Amendment No. 4 to Credit Agreement among Home Properties, L.P., Lenders, and Manufacturers and Traders Trust Company

 EXHIBIT 10.78 AMENDMENT NO. 4 TO CREDIT AGREEMENT This AMENDMENT NO. 4 TO CREDIT AGREEMENT (this "Amendment No. 4") is made and entered into as of the 8 day of September, 2005 by and among HOME PROPERTIES, L.P., f/k/a Home Properties of New York, L.P. (the "Borrower"), the LENDERS party hereto and MANUFACTURERS AND TRADERS TRUST COMPANY, as Administrative Agent (in such capacity, the "Administrative Agent") for each of the lenders (the "Lenders") now or hereafter party to the Credit Agreement referenced below. R E C I T A L S: A. The Borrower, the Administrative Agent, Manufacturers and Traders Trust Company ("M&T") and Citizens Bank of Rhode Island ("CBRI") entered into a Credit Agreement dated as of August 23, 1999 (the "1999 Credit Agreement"), pursuant to which the Lenders agreed to make certain revolving credit and letters of credit facilities available to the Borrower. B. On July 12, 2000, M&T assigned to Chevy Chase Bank, FSB ("CCB") a portion of its Commitment which constituted 15% of all Commitments and loans previously made pursuant thereto. C. The Borrower, the Administrative Agent, M&T, CBRI and CCB entered into Amendment No. 1 to Credit Agreement, dated as of September 6, 2000, ("Amendment No. 1") pursuant to which certain amendments to the 1999 Credit Agreement were made. D. The Borrower, the Administrative Agent, M&T, CBRI and CCB entered into Amendment No. 2 to Credit Agreement, dated as of September 1, 2002 ("Amendment No. 2") pursuant to which certain further amendments to the 1999 Credit Agreement as amended by Amendment No. 1 were made. E. On April 1, 2003, M&T assigned to Comerica Bank ("CB") a portion of its Commitment which constituted 17.39130435% of all Commitments and loans previously made pursuant thereto. F. The Borrower, the Administrative Agent, M&T, CBRI , CCB and CB entered into Amendment No. 3 to Credit Agreement, dated as of April 1, 2004 ("Amendment No. 3") pursuant to which certain further amendments to the 1999 Credit Agreement as amended by Amendment No. 1 and Amendment No. 2 were made. The 1999 Credit Agreement as amended by Amendment No. 1, Amendment No. 2, Amendment No. 3 and as hereby amended and as from time to time further amended, supplemented, modified, replaced or restated is hereinafter referred to as the "Credit Agreement." F. Borrower has requested the Lenders to further amend the Credit Agreement as provided herein and subject to the terms and conditions set forth herein, and the Required Lenders are willing to amend the Credit Agreement as set forth herein. Amendments made by Amendment No. 1, Amendment No. 2 and Amendment No. 3 are hereinafter restated with any further modification or amendments made by this Amendment No. 4. P R O V I S I O N S: NOW, THEREFORE, in consideration of any prior extension of credit by the Lenders to Borrower, and/or in consideration of the Lenders having entered into the Credit Agreement with Borrower, and in consideration of the mutual promises set forth below, Borrower, Administrative Agent and the Lenders hereby agree as follows: 1. Definitions. The term "Credit Agreement" as used herein and in the Loan Documents shall mean the Credit Agreement as hereby amended and modified. This Amendment No. 4 is a cumulative amendment entirely replacing and restating previous amendments. Any capitalized terms used herein without definition shall have the meaning set forth in the Credit Agreement. 2. Amendment Effective Date. This Amendment No. 4 shall be effective on the later of September 8, 2005 or the first date that the following conditions have been satisfied (the "Effective Date"): 2.1 The Administrative Agent shall have received a fully executed counterpart of this Amendment No. 4 from the Lenders, the Borrower and the Company and the fully executed Notes dated as of the date hereof from the Borrower. 2.2 The Administrative Agent shall have received an opinion of counsel to the Borrower and the Company acceptable to it in its sole discretion and such other certificates, instruments and other writings pertaining to the Borrower and the Company as it shall require in connection herewith. 2.3 The Administrative Agent shall have received payment in immediately available funds of any and all fees agreed to between the Borrower and the Administrative Agent and all out-of-pocket expenses incurred by the Administrative Agent in connection with the preparation, negotiation and execution of this Amendment No. 4 and related documents. 3. Amendment of Certain Provisions of the Credit Agreement. Subject to the terms and conditions set forth herein, the Credit Agreement is hereby amended as set forth below: 3.1 Section 1.01 of the Credit Agreement is hereby amended to amend and restate in their respective entireties the definitions of "Alternate Base Rate," "Applicable Eurodollar Margin," "Borrower," "Capital Expenditure Reserve Amount," "Commitment," "Company," "Fixed Charges," "Maturity Date," "Management Company," "Maximum Availability," "Prime Rate," "Required Lenders," "Statutory Reserve Rate," "Total Property Value," "Total Value," and "Type" to read as follows: "Alternate Base Rate" means, for any day, a rate per annum equal to the greatest of (a) the Prime Rate in effect on such day and (b) the Federal Funds Effective Rate in effect on such day plus 1/2 of 1%. Any change in the Alternate Base Rate due to a change in the Prime Rate or the Federal Funds Effective Rate shall be effective from and including the effective date of such change in the Prime Rate or the Federal Funds Effective Rate, respectively. "Applicable Eurodollar Margin" means, as of any date of determination, the percentage set forth below under the appropriate heading corresponding to an "implied" or "corporate" rating as rated by Fitch IBCA ("Fitch IBCA") and/or S&P (the "S&P Rating") and/or Moody's (the "Moody's Rating" and, each of the Fitch IBCA, S&P Rating and the Moody's Rating referred to herein as a "Rating"). Rating Service Rating Applicable Eurodollar Margin BBB+ 62.5 basis points BBB 75.0 basis points BBB- 87.5 basis points The Administrative Agent shall determine the Applicable Eurodollar Margin from time to time in accordance with the above table and notify the Borrower and the Banks of such determination from time to time. In the event the Borrower is Rated by two Rating Services and there is a different Rating between the two Rating Services, the lower Rating from the two Rating Services shall be used to determine the Applicable Eurodollar Margin. In the event the Borrower is Rated by more than two Rating Services, the lower Rating, of the two highest Ratings, shall be used to determine the Applicable Eurodollar Margin. In the event the Rating by any Rating Service is not in the BBB range, the Applicable Eurodollar Margin shall be (i) 62.5 basis points if the Rating is above BBB+ or (ii) 125 basis points if the Rating is below BBB-. In the event the Borrower ceases to be Rated by any Rating Service, a Rate equivalent to the most recent Rating of the Borrower by any Rating Service shall be used to determine the Applicable Eurodollar Margin. Any necessary adjustment in the Applicable Eurodollar Margin pursuant to the terms hereof, shall become effective immediately upon any change in a Rating. "Borrower" means Home Properties, L.P., a New York limited partnership. "Capital Expenditure Reserve Amount" means, for any period, an amount equal to (i) $300 multiplied by the number of apartment units contained in all Projects multiplied by (ii) a fraction, the numerator of which is equal to the number of days in such period and the denominator of which is equal to 365. "Commitment" means, with respect to each Lender, the commitment of such Lender to make Revolving Loans and to acquire participations in Letters of Credit hereunder, expressed as an amount representing the maximum aggregate amount of such Lender's Revolving Credit Exposure hereunder, as such commitment may be (a) reduced from time to time pursuant to Section 2.07 and (b) reduced or increased from time to time pursuant to assignments by or to such lender pursuant to Section 9.04. The initial amount of each Lender's Commitment is set forth on Schedule 2.01, or in the Assignment and Acceptance pursuant to which such Lender shall have assumed its Commitment, as applicable. The initial aggregate amount of the Lenders' Commitments is $140,000,000. Provided that no Event of Default under the Credit Agreement has occurred, the Borrower may request on or before September 1, 2007 that the Lenders increase the aggregate amount of the Lenders' Commitments to an amount not exceeding $190,000,000. No increase will be effective unless a Lender gives its written consent to increase its Commitment and a new Note in the increased amount of such Lender's Commitment is executed in favor of the Lender and delivered to the Administrative Agent for the account of such Lender. The decision of a Lender to increase its Commitment will be in its sole and absolute discretion. "Company" means Home Properties, Inc., a Maryland corporation. "Fixed Charges" means, with respect to any fiscal period, the sum of (i) Total Interest Expense and (ii) the aggregate of all scheduled principal payments on Indebtedness made or required to be made during such fiscal period for the Consolidated Businesses (but excluding balloon payments of principal due upon the stated maturity of an Indebtedness) and (iii) the aggregate of all dividends declared and payable on any of the Company's, the Borrower's or any of their Subsidiaries' preferred stock, or preferred partnership units, as the case may be. The Lenders acknowledge that certain convertible preferred issues were previously excluded from this definition and agree to review, at the request of the Borrower, any future convertible preferred issues for similar consideration. "Management Company" means Home Properties Management, Inc. and Home Properties Resident Services, Inc., both Maryland corporations of which 100% of the issued and outstanding capital stock is and shall continue to be owned, beneficially and of record, by the Borrower. "Maturity Date" means September 1, 2008, unless (i) the Borrower advises the Administrative Agent on or before June 1, 2008 in writing of its desire to extend the Maturity Date and pays the Administrative Agent for the account of each Lender an extension fee (the "Extension Fee") equal to 0.08% of each Lender's Commitment and (ii) there exists no Event of Default under the Credit Agreement or any of the other Loan Documents, in which case "Maturity Date" means September 1, 2009. Upon payment, the Extension Fee shall be fully earned and non-refundable. "Maximum Availability" means the aggregate amount of the Lenders' Commitments. "Prime Rate" means the rate of interest per annum publicly announced from time to time by Manufacturers and Traders Trust Company as its prime rate in effect at its principal office; each change in the Prime Rate shall be effective from and including the date such change is publicly announced as being effective. "Required Lenders" means, at any time, Lenders having Revolving Credit Exposures and unused Commitments representing at least 51% of the sum of the total Revolving Credit Exposures and unused Commitments at such time. "Statutory Reserve Rate" means a fraction (expressed as a decimal), the numerator of which is the number one and the denominator of which is the number one minus the aggregate of the maximum reserve percentages (including any marginal, special, emergency or supplemental reserves) expressed as a decimal established by the Board to which the Administrative Agent is subject with respect to the Adjusted LIBO Rate, for eurocurrency funding (currently referred to as "Eurocurrency Liabilities" in Regulation D of the Board). Such reserve percentages shall include those imposed pursuant to such Regulation D. Eurodollar Loans shall be deemed to constitute eurocurrency funding and to be subject to such reserve requirements without benefit of or credit for proration, exemptions or offsets that may be available from time to time to any Lender under such Regulation D or any comparable regulation. The Statutory Reserve Rate shall be adjusted automatically on and as of the effective date of any change in any reserve percentage. "Total Property Value" means, as of any date, the sum of (i) with respect to all Eligible Projects which have been owned by the Borrower for not less than four full consecutive calendar quarters, as of the first day of each fiscal quarter for the immediately preceding consecutive four calendar quarters, an amount equal to Adjusted NOI relating to such Eligible Project for such period divided by an annual interest rate equal to 7.75% and (ii) with respect to all Eligible Projects which have been owned by the Borrower for less than four full consecutive calendar quarters, an amount equal to the cost of acquiring such Eligible Projects less reasonable and customary transaction costs incurred in connection with such acquisition. "Total Value" means, as of any date, the sum of (i) Total Property Value for all Eligible Projects; (ii) an amount equal to 75% of all investments in notes secured by mortgages on the Property of any Person (including Affiliates); (iii) unrestricted Permitted Investments of the Consolidated Businesses; (iv) an amount equal to 75% of Book Value of undeveloped land and Projects on which construction is in progress, up to a maximum of 10% of Total Value before including the amount of Total Value derived from this clause (iv); and (v) Borrower's pro rata share of investments in Real Property not constituting Eligible Projects, valued at the lower of cost or the value specified in clauses (i) through (v) above. "Type" when used in reference to any Loan or Borrowing, refers to whether the rate of interest on such Loan, or on the Loans comprising such Borrowing, is determined by reference to the Adjusted LIBO Rate or the Alternate Base Rate. 3.2 Section 1.01 of the Credit Agreement is further amended (i) to delete in their respective entireties the following definitions: "Adjusted EBITDA," "Assessment Rate," "Base CD Rate," "Money Market," "Money Market Loan Maturity Date," "Money Market Rate," "Restricted Payment" and "Three-Month Secondary CD Rate" and (ii) to insert the following new definitions: "Annual Facility Fee Rate" means, as of any date of determination, the percentage set forth below under the appropriate heading corresponding to the Rating Service Rating Rating Service Rating Annual Facility Fee BBB+ 12.5 basis points BBB 15.0 basis points BBB- 17.5 basis points The Administrative Agent shall determine the Annual Facility Fee Rate from time to time in accordance with the above table and notify the Borrower and the Lenders of such determination from time to time. In the event the Borrower is Rated by two Rating Services and there is a different Rating between the two Rating Services, the lower Rating from the two Rating Services shall be used to determine the Annual Facility Fee Rate. In the event the Borrower is Rated by more than two Rating Services, the lower Rating, of the two highest Ratings, shall be used to determine the Annual Facility Fee Rate. In the event the Rating by any Rating Service is not in the BBB range, the Annual Facility Fee Rate shall be (i) 12.5 basis points if the Rating is above BBB+; or (ii) 25 basis points if the Rating is below BBB-. In the event the Borrower ceases to be Rated by any Rating Service, a Rate equivalent to the most recent Rating of the Borrower by any Rating Service shall be used to determine the Annual Facility Fee Rate. Any necessary adjustment in the Annual Facility Fee Rate pursuant to the terms hereof, shall become effective immediately upon any change in a Rating. "Rating Service" means Fitch IBCA Rating or any other nationally recognized, independent, securities rating service acceptable to the Agent. "Total Unencumbered Value" means, as of any measurement date, the sum of (i) with respect to all Unencumbered Eligible Projects which have been owned by the Borrower, as of the measurement date, for not less than four (4) full consecutive calendar quarters, an amount equal to Adjusted NOI for such Unencumbered Eligible Project for the immediately preceding four (4) consecutive calendar quarters as of the measurement date, divided by 7.75%; (ii) with respect to all Unencumbered Eligible Projects which have been owned by the Borrower for less than four (4) full consecutive calendar quarters as of the measurement date, an amount equal to the cost of acquiring such Unencumbered Eligible Projects less reasonable and customary transaction costs incurred in connection with such acquisition and (iii) an amount equal to 75% of Book Value of undeveloped land and Projects on which construction is in progress, up to a maximum of 10% of Total Unencumbered Value before including the amount of Total Unencumbered Value derived from this clause (iii). The sum of (i) and (ii) shall never fall below $100,000,000. "Unsecured Indebtedness" means, for any applicable period, without duplication, (a) all obligations for borrowed money or advances of any kind, (b) all obligations evidenced by bonds, debentures, notes or similar instruments, and (c) all obligations upon which interest charges are customarily paid, that are not secured by a Lien. 3.3 Section 2.02 and Section 2.03 of the Credit Agreement are hereby deleted in their respective entireties and replaced with the following: SECTION 2.02 Loans and Borrowings. (a) Each Loan shall be made as part of a Borrowing consisting of Loans made by the Lenders ratably in accordance with their respective Commitments. The failure of any Lender to make any Loan required to be made by it shall not relieve any other Lender of its obligations hereunder, provided that the Commitments of the Lenders are several and no Lender shall be responsible for any other Lender's failure to make Loans as required. (b) Subject to Section 2.12, each Borrowing shall be comprised entirely of ABR Loans or Eurodollar Loans as the Borrower may request in accordance herewith. Each Lender at its option may make any Eurodollar Loan by causing any domestic or foreign branch or Affiliate of such Lender to make such Loan; provided that any exercise of such option shall not affect the obligation of the Borrower to repay such Loan in accordance with the terms of this Agreement. (c) At the commencement of each Interest Period for any Eurodollar Loan, such Loan shall be in an aggregate amount that is not less than $2,500,000 and $250,000 increments in excess thereof. At the time that each ABR Loan is made, such Borrowing shall be in an aggregate amount that is an integral multiple of $ 100,000 and not less than $ 1,000,000; provided that an ABR Loan may be in an aggregate amount that is equal to the entire unused balance of the total Commitments or that is required to finance the reimbursement of an LC Disbursement as contemplated by Section 2.04(e). Borrowings of more than one Type may be outstanding at the same time; provided that there shall not at any time be more than a total of ten Eurodollar Loans outstanding. (d) Notwithstanding anything herein to the contrary, at no time shall the aggregate Revolving Credit Exposure be greater than the Maximum Availability. (e) Notwithstanding any other provision of this Agreement, the Borrower shall not be entitled to request, or to elect to convert or continue, any Borrowing if the Interest Period requested with respect thereto would end after the Maturity Date. SECTION 2.03. Requests for Borrowings. To request a Borrowing, the Borrower shall notify the Administrative Agent of such request by telephone (a) in the case of a Eurodollar Borrowing, not later than 11:00 a.m., New York City time, three Business Days before the date of the proposed Borrowing or (b) in the case of an ABR Borrowing, not later than 11:00 a.m., New York City time, one Business Day before the date of the proposed Borrowing; provided that any such notice of an ABR Borrowing to finance the reimbursement of an LC Disbursement as contemplated by Section 2.04(e) may be given not later than 10:00 a.m., New York City time, on the date of the proposed Borrowing. Each such telephonic Borrowing Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Borrowing Request in the form of Exhibit D-1 attached hereto, or such other form approved by the Administrative Agent, and signed by the Borrower. Each such telephonic and written Borrowing Request shall specify the following information in compliance with Section 2.02: (i) the aggregate amount of the requested Borrowing; (ii) the date of such Borrowing, which shall be a Business Day; (iii) whether such Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; (iv) in the case of a Eurodollar Borrowing, the initial Interest Period to be applicable thereto, which shall be a period contemplated by the definition of the term "Interest Period"; and (v) the location and number of the Borrower's account to which funds are to be disbursed, which shall comply with the requirements of Section 2.05. If no election as to the Type of Borrowing is specified, then the requested Borrowing shall be a Eurodollar Borrowing with an Interest Period of one month's duration. If no Interest Period is specified with respect to any requested Eurodollar Borrowing, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. Promptly following receipt of a Borrowing Request in accordance with this Section, the Administrative Agent shall advise each Lender of the details thereof and of the amount of such Lender's Loan to be made as part of the requested Borrowing. 3.4 Section 2.04(b)(i) of the Credit Agreement is hereby deleted in its entirety and replaced with the following: (i) the LC Exposure shall not exceed $20,000,000 3.5 Section 2.06 of the Credit Agreement is hereby deleted in its entirety and replaced with the following: SECTION 2.06. Interest Elections. (a) Each Loan initially shall be of the Type specified in the applicable Borrowing Request and, in the case of a Eurodollar Loan, shall have an initial Interest Period as specified in such Borrowing Request. Thereafter, the Borrower may elect to convert such Loan to a different Type or to continue such Loan and, in the case of a Eurodollar Loan, may elect Interest Periods therefor, all as provided in this Section. The Borrower may elect different options with respect to different portions of the affected Borrowing, in which case each such portion shall be allocated ratably among the Lenders holding the Loans comprising such Borrowing, and the Loans comprising each such portion shall be considered a separate Borrowing. (b) To make an election pursuant to this Section, the Borrower shall notify the Administrative Agent of such election by telephone by the time that a Borrowing Request would be required under Section 2.03 if the Borrower were requesting a Borrowing of the Type resulting from such election to be made on the effective date of such election. Each such telephonic Interest Election Request shall be irrevocable and shall be confirmed promptly by hand delivery or telecopy to the Administrative Agent of a written Interest Election Request in a form approved by the Administrative Agent and signed by the Borrower. (c) Each telephonic and written Interest Election Request shall specify the following information in compliance with Section 2.02: (i) the Borrowing to which such Interest Election Request applies and, if different options are being elected with respect to different portions thereof, the portions thereof to be allocated to each resulting Borrowing (in which case the information to be specified pursuant to clauses (iii) and (iv) below shall be specified for each resulting Borrowing); (ii) the effective date of the election made pursuant to such Interest Election Request, which shall be a Business Day; (iii) whether the resulting Borrowing is to be an ABR Borrowing or a Eurodollar Borrowing; and (iv)if the resulting Borrowing is a Eurodollar Borrowing, the Interest Period to be applicable thereto after giving effect to such election, which shall be a period contemplated by the definition of the term "Interest Period." If any such Interest Election Request requests a Eurodollar Borrowing but does not specify an Interest Period, then the Borrower shall be deemed to have selected an Interest Period of one month's duration. (d) Promptly following receipt of an Interest Election Request, the Administrative Agent shall advise each Lender of the details thereof and of such Lender's portion of each resulting Borrowing. (e) If the Borrower fails to deliver a timely Interest Election Request with respect to a Eurodollar Loan prior to the end of the Interest Period applicable thereto, then, unless such Borrowing is repaid as provided herein, at the end of such Interest Period such Loan shall be converted to a Eurodollar Loan with an Interest Period of one month's duration. Notwithstanding any contrary provision hereof, if an Event of Default has occurred and is continuing and the Administrative Agent, at the request of the Required Lenders, so notifies the Borrower, then, so long as an Event of Default is continuing (i) no outstanding Loan may be converted to or continued as a Eurodollar Loan and (ii) unless repaid, each Eurodollar Loan shall be converted to an ABR Loan at the end of the Interest Period applicable thereto. 3.6 Section 2.09(b) of the Credit Agreement is hereby deleted in its entirety and replaced with the following: (b) The Borrower shall notify the Administrative Agent by telephone (confirmed by telecopy) of any prepayment hereunder (i) in the case of prepayment of a Eurodollar Loan, not later than 11:00 a.m., New York City time, three Business Days before the date of prepayment or (ii) in the case of prepayment of an ABR Loan, not later than 11:00 a.m., New York City time, one Business Day before the date of prepayment. Each such notice shall be irrevocable and shall specify the prepayment date and the principal amount of each Borrowing or portion thereof to be prepaid; provided that, if a notice of prepayment is given in connection with a conditional notice of termination of the Commitments as contemplated by Section 2.07, then such notice of prepayment may be revoked if such notice of termination is revoked in accordance with Section 2.07. Promptly following receipt of any such notice relating to a Loan, the Administrative Agent shall advise the Lenders of the contents thereof. Each partial prepayment of any Loan shall be in an amount that would be permitted in the case of an advance of a Loan of the same Type as provided in Section 2.02. Each prepayment of a Loan shall be applied ratably to the Loans included in the prepaid Borrowing. Prepayments shall be accompanied by accrued interest to the extent required by Section 2.11. 3.7 Section 2.10 and Section 2.11 of the Credit Agreement are hereby deleted in their respective entireties and replaced with the following: SECTION 2.10. Fees. (a) On the date of this Amendment No. 4, Borrower shall pay to the Administrative Agent for the account of each Lender a commitment fee equal to 0.125% of each Lender's Commitment, which shall be fully earned and non-refundable. (b) Borrower agrees to pay to the Administrative Agent for the account of each Lender, an annual facility fee, which as of the measurement date shall accrue at a rate per annum based on the Annual Facility Fee Rate. The annual facility fee shall be the product of the Commitment of such Lender during the period from and including the Effective Date to but excluding the date on which such Commitment terminates and the Annual Facility Fee Rate; provided that, if such Lender continues to have any Revolving Credit Exposure after its Commitment terminates, then such annual facility fee shall continue to accrue on the daily amount of such Lender's Revolving Credit Exposure from and including the date on which its Commitment terminates to but excluding the date on which such Lender ceases to have any Revolving Credit Exposure. Accrued annual facility fees shall be payable in arrears on the last day of March, June, September and December of each year and on the date on which the Commitments terminate, commencing on the first such date to occur after the date hereof, provided that any annual facility fees accruing after the date on which the Commitments terminate shall be payable on demand. All annual facility fees shall be computed on the basis of a year of three hundred sixty (360) days and shall be payable for the actual number of days elapsed (including the first day but excluding the last day). Any necessary adjustment in the annual facility fee pursuant to the terms hereof, shall become effective immediately upon any change in a Rating. (c) Upon the issuance of each Letter of Credit, the Borrower agrees to pay to the Lender an issuance fee. If the requested Letter of Credit is for a duration of one year, the issuance fee shall be equal to .9% of the face amount of the Letter of Credit, which Letter of Credit fee shall also be due on each anniversary date of the issuance of the Letter of Credit (or any extension or renewal thereof), so long as the Letter of Credit (or any extension or renewal thereof), remains outstanding. If the requested Letter of Credit is for a duration of less than one year, the issuance fee shall be equal to .9%, pro-rated to the nearest 1/12 of a year, of the face amount of the Letter of Credit. Notwithstanding the above, in no case shall the issuance fee be less than the greater of $400.00 or1/2% of the face amount of the Letter of Credit. Upon the issuance of each Letter of Credit (and upon each anniversary thereof so long as the Letter of Credit remains outstanding), the issuance fee shall be payable in full and shall be fully earned and non-refundable. Borrower shall also pay to the Lender the Lender's standard fees with respect to the amendment, renewal or extension of any Letter of Credit and processing of drawings thereunder. (d) The Borrower agrees to pay to the Administrative Agent, for its own account, fees payable in the amounts and at the times separately agreed upon between the Borrower and the Administrative Agent. (e) All fees payable hereunder shall be paid on the dates due, in immediately available funds, to the Administrative Agent (or to the Issuing Bank, in the case of fees payable to it) for distribution, in the case of facility fees and participation fees, to the Lenders. Fees paid shall not be refundable under any circumstances. Upon its receipt of fees to which the Lenders are entitled, the Administrative Agent shall promptly remit such fees to the Lenders as provided herein. SECTION 2.11. Interest. (a) The Loans comprising each ABR Borrowing shall bear interest at the Alternate Base Rate, which rates are subject to change without notice to the Borrower as specified in the definition of Alternate Base Rate. (b) The Loans comprising each Eurodollar Borrowing shall bear interest at the Adjusted LIBO Rate for the Interest Period in effect for such Borrowing plus the Applicable Eurodollar Margin. (c) [intentionally omitted]. (d) Notwithstanding the foregoing, if any principal of or interest on any Loan or any fee or other amount payable by the Borrower hereunder is not paid when due, whether at stated maturity, upon acceleration or otherwise, such overdue amount shall bear interest, after as well as before judgment, at a rate per annum equal to (i) in the case of overdue principal of any Loan, 2% plus the rate otherwise applicable to such Loan as provided in the preceding paragraphs of this Section or (ii) in the case of any other amount, 2% plus the rate applicable to ABR Loans as provided in paragraph (a) of this Section. (e) Accrued interest on each Loan shall be payable in arrears on each Interest Payment Date for the immediately preceding calendar month and upon termination of the Commitments; provided that (i) interest on any Eurodollar Loan shall be paid at the end of each Interest Period but in no event less frequently than every three months, (ii) interest accrued pursuant to paragraph (d) of this Section 2.11 shall be payable on demand, (iii) in the event of any repayment or prepayment of any Loan, accrued interest on the principal amount repaid or prepaid shall be payable on the date of such repayment or prepayment and (iv) in the event of any conversion of any Eurodollar Loan prior to the end of the current Interest Period therefor, accrued interest on such Loan shall be payable on the effective date of such conversion. (f) All interest hereunder shall be computed on the basis of a year of 360 days, except that interest computed by reference to the Alternate Base Rate shall be computed on the basis of a year of 365 days (or 366 days in a leap year), and in each case shall be payable for the actual number of days elapsed (including the first day but excluding the last day). The applicable Alternate Base Rate, Adjusted LIBO Rate and Money Market Rate shall be determined by the Administrative Agent, and such determination shall be conclusive absent manifest error. 3.8 Section 5.08(a) and Section 5.08(g) of the Credit Agreement are hereby deleted in their respective entireties and replaced with the following: (a) Acquisition of residential housing Projects similar to and consistent with the types of Projects owned and/or operated by the Borrower on the Effective Date. (g) Working capital needs of the Borrower. 3.9 Section 6.01 of the Credit Agreement is hereby deleted in its entirety and replaced with the following: SECTION 6.01. (a) Indebtedness and Other Financial Covenants. Neither the Borrower nor any of its Subsidiaries shall directly or indirectly create, incur, assume or otherwise become or remain directly or indirectly liable with respect to any Indebtedness, except that the Borrower and/or its Subsidiaries may create, incur, assume or otherwise become or remain directly or indirectly liable with respect to any Indebtedness to the extent that Total Outstanding Indebtedness, would not exceed (i) 62.5% of Total Value, or (ii) in the case of Secured Indebtedness of the Consolidated Businesses, 60% of Total Value, or (iii) in the case of Recourse Secured Indebtedness of the Consolidated Businesses, 35% of Total Value, or (iv) in the case of Adjusted Recourse Secured Indebtedness, 12.5% of Total Value. Notwithstanding anything to the contrary herein contained, in no event shall (x) the aggregate amount of completion guarantees with respect to Projects at any time exceed 15% of Total Value and (y) the aggregate amount of Low Income Housing Credit Program Guarantees at any time exceed $11 million. (b) Minimum Equity Value. The Equity Value shall at no time be less than $270,800,000.00, plus an amount equal to 85% of all Net Offering Proceeds received by the Company after July 6, 1998. (c) Minimum Consolidated Interest Coverage Ratio. As of the first day of each calendar quarter for the immediately preceding four consecutive calendar quarters, the ratio of EBITDA to Total Interest Expense for such period shall not be less than 2.0 to 1.0. (d) Minimum Unsecured Interest Coverage Ratio. As of the first day of each calendar quarter for the immediately preceding four consecutive calendar quarters, the ratio of Adjusted Unencumbered NOI to Unsecured Interest Expense shall not be less than 1.65 to 1.0. (e) Total Unencumbered Value. At no time shall (i) the Unsecured Indebtedness be greater than 60% of the Total Unencumbered Value, (ii) the Total Unencumbered Value be less than $100,000,000 or (iii) the Unencumbered Eligible Projects consist of less than ten (10) Eligible Projects. (f) Minimum Fixed Charge Coverage Ratio. As of the first day of each calendar quarter for the immediately preceding four consecutive calendar quarters, the ratio of Adjusted NOI to Fixed Charges shall not be less than 1.6 to 1.0. (g) Maximum Availability. The Revolving Credit Exposure shall not at any time exceed the Maximum Availability. If at any time the Revolving Credit Exposure exceeds the Maximum Availability, the Borrower shall immediately prepay a portion of the Loan in an amount equal to such excess as provided for in Section 2.09(d). (h) Minimum Occupancy Level for Unencumbered Eligible Projects. As of the first day of each calendar quarter for the immediately preceding four consecutive calendar quarters, the weighted average economic occupancy for Unencumbered Eligible Projects shall not be less than 80% with the exception that each individual project within the definition of Unencumbered Eligible Projects shall have an occupancy level of not less than 75%. If the occupancy level of an individual project falls below 75%, a capitalization rate of 10% will be used to determine the value of the individual Unencumbered Eligible Project. Borrower will include a schedule of occupancy levels of Unencumbered Eligible Projects within its Quarterly Compliance Certificates. 3.10 Section 9.01 of the Credit Agreement is hereby deleted in its entirety and replaced with the following: SECTION 9.01. Notices. Except in the case of notices and other communications expressly permitted to be given by telephone, all notices and other communications provided for herein shall be in writing and shall be delivered by hand or overnight courier service, mailed by certified or registered mail, return receipt requested, or sent by telecopy, as follows: (a) if to the Borrower, to it at 850 Clinton Square, Rochester, New York 14604, Attn: David P. Gardner (Telecopy No. 585 ###-###-####), with a copy to the Borrower at the same address, Attention: Gerald B. Korn (Telecopy No. 585 ###-###-####); (b) if to the Administrative Agent, to Manufacturers and Traders Trust Company, 255 East Avenue, Rochester, New York 14604, Attn: Ms. Lisa Plescia, Vice President, Telecopy No. 585 ###-###-####; (c) if to the Issuing Bank, to Manufacturers and Traders Trust Company, 255 East Avenue, Rochester, New York 14604, Attn: Ms. Lisa Plescia, Vice President; Telecopy No. 585 ###-###-#### and (d) if to any other Lender, to it at its address (or telecopy number) set forth in its Administrative Questionnaire. Any party hereto may change its address or telecopy number for notices and other communications hereunder by notice to the other parties hereto. All notices and other communications given to any party hereto in accordance with the provisions of this Agreement shall be deemed to have been given on the date of receipt. 3.11 Section 9.02(b) of the Credit Agreement is hereby deleted in its entirety and replaced with the following: (b) Neither this Agreement nor any provision hereof may be waived, amended or modified except pursuant to an agreement or agreements in writing entered into by the Borrower and the Required Lenders or by the Borrower and the Administrative Agent with the prior written consent of the Required Lenders; provided that no such agreement shall (i) increase the Commitment of any Lender without the written consent of such Lender or, except as is otherwise set forth in this Agreement, increase the aggregate amount of the Lenders' Commitments without the written consent of all Lenders, (ii) change the principal amount of any Loan or LC Disbursement or reduce the rate of interest thereon, or reduce any fees payable hereunder, without the written consent of each Lender affected thereby, (iii) postpone the scheduled date of payment of the principal amount of any Loan or LC Disbursement, or any interest thereon, or any fees payable hereunder, or reduce the amount of, waive or excuse any such payment, or postpone the scheduled date of expiration of any Commitment, without the written consent of each Lender affected thereby, (iv) change Section 2.16(b) or (c) in a manner that would alter the pro rata sharing of payments required thereby, without the written consent of each Lender, (v) release any stock or any other material collateral that may now or hereafter secure amounts owing under this Agreement or (vi) change any of the provisions of this Section or the definition of "Required Lenders" or any other provision hereof specifying the number or percentage of Lenders required to waive, amend or modify any rights hereunder or make any determination or grant any consent hereunder, without the written consent of each Lender, provided further that no such agreement shall amend, modify or otherwise affect the rights or duties of the Administrative Agent or the Issuing Bank hereunder without the prior written consent of the Administrative Agent or the Issuing Bank, as the case may be. 3.12 Schedules 2.01, 3.02, 3.04, 3.07 and 3.13 of the Credit Agreement are replaced by the corresponding revised schedules that are made a part hereof, each such schedule being as of the Effective Date unless otherwise specified in such schedule. 4. Representations and Warranties. In order to induce the Administrative Agent and the Lenders to enter into this Amendment No. 4, the Borrower represents and warrants to the Administrative Agent and the Lenders as follows: 4.1 The execution, delivery and performance by Borrower of this Amendment No. 4 and the consummation of the transactions contemplated hereby, are within the Borrower's powers, have been duly authorized by all necessary action, and do not (i) contravene Borrower's Partnership Agreement, (ii) violate any law (including, without limitation, the Securities Exchange Act of 1934), rule, regulation (including, without limitation, Regulation X of the Board of Governors of the Federal Reserve System), order, writ, judgment, injunction, decree, determination or award applicable to the Borrower, (iii) conflict with or result in the breach of, or constitute a default under, any contract, loan agreement, indenture, mortgage, deed of trust, lease or other instrument binding on or affecting the Borrower or any of its properties other than as specified in the Credit Agreement, or (iv) result in or require the creation or imposition of any Lien upon or with respect to any of the properties of Borrower. 4.2 Other than those that have already been obtained and are in full force and effect, or as would not reasonably be expected to have a Material Adverse Effect, no authorization or approval or other action by, and no notice to or filing with, any governmental authority or regulatory body or any other third party is required to be obtained by the Borrower for the due execution, delivery or performance by Borrower of this Amendment No. 4. 4.3 This Amendment No. 4 has been duly executed and delivered by the Borrower. This Amendment No. 4 is the legal, valid and binding obligation of each party hereto, enforceable against the Borrower in accordance with its terms except as may be limited by bankruptcy, insolvency, reorganization, moratorium or other laws relating to or limiting creditors' rights or by equitable principles generally. 4.4 All of the Borrower's representations and warranties contained in the Credit Agreement are true and correct, the Borrower is in compliance with all the affirmative covenants contained in the Credit Agreement, the Borrower has not violated any of the negative covenants contained in the Credit Agreement and no Event of Default has occurred under the terms of the Credit Agreement and/or any of the Loan Documents. 4.5 There has been no material adverse change in the condition, financial or otherwise, of the Borrower since the date of the most recent financial reports of the Borrower received by the Administrative Agent and each Lender under Section 5.01 of the Credit Agreement. 4.6 The business and properties of the Borrower are not, and since the most recent financial report of the Borrower received by the Administrative Agent and the Lenders under Section 5.01 of the Credit Agreement, have not been, materially adversely affected in any substantial way as the result of any fire, explosion, earthquake, accident, strike, lockout, combination of workers, flood, embargo, riot, activities of armed forces, war or acts of God or the public enemy, or the cancellation or loss of any major contracts. 5. Attorneys' Fees and Expenses. The Borrower shall pay all of the Administrative Agent's and the Lenders' attorneys' fees, plus expenses and disbursements, incurred and to be incurred in connection with the preparation, negotiation and execution of this Amendment No. 4. 6. Entire Agreement. This Amendment No. 4 as it amends the 1999 Credit Agreement sets forth the entire understanding and agreement of the parties hereto in relation to the subject matter hereof and supersedes any prior negotiations and agreements among the parties relative to such subject matter. No promise, condition, representation or warranty, express or implied, not herein set forth shall bind any party hereto, and not one of them has relied on any such promise, condition, representation or warranties. Each of the parties hereto acknowledges that, except as in this Amendment No. 4 otherwise expressly stated, no representations, warranties or commitments, express or implied, have been made by any party to the other. None of the terms or conditions of this Amendment No. 4 may be changed, modified, waived or canceled orally or otherwise, except as provided in the Credit Agreement. Upon the Effective Date, Amendment No. 3 shall be superceded and replaced by this Amendment No. 4. 7. Full Force and Effect of Credit Agreement. Except as hereby specifically amended, modified, waived or supplemented, the Credit Agreement and all other Loan Documents are hereby confirmed and ratified in all respects and shall remain in full force and effect according to their respective terms. The parties agree that each reference in the Credit Agreement to "the Credit Agreement", "thereunder", "thereof", "therein" or words of like import referring to the Credit Agreement and each referenced in the Loan Documents to the "Credit Agreement" shall mean and be a reference to the Credit Agreement, as amended and otherwise modified by this Amendment No. 4. 8. Counterparts. This Amendment No. 4 may be executed in any number of counterparts, each of which shall be deemed an original as against any party whose signature appears thereon, and all of which shall together constitute one and the same instrument. 9. Governing Law. This Amendment No. 4 is governed by New York law. Any litigation involving this Amendment No. 4, the Credit Agreement, the Notes or any other Loan Document shall, at the Administrative Agent's sole option, be triable only in a court located in Monroe County, New York. BORROWER, ADMINISTRATIVE AGENT AND THE LENDERS PARTY HERETO WAIVE THE RIGHT TO A JURY TRIAL IN ANY LITIGATION IN WHICH BORROWER, AND ADMINISTRATIVE AGENT AND THE LENDERS PARTY HERETO ARE PARTIES. No other Person is a third party beneficiary of this jury trial waiver. 10. Enforceability. Should any one or more of the provisions of this Amendment No. 4 be determined to be illegal or unenforceable as to one or more of the parties hereto, all other provisions nevertheless shall remain effective and binding on the parties hereto. 11. Successors and Assigns. This Amendment No. 4 shall be binding upon and inure to the benefit of each of the Borrower, the Lenders and the Administrative Agent, and their respective successors, assigns and legal representatives; provided, however, that the Borrower, without the prior consent of all of the Lenders, may not assign any rights, powers, duties or obligations hereunder. 12. Consent of Company. Home Properties, Inc., f/k/a Home Properties of New York, Inc., a Maryland corporation, by its execution and delivery hereof (a) consents and agrees to the amendments to the Credit Agreement set forth herein and (b) reaffirms its obligations set forth in the Guaranty. IN WITNESS WHEREOF, Borrower, Agent and the Lenders have executed and unconditionally delivered this Amendment No. 4 all as of the day and year first above written. HOME PROPERTIES, L.P. By: Home Properties, Inc., its General Partner By: /s/ Gerald B. Korn Name: Gerald B. Korn Title: Vice President MANUFACTURERS AND TRADERS TRUST COMPANY, as Lender and as Administrative Agent By: /s/ Lisa A. Plescia Name: Lisa A. Plescia Title: Vice President CITIZENS BANK OF RHODE ISLAND By: /s/ Craig E. Schermerhorn Name: Craig E. Schermerhorn Title: Vice President CHEVY CHASE BANK, FSB By: /s/ Sadhvi K. Subramanian Name: Sadhvi K. Subramanian Title: Vice President COMERICA BANK By: /s/ Jessica L. Kempf Name: Jessica L. Kempf Title: Vice President The undersigned by its execution and delivery hereof (a) consents and agrees to the Amendment No. 4 herein and (ii) ratifies and reaffirms its obligations set forth in the Guaranty, (iii) acknowledges and agrees that the Guaranty is, and shall continue to be, in full force and (iv), except that, on and after the Amendment Effective Date, each reference in the Guaranty to "the Credit Agreement", "thereunder", "thereof", "therein" or words of like import referring to the Credit Agreement shall mean and be a reference to the Credit Agreement, as amended and otherwise modified by Amendment No. 4. This Consent shall be governed by, and construed in accordance with, the laws of the State of New York. Home Properties, Inc. By: /s/ Gerald B. Korn Name: Gerald B. Korn Title: Vice President