-----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, C8xp5oTiVdFkiZwuDvmIfwripezBgAw1+qHo4b27eP1glznIOmzpNw9W8huebx1t 2BBsV8mArS6KNayisk4jPg== 0000923118-99-000009.txt : 19990705 0000923118-99-000009.hdr.sgml : 19990705 ACCESSION NUMBER: 0000923118-99-000009 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19990701 ITEM INFORMATION: ITEM INFORMATION: FILED AS OF DATE: 19990702 FILER: COMPANY DATA: COMPANY CONFORMED NAME: HOME PROPERTIES OF NEW YORK INC CENTRAL INDEX KEY: 0000923118 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 161455126 STATE OF INCORPORATION: MD FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: SEC FILE NUMBER: 001-13136 FILM NUMBER: 99658544 BUSINESS ADDRESS: STREET 1: 850 CLINTON SQ CITY: ROCHESTER STATE: NY ZIP: 14604 BUSINESS PHONE: 7162464105 MAIL ADDRESS: STREET 1: 850 CLINTON SQUARE CITY: ROCHESTER STATE: NY ZIP: 14604 8-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of Report (Date of earliest event reported): July 1, 1999 HOME PROPERTIES OF NEW YORK, INC. (Exact name of Registrant as specified in its Charter)
MARYLAND 1-13136 16-1455126 (State or other jurisdiction of (Commission file number) (I.R.S. Employer Identification incorporation or organization Number)
850 CLINTON SQUARE ROCHESTER, NEW YORK 14604 (Address of principal executive offices) Registrant's telephone number, including area code: (716) 546-4900 Not applicable (Former name or former address, if changed since last report) HOME PROPERTIES OF NEW YORK, INC. CURRENT REPORT ON FORM 8-K Home Properties of New York, L.P. (the "Operating Partnership"), a New York limited partnership has acquired certain property in certain transactions which are deemed "significant acquisitions" pursuant to the regulations of the Securities and Exchange Commission governing the reporting of transactions under the Current Report on Form 8-K. Home Properties of New York, Inc. (the "Company") is the sole general partner and holder, directly and indirectly through Home Properties Trust, in which the Company holds 100% of the beneficial interests, of approximately 57% of the partnership interests in the Operating Partnership. Item 2. Acquisition or Disposition of Assets. On July 1, 1999, the Operating Partnership acquired the equity interests in seven different entities which each individually own a single asset as follows: - - Bernmil Associates, L.L.P., a Maryland limited liability partnership, which owns a 432 unit apartment community in Rockville, Maryland. - - Bonnie Ridge, L.L.C., a Maryland limited liability company, which owns a 966 unit apartment community in Baltimore, Maryland and whose member interests were held 50% by Albert H. Small and 50% by Hermen Greenberg. - - Kenwood Associates Limited Partnership, a Virginia limited partnership, which owns a 664 unit apartment community in Richmond, Virginia. - - Laurel Pines Club Apartments Limited Partnership, a Maryland limited partnership, which owns a 236 unit apartment community in Laurel, Maryland. - - Riverdale Apartments, L.L.C., a Virginia limited liability company, which owns a 580 unit apartment community in Hampton, Virginia. - - Seminary Hills Limited Partnership, a Virginia limited partnership, which owns a 296 unit apartment community in Alexandria, Virginia. - - Seminary Towers Limited Partnership, a Virginia limited partnership, which owns a 548 unit apartment community in Alexandria, Virginia. All of the above properties (the "CRC Portfolio"), which comprise 3,722 units in total, were previously managed by Community Realty Company, Inc. ("CRC"). The CRC Portfolio is currently 94.5% occupied and the buildings have an average age of 32 years. As part of the transaction, the Operating Partnership also acquired certain management agreements and other assets from CRC (the "CRC Assets"). The total consideration for the CRC Portfolio and the CRC Assets was $178,314,000, consisting of operating partnership units in the Operating Partnership having an agreed upon value of approximately $106 million, the assumption of approximately $57 million of indebtedness and cash of approximately $15 million. The assumed mortgages carry a weighted average interest rate of 7.16% and have a weighted average maturity of 12 years. The cash consideration was funded from cash on hand. None of the sellers were affiliated with the Operating Partnership, the Company, the directors or officers of the Company or any affiliate of any such director or officer. The CRC Portfolio was previously operated as multifamily apartment projects, and it is the intent of the Company and the Operating Partnership to continue to operate the projects as multifamily apartment communities. The personal property that comprises a portion of the CRC Assets was used in connection with the management of the CRC Portfolio and the other properties formerly managed by CRC. It is the intent of the Company and the Operating Partnership to continue to use those assets for that purpose. The consideration was negotiated with representatives of the sellers and was based on an internal analysis by the Company of the historical cash flows and fair market value of the properties and assets. Item 5. Other Events. On July 1, 1999, Home Properties announced that it has added Albert H. Small as Director. Mr. Small, age seventy-two, was born and raised in Washington, D.C. and graduated from the University of Virginia School of Engineering. He attended the George Washington Law School and the American University Graduate School of Business. Mr. Small, who has been active in the construction industry for 50 years, is the President of Southern Engineering Corporation. At their Annual Meeting held on May 4, 1999, the shareholders of the Company approved an amendment to the Company's Articles of Incorporation to increase the number of authorized shares of Common Stock, par value $.01 per share, to an aggregate of 80,000,000 shares. Also at their Annual Meeting, the shareholders of the Company approved the issuance of up to 15,000,000 additional shares of the Company's Common Stock, or securities convertible into Common Stock, from time to time in one or more privately negotiated transactions or public offerings, including issuances to current and future holders of shares in excess of five percent of the shares outstanding. On February 2, 1999, the Board of Directors approved the Home Properties of New York, Inc., Home Properties of New York, L.P. Executive Retention Plan. On May 5, 1998, the Board of Directors approved the Home Properties of New York, Inc. Deferred Bonus Plan. Item 7. Financial Statements and Exhibits. a. Financial Statements of the Businesses Acquired: Financial statements for the interests and properties acquired and noted in Item 2 are not available at this time and will be filed by amendment as soon as practicable, but not later than 60 days from the date this Form 8-K must be filed. b. Pro Forma Financial Information: Pro forma financial statements of the Company reflecting the interests and properties acquired and noted in Item 2 are not available at this time and will be filed by amendment as soon as practicable, but not later than 60 days from the date this Form 8-K must be filed. c. Exhibits: 2.1 Form of Contribution Agreement, dated June 7, 1999, relating to the CRC Portfolio with schedule setting forth material details in which documents differ from form 99 Additional Exhibits 99.1 Certificate of Amendment to the Articles of Incorporation 99.2 Home Properties of New York, Inc., Home Properties of New York, L.P. Executive Retention Plan 99.3 Home Properties of New York, Inc. Deferred Bonus Plan SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. HOME PROPERTIES OF NEW YORK, INC. (Registrant) Date: July 2, 1999 By: /s/ David P. Gardner ------------------------ David P. Gardner Vice President Chief Financial Officer and Treasurer Date: July 2, 1999 By: /s/ David P. Gardner ---------------------- David P. Gardner Vice President Chief Financial Officer and Treasurer EX-2 2 CONTRIBUTION AGREEMENT This Contribution Agreement ("Agreement"), made as of the 7th day of June, 1999 by and among HOME PROPERTIES OF NEW YORK, L.P., a New York limited partnership, having its principal office at 850 Clinton Square, Rochester, New York 14604, ("Home Properties"); and _____________________________, a _______________________(the "Partnership"), having its principal office at _________________. W I T N E S S E T H: WHEREAS, the Partnership owns a certain apartment complex and adjacent land located in the State of ________, all as more particularly described on EXHIBIT A; WHEREAS, the Partnership desires to cause each of its members (the "Partners") to contribute each of the member interests in the Partnership (the "Interests") to Home Properties in exchange for limited partnership interests in Home Properties (the "Units"), cash, or a combination of both Units and cash, to be allocated among the Partners in accordance with SCHEDULE 1 attached hereto; WHEREAS, Home Properties desires to obtain 100% (but not less than 90%) of the Interests in the Partnership and thus a 100% (but not less than 90%) of the interests in the entity that owns fee simple title to the Property (as hereinafter defined), together with the related Other Items (as hereinafter defined), in exchange for Units, cash, or a combination of both Units and cash, all as more particularly described herein; WHEREAS the parties hereto also desire, subject to the terms and conditions set forth herein and in the agreements noted below, that the entities described on EXHIBIT B attached hereto (the "Affiliated Partnerships") cause each of their respective constituents (the "Affiliated Partners") to contribute to Home Properties and Home Properties accepts from the Affiliated Partners, all (but not less than 90%) of the ownership interests in the Affiliated Partnerships (the "Affiliated Interests") pursuant to contribution agreements entered into between the Affiliated Partnerships and Home Properties, each of even date herewith (the "Other Contribution Agreements"), and that the transactions contemplated therein close simultaneously with, and as a condition to, the closing of the transactions contemplated hereby; NOW, THEREFORE, in consideration, of the mutual covenants herein contained, and for other good and valuable consideration, the receipt and sufficiency whereof being hereby acknowledged, the parties hereby agree as follows: 1. REAL PROPERTY DESCRIPTION. The Real Property owned by the Partnership consists of an apartment complex commonly known as ______________, which includes ___apartments (the " Project"), located in __________________, on land more particularly described on EXHIBIT A attached hereto, together and including all buildings and other improvements thereon, including but not limited to, the ____ apartment units and all rights in and to any and all streets, roads, highways, alleys, driveways, easements and rights of way appurtenant thereto (the foregoing are hereafter collectively referred to as the "Property"). 2. OTHER ITEMS. The transfer, exchange, conveyance and acquisition of the Interests shall include all of the right, title and interest of the Partnership in and to the following items now or at the Closing (hereinafter defined) in or on the Property and owned by the Partnership: A. all heating, air-conditioning, plumbing and lighting fixtures, B. ranges, refrigerators and disposals (one of each for each apartment unit), C. water heaters, D. any and all pools and pool equipment, bathroom fixtures, exhaust fans, hoods, signs, screens, maintenance building, fences, cabinets, mirrors, shelving, mail boxes, office furniture and equipment, including but not limited to computers, and any and all related equipment in connection with the Property, E. any fixtures appurtenant to the Property and any other furniture or equipment used in connection with the operation and maintenance of the Property, including any vehicles used in connection with the operation and maintenance of the Property, F. all tenant security deposits (and interest thereon if required by law or contract to be earned thereon) (hereinafter with the items listed in AE above, collectively, the "Other Items"). At Closing, the Other Items will be free and clear of all liens and encumbrances, subject only to the Existing Loan and Permitted Exceptions (as each such terms are hereinafter defined). Notwithstanding anything set forth herein to the contrary, the transfer, exchange, conveyance and acquisition of the Interests shall specifically exclude any right, title or interest of the Partnership in or to: (i) any tax, insurance or other escrows held by any Existing Lender (hereinafter defined) and (ii) any working capital, capital reserves or any other cash accounts held or maintained by the Partnership (other than tenant security deposits described in subparagraph F. hereinabove) (collectively, the "Excluded Items"). Subject to the obligation to establish and fund the Reserve Amount (hereinafter defined), on or before the Closing, the Excluded Items shall be transferred by the Partnership to its Managers (hereinafter defined) to be held for distribution to the Partners. 3. EXCHANGE. A. Promptly after the expiration of the Due Diligence Period (if this Agreement has not been previously terminated), Home Properties shall make an offer (the "Offer") to each of the Partners to exchange the Partners' Interests in the Partnership for: (i) cash, (ii) Units or (iii) a combination of both cash and Units, as each such Partner may, subject to Paragraph 3.C., elect to receive, and having a value, in each instance, equal to the Exchange Price (hereinafter defined). The Partnership agrees that it will use its reasonable efforts to solicit acceptance from the Partners of the Offer, whether in exchange for cash, Units, or a combination of both cash and Units. Upon and subject to the terms and conditions set forth in this Agreement, Home Properties agrees that on the Closing Date (as hereinafter defined), it shall accept an assignment of the Interests from the Partners who have accepted the Offer and will issue Units, pay cash, or pay and issue a combination of both cash and Units to the Partners, as each such Partner shall have elected, and as more particularly provided herein. B. Subject to the satisfaction or waiver of the closing conditions to the Partnership's obligations to close the transaction contemplated by this Agreement _______________ and ________________ (the "Managers") hereby agrees that they will accept the Offer with respect to all of their Interests. C. Notwithstanding the foregoing right of Partners to elect to be paid their portion of the Exchange Value in cash, Units, or a combination of both cash and Units, $50 million shall be the maximum aggregate portion of the Exchange Price payable to the Partners in cash under this Contribution Agreement as well as under the Other Contribution Agreements and the Contribution Agreement (the "Management Company Agreement") between Home Properties and Community Realty Company, Inc. (the "Management Company"). In the event that the aggregate portion of the Exchange Price to be paid in cash to the Partners, the Affiliated Partners, and the Management Company who are not accredited investors under the securities laws (and are therefore not permitted to receive Units) (collectively, the "Non-Accredited Investors") or who are accredited investors under the securities laws but have nonetheless elected to receive all or any portion of their Exchange Price in cash (the "Accredited Cash Payees") exceeds $50 million in the aggregate, then cash, up to $50 million, shall be paid first to the Non-Accredited Investors, and then the remaining cash, if any, shall be paid pro-rata to the Accredited Cash Payees. The remainder of the Exchange Value, if any, not paid in cash to the Accredited Cash Payees (the "Remaining Non-Cash Exchange Value"), shall be paid to such Accredited Cash Payees in the form of Units at the Designated Value (as hereinafter defined). 4. CONSIDERATION AND MANNER OF PAYMENT. A. The aggregate consideration payable by Home Properties for 100% of the Interests shall be $___________ (the "Consideration"). B. On the Closing Date, each of the Partners who has accepted the Offer shall assign their Interests to Home Properties in exchange for the Exchange Price. As used herein, the term "Exchange Price" means the Consideration less the principal amount on the Closing Date of the Existing Loan (as hereinafter defined), multiplied by the percentage interest of the relevant Partner's Interest in the Partnership as set forth on SCHEDULE 1. C. At Closing, the Managers shall establish from Partnership funds otherwise distributable to the Partners a "Reserve Amount". As used herein, the term "Reserve Amount" means the sum of: (a) an amount equal to the current accrued and unpaid monetary liabilities of the Partnership on the Closing Date (other than the principal amount of the Existing Loan), together with such other amounts as the Managers may reasonably determine are necessary or prudent to retain to satisfy any Partnership Claims (hereinafter defined) (the "Liabilities Reserve") and (b) the sum of $___________ (the "Indemnity Reserve"); provided, however, that the Indemnity Reserve portion of the Reserve Amount shall be reduced in proportion to the Interests of Partners of the Partnership ("Dissenting Partners") who do not accept the Offer. The Reserve Amount shall be held and disbursed by the Disbursing Agent (as defined in Paragraph D of this Section 4) as described in Paragraph D of this Section 4 and in Paragraphs A and B of Section 5. The Reserve Amount shall initially be used to pay all amounts required to satisfy the accrued and unpaid monetary liabilities of the Partnership on the Closing Date (other than the principal amount of the Existing Loan) and any liabilities of or claims against the Partnership accrued before the Closing Date (other than the principal amount of the Existing Loan) that Home Properties has not specifically agreed to assume as provided herein ("Liabilities Claims") and any amounts paid or subject to claims of Home Properties by reason of a material breach or material misrepresentation of any representations, warranties, covenants or agreements of the Partnership which survive Closing (but only during the period of such survival) ("Indemnity Claims", together with Liabilities Claims herein referred to collectively as "Partnership Claims"). Notwithstanding the above, if the Partnership can establish to Home Properties' reasonable satisfaction that after Closing, the Managers or their agents will have retained sufficient Partnership funds to pay all Liabilities Claims, then no Liabilities Reserve will be required to be established. D. At Closing, the Managers shall deliver in immediately available funds from monies otherwise distributable to the partners of the Partnership (but not from proceeds of Consideration) to the Title Company as "Disbursing Agent" the Reserve Amount. The Reserve Amount shall be held and disbursed pursuant to the terms of an escrow agreement that shall be in form and substance substantially similar to that attached hereto as EXHIBIT C. E. Subject to the limitation described in Paragraph C. of Section 3, Home Properties shall pay the Partners who are Non-Accredited Investors or Accredited Cash Payees their Exchange Price in cash at the Closing, F. Partners who are accredited under applicable securities laws and who have elected to receive Units in exchange for their Interests and Partners who are Accredited Cash-Payees who because of the $50 million cash limitation described in Paragraph 3.C. herein, are not paid all of their Exchange Value in cash (each a "Unit Partner" and collectively the "Unit Partners") shall be paid their Exchange Price (or in the case of Accredited Cash Payees the Remaining Non-Cash Exchange Value) by the issuance of Units. The number of Units to be issued to each Unit Partner shall be the Exchange Price divided by the "Designated Value" of a Unit. The Designated Value of a Unit shall be equal to $25.9417, which is the average closing price for the period from and including May 10 to and including May 28, 1999 of a share of common stock of Home Properties of New York, Inc., ("HME") as listed on the New York Stock Exchange. G. The initial distribution payable with respect to Units issued hereunder shall be made on the date on which HME pays the dividend to the holders of its common stock that relates to the earnings for the calendar quarter in which the Units were issued and shall be pro-rated such that the Unit Partners shall receive a pro-rata distribution for the period from the date on which the Units were issued to and including the last day of the calendar quarter in which the Units were issued. H. Subject to the terms of a Registration Rights and Lock-Up Agreement, in the form of EXHIBIT D attached hereto, to be dated as of the Closing Date and entered into between HME and each Unit Partner, and to the terms of that certain Second Amended and Restated Agreement of Limited Partnership of the Operating Partnership, as amended (the "Operating Partnership Agreement"), the Units will be convertible into HME common stock, on a one-to-one basis, after the elapse of one (1) year from and after the Closing Date (the "Lock-Up Period"), during which time the Unit Partners will be restricted, to the extent provided in the Registration Rights and Lock-Up Agreement and the Operating Partnership Agreement, from converting, or transferring, any of the Units. From and after the expiration of the Lock-Up Period, the Unit Partners shall have all of the transfer, exchange and conversion rights with regard to the Units as are set forth in the Operating Partnership Agreement and the Registration Rights and Lock-Up Agreement. I. Upon the expiration of the Due Diligence Period (as hereinafter defined) and provided Home Properties has not exercised its right to terminate this Agreement, Home Properties shall deposit a sum equal to the amount of the Liability Reserve with Commercial Settlements, Inc. (the "Title Company") as a good faith deposit hereunder (the "Deposit"). The Title Company shall invest the Deposit in an FDIC or FSLIC insured money market account and shall be held and disbursed as provided in the Escrow Agreement attached hereto as EXHIBIT E. Any interest earned on such investment shall be reported to Home Properties Federal tax identification number. The Deposit shall be refunded to Home Properties at Closing in the event Home Properties consummates the transaction contemplated hereby, upon termination of this Agreement by Home Properties expressly permitted hereunder, or upon the Partnership's default and resulting termination of this Agreement by Home Properties expressly permitted hereunder. In the event Home Properties fails to acquire the Interests other than by reason of a termination by Home Properties expressly permitted hereunder or the Partnership's default, the Deposit shall be forfeited to the Partnership as liquidated damages. Any and all sums deposited hereunder shall be applied or refunded as provided herein. (All references to "Deposit" shall be deemed to include all accrued interest thereon). 5. RELEASE OF RESERVES. A. On the 180{th} day after the Closing Date, the parties hereto shall jointly instruct the Disbursing Agent to disburse to the Managers that portion of the Reserve Amount that has not been paid, disbursed or otherwise required to be paid on account of Liability Claims or Indemnity Claims. The Managers may then elect: (i) to continue to hold such disbursed amounts for up to 360 days after the Closing Date, in trust for the benefit of the Partnership and the Partners, as a fund against which to pay unanticipated Partnership Claims (the "Contingency Reserve"); or (ii) to distribute such sums pro rata to the Partners. Notwithstanding the above, Dissenting Partners shall not be entitled to a distribution of any portion of the Indemnity Reserve. B. At any time, and from time to time, after the 180{th} day after the Closing Date that there is a Final Determination (as defined in EXHIBIT C) that any remaining portion, if any, of the Reserve Amount is no longer subject to Liability Claims or Indemnity Claims, the parties hereto shall instruct the Disbursing Agent to distribute such remaining portion of the Reserve Amount to the Managers. The Managers may then elect: (i) to continue to hold such disbursed amounts for up to 360 days after the Closing Date, in trust for the benefit of the Partners, as a Contingency Reserve; or (ii) to distribute such sums pro rata to the Partners in accordance with their percentage interests. Notwithstanding the above, Dissenting Partners shall not be entitled to a distribution of any portion of the Indemnity Reserve. C. Not later than 360 days after the Closing Date (provided that there have been no unanticipated Partnership Claims), the Managers shall distribute any balance remaining in the Contingency Reserve pro rata to the Partners in accordance with their percentage interests. In the event that at the end of the 360 day period following Closing there are unanticipated Partnership Claims pending or asserted, or the Managers have reason to believe that such unanticipated Partnership Claims may be asserted, the Managers may continue to hold the Contingency Reserve until such time as the Managers deem prudent, after which time any undisbursed amount remaining in the Contingency Reserve shall be disbursed by the Managers pro rata to the Partners in accordance with their percentage interests. Notwithstanding the above, Dissenting Partners shall not be entitled to a distribution of any portion of the Indemnity Reserve. 6. EXISTING LOANS. Home Properties acknowledges that the Property is currently subject to mortgage financing having a principal balance as of May 1, 1999 of approximately $____________ (the "Existing Loan") and held by ________________ (the "Existing Lender"). Subject to the consent of the Existing Lender, Home Properties agrees that at the time it acquires the Interests, the Property will remain subject to the Existing Loan. The costs involved in connection with obtaining the Existing Lender's consent to that transaction (the "Assumption"), including any assumption fees, shall be paid by Home Properties. 7. ADJUSTMENTS AT CLOSING. The following shall be adjusted and prorated between Home Properties and the Partnership at Closing as if Home Properties was the owner of the Property as of the Closing Date (the Closing Date being a day of income and expense to Home Properties). All such adjustments and prorations between Home Properties and the Partnership shall be settled in cash and shall not increase or decrease the Consideration, as the case may be. A. All ad valorem real estate taxes with respect to the Property for the calendar year or other applicable tax period in which the Closing is consummated. If the amount of such taxes is not known at Closing, proration of such taxes will be made upon the basis of the most recently ascertainable taxes. In such event, Home Properties and the Managers on behalf of the former partners of the Partnership agree to re-prorate/adjust the taxes between themselves after the Closing, based upon the full amount of the actual taxes for the Property when the actual amount of such taxes is known. B. Water charges. C. Sewer charges. D. Fuel, electricity and other utilities. E. All tenant security deposits (and interest thereon if required by law or contract to be earned thereon) shall remain in the Partnership whose Interests are conveyed to Home Properties at Closing. At Closing, Home Properties shall assume the Partnership's obligations related to tenant security deposits to the extent they remain part of the Other Items. Home Properties agrees that it will indemnify, defend, hold the Partnership harmless and will indemnify the Partnership against all demands, claims, losses, costs, damages, expenses or liabilities, including, but not limited to, attorneys' fees, arising out of or in connection with the transfer or disposition of such security deposits if and to the extent such demands, claims, losses, costs, damages, expenses or liabilities relate to the period after the Closing Date. F. Charges under the service contracts assumed by Home Properties. G. Laundry income. H. Any other charges incurred with respect to the Property which the Partnership or the Partners are obligated to pay. I. Accrued and unpaid interest on the Existing Loan. J. Rents. (1) All rent payments collected as of the Closing Date for the month of Closing shall be prorated as between the parties as of the Closing Date. (2) All rent collected after Closing for any period prior to Closing shall belong to the Partnership and, if paid to Home Properties, Home Properties shall promptly send such rent to the Managers for distribution to the Partners. (3) All rent collected by the Partnership prior to the Closing for rental periods subsequent to Closing shall be paid to Home Properties at Closing. (4) All rent collected by Partnership or Home Properties for rental periods after the Closing shall belong to Home Properties and, if paid to the Partnership, the Partnership shall promptly send such rent to Home Properties. (5) Home Properties will make reasonable efforts to collect all rents due for the month of the Closing and any past due rents, but shall not be required to bring suit to collect such rents. Any rent received from any tenant after Closing shall first be applied to pay any rent owing by that tenant for the month of the Closing and then to pay rent owing for the then current month and thereafter in reverse order of delinquency. Any rents due for the month of Closing (and accruing prior to the Closing Date) and past due rents not collected by Home Properties within the period of 180 days following the Closing Date shall be assigned to the Managers without recourse who may pursue such remedies for collection thereof for its own account. Any error in the calculation of adjustments shall be corrected subsequent to Closing with appropriate credits to be given based upon corrected adjustments, provided, however, that the adjustments (except if errors are caused by misrepresentations and except for actual taxes) shall be final upon expiration of the sixtieth day after Closing. 8. COSTS. Home Properties shall pay all recording fees, its attorneys' fees, one-half of any applicable transfer and recordation taxes, if any, the costs of obtaining any title commitment and title policy, one-half of the closing charges of the Title Company, and all other incidental costs and expenses, if any, incurred in connection with closing this transaction customarily paid for by the transferee of similar property. The Partnership shall pay one-half of any applicable transfer and recordation taxes, if any, attorneys' fees incurred by them in connection with this transaction, one-half of the closing charges of the Title Company and all other incidental costs and expenses, if any, incurred in connection with closing this transaction customarily paid for by the transferor of similar property. 9. EVIDENCE OF TITLE. The Partnership shall furnish to Home Properties, at the Partnership's expense, and within ten (10) days from the execution hereof, a copy of the most recent title policy relating to the Property along with the most recent instrument survey of the Property, in each case, to the extent in its possession or control. At the time of the Closing, as a condition to Home Properties' obligation to close, the Property shall be subject only to: (i) all zoning and building laws, ordinances, resolutions and regulations of all governmental authorities having jurisdiction which affect the Property and the use and improvement thereof; (ii) all leases identified in the Rent Roll (hereinafter defined); (iii) ad valorem real estate taxes for the current year and subsequent years which are not yet due and payable; and (iv) easements, covenants, restrictions, agreements and/or reservations of record, so long as they do not interfere with the use of the Property as a rental apartment complex, if any, (v) private, public and utility easements and roads and highways, if any, (vi) the documents evidencing or securing the Existing Loan; and (vii) and any other exceptions not objected to or waived by Home Properties under Section 12 herein (collectively, the "Permitted Exceptions"). 10. CLOSING DOCUMENTS. A. At the time of Closing, the Partnership shall deliver to Home Properties the following: (1) Properly executed Assignments to Home Properties of no less than 90% of the Interests; (2) A current rent roll ("Rent Roll") certified, as of the date of Closing, which shall include a correct list of all tenants, all rental obligations of each tenant with respect to the Property and all security deposits along with a copy of all leases shown on the Rent Roll; (3) A certificate of title and any other documentation necessary to transfer title to any vehicles, if any; (4) Copies of the personnel files of all employees employed at the Property by the Partnership, if any, and remaining in the employment of Home Properties after the Closing; (5) An executed original of the Registration Rights and Lock-Up Agreement in the form attached hereto as EXHIBIT D; (6) An estoppel certificate from the Existing Lender confirming that there is no default under the Existing Loan, and that there exists no event that with the passage of time or the giving of notice, or both, would constitute such a default; (7) Any and all affidavits, certificates or other documents reasonably and customarily required by the Title Company in order to cause it to issue the title policy regarding the Property in the form and condition required by this Agreement and any affidavits as may be necessary in order for Home Properties to obtain a non-imputation endorsement; (8) All keys to the Property in the possession of the Partnership, which shall remain at the rental office and need not be brought to Closing; (9) A certified copy of the Certificate of Limited Partnership of the Partnership, and such other evidence of the Partnership's power and authority as the Title Company may reasonably request; (10) A signed counterpart of the Escrow Agreement-Reserve Amount in form substantially similar to EXHIBIT C; and, (11) Any additional funds, documents and or instruments as may be necessary for the proper performance by the Partnership of its obligations contemplated by this Agreement. B. At the time of Closing, Home Properties shall deliver to the Partnership the following: (1) Evidence of organization, existence and authority of Home Properties and HME and the authority of each person executing documents on behalf of each, reasonably satisfactory to the Partnership; (2) An opinion of a nationally recognized law firm acting as counsel for Home Properties and HME reasonably acceptable in form and content to the Partnership to the effect that (1) HME has been organized in conformity with the requirements for qualification as a real estate investment trust under the Code and currently qualifies to be taxed as such, and (2) Home Properties is classified as a partnership and not as an association or publicly traded partnership taxable as a corporation for federal income tax purposes; (3) Such cash as may be required of Home Properties to pay closing costs or charges properly allocable to Home Properties; (4) An Amendment to the Home Properties' Partnership Agreement in the form necessary to admit the Unit Partners as limited partners of Home Properties and evidencing the issuance of the Units required pursuant to this Agreement; (5) Subject to the limitation set forth in Section 3.C. herein, cash in an amount sufficient to pay Partners required to be paid, or electing to be paid their share of the Exchange Value in cash; (6) An executed original of the Registration Rights and Lock-Up Agreement in the form attached hereto as EXHIBIT D; and, (7) Any additional funds, documents and or instruments as may be necessary for the proper performance by Home Properties of its obligations contemplated by this Agreement. 11. INSPECTION. For a period ending on June 15, 1999 (the "Due Diligence Period"), the Partnership agrees that Home Properties and its authorized representatives shall have the right and privilege to enter upon the Property and the Partnership's offices, upon reasonable notice, during regular business hours, for the purpose of gathering such information and conducting such environmental and engineering studies or other tests and reviews as Home Properties may deem appropriate and necessary, including but not limited to a review of the Partnership's books and records pertaining to the Property and the Other Items, matters relating to zoning compliance and compliance by the Property and the Other Items with other applicable governmental regulations, the markets in which the Property operates, any service or other contracts relating to the Property, the tax assessment on the Property and on comparable properties, the documents pertaining to the Existing Loan and such other matters as Home Properties shall deem reasonably necessary or appropriate in connection with the Property and the Other Items. All such inspections, studies, tests and reviews shall be at Home Properties' sole expense. The Partnership agrees to cooperate with Home Properties by making available to Home Properties such records, plans, drawings or other data as may be in the Partnership's possession or control relating to the Property and its operation; excluding however, any files containing confidential documents such as personnel documents, tax returns, appraisals, market analyses, projections, internal communications, or correspondence between the property manager and the Partnership. Home Properties agrees that it will provide the Partnership with a copy of any third party reports received by Home Properties with respect to its due diligence activities pursuant to this paragraph. Home Properties hereby agrees to indemnify, defend and hold the Partnership, the Partnership's tenants, agents, employees, partners and the Property harmless from and against all claims, losses, costs, damages, expenses or liabilities, including, but not limited to, mechanic's and materialmen's liens and attorneys' fees arising out of or in connection with Home Properties' access to or entry upon the Property. If any inspection or test disturbs the Property, Home Properties will restore the Property, at Home Properties' own cost and expense, to the same condition as existed prior to any inspection or test. Home Properties agrees that prior to any physical inspection or testing at the Property, it or its agents will provide the Partnership with appropriate evidence of insurance reasonably satisfactory to the Partnership. Home Properties agrees that its rights under this Section 11 shall be subject to the rights of the residents at the Property and that it will use its reasonable efforts to minimize any disruption to those residents. Home Properties shall have the right to terminate this Agreement if it determines that it does not wish to purchase the Property as a result of its findings during the Due Diligence Period and notifies the Partnership in writing of such decision on or before June 18, 1999 (the "Termination Notice"). In such event, this Agreement shall be null and void and neither party shall have any further rights or obligations under this Agreement, other than the obligations expressly surviving any such termination, and Home Properties shall be entitled to the prompt return of the Deposit. Home Properties' failure to deliver the Termination Notice on or before June 18, 1999 shall be deemed to be a waiver by Home Properties of its right to terminate the Agreement as provided in this Section 11. The provisions of this Section 11 shall survive indefinitely any termination of this Agreement. 12. TITLE; TITLE EXAMINATION; OBJECTIONS TO TITLE. Promptly upon execution of this Agreement by all of the parties, Home Properties shall order from the Title Company a commitment ("Title Commitment") for an ALTA owner's policy insuring the Partnership's title to the Property in an amount equal to the Consideration. No later than June 8, 1999, Home Properties shall deliver to the Partnership a statement (a "Statement of Title Defects") of defects, encumbrances or objections to title or survey matters ("Title Defects"). If Home Properties fails to deliver a Statement of Title Defects within such time period as aforesaid, such failure shall be deemed to be a waiver of any such Title Defects and the Partnership shall convey title in accordance with this Agreement and such Title Defects will be additional Permitted Exceptions. Upon receipt of Home Properties' Statement of Title Defects, the Partnership shall have five (5) business days to determine whether it wishes to attempt to cure any matters shown on such statement. If the Partnership is unable or unwilling to cure or attempt to cure any such matters, the Partnership shall give notice to Home Properties within such five (5) day period, but if no such notice is given, the Partnership shall be deemed to be unwilling to cure any such Title Defects. If the Partnership does not agree to attempt such cure, Home Properties shall have ten (10) days after the expiration of the foregoing five (5) business day period to terminate this Agreement, in which case it shall have the right to the return of the Deposit, or to give the Partnership notice that it has elected to take title to the Property subject to the Title Defects without abatement of the Consideration and such Title Defects will be additional Permitted Exceptions. If no notice is given by Home Properties within the ten (10) day period, Home Properties shall be deemed to have terminated this Agreement. Home Properties agrees that the Partnership shall be under no obligation whatsoever to commence any proceedings, suits or actions to clear title or eliminate any Title Defects or expend any funds in connection therewith. 13. CLOSING DATE. Unless this Agreement is terminated as provided herein, the Closing shall occur upon the later of: (a) June 30, 1999; and (b) ten (10) days after receipt of the consent of the Existing Lender to the Assumption. In the event that the consent of the Existing Lender is not received on or before June 30, 1999, either Home Properties or the Partnership may terminate this Contribution Agreement in which event this Agreement shall be null and void and neither party shall have any further rights or obligations under this Agreement, other than the obligations expressly surviving any such termination, and Home Properties shall be entitled to a return of the Deposit. 14. POSSESSION. Home Properties shall have possession and occupancy of the Property from and after the Closing Date subject only to the Permitted Exceptions and to the rights of tenants shown on the Rent Roll delivered to Home Properties at Closing. 15. BROKER'S COMMISSION. Home Properties and the Partnership each represent to the other that there are no fees or commissions due as a result of their employment of any Broker other than the fees due to Friedman, Billings, Ramsey and Co., Inc. which fees Home Properties agrees to pay. Home Properties and the Partnership each agree to indemnify the other for any and all claims and expenses, including legal fees, if any other fees or commission is determined to be due by reason of the employment of any other broker by the indemnifying party. This representation and indemnity shall survive the Closing. Without limitation of the foregoing, at the Closing, the Partnership (prior to Home Properties acquiring the Interests) shall pay to the Management Company a disposition fee of .25% of the Consideration. The provisions of this Section 15 shall survive indefinitely any termination or Closing of this Agreement. 16. RISK OF LOSS. Risk of loss resulting from any eminent domain proceeding which is commenced prior to Closing, and risk of loss to the Property due to fire or any other casualty prior to Closing shall remain with the Partnership. If prior to the Closing the Property or any portion thereof is destroyed or damaged in excess of $250,000, or if the Property or any portion thereof shall is subjected to a BONA FIDE threat of condemnation or becomes the subject of any proceedings, judicial, administrative or otherwise, with respect to the taking by eminent domain or condemnation, the Partnership shall notify Home Properties thereof within a reasonable time after receipt of actual notice thereof by the Partnership, but in any event prior to Closing, and, at its option, Home Properties may, within 5 days after receipt of such notice, elect to cancel this Agreement in which event this Agreement shall terminate and the Deposit shall be returned to Home Properties. If the Closing Date is within the aforesaid 5-day period, then Closing shall be extended to the next business day following the end of said 5-day period. If no such election is made, and in any event if the destruction or damage is not in excess of $250,000, this Agreement shall remain in full force and effect and the contribution contemplated herein, less any interest taken by eminent domain or condemnation, shall be effected with no further adjustment, and upon the Closing of this contribution, the Partnership shall assign, transfer and set over to Home Properties all of the right, title and interest of the Partnership in and to any awards that have been or that may thereafter be made for such taking, and the Partnership shall assign, transfer and set over to Home Properties any insurance proceeds that may have been or that may thereafter be made for such damage or destruction giving Home Properties a credit at Closing for any deductible under such policies. The Partnership hereby agrees that it shall keep all insurance policies presently existing which relate to the Property in effect through the Closing Date. 17. CONDITIONS PRECEDENT TO HOME PROPERTIES' OBLIGATION TO CLOSE. A. It shall be a condition to Home Properties' obligation to consummate the Closing that there are at Closing 966 apartment units in rentable condition and with respect to all of which the Partnership has received no notice from any governmental authority or agency having jurisdiction over the Partnership, the Property and the Other Items stating that the Partnership, the Property or the Other Items are in violation of any federal, state, county or local laws, ordinances, rules and regulations. In the event that the Partnership has received any such notice, then at its election, the Partnership shall, for up to sixty (60) days after the receipt of such notice, have the right, but not the obligation, to cure any violation set forth therein and the Closing Date shall be extended to that date which is five days after the violation has been cured, but such extension is not to be for more than 65 days. If the Partnership fails to notify Home Properties that it has elected to cure any such violation within 10 days of the receipt of any such notice, then the Partnership shall be deemed to have elected not to cure any such violation. B. It shall be a condition to Home Properties' obligation to consummate the Closing that Home Properties has not exercised its right to terminate this Agreement as provided herein. C. It shall be a condition to Home Properties' obligation to consummate the Closing that on the Closing Date the Title Company is prepared to issue a title policy insuring the Partnership's fee interest in the Property subject only to the Permitted Exceptions. D. It shall be a condition to Home Properties' obligation to close that prior to May 30, 1999, the Board of Directors of HME (the "Board") shall have approved the acquisition of the Interests by Home Properties on the terms and conditions set forth in this Agreement. E. It shall be a condition to Home Properties' obligation to close that, as at the Closing Date, the Existing Loan shall be in full force and effect and no default or right to accelerate shall be occurring under the Existing Loan. F. It shall be a condition to Home Properties' obligation to close that the Managers shall have executed an agreement whereby they agree that they will be responsible for making all final distributions to the former Partners of the Partnership from: (i) any amounts remaining in the Reserve Amount and/or Contingency Account (as the case may be) at the time of expiration of such Accounts; and (ii) and from any other Partnership funds that the Managers hold, and shall indemnify Home Properties for all claims relating thereto. It shall be a condition to Home Properties' obligation to close that the Unit Partners shall provide a guarantee to the Existing Lender of the Partnership's indebtedness in the amount determined by the Partnership to be necessary to avoid disguised sale treatment under applicable regulations. Notwithstanding the foregoing, no Unit Partner will be required to guarantee any debt of Home Properties other than with respect to debt described in the immediately preceding sentence. It is understood that the conditions set forth Paragraphs A through G in this Section 17 are for Home Properties' benefit and may be waived by Home Properties at any time. If any of the above conditions are not satisfied or waived by Home Properties, Home Properties shall have the right to terminate this Agreement by written notice to the Partnership. In the event of such a termination, this Agreement shall be null and void and neither party shall have any further rights or obligations under this Agreement, other than the obligations expressly surviving any such termination, and Home Properties shall have the right to the return of its Deposit. 18. CONDITIONS TO THE PARTIES' OBLIGATIONS TO CLOSE. In addition to all other conditions set forth herein, the obligation of Home Properties, on the one hand, and Partnership, on the other hand, to consummate the Closing contemplated hereunder shall be contingent upon the following: A. The other party's representations and warranties contained herein shall be true and correct as of the date of this Agreement and the Closing Date. B. As of the Closing Date, the other party shall have performed its obligations hereunder and all deliveries to be made at Closing have been tendered; C. There shall exist no pending or threatened actions, suits, arbitrations, claims, attachments, proceedings, assignments for the benefit of creditors, insolvency, bankruptcy, reorganization or other proceedings, against the other party that would materially and adversely affect the other party's ability to perform its obligations under this Agreement; D. There shall exist no pending or threatened action, suit or proceeding with respect to the other party before or by any court or administrative agency which seeks to restrain or prohibit, or to obtain damages or a discovery order with respect to, this Agreement or the consummation of the transactions contemplated hereby; E. The Management Company shall have conveyed to Home Properties and Home Properties shall have accepted from the Management Company, the assets and management agreements to be conveyed to Home Properties pursuant to the terms of the Management Company Agreement, and the transactions contemplated therein have closed simultaneously with the transactions contemplated hereby; F. The Affiliated Partners shall have contributed to Home Properties and Home Properties shall have accepted from the Affiliated Partners, all (but not less than 90%) of the Affiliated Interests pursuant to the Other Contribution Agreements, and the transactions contemplated therein have closed simultaneously with the transactions contemplated hereby; and, G. Partners owning not less than 90% of the aggregate Partnership Interests shall have agreed in writing on or before the Closing Date to exchange their Interests in the Partnership for cash, Units, or a combination of both cash and Units, and assignments for such interests shall have been received by Closing. H. Home Properties and Douglas Erdman shall have entered into a mutually satisfactory written employment agreement. I. All of the provisions of the Operating Agreement of the Partnership shall have been complied with or properly waived by the necessary parties in order for Home Properties to acquire the Interests and be substituted as a member of the Partnership. So long as a party is not in default hereunder, if any condition to such party's obligation to proceed with the Closing hereunder has not been satisfied as of the Closing Date, such party may, in its sole discretion, (i) terminate the Agreement by delivering written notice of termination to the other party on or before the Closing Date specifying the unsatisfied condition entitling the non-defaulting party to terminate this Agreement and provided the other party fails to satisfy the condition specified in the notice within five days after receipt of the notice; (ii) elect to extend the Closing for up to 60 days until such condition is satisfied, and (iii) elect to consummate the transaction, notwithstanding the non-satisfaction of such condition, in which event such party shall be deemed to have waived any such condition. In the event such party elects to close, notwithstanding the non-satisfaction of such condition, there shall be no liability on the part of any other party hereto for breaches of representations and warranties of which the party electing to close had actual knowledge at the Closing. Notwithstanding the foregoing, the failure of a condition due to the breach of a party shall not relieve such breaching party from any liability it would otherwise have hereunder. So long as Home Properties is not in default hereunder, upon termination of this Agreement as provided above, Home Properties shall have the right to the return of its Deposit. 19. REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP. The Partnership makes the following representations and warranties to Home Properties as of the date hereof and as of Closing: A. To the best of the Partnership's knowledge, the leases (the "Leases") listed on the rent roll attached hereto as EXHIBIT G and the contracts listed on the attached EXHIBIT H (the "Contracts") comprise all of the leases and rights to the property and all of the contracts to which Home Properties will be subject on the Closing Date. B. All of the Partnership's obligations under the Leases and Contracts are fully performed and, to the best of the Partnership's knowledge, except as set forth on the attached Exhibits and except for delinquencies in the payment of rent for the current month, there is no default under any of the Leases and Contracts by any party thereto or no event which, with the giving of notice or passage of time, or both, would constitute a default thereunder. There are no other security deposits (the "Security Deposits") except as identified on EXHIBIT G. C. Other than to the Existing Lender, the Partnership has made no prior assignment or conveyance of the Leases, Security Deposits and Contracts and the Partnership is the valid holder of landlord's interest in the Leases. D. To the best of the Partnership's knowledge, there is no litigation, proceeding or investigation pending, or to the knowledge of the Partnership threatened, against or affecting the Partnership that might affect or relate to the validity of this Agreement, any action taken or to be taken pursuant hereto, or the Property or the Other Items or any part or the operation thereof, whether or not fully covered by insurance. E. To the best of the Partnership's knowledge, the Partnership has not received any written notices from any governmental authority or agency having jurisdiction over the Partnership or the Property that the Partnership, the Property or the Other Items are in violation of, any law, ordinance, rule, regulation or code or condition in any approval or permit pursuant thereto (including without limitation, any zoning, sign, environmental, labor, safety, health or price or wage control, ordinance, rule, regulation or order of) applicable to the ownership, development, operation or maintenance of the Property or the Other Items. Promptly upon receipt of any such notice, the Partnership shall provide Home Properties with a copy. F. All of Community Realty Company, Inc.'s obligations under the management agreement for the Property (the "Management Agreement") have been performed and the Partnership has no claim of any nature against Community Realty Company, Inc. or any of its successors and assigns relating to that Management Agreement. G. The Partnership is a limited liability company, duly organized, validly existing, and in good standing under the laws of the State of Maryland, and, subject to consent of the Partners and the consent of the Existing Lender, the Partnership has full power and authority to enter into, and to fully perform and comply with the terms of this Agreement and to own, lease and operate its properties and to carry on its business as it is now being conducted. H. Subject to consent of the Partners and the consent of Existing Lender, the execution and delivery of this Agreement, and its performance by the Partnership, will not conflict with, or result in the breach of, any contract, agreement, law, rule or regulation to which the Partnership is a party, or by which the Partnership is bound. I. Subject to consent of the Partners and consent of Existing Lender, to the best knowledge of the Partnership this Agreement is valid and enforceable against the Partnership in accordance with its terms, and each instrument to be executed by the Partnership pursuant to this Agreement, or in connection herewith, will, when executed and delivered, be valid and enforceable against the Partnership in accordance with its terms, except as such enforcement may be limited by bankruptcy and other laws affecting creditors' rights generally. J. To the best knowledge of the Partnership, the tax-related information set forth on SCHEDULE 2 attached hereto is true, complete and accurate in all material aspects as at the date set forth therein. The obligations of Home Properties contained in Paragraph (A)(ii) of Section 29 are based upon and limited to, the information set forth on SCHEDULE 2. K. SCHEDULE 1 hereto lists the current holders of all outstanding Partner Interests of the Partnership together with the percentage Interest held by each Partner. In the event that any Partner listed on Schedule 1 transfers any Interests prior to the Closing Date, the Partnership shall use good faith reasonable efforts to promptly provide written notice to Home Properties of such transfer, and such notice shall include the names of the transferor and the transferee, the address of the transferee and the percentage of Interests transferred. L. To the best knowledge of the Partnership, except: (i) as disclosed in SCHEDULE 3 attached hereto; (ii) for liabilities and obligations incurred in the normal course of business of the Partnership; and (iii) as otherwise disclosed in this Agreement, the Partnership has no material liability or obligation of any nature which in any way materially affects the Partnership, the Property or the Other Items whether now due or to become due, absolute, contingent or otherwise, including liabilities for taxes (or any interest or penalties thereto). M. To the best knowledge of the Partnership, the Partnership has filed or will file when due all notices, reports and returns of Taxes (as defined below) required to be filed before the Closing Date and has paid or, if due and payable between the date hereof and the Closing Date, will pay, all Taxes and other charges for the periods shown to be due on such notices, reports and returns. "Taxes" shall mean all taxes, charges, fees, levies or other assessments, including, without limitation, income, excise, property, sale, gross receipts, employment and franchise taxes imposed by the United States, or any state, country, local or foreign government, or subdivision or agency thereof with respect to the assets or the business of the Partnership, and including any interest, penalties or additions attributable thereto. Home Properties acknowledges, understands and agrees that, except as provided in this Agreement to the contrary, Home Properties' acquisition of the Property and Other Items and any other rights and interests to be contributed, conveyed, transferred and/or assigned is on an "AS IS" "WHERE IS" PHYSICAL BASIS, WITHOUT REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, WITH REGARD TO PHYSICAL CONDITION OR COMPLIANCE WITH ANY LEGAL REQUIREMENTS OR TITLE EXCEPTIONS OF THE PROPERTY, INCLUDING WITHOUT LIMITATION ANY LATENT OR PATENT DEFECTS, CONDITION OF SOILS (INCLUDING SURFACE AND SUBSURFACE CONDITIONS), EXISTENCE OR NON EXISTENCE OF HAZARDOUS SUBSTANCES OR POLLUTANTS, QUALITY OF CONSTRUCTION, STATE OF REPAIR, WORKMANSHIP, MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE OR AS TO THE PHYSICAL MEASUREMENTS OR USABLE SPACE THEREOF, TITLE TO THE PROPERTY, THE ASSIGNABILITY, ASSUMABILITY OR TRANSFERABILITY OR VALIDITY OF ANY LICENSES, PERMITS, GOVERNMENT APPROVALS, WARRANTIES OR GUARANTIES RELATING TO THE PROPERTY OR THE USE OR OPERATION THEREOF, ZONING, BUILDING CODE, ACCESS, ENVIRONMENTAL, FIRE OR LIFE SAFETY, SUBDIVISION OR OTHER ORDINANCES, LAWS, CODES OR REGULATIONS, OF ANY KIND, PRIOR OR CURRENT OPERATIONS CONDUCTED ON THE PROPERTY AND SURROUNDING PROPERTY, OR ANY COVENANTS, CONDITIONS, RESTRICTIONS OR DECLARATIONS OF RECORD AND ALL OTHER MATTERS OR THINGS AFFECTING OR RELATING TO THE PROPERTY. THE PROVISIONS OF THIS PARAGRAPH SHALL SURVIVE INDEFINITELY ANY CLOSING OR TERMINATION OF THIS AGREEMENT AND SHALL NOT BE MERGED INTO THE CLOSING DOCUMENTS. As used in the foregoing representations and warranties, the phrase "to the best of the Partnership's knowledge" shall mean the actual, conscious knowledge of Douglas Erdman. Notwithstanding the foregoing Paragraphs A. through M. of this Section 19, if Home Properties or its representatives has actual knowledge on the Closing Date that any of the Partnership's representations or warranties in this Contribution Agreement are not true as of the Closing Date and Home Properties elects nonetheless to close, Home Properties shall be deemed to have waived any claim for breach of such representation or warranty, to the extent that Purchaser or its representatives had actual knowledge that the same was not true. The representations and warranties contained herein shall survive the Closing and shall not be deemed to have merged in any document delivered at Closing, but each such representation and warranty shall terminate on, and be of no further force after the 180th day following the Closing Date. Notwithstanding the foregoing sentence, any claim relating to any intentional, material breach of a representation and warranty shall survive indefinitely. Any claim based upon a misrepresentation or a breach of a representation or warranty contained in this Contribution Agreement shall be actionable or enforceable only if the amount of damages or losses as a result of such claim suffered exceeds $25,000. 20. REPRESENTATIONS AND WARRANTIES OF HOME PROPERTIES. Home Properties represents and warrants to the Partnership as of the date hereof and as of the Closing as follows: A. Home Properties is and will be as of the date of Closing duly organized, validly existing and in good standing under the laws of the State of New York and has all the requisite power and authority to enter into and carry out this Agreement according to its terms. B. This Agreement has been duly authorized, executed and delivered and constitutes a legal and binding obligation of Home Properties, enforceable in accordance with its terms, except as may be limited by bankruptcy and other laws affecting creditors' rights generally. C. To the best of its knowledge after due inquiry, there is no litigation, proceeding or investigation pending, or to the knowledge of Home Properties threatened, against or affecting Home Properties or the partners of Home Properties that might affect or relate to the validity of this Agreement or any action taken or to be taken pursuant hereto, or that might have a material adverse effect on the business or operations of Home Properties. D. HME has been organized in conformity with the requirements for qualification as a real estate investment trust under the Internal Revenue Code of 1986 (the "Code") and its method of operation is expected to enable it to continue to satisfy the requirements for taxation as a real estate investment trust under the Code for the fiscal year ending December 31, 1999 and in the future. E. Home Properties is classified as a partnership and not as an association or publicly traded partnership taxable as a corporation for federal income tax purposes. F. (i) HME, Home Properties, each subsidiary of HME or Home Properties and each partnership or limited liability company in which HME or Home Properties owns an interest (any such subsidiary, partnership or limited liability company being herein referred to as a "Subsidiary") have filed or caused to be filed all federal, state, local, foreign and other tax returns, reports, information returns and statements required to be filed by them; (ii) HME, Home Properties and each Subsidiary have paid or caused to be paid all taxes (including interest and penalties) that are shown as due and payable on such returns or claimed by any taxing authority to be due and payable with respect to such returns, except those which are being contested by them in good faith by appropriate proceedings and in respect of which adequate reserves are being maintained on their books in accordance with generally accepted accounting principles consistently applied; (iii) HME Home Properties and each Subsidiary do not have any material liabilities for taxes other than those incurred in the ordinary course of business and in respect of which adequate reserves are being maintained by them in accordance with generally accepted accounting principles consistently applied; (iv) as of the date of this Agreement, Federal and state income tax returns for HME and Home Properties have not been audited by the Internal Revenue Service or state authorities; (v) as of the date of this Agreement, no deficiency, assessment with respect to, or proposed adjustment of, HME's or Home Properties' federal, state, local, foreign or other tax returns is pending or, to the best of Home Properties' knowledge, threatened; and (vi) as of the date of this Agreement, there is no tax lien, whether imposed by any federal, state, local or other tax authority, outstanding against the assets, properties or business of HME, Home Properties or any Subsidiary. G. Home Properties has delivered to the Partnership a complete and correct copy of: (i) the Articles of Incorporation and by-laws of HME; and (ii) the Second Amended and Restated Agreement of Limited Partnership of Home Properties, in each case, as amended. H. Home Properties has previously made available to the Partnership as requested in writing by the Partnership complete and correct copies of: (i) the annual report on Form 10-K for HME for the period ending December 31, 1998; (ii) all quarterly reports on Form 10-Q for HME for each of the quarters in 1998 and first quarter of 1999; (iii) definitive proxy statement for HME for the 1999 Shareholders' Meeting; (iv) any current reports on Form 8-K filed by HME since December 31, 1998; and (v) any other form, report, schedule and statement and filed by HME with the Securities and Exchange Commission ("SEC") under the Exchange Act, since January 1, 1999 (collectively, the "SEC Documents"). As of their respective dates, each of the SEC Documents complied in all material respects with the requirements of the Exchange Act to the extent applicable to such SEC Documents, and none of such SEC Documents (as of their respective dates) contained an untrue statement of a material fact required to be stated therein or necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading, except as the same was corrected or superseded in a subsequent document duly filed with the SEC. HME is not aware of any reports or filings required to be filed under the Exchange Act with the SEC under the rules and regulations of the SEC that have not been filed. I. Home Properties is receiving the Interests delivered pursuant to this Agreement for investment purposes for its own account, and not with the view to or in connection with any distribution thereof. Home Properties understands that the Interests may not be sold, assigned, offered for sale, pledged or otherwise transferred unless such transaction is registered under the Securities Act of 1933, as amended, and applicable state securities laws, or exemptions from such registration requirements. The representations and warranties of Home Properties contained in this Agreement, the statements in any Exhibit or Schedules attached to this Agreement, or other instruments furnished to the Partnership at or prior to Closing pursuant to this Agreement, or in connection with the transactions contemplated pursuant to this Agreement, do not contain any untrue statements or a material fact, or fail to state a material fact necessary to make it not misleading. The representations and warranties contained herein shall survive the Closing and shall not be deemed to have merged in any document delivered at Closing. 21. ASSIGNMENT. This Agreement, and all or any portion of the rights of Home Properties hereunder, may not be assigned by Home Properties without the prior written consent of the Partnership, which may be granted or withheld in its sole discretion. 22. NOTICE. All notices given pursuant to any provisions of this Agreement shall be in writing and shall be effective upon receipt and then only if delivered personally, or sent by registered or certified mail, postage prepaid or sent by a national over-night carrier, or by telecopy with confirmation of receipt to the addresses set forth below: To the Partnership: c/o Community Realty Company, Inc. Attn: Douglas F. Erdman 6305 Ivy Lane, Suite 210 Greenbelt, Maryland 20770 Telecopy No.: (301) 474-8672 To Home Properties: HOME PROPERTIES OF NEW YORK, L.P. Attn: Norman Leenhouts, Chairman 850 Clinton Square Rochester, New York 14604 Telecopy No.: (716) 546-5433 23. PLANS. The Partnership agrees to provide Home Properties with all plans and architectural drawings in their possession for the improvements completed at the Property, including, without limitation, all "as built" plans in their possession and the Partnership further agrees that it will endeavor to turn over the same to Home Properties at the Property during the Due Diligence Period. 24. APPLICABLE LAW. The corporate laws of the State of Maryland will govern all questions concerning the relative rights and obligations of the parties with respect to any HME Common Shares acquired or acquirable by the holders of Units on account of their Units. Except as limited by the Operating Partnership Agreement, the laws of the State of New York will govern all other questions concerning the relative rights and obligations of the holders of Units as limited partners in Home Properties, or otherwise with respect to the Units. This Agreement shall, otherwise, be governed, construed and interpreted in accordance with the laws of the State of Maryland applicable to contracts made and to be performed wholly within the State of Maryland without giving effect to the conflicts-of-laws principles thereof. 25. ENTIRE AGREEMENT. This Agreement shall constitute the entire agreement between the parties, and any and all prior understandings or agreements, whether written or oral, are hereby merged into this Agreement. This Agreement cannot be modified except by a written instrument signed by the parties hereto. 26. BINDING AGREEMENT. This Agreement shall not be binding or effective until properly executed by the Partnership and Home Properties. 27. CONFIDENTIALITY. By execution of this Agreement and except as otherwise provided herein, prior to the Closing Home Properties and the Partnership agree to keep any and all information with respect to the transactions contemplated by this Agreement strictly confidential, and will not disclose any such information, without the other's prior written consent, unless such disclosure is required by, or appropriate under, applicable law or judicial process. Home Properties may disclose the existence of this Agreement to the extent necessary to conduct its due diligence with respect to the Property and the Partnership may disclose the existence and terms of this Agreement to the extent necessary to consummate the transactions contemplated hereby. Home Properties agrees that it will obtain the consent of the Partnership, which shall not be unreasonably withheld or delayed, with respect to the content of any press releases to be issued by Home Properties relating to the transaction described herein. The provisions of this Section 27 shall survive indefinitely any termination of this agreement. 28. PARTNERSHIP COVENANTS. A. Upon the request of Home Properties, the Partnership will provide, or cause to be provided, a signed representation letter substantially in the form attached hereto as EXHIBIT I. The Partnership will provide access by Home Properties' representatives, to all financial and other information relating to the Property as is sufficient to enable them to prepare audited financial statements, at Home Properties' expense, in conformity with Regulation S-X of the Securities and Exchange Commission (the "Commission") and any registration statement, report or disclosure statement required to be filed with the Commission. B. Prior to the Closing Date, the Partnership shall continue to fulfill all of its obligations under the terms of the leases encumbering the Property and under the service contracts and the Partnership shall operate, maintain and repair all landscaping, buildings, fixtures and facilities in accordance with its current practices. C. The Partnership covenants that it hereby waives any and all claims it may have against Home Properties as assignee of the Management Agreement relating to any defaults by Community Realty Company, Inc. in the performance of its obligations under the Management Agreement. D. The Partnership will cease to market the Property during the term and pendency of the Contribution Agreement. In that regard, the Partnership will refrain from soliciting or accepting any offer from any third party, or initiating any discussions with any third party concerning the sale, refinancing or recapitalization of the Property, until such time as either Home Properties or the Partnership shall have terminated this Contribution Agreement. E. The Managers hereby covenant to cause the tax returns to be prepared for the Partnership for the period up to the Closing Date. Home Properties shall make available to the Managers (and their representatives) promptly upon request, all financial and other information relating to the Partnership which is necessary to permit the Managers to file any tax returns on behalf of the Partnership for its taxable year ended on the Closing Date, and for such other purposes as may be requested by the Managers in order to wind up business affairs for the entity and the Partners, and shall otherwise cooperate reasonably with the Managers with respect to any pre-Closing tax matters. F. The Managers shall cause tax returns for the Partnership for the period up to the Closing Date to be completed within one hundred twenty (120) days of the Closing Date. A copy of such final tax returns shall be submitted to Home Properties promptly upon their filing with the relevant governmental authority. Within one hundred twenty (120) days of the Closing Date, the Managers shall also provide Home Properties with a schedule showing: (i) the net book value of the Property and the Other Items owned by the Partnership as of the Closing Date; and (ii) an updated SCHEDULE 2 providing the actual information which was estimated in such Schedule. The obligation of Home Properties contained in Section 29.A.(2) is limited by the estimated information originally provided in SCHEDULE 2. The information on the Schedule shall be calculated in a manner consistent with the calculations made for federal income tax depreciation purposes. 29. HOME PROPERTIES' COVENANTS. A. Home Properties hereby covenants to the Partnership and the Unit Partners as follows: (1) For a period of ten (10) years from and after the Closing Date, Home Properties shall not sell, exchange, transfer or otherwise dispose of the Property unless such transaction occurs in a manner as to be tax free to the Partners receiving Units. After the foregoing 10-year period, Home Properties will use commercially reasonable efforts to effect any disposition of all or part of the Property through a
1031 tax-free exchange or other transaction which does not cause federal income tax gain to be incurred by the Partners receiving Units and their respective successors and assigns. In the event that Home Properties breaches any of its obligations set forth in this Section 29(A)(I), Home Properties shall indemnify, defend and hold harmless each of the Partners receiving Units and their respective successors and assigns (each an "Indemnified Party" and collectively the "Indemnified Parties") from and against the aggregate federal, state and local income taxes incurred by such Indemnified Party as a result thereof (collectively, "Taxes") plus the Taxes incurred by such Indemnified Party as a result of the receipt of the Indemnity Payment (the "Tax Indemnity Amount"). Any such Taxes shall be deemed to be the amount of gain or income recognized by the relevant Indemnified Party multiplied by the highest actual rate or rates imposed upon such Indemnified Party for such gain or income (assuming it is the last dollar of income or gain) for the year in which such gain or income is recognized. In determining the Tax Indemnity Amount, no effect shall be given to the Indemnified Parties' tax deductions, tax credits, tax carry forwards nor to any other of their tax benefits or tax attributes. The Tax Indemnity Amount shall be payable by Home Properties to each Indemnified Party not later than thirty (30) days following the filing of tax returns for the Indemnified Party for the year in question. (2) For a period of ten (10) years from and after the Closing Date, Home Properties shall allocate to the Partners receiving Units, for federal income tax purposes, pursuant to Section 752 of the Code, nonrecourse liabilities of Home Properties in an aggregate amount necessary to prevent gain recognition under Section 731(a)(1) of the Internal Revenue Code (the "Code") by the Partners receiving Units with negative capital accounts as a result of a deemed distribution of money to such persons pursuant to Section 752(b) of the Code. Notwithstanding the above, the Partnership on behalf of itself and the Unit Partners acknowledges that Home Properties has made no representation that the transaction as described in this Agreement will avoid disguised sale treatment under applicable Code regulations. (3) Home Properties shall utilize the "traditional method" under Section 704(c) of the Code without curative allocations in accordance with Treasury Regulation Section 1.7043(b)(1) to adjust for discrepancies between the agreed- upon value of the various components of the contributed Property (or for any property received in exchange for any contributed Property in a like-kind exchange) and the adjusted tax basis of such components. (4) If, at the expiration of the one-year anniversary of the Closing Date (the "Lock-In Period") and for one year thereafter a Unit owner elects to exercise their Purchase Right (as defined in the Operating Partnership Agreement) and the then current Market Value (as defined in the Operating Partnership Agreement) is less than the Designated Value, then such Unit owner shall, on the Specified Purchase Date (as defined in the Operating Partnership Agreement), receive a proportionately increased Cash Amount (as defined in the Operating Partnership Agreement) or increased number of HME Common Shares (if Home Properties has elected to deliver HME Common Shares as permitted pursuant to Section 6.08(b) of the Operating Partnership Agreement) having a value up to, but not exceeding 10% of the Designated Value for each Unit with respect to which the Purchase Right was exercised. An example of the calculation as described above is attached as EXHIBIT J. (5) Home Properties covenants and agrees that it shall use its reasonable commercial efforts to cause HME to continue to be taxed as a real estate investment trust under the Code unless the Board of Directors of HME determines that it is in the best interests of shareholders of HME to be taxed otherwise. (6) Simultaneously with the Closing, Home Properties shall cause HME to expand the number of directors on the Board by one seat and to procure that Mr. Albert Small (the "Nominee") is appointed to such Board through any actions of the then current Board to serve until the next annual meeting of the shareholders of HME. After the expiration of the initial term of the Nominee, at each successive annual or special meeting of the shareholders of HME at which directors are to be elected by shareholders and which meetings are held during the years 2000, 2001 and 2002, the Unit Partners, collectively as one group with the individuals and entities that received Units as Consideration under the Other Contribution Agreements, shall have the right to nominate the Nominee. Notwithstanding the above, the right to so nominate the Nominee shall terminate when Albert Small shall cease to hold a seat on the Board unless caused by the violation by HME of the above provisions or in the event that Mr. Small shall become incapacitated or incompetent. In the event that HME adopts any mandatory age restrictions that would otherwise restrict Mr. Small's ability to be nominated and elected to the Board as provided above, it is agreed that, for the years 2000, 2001 and 2002, such restrictions shall not apply to Mr. Small or that he shall receive a waiver from such restrictions. (7) Home Properties shall cooperate fully, as and to the extent reasonably requested by the Managers, in connection with the filing of any tax return, statement, report or form, and any audit litigation or other proceeding with respect to Taxes. Such cooperation shall include, without limitation, the retention and (upon request) the provision of records and information which are reasonably relevant to any such audit, litigation or other proceeding. Home Properties agrees to retain all books and records with respect to Tax matters pertinent to the Partnership relating to any pre-Closing tax period until the expiration of the applicable statute of limitations (taking into account waivers or extensions) or, if sooner, such time as a final determination shall have been made with respect to such Taxes for such period, and to abide by all record retention agreements entered into with any taxing authority. 30. DEFAULT. In the event that Home Properties fails to acquire the Interests pursuant to this Agreement other than by reason of a termination by Home Properties expressly permitted hereunder or the Partnership's default, the Partnership agrees that the Partnership's sole remedies shall be (i) to have the Title Company deliver the Deposit to the Partnership as liquidated damages to recompense the Partnership for time spent, labor and services performed, and loss of its bargain and to terminate this Agreement; or (ii) to seek specific performance. Home Properties acknowledges that in the event of such a failure by Home Properties, the damages suffered by the Partnership will be difficult to ascertain with certainty. Therefore, Home Properties and the Partnership agree that in the event of such a failure by Home Properties, and if the Partnership does not elect to seek specific performance, then the sum of $270,000 is a good faith estimate of the Partnership's damages and at the Partnership's election said sum shall be promptly paid to the Partnership in the form of the Deposit. In such event the Partnership agrees to accept the Deposit as the Partnership's total damages and relief hereunder in the event of Home Properties' default hereunder. In the event that Home Properties does so default and this Agreement is terminated, Home Properties shall have no further right, title, or interest in the Property or the Interests. In the event the Partnership fails to sell the Property to Home Properties pursuant to this Agreement other than by reason of a termination by the Partnership expressly permitted hereunder or Home Properties' default, Home Properties' sole remedies shall be (i) cancellation of this Agreement in which event Home Properties shall be entitled to the return by the Title Company to Home Properties of the Deposit, or (ii) to seek specific performance. In no event shall either party be entitled to any remedies or damages for breach of this Agreement, except as set forth hereinabove. And in no event shall any party be entitled to punitive or consequential damages for the breach of this Agreement. 31. RECORDATION. Neither party may record this Contribution Agreement; and any recordation shall render the contract void. Also, neither party may file a lis pendens against the Property. 32. ARBITRATION. Any controversy or claim arising out of or relating to this Agreement, or the breach or the validity thereof shall be settled by final and binding arbitration in accordance with the most current Commercial Arbitration Rules (the "Rules") of the American Arbitration Association ("AAA"). The arbitration shall be conducted by a tribunal of three (3) arbitrators (the "Tribunal"). Each party shall appoint an arbitrator within ten (10) days from the filing of the Demand and Submission in accordance with Paragraph 7 of the Rules and the two (2) arbitrators shall jointly appoint the third arbitrator, within fifteen (15) days from their appointment, in accordance with Paragraph 7 of the Rules. If the two (2) appointed arbitrators fail to agree upon a third arbitrator within said fifteen (15) days and fail to agree to an extension of such period, the third arbitrator shall be appointed by the AAA in accordance with Paragraph 15 of the Rules. The place of arbitration shall be Baltimore, Maryland and the Award shall be issued at the place of arbitration. The Tribunal may, however, call and conduct hearings and meetings at such other places as the parties may agree. The law applicable to the arbitration procedure shall be the Federal Arbitration Act (the "Act") as supplemented by any law of the place of arbitration which is not inconsistent with the Act. The decision of the Tribunal (the "Award") shall be made within ninety (90) days of the appointment of the Tribunal pursuant to the provisions hereof, and the parties hereby agree that any such decision need not be accompanied by a reasoned opinion. The Award may, except as limited by Section 30 of this Agreement, include (i) recovery of actual damages for violation of any obligations under this Agreement or of governing law, including the recovery of attorneys' fees to the prevailing party (ii) injunctive relief against threatened or actual violations of any obligation under the Agreement or of governing law or (iii), if and to the extent permitted under the terms of the Agreement, the remedy of specific performance. The Award shall be final and binding on the parties. Judgment upon the Award may be entered in any court having jurisdiction thereof or having jurisdiction over one or more of the parties or their assets. The parties specifically waive any right they may enjoy to apply to any court for relief from the provisions of this Agreement or from any decision of the Tribunal made prior to the Award. 33. EXECUTION IN COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. This Agreement shall become binding when one or more counterparts hereof, individually or taken together, shall bear the signatures of all of the parties reflected thereon as the signatories. 34. SIGNATURE BY FACSIMILE. The parties may execute and deliver this Agreement by forwarding signed facsimile copies of their signature page to this Agreement and delivering an original of the same by overnight courier. Such facsimile signatures shall have the same binding effect as original signatures, and the parties hereby waive any defense to validity based on any such copies or signatures. 35. EMPLOYEES. The Partnership shall be responsible for, and shall make arrangements for payment of, all amounts due, up to the Closing Date, as management fees under any management agreement relating to the Project as well as for salaries, accrued vacation pay and withholding and payroll taxes, if any, accruing prior to the Closing Date to the employees of the Partnership. The Partners hereby indemnify Home Properties for any and all expenses and costs Home Properties may incur relating to claims by employees of the Partnership for payment of any salaries or other benefits due to such employees for periods prior to the Closing Date. Any such claims shall be deemed to be Indemnity Claims as described in Section 4C above. IN WITNESS WHEREOF, the parties hereto have caused this Instrument to be executed as of the day and date first above written. HOME PROPERTIES OF NEW YORK, L.P. By: Home Properties of New York, Inc., General Partner By: __________________________ Title: _________________________ (PARTNERSHIP) By: __________________________ LIST OF EXHIBITS AND SCHEDULES EXHIBIT A Legal Description EXHIBIT B Other Contribution Agreements EXHIBIT C Escrow Agreement Reserve Amount EXHIBIT D Registration Rights and Lock-Up Agreement EXHIBIT E Escrow Agreement Deposit EXHIBIT F Intentionally Omitted. EXHIBIT G Rent Roll EXHIBIT H List of Contracts EXHIBIT I Representation Letter EXHIBIT J Example of Calculation Schedule 1 List of Partners Schedule 2 Tax-Related Information Schedule 3 Liabilities PORTFOLIO INFORMATION NAME AND LOCATION # OF PRICE OWNER ENTITY UNITS Bonnie Ridge Apartments 966 $46,832,000 Bonnie Ridge,LLC 4 Wytchwood Court Baltimore, MD 21209 Carriage Hill Apartments 664 $36,752,000 Kenwood Associates Glenside Drive Limited Partnership Richmond, VA Laurel Pines Apartments 236 $7,488,000 Laurel Pines Club 14601 Bowie Road Aparments, LLLP Laurel, MD 20708 The Pavilion Apartments 432 $30,092,000 Bernmil Associates 5901 Montrose Road LLP Rockvill, MD 20852 Riverdale Apartments 580 $15,496,000 Riverdale 2018 Cunningham Drive Apartments, LLC Hampton, VA 23666 Seminary Hill Apartments 296 $13,000,000 Seminary Hills 4700 Kenmore Ave. Limited Partnership Alexandria, VA 22304 Seminary Towers Apartments 548 $24,494,000 Seminary Towers 4701 & 4801 Kenmore Ave. Limited Partnership Alexandria, VA 22304 CRC Assets N/A $4,160,000 Community Realty Company, Inc.
EX-99 3 EXHIBIT 99.1 ARTICLES OF AMENDMENT OF THE ARTICLES OF INCORPORATION OF HOME PROPERTIES OF NEW YORK, INC. Home Properties of New York, Inc., a Maryland corporation (the "Corporation") hereby certifies to the State Department of Assessments and Taxation of Maryland that: FIRST: The charter of the Corporation is hereby amended be striking out Article 6.1 and inserting in lieu thereof the following: 1.1 AUTHORIZED CAPITAL STOCK. The total number of shares of stock (the "Stock") which the Corporation has authority to issue is one hundred million (100,000,000) shares, consisting of (A) eighty million (80,000,000) shares of common stock, par value $.01 per share ("Common Stock"); (B) ten million (10,000,000) shares of excess stock, par value $.01 per share ("Excess Stock"); and (C) ten million (10,000,000) shares of preferred stock, par value $.01 per share ("Preferred Stock"). The aggregate par value of all of the shares of all classes of Stock is $1,000,000. SECOND: The amendment of the charter of the Corporation as hereinabove set forth has been duly advised by the Board of Directors and approved by the stockholders of the Corporation. THIRD: Immediately before the amendment affected by these Articles of Amendment, the Corporation has the authority to issue 50,000,000 shares of Common Stock, par value $.01 per share, 10,000,000 shares of Excess Stock, par value $.01 per share and 10,000,000 shares of Preferred Stock, par value $.01 per share and the aggregate par value of all the shares of all the classes the Corporation was authorized to issue was $700,000. After such amendment, the Corporation has the authority to issue 80,000,000 shares of Common Stock, par value $.01 per share, 10,000,000 shares of Excess Stock, par value $.01 per share and 10,000,000 shares of Preferred Stock, par value $.01 per share and the aggregate par value of all the shares of all the classes the Corporation is authorized to issue is $1,000,000. The information required by Section 2-607(b)(2)(i) of the Maryland General Corporation Law as not changed by this amendment. IN WITNESS WHEREOF: the Corporation has caused these presents to be signed in its name and on its behalf by its President and attested by its Secretary on this 4{th} day of May, 1999. HOME PROPERTIES OF NEW YORK, INC. By: /s/ Nelson B. Leenhouts ------------------------------ Nelson B. Leenhouts, President Attest: /s/ Ann M. McCormick - --------------------------- Ann M. McCormick, Secretary EX-99 4 EXHIBIT 99.2 HOME PROPERTIES OF NEW YORK, INC. HOME PROPERTIES OF NEW YORK, L.P. EXECUTIVE RETENTION PLAN This Executive Retention Plan is adopted by Home Properties of New York, Inc. (the "Company"), a Maryland corporation organized and operated as a real estate investment trust ("REIT"), and Home Properties of New York, L.P. (the "Operating Partnership"), a New York limited partnership, as of the __ day of February, 1999. The Company, the Operating Partnership and any subsidiary entities controlled by the Company or the Operating Partnership are collectively referred to herein as the "Company." 1. PURPOSES OF THE PLAN The Board of Directors (the "Board") of the Company, has determined that it is in the best interests of the Company and its shareholders and the Operating Partnership and its partners to assure that certain of the Company's officers and employees (the "Participants") will be able to carry out their functions in the best interests of the shareholders of the Company and the partners of the Operating Partnership not distracted by the ongoing consolidation in the REIT industry and notwithstanding the possibility, threat or occurrence of a Change of Control (as defined below) of the Company. The Board believes it is in the best interests to diminish the inevitable distraction of the Participants because of the personal uncertainties and risks created by a pending or threatened Change of Control and to encourage Participants' full attention and dedication to the Company currently and in the event of any threatened or pending Change of Control, and to provide the Participants with compensation and benefits arrangements upon a Change of Control which ensure that (a) such attention and dedication are likely through protecting the compensation and benefits expectations of Officer, and (b) such arrangements are competitive with those of other entities in the REIT industry. 2. CERTAIN DEFINITIONS. (a) "Base Salary" means the Participant's wage or salary base for federal income tax purposes on the Termination Date without regard to annual or special bonuses or compensation income resulting from employee benefit plans of the Company (E.G., stock grants, options, excess life insurance). (b) "Bonus" means an annual bonus in cash under the Bonus Plan, or any comparable bonus under any predecessor or successor plan. (c) "Bonus Plan" means the Company's Bonus Plan and any successor or replacement plan providing for periodic cash bonuses based on various categories or pay grades and related individual and Company performance criteria. (d) "Cause" means: (i) the willful and continued failure of a Participant to perform substantially the Participant's duties with the Company (other than any such failure resulting from the incapacity due to physical or mental illness), after a written demand for substantial performance is delivered to a Participant by the Board or one of the co- Chief Executive Officers of the Company which specifically identifies the manner in which the Board or Chief Executive Officer believes that the Participant has not substantially performed the Participant's duties, or (ii) the willful engaging by the Participant in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company. For purposes of this provision, no act or failure to act, on the part of Participant, shall be considered "willful" unless it is done, or omitted to be done, by Participant in bad faith or without reasonable belief that Participant's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of one of the co-Chief Executive Officer or a senior officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Participant in good faith and in the best interests of the Company. (e) "Change of Control" means: (i) The acquisition by any individual, entity or group, within the meaning of Section 13(d)(3) or 14(d)(2) of the Exchange Act (a "Person") of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 25% or more of either: (y) the then-outstanding shares of common stock of the Company or interests in the Operating Partnership (either such stock or interests the "Outstanding Company Equity"), or (z) the combined voting power of the then-outstanding voting securities of the Corporation entitled to vote generally in the election of directors (the "Outstanding Company Voting Securities"); PROVIDED, HOWEVER, that for purposes of this subsection (i), the following acquisitions shall not constitute a Change of Control: (A) any acquisition directly from the Corporation or the Operating Partnership, (B) any acquisition by the Company, (C) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any Person controlled by the Company, or (D) the acquisition by any Person pursuant to a transaction which complies with clauses (y) and (z) of Section 2(e)(iii); or (ii) Individuals who, as of the date hereof, constitute the Board (the "Incumbent Board") cease for any reason to constitute at least a majority of the Board; provided, however, that any individual becoming a director subsequent to the date this Plan is adopted whose election, or nomination for election by the Company's shareholders, was approved by a vote of at least two-thirds of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, PROVIDED, HOWEVER, any individual whose initial assumption of office occurs as a result of an acquisition of any equity interest in the Company or an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Incumbent Board shall not be deemed a member of the Incumbent Board; or (iii) consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company (a "Business Combination"), in each case, unless: (y) following such Business Combination, (A) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Equity and Outstanding Company Voting Securities immediately prior to such Business Combination beneficially own, directly or indirectly, more than 50% of, respectively, the then-outstanding shares of common stock or other equity and the combined voting power of the then-outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the entity resulting from such Business Combination (including, without limitation, a entity which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Business Combination of the Outstanding Company Equity and Outstanding Company Voting Securities, as the case may be, (B) no Person (excluding any entity resulting from such Business Combination or any employee benefit plan (or related trust) of the Company or such entity resulting from such Business Combination) beneficially owns, directly or indirectly, 25% or more of, respectively, the then-outstanding shares of common stock or other equity of the entity or similar voting control of the entity resulting from such Business Combination, or the combined voting power of the then-outstanding voting securities of such entity except to the extent that such ownership existed prior to the Business Combination, and (C) at least a majority of the members of the board of directors of the entity resulting from such Business Combination were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board, providing for such Business Combination, or (z) prior to such Business Combination, the Incumbent Board determines in good faith and in the reasonable exercise of its discretion, by the affirmative vote of at least two-thirds of its members, that the Business Combination is not a transaction which was intended to be a "Change of Control" for purposes of this Plan; or (iv) Approval by the shareholders of the Corporation of a complete liquidation or dissolution of the Corporation or by the partners of the Operating Partnership, provided that such liquidation or dissolution is not abandoned by the Board. (f) "Corporate Staff" means the senior management employees, in each case, who qualify for bonuses in "Category 3" or above under the Bonus Plan or equivalent under any successor or substitute bonus plan or policy. (g) "Effective Date" means the first date on which a Change of Control occurs, provided, however, if a Change of Control occurs and if a Participant's employment with the Company is terminated prior to the date on which the Change of Control occurs, and if it is reasonably demonstrated by the Participant that such termination of employment: (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change of Control, or (ii) otherwise arose in connection with or anticipation of a Change of Control, then for all purposes of this Plan, the "Effective Date" as to such Participant means the date immediately prior to the date of such termination of employment. (h) "Employee Benefit Plans" any employee benefit plan in which the Participants participate other than Welfare Benefit Plans. (i) "Exchange Act" means the Securities Exchange Act of 1934, as amended, and, where applicable, the rules and regulations promulgated thereunder and judicial interpretations thereof. (j) "Good Reason" means: (i) the assignment to the Participant of any duties inconsistent in any respect with the Participant's position (including status, offices, titles and reporting requirements), authority, duties or responsibilities as such authority, duties or responsibilities were assigned to or exercised by the Participant immediately prior to the Change in Control, or any other action by the Company which results in a diminution in such position, authority, duties or responsibilities, excluding for this purpose an isolated, insubstantial and inadvertent action not taken in bad faith and which is remedied by the Company promptly after receipt of notice thereof given by the Participant; (ii) the Company's requiring Participant to be based at any office or location more than 30 miles from the location at which the Participant was principally employed prior to the Change in Control; (iii) a material reduction by the Company of the Participant's compensation; or (iv) any failure by the Company to require any successor to the Company to expressly assume and agree to perform this Plan as provided in Section 8(c) of this Plan. (k) "Gross Up Payment" means the amount calculated in accordance with Section 7(a). (l) "Notice of Termination" means a written notice which: (i) indicates the specific basis on which the Participant's employment is being terminated, (ii) to the extent applicable, sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Participant's employment under the provision so indicated, and (iii) the Termination Date. (m) "Officers" means the officers of the Company and other senior management employees, in each case, who qualify for bonuses in "Category 4" or above under the Bonus Plan or equivalent under any successor or substitute bonus plan or policy. (n) "Other Senior Staff" means all employees on the "corporate" payroll of the Company (and not the "site" payroll), other than the Officers or Corporate Staff. (o) "Participant" means any of the Officers, Corporate Staff or Other Senior Staff. (p) "Termination Date" means (i) if a Participant's employment is terminated by the Company for Cause, or by a Participant for Good Reason, the date of receipt of the Notice of Termination or any later date specified therein, as the case may be, and (ii) if a Participant's employment is terminated by the Company other than for Cause, the Termination Date shall be the date on which the Company notifies Participant of such termination. (q) "Welfare Benefit Plan" means welfare benefit plans, practices, policies and programs provided by the Company (including, without limitation, medical, prescription, dental, disability, employee life, group life, accidental death and travel accident insurance plans and programs). (r) "Window Period" means the 30-day period commencing on the first anniversary of the date the Change of Control is effective. 3. TERMINATION OF EMPLOYMENT; OBLIGATIONS OF THE COMPANY UPON TERMINATION. (a) OFFICERS. In the event the employment of an Officer is terminated on or after the Effective Date and during the two-year period following such Effective Date by the Company without Cause or by the Officer for Good Reason, or if such employment is terminated by the Officer during the Window Period for any reason, the Company shall pay to the Officer in a lump sum in cash within 30 days after the Termination Date the aggregate of the following amounts: (i) the Officer's Base Salary through the Termination Date to the extent not theretofore paid, (ii) all other amounts earned, accrued or deferred under the Bonus Plan, other Employee Benefit Plans, Welfare Benefit Plans or otherwise due from the Company to the Officer, (iii) two times the Officer's Base Salary, (iv) an amount equal to two times the last bonus which was awarded to the Officer under the Bonus Plan, and (v) the Gross-Up Amount. (b) MEMBERS OF CORPORATE STAFF. In the event the employment of a member of Corporate Staff is terminated on or after the Effective Date and during the two-year period following such Effective Date by the Company without Cause or by the Corporate Staff member for Good Reason, the Company shall pay to the Corporate Staff member in a lump sum in cash within 30 days after the Termination Date the aggregate of the following amounts: (i) the Corporate Staff member's Base Salary through the Termination Date to the extent not theretofore paid, (ii) all other amounts earned, accrued or deferred under the Bonus Plan, other Employee Benefit Plans, Welfare Benefit Plans or otherwise due from the Company to the Corporate Staff member, (iii) at the option of the Corporate Staff member, the lesser of (y) two times the Officer's Base Salary, or (z) 2.99 multiplied by the average of the Corporate Staff member's Base Salary for the five years preceding the Termination Date (or such lessor period as such Corporate Staff member shall have been an employee of the Company)or such other amounts as may be determined to be an amount which would not trigger the Excise Tax, and (iv) an amount equal to two times the last bonus which was awarded to the Corporate Staff member under the Bonus Plan. (c) OTHER SENIOR STAFF. In the event the employment of an Other Senior Staff member is terminated on or after the Effective Date by the Company without Cause, or by the Corporate Staff member for Good Reason, the Company shall pay to the member of Other Senior Staff member in a lump sum in cash within 30 days after the Termination Date the aggregate of the following amounts: (i) the Other Senior Staff member's Base Salary through the Termination Date to the extent not theretofore paid, (ii) all other amounts earned, accrued or deferred under the Bonus Plan, other Employee Benefit Plans, Welfare Benefit Plans or otherwise due from the Company to the member of Other Senior Staff, and (iii) an amount equal to one month's Base Salary for each year such member of Other Senior Staff was employed by the Company (or a predecessor entity for which such Other Senior Staff member is given service credit for purposes of one or more of the Employee Benefit Plans), with a minimum of two month's Base Salary and a maximum of twenty-four month's Base Salary. 4. NON-EXCLUSIVITY OF RIGHTS. Nothing in this Plan shall prevent or limit a Participant's continuing or future participation in any plan, program, policy or practice provided by the Company and for which such Participant may qualify, nor shall anything herein limit or otherwise affect such rights as Participant may have under any contract or Plan with the Company. Amounts which are vested benefits or which the Participant is otherwise entitled to receive under any plan, policy, practice or program of or any contract or agreement with the Company at or subsequent to the Termination Date shall be payable in accordance with such plan, policy, practice or program or contractor agreement except as explicitly modified by this Plan. 5. NO EMPLOYMENT RIGHTS. Each Participant and the Company acknowledge that, except as may otherwise be provided under any other written agreement between such Participant and the Company, the employment of each Participant by the Company is "at will" and each Participant's employment may be terminated by either the Participant or the Company at any time, subject in each case to any rights which the Participant may have to compensation after the Effective Date. 6. NO MITIGATION. The Company's obligation to make the payments under this Plan shall not be affected by any set-off, counterclaim, recoupment, defense or other claim, right or action which the Company may have against the Participant or others. In no event shall any Participant be obligated to seek other employment or take any other action by way of mitigation of the amounts payable to the Participant under any of the provisions of this Plan and such amounts shall not be reduced whether or not the Participant obtains other employment. 7. CERTAIN ADDITIONAL PAYMENTS BY THE COMPANY. (a) In the event it shall be determined that any payment or distribution by the Company to or for the benefit of an Officer (whether paid or payable or distributed or distributable pursuant to the terms of this Plan or otherwise, but determined without regard to any additional payments required under this Section 7) (a "Payment") would be subject to the excise tax imposed by Section 4999 of the Internal Revenue Code of 1986, as amended (the "Code") or any successor or similar provision or any interest or penalties are incurred by such Officer with respect to such excise tax (such excise tax, together with any such interest and penalties, are hereinafter collectively referred to as the "Excise Tax"), then such Officer shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Officer of all taxes (including any interest or penalties imposed with respect to such taxes), including, without limitation, any income taxes (and any interest and penalties imposed with respect thereto) and Excise Tax imposed upon the Gross-Up Payment, the Officer retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Subject to the provisions of Section 7(c), all determinations required to be made under this Section 7, including whether and when a Gross-Up Payment is required and the amount of such Gross-Up Payment and the assumptions to be utilized in arriving at such determination, shall be made by PricewaterhouseCoopers LLP or such other certified public accounting firm as may be designated by the Officer (the "Accounting Firm") which shall provide detailed supporting calculations both to the Company and the Officer within 15 business days of the receipt of notice from the Officer that there has been a Payment, or such earlier time as is requested by the Company. In the event that the Accounting Firm is serving as accountant or auditor for the individual, entity or group effecting the Change of Control, the Officer shall appoint another nationally recognized accounting firm to make the determinations required hereunder (which accounting firm shall then be referred to as the Accounting Firm hereunder). All fees and expenses of the Accounting Firm shall be borne solely by the Company. Any Gross-Up Payment, as determined pursuant to this Section 7, shall be paid by the Company to the Officer within five days of the receipt of the Accounting Firm's determination. Any determination by the Accounting Firm shall be binding upon the Company and the Officer. As a result of the uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments which will not have been made by the Company should have been made ("Underpayment"), consistent with the calculations required to be made under Section 7(a). In the event that the Company exhausts it remedies pursuant to Section 7(c) and the Officer thereafter is required to make a payment of any Excise Tax, the Accounting Firm shall determine the amount of the Underpayment that has occurred and any such Underpayment shall be promptly paid by the Company to or for the benefit of the Officer. (c) The Officer shall notify the Company in writing of any claim against the Officer by the Internal Revenue Service which, if successful, would require the payment by the Company of the Gross-Up Payment. Such notification shall be (i) given as soon as practicable but no later than ten business days after Officer is informed in writing of such claim, and (ii) apprise the Company of the nature of such claim and the date on which such claim is required to be paid. The Officer shall not pay such claim prior to the expiration of the 30-day period following the date on which it gives such notice to the Company (or such shorter period ending on the date that any payment of taxes with respect to such claim is due). If the Company notifies the Officer in writing prior to the expiration of such period that it desires to contest such claim, the Officer shall: (i) give the Company any information reasonably requested by the Company relating to such claim, (ii) take such action in connection with contesting such claim as the Company shall reasonably request in writing from time to time, including, without limitation, accepting legal representation with respect to such claim by an attorney selected by the Company and reasonably acceptable to the Officer, (iii) cooperate with the Company in good faith in order effectively to contest such claim, and (iv) permit the Company to participate in any proceedings relating to such claim; provided, however, that the Company shall bear and pay directly all costs and expenses (including additional interest and penalties) incurred in connection with such contest and shall indemnify and hold the Officer harmless, on an after-tax basis, for any Excise Tax or income tax (including interest and penalties with respect thereto) imposed as a result of such representation and payment of costs and expenses. Without limitation on the foregoing provisions of this Section 7(c), the Company shall control all proceedings taken in connection with such contest and, at its sole option, may pursue or forgo any and all administrative appeals, proceedings, hearings and conferences with the taxing authority in respect of such claim and may, at its sole option, either direct the Officer to pay the tax claimed and sue for a refund or to contest the claim in any permissible manner, and the Officer agrees to prosecute such contest to a determination before any administrative tribunal, in a court of initial jurisdiction and in one or more appellate courts, as the Company shall determine; provided, however, that if the Company directs the Officer to pay such claim and sue for are fund, the Company shall advance the amount of such payment to the Officer, on an interest-free basis and shall indemnify and hold the Officer harmless, on an after-tax basis, from any Excise Tax or income tax (including interest or penalties with respect thereto) imposed with respect to such advance or with respect to any imputed income with respect to such advance; and further provided that any extension of the statute of limitations relating to payment of taxes for the taxable year of the Officer with respect to which such contested amount is claimed to be due is limited solely to such contested amount. Furthermore, the Company's control of the contest shall be limited to issues with respect to which a Gross-Up Payment would be payable hereunder and the Officer shall be entitled to settle or contest, as the case may be, any other issue raised by the Internal Revenue Service or any other taxing authority. (d) If, after the receipt by Officer of an amount advanced by the Company pursuant to Section 7(c), Officer becomes entitled to receive any refund with respect to such claim, Officer shall (subject to the Company's complying with the requirements of Section 7(c)) promptly pay to the Company the amount of such refund (together with any interest paid or credited thereon after taxes applicable thereto). If, after the receipt by Officer of an amount advanced by the Company pursuant to Section 7(c),a determination is made that Officer shall not be entitled to any refund with respect to such claim and the Company does not notify Officer in writing of its intent to contest such denial of refund prior to the expiration of 30 days after such determination, then such advance shall be forgiven and shall not be required to be repaid and the amount of such advance shall offset, to the extent thereof, the amount of Gross-Up Payment required to be paid. 8. SUCCESSORS AND ASSIGNS. (a) This Plan is personal to each Participant covered by the Plan and without the prior written consent of the Company shall not be assignable by any Participant, directly or indirectly or by operation of law, otherwise than by will or the laws of descent and distribution. The interests of each Participant under this Plan are not subject to the claims of any creditors of such Participant and may not be involuntarily assigned, alienated or encumbered. Any purported assignment in violation of this Plan shall be null and void. This Plan shall inure to the benefit of and be enforceable by Participant's legal representatives. (b) This Plan shall inure to the benefit of and be binding upon the Company and its successors and assigns. (c) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) to all or substantially all of the business and/or assets of the Company to assume expressly and agree to perform this Plan in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. 9. MISCELLANEOUS. (a) This Plan shall be governed by and construed in accordance with the laws of the State of Maryland, without reference to principles of conflict of laws. The captions of this Plan are not part of the provisions hereof and shall have no force or effect. This Plan may not be amended or modified otherwise than by a written Plan executed by the parties hereto or their respective successors and legal representatives. (b) The Company agrees to pay as incurred, to the full extent permitted by law, all legal fees and expenses which any Participant may reasonably incur as a result of any contest by the Company, the Participants or others of the validity or enforceability of, or liability under, any provision of this Plan, plus in each case interest on any delayed payment at the applicable Federal rate provided for in Section 7872(f)(2)(A) of the Code whether or not the Participant is successful in asserting such Participant's rights in such contest; provided, however, that the Company shall not be obligated to make any such reimbursement, and shall be entitled to repayment of any of Participant's legal fees or expenses previously advanced (i) if the Participant is unsuccessful, and (ii) if independent counsel mutually acceptable to the Company and the Participant determines that the assertion by such Participant of such contested rights under the Plan was in bad faith or frivolous. Payments for legal fees and expense shall be made by the Company within five business days after delivery of the Participant's written request for such payment accompanied by reasonably detailed evidence of such fee and expenses. (c) The provisions of this Plan shall be deemed severable and the invalidity or unenforceability of any provision shall not affect the validity or enforceability of the other provisions hereof. If any provision of this Plan, or the application thereof to any Person or any circumstance, is invalid or unenforceable, (i) a suitable and equitable provision shall be substituted therefor in order to carry out, so far as may be valid and enforceable, the intent and purpose of such invalid or unenforceable provision, and (ii) the remainder of this Agreement and the application of such provision to other persons, entities or circumstances shall not be affected by such invalidity or unenforceability. (d) The Company may withhold from any amounts payable under this Plan such Federal, state, local or foreign taxes as shall be required to be withheld pursuant to any applicable law or regulation. (e) Any Participant's or the Company's failure to insist upon strict compliance with any provision of this Plan or the failure to assert any right of such Participant or the Company may have hereunder, including, without limitation, the right of Participants to terminate employment for Good Reason, shall not be deemed to be a waiver of such provision or right or any other provision or right of this Plan. This Plan shall be deemed to constitute a contract between the Company and each Participant who serves as such at any time while this Plan is in effect. No repeal or amendment of this Plan, insofar as it reduces the extent of the benefits due any Participant, shall, without such Participant's express prior written consent be effective as to such Participant with respect to any Effective Date occurring or allegedly occurring prior to such repeal or amendment. EX-99 5 EXHIBIT 99.3 HOME PROPERTIES OF NEW YORK, INC. DEFERRED BONUS PLAN 1. PURPOSE Home Properties of New York, Inc. (the "Company") has adopted this Home Properties of New York, Inc. Deferred Bonus Plan (the "Plan") to assist its key employees with their individual tax and financial planning and to permit the Company to remain competitive in attracting, retaining, motivating and rewarding key employees who can directly influence the Company's operating results. The Plan permits eligible employees to defer the receipt of annual cash bonuses which they may be entitled to receive from the Company and the Company to contribute matching contributions on their behalf. 2. ELIGIBILITY An employee of the Company is eligible to participate in this Plan if he or she is in the 3% and above bonus group, is designated by the Committee established pursuant to section 9 as eligible to participate, is a "highly compensated employee" as this term is defined in Section 414(q) of the Internal Revenue Code, and is a member of a "select group of management or highly compensated employees" as this term is defined in Title I of ERISA. 3. CONTRIBUTIONS (a) Participant Contributions. (1) AMOUNT OF DEFERRAL. A participant may elect to defer receipt of any whole percent (50 percent maximum) of his or her annual cash bonus otherwise payable to the participant by the Company during a calendar year. (2) TIME FOR ELECTING DEFERRAL. An initial election to make a deferral shall be made within 30 days of the time the participant first becomes eligible to participate. All other deferral elections shall be made prior to the time that such compensation is to be earned by the participant but, in any event, prior to the March 31 of the year prior to the year in which the annual cash bonus is otherwise payable. Any election to defer shall be made in accordance with subsection 3 below. (3) MANNER OF ELECTING DEFERRAL. A participant shall elect a deferral by giving written notice to the Committee in a form prescribed by the Committee. The notice shall include (1) the year to which the deferral relates; (2) the amount to be deferred; (3) the bonus period with respect to which the deferral relates; and (4) the length of the deferral period. A participant may designate a deferral period of three, five or ten years in which case payment will be made within 60 days following the applicable anniversary date measured from the date the amounts are deferred. For example, a participant may elect in December 1998 to defer for three years a bonus payable in 2000 with respect to 1999 services. If the bonus is otherwise payable in cash in January 2000, it will be deferred and actually paid within 60 days after the anniversary date that falls in January 2003. Notwithstanding the foregoing, in the event the participant retires or otherwise terminates employment, vested benefits payments shall be paid within 60 days of retirement or termination notwithstanding any later date specified in the participant's election form. In addition, if any scheduled payment from this Plan during a taxable year of the Company would, in combination with other compensatory payments to the participant during such year, result in the participant's compensation exceeding the $1 million cap under Code Section 162(m), the Company in its sole discretion may defer benefit payments to the first subsequent year when the participant's compensation will not exceed the $1 million cap. (b) Company Matching Contributions. The Company shall contribute 10 percent of the amount each participant defers. The Company's contribution shall be made as of the same date as the participant's deferral to which it relates and shall be deferred to the same payment date as the related participant deferral. 4. PARTICIPANT ACCOUNTS For each participant there shall be established a Participant Account. A Participant's Account shall be valued as of each day there occurs a transaction affecting the Account. Each deferral or Company contribution shall be reflected by crediting the Participant Account with the number of shares of Company Common Stock that could be purchased at the Common Stock's then fair market value with the amounts deferred by the participant, or contributed by the Company on behalf of a participant, plus any hypothetical dividends payable on the Company Common Stock previously credited to the Participant Account. Distributions from, or forfeiture of, the Participant Account shall be recorded as of the day of such distributions or forfeitures. The Account shall also be adjusted as of the date of any transaction requiring additions to or distributions from the Account to reflect any gains (or losses) in the fair market value of Company Common Stock held in the Account. Two subaccounts shall be established within the Account to track separately participant and Company contributions and the earnings and distributions on each. The Common Stock's fair market value shall be the closing price for a share of the Company's Common Stock as listed on the New York Stock Exchange on the date that the transaction occurs. All amounts credited to participant contribution subaccounts shall be fully vested at all times. Except for the possible claims of the Company's general creditors, they shall not be subject to forfeiture on account of any action by a participant or by the Company, including termination of employment. Amounts credited to a participant's Company contribution subaccount shall become fully vested on the third anniversary of the date first credited to the subaccount if the participant has been in continuous employment with the Company through the third anniversary of the contribution date, or if the participant terminates employment on account of disability, death or retirement on or after age 60 or upon a change in control as hereinafter provided. For this purpose, "disability" shall mean the participant's inability to perform his or her usual duties for the Company on account of illness or injury. Amounts payable under this Plan shall be paid only to the participant provided that in the event of his or her death payments shall be made to his or her estate. If a participant's Company subaccount becomes forfeitable, he or she shall forfeit both Company contributions and the earnings thereon. The maintenance of individual Participant Accounts is for bookkeeping purposes only. The Company is not obligated to make actual contributions to fund this plan or to acquire or set aside any particular assets for the discharge of its obligations, nor is any participant to have any property rights in any particular assets held by the Company, whether or not held for the purpose of funding the Company's obligations hereunder. 5. PAYMENT OF DEFERRED AMOUNTS No withdrawal may be made from a Participant Account except as provided in this section 5. Payments of vested amounts from an Account shall normally be made in a lump sum amount within 60 days following an elected anniversary date or the participant's retirement or other termination of employment. In the case of financial hardship, the Committee, in its sole discretion, may distribute all or a portion of the vested portion of an Account before an elected anniversary date or termination of employment but the amount of the distribution shall not exceed the amount needed to relieve the financial hardship. In the case of a potential violation of the $1 million cap on compensation under Code Section 162(m), the Company may defer payments to a later year as authorized in section 3. Any payments deferred for Section 162(m) purposes shall be paid as soon as payment would no longer constitute a violation of the Code Section 162(m) compensation cap. Such payments shall be made in a manner as consistent as possible with the participant's original deferral election. Payments for any reason other than a change in control shall be made only in stock provided that any fractional shares from a Participant Account shall be paid in cash. In the event of a change in control, all account balances shall become fully and immediately vested and shall be paid, in cash or stock as the Committee in its sole discretion may determine, within five days of the change in control. For this purpose, the term "change in control" means a change in control of the Company of a nature that would be required to be reported in response to Item 5(f) of Schedule 14A of Regulation 14A or to Item 1 of Form 8-K promulgated under the Securities Exchange Act of 1934, as amended, provided that, without limitation, a change in control shall be deemed to have occurred if (i) any "person" (as such term is used in Sections 13(d) and 14(d)(2) of such Act) is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; or (ii) during any period of twenty- four (24) consecutive months, individuals who at the beginning of such period constitute the Board of Directors of the Company cease for any reason to constitute at least a majority thereof unless the election, or the nomination for election by the Company's shareholders, of each new director was approved by a vote of at least two-thirds of the directors then still in office who were directors at the beginning of the period. An aggregate of 100,000 shares of Company Common Stock (subject to substitution or adjustment as provided below) shall be available for stock payments under this Plan. Such shares may be authorized and unissued shares or may be treasury shares. In the event of any change in the Common Stock of the Company by reason of any stock dividend, recapitalization, reorganization, merger, consolidation, split-up, combination, or exchange of shares, or rights offering to purchase Common Stock at a price substantially below fair market value, or of any similar change affecting the Common Stock, the number and kind of shares which thereafter are available for stock payments under the Plan shall be appropriately adjusted consistent with such change in such manner as the Committee may deem equitable to prevent substantial dilution or enlargement of the rights granted to, or available for, participants in the Plan. 6. PARTICIPANT'S RIGHTS UNSECURED The right of any participant or, if applicable, the participant's estate, to receive benefits under the provisions of this Plan shall be an unsecured claim against the general assets of the Company. Any amounts held in a Participant Account, including amounts that may be set aside by the Company for the purpose of meeting its obligations under this Plan, are a part of the Company's general assets and shall be reachable by the general creditors of the Company. 7. STATEMENT OF ACCOUNT Statements will be sent to participants no less frequently than annually setting forth the value of their Participant Accounts. 8. TRANSFERABILITY The rights of a participant under this Plan shall not be transferable other than by will or by the laws of descent and distribution and are exercisable during the participant's lifetime only by the participant or by his guardian or legal representative. 9. PLAN ADMINISTRATOR The administrator of this Plan shall be a committee of the Board of Directors of the Company as from time to time designated by the Board. The Committee's members shall not be employees of the Company. The Committee shall have the authority to adopt rules and regulations for carrying out the Plan and to interpret, construe and implement the provisions of the Plan. The Committee may delegate some or all of its functions to another person as it may deem appropriate. 10. TAXES Amounts contributed to this Plan are subject to FICA and Medicare taxes at the time they become vested. Contributed amounts are not subject to income taxes until they are paid or otherwise made available. The Company may make arrangements with participants to ensure that any withholding requirements are satisfied, including withholding the number of shares needed to satisfy the requirements, withholding on other cash payments from the Company to the participant or receiving from the participant sufficient cash that can be used by the Company to satisfy its withholding requirements. 11. AMENDMENT This Plan may at any time or from time to time be amended, modified or terminated by the Company's Board of Directors. No amendment, modification or termination shall, without the consent of a participant, adversely affect such participant's accruals in his or her Participant Account. 12. GOVERNING LAW This Plan and any participant elections hereunder shall be interpreted and enforced in accordance with the laws of the State of New York. 13. EFFECTIVE DATE The effective date of this Plan is January 1, 1998. IN WITNESS WHEREOF, the Company has caused its duly authorized officer to execute this Plan document on its behalf this 5th day of May, 1998. HOME PROPERTIES OF NEW YORK, INC. By: /s/ Ann M. McCormick --------------------- Ann M. McCormick, Vice President HOME PROPERTIES OF NEW YORK, INC. DEFERRED BONUS PLAN Election Form To: HOME PROPERTIES OF NEW YORK, INC. In accordance with the provisions of the Plan, I hereby elect to defer the annual cash bonuses otherwise payable in ________ (enter year; after the first year of eligibility, this election must be made by the March 31 before the year the bonus would otherwise be paid) to me by the Company as follows: 1. AMOUNT OF BONUS DEFERRAL (fill in percentage): _________ percentage of bonus (maximum of 50%). 2. DEFERRAL PERIOD (subject to Plan's payment terms) (check one): __ three years __ five years __ ten years In the event of my death before I have received all of the deferred payments, the payments which would have been paid to me shall be paid to my estate in the same manner I would have received them as noted above. This election is subject to all of the terms of the Home Properties of New York, Inc. Deferred Bonus Plan on file with the records of the company. Dated: ___________________________________ Signature of Employee Accepted on the ___ day of ________, l9__, on behalf of Home Properties of New York, Inc. By_________________________________ FEDERAL TAX ASPECTS The Plan is a non-qualified deferred compensation plan under the provisions of the Internal Revenue Code. At the time a Company contribution or a participant's deferral of compensation is made, it is intended that the participants will not recognize income, for Federal income tax purposes. In addition, assumed dividends will not be treated as income at the time they are credited to the participant accounts. Participants will recognize ordinary income at the time the Company contributions and participant deferrals, together with the earnings credited to these amounts, are actually paid out or made available to the participants. The amount of such ordinary income will equal the amount of cash received plus the fair market value, on the date of payment, of any shares paid or made available. The ultimate sale or exchange of any shares of common stock received under the Plan will result in either long-term or short term capital gain, or loss depending on the holding period. A participant's basis in the shares will be the amount of income he recognizes at the time the shares were actually paid or made available to the participant. The Company is not entitled to deduct the amount of contributions or deferrals into the Plan or the assumed dividends credited to an account. Instead, the Company is entitled to take a deduction at the time a participant recognizes income. The amount of the deduction is the amount of income that a participant must recognize. For Social Security tax (F.I.C.A.) purposes the Company contributions and participant deferrals under the Plan are taxable as "wages" at the time the amounts vest. This will result in Social Security taxes to a participant and to the Company only where a participant is otherwise below the Social Security Wage Base at the time the contributions or deferrals are made. Since there is no wage base for Medicare taxes, all deferrals and Company contributions will be subject to Medicare tax at the time contributions vest. The Plan is not a tax-qualified plan under Section 401(a) of the Internal Revenue Code and is not subject to ERISA. The Company has not received any ruling from the Internal Revenue Service concerning the tax consequences of the Plan. -----END PRIVACY-ENHANCED MESSAGE-----