1996, resulting from a higher level of acquisitions in 1996 (1,652 apartment units) than in 1995 (1,061 apartment units). The Company's net cash provided by financing activities increased from $10,714,000 in 1995 to $12,111,000 in 1996. The major source of financing in 1995 was debt related, with $21,363,000 of net debt proceeds utilized to fund property acquisitions and additions. In 1996, sales of shares and UPREIT unit proceeds of $59,795,000 were used to repay debt by $21,792,000 and fund property acquisitions and additions. Capital Improvements. Total capital improvement expenditures increased from $8,179,000 in 1995 to $8,843,000 in 1996. Of the $8,843,000 expenditures, $1,387,000 is attributable to the 1996 Communities and $1,621,000 is attributable to the 1995 Communities. The balance of $5,835,000 is allocated between the Core Properties of $4,928,000 and $907,000 for land acquired for development. Recurring, non-revenue enhancing capital replacements typically include carpeting and tile, appliances, HVAC equipment, new roofs, site improvements and various exterior building improvements. Funding for these capital replacements are provided by cash flows from operating activities. The Company estimates that approximately $350 per unit is spent on capital replacements in a normal year to maintain the condition of its properties. In 1996, $3,300,000 in capital expenditures for the Core Properties was incurred to fund non-recurring, revenue enhancing upgrades, including the following: construction of two new community centers; conversion of one property from radiant to gas heat; continued additions of new windows and exterior siding to one community; energy conservation measures; and the modernization of numerous kitchens and bathrooms. In addition, over $2,300,000 in substantial rehabilitations was incurred on acquisition properties as part of management's acquisition and repositioning strategies. The pace of capital replacements was accelerated to improve the overall competitive condition of the properties. Funding for these capital improvements was provided by the line of credit and other credit facilities. During 1997, the Company expects to continue to fund similar non-recurring, revenue enhancing upgrades as well as rehabilitations to acquisition properties in addition to normal capital replacements. Page 20 Recent Accounting Developments The Company will adopt the provisions of Statement of Accounting Standards No. 128, "Earnings Per Share" for the year ended December 31, 1997. Management does not anticipate the adoption of this statement to have a material impact on the financial statements. Inflation Substantially all of the leases at the communities are for a term of one year or less, which enables the Company to seek increased rents upon renewal of existing leases or commencement of new leases. These short-term leases minimize the potential adverse effect of inflation on rental income, although residents may leave without penalty at the end of their lease terms and may do so if rents are increased significantly. Item 8. Financial Statements and Supplemental Data The financial statements and supplementary data are listed under Item 14(a) and filed as part of this report on the pages indicated. Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None. Page 21 PART III Item 10. Directors and Executive Officers of the Registrant Directors The Board of Directors (the "Board") currently consists of eleven members. Effective with the consummation of the transaction with the State of Michigan Retirement System, the Board increased its number from 10 to 11 and elected Alan J. Gosule as a director to serve until the 1997 Shareholders' Meeting. The terms for all of the directors of Home Properties expire at that Shareholders' Meeting. The information sets forth, as of February 28, 1997, for each director of the Company such director's name, experience during the last five years, other directorships held, age and the year such director was first elected as director of the Company.
Year First Name of Director Age Elected Director Burton S. August, Sr. 81 1994 William Balderston, III 69 1994 Richard J. Crossed 57 1996 Alan L. Gosule 56 1996 Leonard F. Helbig, III 51 1994 Roger W. Kober 63 1994 Nelson B. Leenhouts 61 1993 Norman Leenhouts 61 1993 Clifford W. Smith, Jr. 50 1994 Paul L. Smith 61 1994 Amy L. Tait 38 1993
Burton S. August, Sr. has been a director of the Company since August, 1994. Mr. August is currently a director of Monro Muffler Brake, Inc., a publicly traded company where Mr. August served as Vice President from 1969 until he retired in 1980. Mr. August is also a trustee emeritus of Rochester Institute of Technology, a trustee of Strong Museum and a trustee of the Otetiana Council Boy Scouts of America. William Balderston, III has been a director of the Company since August, 1994. From 1991 to the end of 1992, he was an Executive Vice President of The Chase Manhattan Bank, N.A. From 1986 to 1991, he was President and Chief Executive Officer of Chase Lincoln First Bank, N.A., which was merged into The Chase Manhattan Bank, N.A. He is a director of Bausch & Lomb Incorporated and Rochester Gas and Electric Corporation, as well as a Trustee of the University of Rochester. Mr. Balderston is a graduate of Dartmouth College. Richard J. Crossed has served as a director of the Company and as a director, President and Chief Executive Officer of Conifer Realty since January 1, 1996. He has served as President and Chief Executive Officer of Conifer from 1985. Prior to becoming President of Conifer, he served as Director of Development for Conifer. Mr. Crossed is a director of St. Joseph's Villa and is active in many housing organizations. He has served on the New York State Housing Turnkey Task Force and New York State Low-Income Housing Tax Credit Task Force. Mr. Crossed is a graduate of Bellarmine College. Page 22 Alan L. Gosule, 56, has been a director of the Company since December, 1996. Mr. Gosule has been a partner in the law firm of Roger & Wells, New York, New York, since August, 1991 and prior to that time was a partner in the law firm of Gaston & Snow. He serves as Chairman of the Rogers & Wells Tax Department and Real Estate Securities practice group. Mr. Gosule is a graduate of Boston University and its Law School and received a LL.M. from Georgetown University. Mr. Gosule also serves on the Boards of Directors of 15 funds of the Northstar Mutual Funds, the Simpson Housing Limited Partnership and F.C. Putnam Investment Management Company. Rogers & Wells acted as counsel to Coopers & Lybrand, LLP in its capacity as advisor to the State Treasurer of the State of Michigan in connection with its investment of retirement funds in the Operating Partnership and Mr. Gosule was the nominee of the State Treasurer under the terms of the investment agreements described above. Leonard F. Helbig, III has been a director of the Company since August, 1994. Mr. Helbig has served as Executive Managing Director of the Asset Services Group and a Director of Cushman & Wakefield since 1984. He joined Cushman & Wakefield in 1980 and is also a member of that firm's Executive and National Management Committees. Mr. Helbig is a member of the Urban Land Institute, the Pension Real Estate Association and the International Council of Shopping Centers. Mr. Helbig is a graduate of LaSalle University and holds the MAI designation of the American Institute of Real Estate Appraisers. Roger W. Kober has been a director of the Company since August, 1994. Mr. Kober is the Chairman of the Board and Chief Executive Officer of Rochester Gas and Electric Corporation where he has been employed since 1965. He is also a member of the Board of Trustees of Rochester Institute of Technology and a director of the Association of Edison Illuminating Companies, the Chase Upstate Advisory Council, the Greater Rochester Metro Chamber of Commerce, the United Way of Greater Rochester, Inc. and other civic and professional organizations. Mr. Kober is a graduate of Clarkson College and holds a Masters Degree in Engineering from Rochester Institute of Technology. Nelson B. Leenhouts has served as President and a director of the Company since its inception in 1993. He has also served as President and Chief Executive Officer of HP Management since its formation and has been a director of Conifer Realty since its formation. Nelson Leenhouts was the founder, and a co-owner, together with Norman Leenhouts, of Home Leasing, and served as President of Home Leasing from 1967. He is a director of Hauser Corporation. Nelson Leenhouts is a graduate of the University of Rochester. He is the twin brother of Norman Leenhouts. Norman P. Leenhouts has served as Chairman of the Board of Directors and a director of the Company since its inception in 1993. He has also served as Chairman of the Board of HP Management and as a director of Conifer Realty since their formation. Norman Leenhouts was a co-owner, together with Nelson Leenhouts, of Home Leasing and served as Chairman of Home Leasing from 1971. He is a director of Hauser Corporation and Rochester Downtown Development Corporation. He also serves as Chairman of the Board of Trustees of Roberts Wesleyan College and as a trustee of the University of Rochester. He is a graduate of the University of Rochester and is a certified public accountant. He is the twin brother of Nelson Leenhouts. Clifford W. Smith, Jr. has been a director of the Company since August, 1994. Mr. Smith has been the Clarey Professor of Finance of the William E. Simon Graduate School of Business Administration of the University of Rochester since 1988. He has written numerous books, monographs, articles and papers on a variety of financial, capital markets, risk management and accounting topics and has held a variety of editorial Page 23 positions on a number of journals. Mr. Smith is a graduate of Emory University and holds a Doctor of Economics from the University of North Carolina at Chapel Hill. Paul L. Smith has been a director of the Company since August, 1994. Mr. Smith was a director, Senior Vice President and the Chief Financial Officer of the Eastman Kodak Company from 1983 until he retired in 1993. He is currently a director of Rochester General Hospital and GeVa Theatre and is a member of the Board of Trustees of the George Eastman House. Mr. Smith also serves on the Boards of Directors of Performance Technologies, Inc. and BioWorks, Inc. Mr. Smith is a graduate of Ohio Wesleyan University and holds an MBA Degree in finance from Northwestern University. Amy L. Tait has served as Executive Vice President and a director of the Company since its inception in 1993. She has also served as a director of HP Management since its formation. Mrs. Tait joined Home Leasing in 1983 and has had several positions, including Senior and Executive Vice President and Chief Operating Officer. She currently serves on the M & T Bank Advisory Board and the boards of the United Way of Rochester and GeVa Theatre. Mrs. Tait is a graduate of Princeton University and holds a Masters Degree in Business Administration from the William E. Simon Graduate School of Business Administration of the University of Rochester. She is the daughter of Norman Leenhouts. See Item X in Part I hereof for information regarding executive officers of the Company. Compliance with Section 16(a) of the Securities Act of 1934. Section 16(a) of the Securities Exchange Act of 1934, as amended, (the "Exchange Act") requires the Company's executive officers and directors, and persons who own more than 10% of a registered class of the Company's equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission and the New York Stock Exchange. Officers, directors and greater than 10% shareholders are required to furnish the Company with copies of all Section 16(a) forms they file. To the Company's knowledge, based solely on review of the copies of such reports furnished to the Company and written representations that no other reports were required during the fiscal year ended December 31, 1996, all Section 16(a) filing requirements applicable to its executive officers, directors and greater than 10% beneficial owners were satisfied except as follows. Amy Tait's Form 4 for August, 1996 with respect to her acquisition of shares of Common Stock and options under the Company's Executive and Director Stock Purchase Program did not reflect the acquisition of shares and options under the same Program by her husband, Robert Tait, a Vice President of the Company. The Form 4 was subsequently amended to reflect this omission. Burton August's interest in 4,246 Units in the Operating Partnership received in connection with the Conifer Transaction were reported in last year's proxy statement and Report on Form 10-K, but was not reflected on a Form 4 for January, 1996. A Form 4 reflecting these interests was subsequently filed. Page 24 Item 11. Executive Compensation The following table sets forth the cash compensation paid during 1994, 1995 and 1996 to the Company's Co-Chief Executive Officers and other most highly compensated executive officers. Except for the Co-Chief Executive Officers, no executive officer's annual salary and bonus exceeded $100,000 on an annualized basis during the fiscal years ending December 31, 1994 and 1995.
Summary Compensation Table Long-Term Compensation Annual Compensation Awards Shares Underlying Name and Principal Position Year Salary Bonus Options Norman P. Leenhouts 1994(1) $ 50,000 $14,556 88,000 sh. Chairman and Co-Chief Executive Officer 1995 132,000 0 0 1996 145,200 59,702 7,338 sh.(4) Nelson B. Leenhouts 1994(1) 50,000 14,556 88,000 sh. President and Co-Chief Executive Officer 1995 132,000 0 0 1996 145,200 59,702 7,338 sh.(4) Richard J. Crossed 1996(2) 145,200 59,702 88,000 sh.(3) Executive Vice President 7,338 sh.(4) Amy L. Tait 1994(1) 33,333 16,495 88,000 sh. Executive Vice President 1995 87,917 0 0 1996 103,000 42,351 5,206 sh.(4)
________________ (1) Amounts reported reflect actual base salary earned during the Company's period of operations from August 4, 1994 through December 31, 1994. The annual base salary of each of Norman and Nelson Leenhouts for 1994 was $120,000 and for Amy Tait was $80,000. (2) Mr. Crossed was not employed by the Company in 1994 and 1995. (3) Issued in connection with the Conifer Transaction. (4) These options were granted under the Company's Stock Benefit Plan in connection with the purchase of the Company's common stock under the Executive and Director Stock Purchase and Loan Program described below. The options are exercisable for ten years at $20.50 per share and vest over five years. Option Grants in Fiscal Year 1996 The following table sets forth certain information relating to the options granted with respect to fiscal year ended December 31, 1996. The columns labelled "Potential Realizable Value" are based on hypothetical 5% and 10% growth assumptions in accordance with the rules of the Securities and Exchange Commission. The Company cannot predict the actual growth rate of the Common Stock. Page 25
Option Grants In Last Fiscal Year* Individual Grants ------------------------------------------------- Potential Realizable Value Percent of at Assumed Annual Number of Total Options Rates of Stock Shares Granted to Price Appreciation Underlying Employees Exercise or For Option Term Options in Fiscal Base Price Expiration ------------------ Name Granted Year ($/sh) Date 5% 10% Norman P. 7,338 (1) $20.50 8/12/2006 $ 94,587 $ 239,732 Leenhouts Nelson B. 7,338 (1) $20.50 8/12/2006 $ 94,587 $ 239,732 Leenhouts Richard J. 88,000 (2) $19.00 1/2/2006 $1,051,600 $2,664,640 Crossed 7,338 (1) $20.50 8/12/2006 $ 94,587 $ 239,732 Amy L. Tait 5,206 (1) $20.50 1/2/2006 $ 67,105 170,080
____________ * Stock appreciation rights were not granted in 1996. (1) These stock options were granted in connection with the purchase by the named individuals of shares of Common Stock under the Executive and Director Stock Purchase and Loan Program described below. An option to purchase .25 shares of Common Stock was granted, with an exercise price equal to fair market value on the date of grant, for each share purchased. (2) Issued in connection with the Conifer Transaction. Page 26 Option Exercises and Year-End Option Values No options were exercised in 1996. The following table sets forth the value of options held at the end of 1996 by the Company's named Executive Officers.
Aggregated Option Exercises in Last Fiscal Year and Fiscal Year-End Option Values(1) Number of Shares Value of Unexercised in- Acquired Number of Shares the- on Value Underlying Money Options at Name Exercise Realized Unexercised Fiscal-Year-End (2) Options at Fiscal Year-End Exercisable Unexercisable Exercisable Unexercisable Norman P. Leenhouts 0 0 88,000 sh. 7,338 sh. $308,000 $14,676 Nelson B. Leenhouts 0 0 88,000 sh. 7,338 sh. $308,000 $14,676 Richard J. Crossed 0 0 88,000 sh. 7,338 sh. $308,000 $14,676 Amy L. Tait 0 0 35,200 sh. 58,006 sh. $123,200 $195,212
(1) Stock appreciation rights were not granted in 1996. (2) Based on the last reported sale price of the Common Stock on the NYSE on December 31, 1996 of $22.50 less the per Share exercise price of the options. Employment Agreements Norman and Nelson Leenhouts entered into employment agreements with the Company prior to its initial public offering providing for an initial term of five years commencing August 4, 1994. The agreements provide for the employment of Norman P. Leenhouts as Chairman of the Board and Co-Chief Executive Officer of the Company at an annual base salary of $120,000 and Nelson B. Leenhouts as President and Co-Chief Executive Officer of the Company and President and Chief Executive Officer of HP Management at an annual base salary of $120,000. The base salaries under each employment agreement automatically increase by 10% each year starting January 1, 1995. Although their employment agreements provide for a specific formula for the payment of incentive compensation to each of Norman and Nelson Leenhouts, they have voluntarily agreed to waive application of that formula and instead receive incentive compensation pursuant to the Company's Incentive Compensation Plan as it may be revised by the Compensation Committee from time to time. The employment agreements also provide that if employment is terminated by the Company or not renewed without cause, or terminated by the executive for good reason at any time, then the executive is entitled to receive a severance payment equal to the executive's annual base salary and incentive compensation for the preceding year multiplied by two or the number of years remaining of the initial term, whichever is greater. Pursuant to their respective employment agreements with the Company, Norman and Nelson Leenhouts are each subject to a covenant not to compete with the Company during the term of his employment and, if either is terminated by the Company for cause or resigns without good reason, for two years thereafter. The covenants prohibit Norman and Nelson Leenhouts from participating in the management, operation or control of any multifamily residential business which is competitive with the business of the Company, Page 27 except that they, individually and through Home Leasing and its affiliates, may continue to own and develop the properties managed by HP Management. The Leenhoutses have also agreed that any commercial property which may be developed by them will be managed by HP Management subject to the approval of the outside members of the Board of Directors. Richard J. Crossed also entered into and Employment Agreement with the Company, effective January 1, 1996. The terms of that agreement are substantially the same as the employment agreements entered into by Norman and Nelson Leenhouts as described above. The initial term is for five years and identical termination provisions are provided. In his employment agreement, Mr. Crossed has agreed not to compete with the Company during the term of his employment and, if he is terminated by the Company for cause or resigns without good reason, for three years thereafter. Incentive Compensation Plan The Company's incentive compensation plan (the "Incentive Plan") for officers and key employees of the Company was amended for 1996 to provide that eligible officer and key employees may earn a cash bonus ranging from 5% to 50% of base salary based on increases in the Company's Funds from Operations per Share ("FFO"). The 1996 Incentive Plan provides for a bonus pool to be established as follows:
Growth in FFO/Share Percent of Growth Contributed to Bonus Pool First 2% 0% Next 1% 20% Next 1% 30% Next 1% 40% Growth Over 5% 50%
A factor is applied to each eligible participant's salary, ranging from 1% to 10%, to determine the split of the bonus pool. The factor applied to the salaries of Norman and Nelson Leenhouts, Richard Crossed and Amy Tait is 10%, with the maximum bonus payable to them being 50% of their base salary. Executive and Director Stock Purchase and Loan Program In August 1996, the Board of Directors approved an Executive and Director Stock Purchase and Loan Program. Pursuant to the program, each officer and director of the Company was eligible to receive loans for the purchase of Common Stock under the Company's Dividend Reinvestment, Stock Purchase, Resident Stock Purchase and Employee Stock Purchase Plan ("Dividend Reinvestment Plan") and receive options to purchase Common Stock under the Company's Stock Benefit Plan. The one-time program provided for loans up to a formula amount for each officer based on salary and bonus category and up to $60,000 for each independent director. The Company loaned approximately 50% of the purchase price and arranged loans from a commercial bank, guaranteed by the Company, for the balance. The program also provided for the issuance of stock options to purchase .25 shares of Common Stock at the fair market value on the date of issuance ($20.50) for each share of Common Stock purchased. In the aggregate, eighteen officers purchased 190,345 shares of Common Stock and received 47,592 options to purchase Common Stock at an exercise price of $20.50 vesting over five years. The six independent directors purchased an aggregate of Page 28 18,198 shares of Common Stock and received options to purchase 4,554 shares of Common Stock for $20.50 per share vesting over five years. The Company loaned the directors and officers an aggregate of $2,063,469 maturing on August 31, 2016 with simple interest at 7% and guaranteed bank loans totaling $2,033,180 repayable from the quarterly dividends on the stock and the proceeds of any sale of the stock. Compensation of Directors In 1996, the Company paid its directors who are not employees of the Company annual compensation of $9,000 plus $1,000 per day for attendance (in person or by telephone) at Board and committee meetings. Effective January 1, 1997, the annual director fee was increased to $10,000 per year. Directors of the Company who are employees of the Company do not receive any compensation for their services as directors. All directors are reimbursed for their expenses incurred in attending directors' meetings. Pursuant to the Company's Stock Benefit Plan, each non- employee director (other than Mr. Gosule) was granted options to purchase 3,000 shares of Common Stock immediately following the annual meeting of stockholders in 1996. The options have an exercise price equal to the fair market value of the Company's Common Stock on the date of grant. The Stock Benefit Plan does not have additional options available for awards to directors. Subject to stockholder approval of the changes to the Stock Benefit Plan, the Board has approved additional awards to each director of options to purchase 3,500 shares of Common Stock immediately following the annual meeting of stockholders in each of 1997, 1998 and 1999 at an exercise price equal to the fair market value of the Company's Common Stock on the date of grant. In addition, stockholder approval of the proposed changes to the Stock Benefit Plan would ratify the grants of options to purchase 4,554 shares of Common Stock in August 1996 in connection with the Executive and Director Stock Purchase and Loan Program described below. Compensation Committee Interlocks and Insider Participation in Compensation Decisions During the fiscal year 1996, the Compensation Committee was comprised of Burton S. August, Sr., William Balderston, III and Clifford W. Smith, Jr. None of them have ever been an officer of the Company or any of its subsidiaries. Alan L. Gosule joined the Committee at the beginning of 1997. Each of the Compensation Committee members other than Mr. Gosule, as well as each of the other independent directors, participated in the Company's Executive and Director Stock Purchase and Loan Program on August 12, 1996 and purchased 3,033 shares of Common Stock through the Company's Dividend Reinvestment and Stock Purchase Plan for $19.788 per share (3% below the five-day average market value as provided in that Plan) and received options to purchase 759 shares of Common Stock at the fair market value on that date of $20.50 per share. The purchases were financed 50% by a loan from the Company due August 31, 2016 bearing simple interest at 7% per annum and 50% by a loan from a commercial bank arranged by and guaranteed by the Company. Mr. August also had an interest in the transactions consummated in January 1996 because he and members of his immediate family had interests in a limited partnership merged into the Operating Partnership as part of the Conifer Transaction. In connection with such merger, Mr. August received 4,246 Units in the Operating Partnership, and his immediate family members received 5,404 Units in the Operating Partnership, as merger consideration. Page 29 Item 12. Securities Ownership of Certain Beneficial Owners and Management The following table sets forth information as of February 24, 1997 regarding the beneficial ownership of shares of Common Stock by (i) directors, nominees and certain executive officers of Home Properties, and (ii) directors, nominees and executive officers of Home Properties as a group, and (iii) each person known by the Company to be the beneficial owner of more than a 5% interest in the Company. The table also includes information relating to the number and percentage of shares of Common Stock and partnership units of the Operating Partnership ("Units") beneficially owned by the persons included in (i) and (ii) above (such Units are exchangeable into shares, or cash at the election of the independent directors of the Company. In preparing this table, the Company has relied on information supplied by its officers, directors, Nominees and certain stockholders, and upon information contained in filings with the SEC.
Number of Shares Percentage of Number of Percentage Name and Address of Beneficially Outstanding Shares/Units of Beneficial Owner Owned Shares(2) Owned Shares/Units Norman P. Leenhouts 118,353(1) 1.9% 387,513(1)(3) 4.1%(4) Nelson B. Leenhouts 117,453(1) 1.8% 386,365(1)(3) 4.1%(4) Richard J. Crossed 118,852(5) 1.9% 313,816(5) 3.3% Amy L. Tait 59,268(6) * 73,011(6) * Burton S. August, Sr. 30,533(8) * 34,779(7)(8) * William Balderston, III 13,533(7) * 13,533(7) * Alan L. Gosule 0 * 0 * Leonard Helbig, III 13,206(7) * 13,206(7) * Roger W. Kober 13,220(7) * 13,220(7) * Clifford W. Smith, Jr. 16,935(7) * 16,935(7) * Paul L. Smith 14,033(7) * 14,033(7) * All executive officers and directors as a group (13 persons) 554,571(9) 8.3%(10) 1,303,141(3)(9) 17.9%(11)
Page 30
Name and Address Number of Shares Percentage of of Beneficial Owner Beneficially Owned Outstanding Shares Capital Growth Management 317,000(12) 5.42% Limited Partnership One International Place Boston, MA 02110 Miller Anderson & Sherrerd 512,200(13) 8.81% One Tower Bridge West Conshohocken, PA 19428 and Morgan Stanley Group Inc. 1585 Broadway New York, NY 10036 Palisade Capital Management L.L.C. 502,000(14) 8.20% 1 Bridge Plaza, Suite 695 Fort Lee, NJ 07024 State Treasurer, State of Michigan 1,666,667(15) 26.76% Bureau of Investments Department of Treasury Treasury Building, Box 15128 Lansing, MI 48901
__________ * Less than 1% (1) Includes 88,000 shares which may be acquired upon the exercise of currently exercisable options by each of Norman and Nelson Leenhouts. (2) Assumes that all options included with respect to the person have been exercised. The total number of shares outstanding used in calculating the percentage assumes that none of the options held by any other person have been exercised. (3) Includes Units owned by Home Leasing and Leenhouts Ventures. Norman Leenhouts and Nelson Leenhouts are each directors, officers and 50% stockholders of Home Leasing and each owns 50% of Leenhouts Ventures. Includes 50,000 Units owned by the respective spouses of each of Norman and Nelson Leenhouts as to which they disclaim beneficial ownership. (4) Assumes that all options included with respect to the person have been exercised and all Units included with respect to the person have been exchanged for shares of Common Stock. The total number of shares outstanding used in calculating the percentage assumes that none of the options held by any other person have been exercised and that none of the Units held by any other person have been exchanged for shares. (5) Includes 88,000 shares which may be acquired upon the exercise of currently exercisable options. Also includes Mr. Crossed's proportionate share of Units owned by Conifer and its affiliates. (6) Includes 35,200 shares which may be acquired upon the exercise of currently exercisable options. Also includes 3,246 shares owned by Mrs. Tait's spouse as to which she disclaims beneficial ownership. Mrs. Tait shares voting and dispositive power with respect to 2,548 Units with her spouse. (7) Includes 9,000 shares which may be acquired upon the exercise of currently exercisable options. (8) Includes 12,500 shares owned by immediate family members of Mr. August as to which he disclaims beneficial ownership. (9) Includes 406,000 shares which may be acquired upon the exercise of immediately exercisable options. (10) Assumes that all exercisable options included with respect to all listed persons have been exercised. (11) Assumes that all exercisable options included with respect to all listed persons have been exercised and that all Units included with respect to all listed persons have been exchanged for shares of Common Stock. (12) Based on a report on Schedule 13G, dated February 11, 1997, reflecting that Capital Growth Management Limited Partnership has shared dispositive and sole voting power with respect to shares held in client accounts, as to which Capital Growth disclaims beneficial ownership. (13) Based on a report on Schedule 13G, dated February 14, 1997, filed jointly on behalf of Miller Anderson & Sherrerd and Morgan Stanley Group Inc., reflecting that the two Investment Advisors have shared voting and dispositive power with respect to 515,200 shares. Page 31 (14) Based on a report in Schedule 13G, dated February 1, 1997, reflecting that Palisade Capital Management, L.L.C. holds the shares on behalf of clients in accounts over which Palisade has sole voting and dispositive power. (15) Based on a report on Form 13D, dated January 6, 1997, reflecting that the State Treasurer, State of Michigan and the individual members of the Michigan Department of Treasury's Bureau of Investments, which manages the investments for four state- sponsored retirement systems: Public School Retirement System, State Employees' Retirement System, Michigan State Police Retirement System and Judges' Retirement System acquired a Class A Limited Partnership Interest in the Operating Partnership which is convertible, at the option of the State of Michigan, into 1,666,667 shares of common stock, subject to adjustment, over which the State Treasurer would have sole voting and dispositive power. Item 13. Certain Relationships and Related Transactions. Certain directors and an executive officer of the Company (or entities controlled by them or members of their immediate families) had direct or indirect interests in transactions which were consummated in connection with the acquisition of Conifer Realty, Inc. and certain affiliates on January 1, 1996 (the "Conifer Transaction"). The following persons received Units in connection with the Conifer Transaction, and certain indebtedness was or will be repaid by the Company:
Units Indebtedness Name Received Repaid Burton August Sr. 4,246 0 Immediate family members of Burton S. August, Sr. 5,404 0 Richard J. Crossed 68,021 0 Conifer Development, Inc. (1) 20,738 $1,433,190 C.O.F., Inc. (2) 285,403 0 Tamarack II Associates (3) 2,027 0
_______________ (1) Richard J. Crossed owns a 40.6% interest in Conifer Development, Inc. (2) Formerly Conifer Realty, Inc. Richard J. Crossed owns a 40.6% interest in C.O.F., Inc. (3) Conifer Development, Inc. owns a 5% interest in Tamarack II Associates. Mr. Crossed is a 2% General Partner of a partnership comprised of his family members that owns a 39% interest in Tamarack II Associates. In connection with the Conifer Transaction, the Company became the general partner of St. Paul Genesee Associates, L.P.. In May, 1996, Huntington Associates L.P., a partnership in which the Operating Partnership serves as general partner, purchased the property owned by St. Paul Genesee Associates at a purchase price determined by the Board of Directors of the Company, which was paid in cash and by a promissory note. Mr. Crossed and Mr. August are partners of St. Paul Genesee Associates and received or have an interest in $75,580 and $18,965, respectively, of the cash and payments on the promissory note received by St. Paul Genesee Associates. They abstained from the action of the Board setting the purchase price for the property. It is anticipated that the limited partnership interests in Huntington Associates L.P. will be sold in a tax credit transaction and that substantially all of the Company's investment will be returned. Page 32 Directors and executive officers of the Company received loans from the Company of 50% of the purchase price of shares of Common Stock purchased by them in connection with the Company's Executive and Director Stock Purchase and Loan Program described above and commercial bank loans for the balance, guaranteed by the Company. The indebtedness to the Company of each of the named executive officers is: each of Messrs. Leenhouts and Crossed - $290,408 and Mrs. Tait - $206,000. Home Leasing, in consideration of a portion of the Units and cash received by it in connection with the formation of the Company, assigned to HP Management certain management contracts between it and certain entities of which it is a general partner. As a general partner of those entities, Home Leasing Corporation (and, indirectly, Norman and Nelson Leenhouts) has an ongoing interest in such management contracts. Pursuant to the Contribution Agreement, Conifer assigned to the Company and its affiliates certain management contracts between Conifer and entities in which it is the general partner. As a general partner, Conifer (and indirectly, Richard Crossed) has an ongoing interest in such management contracts. Page 33 PART IV Item 14. Exhibits, Financial Statement Schedules and Reports on Form 8-K (a) 1 and 2. Financial Statements and Schedules The financial statements and schedules listed below are filed as part of this annual report on the pages indicated. HOME PROPERTIES OF NEW YORK, INC. AND THE ORIGINAL PROPERTIES Consolidated and Combined Financial Statements Page Report of Independent Accountants F-2 Consolidated Balance Sheets as of December 31, 1996 & 1995 F-3 Consolidated and Combined Statements of Operations for the Years Ended December 31, 1996 and 1995, for the Period from August 4, 1994 through December 31, 1994 and for the Period from January 1, 1994 through August 3, 1994 F-4 Consolidated and Combined Statements of Stockholders' Equity/Owners Deficit for the Years Ended December 31, 1996 and 1995, for the Period from August 4, 1994 through December 31, 1994 and for the Period from January 1, 1994 through August 3, 1994 F-5 Consolidated and Combined Statements of Cash Flows for the Years Ended December 31, 1996 and 1995, for the Period from August 4, 1994 through December 31, 1994 and for the Period from January 1, 1994 through August 3, 1994 F-6 Notes to the Consolidated and Combined Financial Statements F-7 Schedule III: Real Estate and Accumulated Depreciation F-24 Page 34 (a) 3. Exhibits Exhibit Exhibit Number 3.1 Articles of Incorporation of Home Properties of New York, Inc. 3.2 Articles of Amendment and Restatement of Articles of Incorporation of Home Properties of New York, Inc. 3.3 Amended and Restated By-Laws of Home Properties of New York, Inc. (Revised 12/30/96) 4.1 Form of certificate representing Shares of Common Stock. 4.2 Agreement of Home Properties of New York, Inc. to file instruments defining the rights of holders of long-term debt of it or its subsidiaries with the Commission upon request. 4.3 Credit Agreement between Manufacturers and Traders Trust Company, Home Properties of New York, L.P. and Home Properties of New York, Inc. 4.4 Amendment Agreement between Manufacturers and Traders Trust Company, Home Properties of New York, L.P. and Home Properties of New York, Inc. amending the Credit Agreement. 4.5 Mortgage Spreader, Consolidation and Modification Agreement between Manufacturers and Traders Trust Company and Home Properties of New York, L.P., together with form of Mortgage, Assignment of Leases and Rents and Security Agreement incorporated therein by reference. 4.6 Mortgage Note made by Home Properties of New York, L.P. payable to Manufacturers and Traders Trust Company in the principal amount of $12,298,000. 4.7 Demand Grid Note, dated August 22, 1995, from the Operating Partnership to Manufacturers and Traders Trust Company in the maximum principal amount of $15,000,000. 4.8 Spreader, Consolidation, Modification and Extension Agreement between Home Properties of New York, L.P. and John Hancock Mutual Life Insurance Company, dated as of October 26, 1995, relating to indebtedness in the principal amount of $20,500,000. 4.9 Demand Grid Note, dated August 22, 1996 from the Operating Partnership to Manufacturers and Traders Trust Company in the maximum principal amount of $25,000,000. 4.10 Demand Grid Note, dated March 5, 1997 from the Operating Partnership to Manufacturers and Traders Trust Company in the maximum principal amount of $35,000,000. Page 35 10.1 Agreement of Limited Partnership of Home Properties of New York, L.P. 10.2 Amended and Restated Agreement of Limited Partnership of Home Properties of New York, L.P. 10.3 Amendments No. One through Eight to the Agreement of Limited Partnership of Home Properties of New York, L.P. 10.4 Amendment No. Nine to the Agreement of Limited Partnership of Home Properties of New York, L.P. 10.5 Amendment No. Ten to the Agreement of Limited Partnership of Home Properties of New York, L.P. 10.6 Articles of Incorporation of Home Properties Management, Inc. 10.7 By-Laws of Home Properties Management, Inc. 10.8 Articles of Incorporation of Conifer Realty Corporation. 10.9 By-Laws of Conifer Realty Corporation. 10.10 Employment Agreement between Home Properties of New York, L.P. and Norman P. Leenhouts. 10.11 Employment Agreement between Home Properties of New York, L.P. and Nelson B. Leenhouts. 10.12 Employment Agreement between Home Properties of New York, L.P. and Richard J. Crossed. 10.13 Indemnification Agreement between Home Properties of New York, Inc. and certain officers and directors. 10.14 Indemnification Agreement between Home Properties of New York, Inc. and Richard J. Crossed. 10.15 Indemnification Agreement between Home Properties of New York, Inc. and Alan L. Gosule. 10.16 Home Properties of New York, Inc. 1994 Stock Benefit Plan. 10.17 Registration Rights Agreement among Home Properties of New York, Inc., Home Leasing Corporation, Leenhouts Ventures, Norman P. Leenhouts, Nelson B. Leenhouts, Amy L. Tait, David P. Gardner, Ann M. McCormick, William E. Beach, Paul O'Leary, Richard J. Struzzi, Robert C. Tait, Timothy A. Florczak and Laurie Tones. Page 36 10.18 Lockup Agreements by Home Properties of New York, Inc. and Conifer Realty, Inc., Conifer Development, Inc., Richard J. Crossed, Peter J. Obourn and John F. Fennessey. 10.19 Contribution Agreement between Home Properties of New York, L.P. and Conifer Realty, Inc., Conifer Development, Inc., Richard J. Crossed, Peter J. Obourn and John H. Fennessey. 10.20 Amendment to Contribution Agreement between Home Properties of New York, L.P. and Conifer Realty, Inc., Conifer Development, Inc., Richard J. Crossed, Peter J. Obourn and John H. Fennessey. 10.21 Agreement of Operating Sublease, dated October 1, 1986, among KAM, Inc., Morris Massry and Raintree Island Associates, as amended by Letter Agreement Supplementing Operating Sublease dated October 1, 1986. 10.22 Second Amended and Restated Incentive Compensation Plan of Home Properties of New York, Inc. 10.23 Indemnification and Pledge Agreement between Home Properties of New York, L.P. and Conifer Realty, Inc., Conifer Development, Inc., Richard J. Crossed, Peter J. Obourn and John H. Fennessey. 10.24 Form of Term Promissory Note payable to Home Properties of New York, Inc. by officers and directors in association with the Executive and Director Stock Purchase and Loan Program. 10.25 Form of Pledge Security Agreement executed by officers and directors in connection with Executive and Director Stock Purchase and Loan Program. 10.26 Schedule of Participants, loan amounts and shares issued in connection with the Executive and Director Stock Purchase and Loan Program. 10.27 Guaranty by Home Properties of New York, Inc. and Home Properties of New York, L.P. to The Chase Manhattan Bank of the loans from The Chase Manhattan Bank to officers and directors in connection with the Executive and Director Stock Purchase and Loan Program. 10.28 Subordination Agreement between Home Properties of New York, Inc. and The Chase Manhattan Bank relating to the Executive and Director Stock Purchase and Loan Program. 10.29 Partnership Interest Purchase Agreement, dated as of December 23, 1996, among Home Properties of New York, Inc., Home Properties of New York, L.P. and State of Michigan Retirement Systems. Page 37 10.30 Registration Rights Agreement, dated as of December 23, 1996 between Home Properties of New York, Inc. and State of Michigan Retirement Systems. 10.31 Lock-Up Agreement, dated December 23, 1996 between Home Properties of New York, Inc. and State of Michigan Retirement Systems. 10.32 Contract of Sale between Lake Grove Associates Corp. and Home Properties of New York, L.P., dated December 17, 1996, relating to the Lake Grove Apartments. 11 Computation of Per Share Earnings Schedule 21 List of Subsidiaries of Home Properties of New York, Inc. 23.1 Consent of Coopers & Lybrand, LLP 23.2 Consent of Coopers & Lybrand, LLP 23.3 Consent of Coopers & Lybrand, LLP 27 Financial Data Schedule (b) Reports on Form 8-K A Form 8-K, dated January 5, 1996 was filed on December 6, 1996 reporting on the acquisition of several properties. On February 4, 1997, the Company filed Amendment No. 1 to Form 8-K/A, that includes the following financial statements: * Audited statement of revenues and certain expenses of Valley Park South Apartments for the year ended December 31, 1995. * Audited statement of revenues and certain expenses of the Hudson Valley Acquisition for the year ended December 31, 1995. * Pro forma condensed consolidated balance sheet of Home Properties of New York, Inc. as of September 30, 1996 and related notes (unaudited). * Pro forma consolidated statement of operations of Home Properties of New York, Inc. for the nine months ended September 30, 1995 and for the year ended December 31, 1995 and related notes (unaudited). * Notes to the pro forma consolidated statement of operations of the Company for the nine months ended September 30, 1996 and for the year ended December 31, 1995 (unaudited). Amendment No. 2 to Form 8-K/A, dated May 16, 1995, was filed on November 13, 1996 and included the following financial statements: * Audited Statement of Revenues and Certain Expenses for Idylwood Apartments for the year ended December 31, 1994. * Pro Forma Condensed Consolidated Balance Sheet for Home Properties of New York, Inc. as of June 30, 1995 and related notes (unaudited). Page 38 * Pro Forma Consolidated and Combined Statement of Operations for Home Properties of New York, Inc. for the six months ended June 30, 1995 (unaudited) and for the year ended December 31, 1994 (unaudited). * Notes to the pro forma consolidated and combined statement for operations of Home Properties of New York, Inc. for the six months ended June 30, 1995 and for the year ended December 31, 1994 (unaudited). Amendment No. 3 to Form 8-K, dated January 9, 1996 was filed on November 13, 1996 and included the following financial statements: * Audited statements of net assets acquired of Conifer Corporation and Subsidiaries as of March 31, 1995 and 1994 and the related statements of acquired operations and cash flow for the years then ended. * Audited combined statement of revenues and certain expenses of the Conifer Acquisition Property for the year ended December 31, 1995. * Pro forms condensed consolidated balance sheet of the Company as of December 31, 1995 and related notes (unaudited). * Pro forma consolidated statement of operations of Home Properties of New York, Inc. for the year ended December 31, 1995 and related notes (unaudited). A Form 8-K, dated August 6, 1996 was filed on October 8, 1996, reporting the increase by 580,000 shares of the Company's Common Stock available for cash purchases under the Company's Dividend Reinvestment, Stock Purchase Resident Stock Purchase and Employee Stock Purchase Plan. No financial statements were filed. A Form 8-K, dated December 23, 1996 was filed on January 7, 1997, reporting the sale of $35 million Class A limited partnership interest in Home Properties of New York, L.P. to the State Treasurer of the State of Michigan, Custodian of the Michigan Public School Employees' Retirement Systems, State Employees' Retirement System, Michigan State Police Retirement System and Michigan Judges' Retirement System. No financial statements were included. (c) Exhibits See Item 14(a)(3) above. (d) Financial Statement Schedules See Index to Financial Statements attached hereto on page F-1 of this Form 10-K. Page 39 SIGNATURES Pursuant to the requirements of Section 13 or 13(d) of the Securities Exchange Act of 1934, Home Properties of New York, Inc. certifies that it has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. HOME PROPERTIES OF NEW YORK, INC. By: /s/ Norman P. Leenhouts ---------------------------- Norman P. Leenhouts Chairman of the Board, Co-Chief Executive Officer and Director Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of Home Properties of New York, Inc. and in the capacities and on the dates indicated. Signature Title Date /s/ Norman P. Leenhouts Director, Chairman of the March 17, 1997 - ---------------------------- Norman P. Leenhouts Board of Directors and Co-Chief Executive Officer (Co-Principal Executive Officer) /s/ Nelson B. Leenhouts Director, President March 21, 1997 - ---------------------------- Nelson B. Leenhouts and Co-Chief Executive Officer (Co-Principal Executive Officer) /s/ Richard J. Crossed Director, Executive Vice March 25, 1997 - ---------------------------- Richard J. Crossed President /s/ Amy L. Tait Director, Executive Vice March 21, 1997 - ---------------------------- Amy L. Tait President /s/ David P. Gardner Vice President, Chief Financial March 25, 1997 - ---------------------------- David P. Gardner Officer and Treasurer (Principal Financial and Accounting Officer) Page 40 Signature Title Date /s/ Burton S. August, Sr. Director March 21, 1997 - ---------------------------- Burton S. August, Sr. /s/ William Balderston, III Director March 17, 1997 - ---------------------------- William Balderston, III /s/ Alan L. Gosule Director March 21, 1997 - ---------------------------- Alan L. Gosule /s/ Leonard F. Helbig, III Director March 13, 1997 - ---------------------------- Leonard F. Helbig, III /s/ Roger W, Kober Director March 25, 1997 - ---------------------------- Roger W. Kober /s/ Clifford W. Smith, Jr. Director March 19, 1997 - ---------------------------- Clifford W. Smith, Jr. /s/ Paul L. Smith Director March 12, 1997 - ---------------------------- Paul L. Smith Page 41 HOME PROPERTIES OF NEW YORK, INC. AND THE ORIGINAL PROPERTIES INDEX TO FINANCIAL STATEMENTS AND FINANCIAL STATEMENT SCHEDULE Page Report of Independent Accountants F-2 Consolidated Balance Sheets as of December 31, 1996 and 1995 F-3 Consolidated and Combined Statements of Operations for the Years Ended December 31, 1996 and 1995, for the Period From August 4, 1994 through December 31, 1994 and for the Period From January 1, 1994 through August 3, 1994. F-4 Consolidated and Combined Statements of Stockholders' Equity/Owners' Deficit for the Years Ended December 31, 1996 and 1995, for the Period From August 4, 1994 through December 31, 1994 and for the Period From January 1, 1994 through August 3, 1994. F-5 Consolidated and Combined Statements of Cash Flows for the Years Ended December 31, 1996 and 1995, for the Period From August 4, 1994 through December 31, 1994 and for the Period From January 1, 1994 through August 3, 1994. F-6 Notes to Consolidated and Combined Financial Statements F-7 Schedule III: Real Estate and Accumulated Depreciation F-24 Page F-1 REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors and Stockholders of Home Properties of New York, Inc. We have audited the accompanying consolidated and combined financial statements and the financial statement schedule of Home Properties of New York, Inc. and the Original Properties listed in Item 14(a) of this Form 10-K. These financial statements and the financial statement schedule are the responsibility of the Home Properties of New York, Inc. and the Original Properties' management. Our responsibility is to express an opinion on these financial statements and the financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Home Properties of New York, Inc. as of December 31, 1996 and 1995, and the consolidated results of its operations and its cash flows for the years ended December 31, 1996 and 1995 and the period from August 4, 1994 through December 31, 1994, and the combined results of operations and cash flows of the Original Properties for the period from January 1, 1994 through August 3, 1994, in conformity with generally accepted accounting principles. In addition, in our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. /s/ Cooper & Lybrand L.L.P. Rochester, New York February 3, 1997 Page F-2
HOME PROPERTIES OF NEW YORK, INC. CONSOLIDATED BALANCE SHEETS DECEMBER 31, 1996 and 1995 (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 1996 1995 ASSETS Real estate: Land $ 15,080 $ 7,065 Buildings, improvements and equipment 246,693 191,138 -------- -------- 261,773 198,203 Less: accumulated depreciation ( 40,237) ( 32,258) -------- -------- Real estate, net 221,536 165,945 Cash and cash equivalents 1,523 812 Cash in escrows 5,637 3,754 Accounts receivable 2,185 1,252 Prepaid expenses 2,496 1,936 Deposit 1,900 - Advances to affiliates 5,898 5,097 Deferred financing costs 1,616 1,976 Other assets 5,840 690 -------- -------- Total assets $248,631 $181,462 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY Mortgage notes payable $104,915 $ 86,149 Notes payable 261 470 Line of Credit - 4,500 Accounts payable 2,024 1,657 Accrued interest payable 601 383 Accrued expenses and other liabilities 2,525 1,882 Security deposits 2,545 1,902 -------- -------- Total liabilities 112,871 96,943 -------- -------- Minority interest 52,730 8,739 -------- -------- Commitments and contingencies Stockholders' equity: Preferred stock, $.01 par value; 10,000,000 shares authorized; no shares issued - - Common stock, $.01 par value; 30,000,000 shares authorized; 6,144,498 and 5,408,817 shares issued and outstanding at December 31, 1996 and 1995, respectively 61 54 Excess stock, $.01 par value; 10,000,000 shares authorized; no shares issued - - Additional paid-in capital 98,092 83,413 Distributions in excess of accumulated earnings ( 13,062) ( 7,687) Officer and director notes for stock purchases ( 2,061) - -------- -------- Total stockholders' equity 83,030 75,780 -------- -------- Total liabilities and stockholders' equity $248,631 $181,462 ======== ========
The accompanying notes are an integral part of these consolidated and combined financial statements. Page F-3 HOME PROPERTIES OF NEW YORK, INC. AND THE ORIGINAL PROPERTIES CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Original Home Properties of New York, Inc. Properties ---------------------------------------- ---------- Years Ended --------------------------- 08/04/94 01/01/94 December 31, December 31, Through Through 1996 1995 12/31/94 08/03/94 Revenues: Rental income $42,214 $31,705 $10,995 $11,526 Property other income 1,025 1,062 423 415 Other income 2,431 1,534 525 79 Property management income - - - 834 -------- -------- -------- -------- Total revenues 45,670 34,301 11,943 12,854 -------- -------- -------- -------- Expenses: Operating and maintenance 21,859 15,911 5,267 6,329 Property management - - - 625 General and administrative 1,482 1,200 400 407 Interest 9,208 6,432 1,444 3,126 Depreciation and amortization 8,077 6,258 2,191 1,584 -------- -------- -------- -------- Total expenses 40,626 29,801 9,302 12,071 -------- -------- -------- -------- Income before minority interest and extraordinary item 5,044 4,500 2,641 783 Minority interest 897 455 256 - -------- -------- -------- -------- Income before extraordinary item 4,147 4,045 2,385 783 Extraordinary item, prepayment penalties, net of $141 in 1995 and $265 in 1994 allocated to minority interest - ( 1,249) ( 2,498) - -------- -------- -------- -------- Net income (loss) $ 4,147 $ 2,796 ($ 113) $ 783 ======== ======== ======== ======== Per share data: Income before extraordinary item $.74 $.75 $.44 Extraordinary item - ($.23) ($.46) ---- ---- ---- Net income (loss) $.74 $.52 ($.02) ==== ==== ==== Weighted average number of shares outstanding 5,601,027 5,408,474 5,408,230 ========= ========= =========
The accompanying notes are an integral part of these consolidated and combined financial statements. Page F-4 HOME PROPERTIES OF NEW YORK, INC. AND THE ORIGINAL PROPERTIES CONSOLIDATED AND COMBINED STATEMENTS OF STOCKHOLDERS' EQUITY/OWNERS' DEFICIT (IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
Distributions Original Common Stock Additional in Excess of Properties Officer/Director ---------------- Paid-In Accumulated Owners Notes for Shares Amount Capital Earnings Deficit Stock Purchases Balance, January 1, 1994 $ - $ - $ - ($2,591) $ - Distributions ( 933) Net income 783 --------- --------- --------- --------- --------- --------- Balance, August 3, 1994 ( 2,741) Reclassification of Original Properties deficit in connection with formation of the Company ( 2,741) 2,741 Initial capitalization of the Company and gross proceeds from the initial public offering of stock 5,408,200 54 102,698 Offering and organization costs ( 8,986) Acquisition of non-controlled interest in entities included in Original Properties 1,288 Adjustment for minority interest's ownership of Operating Partnership at date of initial public offering ( 8,857) Issuance of common stock 234 4 Net loss of Company ( 113) Dividends paid ($.26 per share) ( 1,406) --------- --------- --------- --------- --------- --------- Balance, December 31, 1994 5,408,434 54 83,406 ( 1,519) Issuance of common stock 383 7 Net income of Company 2,796 Dividends paid ($1.66 per share) ( 8,964) --------- --------- --------- --------- --------- --------- Balance, December 31, 1995 5,408,817 54 83,413 ( 7,687) Issuance of common stock, net 735,681 7 14,679 ( 2,061) Net income of Company 4,147 Dividends paid ( 9,522) ($1.69 per share) --------- --------- --------- --------- --------- --------- Balance, December 31, 1996 6,144,498 $61 $98,092 ($13,062) $ - ($ 2,061) ========= ========= ========= ========= ========= =========
The accompanying notes are an integral part of these consolidated and combined financial statements. Page F-5 HOME PROPERTIES OF NEW YORK, INC. AND THE ORIGINAL PROPERTIES CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS (IN THOUSANDS)
Original Home Properties of New York, Inc. Properties ---------------------------------------- ---------- Years Ended ------------------------ 08/04/94 01/01/94 December 31, December 31, Through Through 1996 1995 12/31/94 08/03/94 Cash flows from operating activities: Net income (loss) $ 4,147 $ 2,796 ($ 113) $ 783 -------- -------- -------- -------- Adjustments to reconcile net income (loss) to net cash provided by operating activities: Extraordinary item - deferred loan costs - 624 412 - Equity in income of HP Management and ( 142) ( 35) ( 61) - Conifer Realty Income allocated to minority interest 897 455 256 - Extraordinary item allocated to minority - ( 141) ( 265) - interest Depreciation and amortization 8,667 6,914 2,426 1,647 Changes in assets and liabilities: Other assets ( 1,199) ( 1,652) 325 ( 1,208) Accounts payable and accrued 1,871 850 171 1,305 liabilities -------- -------- -------- -------- Total adjustments 10,094 7,015 3,264 1,744 -------- -------- -------- -------- Net cash provided by operating activities 14,241 9,811 3,151 2,527 -------- -------- -------- -------- Cash flows used in investing activities: Purchase of properties, net of mortgage ( 14,026) ( 9,402) ( 68,063) - notes assumed Additions to properties ( 8,843) ( 8,179) ( 1,703) ( 1,168) Deposit on property ( 1,900) - - - Advances to affiliates ( 15,308) ( 5,683) ( 1,344) - Payments on advances to affiliates 14,507 1,930 - - Other ( 71) ( 14) - - -------- -------- -------- -------- Net cash used in investing activities ( 25,641) ( 21,348) ( 71,110) ( 1,168) -------- -------- -------- -------- Cash flows from financing activities: Proceeds from sale of common stock 12,625 7 102,756 - Proceeds from mortgage and other notes 4,530 45,292 22,496 - payable Payments of mortgage and other notes ( 21,822) ( 28,429) ( 42,300) ( 631) payable Proceeds from line of credit 34,030 17,677 5,550 - Payments on line of credit ( 38,530) ( 13,177) ( 5,550) - Payment of offering expenses - - ( 8,986) - Payment of interest rate reduction - - ( 1,675) - agreements Additions to deferred loan costs ( 243) ( 882) ( 763) ( 120) Additions to cash escrows ( 196 ( 1,687) ( 5) 1,883) Dividends and distributions paid ( 11,537) ( 9,970) ( 1,556) - Capital contribution to minority interest 34,941 - 30 - Capital distributions - - - ( 933) -------- -------- -------- -------- Net cash provided by (used in) financing 12,111 10,714 68,315 ( 1,689) activities -------- -------- -------- -------- Net increase (decrease) in cash 711 ( 823) 356 ( 330) Cash and cash equivalents: Beginning of period 812 1,635 1,279 1,609 -------- -------- -------- -------- End of period $ 1,523 $ 812 $ 1,635 $ 1,279 ========= ========== ========= ========
The accompanying notes are an integral part of these consolidated and combined financial statements. Page F-6 HOME PROPERTIES OF NEW YORK, INC. AND THE ORIGINAL PROPERTIES NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA) 1 ORGANIZATION AND BASIS OF PRESENTATION Organization Home Properties of New York, Inc. (the " Company " ) was formed in November 1993, as a Maryland corporation and is engaged primarily in the ownership, management, acquisition and development of residential apartment communities. On August 4, 1994, the Company completed an initial public offering ( " IPO " ) of 5,408,000 shares of common stock. Net proceeds from the IPO of approximately $94,000 were contributed to Home Properties of New York, L.P. (the " Operating Partnership " ) in exchange for units representing a 90.4% general partnership interest in the Operating Partnership. The Operating Partnership acquired all of the assets and assumed all of the liabilities of the Original Properties and in connection therewith, (i) issued 575,375 units, representing a 9.6% minority interest in the Operating Partnership, to insiders of Home Leasing Corporation ( " HLC " ); (ii) paid $30,600 in cash to the partners of the Original Properties; (iii) prepaid approximately $29,600 of the approximately $58,000 of mortgage indebtedness on the Original Properties; and (iv) acquired four residential properties (the " Acquisition Properties " ) from unaffiliated sellers for approximately $32,400 in cash and the assumption of approximately $3,300 in existing mortgage indebtedness. The Original Properties is not a legal entity but rather a combination of twelve entities which were wholly owned by HLC and its affiliates that were reorganized to combine HLC's interest in certain investment properties and property management operations. The entities owned 100% of each property. On January 1, 1996, the Operating Partnership acquired the operations of Conifer Realty, Inc. and Conifer Development, Inc. ("Conifer") and purchased certain of Conifer's assets for a total acquisition price of $15,434. The acquisition was funded by issuing 486,864 Operating Partnership units (UPREIT units, valued at $17.25 per unit), the assumption of $6,801 of existing mortgage debt and $235 in cash paid to outside partners. Additional consideration will be paid in UPREIT units if development fee income exceeds target levels over the next five years. Conifer was involved in the development and management of government-assisted housing throughout New York State. The acquisition has been accounted for using the purchase method of accounting and, accordingly, the results of operations are included from the date of acquisition forward. The purchase price was allocated to three communities containing 358 units valued at $10,173, general partnership interests in 2,804 apartment units that Home Properties will manage valued at $1,757, goodwill valued at $3,348 and other assets valued at $156. Page F-7 HOME PROPERTIES OF NEW YORK, INC. AND THE ORIGINAL PROPERTIES NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS - (Conti nued) 1 ORGANIZATION AND BASIS OF PRESENTATION (Continued) Basis of Presentation The accompanying consolidated financial statements include the accounts of the Company and its 68.2% (89.8% at December 31, 1995) general partnership interest in the Operating Partnership. In addition, the combined financial statements of the Original Properties present the historical financial statements of the partnerships and assets acquired by the Operating Partnership on a combined basis. All significant intercompany balances and transactions have been eliminated in these consolidated and combined financial statements. 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Real Estate Real estate is recorded at the lower of cost or net realizable value. Costs related to the acquisition, development, construction and improvement of properties are capitalized. Interest costs are capitalized until construction is substantially complete. When retired or otherwise disposed of, the related cost and accumulated depreciation are cleared from the respective accounts and the net difference, less any amount realized from disposition, is reflected in income. There was $63 of interest capitalized in 1996. Ordinary repairs and maintenance are expensed as incurred. The Company quarterly reviews its properties in accordance with the Statement of Financial Accounting Standards No. 121 "Accounting for the Impairment of Long Lived Assets" to determine if its carrying costs will be recovered from future operating cash flows. In cases where the Company does not expect to recover its carrying costs, the Company recognizes an impairment loss. No such losses have been recognized to date. Depreciation Properties are depreciated using a straight-line method over the estimated useful lives of the assets as follows: buildings, improvements and equipment - 5-40 years; and tenant improvements - life of related lease. Depreciation expense charged to operations was $7,979, $6,499, $2,192 and $1,583 for the years ended December 31, 1996 and 1995, for the period August 4, 1994 to December 31, 1994 and for the period January 1, 1994 to August 3, 1994. Page F-8 HOME PROPERTIES OF NEW YORK, INC. AND THE ORIGINAL PROPERTIES NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS - (Conti nued) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Cash and Cash Equivalents For purposes of the consolidated and combined statements of cash flows, cash and cash equivalents include all cash and highly liquid investments purchased with original maturities of three months or less. The Company estimates that the fair value of cash equivalents approximates the carrying value due to the relatively short maturity of these instruments. Cash in Escrows Cash in escrows consists of cash restricted under the terms of various loan agreements to be used for the payment of property taxes and insurance as well as required replacement reserves and tenant security deposits for residential properties. Deferred Charges Costs relating to the financing of properties and interest rate reduction agreements are deferred and amortized over the life of the related agreement. The straight-line method, which approximates the effective interest method, is used to amortize all financing costs. The range of the terms of the agreements are from 1-32 years. Accumulated amortization was $1,349 and $1,588 as of December 31, 1996 and 1995, respectively. Goodwill Goodwill represents the excess of the purchase price of acquired companies over the estimated fair value of the tangible and intangible net assets acquired. Goodwill is being amortized on a straight-line basis over forty years. Accumulated amortization was $85 and $0 as of December 31, 1996 and 1995, respectively. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Page F-9 HOME PROPERTIES OF NEW YORK, INC. AND THE ORIGINAL PROPERTIES NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS - (Conti nued) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Advertising Advertising expenses are charged to operations during the year in which they were incurred. Advertising expenses incurred and charged to operations were approximately $1,256, $870, $262 and $267 for the years ended December 31, 1996 and 1995, for the period August 4, 1994 to December 31, 1994 and for the period January 1, 1994 to August 3, 1994. Revenue Recognition The Operating Partnership leases its residential properties under leases with terms generally one year or less. Rental income is recognized when earned. Property other income, which consists primarily of income from operation of laundry facilities, administrative fees, garage and carport rentals and miscellaneous charges to residents, is recognized when earned. The Operating Partnership receives development and other fee income from properties in the development phase. This fee income is recognized on the percentage of completion method. Income Taxes The Company has elected to be taxed as a real estate investment trust ( " REIT " ) under the Internal Revenue Code of 1986, as amended, commencing with the taxable year ended December 31, 1994. As a result, the Company generally will not be subject to Federal or State income taxation at the corporate level to the extent it distributes annually at least 95% of its REIT taxable income to its shareholders and satisfies certain other requirements. Accordingly, no provision has been made for federal income taxes in the accompanying consolidated financial statements for the years ended December 31, 1996 and 1995 and for the period from August 4, 1994 to December 31, 1994. Stockholders are taxed on dividends and must report such dividends as either ordinary income, capital gains, or as return of capital. Prior to the formation of the Company, each partner of the Original Properties was taxed individually on such partner's share of partnership income or loss, thus no provision for federal and state income taxes was provided in the combined financial statements for the period from January 1, 1994 to August 3, 1994. Earnings Per Common Share Earnings (loss) per common share amounts are based on the weighted average number of common shares and common equivalent shares outstanding during the period presented. The exchange of an Operating Partnership unit for common stock will have no effect on earnings (loss) per common share as unitholders and stockholders effectively share equally in the net income (loss) of the Operating Partnership. Fully diluted earnings (loss) per common share are based upon the increased number of common shares that would be outstanding assuming the exercise of common share options. Since fully diluted earnings per common share are not materially dilutive, such amounts are not presented. Page F-10 HOME PROPERTIES OF NEW YORK, INC. AND THE ORIGINAL PROPERTIES NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS - (Conti nued) 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Account Reclassifications Certain account balances at December 31, 1995 and December 31, 1994 were reclassified to conform to account classifications used by the Company at December 31, 1996. These changes had no effect on reported results of operations or financial position. 3 LINE OF CREDIT As of December 31, 1996, the Company had an unsecured line of credit of $25,000 with no outstanding balance. The line of credit expires on August 22, 1997. Borrowings bear interest at 1.75% over the one-month LIBOR rate. At December 31, 1996, the interest rate was 7.34%. Page F-11 HOME PROPERTIES OF NEW YORK, INC. AND THE ORIGINAL PROPERTIES NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS - (Conti nued) 4 MORTGAGE NOTES PAYABLE Mortgage notes, collateralized by certain properties, are as follows:
December 31, Periodic ---------------- Interest Payment Maturity 1996 1995 Rate Terms (a) Date Westminster $ 3,230 - (b) (b) 1997 Conifer Court 412 - 10.53% 4 1999 Perinton, Riverton & Waterfalls 12,087 $12,185 (c) 76 2000 Valley Park South 9,650 - 8.50% (i) 2000 Wedgewood Village 5,750 5,750 (d) (d) 2001 Wedgewood Shopping 500 500 (d) (d) 2001 Brook Hill 5,019 5,089 7.75% 39 2002 Garden Village 4,723 4,790 7.75% 36 2002 1600 Elmwood 5,510 5,588 7.75% 42 2002 Village Green 4,920 4,989 7.75% 38 2002 Williamstowne Village 9,980 10,084 (e) 70 2002 Fairview 4,045 4,082 (f) 29 2003 Finger Lakes 4,045 4,082 (f) 29 2003 Hamlet Court 1,832 - (g) 14 2003 Springcreek & Meadows 3,254 3,312 (h) 23 2004 Idylwood 9,468 9,539 8.625% 74 2005 Raintree Island 6,582 6,664 8.50% 54 2006 Conifer Village 3,045 3,170 7.20% (j) 2010 Fairways at Village Green 4,584 - 8.23% 37 2019 Raintree Island 1,218 1,233 8.50% 10 2020 Harborside 5,061 5,092 8.92% 40 2027 -------- -------- $104,915 $86,149 ======== =======
(a) This amount represents the monthly payment of principal and interest. (b) Monthly payments of interest only at 1.75% above LIBOR are due until maturity. (c) The interest rate for the period August 4, 1994, through August 31, 1999, is 6.75%; and, for the period September 1, 1999, through maturity, the rate is .5% over prime. (d) The interest rate for the period August 4, 1994, through July 31, 1999, is 6%; and, for the period August 1, 1999, until maturity, the rate is fixed at 2% over the five-year US Treasury bill yield with a minimum of 7.5%. Monthly payments of interest only, with a $100 principal payment due in August 1998, and $150 payment due in August 1999, to be allocated between the apartments and shopping center. Page F-12 HOME PROPERTIES OF NEW YORK, INC. AND THE ORIGINAL PROPERTIES NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS - (Continued) 4 MORTGAGE NOTES PAYABLE (Continued) (e) The interest rate for the period October 27, 1995 through October 31, 2000 is 7.37%; and, for the period November 1, 2000 until maturity, the rate is .5% above prime. (f) The interest rate for the period May 17, 1995 through April 30, 2000 is 7.71%; and, for the period May 1, 2000 until maturity, the rate is .5% above prime. (g) The interest rate for the period January 1, 1996 through April 30, 1998 is 8.25%; for the period May 1, 1998 through May 1, 2003, the rate is 2.75% above the five-year US Treasury Security, not to be lower than 7.75%. (h) The interest rate for the period August 4, 1994 through July 31, 1997 is 6.75%; for the period August 1, 1997 through July 31, 2000, the rate is 1.75% above the three-year US Treasury bond yield; and, for the period August 1, 2000 through July 31, 2004, the rate is .5% over prime. (i) Monthly payments of interest only. (j) Monthly payments of interest only with annual principal payments of $135 in 1997 increasing to $330 in 2010. Principal payments on the mortgage notes payable for years subsequent to December 31, 1996 are as follows: 1997 $ 4,326 1998 1,233 1999 1,743 2000 22,579 2001 7,205 Thereafter 67,829 ------- $104,915 ======== The Company determines the fair value of the mortgage notes payable based on the discounted future cash flows at a discount rate that approximates the Company's current effective borrowing rate for comparable loans. Based on this analysis, the Company has determined that the fair value of the mortgage notes payable approximates $107,322 at December 31, 1996. The Company has incurred prepayment penalties on debt restructurings which are accounted for as extraordinary items in the statement of operations. Prepayment penalties were approximately $1,390 and $2,763 for the year ended December 31, 1995 and for the period from August 4, 1994 to December 31, 1994, respectively. The 1995 paydowns totaled $39,080 from six debt instruments and were financed by three new borrowings in excess of $40,000. The 1994 paydowns totaled $29,796 from seven debt instruments and were financed from the proceeds of the IPO. Page F-13 HOME PROPERTIES OF NEW YORK, INC. AND THE ORIGINAL PROPERTIES NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS - (Conti nued) 5 NOTES PAYABLE Notes payable consist of the following:
December 31, ---------------- Interest 1996 1995 Rate Financial institution $ 72 $107 2.5% Seller financing 189 363 7.5% ---- ---- $261 $470 ==== ====
Principal payments on the notes payable are approximately $211 annually. 6 MINORITY INTEREST The changes in minority interest for the two years ended December 31, 1996 are as follows:
1996 1995 Balance, beginning of year $ 8,739 $8,978 Issuance of UPREIT Units associated with property acquisitions 10,168 453 Proceeds from private placement, net of associated costs 34,941 - Net income 897 314 Distributions ( 2,015) (1,006) ------- ------- $52,730 $8,739 ======= =======
7 STOCKHOLDERS' EQUITY Dividend Reinvestment Plan In November, 1995, the Company adopted the Dividend Reinvestment, Stock Purchase, Resident Stock Purchase and Employee Stock Purchase Plan (the " Plan " ). The Plan provides the stockholders of the Company an opportunity to automatically invest their cash dividends at a discount of 3% from the market price. In addition, eligible participants may make monthly or other voluntary cash investments in shares of common stock. During 1996, over $12 million net was raised through this program. Page F-14 HOME PROPERTIES OF NEW YORK, INC. AND THE ORIGINAL PROPERTIES NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS - (Conti nued) 7 STOCKHOLDERS' EQUITY (Continued) Officer and Director Notes for Stock Purchases On August 12, 1996, eighteen officers and the six independent directors purchased an aggregate of 208,543 shares of common stock through the Dividend Reinvestment Plan at the price of $19.79. The purchases were financed 50% from a bank loan and 50% by the Company. The Company loans bear interest at 7% per annum and mature in August, 2016. The Company loans are nonrecourse, subordinate to the above-referenced bank loans, and are collateralized by pledges of the 208,543 common shares. The loans will be repaid from the regular quarterly dividends paid on the shares of common stock pledged, after the corresponding bank loans are paid in full. The Company has guaranteed the bank loans which total $1,874 at December 31, 1996. Dividends Stockholders are taxed on dividends and must report such dividends as either ordinary income, capital gains, or as return of capital. The appropriate amount of each per common share is as follows:
Ordinary Income Return of Capital 1994 5.785% 94.215% 1995 46.2% 53.8% 1996 51.1% 48.9%
Operating Partnership Units/Interests Units in the Operating Partnership ("UPREIT Units") are exchangeable on a one-for-one basis into common shares. On December 30, 1996, $35 million was raised in a private placement through the sale of a Class A Limited Partnership Interest to a state pension fund. The interest, which can be converted into 1,666,667 shares of common stock, will receive a preferred return equal to the greater of: (a) 9.25% on the original investment during the first two years declining to 9.0% thereafter, or (b) the actual dividends paid to common shareholders on 1,666,667 shares. Any unconverted interest can be redeemed without premium by the Company after ten years. Proceeds of the transaction, which are anticipated to be used to fund future acquisitions, were used to repay floating rate debt on an interim basis. At December 31, 1996, 6,144,498 common shares and 2,869,686 convertible units/interests were outstanding, for a total of 9,014,184. Page F-15 HOME PROPERTIES OF NEW YORK, INC. AND THE ORIGINAL PROPERTIES NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS - (Conti nued) 8 MANAGEMENT COMPANIES The property management, leasing and development activities for properties affiliated with HLC, which were not combined with the Original Properties, and certain other properties not affiliated with HLC, are performed by Home Properties Management, Inc. (" HP Management " ). HP Management issued non-voting common stock to the Operating Partnership in exchange for management contracts for commercial and development managed properties and certain other assets. This exchange entitles the Operating Partnership to receive 99% of the economic interest of HP Management. The remaining 1% economic interest and voting stock were issued to the owners of HLC. The property management, leasing and development activities for properties affiliated with the Conifer acquisition which occurred on January 1, 1996 are performed by Conifer Realty Corp. ("Conifer Realty"). Conifer Realty issued non-voting common stock to the Operating Partnership in exchange for management contracts for residential, commercial and development managed properties and certain other assets. This exchange entitles the operating Partnership to receive 99% of the economic interest of Conifer Realty. The remaining 1% economic interest and voting stock were issued to the owners of HLC and Conifer. HP Management and Conifer Realty (the "Management Companies") receive development, construction and other fee income from properties in the development phase. This fee income is recognized on the percentage of completion method. The Management Companies are accounted for under the equity method. The Management Companies provide property management and administrative services to certain real estate and other entities. In consideration for these services, the Management Companies receive monthly management fees generally based on a percentage of revenues or costs incurred. Management fees are recognized as revenue when they are earned. The Company's share of income from the Management Companies was $142, $35 and $61 for the years ended December 31, 1996 and 1995 and for the period August 4, 1994 to December 31, 1994. Summarized combined financial information of the Management Companies at and for the years ended December 31, 1996 and 1995 and for the period August 4, 1994 to December 31, 1994 follows:
1996 1995 1994 Management fees $2,942 $1,043 $431 Development and construction management fees 1,971 320 170 General and administrative (4,448) (1,226) (499) Other expenses ( 322) ( 101) ( 40) ------ ------ ---- Net income $ 143 $ 36 $ 62 ====== ====== ==== Total assets $3,279 $ 646 $406 ====== ====== ==== Total liabilities $2,762 $ 430 $226 ====== ====== ====
Page F-16 HOME PROPERTIES OF NEW YORK, INC. AND THE ORIGINAL PROPERTIES NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS - (Continued) 9 TRANSACTIONS WITH AFFILIATES The Company and the Management Companies recognized management and development fee revenue, interest income and other miscellaneous income from affiliated entities of $6,170, $2,291, $821 and $813 for the years ended December 31, 1996 and 1995, for the period August 4, 1994 to December 31, 1994, and for the period January 1, 1994 to August 3, 1994, respectively. The Company leases its corporate office space from HLC. The lease requires an annual base rent of $172 through the August, 2000 lease expiration. The lease also requires the Company to pay a pro rata portion of property improvements, real estate taxes and common area maintenance. Rental expense was $349, $237, $96 and $134 for the years ended December 31, 1996 and 1995, for the period August 4, 1994 to December 31, 1994, and for the period January 1, 1994 to August 3, 1994, respectively. From time to time, the Company advances funds as needed to the Management Companies which totaled $2,451 and $422 at December 31, 1996 and 1995, respectively, and bear interest at 1% over prime. 10 COMMITMENTS AND CONTINGENCIES Ground Lease The Company has a non-cancelable operating ground lease for one of its properties. The lease expires May 1, 2020, with options to extend the term of the lease for two successive terms of twenty-five years each. The lease provides for contingent rental payments based on certain variable factors. The lease also requires the lessee to pay real estate taxes, insurance and certain other operating expenses applicable to the leased property. Ground lease expense was $174, $169, $70 and $97 including contingent rents of $104, $99, $40 and $57 for the years ended December 31, 1996 and 1995, for the period August 4, 1994 to December 31, 1994, and for the period January 1, 1994 to August 3, 1994, respectively. At December 31, 1996, future minimum rental payments required under the lease are $70 per year until the lease expires. 401(K) Savings Plan The Company participates in a contributory savings plan. Under the plan, the Company will match 75% of the first 4% of participant contributions. Expenses under this plan for the periods presented were not material. Page F-17 HOME PROPERTIES OF NEW YORK, INC. AND THE ORIGINAL PROPERTIES NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS - (Conti nued) 10 COMMITMENTS AND CONTINGENCIES (Continued) Employment Agreements The Operating Partnership entered into five-year employment agreements with two executives on August 4, 1994. The executives have a base salary of $145 through December 31, 1996, and for each subsequent year the base salary shall be 10% in excess of the base salary for the preceding year. The Operating Partnership has also entered into an employment agreement with one other executive effective January 1, 1996. The terms of that agreement are substantially the same in all respects as described above. The executives are also entitled to receive incentive compensation pursuant to the Company's Incentive Compensation Plan as it may be revised by the Compensation Committee from time to time. Incentive Compensation Plan Effective January 1, 1996, the Incentive Compensation Plan provides that eligible officers and key employees may earn a cash bonus based on increases in funds from operations. No cash bonuses will be payable under the Incentive Compensation Plan unless the increase in funds from operations per share, after giving effect to the bonuses, is equal to or greater than 2%. The Company accrued $100 under the prior formula in 1994 relative to results for the period from August 4, 1994 to December 31, 1994. No bonus was accrued for 1995. The Company accrued $495 based on the formula for 1996. Contingencies The Company is subject to various legal proceedings and claims that arise in the ordinary course of business. These matters are generally covered by insurance. While the resolution of these matters cannot be predicted with certainty, management believes that the final outcome of such legal proceedings and claims will not have a material adverse effect on the Company's liquidity, financial position or results of operations. Debt Covenants Certain loan agreements of the Company contain restrictions which, among other things, require maintenance of certain financial ratios and limit the payment of dividends. At December 31, 1996, the Company was in compliance with these covenants. Guarantees The Company has guaranteed temporary construction financing totalling $13,479 associated with five entities and a total of $3,692 of additional debt associated with six entities where the Company is the general partner. In addition, the Company, has guaranteed the Low Income Housing Tax Credit to limited partners in thirty-two partnerships totalling approximately $23,000. As of December 31, 1996, there were no known conditions that would make certain such payments necessary. Page F-18 HOME PROPERTIES OF NEW YORK, INC. AND THE ORIGINAL PROPERTIES NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS - (Conti nued) 11 STOCK BENEFIT PLAN The Company has adopted the 1994 Stock Benefit Plan as Amended (the " Plan " ). Plan participants include officers, non-employee directors, and key employees of the Company. The Company has reserved 946,000 shares for issuance to officers and employees and 54,000 shares for issuance to non-employee directors. No options have been exercised. Options granted to officers and employees of the Company vest 20% for each year of service until 100% vested on the fifth anniversary. Certain officers' options (264,000) and directors' options (54,000) vest immediately upon grant. The exercise price per share for stock options may not be less than 100% of the fair market value of a share of common stock on the date the stock option is granted (110% of the fair market value in the case of incentive stock options granted to employees who hold more than 10% of the voting power of the Company's common stock). During 1996, 144,000 options were granted with an exercise price greater than the fair market value of the stock at the date of the grant. The weighted average fair value of these options was $0.78. Options granted to directors and employees who hold more than 10% of the voting power of the Company expire after five years from the date of grant. All other options expire after ten years from the date of grant. The Plan also allows for the grant of stock appreciation rights and restricted stock awards, however, there were none granted at December 31, 1996. At December 31, 1996, 302,222 common shares were available for future grant of options or awards under the Plan. Details of stock option activity during 1996, 1995 and 1994 are as follows:
Number Option Price of Shares Per Share Options outstanding at August 4, 1994 - $ - Granted, 1994 429,532 19.00 ------- Options outstanding at December 31, 1994 429,532 19.00 (194,000 shares exercisable) Granted 1995 18,000 17.875 Cancelled 1995 ( 2,000) 19.00 ------- Options outstanding at December 31, 1995 445,532 17.875-19.00 (258,527 shares exercisable) Granted, 1996 180,000 19.00 Granted, 1996 21,000 19.375 Granted, 1996 52,146 20.50 Cancelled, 1996 ( 900) 19.00 ------- Options outstanding at December 31, 1996 697,778 $17.875-$20.50 =======
(411,053 shares exercisable) Page F-19 HOME PROPERTIES OF NEW YORK, INC. AND THE ORIGINAL PROPERTIES NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS - (Conti nued) 11 STOCK BENEFIT PLAN (Continued) The following table summarizes information about options outstanding at December 31, 1996:
Weighted Average Weighted Weighted Remaining Average Average Year Number Contractual Fair Value Number Exercise Granted Outstanding Life of Options Exercisable Price 1994 426,632 7 N/A 287,053 $19.000 1995 18,000 3 $1.39 18,000 17.875 1996 253,146 9 $1.01 106,000 19.060 ------- - ------- ------- Totals 697,778 8 411,053 $18.970 ======= = ======= =======
The Company has adopted the disclosure only provisions of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation." Accordingly, no compensation cost has been recognized for the stock option plan. Had compensation for the Company's stock option plan been determined based on the fair value at the date of grant for awards in 1996 and 1995, the Company's proforma net income and proforma earnings per share would have been $4,031 and $2,771, and $.72 and $.51, respectively. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions used for grants in 1996 and 1995: dividend yield of 9.315%; expected volatility of 18.97%; forfeiture rate of 5%; and expected lives of 7.5 years for options with a lifetime of ten years, and five years for options with a lifetime of five years. The interest rate used in the option-pricing model is based on a risk free interest rate ranging from 5.25% to 6.87%. Page F-20 HOME PROPERTIES OF NEW YORK, INC. AND THE ORIGINAL PROPERTIES NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS - (Conti nued) 12 PROPERTY ACQUISITIONS Subsequent to the IPO in August, 1994 and through December 31, 1996, the Company has acquired the communities listed below.
Date Year Number Cost of Community Acquired Constructed of Units Acquisitions Harborside (1) 10/1/94 1972 281 $ 6,363 Northgate Manor 11/3/94 1962 224 7,277 Village Green 12/19/94 1988 248 9,080 Idylwood (2) 1/6/95 1969 720 17,627 Pearl Street 5/16/95 1969 60 1,238 Candlewood (3) 12/4/95 1969 126 2,950 Conifer Court 1/1/96 1963 20 703 Hamlet Court 1/1/96 1971 98 2,702 Westminster 1/1/96 1972 240 6,623 Village Green (Fairways) 3/5/96 1986 200 5,246 Carriage Hill 7/16/96 1973 140 4,396 Cornwall Park 7/16/96 1967 75 3,386 Lakeshore Villa 7/16/96 1975 152 4,421 Sunset Gardens 7/16/96 1968-71 217 5,357 Valley Park South 11/22/96 1971-73 384 18,914
(1) Operation of Harborside commenced October 1, 1994 subject to an operating and management agreement. The acquisition was accounted for on the equity method until the final closing date of March 29, 1995. (2) The acquisition of Idylwood occurred in stages, with 44% being acquired on January 6, 1995 and the balance on September 7, 1995. The 56% acquired in September was subject to a lease entitling the Operating Partnership to all items of income and expense effective January 1, 1995. The acquisition was accounted for on the equity method until the final closing date in September 1995. (3) Operation of Candlewood commenced December 4, 1995 subject to a net lease agreement. This acquisition was accounted for on the equity method until the final closing date of January 5, 1996. Page F-21 HOME PROPERTIES OF NEW YORK, INC. AND THE ORIGINAL PROPERTIES NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS - (Conti nued) 12 PROPERTY ACQUISITIONS (Continued) Proforma Financial Information (Unaudited) The following unaudited proforma information was prepared as if the 1996 transactions related to the Conifer acquisition and the subsequent acquisitions of seven separate apartment communities had occurred on January 1, 1995. The proforma financial information is based upon the historical consolidated financial statements and is not necessarily indicative of the consolidated results which actually would have occurred if the transactions had been consummated at the beginning of 1995, nor does it purport to represent the results of operations for future periods.
For the years ended December 31, 1996 1995 Total revenues $50,660 $45,112 Income before extraordinary item 3,744 3,363 Net income 3,744 2,225 Per share data $.67 $.62 Income before extraordinary item $.67 $.41 Weighted average numbers of shares 5,601,027 5,408,474 outstanding
13 SUPPLEMENTAL CASH FLOW DISCLOSURES
Original Home Properties of New York, Inc. Properties -------------------------------- ---------- Years Ended ---------------------- 08/04/94 01/01/94 December 31, December 31, Through Through 1996 1995 12/31/94 08/03/94 Cash paid for interest $8,441 $5,739 $1,268 $3,054 Mortgage loans assumed associated with property acquisitions 35,849 14,694 14,700 - Issuance of UPREIT Units associated with property and other acquisitions 10,168 453 250 - Raintree capitalized lease affecting real estate and leasehold liability - 1,719 - - Shares issued in exchange for officer and director notes 2,061 - - -
Page F-22 HOME PROPERTIES OF NEW YORK, INC. AND THE ORIGINAL PROPERTIES NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS - (Continued) 14 SUBSEQUENT EVENT On February 3, 1997, the Operating Partnership acquired Lake Grove Apartments, a 368-unit apartment community located in Lake Grove, Long Island, New York for $19,000. The Company borrowed $17,500 from its line of credit to fund the purchase plus closing costs, net of a $1,900 deposit which had been made at December 31, 1996. The remaining available balance on the line of credit after this borrowing is $7,500. 15 QUARTERLY FINANCIAL STATEMENT INFORMATION (UNAUDITED) Quarterly financial information for the years ended December 31, 1996 and 1995 are as follows:
1996 ---------------------------------------- First Second Third Fourth Revenues $10,540 $10,706 $11,816 $12,608 Income before minority interest and extraordinary item 810 1,122 1,626 1,486 Minority interest 147 194 285 271 Extraordinary item, net of minority interest N/A N/A N/A N/A Net income 663 928 1,341 1,215 Earnings per share: Net income .12 .17 .24 .21
1995 ---------------------------------------- First Second Third Fourth Revenues $7,561 $8,180 $8,809 $9,751 Income before minority interest and extraordinary item 851 1,030 1,245 1,374 Minority interest (84) (105) (126) (140) Extraordinary item, net of minority interest N/A N/A N/A (1,249) Net income (loss) 767 925 1,119 (15) Earnings per share: Income before extraordinary item .14 .17 .21 .23 Extraordinary item N/A N/A N/A (.23) Net income .14 .17 .21 0
Page F-23 SCHEDULE III HOME PROPERTIES OF NEW YORK, INC. REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1996 (IN THOUSANDS)
Total Initial Cost Total Cost Cost, -------------------------- Costs ----------------------- Net of Buildings, Capitalized Buildings Accumu- Accumu- Improve- Subsequent Improve- lated lated Year of Encum- ments & Adjustments to ments & Total Deprecia- Deprecia- Acquisi- brances Land Equipment (a) Acquisition Land Equipment (b) tion tion tion Brook Hill $ 5,019 $ 330 $ 7,920 $ 948 $ 330 $ 8,868 $ 9,198 $ 660 $ 8,538 1994 Apartments Candlewood 387 2,592 33 387 2,625 3,012 85 2,927 1996 Apartments Carriage 570 3,826 451 570 4,277 4,847 64 4,783 1996 Hill Apartments Conifer 412 91 612 9 91 621 712 22 690 1996 Court Apartments Conifer 3,045 358 8,555 26 358 8,581 8,939 628 8,311 1994 Village Apartments Cornwall 439 2,947 236 439 3,183 3,622 54 3,568 1996 Park Townhouses Fairview 4,045 580 5,305 $ 2,828 958 580 9,091 9,671 2,766 6,905 1985 Heights & Fairview Manor Finger Lakes 4,045 200 4,536 1,882 759 200 7,177 7,377 2,076 5,301 1983 Manor Apartments Garden 4,723 354 8,546 789 354 9,335 9,689 823 8,866 1994 Village Apartments Hamlet Court 1,832 351 2,351 35 351 2,386 2,737 76 2,661 1996 Apartments Harborside 5,061 250 6,113 1,187 250 7,300 7,550 455 7,095 1995 Manor Idylwood 9,468 700 16,927 2,719 700 19,646 20,346 1,074 19,272 1995 Apartments Lakeshore 573 3,848 83 573 3,931 4,504 62 4,442 1996 Villa Apartments Meadows 2,017 208 2,776 1,216 713 208 4,705 4,913 1,492 3,421 1984 Apartments Newcastle 197 4,007 3,684 1,734 197 9,425 9,622 2,674 6,948 1982 Apartments Northgate 290 6,987 1,182 290 8,169 8,459 616 7,843 1994 Manor Apartments Pearl Street 49 1,189 43 49 1,232 1,281 66 1,215 1995 Perinton 5,614 224 6,120 3,629 1,045 224 10,794 11,018 3,168 7,850 1982 Manor Apartments Raintree 7,800 6,654 3,217 4,410 14,281 14,281 3,199 11,082 1985 Island Apartments Riverton 5,116 240 6,640 2,523 1,769 240 10,932 11,172 3,857 7,315 1983 Knolls Apartments & Townhouses 1600 Elmwood 5,510 303 5,698 3,339 1,739 299 10,780 11,079 3,802 7,277 1983 Avenue Apartments Spanish 373 9,263 971 398 10,209 10,607 762 9,845 1994 Gardens Apartments Springcreek 1,237 128 1,702 745 413 128 2,860 2,988 915 2,073 1984 Apartments Sunset 696 4,661 114 696 4,775 5,471 76 5,395 1996 Gardens Apartments Valley Park 9,650 2,459 16,454 6 2,459 16,460 18,919 83 18,836 1996 South Apartments Village 9,504 1,043 13,283 1,487 1,043 14,770 15,813 765 15,048 1994- Green 1996 Apartments Waterfalls Village Manufactured 1,357 409 1,995 1,206 195 409 3,396 3,805 887 2,918 1987 Home Community Wedgewood 500 100 504 15 184 100 703 803 262 541 1986 Shopping Center Wedgewood 5,750 1,000 9,327 2,297 1,354 1,000 12,978 13,978 3,447 10,531 1986 Village Apartments Westminster 3,230 860 5,763 150 860 5,913 6,773 191 6,582 1996 Apartments Williamstowne 9,980 390 9,748 5,115 2,007 390 16,870 17,260 4,895 12,365 1985 Village Apartments Other Assets 907 125 295 907 420 1,327 235 1,092 -------- ------- -------- ------- ------- ------- -------- -------- ------- -------- $104,915 $15,059 $186,849 $31,821 $28,044 $15,080 $246,693 $261,773 $40,237 $221,536 ======== ======= ======== ======= ======= ======= ======== ======== ======= ========
(a) Represents the excess of fair value over the historical cost of partnership interests as a result of the application of purchase accounting for the acquisition of non-controlled interests. (b) The aggregate cost for Federal Income Tax purposes was approximately $258,839. Page F-24 SCHEDULE III (CONTINUED) HOME PROPERTIES OF NEW YORK, INC. REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1996 (IN THOUSANDS) Depreciation and amortization of the Company's investments in buildings and improvements reflected in the consolidated and combined statements of operations are calculated over the estimated useful lives of the assets as follows: Buildings and improvements 5-40 years Tenant improvements Life of related lease The changes in total real estate assets for the three years ended December 31, 1996, are as follows:
1996 1995 1994 Balance, beginning of year $198,203 $162,991 $ 76,646 New property acquisition 54,727 26,956 52,057 Adjustments - - 31,821 Additions 8,843 8,256 2,871 Disposals and retirements - - ( 404) -------- -------- -------- Balance, end of year $261,773 $198,203 $162,991 ======== ======== ========
The changes in accumulated depreciation for the three years ended December 31, 1996, are as follows:
1996 1995 1994 Balance, beginning of year $32,258 $25,759 $22,268 Depreciation for the year 7,979 6,499 3,775 Disposals and retirements - - ( 284) ------- ------- ------- Balance, end of year $40,237 $32,258 $25,759 ======= ======= =======
Page F-25
HOME PROPERTIES OF NEW YORK, INC. FORM 10-K For Fiscal Year Ended December 31, 1996 Exhibit Index Exhibit Number Exhibit Location 3.1 Articles of Incorporated by Incorporation of Home reference to Home Properties of New York, Properties of New York, Inc. Inc. Registration on Form S-11, File No. 33- 78862 (the "S-11 Registration Statement"). 3.2 Articles of Amendment Incorporated by and Restatement of reference to S-11 Articles of Registration Statement. Incorporation of Home Properties of New York, Inc. 3.3 Amended and Restated By- Incorporated by Laws of Home Properties reference to the Form 8- of New York, Inc. K filed by Home (Revised 12/30/96) Properties of New York, Inc. dated December 23, 1996 (the "12/23/96 8- K"). 4.1 Form of certificate Incorporated by representing Shares of reference to the Form 10- Common Stock. K filed by Home Properties of New York, Inc. for the period ended 12/31/94 (the "12/31/94 10-K"). 4.2 Agreement of Home Incorporated by Properties of New York, reference to 12/31/94 10- Inc. to file instruments K. defining the rights of holders of long-term debt of it or its subsidiaries with the Commission upon request. 4.3 Credit Agreement between Incorporated by Manufacturers and reference to the Form 10- Traders Trust Company, Q filed by Home Home Properties of New Properties of New York, York, L.P. and Home Inc. for the quarterly Properties of New York, period ended 6/30/94 Inc. (the "6/30/94 10-Q"). 4.4 Amendment Agreement Incorporated by between Manufacturers reference to the and Traders Trust 12/31/94 10-K. Company, Home Properties of New York, L.P. and Home Properties of New York, Inc. amending the Credit Agreement. Page 1 4.5 Mortgage Spreader, Incorporated by Consolidation and reference to the 6/30/94 Modification Agreement 10-Q. between Manufacturers and Traders Trust Company and Home Properties of New York, L.P., together with form of Mortgage, Assignment of Leases and Rents and Security Agreement incorporated therein by reference. 4.6 Mortgage Note made by Incorporated by Home Properties of New reference to the 6/30/94 York, L.P. payable to 10-Q. Manufacturers and Traders Trust Company in the principal amount of $12,298,000. 4.7 Demand Grid Note, dated Incorporated by August 22, 1995, from reference to the Form 10- Home Properties of New K filed by Home York, L.P. to Properties of New York, Manufacturers and Inc. for the period Traders Trust Company in ended 12/31/95 (the the maximum principal "12/31/95 10-K"). amount of $15,000,000. 4.8 Spreader, Consolidation, Incorporated by Modification and reference to the Extension Agreement 12/31/95 10-K. between Home Properties of New York, L.P. and John Hancock Mutual Life Insurance Company, dated as of October 26, 1995, relating to indebtedness in the principal amount of $20,500,000. 4.9 Demand Grid Note, dated Pages _____ to _______. August 22, 1996 from the Operating Partnership to Manufacturers and Traders Trust Company in the maximum principal amount of $25,000,000. 4.10 Demand Grid Note, dated Pages _____ to _______. March 5, 1997 from the Operating Partnership to Manufacturers and Traders Trust Company in the maximum principal amount of $35,000,000. 10.1 Agreement of Limited Incorporated by Partnership of Home reference to S-11 Properties of New York, Registration Statement. L.P. Page 2 10.2 Amended and Restated Incorporated by Agreement of Limited reference to 6/30/94 10- Partnership of Home Q. Properties of New York, L.P. 10.3 Amendments No. One Incorporated by through Eight to the reference to 12/31/95 10- Agreement of Limited K. Partnership of Home Properties of New York, L.P. 10.4 Amendment No. Nine to Incorporated by the Agreement of Limited reference to 12/23/96 8- Partnership of Home K. Properties of New York, L.P. 10.5 Amendment No. Ten to the Pages _____ to ______. Agreement of Limited Partnership of Home Properties of New York, L.P. 10.6 Articles of Incorporated by Incorporation of Home reference to S-11 Properties Management, Registration Statement. Inc. 10.7 By-Laws of Home Incorporated by Properties Management, reference to S-11 Inc. Registration Statement. 10.8 Articles of Incorporated by Incorporation of Conifer reference to 12/31/95 10- Realty Corporation. K. 10.9 By-Laws of Conifer Incorporated by Realty Corporation. reference to 12/31/95 10- K. 10.10 Employment Agreement Incorporated by between Home Properties reference to 6/30/94 10- of New York, L.P. and Q. Norman P. Leenhouts. 10.11 Employment Agreement Incorporated by between Home Properties reference to the 6/30/94 of New York, L.P. and 10-Q. Nelson B. Leenhouts. 10.12 Employment Agreement Incorporated by between Home Properties reference to 12/31/95 10- of New York, L.P. and K. Richard J. Crossed. 10.13 Indemnification Incorporated by Agreement between Home reference to the 6/30/94 Properties of New York, 10-Q. Inc. and certain officers and directors. Page 3 10.14 Indemnification Incorporated by Agreement between Home reference to 12/31/95 10- Properties of New York, K. Inc. and Richard J. Crossed. 10.15 Indemnification Pages ______ to _______. Agreement between Home Properties of New York, Inc. and Alan L. Gosule. 10.16 Home Properties of New Incorporated by York, Inc. 1994 Stock reference to S-11 Benefit Plan. Registration Statement. 10.17 Registration Rights Incorporated by Agreement among Home reference to the 6/30/94 Properties of New York, 10-Q. Inc., Home Leasing Corporation, Leenhouts Ventures, Norman P. Leenhouts, Nelson B. Leenhouts, Amy L. Tait, David P. Gardner, Ann M. McCormick, William E. Beach, Paul O'Leary, Richard J. Struzzi, Robert C. Tait, Timothy A. Florczak and Laurie Tones. 10.18 Lockup Agreements by Incorporated by Home Properties of New reference to 12/31/95 10- York, Inc. and Conifer K. Realty, Inc., Conifer Development, Inc., Richard J. Crossed, Peter J. Obourn and John F. Fennessey. 10.19 Contribution Agreement Incorporated by between Home Properties reference to the Form 8- of New York, L.P. and K filed by Home Conifer Realty, Inc., Properties of New York, Conifer Development, Inc., dated September Inc., Richard J. 14, 1995. Crossed, Peter J. Obourn and John H. Fennessey. 10.20 Amendment to Incorporated by Contribution Agreement reference to the Form 8- between Home Properties K filed by Home of New York, L.P. and Properties of New York, Conifer Realty, Inc., Inc., dated January 9, Conifer Development, 1996. Inc., Richard J. Crossed, Peter J. Obourn and John H. Fennessey. Page 4 10.21 Agreement of Operating Incorporated by Sublease, dated October reference to S-11 1, 1986, among KAM, Registration Statement. Inc., Morris Massry and Raintree Island Associates, as amended by Letter Agreement Supplementing Operating Sublease dated October 1, 1986. 10.22 Second Amended and Incorporated by Restated Incentive reference to 12/31/95 10- Compensation Plan of K. Home Properties of New York, Inc. 10.23 Indemnification and Incorporated by Pledge Agreement between reference to 12/31/95 10- Home Properties of New K. York, L.P. and Conifer Realty, Inc., Conifer Development, Inc., Richard J. Crossed, Peter J. Obourn and John H. Fennessey. 10.24 Form of Term Promissory Pages _____ to _______. Note payable to Home Properties of New York, Inc. by officers and directors in association with the Executive and Director Stock Purchase and Loan Program. 10.25 Form of Pledge Security Pages _____ to _______. Agreement executed by officers and directors in connection with Executive and Director Stock Purchase and Loan Program. 10.26 Schedule of Pages _____ to _______. Participants, loan amounts and shares issued in connection with the Executive and Director Stock Purchase and Loan Program. 10.27 Guaranty by Home Pages _____ to _______. Properties of New York, Inc. and Home Properties of New York, L.P. to The Chase Manhattan Bank of the loans from The Chase Manhattan Bank to officers and directors in connection with the Executive and Director Stock Purchase and Loan Program. Page 5 10.28 Subordination Agreement Pages _____ to _______. between Home Properties of New York, Inc. and The Chase Manhattan Bank relating to the Executive and Director Stock Purchase and Loan Program. 10.29 Partnership Interest Incorporated by Purchase Agreement, reference to 12/23/96 8- dated as of December 23, K. 1996, among Home Properties of New York, Inc., Home Properties of New York, L.P. and State of Michigan Retirement Systems. 10.30 Registration Rights Incorporated by Agreement, dated as of reference to 12/23/96 8- December 23, 1996 K. between Home Properties of New York, Inc. and State of Michigan Retirement Systems. 10.31 Lock-Up Agreement, dated Incorporated by December 23, 1996 reference to 12/23/96 8- between Home Properties K. of New York, Inc. and State of Michigan Retirement Systems. 10.32 Contract of Sale between Pages ______ to Lake Grove Associates ________. Corp. and Home Properties of New York, L.P., dated December 17, 1996, relating to the Lake Grove Apartments. 11 Computation of Per Share Page ______ Earnings Schedule 21 List of Subsidiaries of Page ______ Home Properties of New York, Inc. 23 Consent of Coopers & Page ______ Lybrand 27 Financial Data Schedule Page ______ Page 6
EX-4 2 Exhibit 4.9 DEMAND GRID NOTE Rochester, New York August 22, 1996 $25,000,000 For purposes of this Note: 1. The "Bank" means Manufacturers and Traders Trust Company, a New York banking corporation having its chief executive office at One M&T Plaza, Buffalo, New York 14240. 2. The "Bank's Prime Rate" means the rate per year announced by the Bank as the prime rate of interest of the Bank. 3. The "Borrower" means Home Properties of New York, L.P., a New York limited partnership having its chief executive office at 850 Clinton Square, Rochester, New York 14604. 4. "Business Day" means any day on which banks are open to conduct regular business in both New York City and London. 5. The "Corporate General Partner" means Home Properties of New York, Inc., a Maryland business corporation having its chief executive office at 850 Clinton Square, Rochester, New York 14604. 6. The "Credit" means a line of credit made available by the Bank to the Borrower in the maximum principal amount equal to the Limiting Principal Amount. Page 1 7. "Demand" means any demand by the Holder for the payment of the Outstanding Principal Amount. 8. "Distribution" means, with respect to any corporation, (a) any dividend or other distribution, whether in cash or in the form of any other asset, on account of any of its stock or (b) any payment on account of the purchase, redemption, retirement or other acquisition of any of its stock. 9. The "Holder" means the Bank or any transferee of this Note. 10. The "Limiting Principal Amount" means $25,000,000. 11. "Loan" means any loan made by the Bank pursuant to the Credit. 12. "One-Month Libor Rate" means, for any calendar month, the rate, as determined by the Bank from any broker, quoting service or commonly available source utilized by the Bank and as adjusted, in the sole discretion of the Bank, to reflect any increased cost directly or indirectly resulting from, or any reserve required by, applicable law, any guideline or program of any court, agency or other governmental authority or any other circumstance affecting the London Page 2 interbank eurodollar market, at which United States dollar deposits in immediately available funds are offered in the London interbank eurodollar market at approximately 11:00 a.m. London time (or as soon thereafter as practicable) on the date that is two Business Days before the first Business Day of such calendar month for delivery on the first Business Day of such calendar month for a one-month period. 13. The "Outstanding Principal Amount" means the outstanding principal amount of this Note. 14. "Person" means (a) any individual, corporation, partnership, limited liability company, joint venture, trust or unincorporated association or (b) any other entity, body, organization or group. 15. "Related Entity" means (a) the Borrower, (b) the Corporate General Partner or (c) any Person (i) of which the Borrower or the Corporate General Partner now or hereafter has beneficial ownership, whether direct or indirect, of 50% or more of the outstanding shares of any class of stock or 50% or more of any class of other ownership interest or (ii) such lower percentage of the outstanding shares of any class of such stock or any class of such other ownership interest as is sufficient to render such Person a subsidiary of the Borrower or the Corporate General Partner for purposes of generally accepted accounting principles as in effect at the time of determination of the status of such Person for purposes of this definition. Page 3 16. "Request" means any oral (including, but not limited to, telephonic), written (including, but not limited to, facsimile) or other request for a Loan that (a) states the original principal amount of such Loan, the date such Loan is requested to be made and the purpose of such Loan, (b) certifies that no change in the Partnership Agreement of the Borrower or the Certificate of Incorporation or By-laws of the Corporate General Partner has been made since the date of this Note except as disclosed in such request or a prior such request and (c) contains any other information required by the Bank prior to the making of such Loan. For value received, the Borrower promises to pay to the order of the Bank at any of the banking offices of the Bank, in lawful money of the United States and immediately available funds, on demand (a) the Limiting Principal Amount or the Outstanding Principal Amount, if less, (b) interest, calculated on the basis of a 360-day year for the actual number of days each year (365 or 366, as applicable), on the Outstanding Principal Amount from and including the date of this Note to but not including the date the Outstanding Principal Amount is paid in full at a rate per year that shall (i) on each day beginning before the Outstanding Principal Amount becomes due, whether pursuant to any Demand or otherwise, be 1.75% above the One-Month Libor Rate for the calendar month in which such day falls and (ii) on each day subsequent to the last day described in clause (a)(i) of this sentence be 4% above the rate in effect such subsequent day as the Bank's Prime Rate (provided, however, that (A) Page 4 in no event shall such interest be payable at a rate in excess of the maximum rate permitted by applicable law and (B) solely to the extent necessary to result in such interest not being payable at a rate in excess of such maximum rate, any amount that would be treated as part of such interest under a final judicial interpretation of applicable law shall be deemed to have been a mistake and automatically canceled, and, if received by the Bank, shall be refunded to the Borrower, it being the intention of the Bank and the Borrower that such interest not be payable at a rate in excess of such maximum rate) and (c) each cost and expense (including, but not limited to, the reasonable fees and disbursements of counsel to the Holder, whether retained for advice, litigation or any other purpose) incurred by the Holder in endeavoring to (i) collect any amount payable pursuant to this Note and remaining unpaid, (ii) preserve or exercise any right or remedy of the Holder pursuant to this Note or (iii) preserve or exercise any right or remedy of the Holder relating to, enforce or realize upon any guaranty, endorsement, collateral, subordination or other security or assurance of payment now or hereafter securing the payment of or otherwise now or hereafter applicable to any amount payable pursuant to this Note. In the absence of any Demand, a payment of interest pursuant to this Note shall become due on the first day of each calendar month. Page 5 In the absence of any earlier Demand, the Outstanding Principal Amount shall become due on August 22, 1997. If any of the Outstanding Principal Amount or any interest payable pursuant to this Note is not paid within ten days after the date it becomes due, whether pursuant to any Demand or otherwise, the Borrower shall pay to the Holder on demand a late charge of 6% thereof. The Bank may make any Loan in reliance upon any Request that the Bank in good faith believes to be valid and to have been made in the name or on behalf of the Borrower by any officer of the Corporate General Partner unless prior to receipt of such Request by the Bank the Bank received from the Corporate General Partner and had a reasonable time to act on written notice revoking the authority of such officer to make a Request in the name or on behalf of the Borrower. The Bank shall not incur any liability to the Borrower or any other Person as a direct or indirect result of making any Loan in accordance with the preceding sentence. The Credit is available subject to the Bank's continuing review and right of modification, restriction, suspension or termination at any time for any reason without any prior notice to the Borrower. No modification, restriction, suspension or termination of the Credit shall affect the obligation of the Borrower to repay the original principal amount of each Loan, the obligation Page 6 of the Borrower to pay interest on the outstanding principal amount of each Loan or any other obligation of the Borrower to the Holder pursuant to this Note or otherwise. For each period (1) beginning on the date of this Note and ending on the last day of the calendar quarter containing such date, (2) consisting of any calendar quarter beginning after the calendar quarter containing the date of this Note and before the calendar quarter containing the first date any Demand is made or (3) beginning on the first day of the calendar quarter containing the first date any Demand is made and ending on such date, the Borrower shall pay to the Bank on demand a non-usage fee equal to the product obtained by multiplying (a) the difference between the Limiting Principal Amount and the daily average during such period of the Outstanding Principal Amount first by (b) 1/4% and then by (c) the fraction obtained by dividing the number of days in such period by 360 (provided, however, that (i) in no event shall there be payable any such non- usage fee that would result in interest being payable on the Outstanding Principal Amount at a rate in excess of the maximum rate permitted by applicable law and (ii) solely to the extent necessary to result in such interest not being payable at a rate in excess of such maximum rate, any amount that would be treated as part of such interest under a final judicial interpretation of applicable law shall be deemed to have been a mistake and automatically canceled and, if received by the Bank, shall be refunded to the Borrower, it being the intention Page 7 of the Bank and the Borrower that such interest not be payable at a rate in excess of such maximum rate). There shall be payable as principal pursuant to this Note only so much of the Limiting Principal Amount as shall have been advanced by the Bank as a Loan or Loans and is outstanding. The Holder shall set forth on the schedule attached to and made a part of this Note or any similar schedule (including, but not limited to, any similar schedule maintained in computerized records) annotations evidencing (1) the date and original principal amount of each Loan, (2) the date and amount of each payment to be applied to the Outstanding Principal Amount and (3) the Outstanding Principal Amount after each Loan and each such payment. Each such annotation shall, in the absence of manifest error, be conclusive and binding upon the Borrower. No failure by the Holder to make and no error by the Holder in making any annotation on such attached schedule or any such similar schedule shall affect the obligation of the Borrower to repay the original principal amount of each Loan, the obligation of the Borrower to pay interest on the outstanding principal amount of each Loan or any other obligation of the Borrower to the Holder pursuant to this Note or otherwise. Until the Credit has been terminated by the Bank and all amounts payable pursuant to this Note have been fully and indefeasibly paid or otherwise discharged, the Borrower shall, unless Page 8 the prior written consent of the Holder to not doing so shall have been obtained by the Borrower, assure that: 1. The aggregate outstanding principal amount at any time of liabilities of Related Entities arising from the borrowing of any money or the deferral of any of the purchase price of any asset or pursuant to any capital lease does not exceed 50% of the total of (a) the aggregate market value at such time of all outstanding shares of stock of the Corporate General Partner, (b) the aggregate market value at such time of all outstanding partnership interests in the Borrower not owned by the Corporate General Partner and (c) the aggregate outstanding principal amount at such time of liabilities of the Borrower and the Corporate General Partner arising from the borrowing of any money or the deferral of any of the purchase price of any asset or pursuant to any capital lease; 2. The combined net income of all Related Entities for any fiscal year of the Corporate General Partner before distributions and non-cash expenses is at least 120% of the higher of (a) all principal and interest scheduled to become due during the immediately following fiscal year of the Corporate General Partner with respect to liabilities of Related Entities arising from the borrowing of any money or the deferral of any of the purchase price of any asset or pursuant to any capital lease, except for any balloon payment of any of such principal that is scheduled to become due during such immediately following fiscal year and is reasonably expected to be Page 10 refinanced, extended or paid prior to becoming due, or (b) all principal and interest that would be scheduled to become due during such immediately following fiscal year in connection with a loan for which (i) the principal amount was equal to the aggregate outstanding principal amount at the end of such fiscal year of such liabilities, (ii) the rate of interest was a fixed rate of 9% per year and (iii) 300 monthly payments of principal and interest equal in amount were scheduled to be made to repay the principal amount thereof and pay interest in connection therewith; 3. The combined earnings of all Related Entities for any fiscal year of the Corporate General Partner before interest, tax, depreciation and amortization expense are at least 200% of all principal and interest scheduled to become due during the immediately following fiscal year of the Corporate General Partner with respect to liabilities of Related Entities arising from the borrowing of any money or the deferral of the purchase price of any asset or pursuant to any capital lease, except for any balloon payment of any of such principal that is scheduled to become due during such immediately following fiscal year and is reasonably expected to be refinanced, extended or paid prior to becoming due; 4. The aggregate outstanding principal amount at the end of each fiscal quarter of the Corporate General Partner of liabilities of Related Entities does not exceed 550% of the combined Page 10 earnings of all Related Entities for such fiscal quarter before interest, tax, depreciation and amortization expense; 5. The combined earnings of all Related Entities for any fiscal year of the Corporate General Partner before interest, tax, depreciation and amortization expense that are attributable to assets not subject to any mortgage, security interest or other lien are at least 200% of the higher of (a) all principal and interest scheduled to become due during the immediately following fiscal year of the Corporate General Partner with respect to liabilities of Related Entities (i) arising from the borrowing of any money or the deferral of the purchase price of any asset or pursuant to any capital lease and (ii) the payment of which is not secured by any mortgage, security interest or other lien on any asset of any Related Entity, except for any balloon payment of any of such principal that is scheduled to become due during such immediately following fiscal year and is reasonably expected to be refinanced, extended or paid prior to becoming due, or (b) all principal and interest that would be scheduled to become due during such immediately following fiscal year in connection with a loan for which (i) the principal amount was equal to the daily average of the Outstanding Principal Amount during such fiscal year of such liabilities, (ii) the rate of interest was a fixed rate of 8% per year and (iii) 300 monthly payments of principal and interest equal in amount were scheduled to be made the repay the principal amount thereof and pay interest in connection therewith; Page 11 6. The aggregate market value at any time of all real property interests of Related Entities not subject to any mortgage, security interest or other lien is at least 150% of the aggregate outstanding principal amount at such time of liabilities of Related Entities (a) arising from the borrowing of any money or the deferral of any of the purchase price of any asset or pursuant to any capital lease and (b) the payment of which is not secured by any mortgage, security interest or other lien on any asset of any Related Entity; and 7. No Related Entity that is a corporation declares, pays or makes any Distribution, except for (a) dividends payable solely in any of its stock, (b) cash dividends paid to the Borrower or the Corporate General Partner by any Related Entity all of the outstanding shares of stock of which other than shares required by applicable law to enable any individual to serve as a director of such Related Entity are owned by the Borrower or the Corporate General Partner at the time of such payment and (c) during each fiscal year of the Corporate General Partner, cash dividends declared or paid by the Corporate General Partner in an amount not exceeding (i) the consolidated earnings of the Corporate General Partner for such fiscal year before depreciation and amortization expense minus (ii) all principal scheduled to become due during the immediately following fiscal year of the Corporate General Partner with respect to liabilities of Related Entities arising from the borrowing of any money or the deferral of any of the purchase price of any asset or Page 12 pursuant to any capital lease, except for any balloon payment of any of such principal that is scheduled to become due during such immediately following fiscal year and is reasonably expected to be refinanced, extended or paid prior to becoming due. Each accounting term used in this Note shall be construed as of any time in accordance with generally accepted accounting principles as in effect at such time. Each accounting computation that this Note requires to be made as of any time shall be made in accordance with such principles as in effect at such time, except where such principles are incompatible with any requirement of this Note. All amounts payable pursuant to this Note and remaining unpaid shall, without any notice, demand, presentment or protest of any kind (each of which is knowingly, voluntarily, intentionally and irrevocably waived by the Borrower), automatically become immediately due if the Borrower commences or has commenced against it any proceeding pursuant to any bankruptcy or insolvency statute. This Note shall be governed by and construed, interpreted and enforced in accordance with the internal law of the State of New York, without regard to principles of conflict of laws. This Note is given in replacement of and substitution for, but not payment of, a Demand Grid Note, dated July 15, 1996, in the Page 13 maximum principal amount of $17,000,000 executed and delivered to the Bank by the Borrower. THE BORROWER KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY ACTION OR OTHER LEGAL PROCEEDING, WHETHER BASED ON ANY CONTRACT, ON ANY NEGLIGENT OR INTENTIONAL TORT, ON ANY STATUTE, REGULATION OR OTHER LAW OR OTHERWISE, IN CONNECTION WITH, OR OTHERWISE RELATING TO, (A) THIS NOTE OR ANY GUARANTY, ENDORSEMENT, COLLATERAL, SUBORDINATION OR OTHER SECURITY OR ASSURANCE OF PAYMENT NOW OR HEREAFTER DIRECTLY OR INDIRECTLY SECURING THE PAYMENT OF, OR OTHERWISE NOW OR HEREAFTER DIRECTLY OR INDIRECTLY APPLICABLE TO, ANY AMOUNT PAYABLE PURSUANT TO THIS NOTE, (B) ANY OTHER WRITING HERETOFORE OR HEREAFTER EXECUTED IN CONNECTION WITH, OR OTHERWISE RELATING TO, THIS NOTE OR ANY SUCH GUARANTY, ENDORSEMENT, COLLATERAL, SUBORDINATION OR OTHER SECURITY OR ASSURANCE OF PAYMENT OR (C) ANY COURSE OF DEALING, COURSE OF PERFORMANCE OR OTHER CONDUCT HERETOFORE OR HEREAFTER PURSUED, ANY ACTION HERETOFORE OR HEREAFTER TAKEN OR OMITTED TO BE TAKEN, OR ANY ORAL OR WRITTEN REPRESENTATION HERETOFORE OR HEREAFTER MADE, BY OR ON BEHALF OF THE HOLDER IN CONNECTION WITH, OR OTHERWISE RELATING TO, THIS NOTE OR ANY SUCH GUARANTY, ENDORSEMENT, COLLATERAL, SUBORDINATION OR OTHER SECURITY OR ASSURANCE OF PAYMENT. HOME PROPERTIES OF NEW YORK, L.P. By HOME PROPERTIES OF NEW YORK, INC., Its Sole General Partner Page 14 By /s/ Norman Leenhouts -------------------- Norman Leenhouts, Chairman Page 15 ACKNOWLEDGMENT STATE OF NEW YORK ) : SS. COUNTY OF MONROE ) On the 21st day of August in year 1996, before me personally came Norman Leenhouts, to me known, who being by me duly sworn, did depose and say that he resides at 1206 Fairway 18, Macedon, New York; that he is the Chairman of Home Properties of New York, Inc., the corporation which executed the above instrument on behalf of Home Properties of New York, L.P., the limited partnership described therein and of which said corpora tion is the sole general partner; and that he signed his name thereto by order of the board of directors of said corporation. /s/ Ann M. McCormick ------------------- Notary Public Ann M. McCormick Notary Public in the State of New York Monroe County Commission Expires March 21, 1998 Page 16 SCHEDULE OF ADVANCES AND PAYMENTS Original Outstanding Principal Date Principal Principal Date of Amount of of Amount of Amount of Approving Loan Loan Payment Payment Note Employee EX-4 3 Exhibit 4.10 DEMAND GRID NOTE Rochester, New York March 5, 1997 $35,000,000 For purposes of this Note: 1. The "Bank" means Manufacturers and Traders Trust Company, a New York banking corporation having its chief executive office at One M&T Plaza, Buffalo, New York 14240. 2. The "Bank's Prime Rate" means the rate per year announced by the Bank as the prime rate of interest of the Bank. 3. The "Borrower" means Home Properties of New York, L.P., a New York limited partnership having its chief executive office at 850 Clinton Square, Rochester, New York 14604. 4. "Business Day" means any day on which banks are open to conduct regular business in both New York City and London. 5. The "Corporate General Partner" means Home Properties of New York, Inc., a Maryland business corporation having its chief executive office at 850 Clinton Square, Rochester, New York 14604. 6. The "Credit" means a line of credit made available by the Bank to the Borrower in the maximum principal amount equal to the Limiting Principal Amount. 7. "Demand" means any demand by the Holder for the payment of the Outstanding Principal Amount. Page 1 8. "Distribution" means, with respect to any corporation, (a) any dividend or other distribution, whether in cash or in the form of any other asset, on account of any of its stock or (b) any payment on account of the purchase, redemption, retirement or other acquisition of any of its stock. 9. The "Holder" means the Bank or any transferee of this Note. 10. The "Limiting Principal Amount" means $35,000,000. 11. "Loan" means any loan made by the Bank pursuant to the Credit. 12. "One-Month Libor Rate" means, for any calendar month, the rate, as determined by the Bank from any broker, quoting service or commonly available source utilized by the Bank and as adjusted, in the sole discretion of the Bank, to reflect any increased cost directly or indirectly resulting from, or any reserve required by, applicable law, any guideline or program of any court, agency or other governmental authority or any other circumstance affecting the London interbank eurodollar market, at which United States dollar deposits in immediately available funds are offered in the London interbank eurodollar market at approximately 11:00 a.m. London time (or as soon thereafter as practicable) on the date that is two Business Days before the first Business Day of such calendar month Page 2 for delivery on the first Business Day of such calendar month for a one-month period. 13. The "Outstanding Principal Amount" means the outstanding principal amount of this Note. 14. "Person" means (a) any individual, corporation, partnership, limited liability company, joint venture, trust or unincorporated association or (b) any other entity, body, organization or group. 15. "Related Entity" means (a) the Borrower, (b) the Corporate General Partner or (c) any Person (i) of which the Borrower or the Corporate General Partner now or hereafter has beneficial ownership, whether direct or indirect, of 50% or more of the outstanding shares of any class of stock or 50% or more of any class of other ownership interest or (ii) such lower percentage of the outstanding shares of any class of such stock or any class of such other ownership interest as is sufficient to render such Person a subsidiary of the Borrower or the Corporate General Partner for purposes of generally accepted accounting principles as in effect at the time of determination of the status of such Person for purposes of this definition. 16. "Request" means any oral (including, but not limited to, telephonic), written (including, but not limited to, facsimile) Page 3 or other request for a Loan that (a) states the original principal amount of such Loan, the date such Loan is requested to be made and the purpose of such Loan, (b) certifies that no change in the Partnership Agreement of the Borrower or the Certificate of Incorporation or By-laws of the Corporate General Partner has been made since the date of this Note except as disclosed in such request or a prior such request and (c) contains any other information required by the Bank prior to the making of such Loan. For value received, the Borrower promises to pay to the order of the Bank at any of the banking offices of the Bank, in lawful money of the United States and immediately available funds, on demand (a) the Limiting Principal Amount or the Outstanding Principal Amount, if less, (b) interest, calculated on the basis of a 360-day year for the actual number of days each year (365 or 366, as applicable), on the Outstanding Principal Amount from and including the date of this Note to but not including the date the Outstanding Principal Amount is paid in full at a rate per year that shall (i) on each day beginning before the Outstanding Principal Amount becomes due, whether pursuant to any Demand or otherwise, be 1.75% above the One-Month Libor Rate for the calendar month in which such day falls and (ii) on each day subsequent to the last day described in clause (a)(i) of this sentence be 4% above the rate in effect such subsequent day as the Bank's Prime Rate (provided, however, that (A) in no event shall such interest be payable at a rate in excess of the maximum rate permitted by applicable law and (B) solely to the extent Page 4 necessary to result in such interest not being payable at a rate in excess of such maximum rate, any amount that would be treated as part of such interest under a final judicial interpretation of applicable law shall be deemed to have been a mistake and automatically canceled, and, if received by the Bank, shall be refunded to the Borrower, it being the intention of the Bank and the Borrower that such interest not be payable at a rate in excess of such maximum rate) and (c) each cost and expense (including, but not limited to, the reasonable fees and disbursements of counsel to the Holder, whether retained for advice, litigation or any other purpose) incurred by the Holder in endeavoring to (i) collect any amount payable pursuant to this Note and remaining unpaid, (ii) preserve or exercise any right or remedy of the Holder pursuant to this Note or (iii) preserve or exercise any right or remedy of the Holder relating to, enforce or realize upon any guaranty, endorsement, collateral, subordination or other security or assurance of payment now or hereafter securing the payment of or otherwise now or hereafter applicable to any amount payable pursuant to this Note. In the absence of any Demand, a payment of interest pursuant to this Note shall become due on the first day of each calendar month. In the absence of any earlier Demand, the Outstanding Principal Amount shall become due on August 22, 1997. Page 5 If any of the Outstanding Principal Amount or any interest payable pursuant to this Note is not paid within ten days after the date it becomes due, whether pursuant to any Demand or otherwise, the Borrower shall pay to the Holder on demand a late charge of 6% thereof. The Bank may make any Loan in reliance upon any Request that the Bank in good faith believes to be valid and to have been made in the name or on behalf of the Borrower by any officer of the Corporate General Partner unless prior to receipt of such Request by the Bank the Bank received from the Corporate General Partner and had a reasonable time to act on written notice revoking the authority of such officer to make a Request in the name or on behalf of the Borrower. The Bank shall not incur any liability to the Borrower or any other Person as a direct or indirect result of making any Loan in accordance with the preceding sentence. The Credit is available subject to the Bank's continuing review and right of modification, restriction, suspension or termination at any time for any reason without any prior notice to the Borrower. No modification, restriction, suspension or termination of the Credit shall affect the obligation of the Borrower to repay the original principal amount of each Loan, the obligation of the Borrower to pay interest on the outstanding principal amount of each Loan or any other obligation of the Borrower to the Holder pursuant to this Note or otherwise. Page 6 For each period (1) beginning on the date of this Note and ending on the last day of the calendar quarter containing such date, (2) consisting of any calendar quarter beginning after the calendar quarter containing the date of this Note and before the calendar quarter containing the first date any Demand is made or (3) beginning on the first day of the calendar quarter containing the first date any Demand is made and ending on such date, the Borrower shall pay to the Bank on demand a non-usage fee equal to the product obtained by multiplying (a) the difference between the Limiting Principal Amount and the daily average during such period of the Outstanding Principal Amount first by (b) 1/4% and then by (c) the fraction obtained by dividing the number of days in such period by 360 (provided, however, that (i) in no event shall there be payable any such non- usage fee that would result in interest being payable on the Outstanding Principal Amount at a rate in excess of the maximum rate permitted by applicable law and (ii) solely to the extent necessary to result in such interest not being payable at a rate in excess of such maximum rate, any amount that would be treated as part of such interest under a final judicial interpretation of applicable law shall be deemed to have been a mistake and automatically canceled and, if received by the Bank, shall be refunded to the Borrower, it being the intention of the Bank and the Borrower that such interest not be payable at a rate in excess of such maximum rate). There shall be payable as principal pursuant to this Note only so much of the Limiting Principal Amount as shall have been Page 7 advanced by the Bank as a Loan or Loans and is outstanding. The Holder shall set forth on the schedule attached to and made a part of this Note or any similar schedule (including, but not limited to, any similar schedule maintained in computerized records) annotations evidencing (1) the date and original principal amount of each Loan, (2) the date and amount of each payment to be applied to the Outstanding Principal Amount and (3) the Outstanding Principal Amount after each Loan and each such payment. Each such annotation shall, in the absence of manifest error, be conclusive and binding upon the Borrower. No failure by the Holder to make and no error by the Holder in making any annotation on such attached schedule or any such similar schedule shall affect the obligation of the Borrower to repay the original principal amount of each Loan, the obligation of the Borrower to pay interest on the outstanding principal amount of each Loan or any other obligation of the Borrower to the Holder pursuant to this Note or otherwise. Until the Credit has been terminated by the Bank and all amounts payable pursuant to this Note have been fully and indefeasibly paid or otherwise discharged, the Borrower shall, unless the prior written consent of the Holder to not doing so shall have been obtained by the Borrower, assure that: 1. The aggregate outstanding principal amount at any time of liabilities of Related Entities arising from the borrowing of any money or the deferral of any of the purchase price of any asset or Page 8 pursuant to any capital lease does not exceed 50% of the total of (a) the aggregate market value at such time of all outstanding shares of stock of the Corporate General Partner, (b) the aggregate market value at such time of all outstanding partnership interests in the Borrower not owned by the Corporate General Partner and (c) the aggregate outstanding principal amount at such time of liabilities of the Borrower and the Corporate General Partner arising from the borrowing of any money or the deferral of any of the purchase price of any asset or pursuant to any capital lease; 2. The combined net income of all Related Entities for any fiscal year of the Corporate General Partner before distributions and non-cash expenses is at least 120% of the higher of (a) all principal and interest scheduled to become due during the immediately following fiscal year of the Corporate General Partner with respect to liabilities of Related Entities arising from the borrowing of any money or the deferral of any of the purchase price of any asset or pursuant to any capital lease, except for any balloon payment of any of such principal that is scheduled to become due during such immediately following fiscal year and is reasonably expected to be refinanced, extended or paid prior to becoming due, or (b) all principal and interest that would be scheduled to become due during such immediately following fiscal year in connection with a loan for which (i) the principal amount was equal to the aggregate outstanding principal amount at the end of such fiscal year of such liabilities, (ii) the rate of interest was a fixed rate of 9% per year and (iii) Page 9 300 monthly payments of principal and interest equal in amount were scheduled to be made to repay the principal amount thereof and pay interest in connection therewith; 3. The combined earnings of all Related Entities for any fiscal year of the Corporate General Partner before interest, tax, depreciation and amortization expense are at least 200% of all principal and interest scheduled to become due during the immediately following fiscal year of the Corporate General Partner with respect to liabilities of Related Entities arising from the borrowing of any money or the deferral of the purchase price of any asset or pursuant to any capital lease, except for any balloon payment of any of such principal that is scheduled to become due during such immediately following fiscal year and is reasonably expected to be refinanced, extended or paid prior to becoming due; 4. The aggregate outstanding principal amount at the end of each fiscal quarter of the Corporate General Partner of liabilities of Related Entities does not exceed 550% of the combined earnings of all Related Entities for such fiscal quarter before interest, tax, depreciation and amortization expense; 5. The combined earnings of all Related Entities for any fiscal year of the Corporate General Partner before interest, tax, depreciation and amortization expense that are attributable to assets not subject to any mortgage, security interest or other lien are at Page 10 least 200% of the higher of (a) all principal and interest scheduled to become due during the immediately following fiscal year of the Corporate General Partner with respect to liabilities of Related Entities (i) arising from the borrowing of any money or the deferral of the purchase price of any asset or pursuant to any capital lease and (ii) the payment of which is not secured by any mortgage, security interest or other lien on any asset of any Related Entity, except for any balloon payment of any of such principal that is scheduled to become due during such immediately following fiscal year and is reasonably expected to be refinanced, extended or paid prior to becoming due, or (b) all principal and interest that would be scheduled to become due during such immediately following fiscal year in connection with a loan for which (i) the principal amount was equal to the daily average of the Outstanding Principal Amount during such fiscal year of such liabilities, (ii) the rate of interest was a fixed rate of 8% per year and (iii) 300 monthly payments of principal and interest equal in amount were scheduled to be made the repay the principal amount thereof and pay interest in connection therewith; 6. The aggregate market value at any time of all real property interests of Related Entities not subject to any mortgage, security interest or other lien is at least 150% of the aggregate outstanding principal amount at such time of liabilities of Related Entities (a) arising from the borrowing of any money or the deferral of any of the purchase price of any asset or pursuant to any capital lease and (b) the payment of which is not secured by any mortgage, Page 11 security interest or other lien on any asset of any Related Entity; and 7. No Related Entity that is a corporation declares, pays or makes any Distribution, except for (a) dividends payable solely in any of its stock, (b) cash dividends paid to the Borrower or the Corporate General Partner by any Related Entity all of the outstanding shares of stock of which other than shares required by applicable law to enable any individual to serve as a director of such Related Entity are owned by the Borrower or the Corporate General Partner at the time of such payment and (c) during each fiscal year of the Corporate General Partner, cash dividends declared or paid by the Corporate General Partner in an amount not exceeding (i) the consolidated earnings of the Corporate General Partner for such fiscal year before depreciation and amortization expense minus (ii) all principal scheduled to become due during the immediately following fiscal year of the Corporate General Partner with respect to liabilities of Related Entities arising from the borrowing of any money or the deferral of any of the purchase price of any asset or pursuant to any capital lease, except for any balloon payment of any of such principal that is scheduled to become due during such immediately following fiscal year and is reasonably expected to be refinanced, extended or paid prior to becoming due. Each accounting term used in this Note shall be construed as of any time in accordance with generally accepted accounting Page 12 principles as in effect at such time. Each accounting computation that this Note requires to be made as of any time shall be made in accordance with such principles as in effect at such time, except where such principles are incompatible with any requirement of this Note. All amounts payable pursuant to this Note and remaining unpaid shall, without any notice, demand, presentment or protest of any kind (each of which is knowingly, voluntarily, intentionally and irrevocably waived by the Borrower), automatically become immediately due if the Borrower commences or has commenced against it any proceeding pursuant to any bankruptcy or insolvency statute. This Note shall be governed by and construed, interpreted and enforced in accordance with the internal law of the State of New York, without regard to principles of conflict of laws. This Note is given in replacement of and substitution for, but not payment of, a Demand Grid Note, dated August 22, 1996, in the maximum principal amount of $25,000,000 executed and delivered to the Bank by the Borrower. THE BORROWER KNOWINGLY, VOLUNTARILY, INTENTIONALLY AND IRREVOCABLY WAIVES ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY ACTION OR OTHER LEGAL PROCEEDING, WHETHER BASED ON ANY CONTRACT, ON ANY NEGLIGENT OR INTENTIONAL TORT, ON ANY STATUTE, Page 13 REGULATION OR OTHER LAW OR OTHERWISE, IN CONNECTION WITH, OR OTHERWISE RELATING TO, (A) THIS NOTE OR ANY GUARANTY, ENDORSEMENT, COLLATERAL, SUBORDINATION OR OTHER SECURITY OR ASSURANCE OF PAYMENT NOW OR HEREAFTER DIRECTLY OR INDIRECTLY SECURING THE PAYMENT OF, OR OTHERWISE NOW OR HEREAFTER DIRECTLY OR INDIRECTLY APPLICABLE TO, ANY AMOUNT PAYABLE PURSUANT TO THIS NOTE, (B) ANY OTHER WRITING HERETOFORE OR HEREAFTER EXECUTED IN CONNECTION WITH, OR OTHERWISE RELATING TO, THIS NOTE OR ANY SUCH GUARANTY, ENDORSEMENT, COLLATERAL, SUBORDINATION OR OTHER SECURITY OR ASSURANCE OF PAYMENT OR (C) ANY COURSE OF DEALING, COURSE OF PERFORMANCE OR OTHER CONDUCT HERETOFORE OR HEREAFTER PURSUED, ANY ACTION HERETOFORE OR HEREAFTER TAKEN OR OMITTED TO BE TAKEN, OR ANY ORAL OR WRITTEN REPRESENTATION HERETOFORE OR HEREAFTER MADE, BY OR ON BEHALF OF THE HOLDER IN CONNECTION WITH, OR OTHERWISE RELATING TO, THIS NOTE OR ANY SUCH GUARANTY, ENDORSEMENT, COLLATERAL, SUBORDINATION OR OTHER SECURITY OR ASSURANCE OF PAYMENT. HOME PROPERTIES OF NEW YORK, L.P. By HOME PROPERTIES OF NEW YORK, INC., Its Sole General Partner By /s/ Nelson B. Leenhouts ----------------------- Nelson B. Leenhouts, President Page 14 ACKNOWLEDGMENT STATE OF NEW YORK ) : SS. COUNTY OF MONROE ) On the 5th day of March in year 1997, before me person- ally came Nelson B. Leenhouts, to me known, who being by me duly sworn, did depose and say that he resides at 1200 Fairway 18, Macedon, New York; that he is the President of Home Properties of New York, Inc., the corporation which executed the above instrument on behalf of Home Properties of New York, L.P., the limited partnership described therein and of which said corpora tion is the sole general partner; and that he signed his name thereto by order of the board of directors of said corporation. /s/ Ann M. McCormick -------------------- Notary Public Ann M. McCormick Notary Public in the State of New York Monroe County Commission Expires March 21, 1998 Page 15 SCHEDULE OF ADVANCES AND PAYMENTS Original Outstanding Principal Date Principal Principal Date of Amount of of Amount of Amount of Approving Loan Loan Payment Payment Note Employee Page 16 EX-10 4 EXHIBIT 10.5 HOME PROPERTIES OF NEW YORK, L.P. AMENDMENT NO. TEN TO AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP The Amended and Restated Agreement of Limited Partnership of Home Properties of New York, L.P. (the "Partnership Agreement") is hereby amended effective January 1, 1997, such that the "Schedule A" attached hereto shall be substituted for the "Schedule A" currently attached to the Partnership Agreement. The purpose of this amendment is to reflect the substitution of Linda Wells Davey as a limited partner and to reflect the current number of Units currently held by the General Partner. As modified above, the Partnership Agreement shall remain in full force and effect. IN WITNESS WHEREOF, this Amendment No. Ten to the Partnership Agreement is hereby executed as of the 1st day of January, 1997. GENERAL PARTNER HOME PROPERTIES OF NEW YORK, INC. /s/ Ann M. McCormick - -------------------- Ann M. McCormick Vice President and Secretary LIMITED PARTNERS See Schedule A attached. By: HOME PROPERTIES OF NEW YORK, INC. under a power of attorney /s/ Ann M. McCormick - -------------------- Ann M. McCormick Vice President and Secretary
1/1/97 SCHEDULE A HOME PROPERTIES OF NEW YORK, L.P. PARTNERS, UNITS AND PERCENTAGE INTERESTS GENERAL PARTNER Number of Percentage Name and Identifying Number Business or Residence Address Units Held Interest Home Properties of New York, Inc. 850 Clinton Square 6,144,498.156 83.62686% Rochester, New York 14604 LIMITED PARTNERS Home Leasing Corporation 850 Clinton Square 429,376 5.84382% Rochester, New York 14604 Leenhouts Ventures 850 Clinton Square 8,010 0.10902% Rochester, New York 14604 Norman P. Leenhouts 850 Clinton Square 467 0.00636% Rochester, New York 14604 Nelson B. Leenhouts 850 Clinton Square 219 0.00298% Rochester, New York 14604 Arlene Z. Leenhouts 850 Clinton Square 50,000 0.68050% Rochester, New York 14604 Nancy E. Leenhouts 850 Clinton Square 50,000 0.68050% Rochester, New York 14604 Amy L. Tait 850 Clinton Square 11,195 0.15236% Rochester, New York 14604 Amy L. Tait and 850 Clinton Square 2,548 0.03468% Robert C. Tait Rochester, New York 14604 Ann M. McCormick 850 Clinton Square 565 0.00769% Rochester, New York 14604 Ann M. McCormick and 850 Clinton Square 1,737 0.02364% Patrick M. McCormick Rochester, New York 14604 David P. Gardner 850 Clinton Square 3,506 0.04772% Rochester, New York 14604 William E. Beach 850 Clinton Square 2,433 0.03311% Rochester, New York 14604 William E. Beach and 850 Clinton Square 3,046 0.04146% Richelle A. Beach Rochester, New York 14604 Paul O'Leary 850 Clinton Square 3,207 0.04365% Rochester, New York 14604 Richard J. Struzzi 850 Clinton Square 2,363 0.03216% Rochester, New York 14604 Robert C. Tait 850 Clinton Square 70 0.00095% Rochester, New York 14604 Timothy A. Florczak 850 Clinton Square 600 0.00817% Rochester, New York 14604 Laurie Tones 850 Clinton Square 6,033 0.08211% Rochester, New York 14604 John K. Gardner 223 Clark Lane 1,500 0.02042% Money Purchase Pension Plan Camillus, New York 13031 Peter L. Cappuccilli, Sr. 605 Genesee Street 6,250 0.08506% Syracuse, New York 13204 Rocco M. Cappuccilli 605 Genesee Street 6,250 0.08506% Syracuse, New York 13204 J. Neil Boger 27 Arlington Drive 1,225 0.01667% Pittsford, New York 14534 Joyce P. Caldarone 162 Anchor Drive 1,225 0.01667% Vero Beach, Florida 32963 Linda Wells Davey 17 Green Valley Road 1,225 0.01667% Pittsford, New York 14534 John G. Dorschel 20 NE Plantation Road 1,225 0.01667% Stuart, Florida 34996 Richard J. Dorschel 32 Whitestone Lane 1,225 0.01667% Rochester, New York 14618 Elizabeth Hatch Dunn P.O. Box 14261 2,450 0.03334% North Palm Beach, Florida 33408 Rufus Hedges c/o J. Ernest Brophy 2,450 0.03334% 1061 Coconut Road Boca Raton, Florida 33432 Jeremy A. Klainer 295 San Gabriel Drive 612 0.00833% Rochester, New York 14610 J. Robert Maney 506 Panorama Trail 2,450 0.03334% Rochester, New York 14625 John A. McAlpin 6270 Bopple Hill Road 1,225 0.01667% Naples, New York 14512-9771 George E. Mercier 99 Ridgeland Road 1,225 0.01667% Rochester, New York 14623 Harold S. Mercier 404 Miami Avenue 1,225 0.01667% Terrace Park, Ohio 45174 Michelle Mercier 99 Ridgeland Road 1,225 0.01667% Rochester, New York 14623 Jack E. Post 4898 East Lake Road 1,225 0.01667% Rushville, New York 14544 Robert T. Silkett 3 Dartmouth Court 1,225 0.01667% Pittsford, New York 14534 Carolyn M. Steklof 144 Dunrovin Lane 1,225 0.01667% Rochester, New York 14618 Conifer Development, Inc. 850 Clinton Square 20,738 0.28225% Rochester, New York 14604 Conifer Realty, Inc. 850 Clinton Square 285,403 3.88435% Rochester, New York 14604 Richard J. Crossed 850 Clinton Square 68,021 0.92577% Rochester, New York 14604 Crossed Family Partnership 850 Clinton Square 7,200 Rochester, New York 14604 Peter J. Obourn 850 Clinton Square 30,700 0.41783% Rochester, New York 14604 John H. Fennessey 850 Clinton Square 30,700 0.41783% Rochester, New York 14604 Tamarack II Associates 850 Clinton Square 2,027 0.02759% Rochester, New York 14604 Burton S. August 11 Woodbury Place 4,246 0.05779% Rochester, New York 14618 Charles J. August 355 Ambassador Drive 4,246 0.05779% Rochester, New York 14610 Robert W. August 35 Woodstone Rise 1,158 0.01576% Pittsford, New York 14534 John H. Cline 35 Vick Park A 2,316 0.03152% Rochester, New York 14607 Ralph DeStephano, Sr. 1249-1/2 Long Pond Road 2,316 0.03152% Rochester, New York 14626 Philip W. Dunsker 70 Woodland Road 2,316 0.03152% Short Hills, New Jersey 07078 Gerald A. Fillmore 3800 Delano Road 2,316 0.03152% F/B/O Living Trust of G.A.F. Oxford, Michigan 48371 Esther Lowenthal 1400 East Avenue 2,316 0.03152% Rochester, New York 14610 Richard J. Katz, Jr. 191 Island Drive 2,316 0.03152% Jupiter, Florida 33477 Anwer Masood, MD 1445 Portland Avenue 2,316 0.03152% Rochester, New York 14621 Elizabeth W. Pine 1350 Highland Avenue 1,448 0.01971% Rochester, New York 14620 Estate of Ernest I. Reveal, Jr. c/o Mr. Donald K. Easterly 2,316 0.03152% Chase P.O. Box 1412 Rochester, New York 14603 Gregory J. Riley, MD 18 Whitestone Lane 2,316 0.03152% Rochester, New York 14618 Thomas P. Riley 346 Beach Avenue 2,316 0.03152% Rochester, New York 14612 Tamarack Associates c/o Mr. Timothy D. Fournier 2,316 0.03152% 46 Prince Street Rochester, New York 14607 William G. vonberg 8 Old Landmark Drive 2,316 0.03152% Rochester, New York 14618 Stephen C. Whitney 9 Devonwood Lane 869 0.01183% Pittsford, New York 14534 Mr. and Mrs. Frank Zamiara 136 Mendon-Ionia Road 2,316 0.03152% Mendon, New York 14506 The Joseph A. Cicci Revocable Trust 109 Wyoming Street 104,118 1.41705% Syracuse, New York 13204 TOTAL UNITS 7,347,517.156
EX-10 5 EXHIBIT 10.15 INDEMNIFICATION AGREEMENT THIS AGREEMENT is made as of the 30th day of December, 1996 between Home Properties of New York, Inc. (the "Company"), a Maryland corporation and Alan L. Gosule ("Indemnitee"). WHEREAS, highly competent persons are reluctant to serve as directors and officers of the Company unless they are provided with adequate protection through insurance and adequate indemnification against inordinate risks of claims and actions against them arising out of their service to and activities on behalf of the Company; WHEREAS, the current limitations on coverage of available insurance and the uncertainties relating to indemnification have increased the difficulty of attracting and retaining such persons; WHEREAS, the Board of Directors of the Company has determined that the ability to attract and retain such persons is in the best interests of the Company's stockholders and that the Company should act to assure such persons that there will be increased certainty of such protection in the future; WHEREAS, it is reasonable, prudent and necessary for the Company contractually to obligate itself to indemnify such persons to the fullest extent permitted by applicable law so that they will serve or continue to serve the Company free from undue concern that they will not be so indemnified; and WHEREAS, the Indemnitee is willing to serve, continue to serve and to consider taking on additional service for or on behalf of the Company on the condition that the Indemnitee be so indemnified; NOW, THEREFORE, the Company and the Indemnitee hereby agree as follows: 1. Statutory Indemnity. Without limiting any other indemnification rights Indemnitee may have, under this Agreement or otherwise, the Company hereby agrees to hold harmless and indemnify Indemnitee to the full extent authorized or permitted by the provisions of the Maryland General Corporation Law, or by any amendment thereof or other statutory provisions authorizing or permitting such indemnification which is adopted after the date hereof. 2. Indemnity. Without limiting any other indemnification rights Indemnitee may have, under this Agreement or otherwise, subject only to the exclusions set forth in Section 3 hereof, the Company hereby agrees to hold harmless and indemnify Indemnitee: Page 1 (a) Against any and all expenses (including attorneys' fees and expenses incurred in defense or investigation of any claim, including a claim against the Company or Indemnitee with respect to this Agreement), judgments, fines and amounts paid in settlement actually and reasonably incurred by Indemnitee in connection with any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (including an action by or in the right of the Company) to which Indemnitee is, was or at any time becomes a party, or is threatened to be made a party, by reason of the fact that Indemnitee is, was or at any time becomes a director, officer, employee or agent of the Company, or is or was serving or at any time serves at the request of the Company as a director, officer, employee or agent of Home Properties of New York, L.P. (the "Partnership"), the limited partnership of which the Company is general partner, or of any other corporation, partnership, joint venture, trust, employee benefit plan or other enterprise; (b) Otherwise to the fullest extent as may be permitted to Indemnitee by the Company under the non-exclusivity provisions of Article VII of the By-laws of the Company as in effect on the date hereof and subparagraphs (g) and (h) of Section 2-418 of the Maryland General Corporation Law or any successor provision; and (c) The Company covenants and agrees to maintain Directors' and Officers' Liability Insurance on terms at least as favorable to Indemnitee as the policy currently in effect (the "D&O Policy") unless otherwise approved by a majority of the Board of Directors of the Company. 3. Limitations on Indemnity. No indemnity pursuant to Section 2 hereof shall be paid by the Company: (a) if the act or omission of the Indemnitee was material to the matter giving rise to the proceedings and was committed in bad faith or as a result of active and deliberate dishonesty; (b) in the case of any criminal proceeding, the Indemnitee had reasonable cause to believe that the act or omission was unlawful; (c) if a final decision by a court having jurisdiction in the matter, or an opinion of Company counsel (or, if requested by Indemnitee, counsel independent of the Company and Indemnitee) shall determine that such indemnification is unlawful; or (d) if the liability arises under the Securities Act of 1933 in connection with any offering registered under that Act and the Company has not received an opinion of its counsel or opinion of a court of appropriate jurisdiction that such indemnification is not against public policy. 4. Continuation of Indemnity. All agreements and obligations of the Company contained herein shall continue during the period Indemnitee is a director, officer, employee or agent of the Company (or is or was serving at the request of the Company as a Page 2 director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise) and shall continue thereafter for the benefit of Indemnitee and his personal representatives, with respect to any claim or threatened, pending or completed action, suit or proceeding, whether, civil, criminal or investigative, that may be asserted, threatened or exist by reason of the fact that Indemnitee was a director of the Company or serving in any other capacity referred to herein. 5. Notification and Defense of Claim. Promptly after receipt by Indemnitee of notice of any claim or the commencement of any action, suit or proceeding, Indemnitee will, if a claim for indemnity in respect thereof is to be made against the Company under this Agreement, notify the Company of the commencement thereof; but the omission so to notify the Company will not relieve it from any liability which it may have to Indemnitee otherwise than under this Agreement. With respect to any such action, suit or proceeding as to which Indemnitee notifies the Company of the commencement thereof: (a) The Company will be entitled to participate therein at its own expense; and (b) Except as otherwise provided below, to the extent that it may wish, the Company, jointly with any other indemnifying party similarly notified, will be entitled to assume the defense thereof, with counsel reasonably satisfactory to Indemnitee. After notice from the Company to Indemnitee of its election so to assume the defense thereof the Company will not be liable to Indemnitee under this Agreement for any legal or other expenses subsequently incurred by Indemnitee in connection with the defense thereof other than reasonable costs of investigation, or reasonable expenses incurred by Indemnitee in interpreting this Agreement and in concluding whether or not a conflict of interest may exist as contemplated in (ii) below, or as otherwise provided below. Indemnitee shall have the right to employ its counsel in such action, suit or proceeding but the fees and expenses of such counsel incurred after notice from the Company of its assumption of the defense thereof shall be at the expense of Indemnitee unless (i) the employment of counsel by Indemnitee has been authorized by the Company, (ii) Indemnitee shall have reasonably concluded that there may be a conflict of interest between the Company and Indemnitee in the conduct of the defense of such action which would materially hinder the ability of counsel to the Company to represent Indemnitee, or (iii) the Company shall not in fact have employed counsel reasonably satisfactory to Indemnitee to assume the defense of such action, in each of which cases the fees and expenses of Indemnitee's counsel shall be at the expense of the Company. The Company shall not be entitled to assume the defense of any action, suit or proceeding brought by or on behalf of the Company or as to which Indemnitee shall have made the conclusion provided for in (ii) above; (c) The Company shall not be liable to indemnify Indemnitee under this Agreement for any amounts paid in settlement of any action or claim effected without its written consent. The Company shall not settle any action or claim in any manner which would impose any liability, penalty, limitation or acknowledgment of fault on Indemnitee without Indemnitee's written consent. Neither the Company nor Indemnitee will unreasonably withhold their consent to any proposed settlement; and Page 3 (d) Nothing contained herein shall require Indemnitee or the Company to take any actions which would limit the availability of coverage under the D&O Policy or would permit the carrier to disclaim coverage. Indemnitee and the Company agree to use their respective best efforts to comply with the terms and conditions of the D&O Policy. 6. Advance and Repayment of Expenses. The Company shall advance to Indemnitee all reasonable expenses incurred by Indemnitee in defending any civil or criminal action, suit or proceeding against Indemnitee, within 10 days of receiving (a) a written affirmation of Indemnitee that (i) the act or omission giving rise to any such action, suit or proceeding was not committed in bad faith or the result of active and deliberate dishonesty, and (ii) in the case of a criminal proceeding, Indemnitee did not have reasonable cause to believe that the act or omission giving rise to such action, suit or proceeding was unlawful, and (b) a written undertaking by or on behalf of Indemnitee to repay the amount advances if it is ultimately determined that the Indemnitee has not met the standard of conduct necessary for indemnification under applicable law. 7. Enforcement. (a) The Company expressly confirms and agrees that it has entered into this Agreement and assumed the obligations imposed on the Company hereby in order to induce Indemnitee to become or continue as a director or officer of the Company, and acknowledges that Indemnitee is relying upon this Agreement in continuing in such capacity; and (b) In the event either the Company or Indemnitee brings any action to enforce rights or to collect moneys due under this Agreement, to the extent that Indemnitee is successful in such action, the Company shall reimburse Indemnitee for all of Indemnitee's reasonable fees and expenses in defending, bringing or pursuing such action. 8. Separability. Each of the provisions of this Agreement is a separate and distinct agreement and independent of the others, so that if any provision hereof shall be held to be invalid or unenforceable for any reason, such invalidity or unenforceability shall not affect the validity or enforceability of the other provisions hereof. 9. Governing Law; Binding Effect; Amendment and Termination. (a) This Agreement shall be interpreted and enforced in accordance with the laws of the State of New York without regard to principles of conflicts of laws except to the extent the laws of the State of Maryland apply by reason of the fact that the Company is a corporation organized under the laws of the State of Maryland; (b) This Agreement shall be binding upon Indemnitee and upon the Company, its successors and assigns, and shall inure to the benefit of Indemnitee, his heirs, personal representatives and assigns and to the benefit of the Company, its successors and assigns, and supersedes any prior agreement between the parties; and Page 4 (c) No amendment, modification, termination or cancellation of this Agreement shall be effective unless in writing signed by both parties hereto. IN WITNESS WHEREOF, the parties hereto have executed this Agreement on and as of the day and year first above written. HOME PROPERTIES OF NEW YORK, INC. By: /s/ Nelson B. Leenhouts --------------------------------- Nelson B. Leenhouts, President /s/ Alan L. Gosule --------------------------------- Alan L. Gosule Page 5 EX-10 6 EXHIBIT 10.24 Repayment of this Note is subject and subordinate to repayment of a Term Promissory Note in the original principal amount of $____x_____ given by the undersigned to The Chase Manhattan Bank this date. TERM PROMISSORY NOTE $ _______x____________ Rochester, New York August 12, 1996 For value received, the undersigned promises to pay to the order of HOME PROPERTIES OF NEW YORK, L.P. ("Home Properties" or "HME"), at its office located at 850 Clinton Square Rochester, New York, 14604 or to such other address as Home Properties may notify the undersigned, the principal amount of x Dollars ($ __________x____________) (the "Loan"). Maturity Date. The entire amount of principal, and remaining accrued interest on, this Note shall be due on August 31, 2016 (the "Maturity Date"). Interest. The undersigned promise(s) to pay interest on the unpaid balance of the principal amount of the Loan from and including the date of the Loan to but excluding the date the Loan shall be paid in full at the rate of 7% per annum. Interest shall be calculated on the basis of a year of 360 days and payable for the actual number of days elapsed. Interest shall accrue and be paid solely from the regular quarterly dividends paid on the shares of common stock (the "Shares") of Home Properties pledged to Home Properties by the undersigned pursuant to the Pledge Security Agreement dated the date of this Note (the "Pledge Agreement"). Accrued interest shall not be compounded. Payments. All payments under this Note shall be made in lawful money of the United States of America and in immediately available funds at Home Properties' office specified above. During the existence of an Event of Default as hereinafter defined, Home Properties may apply any money received or collected for payment of this Note to the principal of, interest on or any other amount payable under, this Note in any order that Home Properties may elect. The loan may be prepaid at any time without premium or penalty. All partial prepayments shall be applied to the reduction and payment of principal in the inverse order of maturity. Non-Recourse. This Note shall be a non-recourse obligation of the undersigned. By accepting this Note, Home Properties agrees to look solely to the collateral represented by the Shares pledged under the Pledge Agreement for repayment of all amounts due hereunder and waives its right to seek or obtain any judgment or deficiency judgment against the undersigned for such amounts. Records. The date and amount of the Loan and each payment of principal, and the outstanding principal balance of the loan, shall be recorded by Home Properties on its books and any such record shall be conclusive absent manifest error. Representations and Warranties. The undersigned represents and warrants upon the execution and delivery of this Note, that: (a) the execution, delivery and performance of this Note do not violate or conflict with any law applicable to the undersigned, any order or judgment of any court or other agency of government applicable to the undersigned or any of the undersigned's assets or any material contractual restriction binding on or materially affecting the undersigned or any of the undersigned's assets; (b) to the best of undersigned's knowledge, all governmental and other consents that are required to have been obtained by the undersigned with respect to this Note have been obtained and are in full force and effect and all conditions of any such consents have been complied with; and (c) the undersigned's obligations under this Note constitute its legal, valid and binding obligations, enforceable in accordance with its terms except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency or other similar laws affecting creditors' rights generally. Security. This Note is secured pursuant to the terms of the Pledge Agreement. Page 1 Default. If any of the following events of default shall occur with respect to the undersigned (each an "Event of Default"): (a) any representation or warranty made or deemed made by the undersigned in this Note shall prove to have been incorrect in any material respect on or as of the date made or deemed made; (b) the undersigned: (i) shall generally not, or be unable to, or shall admit in writing an inability to, pay debts as such debts become due; (ii) shall make an assignment for the benefit of creditors; (iii) shall file a petition in bankruptcy or for any relief under any law of any jurisdiction relating to reorganization, arrangement, readjustment of debt, dissolution or liquidation; (iv) shall have any such petition filed against the undersigned and the same shall remain undismissed for a period of 30 days or shall consent or acquiesce thereto; or (v) shall have had a receiver, custodian or trustee appointed for all or a substantial part of the undersigned's property; (c) if the undersigned shall die or be declared incompetent; (d) there occurs a default pursuant to the terms of the Term Promissory Note given this date by the undersigned to The Chase Manhattan Bank, which Note is secured by a first pledge of the Shares; (e) the undersigned leaves the employment of or is no longer serving as a Director of Home Properties or Home Properties of New York, Inc., as the case may be, regardless of the circumstances; THEN, in any such case, if Home Properties shall elect by notice to the undersigned, the unpaid principal amount of this Note, together with accrued interest, shall become forthwith due and payable; provided that in the case of an event of default under (b) above, the unpaid principal amount of this Note, together with accrued interest, shall immediately become due and payable without any notice or other action by Home Properties. Certain Waivers. The undersigned waives presentment, notice of dishonor, protest and any other notice or formality with respect to this Note. Notices. All notices, requests, demands or other communications to or upon the undersigned or Home Properties shall be in writing and shall be deemed to be delivered upon receipt if delivered by hand or overnight courier or five days after mailing to the address (a) of the undersigned as set forth next to the undersigned's execution of this Note, (b) of Home Properties as first set forth above, or (c) of the undersigned or Home Properties at such other address as the undersigned or Home Properties shall specify to the other in writing. Assignment. This Note shall be binding upon the undersigned and the undersigned's successors and shall inure to the benefit of Home Properties and its successors and assigns. Entire Agreement, Amendment and Waiver. This Note and the Pledge Agreement executed by the undersigned constitute the entire agreement between the undersigned and Home Properties and may be amended only by a writing signed on behalf of each party and shall be effective only to the extent set forth in that writing. No delay by Home Properties in exercising any power or right hereunder shall operate as a waiver thereof or of any other power or right; nor shall any single or partial exercise of any power or right preclude other or future exercise thereof, or the exercise of any other power or right hereunder. Governing Law. This Note shall be governed by and construed in accordance with the laws of the State of New York. Page 2 Use of Proceeds. The proceeds of the Loan represented by this Note will be used by the undersigned to purchase the Shares and Home Properties is instructed to disburse such proceeds directly to or at the direction of HME with respect to such purchase. _______x__________________________ Address for Notices: _______x__________________________ _______x__________________________ Page 3 EX-10 7 EXHIBIT 10.25 The security interest granted herein is subject and subordinate to a security interest granted by the undersigned this date to The Chase Manhattan Bank. PLEDGE SECURITY AGREEMENT The undersigned executes and delivers this Pledge Security Agreement (the "Agreement") to Home Properties of New York, L.P. ("Home Properties"), having an office located at 850 Clinton Square, Rochester, New York 14604, in consideration of a loan made by Home Properties to the undersigned. Accordingly, Home Properties shall have the rights, remedies and benefits hereinafter set forth. Definitions. The term "Liabilities" shall include any and all indebtedness, obligations and Liabilities of any kind of the undersigned to Home Properties with respect to a certain loan (the "Loan") from Home Properties evidenced by a promissory note of even date herewith (the "Note") in the principal amount of $____X____________, the proceeds of which are being used by the undersigned to purchase the Collateral (as defined below). The term "Collateral" means all property in which the undersigned grants a security interest pursuant to the "Grant of Security Interest" paragraph set forth below. The term "Obligor" means the undersigned. Grant of Security Interest. As security for the payment of the Liabilities, the undersigned hereby grants Home Properties a security interest in, a general lien upon and/or right of set-off against (as applicable) the ____X_____ shares (the "Shares") of common stock of Home Properties acquired by the undersigned on this date with the proceeds of the Loan and a loan ("Chase Loan") from The Chase Manhattan Bank ("Chase"). By accepting this Agreement, Home Properties acknowledges and agrees that the pledge hereunder is secondary and subordinate to a pledge given by the undersigned to Chase to secure the Chase Loan. The undersigned agrees that Home Properties' records will be the accurate record of any substitutions in and additionals to the Collateral. A certificate ("Certificate") for the Shares shall be issued in the name of the undersigned, but when issued shall be forwarded by Home Properties' transfer agent directly to Chase and Chase shall have and maintain custody of the Certificate until the Chase Loan is paid in full. Upon payment in full of the Chase Loan, the undersigned will instruct Chase to deliver the Certificate to Home Properties. The undersigned also agrees to execute and deliver to Home Properties blank stock powers with respect to the Certificate upon the execution of this Agreement. Covenants. As long as any part of the Liabilities remain unpaid the undersigned agrees to: a) defend the Collateral against all claims, keep the Collateral free from other security interests (other than the pledge to Chase) and not dispose of any portion of the Collateral without Home Properties' written consent; Page 1 b) notify Home Properties promptly of any changes in the undersigned's name or address; c) execute and deliver any financing statements or other documents, pay any costs of title searches and filing fees, and take any other action Home Properties requests in relation to the security interest; d) pay all taxes and other charges which may be levied against the Collateral. Warranties. As long as any part of the Liabilities remain unpaid the undersigned warrants to Home Properties that: a) each document representing the Collateral is genuine; b) the undersigned owns the Collateral free of any claims, liens, encumbrances and security interests, except of Chase and Home Properties; c) the undersigned is fully authorized to enter into this Agreement. Voting Rights. So long as no Event of Default occurs, the Shares will remain registered in the name of the undersigned. However, after a default and payment in full of the Chase loan, the undersigned authorizes Home Properties to transfer the shares into Home Properties' name or the name of any nominee and agrees that thereafter Home Properties does not have to send the undersigned any communications with respect to the Shares and any proxies issued by the undersigned will be invalid. Home Properties shall then have the right to vote in person or by proxy without any direction from the undersigned. Default. It shall be an Event of Default if Obligor shall default in the performance of any of his/her agreements herein, or the occurrence and continuance of any Event of Default under Obligor's note. Upon the occurrence of an Event of Default, unless and to the extent that Home Properties shall otherwise elect, all of the Liabilities shall become and be due and payable forthwith. Dividends/Income. After payment in full of the Chase Loan and until the Loan is paid in full, all cash dividends from the Collateral shall be paid directly to Home Properties pursuant to the terms of the Note. If the undersigned receives any dividends or income during the term of this Agreement, the undersigned agrees to promptly turn the same over to Chase until such time as the Chase Loan is paid in full and thereafter to Home Properties. Home Properties shall apply the cash dividends so received to the Liabilities but Home Properties will account for it and pay over to the undersigned any cash which remains on hand after the Liabilities are satisfied. General Waivers. Without affecting the liability of the undersigned to Home Properties, any of the following may be done by Home Properties without notice to the undersigned. a) change, renew or extend the time for repayment of any part of the Liabilities; b) change the rate of interest or any other provisions with respect to any part of the Liabilities; Page 2 c) surrender, sell or otherwise dispose of any money or property which is in Home Properties' possession as collateral security for the Liabilities; d) release or discharge any party liable to Home Properties in whole or in part for the Liabilities or accept any additional parties or guarantors; e) delay or refrain from exercising any of Home Properties' rights; and f) settle or compromise any and all claims. Custody of Collateral. Home Properties agrees to use reasonable care to protect any Collateral in its possession. However, Home Properties shall not be required to: a) vote the stock; b) collect any debt; c) exercise any conversion rights; d) take any steps necessary to preserve rights against prior parties; e) notify the undersigned of any maturities, calls, conversions, or other similar matters concerning the Collateral, except for forwarding to the undersigned those communications which are addressed to the undersigned; or f) act upon any request the undersigned may send Home Properties. Changes in Collateral. Whether or not an Event of Default has occurred, the undersigned authorizes Home Properties to: a) receive and hold as additional collateral any non-cash increases in or profits on the Collateral, including without limitation any shares issued as the result of a stock split or similar distribution; and b) surrender the Collateral and receive any payment or distribution upon redemption, dissolution or liquidation of the issuer of the Collateral. If the undersigned receives any of the payments or distributions described above after payment in full of the Chase Loan, the undersigned agrees to turn them over to Home Properties. Further Assurance. The undersigned appoints Home Properties as its attorney to take any necessary steps, including the filing of financing statements, to perfect Home Properties' security interest without first obtaining the undersigned's signature. Upon Home Properties' request, the undersigned will execute any amendments, including UCC-3 forms, which are necessary to perfect and continue Home Properties' security interest in the Collateral. Modification. This Agreement cannot be modified except by a written agreement. Notices. The undersigned waives any right to notice of any action Home Properties may take with respect to the Collateral. If Home Properties shall provide such notice, the undersigned agrees that notice will be sufficiently given if sent to the undersigned's address shown in this Agreement or to a new address which the undersigned shall have notified Home Properties of in writing. The undersigned agrees that notice of foreclosure sale sent at least five days before the sale provides the undersigned with a reasonable opportunity to exercise the undersigned's right of redemption of the Collateral and any other legal rights. Page 3 Governing Law; Jurisdiction. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. The undersigned consents to the nonexclusive jurisdiction and venue of the state or federal courts located in such state. In the event of a dispute hereunder, suit may be brought against the undersigned in such courts or in any jurisdiction where the undersigned or any of its assets may be located. Service of process by Home Properties in connection with any dispute shall be binding on the undersigned if sent to the undersigned by registered mail at the address(es) specified below or to such further address(es) as the undersigned may specify to Home Properties in writing. IN WITNESS WHEREOF, the undersigned has executed this instrument or has caused this instrument to be duly executed this _____ day of August, 1996. ______________________________ Signature __X____________________________ Address: __X_____________________________ __x_____________________________ Page 4 EX-10 8 EXHIBIT 10.26
NAME OF PARTICIPANTS SHARES ISSUED COMPANY LOAN AMOUNT William E. Beach 963 38,103.59 Lawrence R. Brattain 1,779 70,411.41 C. Terence Butwid 2,527 100,017.10 Richard J. Crossed 7,338 290,417.38 Kathleen M. Dunham 778 30,780.47 John H. Fennessey 1,289 51,007.14 Timothy A. Florczak 834 33,012.77 Timothy D. Fournier 2,401 95,004.38 David P. Gardner 2,174 86,017.08 Nelson B. Leenhouts 7,338 290,417.38 Norman P. Leenhouts 7,338 290,417.38 Robert J. Luken 1,016 40,218.43 Ann M. McCormick 2,123 84,000.12 Paul O'Leary 1,001 39,611.36 John Oster 1,719 68,002.92 Richard J. Struzzi 956 37,809.95 Amy L. Tait 5,206 206,005.95 Robert C. Tait 812 32,112.06 Burton S. August, Sr. 759 30,017.00 William Balderston, III 759 30,017.00 Leonard Helbig, III 759 30,017.00 Roger W. Kober 759 30,017.00 Clifford W. Smith, Jr. 759 0 Paul L. Smith 759 30,017.00
EX-10 9 Exhibit 10.27 GUARANTY (UNLIMITED AMOUNT) This Guaranty is granted by the Guarantor to THE CHASE MANHATTAN BANK having an office located at One Chase Square, Rochester, New York ("Business Office"), and/or any of its subsidiaries and/or affiliates and wherever located (hereinafter with their respective successors and assigns, collectively or individually, as the context may require, referred to as "Chase"). RECITALS. Pursuant to separate notes (the "notes"), Chase is providing up to 24 term loans aggregating up to $2.1 million (the "loans") to the Directors and certain key employees (individually, a "Borrower" and collectively, the "Borrowers") of Home Properties of New York, Inc. ("Home Properties") to assist the Borrowers in financing their purchases of shares of the common stock of Home Properties under its Executive Stock Purchase and Loan Program (the "Program"); and Home Properties and its subsidiary, Home Properties of New York, L.P. ("Home Properties L.P.") (Home Properties and Home Properties L.P. are hereinafter collectively referred to as the "Guarantor", and the term "Guarantor" shall mean each Guarantor individually and both of them together) represents that, by assisting the Borrowers in financing such purchases and thereby acquiring a significant equity interest in Home Properties, it expects to derive advantage from each and every such accommodation. CONSIDERATION. To induce Chase, at its option, at any time or from time to time, to extend the above described loans, with or without security, to or for the accounts of the Borrowers, each Guarantor hereby agrees as follows: GUARANTY. The Guarantor (and if there is more than one Guarantor, jointly and severally) absolutely and unconditionally guarantees to Chase that each Borrower will promptly perform and observe every agreement and condition contained in any instrument, writing or arrangement relating to or the subject of the loan to each Borrower (a "Credit Arrangement") to be performed or observed by such Borrower, that all sums stated to be payable in, or which become payable under, any Credit Arrangement, will be promptly paid in full when due, whether at maturity or earlier by reason of acceleration or otherwise, together with interest and any and all legal and other costs and expenses paid or incurred in connection therewith by Chase (collectively, the "Guaranteed Obligations"), and, in case of one or more extensions of time of payment or renewals, in whole or in part, of any Credit Arrangement or obligation, that the same will be promptly paid or performed when due, according to each such extension or renewal, whether at maturity or earlier by reason of acceleration or otherwise. The Guarantor agrees that, as between the Guarantor and Chase, the Guaranteed Obligations may be declared to be due and payable for purposes of this Guaranty notwithstanding any stay, injunction or other prohibition which may prevent, delay or vitiate any such declaration as against any Borrower and that, in the event of any such declaration (or attempted declaration), the Guaranteed Obligations (whether or not due and payable by any Borrower) shall forthwith become due and payable by the Guarantor for purposes of this Guaranty. The Guarantor further guarantees that all payments made by any Borrower to Chase of any Guaranteed Obligation will, when made, be final and agrees that if any such payment is recovered from, or repaid by, Chase in whole or in part by reason of any bankruptcy, insolvency or similar proceeding instituted by or against such Borrower, this Guaranty shall continue to be fully applicable to such obligation to the same extent as though the payment so recovered or repaid had never been originally made on such obligation. Each Guarantor further specifically guarantees to make prompt payment when due of the additional interest ("interest rate differential") payments with respect to the loans, as further described below. This is a guaranty of payment and performance and not a guaranty of collection only. This Guaranty is enforceable irrespective of the validity, regularity or enforceability of any instrument, writing or arrangement relating to or the subject of a Credit Arrangement or the obligations thereunder and irrespective of any present or future law or order of any government (whether of right or in fact and whether Chase shall have consented thereto) or of any agency thereof purporting to reduce, amend, restructure or otherwise affect any obligation of any Borrower or other obligor or to vary the terms of payment. Page 1 CONSENTS AND WAIVERS. The Guarantor hereby consents that from time to time, without notice to or further consent of the Guarantor, the performance or observance by any Borrower of any Credit Arrangement or Guaranteed Obligation may be waived or the time of performance thereof extended by Chase, and payment of any Guaranteed Obligation may be accelerated in accordance with any agreement governing the same, or may be extended, or any Credit Arrangement may be renewed in whole or in part, or the terms of any Credit Arrangement or any part thereof may be changed, including increase or decrease in the rate of interest thereon, or any collateral therefor may be exchanged, surrendered or otherwise dealt with as Chase may determine, or any co-guarantor or any other party liable upon or in respect of any obligation may be released, and any of the acts mentioned in any Credit Arrangement may be done, all without notice to or affecting the liability of the Guarantor hereunder. The Guarantor waives notice of acceptance of this Guaranty and of the creation of any Guaranteed Obligations. The Guarantor hereby waives presentment of any instrument, demand for payment, protest and notice of non-payment or protest thereof or of any exchange, sale, surrender or other handling or disposition of any such collateral, and any requirement that Chase exhaust any right, power or remedy or proceed against any Borrower under any Credit Arrangement or against any other person under any other guaranty of, or security for, any of the Guaranteed Obligations. The Guarantor hereby further waives any defense whatsoever which might constitute a defense available to, or discharge of, any Borrower or a guarantor. No payment by the Guarantor pursuant to any provision hereunder shall entitle the Guarantor, by subrogation to the rights of Chase or otherwise, to any payment by any Borrower (or out of the property of such Borrower) except after payment in full of all sums (including interest, costs and expenses) which may be or become payable by any Borrower to Chase at any time or from time to time, unless the Guaranteed Obligations shall be paid in full. FINANCIAL STATEMENTS. Each Guarantor shall furnish to Chase, within 120 days after the end of the Guarantor's fiscal year or at such other times or intervals as Chase may request, audited financial statements showing the Guarantor's financial condition at the end of and for the entire fiscal year. Such statements shall fairly present the financial condition of the Guarantor as at the end of such fiscal year or periods in accordance with generally accepted accounting principles consistently applied. RIGHTS CUMULATIVE. The rights, powers and remedies granted to Chase herein shall be cumulative and in addition to any rights, powers and remedies to which Chase may be entitled either by operation of law or pursuant to any other document or instrument delivered or from time to time to be delivered to Chase in connection with any Credit Arrangement. SECURITY. As collateral security for the payment of any and all obligations and liabilities of the Guarantor to Chase, now existing or hereafter arising, the Guarantor grants to Chase a security interest in and a lien upon and right of offset against all moneys, deposit balances, securities or other property or interest therein of the Guarantor now or at any time hereafter held or received by or for or left in the possession or control of Chase or any of its affiliates, whether for safekeeping, custody, transmission, collection, pledge or for any other or different purpose. REPRESENTATIONS AND WARRANTIES. Each Guarantor represents and warrants that: (a) it is duly organized and validly existing under the laws of the jurisdiction of its organization or incorporation and, if relevant under such laws, in good standing; (b) it has the power to execute and deliver this Guaranty and to perform its obligations hereunder and has taken all necessary action to authorize such execution, delivery and performance; (c) such execution, delivery and performance do not violate or conflict with any law applicable to it, any provision of its organizational documents, any order or judgment of any court or other agency of government applicable to it or any of its assets or any material contractual restriction binding on or materially affecting it or any of its assets; (d) to the best of Guarantor's knowledge, all governmental and other consents that are required to have been obtained by it with respect to this Guaranty have been obtained and are in full force and effect and all conditions of any such consents have been complied with; (e) its obligations under this Guaranty constitute its legal, valid and binding obligations, enforceable in accordance with its terms except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency or other similar laws affecting creditors' rights generally; (f) all financial statements and related information furnished and to be furnished to Chase from time to time by the Guarantor are true and complete and fairly present the financial or other information stated therein as at such dates or for the periods covered thereby; (g) there are no actions, suits, proceedings or investigations pending or, to the knowledge of the Guarantor, threatened against or affecting the Guarantor before any court, governmental agency or arbitrator, which involve forfeiture of any assets of the Guarantor or which may materially adversely affect the financial condition, operations, properties or business of the Guarantor or the ability of the Page 2 Guarantor to perform its obligation under this Guaranty; and (h) there has been no material adverse change in the financial condition of the Guarantor since the last such financial statements or information. COVENANTS. Each Guarantor hereby covenants that: (a) all shares of Home Properties' common stock purchased pursuant to the Program will be registered under the Securities Act of 1933 and freely tradeable on the New York Stock Exchange and can be sold without restriction by Chase, as pledgee, pursuant to each Borrower's Pledge Security Agreement securing his/her loan; (b) during the initial five years of the term of each loan, each Guarantor will pay Chase, in cash on the date interest on each loan is due and payable, an interest rate differential payment on each loan equal to 0.94% per annum on the aggregate principal amount of each loan outstanding; (c) at the end of any fiscal quarter of Home Properties, the aggregate outstanding principal amount of the liabilities of Home Properties, Home Properties L.P. and any entity owned 50% or more by Home Properties or Home Properties L.P. (collectively, the "Related Entities") shall not exceed 60% of the total of (i) the aggregate market value at such time of all outstanding shares ot Home Properties' common stock plus, (ii) the aggregate market value at such time of all outstanding partnership interests in Home Properties L.P. on an as-converted basis based upon the then- current conversion price of such interests into shares of Home Properties' common stock, plus (iii) the aggregate outstanding principal amount of liabilities of the Related Entities; (d) for any fiscal year of Home Properties, the combined net income of all Related Entities before distributions and non-cash expenses shall be at least 120% of all principal and interest payments due during that fiscal year with respect to the liabilities of the Related Entities. For purposes of the foregoing calculations, the term "liabilities" shall mean the liabilities of the Related Entities as shown on their respective balance sheets and determined in accordance with generally accepted accounting principles consistently applied. Home Properties will provide Chase with reports showing the calculations required by subparagraphs (c) and (d) above within 15 days following the end of a quarter and within 30 days following a year end. DEFAULT. If any of the following events of default shall occur (each an "Event of Default"): (a) Either Guarantor shall fail to timely make any interest rate differential payment or shall fail to pay any other amount payable under this Guaranty within five days after demand by Chase; (b) any representation or warranty made or deemed made by the Guarantor in this Guaranty or in any other document executed in connection with the loans (this Guaranty and all agreements, instruments or other documents executed by the Guarantor in connection with the loans being the "Facility Documents") or which is contained in any certificate, document, opinion, financial or other statement furnished at any time under or in connection with any Facility Document, shall prove to have been incorrect in any material respect on or as of the date made or deemed made; (c) the Guarantor shall fail to perform or observe any term, covenant or agreement contained in any Facility Document on its part to be performed or observed, and such failure shall continue for five consecutive days; (d) the Guarantor shall fail to pay when due any indebtedness (including but not limited to indebtedness for borrowed money) or if any such indebtedness shall become due and payable, or shall be capable of becoming due and payable at the option of any holder thereof, by acceleration of its maturity, or if there shall be any default by the Guarantor under any agreement relating to such indebtedness; (e) the Guarantor: (i) shall generally not, or be unable to, or shall admit in writing its inability to, pay its debts as such debts become due; (ii) shall make an assignment for the benefit of creditors; (iii) shall file a petition in bankruptcy or for any relief under any law of any jurisdiction relating to reorganization, arrangement, readjustment of debt, dissolution or liquidation; (iv) shall have any such petition filed against it and the same shall remain undismissed for a period of 30 days or shall consent or acquiesce thereto; or (v) shall have had a receiver, custodian or trustee appointed for all or a substantial part of its property; (f) any Facility Document shall at any time and for any reason cease to be in full force and effect or shall be declared null and void, or its validity or enforceability shall be contested by the Page 3 relevant Guarantor or such Guarantor shall deny it has any further liability or obligation under any Facility Document or shall fail to perform its obligations under any Facility Document; (g) any security agreement or other agreement by the Guarantor granting a security interest, lien, mortgage or other encumbrance securing obligations under any Facility Document shall at any time and for any reason cease to create a valid and perfected first priority security interest, lien, mortgage or other encumbrance in or on the property purported to be subject to such agreement or shall cease to be in full force and effect or shall be declared null and void, or the validity or enforceability of any such agreement shall be contested by any party to such agreement, or such party shall deny it has any further liability or obligation under such agreement or any such party shall fail to perform any of its obligations under such agreement, or an event of default shall occur under such agreement; (h) the Guarantor shall make or permit to be made any material change in the character, management or direction of its business or operations (including, but not limited to, a change in its executive management or in the ownership of its capital stock which effects a change in the control of any such business or operations), which is not satisfactory to Chase; (i) the Guarantor shall suffer a material adverse change in its business, financial condition, properties or prospects; (j) any action, suit, proceeding or investigation against or affecting the Guarantor before any court or governmental agency which involves forfeiture of any assets of the Guarantor shall have been commenced; (k) Home Properties ceases paying cash dividends of at least $.42 per share per quarter on or before March 5th, June 5th, September 5th and December 5th each year; (l) failure of either Guarantor to provide an audited set of financial statements within 120 days after each year end as required by the terms of this Guaranty, or the failure of Home Properties to provide the required quarterly and annual financial calculations required by the terms of this Guaranty a within 15 days following the end of a quarter or within 30 days following a year end as the case may be, provided that in each such case, the relevant Guarantor shall first have five days to cure such a default after receiving notice from Chase of such default; THEN, IN ANY SUCH CASE, if Chase shall so elect, in the exercise of its sole discretion, by notice to the Guarantor, Chase may require that Guarantor forthwith pay the unpaid principal amount of any or all of the loans, together with accrued interest; provided that in the case of an event of default under (e) above, all such amounts shall immediately become due and payable without any notice or other action by Chase. COSTS. The Guarantor agrees to reimburse Chase on demand for all costs, expenses and charges (including, without limitation, fees and charges of external legal counsel for Chase and costs allocated by its internal legal department) in connection with the enforcement of this Guaranty. ENTIRE AGREEMENT, AMENDMENT AND WAIVERS. This Guaranty constitutes the entire agreement between the Guarantor and Chase in respect of the subject matter hereof and may be amended only by a writing signed on behalf of each party and shall be effective only to the extent set forth in that writing. No delay by Chase in exercising any power or right hereunder shall operate as a waiver thereof or of any other power or right; nor shall any single or partial exercise of any power or right preclude other or future exercise thereof, or the exercise of any other power or right hereunder. No waiver shall be deemed to be made by Chase of any of its rights hereunder unless the same shall be in writing signed on behalf of Chase, and each waiver, if any, shall be a waiver only with respect to the specific instance involved and shall in no way impair the rights of Chase or the obligations of the Guarantor to Chase in any other respect at any other time. SUCCESSORS. This agreement shall be immediately binding upon the Guarantor, and the successors of the Guarantor. Chase may assign this Guaranty or any of its rights and powers hereunder, with all or any of the obligations hereby guaranteed, and may assign and/or deliver to any such assignee any of the security therefor and, in the event of such assignment, the assignee hereof or of such rights and powers and of such security, if any such security be so Page 4 assigned and/or delivered, shall have the same rights and remedies as if originally named herein in place of Chase, and Chase shall be thereafter fully discharged from all responsibility with respect to any such Security so assigned and/or delivered. GOVERNING LAW; JURISDICTION. This Guaranty shall be governed by and construed in accordance with the laws of the State of New York. The undersigned consent(s) to the nonexclusive jurisdiction and venue of the state or federal courts located in such state. In the event of a dispute hereunder, suit may be brought against the undersigned in such courts or in any jurisdiction where the undersigned or any of its assets may be located. Service of process by Chase in connection with any dispute shall be binding on the undersigned if sent to the undersigned by registered mail at the address(es) specified below or to such further address(es) as the undersigned may specify to Chase in writing. GUARANTOR WAIVERS. EACH GUARANTOR HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES (TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW) ANY RIGHT TO A TRIAL BY JURY OF ANY DISPUTE ARISING UNDER OR RELATING TO THIS GUARANTY, AND AGREES THAT ANY SUCH DISPUTE SHALL, AT CHASE'S OPTION, BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY. Address for notices: HOME PROPERTIES OF NEW YORK, INC. 850 Clinton Square By: /s/ Nelson B. Leenhouts_ Rochester, NY 14604 Print Name: Nelson B. Leenhouts Telecopier No. (716) 546-5433 Title: President HOME PROPERTIES OF NEW YORK, L.P. Address for notices: By: HOME PROPERTIES OF NEW YORK, INC. Its General Partner 850 Clinton Square By: /s/ Nelson B. Leenhouts Rochester, NY 14604 Print Name: Nelson B. Leenhouts Telecopier No. (716) 546-5433 Title: President STATE OF ) ) ss: COUNTY OF ) On this _____ day of ________________, 199___, before me came ______________________________, and ________________________________ to me known to be the individual(s) described in and who executed the foregoing instrument and __________ duly acknowledged that __________ executed the same. State of New York) ) ss: County of Monroe ) On this 12th day of August, 1996, before me personally came Nelson B. Leenhouts, to me known, who, being by me duly sworn, did depose and say that he resides in Macedon, NY; that he is President of Home Properties of New York, Inc., the corporation described in and which executed the above instrument; and that he signed his name thereto by order of the board of directors of said corporation. /s/ Thomas P. Young ------------------- Thomas P. Young Notary Public, State of New York Monroe County My commission expires 11/30/97 State of New York) ) ss: County of Monroe ) On this 12th day of August, 1996, before me came Nelson B. Leenhouts, to me known to be the President of the general partner of the partnership of Home Properties of New York, L.P. and to me known to be the person described in and who executed the foregoing instrument in the partnership name of Home Properties of New York, L.P., and he acknowledges that he executed the same as the act and deed of said partnershp for the uses and purposes therein mentioned. /s/ Thomas P. Young ------------------- Thomas P. Young Notary Public, State of New York Monroe County My commission expires 11/30/97 EX-10 10 Exhibit 10.28 SUBORDINATION AGREEMENT The undersigned makes and grants this Subordination Agreement to THE CHASE MANHATTAN BANK and its affiliates, including subsidiaries whether now existing or hereafter created, (collectively, "Chase"), having an office located at One Chase Square, Rochester, New York ("Business Office"). RECITAL. Pursuant to their participation in the Executive Stock Purchase and Loan Program (the "Program") of Home Properties of New York, Inc., the Directors and officers listed on Rider A hereto (individually, a "Borrower", and collectively, the "Borrowers"), are now indebted to the undersigned in the principal sums set forth opposite their respective names on Rider A (collectively, the "Subordinated Debt"). This Subordination Agreement includes any Rider attached hereto. CONSIDERATION. To induce Chase, at its option, to make loans to the Borrowers to enable them to purchase shares of the undersigned's common stock under the Program, with or without security, the undersigned hereby agrees with each of the Borrowers, for the benefit of Chase, as hereinafter set forth. STANDBY. With respect to each Borrower, except as may be provided herein, the undersigned will not ask, demand, sue for, take or receive from a Borrower, by set-off or in any other manner, the whole or any part of any moneys, principal or interest, now or hereafter owing by that Borrower to the undersigned as part of the Subordinated Debt, nor any security therefor, unless and until all indebtedness of that Borrower to Chase with respect to his/her loan described above, whether now existing or hereafter arising, direct or indirect, absolute or contingent, joint or several, secured or unsecured, due or not due, and whether arising directly between the Borrower and Chase or acquired outright, conditionally or as collateral security from another by Chase (collectively, the "Chase Debt"), shall have been fully paid, with interest (including interest accruing after the commencement of any proceeding mentioned in the paragraph next following). DISTRIBUTIONS. In the event of any distribution, division or application, partial or complete, voluntary or involuntary, by operation of law or otherwise, of all or any part of the assets of a Borrower or the proceeds thereof, to creditors of that Borrower, or upon any indebtedness of that Borrower, by reason of any receivership, insolvency or bankruptcy proceeding, or assignment for the benefit of Page 1 creditors, or any proceeding by or against that Borrower for any relief under any bankruptcy or insolvency law or laws relating to the relief of debtors, readjustment of indebtedness, reorganizations, compositions or extensions, then and in any such event any payment or distribution of any kind or character, either in cash, securities or other property, which shall be payable or deliverable upon or with respect to any or all Subordinated Debt, shall be paid or delivered direct to Chase for application on the Chase Debt, due or not due, until the Chase Debt shall have first been fully paid and satisfied. The undersigned irrevocably authorizes and empowers Chase, in any proceeding mentioned in the preceding sentence, to demand, sue for, collect and receive every such payment or distribution and give acquittance therefor; and to file claims and take such other steps, in Chase's own name or in the name of the undersigned or otherwise, as Chase may deem necessary or advisable for the enforcement of this agreement or of any and all claims upon or with respect to any and all Subordinated Debt or for the collection of any and all payments or distributions which may be payable or deliverable at any time upon or with respect to any of the Subordinated Debt. An irrevocable power of attorney is granted to Chase to effect the foregoing, including supplying any necessary endorsements. RECEIPT OF PROCEEDS. Except as may be provided herein, should any payment or distribution or security or proceeds thereof be received by the undersigned upon or with respect to any of the Subordinated Debt prior to the satisfaction of all of the Chase Debt, the undersigned will forthwith deliver the same to Chase in precisely the form received (except for the indorsement or assignment of the undersigned where necessary), for application on any of the Chase Debt, due or not due, and, until so delivered, the same will be held in trust by the undersigned as property of Chase. In the event of the lure of the undersigned to make any such indorsement or assignment, Chase, or any of its officers or employees, are hereby irrevocably authorized to make the same. SECURITY. As security for its obligations to Chase hereunder and as security for payment of the Chase Debt, the undersigned hereby assigns to Chase, and grants Chase a security interest in, the Subordinated Debt and any instrument evidencing the same. The undersigned and each Borrower will do all things necessary in the opinion of Chase to protect the rights of Chase hereunder including but not limited to delivering possession to Chase of any instrument evidencing the Subordinated Debt, or, if no such instrument exists, creating an instrument evidencing such Subordinated Debt and delivering possession of the same to Chase. Upon the failure by a Borrower to pay when due any of his/her the Chase Debt, whether by acceleration or otherwise, or upon the occurrence of any event, condition or act Page 2 (including notice and lapse of time, if specified) which is defined or described as a default or an event of default in any document or instrument pertaining to or evidencing the Chase Debt, Chase may, without limitation of any other provision herein, in its name or the name of the undersigned or otherwise, take any action for the collection of the Subordinated Debt, may receive the proceeds thereof and give acquittances therefor and after deducting the costs and expenses of any action taken, including reasonable counsel fees, may apply such proceeds to any of the obligations of the undersigned hereunder or to any of the Chase Debt as Chase may elect, accounting to the undersigned for any balance remaining. The undersigned irrevocably appoints Chase as the lawful attorney and agent of the undersigned to execute financing statements on behalf of the undersigned and to file such financing statements signed by Chase alone in any public office. NO ASSIGNMENT WITHOUT SUBROGATION. The undersigned will not assign or transfer, or further subordinate, to others any claim the undersigned has or may have against a Borrower while any Chase Debt remains unpaid, unless such assignment, transfer or subordination is made expressly subject and subordinate to this agreement and the rights of Chase hereunder. REPRESENTATIONS AND WARRANTIES. If the undersigned is other than an individual, the undersigned represents and warrants upon the execution and delivery of this Subordination Agreement, that: (a) it is duly organized and validly existing under the laws of the jurisdiction of its organization or incorporation and, if relevant under such laws, in good standing; (b) it has the power to execute and deliver this Subordination Agreement and to perform its obligations hereunder and has taken all necessary action to authorize such execution, delivery and performance; (c) such execution, delivery and performance do not violate or conflict with any law applicable to it, any provision of its organizational documents, any order or judgment of any court or other agency of government applicable to it or any of its assets or any material contractual restriction binding on or materially affecting it or any of its assets; (d) to the best of undersigned's knowledge, all governmental and other consents that are required to have been obtained by it with respect to this Subordination Agreement have been obtained and are in full force and effect and all conditions of any such consents have been complied with; (e) its obligations under this Subordination Agreement constitute its legal, valid and binding obligations, enforceable in accordance with its terms except to the extent that such enforcement may be limited by applicable bankruptcy, insolvency or other similar laws affecting creditors' rights generally; (f) all financial statements and related information furnished and to be furnished to Chase from time to time by the undersigned are true and complete and Page 3 fairly present the financial or other information stated therein as at such dates or for the periods covered thereby; (g) there are no actions, suits, proceedings or investigations pending or, to the knowledge of the undersigned, threatened against or affecting the undersigned before any court, governmental agency or arbitrator, which involve forfeiture of any assets of the undersigned or which may materially adversely affect the financial condition, operations, properties or business of the undersigned or the ability of the undersigned to perform its obligation under this Subordination Agreement; and (h) there has been no material adverse change in the financial condition of the undersigned since the last such financial statements or information. CHANGES TO CHASE DEBT. Chase, at any time and from time to time, may enter into such agreement or agreements with a Borrower as Chase may deem proper extending the time of payment of or renewing or otherwise altering the terms of all or any of the obligations of that Borrower to Chase or affecting the security underlying any or all of such obligations, or may exchange, sell or surrender or otherwise deal with any such security, or may release any balance of funds of that Borrower with Chase, or may release any guarantor, without notice to the undersigned, and without in any way impairing or affecting this Subordination Agreement thereby. BOOKS OF ACCOUNT. The undersigned shall make and maintain in its books of account notations satisfactory to Chase of its rights and priorities hereunder and from time to time on request, shall furnish Chase with sworn financial statements. Chase may inspect the books of account and records of the undersigned at any time during business hours. COSTS. The undersigned agree(s) to reimburse Chase on demand for all costs, expenses and charges (including, without limitation, fees and charges of external legal counsel for Chase and costs allocated by its internal legal department) in connection with the enforcement of this Subordination Agreement. NOTICES. All notices, requests, demands or other communications to or upon the undersigned or Chase shall be in writing and shall be deemed to be delivered upon receipt if teletransmitted by telecopier or delivered by hand or overnight courier or five days after mailing to the telecopier number or address, respectively (a) of the undersigned as set forth next to the undersigned's execution of this agreement, (b) of Chase at the address set forth above or (c) of the undersigned or Chase at such other telecopier number or address as the undersigned or Chase shall specify to the other in writing. Page 4 ENTIRE AGREEMENT, AMENDMENT AND WAIVERS BY CHASE. This Subordination Agreement and any attachments hereto constitute the entire agreement between the undersigned and Chase in respect of the subject matter hereof and may be amended only by a writing signed on behalf of each party and shall be effective only to the extent set forth in that writing. No delay by Chase in exercising any power or right hereunder shall operate as a waiver thereof or of any other power or right; nor shall any single or partial exercise of any power or right preclude other or future exercise thereof, or the exercise of any other power or right hereunder. No waiver shall be deemed to be made by Chase of any of its rights hereunder unless the same shall be in writing signed on behalf of Chase, and each waiver, if any, shall be a waiver only with respect to the specific instance involved and shall in no way impair the rights of Chase or the obligations of the undersigned to Chase in any other respect at any other time. WAIVERS BY UNDERSIGNED. All obligations and liabilities of the Borrowers to Chase shall be deemed to have been made or incurred at the request of the undersigned and in reliance upon this Subordination Agreement, and the undersigned expressly waives all notice of the acceptance by Chase of this Subordination Agreement, all other notices whatsoever, reliance by Chase upon the subordination herein provided for, and any circumstance which might otherwise constitute a defense available to, or discharge of any Borrower or any subordinated creditor. SUCCESSORS. This Subordination Agreement shall be binding upon the undersigned, and the executors, administrators, successors and assigns of the undersigned. GOVERNING LAW; JURISDICTION. This Subordination Agreement shall be governed by and construed in accordance with the laws of the State of New York. The undersigned consent(s) to the nonexclusive jurisdiction and venue of the state of federal courts located in such state. In the event of a dispute hereunder, suit may be brought against the undersigned in such courts or in any jurisdiction where the undersigned or any of its assets may be located. Service of process by Chase in connection with any dispute shall be binding on the undersigned if sent to the undersigned by registered mail at the address(es) specified below or to such further address(es) as the undersigned may specify to Chase in writing. WAIVER OF JURY TRIAL. THE UNDERSIGNED HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVES (TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW) ANY RIGHT TO A TRIAL BY JURY OF ANY DISPUTE ARISING UNDER OR RELATING TO THIS SUBORDINATION AGREEMENT, AND AGREES THAT ANY SUCH DISPUTE SHALL, AT CHASE'S OPTION, BE TRIED BEFORE A JUDGE SITTING WITHOUT A JURY. Page 5 IN WITNESS WHEREOF, the undersigned has executed this instrument or has caused this instrument to be duly executed by its proper officer(s) this 12th day of August, 1996. HOME PROPERTIES OF NEW YORK, INC., By: /s/ Nelson B. Leenhouts ___________________________________ Nelson B. Leenhouts, President Address for notices: 850 Clinton Square, Rochester, NY 14604 Telecopy No.: (716) 546-5433 Rider A Acknowledgment of Subordination The undersigned Borrower hereby accepts, and acknowledges receipt of a copy of, the foregoing Subordination Agreement, and agrees that he/she will not repay any of the Subordinated Debt to the above-signed subordinating creditor except as in the foregoing agreement provided. In the event of a breach by such subordinating creditor or the undersigned Borrower of any of the provisions of the foregoing agreement, all of the obligations and liabilities of the undersigned Borrower to Chase shall, without notice or demand, become immediately due and payable unless Chase shall otherwise elect. No waiver by Chase of any right hereunder shall be valid unless in writing and no waiver by Chase of any right shall be deemed a waiver of any other right. Nothing herein shall limit or affect in any manner any right Chase may have by virtue of any other instrument or agreement. Borrower Signature: ___________________________ Address: Principal Amount of Loan: EX-10 11 EXHIBIT 10.32 PF 27 (2/79) Standard N.Y.B.T. U. Form 8041 Contract of Sale CONSULT YOUR LAWYER BEFORE SIGNING THIS INSTRUMENT -THIS INSTRUMENT SHOULD BE USED BY LAWYERS ONLY NOTE: FIRE LOSSES. This form of contract contains no express provision as to risk of loss by fire or other casualty before delivery of the deed. Unless express provision is made, the provisions of Section 5-1311 of the General Obligations Law will apply. This section also places risk of loss upon purchaser if title or possession is transferred prior to closing. THIS AGREEMENT, made the 17th day of December, 1996 between LAKE GROVE ASSOCIATES CORP., a New York corporation, having an office at 107 Northern Boulevard, Suite 200, Great Neck, New York 11021, hereinafter described as the seller, and HOME PROPERTIES OF NEW YORK, L.P., a New York limited partnership, having an office at 850 Clinton Square, Rochester, New York 14604, hereinafter described as the purchaser, WITNESSETH, that the seller agrees to sell and convey, and the purchaser agrees to purchase, all those certain plots, pieces or parcels of land, with the buildings and improvements thereon erected, situate, lying and being as described in Schedule A annexed hereto and made a part hereof, 1. This sale includes all right, title and interest, if any, of the seller in and to any land lying in the bed of any street, road or avenue opened or proposed, in front of or adjoining said premises, to the center line thereof, and all right, title and interest of the seller in and to any award made or to be made in lieu thereof and in and to any unpaid award for damage to said premises by reason of change of grade of any street; and the seller will execute and deliver to the purchaser, on closing of title, or thereafter, on demand, all proper instruments for the conveyance of such title and the assignment and collection of any such award. 2. [Intentionally Omitted] 3. [Intentionally Omitted] 4. [Intentionally Omitted] 5. [Intentionally Omitted] 6. Said premises are sold and are to be conveyed subject to: a. Zoning regulations and ordinances of the city, town or village in which the premises lie which are not violated by existing structures. b. Consents by the seller or any former owner of premises for the erection of any structure or structures on, under or above any street or streets on which said premises may abut. c. Encroachments of stoops, areas, cellar steps, trim and cornices, if any, upon any street or highway. 7. [Intentionally Omitted] 8. [Intentionally Omitted] 9. [Intentionally Omitted] 10. The following are to be apportioned: Page 1 a. Rents as and when collected. b. [Intentionally Omitted] c. [Intentionally Omitted\ d. Taxes and sewer rents, if any, on the basis of the fiscal year for which assessed. e. Water charges on the basis of the calendar year. f. Fuel, if any. 11. If the closing of the title shall occur before the tax rate is fixed, the apportionment of taxes shall be upon the basis of the tax rate for the next preceding year applied to the latest assessed valuation. 12. If there be a water meter on the premises, the seller shall furnish a reading to a date not more than thirty days prior to the time herein set for closing title, and the unfixed meter charge and the unfixed sewer rent, if any, based thereon for the intervening time shall be apportioned on the basis of such last reading. 13. The deed shall be the usual bargain and sale deed (without covenant against grantor's acts) (the "Deed") in proper statutory short form for record and shall be duly executed and acknowledged so as to convey to the purchaser the fee simple of the said premises, free of all encumbrances, except as herein stated, and shall contain the covenant required by subdivision 5 of Section 13 of the Lien Law. If the Seller is a corporation, it will deliver to the purchaser at the time of the delivery of the deed hereunder a resolution of its Board of Directors authorizing the sale and delivery of the Deed, and a certificate by the Secretary or Assistant Secretary of the corporation certifying such resolution and setting forth facts showing that the conveyance is in conformity with the requirements of Section 909 of the Business Corporation Law. The Deed in such case shall contain a recital sufficient to establish compliance with said section. 14. At the closing of the title, the seller shall deliver to the purchaser a certified check to the order of the recording officer of the county in which the deed is to be recorded for the amount of the documentary stamps to be affixed thereto in accordance with Article 31 of the Tax Law, and a certified check to the order of the appropriate officer for any other tax payable by reason of the delivery of the deed, and a return, if any be required, duly signed and sworn to by the seller; and the purchaser also agrees to sign and swear to the return and to cause the check and the return to be delivered to the appropriate officers promptly after the closing of title. 15. [Intentionally Omitted] 16. The seller shall give and the purchaser shall accept a title such as any reputable title company, a Member of the New York Board of Title Underwriters, will approve and insure in accordance with the standard form of title policy approved by the New York State Insurance Department, subject only to the matters which Purchaser has agreed to accept title pursuant to in this Contract. 17. All sums paid on account of this contract, and the reasonable expenses of the examination of title to said premises and of the survey, if any, made in connection therewith are hereby made liens on said premises, but such liens shall not continue after default by the purchaser under this contract. 18. [Intentionally Omitted] 19. The amount of any unpaid taxes, assessments, water charges and sewer rents which the seller is obligated to pay and discharge, with the interest and penalties thereon to a date not less than two business days after the date of closing title, may at the option of the seller be allowed to the purchaser out of the balance of the purchase price, provided Page 2 official bills therefor with interest and penalties thereon figured to said date are furnished by the seller at the closing. 20. If at the date of closing there may be any other liens or encumbrances which the seller is obligated to pay and discharge, the seller may use any portion of the balance of the purchase price to satisfy the same, provided the seller shall simultaneously either deliver to the purchase at the closing of title instruments in recordable form and sufficient to satisfy such liens and encumbrances of record together with the cost of recording or filing said instruments; or, provided that the seller has made arrangements with the title company employed by the purchaser in advance of closing, seller will deposit with said company sufficient monies, acceptable to and required by it to insure obtaining and the recording of such satisfactions and the issuance of title insurance to the purchaser either free of any such liens and encumbrances, or with insurance against enforcement of same out of the insured premises. The purchaser, if request is made within a reasonable time prior to the date of closing of title, agrees to provide at the closing separate certified checks as requested, aggregating the amount of the balance of the purchase price, to facilitate the satisfaction of any such liens or encumbrances. The existence of any such taxes or other liens and encumbrances shall not be deemed objections to title if the seller shall comply with the foregoing requirements. 21. 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 the seller, the seller will on request deliver to the purchaser an affidavit showing that such judgments, bankruptcies or other returns are not against the seller. 22. [Intentionally Omitted] 23. [Intentionally Omitted] 24. [Intentionally Omitted] 25. [Intentionally Omitted] 26. This agreement may not be changed or terminated orally. The stipulations aforesaid are to apply to and bind the heirs, executors, administrators, successors and assigns of the respective parties. 27. If two or more persons constitute either the seller or the purchaser, the word "seller" or the word "purchaser" shall be construed as if it read "sellers" or purchasers" wherever the sense of this agreement so requires. IN WITNESS WHEREOF, this Agreement has been duly executed by the parties hereto. SEE RIDER ANNEXED HERETO AND MADE A PART HEREOF. LAKE GROVE ASSOCIATES CORP. By: ____________________________ Name: ____________________________ HOME PROPERTIES OF NEW YORK, L.P. By: Home Properties of New York, Inc. General Partner By: _________________________________ Name: _________________________________ Title: __________________________________ Page 3 ESCROW AGENT: __________________________________ STATE OF NEW YORK) COUNTY OF MONROE) ss: On the 13th day of December, 1996, before me personally came Norman Leenhouts, to me know, who, being by me duly sworn, did depose and say that he resides at No. 1206 Fairway 18, Macedon, New York 14502; that he is the Chairman of Home Properties of New York, Inc., general partner of Home Properties of New York, L.P., the partnership described in and which executed the foregoing instrument; that he signed his name by order of the Board of Directors or said corporation. _____________________________ Notary Public STATE OF NEW YORK) COUNTY OF MONROE) ss: On the ____ day of December, 1996, before me personally came Norman Leenhouts, to me know, who, being by me duly sworn, did depose and say that he resides at No. 1206 Fairway 18, Macedon, New York 14502; that he is the Chairman of Home Properties of New York, Inc., general partner of Home Properties of New York, L.P., the partnership described in and which executed the foregoing instrument; that he signed his name by order of the Board of Directors or said corporation. _____________________________ Notary Public CONTRACT OF SALE LAKE GROVE ASSOCIATES TO HOME PROPERTIES OF NEW YORK, L.P. PREMISES Section 016.00 Block 03.00 Lot 011.00 and 012.000 County of Town: Suffolk Page 4 Return by Mail to: Miles A. Epps Attorney at Law 107 Northern Boulevard Suite 200 Great Neck, New York 11021 THE OBSERVANCE OF THE FOLLOWING SUGGESTIONS WILL SAVE TIME AND TROUBLE AT THE CLOSING OF THIS TITLE The Seller should bring with him all insurance policies and duplicates, receipted bills for taxes, assessments and water rates, and any leases, deeds or agreements affecting the property. When there is a water meter on the premises, he should order it read, and bring bills therefor to the closing. If there are mortgages on the property, he should promptly arrange to obtain the evidence required under Paragraph 5 of this contract. He should furnish to the purchaser a full list of tenants, giving the names, rent paid by each, and date to which the rent has been paid. The Purchaser should be prepared with cash or certified check drawn to the order of the seller. The check may be certified for an approximate amount and cash may be provided for the balance of the settlement. Page 5 RIDER attached to and forming part of Contract of Sale between LAKE GROVE ASSOCIATES CORP., Seller, and HOME PROPERTIES OF NEW YORK, L.P., Purchaser Premises: District 0208, Section 016.00, Block 03.00, Lots 011.000 and 012.000, County of Suffolk, Town of Brookhaven, State of New York. 28. The purchase price for the Premises is Nineteen Million Dollars and 00/100 Dollars ($19,000,000.00), payable by Purchaser as follows: (a) One Million Nine Hundred Thousand and 00/100 Dollars ($1,900,000.00) (the "Initial Payment"), by check of Purchaser, subject to collection, payable to the order of the Escrow Agent (as hereinafter defined), which shall be held by him in accordance with the provisions of Paragraph 42 hereof and, subject to the terms of this Contract, shall be applied on account of the purchase price at closing, receipt of which is hereby acknowledged; and (b) Seventeen Million One Hundred Thousand and no/100 Dollars ($17,100,000.00), representing the balance of the purchase price, at the closing, by certified or official bank or teller's check, drawn on a bank which is a member of the New York Clearing House, or by wire transfer of immediately available federal funds, payable to the order of Seller, or as Seller shall direct, or wired to Seller or as Seller shall direct, as the case may be. 29. Purchaser covenants and agrees that prior to the closing of title hereunder, Purchaser shall in no event take possession of the Premises or any part thereof. 30. (a) Promptly following the execution of this Contract, Purchaser shall, at its sole cost and expense, cause title to the Premises to be examined by any reputable title insurance company (the "Title Company"), and shall direct the Title Company to deliver a copy of its title report (the "Title Report") to Seller or Seller's attorney simultaneously with the delivery of the same to Purchaser. Purchaser agrees that, within fifteen (15) days after it receives the Title Report but in no event later than thirty (30) days prior to the date of closing of title hereunder, Purchaser will furnish to Seller notice of any exceptions to title to the Premises set forth in the Title Report or otherwise known to Purchaser which are not exceptions subject to which Purchaser has agreed to take title pursuant to this Contract. The failure of Purchaser to give such notice to Seller setting forth all such claimed title defects within the time period hereinbefore provided shall constitute a waiver by Purchaser of all title defects not included in such notice which are set forth in such Title Report or otherwise known to Purchaser; provided, however, that delivery of the Title Report by the Title Company to Seller's attorney by the day specified in the preceding sentence shall be deemed to be such notice by Purchaser with respect to all matters set forth in the Title Report which are not exceptions subject to which Purchaser has agreed to take title pursuant to this Contract. If, after giving such notice to Seller, Purchaser learns through continuation reports or otherwise, of any title defects which are not exceptions subject to which Purchaser has agreed to accept title pursuant to this Contract, Purchaser shall give notice thereof to Seller promptly after the date Purchaser learns thereof (a copy of such continuation report being deemed such notice for purposes of this sentence), it being agreed that Purchaser's failure to give notice of any such title defects to Seller as aforesaid shall constitute a waiver thereof. (b) If, at the date of closing of title hereunder, Seller is unable to convey to Purchaser title to the Premises subject to and in accordance with the provisions of this Contract, Seller shall be entitled, upon notice delivered to Purchaser at or prior to such closing, to a reasonable adjournment or adjournments of such closing, for not exceeding ninety (90) days in the aggregate, to enable Seller to convey such title. If Seller does not so elect to adjourn such closing, or if at the adjourned date Seller is unable to convey title subject to and in accordance with the provisions of this Contract, either party may terminate this Contract by notice delivered on the date scheduled for such closing or the date to which such closing may have been so adjourned, in which event both parties hereto shall promptly direct the Escrow Agent to return the Deposit (as hereinafter defined) to Purchaser; Seller shall reimburse Purchaser for the net cost of Page 6 title examination actually incurred by Purchaser; and this Contract shall thereupon be deemed canceled, void and of no further effect, and neither party shall have any obligations of any nature to the other hereunder or by reason hereof, except that the provisions of Paragraph 37 hereof shall survive such termination. If Seller elects to adjourn the closing as hereinbefore provided, this Contract shall remain in effect for the period or periods of adjournment, in accordance with its terms. Nothing contained in this Paragraph or elsewhere in this Contract shall be deemed to require Seller to take or bring any action or proceeding or any other steps to remove any defect in or objection to title or to fulfill any condition or to expend any moneys therefor, nor shall Purchaser have any right of action against Seller therefor, at law or in equity; provided, however, that Seller shall nevertheless have the unqualified obligation to satisfy and discharge (i) all mortgages and (ii) all other liens and encumbrances in ascertainable amounts, provided such other liens and encumbrances may be discharged by payment or bonding and the aggregate amount thereof does not exceed One Hundred Thousand and no/100 Dollars ($100,000.00); and that the provisions of this sentence shall not apply to any defect in or objection to title willfully and intentionally created by Seller after the date of execution and delivery of this Contract in order to render title to the Premises unmarketable. (c) Notwithstanding any termination of this Contract by Seller pursuant to subparagraph (b) of this Paragraph, Purchaser may, within five (5) days following such termination, accept such title to the Premises as Seller can convey, without reduction of the purchase price or any credit or allowance on account thereof and without any claim against Seller; provided, however, that if, at the time of such termination, there are any liens and/or encumbrances which Seller is obligated to satisfy and discharge pursuant to the last sentence of such subparagraph, Seller shall either bond or satisfy and discharge such liens and/or encumbrances, or pay to Purchaser, as an adjustment at closing, the aggregate amount of such liens and encumbrances, but in no event shall the amount of such adjustment exceed One Hundred Thousand and no/100 Dollars ($100,000.00). The acceptance of a Deed to the Premises by Purchaser shall be deemed to be full performance and discharge of every agreement and obligation on Seller's part to be performed under this Contract, except for those, if any, which this Contract specifically provides shall survive the closing of title hereunder. For convenience, Seller may omit from the Deed the recital of any or all of the "subject to" clauses herein contained and/or any other title exceptions, defects or objections which have been waived or consented to by Purchaser, but the same shall nevertheless survive delivery of the Deed. (d) If the Premises shall, at the time of closing of title, be subject to any liens, such as judgment liens or the lien of transfer, inheritance, estate, franchise, license or other similar taxes, or any encumbrances or other title exceptions (other than exceptions subject to which Purchaser has agreed to accept title pursuant to this Contract) which would be grounds for Purchaser to reject title hereunder, the same shall not be deemed an objection to title provided that, at the time of closing, either (a) Seller uses all or a portion of the balance of the purchase price to satisfy the same and delivers to Purchaser at the closing of title instruments in recordable form sufficient to satisfy and discharge of record such liens and encumbrances together with the cost of recording or filing such instruments, or (b) the Title Company will issue or bind itself to issue a policy which will insure Purchaser against collection thereof from or enforcement thereof against the Premises, such policy either to be at regular rates or any excess premium to be paid by Seller. If request is made within a reasonable time prior to the date of closing of title, Purchaser agrees to provide at the closing of title separate certified or official bank checks, as requested, aggregating not more than the amount to be paid by Purchaser to Seller at that date, to facilitate the satisfaction of any of such liens or other defects, and the existence of any thereof shall not be deemed defects in or objections to title if Seller shall comply with the foregoing requirements. 31. Neither Purchaser's interest under this Contract nor any part thereof may be assigned by Purchaser or any successor-in- interest to Purchaser unless (a) Seller shall give its prior written consent to such assignment, (b) a duplicate original of the instrument of assignment, shall be delivered to Seller within five (5) days after the execution thereof but in any event at least fifteen (15) days prior to the date of closing of title hereunder, and (c) in and by such instrument of assignment, the assignee(s) shall assume and agree in writing, expressly for the benefit of Seller as well as the assignor, to perform or cause to be performed all obligations on the part of Purchaser under and in connection with this Contract. Any purported assignment not complying Page 7 with the foregoing shall be void. No assignment shall relieve Purchaser from liability for the performance of the obligations undertaken by Purchaser under this Contract. 32. (a) Subject to the provisions of this Contract, the closing of title hereunder will take place at the office of Miles A. Epps, Esq., 107 Northern Boulevard, Great Neck, New York 11021, at 10:00 a.m., on February 3, 1997 (the "Original Closing Date"). (b) Purchaser shall have the right to one or more adjournments of the closing of title to a date not later than the fifteenth (15th) day (or, if such fifteenth (15th) day is a Saturday, Sunday or legal holiday, the next business day) following the Original Closing Date, provided that: (i) the closing of title shall take place at the same location and at the same time as specified in subparagraph (a) of this Paragraph on the date to which the closing shall be so adjourned; (ii) Purchaser shall give written notice of such adjournment to Seller at least three (3) business days prior to the Original Closing Date (or any later date to which Purchaser or Seller shall adjourn the closing); (iii) if Purchaser fails to give notice of such adjournment to Seller on or before the third (3rd) business day prior to the Original Closing Date (or such later date), Purchaser shall be deemed to have waived its rights to adjourn the closing; and (iv) time shall be of the essence with respect to Purchaser's obligations under this Contract as of (a) the Original Closing Date, if Purchaser fails to give such notice of adjournment to Seller on or before such third (3rd) business day, or (b) if Purchaser shall give such notice of adjournment to Seller on or before such third (3rd) business day, the date to which Purchaser shall have adjourned the date of closing in accordance with this Paragraph 32 (or any later date to which Seller shall adjourn the closing). If Purchaser shall adjourn the closing in accordance with this Paragraph 32, all apportionments will be computed as of the date to which Purchaser shall have so adjourned the closing, or as of any later date to which the closing shall have been adjourned by Seller. (c) Seller hereby grants to Purchaser and Purchaser's employees and agents, including any accountants, attorneys, surveyors or engineers who may be employed by Purchaser, the right, at Purchaser's sole cost and expense and subject to subparagraphs (c) and (d) of Paragraph 52 hereof, (i) to enter upon the Premises for the purposes of making such inspections, engineer's reports, surveys, maps, contour studies, test borings, environmental studies and other sub-surface soil tests, (ii) to review the books and records of the Premises, including but not limited to the Leases (as hereinafter defined) and the Service Contracts (as hereinafter defined) and (iii) to make such other investigations (the activities set forth in clauses (i), (ii) and (iii) of this sentence being hereinafter referred to collectively as the "Property Studies"), as may be reasonably necessary in order for Purchaser to determine whether Purchaser wishes to purchase the Premises. Seller will provide Purchaser with a reasonable opportunity to review any such books, records, Leases, Service Contracts or other documentation relating to the Premises promptly following a request therefor by Purchaser, and Purchaser agrees that any information with respect to the Premises or the operation thereof which Purchaser obtains as a result of the Property Studies will be kept strictly confidential and not disclosed to any third parties other than Purchaser's attorneys or other professional counselors. (d) If Purchaser, in its sole discretion, shall conclude from the Property Studies that Purchaser does not wish to purchase the Premises, Purchaser shall have the right to terminate this Contract by giving notice of such termination (the "Termination Notice") to Seller on or before the forty-fifth (45th) day next following the date of this Contract (the "Contingency Date"), time being of the essence with respect to the giving of the Termination Notice by Purchaser on or before the Contingency Date. Upon the giving of the Termination Notice on or before the Contingency Date, this Contract shall wholly cease and terminate, and neither party shall have any further obligation to the other by reason hereof, except that both parties shall promptly direct the Escrow Agent to deliver the Deposit to Purchaser. If Purchaser does not give Seller the Termination Notice on or before the Contingency Date, this Contract shall remain in full force and effect; Purchaser's obligations hereunder to purchase the Premises and pay the purchase price therefor in accordance with this Contract shall be and become unconditional as of the Contingency Date, except as otherwise expressly provided in this Contract; and Purchaser shall be deemed to have waived as of the Contingency Date any objections under this Contract with respect to the use to which the Premises may be put. Page 8 (e) Purchaser, for itself, its agents, employees and contractors, hereby assumes all responsibility and risk in entering upon the Premises and performing the Property Studies, and Purchaser hereby agrees to indemnify and hold Seller harmless from and against any liability, expense, loss, cost or damage, including attorney's fees, arising out of or in connection with Purchaser's entry upon or use of the Premises prior to the closing of title for the purpose of making of the Property Studies. (f) Purchaser acknowledges and agrees that its obligations to indemnify Seller under the provisions of this Paragraph 32 shall survive the closing of title hereunder, and that, notwithstanding anything contained in this Paragraph 32 or the entry of Purchaser in the Premises for the purpose of making the Property Studies, Purchaser shall in no event be deemed a vendee in possession of the Premises. (g) Purchaser shall have the right to accelerate the closing of title to a date (an "Early Closing Date") earlier than the Original Closing Date, by giving notice of such acceleration to Seller not later than the fifteenth (15th) day before the Early Closing Date, in which event the Early Closing Date shall be deemed, for all purposes of this Contract, to be the Original Closing Date. 33. This Contract may be executed in any number of counterparts, each of which may be signed by either of the parties and shall for all purposes be deemed to be an original, and all of which together shall constitute but one and the same agreement. 34. The parties hereto agree that neither this Contract nor any memorandum or short form thereof shall be recorded or tendered for recording in any land record office relating to the Premises. Purchaser further agrees that the recording of this Contract or any memorandum or short form thereof, by or at the instance of Purchaser shall constitute, at Seller's election, a default by Purchaser hereunder. Upon Seller's giving notice of such default to Purchaser, this Contract shall terminate and be of no further force and effect, and the recording of such notice shall be deemed sufficient and adequate notice to third parties that this Contract is void and of no further force and effect. 35. If any provisions of this Rider conflict with the printed provisions of this Contract, the provisions of this Rider shall control. 36. All notices, demands, requests, consents or other communications ("Notices") which either party may give or be required to give to the other hereunder shall be in writing and shall be: (a) delivered by hand; or (b) sent by registered or certified mail, return receipt requested, postage prepaid; or (c) sent by reputable overnight courier service, such as Federal Express; or (d) transmitted by legible facsimile (with answer back confirmation); in any event addressed to the parties at their respective addresses first above set forth. A copy of any Notice given by Purchaser to Seller prior to the date of closing of title hereunder shall simultaneously be given in the same manner to Seller's attorney, Miles A. Epps, Esq., 107 Northern Boulevard, Suite 200, Great Neck, New York 11021; and a copy of any Notice given by Seller to Purchaser prior to said date shall simultaneously be given in the same manner to Purchaser's attorney, Ann M. McCormick, Esq., 850 Clinton Square, Rochester, New York 14604. Notices given in the manner aforesaid shall be deemed to have been given (i) on the day so delivered by hand; or (ii) five (5) business days after the day mailed, if sent by registered or certified mail, return receipt requested; or (iii) the first (1st) business day after the date of deposit, if sent by reputable overnight courier service; or (iv) the date of transmission with confirmed answer back, if transmitted by facsimile. Either party may change its address for the receipt of Notices by giving Notice to the other party in any manner aforesaid. 37. Each of Purchaser and Seller warrants and represents the other that it did not deal with any broker, finder or similar agent or party who or which might be entitled to a commission or compensation on account of introducing the parties, the negotiation or execution of this Contract and/or the closing of the transaction provided for herein other than Prime Sites Ltd., as broker, whose commission shall be paid by Purchaser pursuant to a separate agreement, and Magnum Realty Corp., as finder, whose fee shall be paid by Seller pursuant to a separate agreement. Purchaser agrees to indemnify and hold Seller harmless from and against all loss, liability, Page 9 damage and expense (including, without limitation, reasonable attorneys' fees) imposed upon or incurred by Seller by reason of any claim for commissions or other compensation for bringing about this transaction by Prime Sites Ltd. or any other broker, finder (other than Magnum Realty Corp.) or similar agent or party who claims to have dealt with Purchaser in connection with this transaction; and Seller agrees to indemnify and hold Purchaser harmless from and against all loss, liability, damage and expense (including, without limitation, reasonable attorneys' fees) imposed upon or incurred by Purchaser by reason of any claim for commissions or other compensation for bringing about this transaction by Magnum Realty Corp. The provisions of this Paragraph 37 shall survive the closing of title hereunder or any termination of this Contract. 38. Seller represents and warrants to Purchaser that Seller is not a "foreign person", as such term is defined in the Internal Revenue Code of 1986, as amended (the "Code"). Seller shall deliver to Purchaser at the closing or on such earlier date as may be required pursuant to the applicable regulations promulgated by the Internal Revenue Service ("IRS"), an affidavit of an officer of Seller, sworn to under penalties of perjury, setting forth the Seller's tax identification number, and stating that the Seller is not a "foreign person", as such term is defined in the Code. If required pursuant to applicable regulations promulgated under the Code, Purchaser may furnish a copy of the affidavit delivered by Seller to the IRS or other agency designated for receipt of such affidavit. 39. [Intentionally omitted] 40. The submission of this Contract by Seller to Purchaser shall not be deemed an offer to sell. The obligations of the parties hereto shall not be binding until a fully executed original of this Contract, signed by both parties, has been delivered and the Deposit required hereunder has been delivered to the Escrow Agent. 41. The parties hereto understand that the Premises are unique and that if Purchaser defaults in the performance of any of the terms of this Contract, Seller's damages would be uncertain and difficult to ascertain. Accordingly, if Purchaser defaults in the performance of any of the terms of this Contract, then Seller shall be entitled to retain the Deposit as liquidated damages for such default, and Seller and Purchaser shall be released and relieved from any further liability hereunder. The amount so retained by Seller shall in no event be considered a penalty. 42. (a) The Initial Payment, together with any interest earned thereon (the "Deposit"), shall be paid to and held in escrow by Seller's attorney, MILES A. EPPS, Esq. (the "Escrow Agent"). Simultaneously with the closing of title, the Escrow Agent shall deliver the Deposit to Seller. Subject to the provisions of subparagraphs (c) and (d), if the Escrow Agent receives notice from Seller that Purchaser has defaulted in any way in its obligations under this Contract, the Escrow Agent shall deliver or mail the Deposit to Seller fifteen (15) days after delivering a copy of such notice to Purchaser; and, in the event that the Escrow Agent receives notice from Purchaser that Purchaser is entitled under the terms of this Contract to the return of the Deposit, the Escrow Agent shall deliver or mail the Deposit to Purchaser fifteen (15) days after delivering a copy of such notice to Seller. (b) Any Notice to the Escrow Agent shall be sufficient only if received by the Escrow Agent within the applicable time period set forth herein, if any. Notices to the Escrow Agent shall be delivered to him at 107 Northern Boulevard, Great Neck, New York 11021 in the manner specified in Paragraph 36 hereof. (c) Upon receipt of a demand for the Deposit made by Purchaser or Seller pursuant to paragraph (a) hereof and in accordance with paragraph (b) hereof, the Escrow Agent shall promptly deliver a copy thereof to the other party in the manner specified in Paragraph 36 hereof. The other party shall have the right to object to the delivery of the Deposit by delivery to and receipt by the Escrow Agent of notice of objection within twelve (12) days after the date of the Escrow Agent's delivery of such copy to the other party, but not thereafter. Such notice of objection may be signed by the attorney for Seller or Purchaser, as the case may be. Upon receipt of such notice of objection, the Escrow Agent shall promptly deliver a copy thereof to the party who made the demand in the manner specified in Paragraph 36 hereof. Page 10 (d) In the event that (i) the Escrow Agent shall have received a notice of objection as provided for in subparagraph (c) hereof within the time therein prescribed, or (ii) any other disagreement or dispute shall arise between or among any of the parties hereto and/or any other persons resulting in adverse claims and demands being made for the Deposit, whether or not litigation has been instituted, then and in any such event, the Escrow Agent shall refuse to comply with any claims or demands on it and continue to hold the Deposit until the Escrow Agent has received either (A) a Notice signed by both Seller and Purchaser directing the delivery of the Deposit, or (B) a final order of a Court of competent jurisdiction, entered in a proceeding in which Seller and Purchaser are parties, directing the delivery of the Deposit, in either of which events, the Escrow Agent shall then deliver the Deposit in accordance with said direction. The Escrow Agent shall not be or become liable in any way or to any person for its refusal to comply with any such claims or demands until and unless it has received a direction of the nature described in (A) or (B) hereof. Upon delivery of the Deposit by the Escrow Agent, as provided in this subparagraph (d), the Escrow Agent shall be released of and from all liability hereunder except for any gross negligence or willful misconduct. Notwithstanding the foregoing provisions of this subparagraph (d), the Escrow Agent shall have the following rights in the circumstances described in (i) and (ii) above: (x) If the Escrow Agent shall have received a Notice signed by either Seller or Purchaser advising that a litigation between Seller and Purchaser over entitlement to the Deposit has been commenced, the Escrow Agent may, on notice to Seller and Purchaser, deposit the Deposit with the Clerk of the Court in which said litigation is pending after paying from the Deposit all court costs relating to such deposit; (y) The Escrow Agent may, on notice to Seller and Purchaser, take such affirmative steps as it may, at its option, elect in order to terminate its duties as the Escrow Agent, including, without limitation, the deposit of the Deposit with a court of competent jurisdiction and the commencement of an action for interpleader, the costs thereof to be borne by whichever of Seller or Purchaser is the losing party; and (z) Upon the taking by the Escrow Agent of either of the actions described in (x) or (y) above, the Escrow Agent shall be released of and from all liability hereunder except for any gross negligence or willful misconduct. (e) The Escrow Agent shall not be responsible in any manner for the validity or sufficiency of any cash, instruments, or any other property delivered to it hereunder, or for the value or collectibility of any check or other instrument so delivered, or for any representation made or obligations assumed by any other party to this agreement. Nothing contained herein shall be deemed to obligate the Escrow Agent to deliver any cash, instrument, or other property referred to herein unless the same shall have first been received by the Escrow Agent pursuant to this Contract. The Escrow Agent shall have the right to act in reliance upon any document, instrument or signature believed by him to be genuine and to assume that any person purporting to give any notice or instructions in accordance with the provisions hereof have been duly authorized to do so. The Escrow Agent shall not be liable for any action taken or omitted hereunder except in the case of his gross negligence or willful misconduct. (f) The Escrow Agent shall not be bound by any modification, cancellation or rescission of this Contract unless the same is in writing and signed by the other parties hereto and a copy thereof has been received by the Escrow Agent. In no event, however, shall any modification of this Contract which shall affect the rights or duties of the Escrow Agent be binding on the Escrow Agent unless the Escrow Agent shall have given his prior written consent. The Escrow Agent has executed this Contract solely to confirm that he is holding the Deposit in escrow pursuant to the provisions of this Paragraph and for no other purpose. (g) If there shall be any dispute between Seller and Purchaser with respect to the Deposit or any other matter arising out of this Contract, Purchaser agrees that the Escrow Agent may represent Seller notwithstanding that the Escrow Agent is simultaneously acting as escrow agent hereunder. Page 11 (h) The Deposit shall be invested by the Escrow Agent in U.S. government securities, FDIC-insured certificates of deposit or an FDIC-insured interest-bearing money market or bank account, but the Escrow Agent shall not be liable for any reasonable delay in investing, reinvesting or distributing the Deposit or for any loss incurred by reason of any such investments. If the closing occurs, any interest earned or accrued on the Deposit shall be paid to Seller. If the closing does not occur, then all interest earned on the Deposit shall be paid to the party entitled to receive the Deposit. (i) Seller and Purchaser hereby agree jointly and severally to indemnify and hold the Escrow Agent harmless from any damage, cost, liability or expense (including, but not limited to, legal fees either paid to retained attorneys or representing the fair value of legal services rendered by the Escrow Agent) which the Escrow Agent may incur by reason of his acting hereunder, without prejudice to any right either party may have to recover from the other party for any such damage, cost, liability or expense; it being expressly acknowledged by the parties hereto that the foregoing indemnity shall apply to such legal fees and expenses incurred by the Escrow Agent in defending an action brought by either party hereto alleging misconduct or negligence by the Escrow Agent; unless there is a final determination by a court of law that the Escrow Agent was grossly negligent or engaged in intentional acts of misconduct. 43. It is understood and agreed that all understandings and agreements heretofore had between the parties hereto are merged in this Contract, which alone fully and completely expresses their understandings, and that the same is entered into after full investigation, neither party relying upon any express or implied statement, representation, warranty, guarantee, promise, "setups" or information not embodied in this Contract, made by the other, or by any real estate broker, agent, employee, servant or other person representing or purporting to represent Seller. Subject to the provisions of subparagraphs (c) and (d) of Paragraph 32 hereof, Purchaser represents that it has inspected, examined and investigated the Premises and the fixtures, equipment, machinery and personal property, if any, therein and is familiar with the physical condition thereof, that it has independently investigated, analyzed and appraised the value and profitability thereof, that it has reviewed all Leases, or has been given full opportunity to review all Leases, that it is thoroughly acquainted with all of the foregoing, that it agrees to accept the Premises and such fixtures, equipment, machinery and personal property "as is", in their condition as of the date hereof, subject to reasonable use, wear, tear and natural deterioration to and including the date of the closing, subject to the provisions of Paragraph 45 hereof, without any liability or responsibility on the part of Seller for any condition caused by tenants at the Premises after the date hereof. Seller has not made and does not make any representations as to the physical condition, expenses, income, operation, rent roll or any other matter or thing affecting or relating to the Premises, except as herein specifically set forth. Purchaser hereby expressly acknowledges that all representations and warranties which Seller has made, and upon which Purchaser relied in entering into this Contract, have been included in this Contract. Without limiting the generality of the foregoing, the Purchaser has not relied on any representations or warranties, and Seller has not made any representations or warranties, in either case express or implied, as to (i) the current or future real estate tax liability, assessment or valuation of the Premises; (ii) the potential qualification of the Premises for any and all benefits conferred by federal, state or municipal laws, whether for subsidies, special real estate tax treatment, insurance, mortgages, or any other benefits, whether similar or dissimilar to those enumerated; (iii) the compliance of the Premises, in its current or any future state with applicable zoning ordinances and the ability to obtain a variance in respect to the Premises' non-compliance, if any, with said zoning ordinances; (iv) the availability of any financing for the purchase, alteration, rehabilitation or operation of the Premises from any source, including but not limited to State, City or Federal government or any institutional lender; (v) the current or future use of the Premises, including but not limited to the use of the Premises, including but not limited to the use of the Premises for residential (including cooperative or condominium use) or commercial purposes; (vi) the presence or absence of any rules or notices of violations of law issued by any governmental authority; and (vii) the topography area, contour, soil conditions or any other aspects of the physical condition of the Premises. The Seller is not liable or bound in any manner by any verbal or written statements, representations, real estate brokers' "set-ups" or information pertaining to the Premises, the uses to which the Premises may be put or the physical condition thereof Page 12 furnished by any real estate broker, agent, employee, or other person, unless the same are specifically set forth herein. 44. The Premises are also being sold and are to be conveyed subject to: (a) Any state of facts an accurate current survey or inspection of the Premises would show, provided the same does not materially impair the marketability of the Premises; (b) Any covenants, restrictions, easements, agreements, consents or reservations of record, if any, not violated by the existing structures on the Premises or the current use thereof; (c) All current zoning, building, environmental and other laws, ordinances, codes, restrictions and regulations of all governmental authorities having or claiming jurisdiction with respect to the Premises or the use or improvement thereof and all zoning variances and special exceptions relating thereto, if any, not violated by the existing structures on the Premises or the current use thereof, and all future such zoning, building, environmental and other laws, ordinances, codes, restrictions, regulations, zoning variances and special exceptions; (d) Any and all violations of law, ordinances, orders or requirements noted of record by any municipal, state or other governmental authority having or claiming jurisdiction, which may affect the Premises on, before or after the date of this Contract, if any, whether or not noted on, before or after the date hereof; (e) Encroachments of stoops, areas, flagpoles, roof cornices, wheel guards, stone bases, leaders, gutters, window trims, vent pipes, signs, piers, lintels, window sills, fire escapes, ledges, fences, coping, ladders and retaining bulkhead or yard walls, if any, upon any street or highway or adjoining property and encroachments of such elements projecting from adjoining property over or upon the Premises, if any; (f) All rights, easements and agreements, whether or not of record, for the erection and/or maintenance of water, gas, steam, electric, telephone, sewer or other utility pipelines, poles, wires, conduits, cable boxes, holes, drains or other like facilities, fixtures, equipment and installations in, on, across or under the Premises, if any; (g) Possible lack or revocable nature of the right, if any, of the owner of the Premises to maintain or use any spaces, facilities or appurtenances outside the building lines, whether on, over or under the ground, including, without limitation, all vaults, vault lights, marquees, signs, coal chutes, sub-surface equipment and sidewalk openings, if any; (h) Minor variations, if any, between tax lot lines, fences, walls, shrubs, trees or driveway surfaces, and record lines of title; (i) All currently existing and future liens against the Premises for unpaid real estate taxes, vault charges, if any, assessments and water and sewer charges and rents not due and payable as of the date of the closing of title hereunder, subject to adjustment as provided in this Contract; (j) The liability of Seller or any corporate predecessor of Seller for New York State Franchise Taxes and the lien thereof, subject to the provisions of Paragraph 30(d) hereof; (k) Rights of tenants and other occupants of the Premises ("Tenants") under, and all terms and conditions of, all leases, subleases and other occupancy agreements of any space in or on the Premises in effect at the date hereof and at the date of the closing of title hereunder, whether or not of record, and all renewals, replacements and amendments thereof (hereinafter referred to collectively as "Leases"), provided, however, that nothing contained in this clause (k) shall be deemed to modify in any respect any other provision of this Contract relating to the Tenants or Leases, or to constitute a representation by Seller that all or any such Leases will be in effect at the date of closing; Page 13 (l) Any financing statements, if any, on or with respect to personality filed more than five (5) years prior to the date of the closing and not renewed, or entered into by or arising from the acts of any tenant at the Premises; and (o) The effect of all current or future laws of the United States and the State of New York and any other governmental regulations relating to the rights and obligations of the Tenants under the Leases and the permissible rents which may be charged to or collected from them. 45. (a) Seller agrees to give Purchaser reasonably prompt notice of any fire or other casualty occurring at the Premises between the date hereof and the date of closing, or of any actual or threatened condemnation of all or any part of the Premises of which Seller has knowledge. (b) If prior to the closing there shall occur (i) damage to the Premises caused by fire or other casualty the reasonably estimated cost to repair of which is One Hundred Thousand and no/100 Dollars ($100,000.00) or more, or (ii) a taking by condemnation of any material portion of the Premises, then, in either such event, Seller or Purchaser may terminate this Contract by notice given to the other within seven (7) days after Seller has given Purchaser the notice referred to in Paragraph 45(a), or at the closing, whichever is earlier, in which event the respective obligations of Seller and Purchaser shall be the same as set forth in Paragraph 30(b) in the event this Contract is terminated as the result of title being unmarketable; provided, however, that if Seller shall so terminate this Contract, Purchaser may nevertheless elect to accept title to the Premises in "as is" condition as of the date of such termination, by giving notice of such election to Seller within three (3) days after such termination. If neither party shall so terminate this Contract, or if Seller so terminates this Contract and Purchaser elects to accept title to the Premises pursuant to the preceding sentence, then the closing shall take place as herein provided, without abatement or reduction of the purchase price, and Seller shall assign to Purchaser at the closing, by written instrument, expressly made without warranty or representation by or recourse to Seller, all of Seller's interest in and to any insurance proceeds or condemnation awards which may be payable to Seller on account of any such fire, casualty or condemnation, less any amount thereof theretofore expended for or required to reimburse Seller for the cost of any restoration made by or on behalf of Seller; and if Seller has so terminated this Contract and Purchaser has nevertheless so elected to accept title to the Premises, Seller shall pay to Purchaser, as an adjustment at closing, an amount equal to the applicable deductible amount, if any, under Seller's fire or casualty insurance. (c) If, prior to the closing, there shall occur (i) damage to the Premises caused by fire or other casualty the reasonably estimated cost to repair of which is less than One Hundred Thousand and no/100 Dollars ($100,000.00) or (ii) a taking by condemnation of any part of the Premises which is not material, then, in either such event, neither party shall have the right to terminate this Contract by reason thereof, and the obligations of Seller and Purchaser under this Contract shall remain in full force and effect; provided however, that at closing (i) Purchaser shall accept the Premises in its damaged or "as is" condition as of such date and/or subject to such taking, as the case may be, and (ii) Seller shall assign to Purchaser, by written instrument expressly made without representation or warranty by or recourse to Seller all of Seller's interest in any insurance proceeds or condemnation awards which may be payable to Seller on account of any such fire, casualty or condemnation, in each case less any amount thereof theretofore expended or required to reimburse Seller for the cost of any protective restoration made by or on behalf of Seller. Notwithstanding the foregoing, in the event of any such damage caused by fire or other casualty, Seller shall pay to Purchaser, as an adjustment at closing, an amount equal to the lesser of (x) such reasonably estimated cost of repair or (y) the applicable deductible amount, if any, under Seller's fire or casualty insurance, unless, prior to closing, Seller shall have repaired and restored the Premises at its sole cost and expense (in which case, Seller shall be entitled to retain any and all insurance proceeds). (d) For purposes of this Paragraph, a taking of a material part of the Premises shall mean any taking which leaves remaining a balance of the Premises which may not be economically operated for the purpose for which the Premises were operated prior to such taking, and shall include any permanent taking which results in a diminution of the aggregate of the gross rents payable under all Leases at the Premises by more than twenty percent (20%), and any Page 14 taking which necessitates repairs or restoration having a reasonably estimated cost of One Hundred Thousand no/100 Dollars ($100,000.00). (e) Whenever, as a result of an assignment by Seller of insurance proceeds pursuant to this Paragraph, Purchaser shall be entitled to file a claim with or collect proceeds from Seller's insurer, Seller agrees to cooperate fully and promptly with Purchaser in connection therewith, to provide such information as Purchaser may reasonably request relating thereto and to execute promptly such drafts, checks, claims, releases, acquittances and the like as may be required by such insurer or as may be reasonably requested by Purchaser with respect thereto; and the obligations of Seller pursuant to this subparagraph (e) shall survive the closing. (f) The parties agree that the foregoing provisions of this Paragraph 45 shall apply to this Contract in lieu of the provisions of Section 5-1311 of the General Obligations Law of the State of New York. 46. Seller is hereby authorized by Purchaser to continue any proceeding or proceedings pending for the reduction of the assessed valuation of the Premises as of the date of closing of title hereunder, and to try or settle the same in Seller's discretion, provided, however, that the refund of taxes, if any, for any tax year which is the subject of such a proceeding and for part of which Purchaser owns the Premises shall be divided between Seller and Purchaser in the same ratio as the ratio of the number of days in such tax year during which the Premises were owned by Seller to the number of days in such tax year during which the Premises were owned by Purchaser, after deducting from such refund all expenses, including counsel fees, incurred by Seller in obtaining such refund. Purchaser shall deliver to Seller, upon demand, receipted tax bills and canceled checks used in payment of such taxes and shall execute any and all consents or other documents, and do any act or thing necessary for the collection of such refund by Seller. Any refunds due for periods prior to Purchaser's ownership shall remain the property of Seller. The provisions of this Paragraph shall survive the closing of title hereunder. 47. Purchaser acknowledges being advised by Seller that the sewage treatment plant (the "Sewer Plant") at the Premises is being upgraded in accordance with environmental requirements pursuant to SPDES Permit No. 0079499 (STP-89-01) issued by the Suffolk County Department of Health Services ("SCDOHS") and an SCDOHS Order of Consent No. UPG-89-01A dated October 26, 1992, as amended, and that Seller anticipates such upgrading will be completed before the Original Closing Date. At the closing of title (or as soon thereafter as possible, if any required governmental consents or approvals have not yet then been obtained), Seller shall transfer and assign, without representation or warranty, express or implied, all of Seller's right, title and interest in and to the Sewer Plant (including, but not limited to, any existing licenses and/or permits necessary for the operation or maintenance thereof and any contractor's or manufacturer's obligations under any construction contracts and guarantees with respect thereto, if any) to Purchaser, and Purchaser shall assume all of Seller's obligations with respect to the Sewer Plant (including, but not limited to, Seller's obligations under the terms of any such construction contracts, licenses and permits, but not including Seller's obligations to pay for any labor or materials performed or purchased with respect to the Sewer Plant prior to the date of closing ("Seller's Pre-Existing Obligations"), it being expressly agreed that Purchaser shall not be responsible for the cost of labor and/or materials incurred by Seller prior to the closing of title hereunder), from and after the date of closing. In connection with such assumption, Purchaser shall reimburse Seller at closing for any deposits made by Seller in order to obtain any such licenses or permits and, as soon as reasonably practicable after the date of closing, replace any bonds posted by Seller to obtain such licenses or franchises with bonds posted by Purchaser; Purchaser shall be entitled to an adjustment at closing in an amount equal to Seller's Pre-Existing Obligations, if any, remaining unpaid as of such date; Purchaser hereby agrees to indemnify and hold Seller harmless from and against any liability, expense, loss, cost or damage, including reasonable attorney's fees, relating to the construction, operation or maintenance of the Sewer Plant (including Seller's Pre-Existing Obligations, if any, provided that Purchaser has received an adjustment with respect thereto at closing; it being expressly acknowledged and agreed that Seller shall continue to be responsible for all other Seller's Pre-Existing Obligations) and the provisions of this subparagraph shall survive the closing of title hereunder. Page 15 48. (a) For the purpose of this Contract, the term "net cost of title examination" or "net charge of title examination" shall mean the expense actually incurred by Purchaser for title examination plus the cost of any survey redating actually obtained or survey inspection actually made. (b) This Contract contains the entire agreement between the parties hereto with respect to the subject matter hereof and supersedes all prior understandings, if any, with respect thereto, and may not be modified, changed or supplemented, nor may any obligations hereunder be waived, except by written instrument signed by the party to be charged or by its agent duly authorized in writing or as otherwise expressly permitted herein. The parties do not intend to confer any benefit hereunder on any person, firm or corporation other than the parties hereto, their successors and assigns. The provisions of this Paragraph shall survive the closing of title hereunder. (c) No waiver of any breach of any agreement or provision herein contained shall be deemed a waiver of any preceding or succeeding breach thereof or of any other agreement or provision herein contained. No extension of time for performance of any obligations or acts shall be deemed an extension of the time for performance of any other obligations or acts. (d) All sums paid on account of this Contract and the net cost of title examination, if any, made in connection therewith are hereby made liens on the Premises, but such liens shall not continue after default by the Purchaser under this Contract or termination of this Contract pursuant to the terms hereof. (e) In no event shall Seller be required to accept the check of a corporation or a partnership unless said corporation or partnership is the grantee of the Premises, nor shall Seller be required to accept an endorsed check, unless the endorser is the payee of the check and the grantee of the Premises. (f) This Contract shall bind and inure to the benefit of the parties hereto and their respective successors and, subject to the provisions of Paragraph 31 hereof, assigns, but shall not inure to the benefit of or be enforceable by any other person or entity. (g) This Contract shall be governed by, interpreted under and construed and enforced in accordance with, the laws of the State of New York applicable to contracts made and to be performed wholly within such State. (h) Any and all checks received or to be received hereunder in payment, or part payment, are and shall be deemed subject to collection. 49. This sale also includes all fixtures and articles of personal property, if any, which are owned by Seller and are attached to, appurtenant to or used in connection with the Premises but only to the extent that such fixtures or articles of personal property are located at the Premises at the time of closing. Such personal property as is included in this sale is sold "as is" and, except as otherwise provided in Paragraph 51 (i) hereof, Seller makes no representation regarding the present condition or state of title, or the condition or state of title on the date of closing, of any such fixtures or other articles of personal property. Seller acknowledges and agrees that the 1988 gray Ford pick-up truck (title and identification number 1FTEF14N9JNA40047) used at the Premises is included in this sale and shall be deemed "personal property" for the purposes of this Paragraph; that Seller shall deliver to Purchaser at closing (or as soon thereafter as reasonably practicable) the certificate of title with respect to such pick-up truck, completed to effect the transfer of title thereto to Purchaser; and that the provisions of this sentence shall survive the closing of title hereunder. Seller represents and warrants that, prior to the closing of title hereunder, Seller shall not remove from the Premises any fixtures or other items of personal property owned by Seller and used in the operation or maintenance of the Premises, unless such fixtures or items of personal property are replaced with reasonably equivalent fixtures or items of personal property. Page 16 50. Notwithstanding any provision of this Contract to the contrary, no officer, director or shareholder of Seller shall have any personal liability under, arising out of or in connection with this Contract, the transactions contemplated by this Contract, any default or breach by Seller under this Contract or the inaccuracy of any representation or warranty set forth in this Contract, it being expressly agreed by Purchaser that no such officer, director or shareholder shall be named as a defendant by Purchaser in any action brought or claim asserted against Seller relating to this Contract or such transactions, default, breach or inaccuracy, and that any judgment against Seller in favor of Purchaser relating to this Contract or such transactions, default, breach or inaccuracy shall be levied or collected only against and collectible only out of corporate assets of Seller, and shall not be levied against or collectible out of the assets of any such officer, director or shareholder. The provisions of this Paragraph 50 shall survive the closing of title hereunder. 51. Seller represents and warrants to Purchaser as follows as of the date of this Contract: (a) The rent schedule (the "Rent Roll") annexed hereto and made a part hereof as Schedule B accurately and completely sets forth the following information with respect to the Tenants under the Leases as of the dates indicated thereon: (i) the name of each Tenant and an identification of the unit occupied by such Tenant; (ii) the monthly rentals (other than arrears) actually and currently being collected from each Tenant; (iii) the amount of any security or other deposits made by each Tenant and held by Seller; and (iv) under the heading "Opening Balance", the amount of any rent arrears owed by each Tenant as of the date indicated therein. (b) No brokerage or leasing commissions are (and, as of the date of closing, none will be) owed or payable in the future by Seller with respect to any of the Leases; (c) The Leases referred to on the Rent Roll constitute all of the leases, tenancies or occupancies affecting the Premises on the date hereof, and there are no other agreements which confer upon any Tenant or any other person or entity any rights to the possession of any portion of the Premises. (d) No Tenant has been granted any rent concession or allowance with respect to rent payable after the date hereof. (e) Schedule C annexed hereto and made a part hereof sets forth all of the service and maintenance contracts and union contracts, if any, affecting the Premises or the operation thereof (the "Service Contracts"). (f) Schedule D annexed hereto and made a part hereof sets forth all of the superintendents, porters, handymen and other similar persons (each, an "Employee" and, collectively, "Employees") employed by Seller in connection with the operation of the Premises. (g) Seller has not received notice from any company underwriting insurance policies covering the Premises requiring the performance of any work at the Premises which has not been completed. (h) Seller has not transferred any development or air rights with respect to the Premises or granted to any person or entity the right to acquire any such rights and, to the best of Seller's knowledge, no former owner of the Premises transferred or granted to any person or entity the right to acquire any such rights (other than to its successor as owner of fee title to the Premises). (i) All fixtures and articles of personal property, if any, included in this conveyance will at the date of closing be owned by Seller free and clear of any conditional bills of sale, chattel mortgages, security agreements, financing statements or other security interests of any kind (except as otherwise provided in Paragraph 44(l) hereof). (j) No person or entity has any right or option to acquire title to the Premises. (k) Seller has not presented any offering plan to the Attorney General of the State of New York or the Tenants at the Premises in connection with the proposed conversion thereof to Page 17 cooperative or condominium status, and there has not been any solicitation or market test made with respect to any such proposed conversion. None of the representations and warranties set forth in this Paragraph (and, except as otherwise expressly indicated to the contrary, none of the representations or warranties, if any, of Seller set forth elsewhere in this Contract) shall survive the closing. 52. (a) Seller agrees that from the date hereof until the date of closing, Seller shall: (i) operate and maintain the Premises, or cause the Premises to be operated and maintained, in the ordinary course of business and in a manner consistent with the practices and procedures followed by Seller prior to the date hereof, except to the extent that Seller is precluded from so doing by acts of God, fire or other casualty, storm, strikes, labor difficulties, riots, insurrection, inability to obtain materials or equipment or other similar or dissimilar events or occurrences beyond the control of Seller; (ii) cause all fire and extended coverage and other insurance policies currently in effect with respect to the Premises (or renewal or replacement policies of like coverage and like amounts or limits) to be kept in full force and effect through and including the date of closing; (iii) not increase the compensation payable to hourly or salaried Employees, except (x) if Purchaser has given its prior written consent to such increase, which consent shall not be unreasonably withheld or delayed, or (y) pursuant to any contracts in effect at the date hereof or any industry- or owners' association-wide collective bargaining agreements becoming effective after the date hereof, or (z) in accordance with the usual past practice of Seller; (iv) not engage any new hourly or salaried employees for employment at the Premises, except as required to replace existing Employees and any such new employees shall be employed for compensation not greater than required by any applicable union contract or, if there is no such applicable union contract, at such compensation as to which Purchaser shall have given its prior written consent, which consent shall not be unreasonably withheld or delayed; (v) not enter into any Service Contracts (other than employment agreements or union contracts in accordance with clauses (iii) and (iv) of this subparagraph (a)) except for (x) renewals or extensions of existing Service Contracts at the then- prevailing rates of compensation provided each such renewal or extension may be canceled by Seller or its successors on not more than thirty (30) days' prior written notice, or (y) any other service or maintenance contracts entered into in the ordinary course of business provided each such contract may be canceled by Seller or its successors on not more than thirty (30) days' prior written notice, or (z) any other service or maintenance contracts to which Purchaser shall have given its prior written consent, which consent shall not be unreasonably withheld or delayed; (vi) cause any management agreement with respect to the Premises, if any, to be terminated on or before the date of closing; and (vii) execute and deliver to Purchaser all written consents or authorizations as may be necessary, in the reasonable opinion of Purchaser or its counsel, to make a search of the records of any Federal, State or City agency having jurisdiction relating to the Premises in order to verify any warranties or representations made herein by Seller or any information relating to the Premises or the tenancies thereof that are set forth in this Contract. (b) Seller and Purchaser agree that if any apartment at the Premises is vacant at the date hereof or becomes vacant after the date hereof and prior to the date of closing, Seller will not enter into any new lease for such vacant apartment, unless (i) at a rent not less than the prevailing rent then being charged for similar apartments at the Premises, and for a term not longer than two (2) years, or (ii) Purchaser has given its prior written consent to the terms of such new lease, which consent Purchaser agrees not unreasonably to withhold or delay. It is also understood and agreed that Seller shall not modify any existing Lease to reduce the rent payable thereunder or to shorten the term thereof, after the date hereof and prior to the date of closing, Page 18 unless Purchaser has given its prior written consent to the terms of such modification, renewal or extension, which consent Purchaser agrees not unreasonably to withhold or delay; provided however, that nothing contained in this Contract shall be deemed to prohibit or preclude Seller from (i) renewing or modifying any existing Lease, if such renewal or modification is required by applicable law, at such rent and on such terms as may be required by applicable law, or (ii) instituting summary proceedings prior to the date of closing against any current Tenant or future Tenant who has defaulted under its Lease or any future Lease, and applying and retaining any security which may have been deposited by such Tenant in accordance with the terms of such Tenant's Lease, or applicable law (but no such security shall be so applied and retained unless such Tenant shall have vacated its apartment). Notwithstanding the foregoing, Purchaser acknowledges and agrees that: (i) Seller has no obligation to institute any such proceedings against any Tenant, and has not made and is not willing to make any representation and assumes no responsibility with respect to the continued occupancy at the Premises of any Tenant; (ii) the removal of any Tenant prior to the closing, whether voluntarily by surrender of possession, by summary proceedings or otherwise, shall not give rise to any claim or objection by Purchaser hereunder, or to any abatement or reduction in the purchase price; and (iii) it will not be an objection to title that any Tenant at the Premises is a hold-over tenant or in default under any Lease. (c) Seller hereby agrees that it shall permit Purchaser or its designated agents, engineer or appraiser to enter the Premises at reasonable times for reasonable periods of time on business days, for the purpose of inspecting the Premises in order to make any study or record or compilation of data required by any lending institution or for any like purpose, provided that (i) Purchaser gives reasonable prior written notice of such inspection to Seller; (ii) Purchaser or such agents, engineer or appraiser are accompanied during all such inspections by a representative of Seller; (iii) such inspection shall not impede or interfere with the normal business operation of the Premises; and (iv) such permission shall be subject to the rights of the Tenants at the Premises under the Leases and applicable law. (d) Purchaser covenants and agrees that prior to the closing, Purchaser (i) shall not contact any Tenant at the Premises for any reason whatsoever, either directly or indirectly by correspondence, telephone, telegraph or otherwise, with respect to the conveyance of the Premises contemplated hereby; and (ii) shall not issue any publicity or press release relating to such conveyance of the Premises. 53. (a) At the closing, the following items shall be apportioned between the parties as of the day next preceding the closing, in accordance with the customs with respect to title closings recommended by The Real Estate Board of New York, Inc. (except where expressly otherwise provided herein): (i) rents and all other charges paid (including any prepaid rents) or payable by Tenants at the Premises, as, when and if collected, subject to the provisions of subparagraphs (b) and (c) hereof; (ii) real estate taxes, unmetered water charges and sewer rents levied or imposed upon the Premises on the basis of the fiscal or calendar year for which assessed. If the closing shall occur before a new tax rate is fixed, the apportionment of taxes shall be on the basis of the tax rate for the immediately preceding period applied to the latest assessed valuation, subject to post-closing adjustment in accordance with subparagraph (f) hereof; (iii) vault charges, if any; (iv) charges payable under Service Contracts assigned to Purchaser, on the basis of the period covered by such contracts; (v) electricity, gas and other utility charges to the extent such charges are not directly metered to and payable by Tenants, if any, subject, however, to the provisions of subparagraph (d) hereof; and Page 19 (vi) such other items, if any, as may be expressly made the subject of apportionment under any other provisions of this Contract. No adjustments or apportionments shall be made between the parties except as provided in this Paragraph. (b) If on the date of the closing, there are past due rents or charges owed by Tenants and Seller is entitled to all or part of the same, then Purchaser agrees that with respect to the then current rentals (i.e., due with respect to the month in which the closing occurs), the first rentals and monies received by Purchaser subsequent to the date of the closing from such Tenants shall be applied: first, to the rent for the month in which the closing occurs, which payment shall be received in trust by Purchaser for the account of Seller in payment of such rents and Seller's share of which, determined in accordance with Paragraph 53(a) (i) hereof, will be remitted by Purchaser to Seller forthwith; then, to rents which become due after the date of closing, which shall be retained by Purchaser; and the balance, if any, to rents which became due prior to the first day of the month in which the closing occurs, which shall be remitted by Purchaser to Seller. Purchaser will make reasonable efforts (but without any obligation to institute legal proceedings in connection therewith) to collect past due rents, if any, for the account of Seller and any such rents, if received, shall be received in trust by Purchaser for the account of Seller and will be remitted by Purchaser to Seller forthwith. Any past due rents not so collected by Purchaser within the period of one hundred twenty (120) days following the date of the closing shall be reassigned to Seller so that Seller may pursue such remedies for collection thereof, for Seller's own account, as Seller may deem advisable. (c) If there are any additional rents or charges (e.g., percentage rent, real estate taxes, insurance, operating expenses or other such charges) not yet due or payable by Tenants but attributable in whole or in part to the period prior to the date of closing, then Purchaser agrees that when the same are received by Purchaser subsequent to the date of the closing from such Tenants, the same shall be received in trust by Purchaser for the account of Seller in payment of such additional rents and such portion thereof as is attributable to the period prior to the date of closing will be remitted by Purchaser to Seller forthwith. Purchaser will make reasonable efforts (but without any obligation to institute legal proceedings in connection therewith) to collect such additional rents, if any, for the account of Seller. (d) Seller shall cause all water, electricity, gas and other utility meters to be read on the day preceding the date of closing, or as close thereto as may be reasonably possible, and shall pay all bills rendered as a result of such readings. The cost of such utilities for the period, if any, between the date of the meter reading and the date of closing shall be adjusted on the basis of the most recently issued bill therefor. If Seller does not obtain such a meter reading for any such utility, the adjustment therefor shall be on the basis of the most recently issued bill therefor, subject to post-closing adjustment in accordance with subparagraph (f) hereof. At the closing, Purchaser shall reimburse Seller in an amount equal to all deposits, if any, made by Seller with any utility company which will remain on deposit for the benefit of Purchaser subsequent to the closing. (e) The amount of any unpaid taxes, water charges and sewer rents which Seller is obligated to pay and discharge, with the interest and penalties thereon to a date not more than two (2) business days after the date of closing, may, at the option of Seller, be allowed to Purchaser as a reduction of the purchase price, provided official bills therefor with interest and penalties thereon figured to said date, are furnished by Seller at the closing. (f) To the extent that any of the prorations made upon the date of closing pursuant to this Paragraph are based upon estimates of payments to be made and/or expenses to be incurred by Purchaser subsequent to the date of closing, or have been erroneously made, Seller and Purchaser agree to adjust such prorations promptly upon receipt by Seller or Purchaser, as the case may be, of bills or other documentation setting forth the actual and/or correct amount of such expenses. The provisions of this Paragraph shall survive the closing. (g) In addition to the other adjustments and apportionments set forth in this Paragraph, Purchaser shall be entitled to the following adjustments at closing: Page 20 (i) The adjustment, if any, with respect to Seller's Pre-Existing Obligations pursuant to Paragraph 47 hereof; (ii) An adjustment of $640.00 with respect to each common hallway at the Premises which has not been painted within two (2) prior to the date of closing; (iii) An adjustment of $180.00 with respect to each vacant one-bedroom apartment at the Premises which has not been painted since such apartment became vacant; (iv) An adjustment of $300.00 with respect to each vacant one-bedroom apartment at the Premises in which the floors have not been sanded and polyurethaned since such apartment became vacant; (v) An adjustment of $240.00 with respect to each vacant two-bedroom apartment at the Premises which has not been painted since such apartments became vacant; and (vi) An adjustment of $350.00 with respect to each vacant two-bedroom apartment at the Premises in which the floors have not been sanded and polyurethaned since such apartment became vacant. 54. (a) In connection with the conveyance of the Premises by Seller to Purchaser, Seller shall deliver to Purchaser at the closing: (i) [Intentionally omitted]; (ii) an instrument duly executed and acknowledged by Seller, in which Seller assigns to Purchaser all of Seller's right, title and interest as landlord, in, to and under all Leases or future leases in effect as of the date of closing, which instrument shall contain no representations or warranties, express or implied; (iii) an instrument duly executed and acknowledged by Seller in which Seller assigns to Purchaser all of Seller's right, title and interest under the Service Contracts in effect as of the date of closing, if any, a schedule of which shall be annexed thereto, which instrument shall contain no representations or warranties, express or implied; (iv) an instrument duly executed and acknowledged by Seller in which Seller assigns to Purchaser all of Seller's right, title and interest in and to all security and similar deposits made by Tenants pursuant to the terms of their Leases, a schedule of which shall be annexed thereto, which instrument shall contain no representations or warranties, express or implied. Seller shall, at its option, either deliver therewith a good certified or official bank check to Purchaser's order in the aggregate amount of such deposits, including accrued interest, if any, which would be due to Tenants, if such deposits were withdrawn on the date of closing, or make arrangements to transfer the accounts in which such deposits are maintained to Purchaser (in either case, less any permissible administrative expenses, the aggregate amount of which shall, in the case of a transfer of accounts, be apportioned as of the date of closing); (v) an instrument duly executed and acknowledged by Seller in which Seller assigns to Purchaser, to the extent transferable and in effect on the date of closing, all of Seller's right, title and interest in and to all existing licenses and permits held by Seller and relating to Seller's ownership or operation of the Premises (but expressly without warranty or representation by Seller that it has any rights in the foregoing which are transferable), which assignment may be general in nature; (vi) a form letter, addressed to the Tenants and executed by Seller, advising such Tenants of the conveyance of the Premises and the transfer of their security and similar deposits to Purchaser, directing them to pay rent to a person and at an address designated by Page 21 Purchaser and containing such other information as may be required in accordance with New York law; (vii) all records and files relating to the operation and maintenance of the Premises in Seller's possession or under Seller's control. Such records and files shall include (to the extent available) but not be limited to counterparts of the Leases and Service Contracts and a copy of any transferable permits or licenses; (viii) all other instruments and documents, including a statement of adjustments, to be executed, acknowledged where appropriate and/or delivered by Seller to Purchaser pursuant to any of the other provisions of this Contract; and (ix) any and all keys to the Premises in Seller's possession. (b) In connection with the conveyance of the Premises by Seller to Purchaser, Purchaser shall deliver to Seller or the Title Company, as the case may be, the following: (i) an instrument or counterparts of the instrument described in clause (ii) of subparagraph (a) hereof, duly executed and acknowledged by Purchaser, in which Purchaser assumes and agrees to observe and perform all of the obligations of Seller under the Leases described in said clause which arise on and after the date of closing and to indemnify Seller in respect thereof; (ii) an instrument or counterparts of the instrument described in clause (iii) of subparagraph (a) hereof, duly executed and acknowledged by Purchaser, in which Purchaser assumes and agrees to observe and perform all of the obligations of Seller under the Service Contracts described in said clause, if any, which arise on and after the date of closing and to indemnify Seller in respect thereof; (iii) an instrument or counterparts of the instrument described in clause (iv) of subparagraph (a) hereof, duly executed and acknowledged by Purchaser, in which Purchaser acknowledges receipt of, and agrees to indemnify Seller, from and after the date of closing, in respect of, the deposits assigned to Purchaser pursuant to said clause; (iv) if Purchaser is a partnership, a certificate executed by a general partner of Purchaser certifying that such general partner has been duly authorized by all requisite partnership action to enter into the within transaction, and to execute, acknowledge and deliver on behalf of Purchaser this Contract and the documents contemplated hereby (and if such general partner shall be a corporation, that all required corporate actions, including consents of shareholders, if required, necessary to authorize the execution and delivery of this Contract and the other documents contemplated hereby, shall have been performed and obtained), together with a copy of Purchaser's Certificate and/or Agreement of Limited Partnership evidencing the authority of the general partner, certified as true, correct and complete by said general partner; (v) if Purchaser is a corporation, certified resolutions of the Board of Directors of Purchaser and, if required, consent of the shareholders of Purchaser, authorizing the purchase of the Premises by Purchaser and the execution and delivery of this Contract and the other documents contemplated hereby and such other proof of Purchaser's right, power and authority to acquire the premises from Seller on the terms and conditions of this Contract as Seller may reasonably require; and Page 22 (vi) all other instruments and documents, including a statement of adjustments, to be executed, acknowledged where appropriate and/or delivered by Purchaser to Seller and Purchaser shall pay or cause to be paid to Seller all sums of money to which Seller may be entitled pursuant to any of the other provisions of this Contract. LAKE GROVE ASSOCIATES CORP. (Seller) By: /s/ Allan Green ------------------- Name: Allan Green Title: President HOME PROPERTIES OF NEW YORK, L.P. (Purchaser) BY: Home Properties of New York, Inc., a general partner By: /s/ Norman Leenhouts -------------------- Name: Norman Leenhouts Title: Chairman ESCROW AGENT: /s/ Miles A. Epps ----------------- MILES A. EPPS Page 23 EX-11 12 EXHIBIT 11
HOME PROPERTIES OF NEW YORK, INC. COMPUTATION OF PER SHARE EARNINGS SCHEDULE (In Thousands, Except Shares and Per Share Data) Years Ended -------------------------- 08/04/94 December 31, December 31, Through 1996 1995 12/31/94 Primary Shares Outstanding: Weighted average number of 5,601,027 5,408,474 5,408,230 shares outstanding Net effect of dilutive 31,097 - - stock options (1) --------- --------- --------- TOTAL 5,632,124 5,408,474 5,408,230 ========= ========= ========= Fully-diluted Shares Outstanding: Weighted average number of shares outstanding 5,601,027 5,408,474 5,408,230 Net effect of dilutive 105,617 - - stock options(1) --------- --------- --------- TOTAL 5,706,644 5,408,474 5,408,230 ========= ========= ========= Income before $4,147 $4,045 $2,385 extraordinary item Extraordinary item - (1,249) (2,498) --------- --------- --------- Net income (loss) $4,147 $2,796 ($113) ========= ========= ========= Primary Earnings Per Share (2): Income before $.74 $.75 $.44 extraordinary item Extraordinary item - ($.23) ($.46) --------- --------- --------- Net income (loss) $.74 $.52 ($.02) ========= ========= ========= Fully-diluted Earnings Per Share (3): Income before $.73 $.75 $.44 extraordinary item Extraordinary item - ($.23) ($.46) --------- --------- --------- Net income (loss) $.73 $.52 ($.02) ========= ========= =========
(1) The net effect is based upon the treasury stock method using average market prices during the periods presented for the primary amounts, and the higher of the average market prices or the market price at year-end for the fully-diluted amounts. (2) Primary earnings per share for the years presented have been reported on the Company's financial statements based only upon the shares of common stock outstanding, since the dilutive effect of the stock options is not considered to be material. (3) Since fully-diluted earnings per share are not materially dilutive, such amounts were not presented in the Company's financial statements. EX-21 13 EXHIBIT 21 SUBSIDIARIES OF HOME PROPERTIES OF NEW YORK, INC. as of December 31, 1996 1. Home Properties of New York, L.P. 2. Through Home Properties of New York, L.P. (the "Operating Partnership"), Home Properties of New York, Inc. has interests in the following entities: * The Operating Partnership owns 9,900 shares of non- voting common stock of Home Properties Management, Inc., a Maryland corporation. Officers and directors of Home Properties own 100 shares of voting common stock of Home Properties Management, Inc. Such shares represent all of the outstanding common stock of Home Properties Management. * The Operating Partnership owns 891 shares of non-voting common stock of Conifer Realty Corporation, a Maryland corporation. Officers and directors of Home Properties own 9 shares of voting stock of Conifer Realty Corporation. Such shares represent all of the outstanding common stock of Conifer Realty Corporation. Page 1 EX-23 14 EXHIBIT 23.1 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the Registration Statements of Home Properties of New York, Inc. on Forms S-3 (Nos. 33-96004 and 333-13723) of the Home Properties of New York, Inc. Dividend Reinvestment, Stock Purchase, Resident Stock Purchase and Employee Stock Purchase Plan, on Form S-8 (No. 33-05705) relating to the Home Properties of New York, Inc. 1994 Stock Benefit Plan, as amended, and on Form S-8 (No. 333-12551) relating to the Home Properties Retirement Savings Plan, of our report dated February 3, 1997, on our audits of the consolidated financial statements and financial statement schedule of Home Properties of New York, Inc. as of December 31, 1996 and 1995, for the years ended December 31, 1996 and 1995 and the period from August 4, 1994 through December 31, 1994, and the combined financial statements and financial statement schedule of the Original Properties for the period from January 1, 1994 through August 3, 1994, which report is included in this Annual Report on Form 10-K. We also consent to the reference to our firm under the caption "Experts". /s/ Coopers & Lybrand L.L.P. Rochester, New York March 26, 1997 EX-23 15 EXHIBIT 23.2 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the Registration Statement of Home Properties of New York, Inc. on Form S-3 (No. 333-2674) of our report dated February 3, 1997, on our audits of the consolidated financial statements of Home Properties of New York, Inc. as of December 31, 1996 and 1995, for the years ended December 31, 1996 and 1995 and the period from August 4, 1994 through December 31, 1994, and the combined financial statements of the Original Properties for the period from January 1, 1994 through August 3, 1994, which report is included in the Annual Report on Form 10-K. We also consent to the reference to our firm under the caption "Experts". /s/ Coopers & Lybrand L.L.P. Rochester, New York March 26, 1997 EX-23 16 EXHIBIT 23.3 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the Registration Statement of Home Properties of New York, Inc. on Form S-3 (No. 333-2672) of our report dated February 3, 1997, on our audits of the consolidated financial statements of Home Properties of New York, Inc. as of December 31, 1996 and 1995, for the years ended December 31, 1996 and 1995 and the period from August 4, 1994 through December 31, 1994, and the combined financial statements of the Original Properties for the period from January 1, 1994 through August 3, 1994, which report is included in the Annual Report on Form 10-K. We also consent to the reference to our firm under the caption "Experts". /s/ Coopers & Lybrand L.L.P. Rochester, New York March 26, 1997 EX-27 17
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM HOME PROPERTIES OF NEW YORK, INC.'S FINANCIAL STATEMENTS CONTAINED IN ITS DECEMBER 31, 1996 FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. DOLLARS 12-MOS DEC-31-1996 JAN-01-1996 DEC-31-1996 1 1,523 0 2,185 0 0 0 261,773 40,237 248,631 0 104,915 0 0 61 82,969 248,631 0 45,670 0 31,418 0 0 9,208 5,044 0 4,147 0 0 0 4,147 .74 .74
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