SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10 - K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ending December 31, 1996 Commission file number 0-13693
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
(Exact name of registrant as specified in its charter)
Massachusetts 13-6850434
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
3111 Paces Mill Road, Suite A-200, Atlanta, GA 30339
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (770) 984-9500
-----------------
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Shares of Beneficial Interest without par value
(Title of Class)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
Yes X No
---
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X
---
Based on the average bid and asking price on March 21, 1997, the aggregate
market value of the Registrant's shares held by non-affiliates of the Registrant
was $3,119,262.
The number of shares outstanding as of March 21, 1997 was 1,080,517.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Trust's Proxy Statement relating
to its 1997 Annual Meeting of
Shareholders are incorporated by reference into Part III
<PAGE>
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
INDEX TO FORM 10-K
PART I.....................................................................3
ITEM 1 - Business......................................................3
ITEM 2 - Properties....................................................7
ITEM 3 - Legal Proceedings.............................................8
ITEM 4 - Submission of Matters to a Vote of Shareholders...............8
PART II....................................................................9
ITEM 5 - Market for Registrant's Shares of Beneficial Interest.........9
ITEM 6 - Selected Financial Information...............................11
ITEM 7 - Management's Discussion and Analysis of Financial
Condition and Results of Operations...................12
ITEM 8 - Financial Statements and Supplementary Data..................17
ITEM 9 - Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure...................17
PART III..................................................................18
ITEM 10 - Directors and Executive Officers of the Registrant..........18
ITEM 11 - Executive Compensation......................................18
ITEM 12 - Security Ownership of Certain Beneficial Owners
and Management......................................18
ITEM 13 - Certain Relationships and Related Transactions..............18
PART IV...................................................................19
ITEM 14 - Exhibits, Financial Statements and Schedule and
Reports on Form 8-K.................................19
Signatures ...............................................................21
<PAGE>
This Form 10-K contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. The Trust's actual results could differ materially from those projected
in the forward-looking statements. Certain factors that might cause such a
difference are set forth in the section entitled "Certain Factors Affecting
Future Operating Results", in the relevant paragraphs of "Management's
Discussion and Analysis of Results of Operations and Financial Condition", and
elsewhere in this report.
PART I
ITEM 1 - BUSINESS
General Development of Business
- -------------------------------
Vinings Investment Properties Trust, a Massachusetts business trust (the
"Trust") (formerly known as Mellon Participating Mortgage Trust, Commercial
Properties Series 85/10), was organized on December 7, 1984 as a twenty year
finite-life real estate investment trust ("REIT"). Its original purpose was to
invest in participating, shared appreciation, convertible and fixed rate
mortgages and joint venture financing secured by office, industrial and retail
facilities located throughout the United States. The Declaration of Trust
provided, among other things, that the Trustees would use their best efforts to
terminate the Trust within approximately 10 years, provided, however, that the
Trustees would have the absolute discretion to determine in good faith such
termination date as would be in the best interests of the shareholders of the
Trust. As provided in the Declaration of Trust, the Trustees proceeded with the
orderly liquidation of assets and distribution of proceeds to the shareholders.
As of December 31, 1995 all of the assets to be liquidated had been sold except
the Hawthorne Note, as hereinafter defined, which was sold on January 3, 1996.
In connection with the liquidation, final distributions of $15.60 and $1.28
(adjusted for the Share Split, as hereinafter defined) were paid on February 2,
1996 and March 8, 1996, respectively. The remaining assets of the Trust were
Peachtree Business Center and approximately $163,000 in cash.
On December 21, 1995, the Trust entered into an Agreement Regarding Tender Offer
(the "Agreement Regarding Tender Offer") with A&P Investors, Inc. ("A&P"), an
unaffiliated third party. Pursuant to an Assignment and Amendment of Agreement
Regarding Tender Offer (the "Assignment and Amendment Agreement" and, together
with the Agreement Regarding Tender Offer, the "Tender Offer Agreement"), dated
as of January 16, 1996, by and between A&P, the Trust and Vinings Investment
Properties, Inc. (the "Purchaser"), a corporation formed by A&P for the purpose
of making the Tender Offer (as hereinafter defined), A&P assigned all of its
interest in the Tender Offer Agreement to the Purchaser.
Pursuant to the Tender Offer Agreement, on January 31, 1996, the Purchaser
commenced a cash tender offer (the "Tender Offer") for a minimum of a majority
and a maximum of 85% of the outstanding shares of beneficial interest of the
Trust, without par value (the "Shares"), at a price of $0.47 per Share ($3.76
adjusted for the Share Split, as hereinafter defined). The Tender Offer expired
in accordance with its terms at midnight on February 28, 1996. The Purchaser
accepted an aggregate of 6,337,279 Shares (792,159 Shares adjusted for the Share
Split, as hereinafter defined) validly tendered pursuant to the Tender Offer,
representing approximately 73.3% of the outstanding Shares.
The purpose of the Tender Offer was for the Purchaser to acquire control of the
Trust and to rebuild the Trust's assets by expanding into the multifamily
property markets. In connection with the consummation of the Tender Offer, all
of the trustees and officers of the Trust resigned and were replaced with
designees of the Purchaser. In addition, prior to the Tender Offer, the Trust
was an externally advised REIT for which it paid advisory fees to an unrelated
third party (the "Advisor"). Upon consummation of the Tender Offer, the
relationship with the Advisor was terminated and the Trust became
self-administered.
On June 11, 1996, Vinings Investment Properties, L.P. (the "Operating
Partnership"), a Delaware limited partnership, was organized. The Trust is the
sole general partner and a 98% limited partner in the Operating Partnership.
Through its ownership of Vinings Holdings, Inc., a Delaware corporation and
wholly-owned subsidiary of the Trust, which is also a limited partner in the
Operating Partnership, the Trust was a 100% economic owner of the Operating
Partnership at December 31, 1996. (This structure is commonly referred to as an
umbrella partnership REIT or "UPREIT.")
On July 1, 1996, the Trust effected a 1-for-8 reverse share split (the "Share
Split") of its 8,645,000 outstanding Shares. Shareholders tendered their Shares
and received one Share for every eight Shares owned. The Trust has purchased and
continues to purchase any fractional Shares at a cost of $5.50 per share. As of
December 31, 1996, fractional Shares totaling 97 had been repurchased and
retired leaving 1,080,528 Shares outstanding.
At December 31, 1996, approximately ninety-four percent (94%) of the Trust's
total assets were invested in two real estate assets. They were (1) The Thicket
Apartments ("Thicket"), a 254-unit apartment complex located in Atlanta,
Georgia, owned through Thicket Apartments, L.P., a Delaware limited partnership,
of which the Operating Partnership is a 99% limited partner and Thicket
Holdings, Inc., a Delaware corporation and wholly-owned subsidiary of the Trust,
is the sole general partner and (2) Peachtree Business Center ("Peachtree"), an
approximately 75,000 square foot, single-story business park located in Atlanta,
Georgia, owned through its wholly-owned subsidiary, PBC Acquisition, Inc.
The Trust has elected to be taxed as a REIT under the Internal Revenue Code of
1986, as amended, and intends to maintain its qualification as a REIT in the
future. As a REIT, the Trust will generally not be subject to federal income
taxation on that portion of its income that qualifies as REIT taxable income to
the extent that it distributes at least 95% of its taxable income to its
shareholders and satisfies certain other requirements.
The Trust's executive offices are located at 3111 Paces Mill Road, Suite A-200,
Atlanta, Georgia 30339, (770) 984-9500.
<PAGE>
Financial Information About Industry Segments
- ---------------------------------------------
The Trust's operations and identifiable long-term assets have been attributed to
the real estate industry for the entirety of its existence. While investments
prior to the Tender Offer were primarily mortgage loans, the current assets of
the Trust are equity investments. Management plans to continue making equity
investments in the multifamily real estate markets.
Narrative Description of Business
- ---------------------------------
The primary objective of the Trust is to continue to expand into the multifamily
real estate markets through the acquisition of garden style apartment
communities which are leased to middle-income residents. The middle-income
resident is a more stable and broader based market, often referred to as "the
renter by necessity." Management believes that middle market properties provide
greater potential for appreciation through increased revenues and cash flows
than the more expensive high-end apartment communities which cater to the
"renter by choice."
Management believes that these investments will provide attractive sources of
income to the Trust which will not only provide cash available for future
distributions, but will increase the value of the Trust's real estate portfolio
as well.
In the past, the Trust has reviewed each real estate investment in the Trust's
portfolio on a quarterly basis. Management plans to continue this review as well
as to carefully review each acquisition to insure that the Trust makes sound
investments on behalf of its shareholders. In this regard, the Trust has
established an Acquisition Committee comprised of four members of the Board of
Trustees, one of which is also an officer. The Board has also established
certain investment criteria which must be met. The Acquisition Committee must
review and approve each potential acquisition before it is presented to the
Board for final approval.
Growth and Expansion Strategy
- -----------------------------
Management intends to implement its growth and expansion strategy by targeting
properties that have been under managed and under maintained, and purchase such
properties at a price which is below replacement cost. Through strategic value
added and return oriented capital improvements and intensive property
management, the Trust believes that cash flow, and in turn value, will be
increased.
The Trust currently anticipates that these acquisitions will include certain
properties within the existing multifamily property portfolios of entities
affiliated with management of the Trust which meet certain criteria, as well as
properties acquired from unaffiliated third parties. These properties may be
acquired either for cash, through debt financing, in exchange for Shares of the
Trust or Operating Partnership units or any combination thereof. In addition,
the Trust believes it can raise capital through private offerings for specific
acquisitions. <PAGE>
Operating Strategy
- ------------------
The Trust believes that conducting its business and operations through the
Operating Partnership will have certain strategic advantages over the Trust's
previous structure, which allowed only direct investment in the Trust's real
estate portfolio through the purchase of Shares of the Trust. In particular, the
Operating Partnership structure will provide the Trust with greater flexibility,
in certain circumstances, in facilitating future acquisitions by permitting the
issuance of partnership units on a tax advantaged basis to owners of real estate
properties who contribute such properties to the Operating Partnership. The
Trust believes that many potential sellers of multifamily properties would be
unwilling to sell their properties except in transactions that would defer
income tax. In addition, holders of partnership units will have the right, under
certain circumstances, to convert such units into Shares of the Trust, resulting
in long-term liquidity for such holders. The overall effect of this structure,
the Trust believes, will be an enhanced ability of the Trust to access the real
estate and capital markets.
Competition
- -----------
The Trust competes with a number of housing alternatives for its residents
including other multifamily communities and single family homes available for
rent as well as purchase. This competition could have an affect not only on the
properties' ability to lease units but also on the rents charged. The Trust also
competes with other investors for potential acquisitions, some of which may have
greater resources with which to purchase projects that the Trust may be
interested in acquiring.
Advisory and Property Management Services
- -----------------------------------------
Through February 28, 1996, the Trust's day-to-day operations were managed by the
Advisor. See Note 8 to the Trust's December 31, 1996, Consolidated Financial
Statements which provides additional information regarding the advisory
agreement. After the consummation of the Tender Offer, the Trust terminated the
services of the Advisor and became self-administered. The Trust has entered into
a management agreement with Vinings Properties, Inc. for property management
services for The Thicket Apartments for a fee equal to five percent of gross
revenues. Vinings Properties, Inc. is an affiliate of certain officers and
trustees of the Trust. In addition, as a commitment to the rebuilding of the
Trust, The Vinings Group, Inc., the parent corporation of Vinings Properties,
Inc., (collectively "Vinings") has provided numerous services to the Trust
relating to administration, acquisition, and capital and asset advisory services
at little or no cost to the Trust. The Trust does not anticipate that these
services will continue to be provided free of charge. However, while the Trust
is in its rebuilding stages, the officers and trustees are committed to
providing as many services as possible to promote the Trust's growth. The
Peachtree Business Center is managed by a third-party property management firm
not affiliated with management.
Employees
- ---------
At December 31, 1996, The Thicket Apartments had six employees who performed
on-site property management services for the community, and were paid with funds
generated from Thicket. The Trust paid a total of $15,000 to Vinings for <PAGE>
shareholder services performed exclusively for the Trust by one of its
employees. None of the officers of the Trust received compensation from the
Trust for their services.
Environmental Policy
- --------------------
Investments in real property create a potential for environmental liability on
the part of the Trust. Owners of real property may be held liable for all costs
and liabilities relating to hazardous substances present on or emanating from
their properties. Current management, as did the previous Advisor, assesses on
an as needed basis, measures that may need to be been taken to comply with
environmental laws and regulations. In the event that there is a potential of
environmental responsibility, the costs to comply with environmental laws and
regulations would be estimated at that time. At December 31, 1996, the Trust was
not aware of any potential environmental contamination relating to investments
in its portfolio.
Certain Factors Affecting Future Operating Results
- --------------------------------------------------
This Form 10-K contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. The Trust's actual results could differ materially from those set forth
in the forward-looking statements. Certain factors that might cause such a
difference include the following: the inability of the Trust to identify
properties within existing multifamily property portfolios of entities
affiliated with management which will have a strategic fit with the Trust, the
inability of the Trust to identify unaffiliated properties for acquisition, the
less than satisfactory performance of any property which might be acquired by
the Trust, the inability to access the capital markets in order to fund the
Trust's present growth and expansion strategy, the cyclical nature of the real
estate market generally and locally in Georgia and the surrounding southeastern
states, the national economic climate, the local economic climate in Georgia and
the surrounding southeastern states, and the local real estate conditions and
competition in Georgia and the surrounding southeastern states. There can be no
assurance that, as a result of the foregoing factors, the Trust's growth and
expansion strategy will be successful or that the business and operations of the
Trust will not be adversely affected thereby.
ITEM 2 - PROPERTIES
As of December 31, 1996, all of the Trust's investments were equity investments
in real estate. While the Trust still owns Peachtree, a single-story business
park, it intends to continue investing only in multifamily communities. The
Trust's two real estate investments are summarized below by property type:
Amount of Investment Occupancy
Investment Percentage at 12/31/96
---------- ---------- -----------
The Thicket Apartments $ 8,547,570 79% 97%
Peachtree Business Center 2,310,966 21% 91%
----------- -----
Totals $10,858,536 100%
=========== =====
<PAGE>
The above investment amounts are net of accumulated depreciation. The Trust
incorporates herein by reference the description of owned real property on
Schedule III and the notes thereto. This schedule is made part of the Trust's
December 31, 1996 Consolidated Financial Statements.
ITEM 3 - LEGAL PROCEEDINGS
Neither the Trust, nor its properties are presently subject to any material
litigation or, to the Trust's knowledge, is any material litigation threatened
against the Trust or either of its properties, other than routine actions or
claims and administrative proceedings arising in the ordinary course of
business. Some of these claims are expected to be covered by insurance and all
of which collectively are not expected to have a material adverse effect on the
business, the financial condition, or the results of operations of the Trust.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
No matters were submitted to a vote of the Trust's shareholders during the
fourth quarter of the fiscal year ended December 31, 1996.
<PAGE>
PART II
ITEM 5 - MARKET FOR REGISTRANT'S SHARES OF BENEFICIAL INTEREST
Stock Quotation
- ---------------
The Trust's Shares are currently traded on the Nasdaq SmallCap Market under the
symbol "VIPIS".
The Trust was informed by the Nasdaq Stock Market, Inc. on February 28, 1996
that, as a result of the liquidating dividends and the purchase of Shares by the
Purchaser pursuant to the Tender Offer, the Shares no longer met all of the
requirements for continued inclusion on the Nasdaq National Market. The Trust
requested and was granted an extension of time in order to meet the initial
inclusion criteria for a transfer from the Nasdaq National Market to the Nasdaq
SmallCap Market.
Market Information
- ------------------
On July 1, 1996, the Trust effected a 1-for-8 reverse Share Split of its
8,645,000 outstanding Shares. Shareholders tendered their Shares and received
one Share for every eight Shares owned. The Trust has purchased and continues to
purchase any fractional Shares at a cost of $5.50 per share. As of December 31,
1996, fractional Shares totaling 97 had been repurchased and retired leaving
1,080,528 Shares outstanding. All Share prices and dividends have been restated
to reflect the Share Split. The high and low sales prices for each quarterly
period during fiscal 1996 and 1995, which reflect inter-dealer prices, without
retail mark-up, mark-down or commission and may not necessarily represent actual
transactions, are as follows:
---------------------- ---------------------
1996 1995
---------------------- ---------------------
Quarter Ended High Low High Low
- ------------- ---- --- ---- ---
March 31 22 3 32 26
June 30 6 1/2 3 30 20
September 30 6 4 28 19
December 31 5 4 3/8 28 16
Dividends
- ---------
The Trust's dividend policy up to the consummation of the Tender Offer, was to
distribute all liquidating proceeds. These dividends were 100% return of capital
in fiscal 1996 and 1995 (as summarized below) which historically had an effect
on the Trust's Share price. The effect of dividend distributions reduced the
book value of the Trust, and therefore, reduced the market price for the Shares,
especially with regard to the final liquidating dividends paid in the first
quarter of 1996. On March 21, 1997, the closing sales price for the Trust's
Shares, as reported on the Nasdaq SmallCap Market, was $4.50.
<PAGE>
The Trust paid quarterly cash distributions to shareholders sufficient to enable
the Trust to qualify as a REIT. For fiscal years 1996 and 1995, the Trust
declared cash distributions per share as reported for generally accepted
accounting principles (adjusted for the Share Split) as shown below. For a
discussion of the federal income tax consequences of these distributions, refer
to Note 9 of the Trust's December 31, 1996, Consolidated Financial Statements.
-------------------------------- --------------------------------
1996 1995
-------------------------------- --------------------------------
Payment Date Distributions Payment Date Distributions
February 2, 1996 $15.60 April 19, 1995 $ 5.20
March 8, 1996 1.28 August 17, 1995 0.64
October 27, 1995 5.60
December 31, 1995 0.80
------ ------
Total $16.88 Total $12.24
====== ======
Since the consummation of the Tender Offer, management has not issued its
dividend policy for the Trust, nor has it declared any dividends. In an effort
to rebuild the Trust's assets, all operating cash flow has been reserved for
future growth and expansion. However, as assets are acquired and operating cash
flow increases, the Trust intends to pay distributions to shareholders in
amounts at least sufficient to enable the Trust to qualify as a REIT.
Holders
- -------
The Trust had 755 holders of record of its Shares as of March 21, 1997.
<PAGE>
ITEM 6 - SELECTED FINANCIAL INFORMATION
The following table sets forth selected financial information for the Trust and
should be read in conjunction with "Management's Discussion and Analysis of
Financial Condition and Results of Operations" as well as the Trust's December
31, 1996, Consolidated Financial Statements which are made part of this report.
All share and per share information have been restated to reflect the Share
Split. <TABLE>
<CAPTION>
For the year ended December 31,
--------------------------------------------------------------------------------------------
1996 1995 1994 1993 1992
-------------- -------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Revenues $ 1,796,917 $ 3,244,908 $ 4,159,170 $ 6,668,425 $ 7,731,951
Expenses 2,580,195 1,779,475 2,477,923 2,163,286 1,712,408
------------ ------------ ------------ ------------ -------------
Income (loss) before loss on
real estate investments (783,278) 1,465,433 1,681,247 4,505,139 6,019,543
Loss on real estate investments (26,800) (886,887) (816,307) (1,325,000) (16,507,006)
------------ ------------ ------------ ------------ -------------
Net income (loss) $ (810,078) $ 578,546 $ 864,940 $ 3,180,139 $(10,487,463)
============ ============ ============ ============ =============
Per share information:
Income (loss) before loss on
real estate investments $ (0.73) $ 1.36 $ 1.56 $ 4.17 $ 5.57
============ ============ ============ ============ =============
Net income (loss) $ (0.75) $ 0.54 $ 0.80 $ 2.94 $ (9.71)
============ ============ ============ ============ =============
Dividends declared and paid:
Ordinary income $ - $ - $ 0.08 $ 4.08 $ 2.16
Return of capital 16.88 12.24 24.64 - 2.40
------------ ------------ ------------ ------------ -------------
Total dividends declared paid $ 16.88 $ 12.24 $ 24.72 $ 4.08 $ 4.56
============ ============ ============ ============ =============
Total assets $11,519,469 $21,878,357 $34,348,242 $60,514,634 $ 61,570,899
============ ============ ============ ============ =============
Shareholders' equity $ 2,232,548 $21,284,112 $33,932,908 $59,781,018 $ 61,009,829
============ ============ ============ ============ =============
Weighted average shares outstanding 1,080,528 1,080,625 1,080,625 1,080,625 1,080,625
============ ============ ============ ============ =============
</TABLE>
<PAGE>
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Overview
- --------
The Trust was organized on December 7, 1984 as a twenty year finite-life REIT
whose original purpose was to invest in participating, shared appreciation,
convertible and fixed rate mortgages and joint venture financing secured by
office, industrial and retail facilities located throughout the United States.
The Declaration of Trust provided, among other things, that the Trustees would
use their best efforts to terminate the Trust within approximately 10 years. The
Trustees proceeded with the orderly liquidation of assets and the distribution
of proceeds to the shareholders. As of December 31, 1995, all of the assets to
be liquidated had been sold except the Hawthorne Note, as hereinafter defined,
which was sold on January 3, 1996. The remaining assets of the Trust were
Peachtree Business Center and approximately $163,000 in cash.
On January 31, 1996, Vinings Investment Properties, Inc. (the "Purchaser")
commenced a cash tender offer (the "Tender Offer") for a minimum of a majority
and a maximum of 85% of the outstanding shares of beneficial interest of the
Trust (the "Shares"). The Tender Offer expired in accordance with its terms at
midnight on February 28, 1996, and the Purchaser accepted approximately 73.3% of
the outstanding Shares. In connection with the consummation of the Tender Offer,
all of the trustees and officers of the Trust ("Prior Management") resigned and
were replaced with designees of the Purchaser ("Management"). In addition, the
Trust was an externally advised REIT for which it paid advisory fees to an
unrelated third party (the "Advisor"). Upon consummation of the Tender Offer,
the relationship with the Advisor was terminated and the Trust became
self-administered.
The purpose of the Tender Offer was for Management to acquire control of the
Trust and to rebuild the Trust's assets by expanding into the multifamily real
estate markets through the acquisition of garden style apartment communities
which are leased to middle-income residents. Management believes that these
investments will provide attractive sources of income to the Trust which will
not only increase net income and provide cash available for future
distributions, but will increase the value of the Trust's real estate portfolio
as well.
On June 11, 1996, Vinings Investment Properties, L.P. (the "Operating
Partnership") was organized. The Trust is the sole general partner and a 98%
limited partner in the Operating Partnership. Through its ownership of Vinings
Holdings, Inc., a wholly-owned subsidiary of the Trust, which is also a limited
partner in the Operating Partnership, the Trust was a 100% economic owner of the
Operating Partnership at December 31, 1996 (this structure is commonly referred
to as an umbrella partnership REIT or "UPREIT").
Management believes that conducting its business and operations through the
Operating Partnership will have certain strategic advantages over the Trust's
previous structure, which allowed investment in the Trust only through the
purchase of Shares of the Trust. In particular, the Operating Partnership
structure will provide the Trust with greater flexibility, in certain
circumstances, in facilitating future acquisitions by permitting the issuance of
partnership units on a tax advantaged basis to owners of real estate properties
who contribute such properties to the Operating Partnership. The overall effect
of this structure, the Trust believes, will be an enhanced ability of the Trust
to access the real estate and capital markets. On July 1, 1996, the Trust
effected a 1-for-8 reverse share split (the "Share Split") of its 8,645,000
outstanding Shares. Shareholders tendered their Shares and received one Share
for every eight Shares owned. The Trust has purchased and continues to purchase
any fractional Shares at a cost of $5.50 per share. As of December 31, 1996,
fractional Shares totaling 97 had been repurchased and retired leaving 1,080,528
Shares outstanding.
As a result of the Tender Offer, much of Management's efforts during 1996 were
focused on the Trust's organizational structure and preparing the Trust
strategically for future acquisitions. The Thicket Apartments (the "Thicket"), a
254-unit apartment community in Atlanta, Georgia, was acquired on June 28, 1996
as the Trust's only acquisition for the year. At December 31, 1996, the Trust's
two real estate assets were Thicket and Peachtree, which were 97% and 91% leased
respectively.
The following discussion and analysis of the financial condition and results of
operations should be read in conjunction with the accompanying consolidated
financial statements of the Trust and the notes thereto.
Results of Operations
- ---------------------
Because it was the original intent of the Trust to terminate after approximately
ten years, the net income, as well as the asset value, of the Trust has
decreased over the last several years. Revenues have steadily decreased from
fiscal years ended December 31, 1994 to 1995 to 1996. Operating expenses,
however, increased substantially in 1996 due to a number of non-recurring costs
associated with the Tender Offer and the structural reorganization of the Trust.
This resulted in a net loss for 1996.
All of the gains (losses) on real estate investments since 1994 were the result
of Prior Management's liquidation of the Trust's investments.
As a result of the liquidation of assets, change in management, and the
redirection of the Trust's business objectives, substantially all of the income
producing assets held in fiscal years 1995 and 1994, are no longer held by the
Trust, with the exception of Peachtree. With the acquisition of Thicket, the
Trust obtained a mortgage note payable and a line of credit, and incurred
interest expense and amortization of deferred financing costs for the first time
in 1996.
Comparison of Operating Results of 1996 to Operating Results of 1995
- --------------------------------------------------------------------
Total revenues decreased $1,447,991, or 45%, from $3,244,908 to $1,796,917 as a
result of the Trust's liquidation of investments.
Rental and Other property revenues increased $952,029, or 159%, from $600,454 to
$1,552,483 as a result of the acquisition of Thicket on June 28, 1996. Revenues
from Peachtree remained fairly constant.
<PAGE>
There was no Partnership income during 1996, as compared to $1,730,508 in 1995,
due to the sale of the interest in the Mellon\Pier I Properties Limited
Partnership I (the "Pier I Interest") on December 29, 1995.
Interest income decreased by $798,842, or 90%, from $891,499 to $92,657. One of
the Trust's major sources of revenues prior to 1996 was its investment in
mortgage loan receivables. Interest earned on these investments generated the
Trust's interest income in 1995. In 1996, interest income was generated from
cash investments primarily in the first two months of the year, prior to the
payment of liquidating dividends.
Property operating and maintenance expense increased $295,882, or 102%, from
$290,548 to $586,430, also as a result of the acquisition of Thicket.
Depreciation and amortization decreased $116,903, or 32%, from $361,013 to
$244,110. There was no depreciation generated from the Pier I Interest in 1996,
as compared to $277,601 in 1995. The Thicket generated depreciation of $162,965
for the six months held in 1996. Depreciation and amortization on Peachtree
increased slightly.
The Trust incurred a mortgage note payable and established a line of credit
during 1996, both associated with the acquisition of Thicket. (See Note 6 to the
Trust's December 31, 1996 Consolidated Financial Statements). In connection with
these liabilities, the Trust incurred financing costs, which are being amortized
over the lives of the obligations, and interest expense associated with the
notes. These amounts totaled $19,502 and $408,719, respectively.
General and administrative expense increased $221,627, or 29%, from $766,346 to
$987,973. The majority of the increased expense relates to costs associated with
the Tender Offer and the structural reorganization of the Trust. In addition,
the 1996 expense includes $180,987 of non-recurring directors' and officers'
insurance obtained for the sole benefit of Prior Management, as well as the
Trust's continuing directors' and officers' insurance coverage.
Investment advisor's fees decreased $28,107, or 8%, from $361,568 to $333,461.
All of the advisor's fees were incurred during January and February, 1996 as the
services of the Advisor were terminated at the consummation of the Tender Offer.
The loss on real estate investment of $26,800 represents commissions and fees on
the sale of the Harwthorne Note, as hereinafter defined, on January 3, 1996. The
Trust established a valuation allowance of $895,000 at December 31, 1995 to
reflect the note's net realizable value.
The Trust incurred a net loss of $810,078 for 1996 as compared to net income of
$578,546 for 1995, representing a decrease of $1,388,624. This decrease was the
direct result of the Trust's liquidation of its assets and the consummation of
the subsequent Tender Offer.
<PAGE>
Comparison of Operating Results of 1995 to Operating Results of 1994
- --------------------------------------------------------------------
Total revenues decreased by $914,262, or 22%, from $4,159,170 to $3,244,908.
This decrease resulted primarily from lost revenue due to the sale of mortgage
loans ($726,647, or 17%), and the vacancy and subsequent sale of the Hawthorne
Research and Development Complex ("Hawthorne") ($140,000, or 3%). Income from
the Pier I Interest and rental income from Peachtree remained fairly constant.
Total operating expenses decreased by $698,448, or 28%, from $2,477,923 to
$1,779,475. This was primarily due to a reduction in the operating expenses
associated with the ownership of Hawthorne and a mortgage note secured by the
Hall Street Industrial Complex ("Hall Street") ($579,667, or 23%) which were
sold in 1995 and 1994, respectively. Investment advisor fees decreased due to
the declining asset value of the Trust upon which the fees were based. Other
expenses remained fairly constant.
The net realized loss of $886,887 resulted from the sales and adjusted fair
value allowances of Hawthorne, the Pier I Interest, two mortgage notes secured
by Arbutus and Pacesetter Shopping Centers ("Arbutus and Pacesetter"), and the
write-down of the Hawthorne Note, as hereinafter defined. (See Note 4 to the
Trust's December 31, 1996 Consolidated Financial Statements.)
Hawthorne was sold on March 30, 1995 for $5,095,000 of which $3,500,000 was paid
at closing. A note for the balance of $1,595,000 (the "Hawthorne Note") was
received by the Trust. The Trust realized a net gain on this sale of $152,825.
On January 3, 1996, the Hawthorne Note was sold for $700,000. As of December 31,
1995, an allowance to reduce the note receivable to fair market value of
$895,000 was recognized on the Hawthorne Note.
The Arbutus and Pacesetter mortgages were sold on August 2, 1995 for $6,515,000.
These sales resulted in a total loss of $1,845,035, comprised of a $1,647,000
write-down to reflect the realizable values, and selling, legal and advisory
expenses of $198,035.
The Pier I Interest was sold on December 29, 1995 for total sales proceeds of
$15,788,680. After legal and advisory fees of $189,648, the Trust recorded a
gain of $1,700,323.
The net income of $578,546 for 1995 was a decrease of $286,394, or 33%, from the
1994 net income of $864,940.
Liquidity and Capital Resources
- -------------------------------
Because Prior Management was liquidating the assets of the Trust, net cash used
in operating activities for fiscal year ended December 31, 1996 was $704,965 as
compared to net cash provided by operating activities of $1,820,321 for fiscal
year ended December 31, 1995. This is the direct result of decreased revenues
and increased expenses due to the Tender Offer as described in "Comparison of
Operating Results of 1996 to Operating Results of 1995."
<PAGE>
Cash flows from investing activities changed dramatically from fiscal year ended
December 31, 1995 to fiscal year ended December 31, 1996. Cash provided by
investing activities of $27,321,390 for 1995 was comprised of proceeds from the
sale of Hawthorne, the Arbutus and Pacesetter mortgage loans, the Pier I
Interest, and principal due on a purchase money note received at the sale of
Hall Street. (See Notes 4 and 5 to the Trust's December 31, 1996 Consolidated
Financial Statements.) As a result of the Tender offer, Management has
implemented a growth and expansion strategy. Net cash used in investing
activities of $8,067,197 for fiscal year ended December 31, 1996 was the result
of the Trust's purchase of Thicket in June, 1996. This was offset slightly by
net proceeds of $673,200 from the sale of the Hawthorne Note in January 1996
(the final asset to be liquidated by Prior Management).
Cash flows used in financing activities were comprised of (1) distributions to
shareholders, and (2) debt incurred. Distributions to shareholders increased
$5,013,608, or 38%, from $13,227,342 during 1995, to $18,240,950 during 1996.
Increased distributions were the result of final liquidating dividends paid to
shareholders. During 1996, the Trust received net proceeds of $7,392,000 from a
mortgage note payable, in addition to $1,568,104 in proceeds from a secured line
of credit, all of which were used in the acquisition of Thicket.
Management believes that many of the costs associated with the liquidation of
Trust assets and the subsequent Tender Offer and organizational restructuring
that were incurred during 1996, will not continue into 1997. The cash held by
the Trust at December 31, 1996, plus the cash flow from Thicket and Peachtree,
is expected to provide sources of liquidity to allow the Trust to meet all
current operating obligations. It is anticipated that the line of credit, which
is due in 1997, will be renewed or refinanced. In addition, Management intends
to seek new capital sources, both public and private, as well as explore
financing alternatives, so as to allow the Trust to expand and grow its income
producing investments. (See "Growth and Expansion Strategy and Operating
Strategy".)
This Form 10-K contains forward-looking statements within the meaning of Section
27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act
of 1934. The Trust's actual results could differ materially from those set forth
in the forward-looking statements. Certain factors that might cause such a
difference include the following: the inability of the Trust to identify
properties within existing multifamily property portfolios of entities
affiliated with management which will have a strategic fit with the Trust, the
inability of the Trust to identify unaffiliated properties for acquisition, the
less than satisfactory performance of any property which might be acquired by
the Trust, the inability to access the capital markets in order to fund the
Trust's present growth and expansion strategy, the cyclical nature of the real
estate market generally and locally in Georgia and the surrounding southeastern
states, the national economic climate, the local economic climate in Georgia and
the surrounding southeastern states, and the local real estate conditions and
competition in Georgia and the surrounding southeastern states. There can be no
assurance that, as a result of the foregoing factors, the Trust's growth and
expansion strategy will be successful or that the business and operations of the
Trust will not be adversely affected thereby.
<PAGE>
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The consolidated financial statements and supplementary data are listed under
Item 14(a) and filed as part of this report on the pages indicated.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
The information required by this Item 9 was previously reported in a Current
Report on Form 8-K filed with the Securities and Exchange Commission on January
14, 1997.
<PAGE>
PART III
ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information concerning the Trustees and Executive Officers of the Registrant
required by Item 10 shall be included in the Proxy Statement to be filed
relating to the 1997 Annual Meeting of the Registrant's shareholders and is
incorporated herein by reference.
ITEM 11 - EXECUTIVE COMPENSATION
The information concerning the Trustees and Executive Officers of the Registrant
required by Item 11 shall be included in the Proxy Statement to be filed
relating to the 1997 Annual Meeting of the Registrant's shareholders and is
incorporated herein by reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
The information concerning Ownership of Certain Beneficial Owners and Management
required by Item 12 shall be included in the Proxy Statement to be filed
relating to the 1997 Annual Meeting of the Registrant's shareholders and is
incorporated herein by reference. Except as described in ITEM 1 BUSINESS, there
are no arrangements known to the registrant which may, at a subsequent date,
result in a change in control of the registrant.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information concerning Certain Relationships and Related Transactions
required by Item 13 shall be included in the Proxy Statement to be filed
relating to the 1997 Annual Meeting of the Registrant's shareholders and is
incorporated herein by reference.
<PAGE>
<TABLE>
PART IV
<CAPTION>
ITEM 14 - EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULE AND
REPORTS ON FORM 8-K
<S> <C>
14(a) (1) and (2) Index to Consolidated Financial Statements and Schedule Page
Schedule
Report of Independent Public Accountants--As of December 31, 1996
and for the year then ended 22
Report of Independent Auditors--As of December 31, 1995 and 1994 23
and for each of the two years then ended
Consolidated Balance Sheets--As of December 31, 1996 and 1995 24
Consolidated Statements of Operations--For the years ended
December 31, 1996, 1995 and 1994. 25
Consolidated Statements of Shareholders' Equity--For the years ended
December 31, 1996, 1995 and 1994 26
Consolidated Statements of Cash Flows--For the years ended
December 31, 1996, 1995 and 1994 27
Notes to Consolidated Financial Statements--For the years ended
December 31, 1996, 1995 and 1994 28
Consolidated Financial Statement Schedule 38
</TABLE>
14(a) (3) Exhibits
<TABLE>
<CAPTION>
<S> <C>
Exhibit No. Description
- ----------- -----------
3.1 --- Second Amended and Restated Declaration of Trust of the Trust (incorporated by
reference to Exhibit 3.1 to the Trust's Registration Statement on Form S-11, No.
2-94776).
3.2 --- Amended and Restated Bylaws of the Trust (incorporated by reference to Exhibit 3.2
to the Trust's Registration Statement on Form S-11, No. 2-94776).
3.3 --- Amendment No. 1 to the Second Amended and Restated Declaration of Trust of the Trust
(filed herewith).
3.4 --- Amendment No. 2 to the Second Amended and Restated Declaration of Trust of the Trust
(filed herewith).
10.1 --- Agreement of Purchase and Sale for The Thicket Apartments, dated March 27, 1996,
between The Patrician Mortgage Company and A&P Investors, Inc. (incorporated by
reference to Exhibit 99.1 to the Trust's Current Report on Form 8-K, filed July 2,
1996).
10.2 --- Amendment to Agreement of Purchase and Sale for The Thicket Apartments, dated June
25, 1996, between The Patrician Mortgage Company and A&P Investors, Inc. (filed
herewith).
10.3 --- Assignment of Agreement for Purchase and Sale for The Thicket Apartments, dated June
25, 1996, between Thicket Apartments, L.P. and A&P Investors, Inc. (filed herewith).
10.4 --- Commercial Credit Agreement between Hardwick Bank and Trust Company and the Trustees
of the Trust (incorporated by reference to Exhibit 10.1 to the Trust's Current
Report on Form 8-K/A, filed September 11, 1996).
10.5 --- Deed to Secure Debt and Security Agreement by and between Thicket Apartments, L.P.,
as mortgagor, and Univest Mortgage Capital, LLC, as mortgagee, dated June 27, 1996
(incorporated by reference to Exhibit 10.2 to the Trust's Current Report on Form
8-K/A, filed September 11, 1996).
10.6 --- Promissory note from Thicket Apartments, L.P. to Univest Mortgage Capital, LLC,
dated June 27, 1996 (incorporated by reference to Exhibit 10.3 to the Trust's
Current Report on Form 8-K/A, filed September 11, 1996).
10.7 --- Agreement of Limited Partnership of Vinings Investment Properties, L.P. (filed
herewith).
10.8 --- Management Contract dated June 25, 1996 between Thicket Apartments, L.P. and Vinings
Properties, Inc. (filed herewith).
10.9 --- Management Contract dated July 6, 1990 between PBC Acquisition, Inc. and Carter &
Associates Enterprises, Inc. (filed herewith).
21.1 --- Subsidiaries of the Trust (filed herewith).
27 --- Financial Data Schedule (filed herewith).
</TABLE>
14(b) Reports on Form 8-K
-------------------------
No reports on Form 8-K have been filed by the Trust during the last
quarter of the year ended December 31, 1996.
14(c) Index to Exhibits
--------------
See Item 14(a)(3) above.
<PAGE>
SIGNATURES
Pursuant to the requirements of Sections 13 or 15(d) 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.
Vinings Investment Properties Trust
By: /s/ Peter D. Anzo
---------------------
Peter D. Anzo
President and Chief
Executive Officer
Dated: March 28, 1997
Pursuant to the requirements of the Securities Exchange Act of 1934, this report
has been signed below by the following persons on behalf of the registrant and
in the capacities and on the dates indicated.
Signature Title Date
- --------- ----- -----
/s/ Peter D. Anzo Chief Executive Officer, March 28, 1997
- ------------------------- President and Trustee
Peter D. Anzo
/s/ Stephanie A. Reed Vice President, Treasurer, March 28, 1997
- ------------------------- Secretary and Trustee
Stephanie A. Reed
/s/ Martin H. Petersen Trustee March 28, 1997
- -------------------------
Martin H. Petersen
/s/ Gilbert H. Watts, Jr. Trustee March 28, 1997
- -------------------------
Gilbert H. Watts, Jr.
/s/ Phill D. Greenblatt Trustee March 28, 1997
- -------------------------
Phill D. Greenblatt
/s/ Henry Hirsch Trustee March 28, 1997
- -------------------------
Henry Hirsch
/s/ Thomas B. Bender Trustee March 28, 1997
- -------------------------
Thomas B. Bender
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Trustees and Shareholders of
Vinings Investment Properties Trust:
We have audited the accompanying consolidated balance sheet of Vinings
Investment Properties Trust and subsidiaries (the "Trust") as of December 31,
1996 and the related consolidated statements of operations, shareholders' equity
and cash flows for the year then ended. These consolidated financial statements
and the schedule referred to below are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these consolidated
financial statements and schedule based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Vinings Investment
Properties Trust and subsidiaries as of December 31, 1996 and the results of
their operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
Our audit was made for the purpose of forming an opinion on the basic financial
statements taken as a whole. The schedule listed in the index to financial
statements is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the audit
of the basic financial statements and, in our opinion, fairly states in all
material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
/s/ ARTHUR ANDERSEN LLP
Atlanta, Georgia
March 7, 1997
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Shareholders of
Vinings Investment Properties Trust:
We have audited the accompanying consolidated balance sheets of Vinings
Investment Properties Trust and Subsidiaries (formerly known as Mellon
Participating Mortgage Trust, Commercial Properties Series 85/10) (the "Trust")
as of December 31, 1995 and 1994 and the related consolidated statements of
operations, changes in shareholders' equity and cash flows for each of the two
years in the period ended December 31, 1995. Our audits also included the
financial statement schedules listed in the index as Item 14 (a) (2). These
financial statements and schedules are the responsibility of the Trust's
management. Our responsibility is to express an opinion on these consolidated
financial statements and schedules based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of the
Trust as of December 31, 1995 and 1994 and the consolidated results of their
operations and their cash flows for each of the two years in the period ended
December 31, 1995, in conformity with generally accepted accounting principles.
Also, it is our opinion, that the related financial statement schedules above,
when considered in relation to the basic financial statements taken as a whole,
present fairly, in all material respects, the information set forth therein.
/s/ Ernst & Young LLP
Atlanta, Georgia
February 23, 1996
<PAGE>
<TABLE>
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31,
------------------------------
1996 1995
------------- -------------
<S> <C> <C>
ASSETS
Real estate assets:
Land $ 1,470,500 $ 400,000
Buildings and improvements 9,218,263 2,332,057
Furniture, fixtures & equipment 783,691 -
Less: accumulated depreciation (613,918) (374,524)
------------- ------------
Net real estate assets 10,858,536 2,357,533
Real estate investments:
Mortgage loans receivable, net of valuation
allowance of $895,000 at December 31, 1995 - 700,000
Cash and cash equivalents 171,736 18,470,031
Cash escrows 192,611 -
Receivables and other assets 86,002 346,057
Deferred financing costs, less accumulated amortization
of $19,502 at December 31, 1996 204,925 -
Deferred leasing costs, less accumulated amortization of
$28,470 and $23,754 at December 31, 1996 and 1995,
respectively 5,659 4,736
------------- ------------
Total Assets $ 11,519,469 $21,878,357
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage note payable $ 7,371,676 $ -
Line of credit 1,568,104 -
Accounts payable and accrued liabilities 347,141 301,358
Due to affiliate - 292,887
------------- ------------
Total Liabilities 9,286,921 594,245
------------- ------------
Contingencies (Note 11)
Shareholders' Equity:
Shares of beneficial interest,
without par value, unlimited shares
authorized, 1,080,528 and 1,080,625
shares issued and outstanding at
December 31, 1996 and 1995, respectively 18,731,763 36,973,249
Cumulative earnings 37,879,314 38,689,392
Cumulative distributions (54,378,529) (54,378,529)
------------- ------------
Total Shareholders' Equity 2,232,548 21,284,112
------------- ------------
Total Liabilities and Shareholders' Equity $ 11,519,469 $ 21,878,357
============= ============
The accompanying notes are an integral part of these Balance Sheets.
</TABLE>
<PAGE>
<TABLE>
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<CAPTION>
For the years ended December 31,
-----------------------------------------
1996 1995 1994
----------- ----------- -----------
<S> <C> <C> <C>
REVENUES
Rental revenues $ 1,482,419 $ 576,216 $ 693,864
Other property revenues 70,064 24,238 27,490
Income from partnership -- 1,730,508 1,727,519
Interest income 92,657 891,499 1,594,398
Other income 151,777 22,447 115,899
----------- ----------- -----------
1,796,917 3,244,908 4,159,170
----------- ----------- -----------
EXPENSES
Property operating and maintenance 586,430 290,548 917,981
Depreciation and amortization 244,110 361,013 397,076
Amortization of deferred financing costs 19,502 -- --
Interest expense 408,719 -- --
General and administrative 987,973 766,346 749,584
Investment advisor's fees 333,461 361,568 413,282
----------- ----------- -----------
2,580,195 1,779,475 2,477,923
----------- ----------- -----------
Income (loss) before gain (loss) on real estate investments (783,278) 1,465,433 1,681,247
----------- ----------- -----------
GAIN (LOSS) ON REAL ESTATE INVESTMENTS
Gain (loss) on real estate investments (26,800) 1,655,113 1,033,333
Allowance to reduce real estate investments
to fair market value -- (2,542,000) (1,849,640)
----------- ----------- -----------
(26,800) (886,887) (816,307)
----------- ----------- -----------
Net income (loss) $ (810,078) $ 578,546 $ 864,940
=========== =========== ===========
EARNINGS PER SHARE
Income (loss) before loss on real estate investments $ (0.73) $ 1.36 $ 1.56
Loss on real estate investments (0.02) (0.82) (0.76)
----------- ----------- -----------
Net income (loss) $ (0.75) $ 0.54 $ 0.80
=========== =========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING 1,080,528 1,080,625 1,080,625
=========== =========== ===========
The accompanying notes are an integral part of these financial statements.
</TABLE>
<PAGE>
<TABLE>
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY For the years
ended December 31, 1994, 1995 and 1996
<CAPTION>
Shares of Total
beneficial Cummulative Cummulative shareholders'
interest earnings distributions equity
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
BALANCE AT DECEMBER 31, 1993 $ 76,913,641 $ 37,245,906 $(54,378,529) $ 59,781,018
Net Income -- 864,940 -- 864,940
Distributions to shareholders
($24.72 per share of which $24.64
represented a return of capital
for federal income tax purposes) (26,713,050) -- -- (26,713,050)
------------ ------------ ------------- -------------
BALANCE AT DECEMBER 31, 1994 50,200,591 38,110,846 (54,378,529) 33,932,908
Net Income -- 578,546 -- 578,546
Distributions to shareholders
($12.24 per share return of capital
for federal income tax purposes) (13,227,342) -- -- (13,227,342)
------------ ------------ ------------- -------------
BALANCE AT DECEMBER 31, 1995 36,973,249 38,689,392 (54,378,529) 21,284,112
Net Loss -- (810,078) -- (810,078)
Retirement of Shares (536) -- -- (536)
Distributions to shareholders
($16.88 per share return of capital
for federal income tax purposes) (18,240,950) -- (18,240,950)
------------ ------------ ------------- -------------
BALANCE AT DECEMBER 31, 1996 $ 18,731,763 $ 37,879,314 $(54,378,529) $ 2,232,548
============ ============ ============= =============
The accompanying notes are an integral part of these financial statements
</TABLE>
<PAGE>
<TABLE>
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
For the years ended December 31,
--------------------------------------------
1996 1995 1994
------------ ------------ ------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss) $ (810,078) $ 578,546 $ 864,940
Adjustments to reconcile net income (loss) to net cash provided by (used in)
operating activities:
Depreciation and amortization 244,110 409,450 439,957
Amortization of deferred financing costs 19,502 -- --
Loan discount amortization -- (101,800) --
Estimated allowance to reduce mortgage
receivable to fair value -- 2,542,000 388,000
Estimated allowance to reduce real
estate to fair value -- -- 1,461,640
(Gain) loss on real estate investments 26,800 (1,655,113) (1,033,333)
Changes in assets and liabilities:
Cash escrows (192,611) -- --
Receivables and other assets 260,055 3,768 150,394
Capitalized leasing costs (5,639) -- (6,953)
Accounts payable, accrued liabilities and due to affiliate (247,104) 43,470 (202,383)
------------ ------------ ------------
Total adjustments 105,113 1,241,775 1,197,322
------------ ------------ ------------
Net cash used in operating activities (704,965) 1,820,321 2,062,262
------------ ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchase of The Thicket Apartments (8,660,900) -- --
The Thicket capital expenditures (49,635) -- --
Peachtree capital expenditures (29,862) (16,751) (6,682)
Principal payments on notes receivable -- 2,000,000 32,400
Sales proceeds from real estate investments 673,200 25,338,141 19,156,693
------------ ------------ ------------
Net cash provided by (used in) investing activities (8,067,197) 27,321,390 19,182,411
------------ ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net proceeds from mortgage note payable 7,392,000 -- --
Net proceeds from line of credit 1,568,104 -- --
Deferred financing costs (224,427) -- --
Principal repayments on mortgage payable (20,324) -- --
Purchase of retired shares (536) -- --
Distributions to shareholders (18,240,950) (13,227,342) (26,713,050)
------------ ------------ ------------
Net cash used in financing activities (9,526,133) (13,227,342) (26,713,050)
------------ ------------ ------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (18,298,295) 15,914,369 (5,468,377)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 18,470,031 2,555,662 8,024,039
------------ ------------ ------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 171,736 $ 18,470,031 $ 2,555,662
============ ============ ============
<FN>
SUPPLEMENTAL DISCLOSURE OF CASH AND NONCASH INVESTING AND FINANCING ACTIVITIES:
The Trust paid interest of $353,032 during 1996. In addition, the Hawthorne
Research and Development Facility was sold on March 30, 1995 for $5,095,000. The
Trust received a note for $1,595,000 with a below market interest rate. See Note
4.
The accompanying notes are an integral part of these financial statements.
</FN>
</TABLE>
<PAGE>
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996, 1995 and 1994
NOTE 1 - FORMATION AND ORGANIZATION
Vinings Investment Properties Trust (the "Trust") was organized on
December 7, 1984 under the laws of the Commonwealth of Massachusetts as
a twenty-year finite-life real estate investment trust ("REIT") under
the Internal Revenue Code of 1986. The Trust was originally organized
for the purpose of making real estate investments consisting primarily
of mortgage loans and was to liquidate at the end of approximately ten
years in accordance with its Declaration of Trust, provided, however,
that the Trustees would have the absolute discretion to determine in
good faith such termination date as would be in the best interests of
the shareholders. On January 3, 1996, the final asset to be liquidated
was sold and final dividends were declared.
On January 31, 1996, Vinings Investment Properties, Inc. ("the
Purchaser") commenced a tender offer for a minimum of a majority and a
maximum of 85% of the issued and outstanding shares of beneficial
interest without par value of the Trust (the "Shares"), at a purchase
price of $0.47 per share ($3.76 per share adjusted for the Share Split,
as hereinafter defined) (the "Tender Offer"). The Tender Offer expired
in accordance with its terms on February 28, 1996, and, in connection
therewith, the Purchaser accepted an aggregate of 6,337,279 Shares
(792,159 Shares adjusted for the Share Split, as hereinafter defined),
representing approximately 73.3% of the outstanding Shares, for a total
acquisition price of $2,978,521. The remaining assets of the Trust were
Peachtree Business Center and approximately $163,000 in cash. The
purpose of the Tender Offer was for the Purchaser to acquire control of
the Trust and to rebuild the Trust's assets by expanding into the
multifamily property markets. In connection with the consummation of
the Tender Offer, all of the Trustees and officers of the Trust
resigned and were replaced with designees of the Purchaser.
Until the consummation of the Tender Offer, the Trust was an externally
advised REIT for which it paid advisory fees to an unrelated third
party (the "Advisor"). Upon consummation of the Tender Offer, the
relationship with the Advisor was terminated and the Trust became
self-administered.
On June 11, 1996, Vinings Investment Properties, L.P. (the "Operating
Partnership"), a Delaware limited partnership, was organized. The Trust
is the sole general partner and a 98% limited partner in the Operating
Partnership. Through its ownership of Vinings Holdings, Inc., a
Delaware corporation and wholly-owned subsidiary of the Trust, which is
also a limited partner in the Operating Partnership, the Trust was a
100% economic owner of the Operating Partnership at December 31, 1996.
(This structure is commonly referred to as an umbrella partnership REIT
or "UPREIT.")
<PAGE>
The Trust currently owns The Thicket Apartments ("Thicket"), a 254-unit
apartment complex located in Atlanta, Georgia, through Thicket
Apartments, L.P., a Delaware limited partnership, of which the
Operating Partnership is a 99% limited partner and Thicket Holdings,
Inc., a Delaware corporation and wholly-owned subsidiary of the Trust,
is the sole general partner. The Trust also owns the Peachtree Business
Center ("Peachtree"), an approximately 75,000 square foot, single-story
business park located in Atlanta, Georgia, through its wholly-owned
subsidiary, PBC Acquisition, Inc. At December 31, 1996, Thicket and
Peachtree were 97% and 91% leased, respectively.
On July 1, 1996, the Trust effected a 1-for-8 reverse share split (the
"Share Split") of its 8,645,000 outstanding Shares. Shareholders
tendered their Shares and received one Share for every eight Shares
owned. The Trust has purchased and continues to purchase any fractional
Shares at a cost of $5.50 per share. As of December 31, 1996,
fractional Shares totaling 97 had been repurchased and retired leaving
1,080,528 Shares outstanding. All share and per share data included in
the accompanying financial statements and notes thereto have been
restated to reflect the Share Split.
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
---------------------
The accompanying consolidated financial statements of Vinings
Investment Properties Trust include the consolidated accounts of
Vinings Investment Properties Trust and its subsidiaries. All
significant intercompany balances and transactions have been eliminated
in consolidation. The term "Trust" hereinafter refers to Vinings
Investment Properties Trust and its subsidiaries, including the
Operating Partnership.
Income Taxes
------------
The Trust has elected to be taxed as a REIT under the Internal Revenue
Code of 1986, as amended (the "Code"). As a result, the Trust will
generally not be subject to federal income taxation on that portion of
its income that qualifies as REIT taxable income to the extent the REIT
distributes at least 95% of its taxable income to its shareholders and
satisfies certain other requirements. Accordingly, no provision for
federal income taxes has been included in the accompanying consolidated
financial statements.
Cash and Cash Equivalents
-------------------------
The Trust considers all highly liquid investments purchased with an
original maturity of three months or less to be cash equivalents. As of
December 31, 1995, cash and cash equivalents included $2,407,118 of
short-term investments in U.S. Treasury bills.
<PAGE>
Cash Escrows
------------
Cash escrows consist of real estate tax, insurance, replacement reserve
and repair escrows held by the mortgagee. These funds are restricted
accounts and released solely for the purpose for which they were
established.
Use of Estimates
----------------
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make certain
estimates and assumptions that affect the reported amounts of assets
and liabilities, the disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could
differ from those estimates.
Mortgage Loan Receivables
-------------------------
Mortgage loan receivables are stated at the lower of cost or net
realizable value.
Real Estate Assets
------------------
Real estate assets are stated at depreciated cost. Ordinary repairs and
maintenance are expensed as incurred. Major improvements and
replacements are capitalized and depreciated over their estimated
useful lives when they extend the useful life, increase capacity or
improve efficiency of the related asset. Depreciation is computed on a
straight-line basis over the useful lives of the real estate assets
(buildings and improvements, 5-40 years; furniture, fixtures and
equipment, 5 years; and tenant improvements, generally over the life of
the related lease.)
During 1995, the Trust adopted Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets
and for Long-Lived Assets to Be Disposed Of" ("SFAS 121"), which, among
other things, requires impairment losses to be recorded on long-lived
assets to be held or used in operations when indicators of impairment
are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amount. SFAS 121
also addresses the accounting for long-lived assets that are expected
to be disposed of. The adoption of SFAS 121 did not have a material
affect on the accompanying consolidated financial statements. In
management's opinion, there has been no impairment of the Trust's real
estate assets as of December 31, 1996.
Revenue Recognition
-------------------
All leases are classified as operating leases and rental income is
recognized when earned which materially approximates revenue
recognition on a straight-line basis.
<PAGE>
Deferred Financing Costs and Amortization
-----------------------------------------
Deferred financing costs include fees and costs incurred to obtain
financing and are capitalized and amortized over the term of the
related debt.
Earnings (Loss) Per Share
-------------------------
Earnings (loss) per share is computed based on the weighted average
number of shares outstanding during the period. All references in the
accompanying financial statements and notes to the financial statements
to the weighted average number of shares outstanding and to earnings
(loss) per share have been restated to reflect the Share Split.
Reclassification
----------------
Certain 1995 and 1994 financial statement amounts have been
reclassified to conform with the current year presentation.
NOTE 3 - REAL ESTATE ASSETS
The Thicket Apartments
----------------------
On June 28, 1996, the Trust acquired The Thicket Apartments for a
purchase price of $8,650,000. The acquisition was financed by a
mortgage loan on the property in the amount of $7,392,000 and
borrowings from the Trust's line of credit.
Peachtree Business Center
-------------------------
The Trust acquired Peachtree through a deed-in-lieu of foreclosure on
April 12, 1990. Peachtree was recorded at $1,700,000, its fair market
value, which was less than the book value of the Trust's mortgage
investment at the date of foreclosure. Subsequent to the acquisition,
approximately $1,062,000 of improvements have been capitalized.
NOTE 4 - REAL ESTATE INVESTMENTS
Hall Street Note
----------------
On October 4, 1994, the Trust sold The Hall Street Industrial Complex
which it had previously acquired through foreclosure for an amount
equal to its carrying value of $4,000,000. The buyer paid $2,000,000 in
cash and executed an interest-only $2,000,000 note payable (the "Hall
Street Note"), at an interest rate of prime plus 2% per annum, maturing
on April 30, 1995. On February 22, 1995, the borrower prepaid the
outstanding balance of the Hall Street Note with accrued interest.
<PAGE>
Arbutus and Pacesetter Notes
----------------------------
On August 2, 1995, the Trust sold participating mortgage loans secured
by the Arbutus and Pacesetter Shopping Centers ("Arbutus and
Pacesetter") for $3,615,000 and $2,900,000, respectively. These sales
resulted in a total loss of $1,845,035, comprised of a $1,647,000
write-down to reflect the realizable value, and selling, legal and
advisory expenses of $198,035.
Hawthorne Note
--------------
The Trust acquired the Hawthorne Research and Development Complex
("Hawthorne") in 1992 through foreclosure of its mortgage note. The
Trust's investment in the property was written down from 1992 through
1994 to $4,605,702 to reflect its anticipated net realizable value. On
March 30, 1995, the Trust sold Hawthorne for $5,095,000 of which
$3,500,000 was paid at closing. The balance of $1,595,000 (the
"Hawthorne Note") was payable pursuant to a non-recourse purchase money
note and was subordinate to first mortgage liens totaling $10,360,000.
In connection with the sale of Hawthorne, the Trust reported a gain of
$152,825.
In connection with the liquidation of assets, the Trust entered into an
agreement with the first mortgage lien holder to sell the Hawthorne
Note for $700,000. At December 31, 1995, the Trust established a
valuation allowance of $895,000 to reflect its net realizable value of
$700,000. On January 3, 1996, the Trust closed on the sale of the
Hawthorne Note and recorded commissions and fees for a loss on the sale
of $26,800.
NOTE 5 - INVESTMENT IN PARTNERSHIP
The Trust held partnership interests totaling 35.5% in the Mellon/Pier
I Properties Limited Partnership I (the "Pier I Partnership"). The Pier
I Partnership was formed to acquire land and buildings which were
leased to affiliates of the Pier I Partnership's managing general
partner, Pier I, and operated as Pier I Imports retail stores.
On December 29, 1995, the Trust sold its partnership interests to Pier
I. Total sales proceeds to the Trust were $15,788,680, which after
legal and advisory fees of $189,648, resulted in a gain of $1,700,323.
NOTE 6 - NOTES PAYABLE
Mortgage Note Payable
---------------------
At December 31, 1996, the Trust had a 9.04% mortgage note payable in
the original principal amount of $7,392,000, which is secured by
Thicket and which matures on July 1, 2003. Principal and interest are
payable in monthly installments of $59,691. At December 31, 1996, the
outstanding principal balance was $7,371,676. Scheduled maturites of
the mortgage note payable as of December 31, 1996, are as follows:
1997 $ 52,007
1998 56,909
1999 62,272
2000 68,140
2001 74,562
Thereafter 7,057,786
----------
Total $7,371,676
==========
Line of Credit
--------------
The Trust obtained a one year line of credit in the amount of
$2,000,000 which bears interest at the bank's base rate which
approximates prime. At December 31, 1996, the interest rate was 8.25%.
Interest is payable monthly with the entire principal balance due on
June 28, 1997. The line of credit is secured by Peachtree. At December
31, 1996, the outstanding balance of the line of credit was
$1,568,104.
NOTE 7 - RELATED PARTY TRANSACTIONS
During 1996, the Trust entered into a management agreement with
Vinings Properties, Inc. for property management services for Thicket
for a fee equal to five percent of gross revenues plus a fee for data
processing. Vinings Properties, Inc. is an affiliate of certain
officers and trustees of the Trust. A total of $44,459 in management
fees and $7,620 in data processing fees were incurred by the Trust
during 1996.
In addition, as a commitment to the rebuilding of the Trust, The
Vinings Group, Inc., the parent corporation of Vinings Properties,
Inc. (collectively "Vinings"), has provided numerous services to the
Trust relating to administration, acquisition, and capital and asset
advisory services at little or no cost to the Trust. The Trust does
not anticipate that these services will continue to be provided free
of charge, and certain costs paid on the Trust's behalf have been
reimbursed to Vinings. However, while the Trust is in its initial
growth stages, the officers and trustees are committed to providing as
many services as possible to promote the growth of the Trust. A total
of $15,000 was paid to Vinings for shareholder services provided for
the sole benefit of the Trust by one of Vinings' employees during
1996. The officers did not receive compensation from the Trust for
their services.
<PAGE>
In connection with the acquisition of Thicket, a broker's commission of
$150,000 was paid by the seller of the property to MFI Realty, Inc., a
wholly-owned subsidiary of The Vinings Group, Inc.
In addition, the Trust has entered into an agreement dated February 28,
1997 with Northshore Communications, Inc., a company affiliated with
one of the Trustees, for the design and production of the Trust's 1996
annual report for a total of $20,500. This cost is substantially less
than the Trust's cost for its annual report for the previous year.
NOTE 8 - ADVISORY AGREEMENT
Prior to the consummation of the Tender Offer, the Trust had engaged
the Advisor to provide investment advisory services and act as the
administrator of Trust operations. The agreement with the Advisor,
which was terminated upon consummation of the Tender Offer, provided
for the payment of administrative, asset management and other servicing
fees to the Advisor for services rendered in administering the Trust's
operations. The Advisor earned administrative, asset management,
special services, and mortgage servicing fees aggregating $333,461,
$290,684 and $254,502 for the years ended December 31, 1996, 1995, and
1994, respectively. The Trust also amortized deferred loan acquisition
fees of $70,884 and $158,780 for the years ended December 31, 1995 and
1994, respectively, which are recorded as investment advisor's fees in
the accompanying financial statements.
NOTE 9 - DISTRIBUTIONS
Distributions declared and distributed for the years ended December 31,
1996, 1995, and 1994 aggregated $18,240,950, $13,227,342, and
$26,713,050, respectively, or $16.88, $12.24, and $24.72 per share.
For federal income tax purposes, all distributions received by
shareholders for the years ended December 31, 1996 and 1995 represented
a return of capital. As the Trust's last 1994 distribution of $0.80 was
made on December 31, 1994, and received by shareholders in 1995,
dividends received by shareholders for federal income tax purposes were
$13.04 and $23.92 per share for 1995 and 1994, respectively. For
federal income tax purposes, of the distributions received for the year
ended December 31, 1994, $23.84 per share represented a return of
capital, while the taxable ordinary income portion was $0.08 per share.
<PAGE>
NOTE 10 - LEASING ACTIVITY
The following is a schedule of future minimum rents due under operating
leases that have initial or remaining noncancellable lease terms in
excess of one year as of December 31, 1996, at Peachtree:
1997 $ 506,378
1998 475,471
1999 425,832
2000 350,214
2001 318,864
Thereafter 132,860
----------
Total $2,209,619
==========
One tenant generated 54% of Peachtree's revenues for the fiscal year
ended December 31, 1996. The same tenant accounts for 78% of the future
minimum lease payments. While this tenant's lease does not expire until
May 31, 2002, it contains a 90-day cancellation clause which management
is currently negotiating to extend to one year.
NOTE 11 - CONTINGENCIES
The Trust is, from time to time, subject to various claims that arise
in the ordinary course of business. These matters are generally covered
by insurance. While the resolution of these matters cannot be predicted
with certainty, management believes that the final outcome of such
matters would not have a material adverse effect on the financial
position or results of operations of the Trust.
NOTE 12 - DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
Based on interest rates and other pertinent information available to
the Trust as of December 31, 1996 and 1995, the Trust estimates that
the carrying value of cash and cash equivalents, mortgage note
receivables, the mortgage note payable, the line of credit, and other
liabilities approximate their fair values when compared to instruments
of similar type, terms and maturity.
Disclosure about fair value of financial instruments is based on
pertinent information available to management as of December 31, 1996
and 1995. Although management is not aware of any factors that would
significantly affect its estimated fair value amounts, such amounts
have not been comprehensively revalued for purposes of these financial
statements since December 31, 1996.
<PAGE>
NOTE 13 - SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Unaudited summarized quarterly results of operations for the years
ended December 31, 1996 and 1995 are as follows:
- --------------------------- ---------- --------- ---------- ---------
1996 First Second Third Fourth
- --------------------------- ---------- --------- ---------- ---------
Total revenues $ 393,473 $ 169,281 $ 613,310 $ 620,853
========= ========= ========== =========
Loss before loss on real estate
investments $(380,871) $(127,349) $ (76,093) $(198,965)
Loss on real estate investments
(26,800) -- -- --
--------- --------- ---------- ---------
Net loss $(407,671) $(127,349) $ (76,093) $(198,965)
========= ========= ========== =========
Per share:
Loss before loss on real estate
investments $ (.36) $ (.12) $ (.07) $ (.18)
Loss on real estate investments
(.02) -- -- --
--------- --------- ---------- ----------
Net loss $ (.38) $ (.12) $ (.07) $ (.18)
========== ========== ========== ==========
Dividends declared and paid $ 16.88 $ -- $ -- $ --
=========== ========== ========== ==========
<PAGE>
- ---------------------------- --------- ------------ ---------- --------
1995 First Second Third Fourth
- ---------------------------- --------- ------------ ---------- --------
Total revenues $ 908,308 $ 906,296 $ 699,013 $731,291
========= ============ ========= ========
Income before gain (loss) on
real estate investments $ 570,162 $ 465,391 $ 256,190 $173,690
Gain (loss) on real estate
investments 169,448 (1,663,623) (150,300) 757,588
--------- ------------ --------- --------
Net income (loss) $ 739,610 $(1,198,232) $ 105,890 $931,278
========= ============ ========= ========
Per share:
Income before gain (loss) on
real estate investments $ 0.53 $ 0.43 $ 0.24 $ 0.16
Gain (loss) on real estate
investments 0.15 (1.54) (0.14) 0.70
--------- ------------ --------- --------
Net income (loss) $ 0.68 $(1.11) $ 0.10 $ 0.86
========= ============ ========= ========
Dividends declared and paid $ 5.20 $ 0.64 $ 5.60 $ 0.80
========= ============ ========= ========
<PAGE>
<TABLE>
VININGS INVESTMENT PROPERTIES TRUST
SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION
DECEMBER 31, 1996
<CAPTION>
Gross amounts at which
Initial Cost to Trust carried at close of period
---------------------- ---------------------------------
Buildings and Buildings and
Description Encumbrance Land Improvements Improvements Land Improvements Total
- --------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Peachtree Business Center $ 1,568,104 $ 400,000 $1,300,000 $1,061,919 $ 400,000 $ 2,361,919 $ 2,761,919
The Thicket Apartments 7,371,676 1,070,500 7,590,400 49,635 1,070,500 7,640,035 8,710,535
----------------------------------------------------------------------------------------------
Totals $ 8,939,780 $1,470,500 $8,890,400 $1,111,554 $1,470,500 $10,001,954 $11,472,454
==============================================================================================
Life on which Date of
Accumulated Depreciation Date Original
Description Depreciation is Computed Acquired Construction
- -------------------------------------------------------------------------------------------
Peachtree Business Center $ 450,953 5-40 Years April 1990 1984
The Thicket Apartments 162,965 5-40 Years June 1996 1989
-----------
$ 613,918
===========
The accompanying notes are an integral part of this schedule.
</TABLE>
<PAGE>
VININGS INVESTMENT PROPERTIES TRUST
NOTES TO SCHEDULE III
December 31, 1996
(A) The Peachtree investment was acquired through a deed in-lieu of
foreclosure of an original mortgage note investment. In June 1996, the
Trust obtained a $2,000,000 line of credit which is secured by
Peachtree. At December 31, 1996, $1,568,104 was outstanding on the
line.
(B) The Thicket Apartments was acquired on June 28, 1996 for a
purchase price of $8,650,000. It was financed by a mortgage loan in
the original amount of $7,392,000 and borrowings from the Trust's line
of credit, which is secured by Peachtree.
(C) Gross capitalized costs of real estate assets are summarized as follows
<TABLE>
<CAPTION>
------------------ ---------------- -------------------
1996 1995 1994
------------------ ---------------- -------------------
<S> <C> <C> <C>
Balance at beginning of period $ 2,732,057 $7,445,666 $12,900,624
Additions during period:
Acquisition of Thicket 8,660,900 - -
Improvements 74,497 16,751 6,682
------------------ ---------------- -------------------
Total additions 8,740,397 16,751 6,682
------------------ ---------------- -------------------
Deductions during period:
Hall Street - - 4,000,000
Hawthorne - 4,730,360 -
Estimated valuation losses and
allowances to fair market value - - 1,461,640
------------------ ---------------- -------------------
Total deductions - 4,730,360 5,461,640
------------------ ---------------- -------------------
Balance at close of period $11,472,454 $ 2,732,057 $ 7,445,666
================== ================ ===================
</TABLE>
<PAGE>
(D) Accumulated depreciation on real estate assets is as follows:
<TABLE>
<CAPTION>
--------------- ---------------- -------------
1996 1995 1994
--------------- ---------------- -------------
<S> <C> <C> <C>
Balance at beginning of period $374,524 $ 424,332 $318,361
Additions during period:
Hawthorne Property - - 30,685
Peachtree Business Center 76,429 75,480 75,286
The Thicket Apartments 162,965 - -
--------------- ---------------- -------------
Total additions 239,394 75,480 105,971
--------------- ---------------- -------------
Deductions during period:
Retirements/sales - (125,288) -
--------------- ---------------- -------------
Total deductions - (125,288)
-
--------------- ---------------- -------------
Balance at close of period $613,918 $ 374,524 $424,332
=============== ================ =============
</TABLE>
<PAGE>
<TABLE>
INDEX TO EXHIBITS
<CAPTION>
<S> <C>
Exhibit No. Description
- ----------- -----------
3.1 --- Second Amended and Restated Declaration of Trust of the Trust (incorporated by reference
to Exhibit 3.1 to the Trust's Registration Statement on Form S-11, No. 2-94776).
3.2 --- Amended and Restated Bylaws of the Trust (incorporated by reference to Exhibit 3.2 to
the Trust's Registration Statement on Form S-11, No. 2-94776).
3.3 --- Amendment No. 1 to the Second Amended and Restated Declaration of Trust of the Trust
(filed herewith).
3.4 --- Amendment No. 2 to the Second Amended and Restated Declaration of Trust of the Trust
(filed herewith).
10.1 --- Agreement of Purchase and Sale for The Thicket Apartments, dated March 27, 1996, between
The Patrician Mortgage Company and A&P Investors, Inc. (incorporated by reference to
Exhibit 99.1 to the Trust's Current Report on Form 8-K, filed July 2, 1996).
10.2 --- Amendment to Agreement of Purchase and Sale for The Thicket Apartments, dated June 25,
1996, between The Patrician Mortgage Company and A&P Investors, Inc. (filed herewith).
10.3 --- Assignment of Agreement for Purchase and Sale for The Thicket Apartments, dated June 25,
1996, between Thicket Apartments, L.P. and A&P Investors, Inc. (filed herewith).
10.4 --- Commercial Credit Agreement between Hardwick Bank and Trust Company and the Trustees of
the Trust (incorporated by reference to Exhibit 10.1 to the Trust's Current Report on
Form 8-K/A, filed September 11, 1996).
10.5 --- Deed to Secure Debt and Security Agreement by and between Thicket Apartments, L.P., as
mortgagor, and Univest Mortgage Capital, LLC, as mortgagee, dated June 27, 1996
(incorporated by reference to Exhibit 10.2 to the Trust's Current Report on Form 8-K/A,
filed September 11, 1996).
10.6 --- Promissory note from Thicket Apartments, L.P. to Univest Mortgage Capital, LLC, dated
June 27, 1996 (incorporated by reference to Exhibit 10.3 to the Trust's Current Report
on Form 8-K/A, filed September 11, 1996).
10.7 --- Agreement of Limited Partnership of Vinings Investment Properties, L.P. (filed herewith).
10.8 --- Management Contract dated June 25, 1996 between Thicket Apartments, L.P. and Vinings
Properties, Inc. (filed herewith).
10.9 --- Management Contract dated July 6, 1990 between PBC Acquisition, Inc. and Carter &
Associates Enterprises, Inc. (filed herewith).
21.1 --- Subsidiaries of the Trust (filed herewith).
27 --- Financial Data Schedule (filed herewith).
</TABLE>
MELLON PARTICIPATING MORTGAGE TRUST
COMMERCIAL PROPERTIES SERIES 85/10
AMENDMENT NO. 1 TO SECOND AMENDED AND RESTATED
DECLARATION OF TRUST
AMENDMENT NO. 1 (the "Amendment") to the Second Amended and Restated
Declaration of Trust (the "Declaration of Trust") of MELLON PARTICIPATING
MORTGAGE TRUST COMMERCIAL PROPERTIES SERIES 85/10 (the "Trust") dated February
6, 1985, made at Atlanta, Georgia this 13th day of March, 1996 by the Board of
Trustees hereunder.
WHEREAS, the third paragraph of Section 1.1 of the Declaration of Trust
provides, among other things, that upon receipt of a written request by Mellon
Bank Corporation ("Mellon"), the Trustees shall change the name of the Trust to
a name that does not contain the name "Mellon."
WHEREAS, Section 9.3 of the Declaration of Trust provides that actions by
the Trustees pursuant to the third paragraph of Section 1.1 of the Declaration
of Trust that result in amending the Declaration of Trust may be effected
without the vote or consent of any shareholder of the Trust;
WHEREAS, Mellon has requested that the Trust no longer use the name
"Mellon" in the Trust's name; and
WHEREAS, the Board of Trustees desires to amend the Declaration of Trust to
change the name of the Trust from "Mellon Participating Mortgage Trust
Commercial Properties Series 85/10" to "Vinings Investment Properties Trust";
NOW, THEREFORE, the undersigned, being all the Trustees of the Trust, do
hereby state:
1. In accordance with Sections 1.1 and 9.3 of the Declaration of Trust,
(a) The first sentence of the first paragraph of Section 1.1 of the
Declaration of Trust is hereby amended in its entirety to read as follows:
"This Trust created by this Declaration of Trust is herein
referred to as the "Trust" and shall be known by the name "Vinings
Investment Properties Trust."
(b) All references to "Mellon Participating Mortgage Trust Commercial
Properties Series 85/10" (or any similar words) in the Declaration of Trust
shall hereafter be deemed to be references to "Vinings Investment
Properties Trust."
2. This Amendment may executed in separate counterparts, each of which so
executed and delivered shall be an original, but all such counterparts shall
together constitute one and the same instrument.
EXECUTED as of the 13th day of March, 1996.
TRUSTEES
/s/ Peter D. Anzo
-----------------
Peter D. Anzo
/s/ Martin H. Petersen
----------------------
Martin H. Petersen
/s/ Stephanie A. Reed
---------------------
Stephanie A. Reed
/s/ Gilbert H. Watts, Jr.
-------------------------
Gilbert H. Watts, Jr.
/s/ Phill D. Greenblatt
-----------------------
Phill D. Greenblatt
VININGS INVESTMENT PROPERTIES TRUST
AMENDMENT NO. 2 TO SECOND AMENDED AND RESTATED
DECLARATION OF TRUST
AMENDMENT NO. 2 (the "Amendment") to the Second Amended and Restated
Declaration of Trust of VININGS INVESTMENT PROPERTIES TRUST (the "Trust") dated
February 6, 1985, as amended (the "Declaration of Trust"), made at Atlanta,
Georgia this 25th day of June, 1996 by the Board of Trustees hereunder.
WHEREAS, Section 9.3 of the Declaration of Trust provides that the
Declaration of Trust may be amended by the vote or written consent of a majority
of the Trustees and of the holders of a majority of the outstanding shares of
beneficial interest of the Trust entitled to vote thereon;
WHEREAS, the Board of Trustees desires to amend the Declaration of Trust to
(i) authorize the Board of Trustees to combine outstanding shares of beneficial
interest of the Trust by way of reverse share split, (ii) provide that to
achieve the general policy objective of the Trust, the Trustees intend to invest
the assets of the Trust in multifamily apartment properties and other real
estate properties which offer the potential to achieve such objective, and (iii)
eliminate certain restrictions on the Trust's investment practices and
activities (collectively, the "Amendments");
WHEREAS, in accordance with Section 9.3 of the Declaration of Trust, the
Trustees have approved the Amendments pursuant to a unanimous written consent
dated May 23, 1996; and
WHEREAS, in accordance with Section 9.3 of the Declaration of Trust, the
Amendments have been approved at a meeting of shareholders held on June 25,
1996, by the holders of a majority of the outstanding shares of beneficial
interest of the Trust entitled to vote thereon;
NOW, THEREFORE, the undersigned, being all the Trustees of the Trust, do
hereby state:
1. Section 2.1 of the Declaration of Trust is hereby amended in its
entirety to read as follows (new language appearing in italics):
"2.1 General Statement of Policy. It is the general policy of the
Trust that the Trustees invest the Trust Estate principally in
investments which will conserve and protect the Trust's invested
capital, produce cash distributions, and offer the potential for
capital appreciation to be realized upon the sale, refinancing or
other disposition of such investments. To achieve this objective, the
Trustees intend to invest the assets of the Trust in Mortgage Loans
and Land Purchase-Leasebacks, including those with equity
enhancements, multifamily apartment properties and other real estate
properties and investments which offer the potential to achieve such
objective. The consideration paid for Real Property acquired by the
Trust shall ordinarily be based on the fair market value of the
property as determined by a majority of the Trustees. In cases where a
majority of the Unaffiliated Trustees so determine, such fair market
value shall be as determined by a qualified independent real estate
appraiser selected by the Trustees, including a majority of the
Unaffiliated Trustees. The Trustees, including a majority of the
Unaffiliated Trustees, shall at least annually review the investment
policies of the Trust to determine that the policies being followed by
the Trust are in the best interests of the Shareholders, and each such
determination and the basis therefor shall be set forth in the minutes
of meetings of the Trustees."
2. Article VI of the Declaration of Trust is hereby deleted in its
entirety.
3. Section 7.1 of the Declaration of Trust is hereby amended in its
entirety to read as follows (new language appearing in italics):
"7.1 Shares. The beneficial interest in the Trust shall be
divided into transferable units of a single class, all of which are
designated as Shares, each without par value, and each Share shall
(except as provided in Section 7.12) be identical in all respects with
every other Share. The total number of Shares the Trust shall have
authority to issue shall be unlimited. The Shares may be issued for
such consideration as the Trustees shall determine, including upon the
conversion of convertible debt, or by way of share dividend or share
split in the discretion of the Trustees. In addition to the issuance
of Shares by way of share dividend or share split, the Trustees may
combine outstanding Shares by way of reverse share split and provide
for the payment of cash in lieu of any fractional interest in a
combined Share; and the mechanics authorized by the Trustees to
implement any such combination shall be binding upon all Shareholders,
holders of convertible debt, optionees and others with any interest in
Shares. Outstanding Shares shall be transferable and assignable in
like manner as are shares of stock of a Massachusetts business
corporation. Shares reacquired by the Trust shall no longer be deemed
outstanding and shall have no voting or other rights unless and until
reissued. Shares reacquired by the Trust may be cancelled by action of
the Trustees. All Shares shall be fully paid and nonassessable by or
on behalf of the Trust upon receipt of full consideration for which
they have been issued or without additional consideration if issued by
way of share dividend, share split or combination or upon the
conversion of convertible debt. The Shares shall not entitle the
holder to preference, preemptive, conversion, or exchange rights of
any kind, except as the Trustees may specifically determine with
respect to any Shares at the time of issuance of such Shares and
except as specifically provided by law."
4. This Amendment may executed in separate counterparts, each of which so
executed and delivered shall be an original, but all such counterparts shall
together constitute one and the same instrument.
5. Pursuant to Section 10.2 of the Declaration of Trust, a copy of this
Amendment shall be filed with the Secretary of The Commonwealth of Massachusetts
and with the Boston City Clerk.
EXECUTED as of the 25th day of June, 1996.
TRUSTEES
/s/ Peter D. Anzo
- ----------------------
Peter D. Anzo
/s/ Martin H. Petersen
- -----------------------
Martin H. Petersen
/s/ Stephanie A. Reed
- ----------------------
Stephanie A. Reed
/s/ Gilbert H. Watts, Jr.
- -------------------------
Gilbert H. Watts, Jr.
/s/ Phill D. Greenblatt
- -----------------------
Phill D. Greenblatt
/s/ Henry Hirsch
- ----------------
Henry Hirsch
AMENDMENT TO AGREEMENT FOR PURCHASE AND SALE
THE THICKET APARTMENTS
THIS AMENDMENT, entered into as of the 25th day of June, 1996, by and
between THE PATRICIAN MORTGAGE COMPANY (hereinafter referred to as "Seller"),
and A & P INVESTORS, INC., a Georgia corporation (hereinafter referred to as
"Purchaser");
W I T N E S S E T H:
WHEREAS, Seller and Purchaser have entered into that certain Agreement
for Purchase and Sale, dated March 27, 1996 (hereinafter referred to as the
"Sales Contract"); and
WHEREAS, Seller and Purchaser desire to amend the Sales Contract as
hereinbelow set forth;
NOW, THEREFORE, for and in consideration of the sum of Ten and
No/100ths Dollars ($10.00) and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, Seller and Purchaser
agree as follows:
1. The Closing Date is hereby extended to June 28, 1996.
2. All capitalized terms used herein, not otherwise defined,
shall have the meanings ascribed thereto in the Sales Contract.
3. All other terms and provisions of the Sales Contract shall
remain in full force and effect.
IN WITNESS WHEREOF, Seller and Purchaser have duly signed and sealed
this Ninth Amendment, effective as of the day and year first above written.
PURCHASER:
A & P INVESTORS, INC., a Georgia corporation
By: /s/Martin H. Petersen
- -------------------------
Martin H. Petersen
Title: Vice President
[Corporate Seal]
[SIGNATURES CONTINUED ON NEXT PAGE]
[SIGNATURES CONTINUED FROM PREVIOUS PAGE]
SELLER:
THE PATRICIAN MORTGAGE COMPANY
By: /s/ W. Thomas Booher
- ------------------------
W. Thomas Booher
Title: Vice President
[Corporate Seal]
ASSIGNMENT OF AGREEMENT FOR PURCHASE AND SALE
For and in consideration of One and No/100ths Dollar ($1.00) in hand
paid by THICKET APARTMENTS, L.P., a Delaware limited partnership, having as its
sole general partner Thicket Holdings, Inc., a Georgia corporation (hereinafter
referred to as "Assignee"), to A & P INVESTORS, INC., a Georgia corporation
(hereinafter referred to as "Assignor"), and other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Assignor hereby assigns, transfers and conveys to Assignee all of Assignor's
right, title and interest in and to that certain Agreement for Purchase and Sale
by and between The Patrician Mortgage Company, as Seller, and Assignor, as
Purchaser, dated March 27, 1996 (hereinafter referred to as the "Sales
Agreement"). Assignee hereby accepts said assignment, transfer and conveyance of
the Sales Agreement by Assignor and hereby assumes all of Assignor's rights,
duties and obligations under said Sales Agreement.
Witness the hands and seals of the parties hereto as of the 25th day of
June, 1996.
ASSIGNOR:
A & P INVESTORS, INC., a Georgia corporation
By: /s/Peter D. Anzo
-------------------------
Peter D. Anzo
Title: CEO
[Corporate Seal]
ASSIGNEE:
THICKET APARTMENTS, L.P., a Delaware limited
partnership
By:Thicket Holdings, Inc., a Delaware corporation,
general partner
By: /s/Peter D. Anzo
-------------------------
Peter D. Anzo
Title: CEO
[Corporate Seal]
AGREEMENT OF LIMITED PARTNERSHIP
OF
VININGS INVESTMENT PROPERTIES, L.P.
June 11, 1996
TABLE OF CONTENTS
ARTICLE 1
DEFINED TERMS........................................................1
ARTICLE 2
ORGANIZATIONAL MATTERS..............................................11
Section 2.1 Formation.........................................11
Section 2.2 Name..............................................11
Section 2.3 Registered Office and Agent; Principal Office.....12
Section 2.4 Power of Attorney.................................12
Section 2.5 Term..............................................13
ARTICLE 3
PURPOSE.............................................................13
Section 3.1 Purpose and Business..............................13
Section 3.2 Powers............................................14
ARTICLE 4
CAPITAL CONTRIBUTIONS...............................................14
Section 4.1 Capital Contributions of the Partners.............14
Section 4.2 Issuances of Additional Partnership Interests.....15
Section 4.3 Contribution of Proceeds of Issuance of REIT
Shares............................................16
ARTICLE 5
DISTRIBUTIONS.......................................................16
Section 5.1 Requirement and Characterization of Distributions.16
Section 5.2 Amounts Withheld..................................17
Section 5.3 Distributions Upon Liquidation....................17
ARTICLE 6
ALLOCATIONS.........................................................17
Section 6.1 Allocations For Capital Account Purposes..........17
ARTICLE 7
MANAGEMENT AND OPERATIONS OF BUSINESS...............................18
Section 7.1 Management........................................18
Section 7.2 Certificate of Limited Partnership................22
Section 7.3 Restrictions on General Partner Authority.........22
Section 7.4 Reimbursement of the General Partner and the
Company...........................................22
Section 7.5 Outside Activities of the General Partner.........23
Section 7.6 Contracts with Affiliates.........................23
Section 7.7 Indemnification...................................24
Section 7.8 Liability of the General Partner..................26
Section 7.9 Other Matters Concerning the General Partner......26
Section 7.10 Title to Partnership Assets.......................27
Section 7.11 Reliance by Third Parties.........................27
ARTICLE 8
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS..........................28
Section 8.1 Limitation of Liability...........................28
Section 8.2 Management of Business............................28
Section 8.3 Outside Activities of Limited Partners............28
Section 8.4 Return of Capital.................................29
Section 8.5 Rights of Limited Partners Relating to the
Partnership.......................................29
Section 8.6 Redemption Right..................................30
ARTICLE 9
BOOKS, RECORDS, ACCOUNTING AND REPORTS..............................31
Section 9.1 Records and Accounting............................31
Section 9.2 Fiscal Year.......................................32
Section 9.3 Reports...........................................32
ARTICLE 10
TAX MATTERS.........................................................32
Section 10.1 Preparation of Tax Returns........................32
Section 10.2 Tax Elections.....................................33
Section 10.3 Tax Matters Partner...............................33
Section 10.4 Organizational Expenses...........................35
Section 10.5 Withholding.......................................35
ARTICLE 11
TRANSFERS AND WITHDRAWALS...........................................36
Section 11.1 Transfer..........................................36
Section 11.2 Transfer of the Company's General Partner
Interest and Limited Partner Interest.............36
Section 11.3 Limited Partners' Rights to Transfer..............36
Section 11.4 Substituted Limited Partners......................37
Section 11.5 Assignees.........................................38
Section 11.6 General Provisions................................38
ARTICLE 12
ADMISSION OF PARTNERS...............................................39
Section 12.1 Admission of Successor General Partner............39
Section 12.2 Admission of Additional Limited Partners..........39
Section 12.3 Amendment of Agreement and Certificate of
Limited Partnership...............................40
ARTICLE 13
DISSOLUTION, LIQUIDATION AND TERMINATION............................40
Section 13.1 Dissolution.......................................40
Section 13.2 Winding Up........................................41
Section 13.3 Compliance with Timing Requirements of
Regulations.......................................43
Section 13.4 Deemed Distribution and Recontribution............43
Section 13.5 Rights of Limited Partners........................44
Section 13.6 Notice of Dissolution.............................44
Section 13.7 Termination of Partnership and Cancellation
of Certificate of Limited Partnership.............44
Section 13.8 Reasonable Time for Winding-Up....................44
Section 13.9 Waiver of Partition...............................44
ARTICLE 14
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS........................45
Section 14.1 Amendments........................................45
Section 14.2 Meetings of the Partners..........................46
ARTICLE 15
GENERAL PROVISIONS..................................................47
Section 15.1 Addresses and Notice..............................47
Section 15.2 Titles and Captions...............................47
Section 15.3 Pronouns and Plurals..............................48
Section 15.4 Further Action....................................48
Section 15.5 Binding Effect....................................48
Section 15.6 Creditors.........................................48
Section 15.7 Waiver............................................48
Section 15.8 Counterparts......................................48
Section 15.9 Applicable Law....................................48
Section 15.10 Invalidity of Provisions.................49
Section 15.11 Entire Agreement.........................49
EXHIBITS
Exhibit A - Partners Contributions and Partnership Interests
Exhibit B - Capital Account Maintenance
Exhibit C - Special Allocation Rules
Exhibit D - Notice of Redemption
<PAGE>
AGREEMENT OF LIMITED PARTNERSHIP
OF
VININGS INVESTMENT PROPERTIES, L.P.
THIS AGREEMENT OF LIMITED PARTNERSHIP OF VININGS INVESTMENT (this
"Agreement"), dated as of June 11, 1996, is entered into by and among Vinings
Investment Properties Trust (the "Company") and the Persons (as defined below)
whose names are set forth on Exhibit A as attached hereto (as it may be amended
from time to time).
WHEREAS, the Company and the Persons whose names are set forth on
Exhibit A, as attached hereto, will make certain capital contributions to the
Partnership;
NOW THEREFORE, in consideration of the mutual covenants herein
contained, and other valuable consideration, the receipt and sufficiency of
which is hereby acknowledged, the parties hereto, and do hereby agree as
follows:
ARTICLE 1
DEFINED TERMS
The following definitions shall be for all purposes, unless otherwise
clearly indicated to the contrary, applied to the terms used in this Agreement.
"Act" means the Delaware Revised Uniform Limited Partnership Act, as it
may be amended from time to time, and any successor to such statute.
"Additional Limited Partner" means a Person admitted to the Partnership
as a Limited Partner pursuant to Section 4.2 hereof and who is shown as such on
the books and records of the Partnership.
"Adjusted Capital Account" means the Capital Account maintained for
each Partner as of the end of each Partnership taxable year (i) increased by any
amounts which such Partner is obligated to restore pursuant to any provision of
this Agreement or is deemed to be obligated to restore pursuant to the
penultimate sentences of Regulations Sections 1.704-2(g)(1) and 1.704-2(i)(5);
and (ii) decreased by the items described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account is intended to comply with
the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
"Adjusted Capital Account Deficit" means, with respect to any Partner,
the deficit balance, if any, in such Partner's Adjusted Capital Account as of
the end of the relevant Partnership taxable year.
"Adjusted Property" means any property, the Carrying Value of which has
been adjusted pursuant to Exhibit B hereof. Once an Adjusted Property is deemed
distributed by, and recontributed to, the Partnership for federal income tax
purposes upon a termination thereof pursuant to Section 708 of the Code, such
property shall thereafter constitute a Contributed Property until the Carrying
Value of such property is further adjusted pursuant to Exhibit B hereof.
"Affiliate" means, with respect to any Person, (i) any Person directly
or indirectly controlling, controlled by or under common control with such
Person; (ii) any Person owning or controlling ten percent (10%) or more of the
outstanding voting interests of such Person; (iii) any Person of which such
Person owns or controls ten percent (10%) or more of the voting interests; or
(iv) any officer, director, general partner or trustee of such Person or of any
Person referred to in clauses (i), (ii), and (iii) above.
"Agreed Value" means (i) in the case of any Contributed Property as of
the time of its contribution to the Partnership, the 704(c) Value of such
property, reduced by any liabilities either assumed by the Partnership upon such
contribution or to which such property is subject when contributed, and (ii) in
the case of any property distributed to a Partner by the Partnership, the
Partnership's Carrying Value of such property at the time such property is
distributed, reduced by any indebtedness either assumed by such Partner upon
such distribution or to which such property is subject at the time of
distribution as determined under Section 752 of the Code and the Regulations
thereunder. The aggregate Agreed Value of the Contributed Property contributed
or deemed contributed by each Partner as of the date hereof is as set forth in
Exhibit A.
"Agreement" means this Agreement of Limited Partnership, as it may be
amended, supplemented or restated from time to time.
"Assignee" means a Person to whom one or more Partnership Units have
been transferred in a manner permitted under this Agreement, but who has not
become a Substituted Limited Partner, and who has the rights set forth in
Section 11.5.
"Available Cash" means, with respect to any period for which such
calculation is being made, (i) the sum of:
(a) the Partnership's Net Income or Net Loss (as the case may
be) for such period (without regard to adjustments resulting from
allocations described in Sections 1.A through 1.E of Exhibit C);
(b) Depreciation and all other noncash charges deducted in
determining Net Income or Net Loss for such period;
(c) the amount of any reduction in the reserves of the
Partnership referred to in clause (ii)(f) below (including, without
limitation, reductions resulting because the General Partner determines
such amounts are no longer necessary);
(d) the excess of proceeds from the sale, exchange,
disposition, or refinancing of Partnership property for such period
over the gain recognized from such sale, exchange, disposition, or
refinancing during such period (excluding Terminating Capital
Transactions); and
(e) all other cash received by the Partnership for such period
that was not included in determining Net Income or Net Loss for such
period;
(ii) less the sum of:
(a) all principal debt payments made by the Partnership
during such period;
(b) capital expenditures made by the Partnership during
such period;
(c) investments made by the Partnership during such
period in any entity (including loans made thereto) to the
extent that such investments are not otherwise described in
clause (ii)(a) or (ii)(b);
(d) all other expenditures and payments not deducted in
determining Net Income or Net Loss for such period;
(e) any amount included in determining Net Income or
Net Loss for such period that was not received by the
Partnership during such period;
(f) the amount of any increase in reserves during such
period which the General Partner determines to be necessary
or appropriate in its sole and absolute discretion; and
(g) the amount of any working capital accounts and
other cash or similar balances which the General Partner
determines to be necessary or appropriate, in its sole and
absolute discretion.
Notwithstanding the foregoing, Available Cash shall not include any
cash received or reductions in reserves, or take into account any disbursements
made or reserves established, after commencement of the dissolution and
liquidation of the Partnership.
"Book-Tax Disparities" means, with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or Adjusted
Property and the adjusted basis thereof for federal income tax purposes as of
such date. A Partner's share of the Partnership's Book-Tax Disparities in all of
its Contributed Property and Adjusted Property will be reflected by the
difference between such Partner's Capital Account balance as maintained pursuant
to Exhibit B and the hypothetical balance of such Partner's Capital Account
computed as if it had been maintained strictly in accordance with federal income
tax accounting principles.
"Business Day" means any day except a Saturday, Sunday or other day on
which commercial banks in New York, New York are authorized or required by law
to close.
"Capital Account" means the Capital Account maintained for a Partner
pursuant to Exhibit B hereof.
"Capital Contribution" means, with respect to any Partner, any cash, cash
equivalents or the Agreed Value of Contributed Property which such Partner
contributes or is deemed to contribute to the Partnership pursuant to Section
4.1, 4.2, or 4.3 hereof.
"Carrying Value" means (i) with respect to a Contributed Property or
Adjusted Property, the 704(c) Value of such property, reduced (but not below
zero) by all Depreciation with respect to such Property charged to the Partners'
Capital Accounts following the contribution of or adjustment with respect to
such Property; and (ii) with respect to any other Partnership property, the
adjusted basis of such property for federal income tax purposes, all as of the
time of determination. The Carrying Value of any property shall be adjusted from
time to time in accordance with Exhibit B hereof, and to reflect changes,
additions or other adjustments to the Carrying Value for dispositions and
acquisitions of Partnership properties, as deemed appropriate by the General
Partner.
"Cash Amount" means an amount of cash per Partnership Unit equal to the
Value on the Valuation Date of the REIT Shares Amount.
"Certificate" means the Certificate of Limited Partnership relating to the
Partnership to be filed simultaneously herewith in the office of the Delaware
Secretary of State, as amended from time to time in accordance with the terms
hereof and the Act.
"Code" means the Internal Revenue Code of 1986, as amended and in effect
from time to time, as interpreted by the applicable regulations thereunder. Any
reference herein to a specific section or sections of the Code shall be deemed
to include a reference to any corresponding provision of future law.
"Consent" means the consent or approval of a proposed action by a Partner
given in accordance with Section 14.2 hereof.
"Contributed Property" means each property or other asset, in such form as
may be permitted by the Act (but excluding cash), contributed or deemed
contributed to the Partnership (including deemed contributions to the
Partnership on termination and reconstitution thereof pursuant to Section 708 of
the Code). Once the Carrying Value of a Contributed Property is adjusted
pursuant to Exhibit B hereof, such property shall no longer constitute a
Contributed Property for purposes of Exhibit B hereof, but shall be deemed an
Adjusted Property for such purposes.
"Conversion Factor" means 1.0, provided that in the event that the Company
(i) declares or pays a dividend on its outstanding REIT Shares in REIT Shares or
makes a distribution to all holders of its outstanding REIT Shares in REIT
Shares; (ii) subdivides its outstanding REIT Shares; or (iii) combines its
outstanding REIT Shares into a smaller number of REIT Shares, the Conversion
Factor shall be adjusted by multiplying the Conversion Factor by a fraction, the
numerator of which shall be the number of REIT Shares issued and outstanding on
the record date for such dividend, distribution, subdivision or combination
assuming for such purpose that such dividend, distribution, subdivision or
combination has occurred as of such time, and the denominator of which shall be
the actual number of REIT Shares (determined without the above assumption)
issued and outstanding on the record date for such dividend, distribution,
subdivision or combination. Any adjustment to the Conversion Factor shall become
effective immediately after the effective date of such event retroactive to the
record date, if any, for such event.
"Declaration of Trust" means the Second Amended and Restated Declaration of
Trust, dated as of February 6, 1985, as amended, of Vinings Investment
Properties Trust.
"Depreciation" means, for each taxable year, an amount equal to the federal
income tax depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such year, except that if the Carrying
Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such year or other period, Depreciation shall be an
amount which bears the same ratio to such beginning Carrying Value as the
federal income tax depreciation, amortization, or other cost recovery deduction
for such year bears to such beginning adjusted tax basis; provided, however,
that if the federal income tax depreciation, amortization, or other cost
recovery deduction for such year is zero, Depreciation shall be determined with
reference to such beginning Carrying Value using any reasonable method selected
by the General Partner.
"General Partner" means the Company, in its capacity as the general partner
of the Partnership, or its successors as general partner of the Partnership.
"General Partner Interest" means a Partnership Interest held by the General
Partner, in its capacity as general partner. A General Partner Interest may be
expressed as a number of Partnership Units.
"IRS" means the Internal Revenue Service, which administers the internal
revenue laws of the United States.
"Immediate Family" means, with respect to any natural Person, such natural
Person's spouse and such natural Person's natural or adoptive parents,
descendants, nephews, nieces, brothers, and sisters.
"Incapacity" or "Incapacitated" means, (i) as to any individual Partner,
death, total physical disability or entry by a court of competent jurisdiction
adjudicating him incompetent to manage his Person or his estate; (ii) as to any
corporation which is a Partner, the filing of a certificate of dissolution, or
its equivalent, for the corporation or the revocation of its charter; (iii) as
to any partnership which is a Partner, the dissolution and commencement of
winding up of the partnership; (iv) as to any estate which is a Partner, the
distribution by the fiduciary of the estate's entire interest in the
Partnership; (v) as to any trustee of a trust which is a Partner, the
termination of the trust (but not the substitution of a new trustee); or (vi) as
to any Partner, the bankruptcy of such Partner. For purposes of this definition,
bankruptcy of a Partner shall be deemed to have occurred when (a) the Partner
commences a voluntary proceeding seeking liquidation, reorganization or other
relief under any bankruptcy, insolvency or other similar law now or hereafter in
effect; (b) the Partner is adjudged as bankrupt or insolvent, or a final and
nonappealable order for relief under any bankruptcy, insolvency or similar law
now or hereafter in effect has been entered against the Partner; (c) the Partner
executes and delivers a general assignment for the benefit of the Partner's
creditors; (d) the Partner files an answer or other pleading admitting or
failing to contest the material allegations of a petition filed against the
Partner in any proceeding of the nature described in clause (b) above; (e) the
Partner seeks, consents to or acquiesces in the appointment of a trustee,
receiver or liquidator for the Partner or for all or any substantial part of the
Partner's properties; (f) any proceeding seeking liquidation, reorganization or
other relief of or against such Partner under any bankruptcy, insolvency or
other similar law now or hereafter in effect has not been dismissed within one
hundred twenty (120) days after the commencement thereof; (g) the appointment
without the Partner's consent or acquiescence of a trustee, receiver or
liquidator has not been vacated or stayed within ninety (90) days of such
appointment; or (h) an appointment referred to in clause (g) which has been
stayed is not vacated within ninety (90) days after the expiration of any such
stay.
"Indemnitee" means (i) any Person made a party to a proceeding by reason of
(A) his status as the General Partner, or as a director, trustee or officer of
the Partnership or the General Partner, or (B) his or its liabilities, pursuant
to a loan guarantee or otherwise, for any indebtedness of the Partnership or any
Subsidiary of the Partnership (including, without limitation, any indebtedness
which the Partnership or any Subsidiary of the Partnership has assumed or taken
assets subject to); and (ii) such other Persons (including Affiliates of the
General Partner or the Partnership) as the General Partner may designate from
time to time (whether before or after the event giving rise to potential
liability), in its sole and absolute discretion.
"Limited Partner" means the Company and any other Person named as a Limited
Partner in Exhibit A attached hereto, as such Exhibit may be amended from time
to time, or any Substituted Limited Partner or Additional Limited Partner, in
such Person's capacity as a Limited Partner of the Partnership.
"Limited Partner Interest" means a Partnership Interest of a Limited
Partner in the Partnership representing a fractional part of the Partnership
Interests of all Partners and includes any and all benefits to which the holder
of such a Partnership Interest may be entitled, as provided in this Agreement,
together with all obligations of such Person to comply with the terms and
provisions of this Agreement. A Limited Partner Interest may be expressed as a
number of Partnership Units.
"Liquidating Event" has the meaning set forth in Section 13.1.
"Liquidator" has the meaning set forth in Section 13.2.
"Net Income" means, for any taxable period, the excess, if any, of the
Partnership's items of income and gain for such taxable period over the
Partnership's items of loss and deduction for such taxable period. The items
included in the calculation of Net Income shall be determined in accordance with
federal income tax accounting principles, subject to the specific adjustments
provided for in Exhibit B.
"Net Loss" means, for any taxable period, the excess, if any, of the
Partnership's items of loss and deduction for such taxable period over the
Partnership's items of income and gain for such taxable period. The items
included in the calculation of Net Loss shall be determined in accordance with
federal income tax accounting principles, subject to the specific adjustments
provided for in Exhibit B.
"Nonrecourse Built-in Gain" means, with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage or negative
pledge securing a Nonrecourse Liability, the amount of any taxable gain that
would be allocated to the Partners pursuant to Section 2.B of Exhibit C if such
properties were disposed of in a taxable transaction in full satisfaction of
such liabilities and for no other consideration.
"Nonrecourse Deductions" has the meaning set forth in Regulations Section
1.704-2(b)(1), and the amount of Nonrecourse Deductions for a Partnership
taxable year shall be determined in accordance with the rules of Regulations
Section 1.704-2(c).
"Nonrecourse Liability" has the meaning set forth in Regulations Section
1.752-1(a)(2).
"Notice of Redemption" means the Notice of Redemption substantially in the
form of Exhibit D to this Agreement.
"Partner" means a General Partner or a Limited Partner, and "Partners"
means the General Partner and the Limited Partners collectively.
"Partner Minimum Gain" means an amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i)(3).
"Partner Nonrecourse Debt" has the meaning set forth in Regulations Section
1.704-2(b)(4).
"Partner Nonrecourse Deductions" has the meaning set forth in Regulations
Section 1.704-2(i)(2), and the amount of Partner Nonrecourse Deductions with
respect to a Partner Nonrecourse Debt for a Partnership taxable year shall be
determined in accordance with the rules of Regulations Section 1.704-2(i)(2).
"Partnership" means the limited partnership formed under the Act and
pursuant to this Agreement, as it may be amended and restated, and any successor
thereto.
"Partnership Interest" means an ownership interest in the Partnership
representing a Capital Contribution by either a Limited Partner or the General
Partner and includes any and all benefits to which the holder of such a
Partnership Interest may be entitled as provided in this Agreement, together
with all obligations of such Person to comply with the terms and provisions of
this Agreement. A Partnership Interest may be expressed as a number of
Partnership Units.
"Partnership Minimum Gain" has the meaning set forth in Regulations Section
1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as any net
increase or decrease in a Partnership Minimum Gain, for a Partnership taxable
year shall be determined in accordance with the rules of Regulations Section
1.704-2(d).
"Partnership Record Date" means the record date established by the General
Partner for the distribution of Available Cash pursuant to Section 5.1 hereof,
which record date shall be the same as the record date established by the
Company for a distribution to its shareholders of some of all of its portion of
such distribution.
"Partnership Unit" means a fractional, undivided share of the Partnership
Interests of all Partners issued pursuant to Sections 4.1, 4.2 and 4.3. The
number of Partnership Units outstanding and the Percentage Interest in the
Partnership represented by such Units are set forth in Exhibit A attached
hereto, as such Exhibit may be amended from time to time. The ownership of
Partnership Units shall be evidenced by such form of certificate for units as
the General Partner adopts from time to time unless the General Partner
determines that the Partnership Units shall be uncertificated securities.
"Partnership Year" means the fiscal year of the Partnership, which shall be
the calendar year.
"Percentage Interest" means, as to a Partner, its interest in the
Partnership as determined by dividing the Partnership Units owned by such
Partner by the total number of Partnership Units then outstanding and as
specified in Exhibit A attached hereto, as such Exhibit may be amended from time
to time.
"Person" means an individual or a corporation, partnership, trust,
unincorporated organization, association or other entity.
"Recapture Income" means any gain recognized by the Partnership upon the
disposition of any property or asset of the Partnership, which gain is
characterized as ordinary income because it represents the recapture of
deductions previously taken with respect to such property or asset.
"Redeeming Partner" has the meaning set forth in Section 8.6 hereof.
"Redemption Right" shall have the meaning set forth in Section 8.6 hereof.
"Regulations" means the Income Tax Regulations promulgated under the Code,
as such regulations may be amended from time to time (including corresponding
provisions of succeeding regulations).
"REIT" means a real estate investment trust under Section 856 of the Code.
"REIT Share" shall mean a share of beneficial interest of the Company,
without par value.
"REIT Shares Amount" shall mean a number of REIT Shares equal to the
product of the number of Partnership Units offered for redemption by a Redeeming
Partner, multiplied by the Conversion Factor, provided that in the event the
Company issues to all holders of REIT Shares rights, options, warrants or
convertible or exchangeable securities entitling the shareholders to subscribe
for or purchase REIT Shares, or any other securities or property (collectively,
the "rights"), then the REIT Shares Amount shall also include such rights that a
holder of that number of REIT Shares would be entitled to receive.
"Residual Gain" or "Residual Loss" means any item of gain or loss, as the
case may be, of the Partnership recognized for federal income tax purposes
resulting from a sale, exchange or other disposition of Contributed Property or
Adjusted Property, to the extent such item of gain or loss is not allocated
pursuant to Section 2.B.1(a) or 2.B.2(a) of Exhibit C to eliminate Book-Tax
Disparities.
"704(c) Value" of any Contributed Property means the fair market value of
such property or other consideration at the time of contribution, as determined
by the General Partner using such reasonable method of valuation as it may
adopt; provided, however, that the 704(c) Value of any property deemed
contributed to the Partnership for federal income tax purposes upon termination
and reconstitution thereof pursuant to Section 708 of the Code shall be
determined in accordance with Exhibit B hereof. Subject to Exhibit B hereof, the
General Partner shall, in its sole and absolute discretion, use such method as
it deems reasonable and appropriate to allocate the aggregate of the 704(c)
Values of Contributed Properties in a single or integrated transaction among the
separate properties on a basis proportional to their respective fair market
values.
"Specified Redemption Date" means the tenth (10th) Business Day after
receipt by the Company of a Notice of Redemption; provided that no Specified
Redemption Date shall occur before one (1) year from the date of this Agreement,
provided further that if the Company combines its outstanding REIT Shares, no
Specified Redemption Date shall occur after the record date of such combination
of REIT Shares and prior to the effective date of such combination.
"Subsidiary" means, with respect to any Person, any corporation,
partnership or other entity of which a majority of (i) the voting power of the
voting equity securities; or (ii) the outstanding equity interests, is owed,
directly or indirectly, by such Person.
"Substituted Limited Partner" means a Person who is admitted as a Limited
Partner to the Partnership pursuant to Section 11.4.
"Terminating Capital Transaction" means any sale or other disposition of
all or substantially all of the assets of the Partnership or a related series of
transactions that, taken together, result in the sale or other disposition of
all or substantially all of the assets of the Partnership.
"Unrealized Gain" attributable to any item of Partnership property means,
as of any date of determination, the excess, if any, of (i) the fair market
value of such property (as determined under Exhibit B hereof) as of such date;
over (ii) the Carrying Value of such property (prior to any adjustment to be
made pursuant to Exhibit B hereof) as of such date.
"Unrealized Loss" attributable to any item of Partnership property means,
as of any date of determination, the excess, if any, of (i) the Carrying Value
of such property (prior to any adjustment to be made pursuant to Exhibit B
hereof) as of such date; over (ii) the fair market value of such property (as
determined under Exhibit B hereof) as of such date.
"Valuation Date" means the date of receipt by the General Partner of a
Notice of Redemption or, if such date is not a Business Day, the first Business
Day thereafter.
"Value" means, with respect to a REIT Share, the average of the daily
market price for the ten (10) consecutive trading days immediately preceding the
Valuation Date. The market price for each such trading day shall be: (i) if the
REIT Shares are listed or admitted to trading on any securities exchange or the
NASDAQ-National Market System, the closing price on such day, or if no such sale
takes place on such day, the average of the closing bid and asked prices on such
day; (ii) if the REIT Shares are not listed or admitted to trading on any
securities exchange or the NASDAQ-National Market System, the last reported sale
price on such day or, if no sale takes place on such day, the average of the
closing bid and asked prices on such day, as reported by a reliable quotation
source designated by the General Partner; or (iii) if the REIT Shares are not
listed or admitted to trading on any securities exchange or the NASDAQ-National
Market System and no such last reported sale price or closing bid and asked
prices are available, the average of the reported high bid and low asked prices
on such day, as reported by a reliable quotation source designated by the
General Partner, or if there shall be no bid and asked prices on such day, the
average of the high bid and low asked prices, as so reported, on the most recent
day (not more than ten (10) days prior to the date in question) for which prices
have been so reported; provided that if there are no bid and asked prices
reported during the ten (10) days prior to the date in question, the Value of
the REIT Shares shall be determined by the General Partner acting in good faith
on the basis of such quotations and other information as it considers, in its
reasonable judgment, appropriate. In the event the REIT Shares Amount includes
rights that a holder of REIT Shares would be entitled to receive, then the Value
of such rights shall be determined by the General Partner acting in good faith
on the basis of such quotations and other information as it considers, in its
reasonable judgment, appropriate.
ARTICLE 2
ORGANIZATIONAL MATTERS
Section 2.1 Formation
----------- ---------
The Partners hereby form a limited partnership under and pursuant to
the Act. Except as expressly provided herein to the contrary, the rights and
obligations of the Partners and the administration and termination of the
Partnership shall be governed by the Act. The Partnership Interest of each
Partner shall be personal property for all purposes.
Section 2.2 Name
----------- ----
The name of the Partnership shall be Vinings Investment Properties,
L.P. The Partnership's business may be conducted under any other name or names
deemed advisable by the General Partner, including the name of the General
Partner or any Affiliate thereof. The words "Limited Partnership," "L.P.,"
"Ltd." or similar words or letters shall be included in the Partnership's name
where necessary for the purposes of complying with the laws of any jurisdiction
that so requires. The General Partner in its sole and absolute discretion may
change the name of the Partnership at any time and from time to time and shall
notify the Limited Partners of such change in the next regular communication to
the Limited Partners.
Section 2.3 Registered Office and Agent; Principal Office
----------- ---------------------------------------------
The address of the registered office of the Partnership in the State of
Delaware and the name and address of the registered agent for service of process
on the Partnership in the State of Delaware is The Corporation Trust Company,
Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801. The
principal office of the Partnership shall be 3111 Paces Mill Road, Suite A-200,
Atlanta, GA 30339, or such other place as the General Partner may from time to
time designate by notice to the Limited Partners. The Partnership may maintain
offices at such other place or places within or outside the State of Delaware as
the General Partner deems advisable.
Section 2.4 Power of Attorney
----------- -----------------
A. Each Limited Partner and each Assignee hereby constitutes and
appoints the General Partner, any Liquidator, and authorized officers and
attorneys-in-fact of each, and each of those acting singly, in each case with
full power of substitution, as its true and lawful agent and attorney-in-fact,
with full power and authority in its name, place and stead to:
(1) execute, swear to, acknowledge, deliver, file and record in the
appropriate public offices (a) all certificates, documents and other
instruments (including, without limitation, this Agreement and the
Certificate and all amendments or restatement thereof) that the General
Partner or the Liquidator deems appropriate or necessary to form, qualify
or continue the existence or qualification of the Partnership as a limited
partnership (or a partnership in which the Limited Partners have limited
liability) in the State of Delaware and in all other jurisdictions in which
the Partnership may or plans to conduct business or own property; (b) all
instruments that the General Partner deems appropriate or necessary to
reflect any amendment, change, modification or restatement of this
Agreement in accordance with its terms; (c) all conveyances and other
instruments or documents that the General Partner or the Liquidator deems
appropriate or necessary to reflect the dissolution and liquidation of the
Partnership pursuant to the terms of this Agreement, including, without
limitation, a certificate of cancellation; (d) all instruments relating to
the admission, withdrawal, removal or substitution of any Partner pursuant
to, or other events described in, Article 11, 12 or 13 hereof or the
Capital Contribution of any Partner; and (e) all certificates, documents
and other instruments relating to the determination of the rights,
preferences and privileges of Partnership Interest; and
(2) execute, swear to, seal, acknowledge and file all ballots,
consents, approvals, waivers, certificates and other instruments
appropriate or necessary, in the sole and absolute discretion of the
General Partner or any Liquidator, to make, evidence, give, confirm or
ratify any vote, consent, approval, agreement or other action which is made
or given by the Partners hereunder or is consistent with the terms of this
agreement or appropriate or necessary, in the sole discretion of the
General Partner or any Liquidator, to effectuate the terms or intent of
this Agreement.
Nothing contained herein shall be construed as authorizing the General
Partner or any Liquidator to amend this Agreement except in accordance with
Article 14 hereof or as may be otherwise expressly provided for in this
Agreement.
B. The foregoing power of attorney is hereby declared to be irrevocable
and a power coupled with an interest, in recognition of the fact that each of
the Partners will be relying upon the power of the General Partner and any
Liquidator to act as contemplated by this agreement in any filing or other
action by it on behalf of the Partnership, and it shall survive and not be
affected by the subsequent Incapacity of any Limited Partner or Assignee and the
transfer of all or any portion of such Limited Partner's or Assignee's
Partnership Units and shall extend to such Limited Partner's or Assignee's
heirs, successors, assigns and personal representatives. Each such Limited
Partner or Assignee hereby agrees to be bound by any representation made by the
General Partner or any Liquidator, acting in good faith pursuant to such power
of attorney, and each such Limited Partner or Assignee hereby waives any and all
defenses which may be available to contest, negate or disaffirm the action of
the General Partner or any Liquidator, taken in good faith under such power of
attorney. Each Limited Partner or Assignee shall execute and deliver to the
General Partner or the Liquidator, within fifteen (15) days after receipt of the
General Partner's or Liquidator's request therefor, such further designation,
powers of attorney and other instruments as the General Partner or the
Liquidator, as the case may be, deems necessary to effectuate this Agreement and
the purposes of the Partnership.
Section 2.5 Term
----------- ----
The term of the Partnership shall commence on the date hereof and shall
continue until December 31, 2095, unless, the Partnership is dissolved sooner
pursuant to the provisions of Article 13 or as otherwise provided by law.
ARTICLE 3
PURPOSE
Section 3.1 Purpose and Business
----------- --------------------
The purpose and nature of the business to be conducted by the Partnership
is (i) to conduct any business that may be lawfully conducted by a limited
partnership organized pursuant to the Act; provided, however, that such business
shall be limited to and conducted in such a manner as to permit the Company at
all times to be classified as a REIT, unless the Company ceases to qualify as a
REIT for reasons other than the conduct of the business of the Partnership; (ii)
to enter into any partnership, joint venture or other similar arrangement to
engage in any of the foregoing or to own interests in any entity engaged in any
of the foregoing; and (iii) to do anything necessary or incidental to the
foregoing. In connection with the foregoing, and without limiting the Company's
right, in its sole discretion, to cease qualifying as a REIT, the Partners
acknowledge the Company's current status as a REIT inures to the benefit of all
of the Partners and not solely the General Partner.
Section 3.2 Powers
----------- ------
The Partnership is empowered to do any and all acts and things
necessary, appropriate, proper, advisable, incidental to or convenient for the
furtherance and accomplishment of the purposes and business described herein and
for the protection and benefit of the Partnership; provided, however, that the
Partnership shall not take, or refrain from taking, any action which, in the
judgment of the General Partner, in its sole and absolute discretion, (i) could
adversely affect the ability of the Company to continue to qualify as a REIT;
(ii) could subject the Company to any additional taxes under Section 857 or
Section 4981 of the Code; or (iii) could violate any law or regulation of any
governmental body or agency having jurisdiction over the Company or its
securities, unless such action (or inaction) shall have been specifically
consented to by the General Partner in writing.
ARTICLE 4
CAPITAL CONTRIBUTIONS
Section 4.1 Capital Contributions of the Partners
----------- -------------------------------------
At the time of the execution of this agreement, the Partners shall make the
Capital Contributions set forth in Exhibit A to this Agreement. To the extent
the Partnership acquires any property by the merger of any other Person into the
Partnership, Persons who receive Partnership Interests in exchange for their
interests in the Person merging into the Partnership shall become Partners and
shall be deemed to have made Capital Contributions as provided in the applicable
merger agreement and as set forth in Exhibit A, as amended to reflect such
deemed Capital Contributions. The Partners shall own Partnership Units in the
amounts set forth for such Partner in Exhibit A and shall have a Percentage
Interest in the Partnership as set forth in Exhibit A, which Percentage Interest
shall be adjusted in Exhibit A from time to time by the General Partner to the
extent necessary to reflect accurately redemptions, additional Capital
Contributions, the issuance of additional Partnership Units (pursuant to any
merger or otherwise), or similar events having an effect on any Partner's
Percentage Interest. The number of Partnership Units held by the General
Partner, in its capacity as general partner, (equal to one percent (1%) of all
outstanding Partnership Units from time to time)shall be deemed to be the
General Partner Interest. Except as provided in Sections 4.2 and 10.5, the
Partners shall have no obligation to make any additional Capital Contributions
or loans to the Partnership.
Section 4.2 Issuances of Additional Partnership Interests
----------- ---------------------------------------------
A. The General Partner is hereby authorized to cause the Partnership
from time to time to issue to the Partners (including the General Partner) or
other Persons additional Partnership Units or other Partnership Interests in one
or more classes, or one or more series of any of such classes, with such
designations, preferences and relative, participating, optional or other special
rights, powers and duties, including rights, powers and duties senior to Limited
Partner Interests, all as shall be determined by the General Partner in its sole
and absolute discretion subject to Delaware law, including, without limitation,
(i) the allocations of items of Partnership income, gain, loss, deduction and
credit to each such class or series of Partnership Interests; (ii) the right of
each such class or series of Partnership Interests to share in Partnership
distributions; and (iii) the rights of each such class or series of Partnership
Interests upon dissolution and liquidation of the Partnership; provided that no
such additional Partnership Units or other Partnership Interests shall be issued
to the Company, as the General Partner or a Limited Partner, unless either
(a)(1) the additional Partnership Interests are issued in connection with an
issuance of REIT Shares or other shares by the Company, which shares have
designations, preferences and other rights such that the economic interests
attributable to such shares are substantially similar to the designations,
preferences and other rights of the additional Partnership Interests issued to
the Company in accordance with this Section 4.2.A, and (2) the Company shall
make a Capital Contribution to the Partnership in an amount equal to the
proceeds raised in connection with such issuance, or (b) the additional
Partnership Interests are issued to all Partners in proportion to their
respective Percentage Interests. In addition, the Company may acquire Units from
other Partners pursuant to this Agreement.
B. From and after the date hereof, the Company shall not issue any
additional REIT Shares (other than REIT Shares issued pursuant to Section 8.6),
or rights, options, warrants or convertible or exchangeable securities
containing the right to subscribe for or purchase REIT Shares (collectively "New
Securities") other than to all holders of REIT Shares unless (i) the General
Partner shall cause the Partnership to issue to the Company, Partnership
Interests or rights, options, warrants or convertible or exchangeable securities
of the Partnership having designations, preferences and other rights, all such
that the economic interests are substantially similar to those of the New
Securities; and (ii) the Company contributes to the Partnership the proceeds
from the issuance of such New Securities and from the exercise of rights
contained in such New Securities. Without limiting the foregoing, the Company is
expressly authorized to issue New Securities for less than fair market value,
and the General Partner is expressly authorized to cause the Partnership to
issue to the Company corresponding Partnership Interests, so long as (x) the
General Partner concludes in good faith that such issuance is in the interests
of the Company and the Partnership (for example, and not by way of limitation,
the issuance of REIT Shares and corresponding Units pursuant to an employee
stock purchase plan providing for employee purchases of REIT Shares at a
discount from fair market value or employee stock options that have an exercise
price that is less than the fair market value of the REIT Shares, either at the
time of issuance or at the time of exercise); and (y) the Company contributes
all proceeds from such issuance and exercise to the Partnership.
Section 4.3 Contribution of Proceeds of Issuance of REIT Shares
----------- ---------------------------------------------------
In connection with any issuance of REIT Shares or New Securities
pursuant to Section 4.2, the Company shall contribute to the Partnership any
proceeds (or a portion thereof) raised in connection with such issuance;
provided that if the proceeds actually received by the Company are less than the
gross proceeds of such issuance as a result of any underwriter's discount or
other expenses paid or incurred in connection with such issuance, then the
Company shall be deemed to have made a Capital Contribution to the Partnership
in the amount equal to the sum of the net proceeds of such issuance plus the
amount of such underwriter's discount and other expenses paid by the Company
(which discount and expense shall be treated as an expense for the benefit of
the Partnership for purposes of Section 7.4). In the case of employee purchases
of New Securities at a discount from fair market value, the amount of such
discount representing compensation to the employee, as determined by the General
Partner, shall be treated as an expense of the issuance of such New Securities.
ARTICLE 5
DISTRIBUTIONS
Section 5.1 Requirement and Characterization of Distributions
----------- -------------------------------------------------
The General Partner shall distribute at least quarterly an amount equal
to 100% of Available Cash generated by the Partnership during such quarter or
shorter period to the Partners who are Partners on the Partnership Record Date
with respect to such quarter or shorter period in accordance with their
respective Percentage Interests on such Partnership Record Date; provided that
in no event may a Partner receive a distribution of Available Cash with respect
to a Partnership Unit if such Partner is entitled to receive a distribution out
of such Available Cash with respect to a REIT Share for which such Partnership
Unit has been exchanged and such distribution shall be made to the Company. The
General Partner shall take such reasonable efforts, as determined by it in its
sole and absolute discretion and consistent with the Company's qualification as
a REIT, to distribute Available Cash to the Limited Partners so as to preclude
any such distribution or portion thereof from being treated as part of a sale of
property to the Partnership by a Limited Partner under Section 707 of the Code
or the Regulations thereunder; provided that the General Partner and the
Partnership shall not have liability to a Limited Partner under any
circumstances as a result of any distribution to a Limited Partner being so
treated.
Section 5.2 Amounts Withheld
----------- ----------------
All amounts withheld pursuant to the Code or any provisions of any
state or local tax law and Section 10.5 hereof with respect to any allocation,
payment or distribution to the Partners or Assignees shall be treated as amounts
distributed to the Partners or Assignees pursuant to Section 5.1 for all
purposes under this Agreement.
Section 5.3 Distributions Upon Liquidation
----------- ------------------------------
Proceeds from a Terminating Capital Transaction and any other cash
received or reductions in reserves made after commencement of the liquidation of
the Partnership shall be distributed to the Partners in accordance with Section
13.2
ARTICLE 6
ALLOCATIONS
Section 6.1 Allocations For Capital Account Purposes
----------- ----------------------------------------
For purposes of maintaining the Capital Accounts and in determining the
rights of the Partners among themselves, the Partnership's items of income,
gain, loss and deduction (computed in accordance with Exhibit B hereof) shall be
allocated among the Partners in each taxable year (or portion thereof) as
provided herein below.
A. Net Income shall be allocated (i) first, to the General Partner to
the extent that Net Losses previously allocated to the General Partner pursuant
to the last sentence of Section 6.1.B exceed Net Income previously allocated to
the General Partner pursuant to this clause (i) of Section 6.1.A; and (ii)
thereafter, Net Income shall be allocated to the Partners in accordance with
their respective Percentage Interests.
B. After giving effect to the special allocations set forth in Section
1 of Exhibit C attached hereto, Net Losses shall be allocated to the Partners in
accordance with their respective Percentage Interests; provided that Net Losses
shall not be allocated to any Limited Partner pursuant to this Section 6.1.B to
the extent that such allocation would cause such Limited Partner to have an
Adjusted Capital Account Deficit at the end of such taxable year (or increase
any existing Adjusted Capital Account Deficit). All Net Losses in excess of the
limitations set forth in this Section 6.1.B shall be allocated to the General
Partner.
C. For purposes of Regulations Section 1.752-3(a), the Partners agree
that Nonrecourse Liabilities of the Partnership in excess of the sum of (i) the
amount of Partnership Minimum Gain; and (ii) the total amount of Nonrecourse
Built-in Gain shall be allocated among the Partners in accordance with their
respective Percentage Interests.
D. Any gain allocated to the Partners upon the sale or other taxable
disposition of any Partnership asset shall, to the extent possible, after taking
into account other required allocations of gain pursuant to Exhibit C, be
characterized as Recapture Income in the same proportions and to the same extent
as such Partners have been allocated any deductions directly or indirectly
giving rise to the treatment of such gains as Recapture Income.
ARTICLE 7
MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1 Management
----------- ----------
A. Except as otherwise expressly provided in this Agreement, all
management powers over the business and affairs the Partnership are and shall be
exclusively vested in the General Partner, and no Limited Partner shall have any
right to participate in or exercise control or management power over the
business and affairs of the Partnership. The General Partner may not be removed
by the Limited Partners with or without cause. In addition to the powers now or
hereafter granted a general partner of a limited partnership under applicable
law or which are granted to the General Partner under any other provision of
this Agreement, the General Partner, subject to Section 7.3 hereof, shall have
full power and authority to do all things deemed necessary or desirable by it to
conduct the business of the Partnership, to exercise all powers set forth in
Section 3.2 hereof and to effectuate the purposes set forth in Section 3.1
hereof, including, without limitation:
(1) the making of any expenditures, the lending or borrowing of money
(including, without limitation, making prepayments on loans and borrowing
money to permit the Partnership to make distributions to its Partners in
such amounts as will permit the Company (so long as the Company qualifies
as a REIT) to avoid the payment of any federal income tax (including, for
this purpose, any excise tax pursuant to Section 4981 of the Code) and to
make distributions to its shareholders in amounts sufficient to permit the
Company to maintain REIT status), the assumption or guarantee of, or other
contracting for, indebtedness and other liabilities, the issuance of
evidence of indebtedness (including the securing of the same by deed,
mortgage, deed of trust or other lien or encumbrance on the Partnership's
assets) and the incurring of any obligations it deems necessary for the
conduct of the activities of the Partnership;
(2) the making of tax, regulatory and other filings, or rendering of
periodic or other reports to governmental or other agencies having
jurisdiction over the business or assets of the Partnership;
(3) the acquisition, disposition, mortgage, pledge, encumbrance,
hypothecation or exchange of any assets of the Partnership (including the
exercise or grant of any conversion, option, privilege, or subscription
right or other right available in connection with any assets at any time
held by the Partnership) or the merger or other combination of the
Partnership with or into another entity (all of the foregoing subject to
any prior approval only to the extent required by Section 7.3 hereof);
(4) the use of the assets of the Partnership (including, without
limitation, cash on hand) for any purpose consistent with the terms of this
Agreement and on any terms it sees fit, including, without limitation, the
financing of the conduct of the operations of the Company, the Partnership
or any of the Partnership's Subsidiaries, the lending of funds to other
Persons (including, without limitation, the Subsidiaries of the Partnership
and/or the Company) and the repayment of obligations of the Partnership and
its Subsidiaries and any other Person in which it has an equity investment,
and the making of capital contributions to its Subsidiaries;
(5) the management, operation, leasing, landscaping, repair,
alteration, demolition or improvement of any real property or improvements
owed by the Partnership or any Subsidiary of the Partnership;
(6) the negotiation, execution, and performance of any contracts,
conveyances or other instruments that the General Partner considers useful
or necessary to the conduct of the Partnership's operations or the
implementation of the General Partner's powers under this Agreement,
including contracting with contractors, developers, consultants,
accountants, legal counsel, other professional advisors and other agents
and the payment of their expenses and compensation out of the Partnership's
assets;
(7) the distribution of Partnership cash or other Partnership assets
in accordance with this Agreement;
(8) holding, managing, investing and reinvesting cash and other assets
of the Partnership;
(9) the collection and receipt of revenues and income of the
Partnership;
(10) the establishment of one or more divisions of the Partnership,
the selection and dismissal of employees of the Partnership (including,
without limitation, employees having titles such as "president," "vice
president," "secretary" and "treasurer" of the Partnership), and agents,
outside attorneys, accountants, consultants and contractors of the
Partnership, and the determination of their compensation and other terms of
employment or hiring;
(11) the maintenance of such insurance for the benefit of the
Partnership and the Partners as it deems necessary or appropriate;
(12) the formation of, or acquisition of an interest in, and the
contribution of property to, any further limited or general partnerships,
joint ventures or other relationships that it deems desirable (including,
without limitation, the acquisition of interests in, and the contributions
of property to, its Subsidiaries and any other Person in which it has an
equity investment from time to time);
(13) the control of any matters affecting the rights and obligations
of the Partnership, including the settlement, compromise, submission to
arbitration or any other form of dispute resolution, or abandonment of, any
claim, cause of action, liability, debt or damages, due or owing to or from
the Partnership, the commencement or defense of suits, legal proceedings,
administrative proceedings, arbitration or other forms of dispute
resolution, and the representation of the Partnership in all suits or legal
proceedings, administrative proceedings, arbitrations or other forms of
dispute resolution, the incurring of legal expense, and the indemnification
of any Person against liabilities and contingencies to the extent permitted
by law;
(14) the undertaking of any action in connection with the
Partnership's direct or indirect investment in its Subsidiaries or any
other Person (including, without limitation, the contribution or loan of
funds by the Partnership to such Persons);
(15) the determination of the fair market value of any Partnership
property distributed in kind using such reasonable method of valuation as
the General Partner may adopt;
(16) the exercise, directly or indirectly, through any
attorney-in-fact acting under a general or limited power of attorney, of
any right, including the right to vote, appurtenant to any asset or
investment held by the Partnership;
(17) the exercise of any of the powers of the General Partner
enumerated in this Agreement on behalf of or in connection with any
Subsidiary of the Partnership or any other Person in which the Partnership
has a direct or indirect interest, or jointly with any such Subsidiary or
other Person;
(18) the exercise of any of the powers of the General Partner
enumerated in this Agreement on behalf of any Person in which the
Partnership does not have an interest pursuant to contractual or other
arrangements with such Person;
(19) the making, execution and delivery of any and all deeds, leases,
notes, mortgages, deeds of trust, security agreements, conveyances,
contracts, guarantees, warranties, indemnities, waivers, releases or legal
instruments or agreements in writing necessary or appropriate, in the
judgment of the General Partner, for the accomplishment of any of the
powers of the General Partner enumerated in this Agreement; and
(20) the issuance of additional Partnership Units, as appropriate, in
connection with Capital Contributions by Additional Limited Partners and
additional Capital Contributions by Partners pursuant to Article 4 hereof.
B. Each of the Limited Partners agrees that the General Partner is
authorized to execute, deliver and perform the above-mentioned agreements and
transactions on behalf of the Partnership without any further act, approval or
vote of the Partners, notwithstanding any other provision of this Agreement
(except as provided in Section 7.3), the Act or any applicable law, rule or
regulation, to the fullest extent permitted under the Act or other applicable
law, rule or regulation. The execution, delivery or performance by the General
Partner or the Partnership of any agreement authorized or permitted under this
Agreement shall not constitute a breach by the General Partner of any duty that
the General Partner may owe the Partnership or the Limited Partners or any other
Persons under this Agreement or of any duty stated or implied by law or equity.
C. At all times from and after the date hereof, the General Partner may
cause the Partnership to establish and maintain at any and all times working
capital accounts and other cash or similar balances in such amounts as the
General Partner, in its sole and absolute discretion, deems appropriate and
reasonable from time to time.
D. In exercising its authority under this Agreement, the General Partner
may, but shall be under no obligation to, take into account the tax consequences
to any Partner of any action taken by it. The General Partner and the
Partnership shall not have liability to a Limited Partner under any
circumstances as a result of an income tax liability incurred by such Limited
Partner as a result of an action (or inaction) by the General Partner taken
pursuant to its authority under this Agreement and in accordance with the terms
of Section 7.3.
Section 7.2 Certificate of Limited Partnership
----------- ----------------------------------
The General Partner shall file, simultaneously herewith, the Certificate
with the Secretary of State of Delaware as required by the Act. The General
Partner shall use all reasonable efforts to cause to be filed such other
certificates or documents as may be reasonable and necessary or appropriate for
the formation, continuation, qualification and operation of a limited
partnership (or a partnership in which the limited partners have limited
liability) in the State of Delaware and any other state, or the District of
Columbia, in which the Partnership may elect to do business or own property. To
the extent that such action is determined by the General Partner to be
reasonable and necessary or appropriate, the General Partner shall file
amendments to and restatements of the Certificate and do all of the things to
maintain the Partnership as a limited partnership (or a partnership in which the
limited partners have limited liability) under the laws of the State of Delaware
and each other state, or the District of Columbia, in which the Partnership may
elect to do business or own property. Subject to the terms of Section 8.5.A(4)
hereof, the General Partner shall not be required, before or after filing, to
deliver or mail a copy of the Certificate or any amendment thereto to any
Limited Partner.
Section 7.3 Restrictions on General Partner Authority
----------- -----------------------------------------
A. The General Partner may not take any action in contravention of an
express prohibition or limitation of this Agreement without the written Consent
of Limited Partners holding a majority of the Percentage Interests of the
Limited Partners (including Limited Partner Interests held by the Company), or
such other percentage of the Limited Partners as may be specifically provided
for under a provision of this Agreement.
B. Except as provided in Article 13 hereof, the General Partner may not
cause the Partnership to engage in a Terminating Capital Transaction (including
by way of merger, consolidation or other combination with any other Person),
without the Consent of Limited Partners holding 85% or more of the Percentage
Interests of the Limited Partners (including Limited Partnership Interests held
by the Company).
Section 7.4 Reimbursement of the General Partner and the Company
----------------------------------------------------------------
A. Except as provided in this Section 7.4 and elsewhere in this Agreement
(including the provisions of Articles 5 and 6 regarding distributions, payments,
and allocations to which it may be entitled), the General Partner shall not be
compensated for its services as general partner of the Partnership.
B. The General Partner shall be reimbursed on a monthly basis, or such
other basis as it may determine in its sole and absolute discretion, for all
expenses that it incurs relating to the ownership and operation of, or for the
benefit of, the Partnership; provided that the amount of any such reimbursement
shall be reduced by any interest earned by the General Partner with respect to
bank accounts or other instruments or accounts held by it on behalf of the
Partnership, and provided further than the General Partner shall not be
reimbursed for any (i) directors fees, (ii) income tax liabilities or (iii)
filing or similar fees in connection with maintaining the General Partner's
continued corporate existence that are incurred by the General Partner, but the
Partners acknowledge that all other expenses of the General Partner are deemed
to be for the benefit of the Partnership. Such reimbursement shall be in
addition to any reimbursement made as a result of indemnification pursuant to
Section 7.7 hereof.
C. In the event that the Company shall elect to purchase from its
shareholders REIT Shares for the purpose of delivering such REIT Shares to
satisfy an obligation under any dividend reinvestment program adopted by the
Company, any employee stock purchase plan adopted by the Company, or any similar
obligation or arrangement undertaken by the Company in the future, the purchase
price paid by the Company for such REIT Shares and any other expenses incurred
by the Company in connection with such purchase shall be considered expenses of
the Partnership and shall be reimbursed to the Company, subject to the condition
that: (i) if such REIT Shares subsequently are sold by the Company, the Company
shall pay to the Partnership any proceeds received by the Company for such REIT
Shares (which sales proceeds shall include the amount of dividends reinvested
under any dividend reinvestment or similar program provided that a transfer of
REIT Shares for Units pursuant to Section 8.6 would not be considered a sale for
such purposes); and (ii) if such REIT Shares are not retransferred by the
Company within 30 days after the purchase thereof, the Company, as General
Partner, shall cause the Partnership to cancel a number of Partnership Units
held by the Company, as a Limited Partner, equal to the product obtained by
multiplying the Conversion Factor by the number of such REIT Shares (in which
case such reimbursement shall be treated as a distribution in redemption of
Units held by the Company).
Section 7.5 Outside Activities of the General Partner
----------- -----------------------------------------
The General Partner shall not directly or indirectly enter into or conduct
any business other than in connection with the ownership, acquisition and
disposition of Partnership Interests and the management of the business of the
Partnership, and such activities as are incidental thereto. The General Partner
and any Affiliates of the General Partner may acquire Limited Partner Interests
and shall be entitled to exercise all rights of a Limited Partner relating to
such Limited Partner Interests.
Section 7.6 Contracts with Affiliates
----------- -------------------------
A. The Partnership may lend or contribute funds or other assets to its
Subsidiaries or other Persons in which it has an equity investment and such
Persons may borrow funds from the Partnership, on terms and conditions
established in the sole and absolute discretion of the General Partner. The
foregoing authority shall not create any right or benefit in favor of any
Subsidiary or any other Person.
B. Except as provided in Section 7.5, the Partnership may transfer assets
to joint ventures, other partnerships, corporations or other business entities
in which it is or thereby becomes a participant upon such terms and subject to
such conditions consistent with this Agreement and applicable law as the General
Partner, in its sole and absolute discretion, believes are advisable.
C. Except as expressly permitted by this Agreement, neither the General
Partner nor any of its Affiliates shall sell, transfer or convey any property
to, or purchase any property from, the Partnership, directly or indirectly,
except pursuant to transactions that are determined by the General Partner in
good faith to be fair and reasonable.
D. The General Partner, in its sole and absolute discretion and without the
approval of the Limited Partners, may propose and adopt, on behalf of the
Partnership, employee benefit plans, stock option plans, and similar plans
funded by the Partnership for the benefit of employees of the General Partner,
the Partnership, Subsidiaries of the Partnership or any Affiliate of any of them
in respect of services performed, directly or indirectly, for the benefit of the
Partnership, the General Partner, or any Subsidiaries of the Partnership.
E. The General Partner is expressly authorized to enter into, in the name
and on behalf of the Partnership, a right of first opportunity arrangement and
other conflict avoidance agreements with various Affiliates of the Partnership
and the General Partner, on such terms as the General Partner, in its sole and
absolute discretion, believes are advisable.
Section 7.7 Indemnification
----------- ---------------
A. To the fullest extent permitted by Delaware law, the Partnership shall
indemnify each Indemnitee from and against any and all losses, claims, damages,
liabilities, joint or several, expenses (including, without limitation,
attorneys fees and other legal fees and expenses), judgments, fines,
settlements, and other amounts arising from any and all claims, demands,
actions, suits or proceedings, civil, criminal, administrative or investigative,
that relate to the operations of the Partnership or the Company as set forth in
this Agreement, in which such Indemnitee may be involved, or is threatened to be
involved, as a party or otherwise. Without limitation, the foregoing indemnity
shall extend to any liability of any Indemnitee, pursuant to a loan guaranty or
otherwise for any indebtedness of the Partnership or any Subsidiary of the
Partnership (including without limitation, any indebtedness which the
Partnership or any Subsidiary of the Partnership has assumed or taken subject
to), and the General Partner is hereby authorized and empowered, on behalf of
the Partnership, to enter into one or more indemnity agreements consistent with
the provisions of this Section 7.7 in favor of any Indemnitee having or
potentially having liability for any such indebtedness. Any indemnification
pursuant to this Section 7.7 shall be made only out of the assets of the
Partnership, and neither the General Partner nor any Limited Partner shall have
any obligation to contribute to the capital of the Partnership, or otherwise
provide funds, to enable the Partnership to fund its obligations under this
Section 7.7.
B. Reasonable expenses incurred by an Indemnitee who is a party to a
proceeding shall be paid or reimbursed by the Partnership in advance of the
final disposition of the proceeding.
C. The indemnification provided by this Section 7.7 shall be in addition to
any other rights to which an Indemnitee or any other Person may be entitled
under any agreement, pursuant to any vote of the Partners, as a matter of law or
otherwise, and shall continue as to an Indemnitee who has ceased to serve in
such capacity unless otherwise provided in a written agreement pursuant to which
such Indemnities are indemnified.
D. The Partnership may, but shall not be obligated to, purchase and
maintain insurance, on behalf of the Indemnities and such other Persons as the
General Partner shall determine, against any liability that may be asserted
against or expenses that may be incurred by such Person in connection with the
Partnership's activities, regardless of whether the Partnership would have the
power to indemnify such Person against such liability under the provisions of
this Agreement.
E. For purposes of this Section 7.7, the Partnership shall be deemed to
have requested an Indemnitee to serve as fiduciary of an employee benefit plan
whenever the performance by it of its duties to the Partnership also imposes
duties on, or otherwise involves services by, it to the plan or participants or
beneficiaries of the plan; excise taxes assessed on an Indemnitee with respect
to an employee benefit plan pursuant to applicable law shall constitute fines
within the meaning of Section 7.7; and actions taken or omitted by the
Indemnitee with respect to an employee benefit plan in the performance of its
duties for a purpose reasonably believed by it to be in the interest of the
participants and beneficiaries of the plan shall be deemed to be for a purpose
which is not opposed to the best interests of the Partnership.
F. In no event may an Indemnitee subject any of the Partners to personal
liability by reason of the indemnification provisions set forth in this
Agreement.
G. An Indemnitee shall not be denied indemnification in whole or in part
under this Section 7.7 because the Indemnitee had an interest in the transaction
with respect to which the indemnification applies if the transaction was
otherwise permitted by the terms of this Agreement.
H. The provisions of this Section 7.7 are for the benefit of the
Indemnities, their heirs, successors, assigns and administrators and shall not
be deemed to create any rights for the benefit of any other Persons. Any
amendment, modification or repeal of this Section 7.7 or any provision hereof
shall be prospective only and shall not in any way affect the Partnership's
liability to any Indemnitee under this Section 7.7, as in effect immediately
prior to such amendment, modification, or repeal with respect to claims arising
from or relating to matters occurring, in whole or in part, prior to such
amendment, modification or repeal, regardless of when such claims may arise or
be asserted.
Section 7.8 Liability of the General Partner
----------- --------------------------------
A. Notwithstanding anything to the contrary set forth in this Agreement,
the General Partner and its officers and directors shall not be liable for
monetary damages to the Partnership, any Partners or any Assignees for losses
sustained or liabilities incurred as a result of errors in judgment or of any
act or omission if the General Partner acted in good faith.
B. The Limited Partners expressly acknowledge that the General Partner is
acting on behalf of the Partnership and the shareholders of the Company
collectively, that the General Partner is under no obligation to consider the
separate interests of the Limited Partners (except as otherwise provided herein)
in deciding whether to cause the Partnership to take (or decline to take) any
actions, and that the General Partner shall not be liable for monetary damages
for losses sustained, liabilities incurred, or benefits not derived by Limited
Partners in connection with such decisions, provided that the General Partner
has acted in good faith.
C. Subject to its obligations and duties as General Partner set forth in
Section 7.1.A hereof, the General Partner may exercise any of the powers granted
to it by this Agreement and perform any of the duties imposed upon it hereunder
either directly or by or through its agents. The General Partner shall not be
responsible for any misconduct or negligence on the part of any such agent
appointed by the General Partner in good faith.
D. Any amendment, modification or repeal of this Section 7.8 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the General Partner's and its officers' and directors' liability
to the Partnership and the Limited Partners under this Section 7.8 as in effect
immediately prior to such amendment, modification or repeal with respect to
claims arising from or relating to matters occurring, in whole or in part, prior
to such amendment, modification or repeal, regardless of when such claims may
arise or be asserted.
Section 7.9 Other Matters Concerning the General Partner
----------- --------------------------------------------
A. The General Partner may rely and shall be protected in acting, or
refraining from acting, upon any resolution, certificate, statement, instrument,
opinion, report, notice, request, consent, order, bond, debenture, or other
paper or document believed by it in good faith to be genuine and to have been
signed or presented by the proper party or parties.
B. The General Partner may consult with legal counsel, accountants,
appraisers, management consultants, investment bankers, architects, engineers,
environmental consultants and other consultants and advisers selected by it, and
any act taken or omitted to be taken in reliance upon the opinion of such
Persons as to matters which such General Partner reasonably believes to be
within such Person's professional or expert competence shall be conclusively
presumed to have been done or omitted in good faith and in accordance with such
opinion.
C. The General Partner shall have the right, in respect of any of its
powers or obligations hereunder, to act through any of its duly authorized
officers and duly appointed attorneys-in-fact. Each such attorney shall, to the
extent provided by the General Partner in the power of attorney, have full power
and authority to do and perform all and every act and duty which is permitted or
required to be done by the General Partner hereunder.
D. Notwithstanding any other provisions of this Agreement or the Act, any
action of the General Partner on behalf of the Partnership or any decision of
the General Partner to refrain from acting on behalf of the Partnership,
undertaken in the good faith belief that such action or omission is necessary or
advisable in order (i) to protect the ability of the Company to continue to
qualify as a REIT; or (ii) to avoid the Company incurring any taxes under
Section 857 or Section 4981 of the Code, is expressly authorized under this
Agreement and is deemed approved by all of the Limited Partners.
Section 7.10 Title to Partnership Assets
------------ ---------------------------
Title to Partnership assets, whether real, personal or mixed and whether
tangible or intangible, shall be deemed to be owned by the Partnership as an
entity, and no Partner, individually or collectively, shall have any ownership
interest in such Partnership assets or any portion thereof. Title to any or all
of the Partnership assets may be held in the name of the Partnership, the
General Partner or one or more nominees, as the General Partner may determine,
including Affiliates of the General Partner. The General Partner hereby declares
and warrants that any Partnership assets for which legal title is held in the
name of the General Partner or any nominee or Affiliate of the General Partner
shall be held by the General Partner for the use and benefit of the Partnership
in accordance with the provisions of this Agreement; provided, however, that the
General Partner shall use its best efforts to cause beneficial and record title
to such assets to be vested in the Partnership as soon as reasonably
practicable. All Partnership assets shall be recorded as the property of the
Partnership in its books and records, irrespective of the name in which legal
title to such Partnership assets is held.
Section 7.11 Reliance by Third Parties
------------ -------------------------
Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Partnership shall be entitled to assume that the General
Partner has full power and authority, without consent or approval of any other
Partner or Person, to encumber, sell or otherwise use in any manner any and all
assets of the Partnership and to enter into any contracts on behalf of the
Partnership, and take any and all actions on behalf of the Partnership and such
Person shall be entitled to deal with the General Partner as if the General
Partner were the Partnership's sole party in interest, both legally and
beneficially. Each Limited Partner hereby waives any and all defenses or other
remedies which may be available against such Person to contest, negate or
disaffirm any action of the General Partner in connection with any such dealing.
In no event shall any Person dealing with the General Partner or its
representatives be obligated to ascertain that the terms of this Agreement have
been complied with or to inquire into the necessity or expedience of any act or
action of the General Partner or its representatives. Each and every
certificate, document or other instrument executed on behalf of the Partnership
by the General Partner or its representatives shall be conclusive evidence in
favor of any and every Person relying thereon or claiming thereunder that (i) at
the time of the execution and delivery of such certificate, document or
instrument, this Agreement was in full force and effect; (ii) the Person
executing and delivering such certificate, document or instrument was duly
authorized and empowered to do so for and on behalf of the Partnership; and
(iii) such certificate, document or instrument was duly executed and delivered
in accordance with the terms and provisions of this Agreement and is binding
upon the Partnership.
ARTICLE 8
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 8.1 Limitation of Liability
----------- -----------------------
The Limited Partners shall have no liability under this Agreement except as
expressly provided in this Agreement, including Section 10.5 hereof, or under
the Act.
Section 8.2 Management of Business
----------- ----------------------
No Limited Partner or Assignee (other than the General Partner, any of its
Affiliates or any officer, director, employee, agent or trustee of the General
Partner, the Partnership or any of their Affiliates, in their capacity as such)
shall take part in the operation, management or control (within the meaning of
the Act) of the Partnership's business, transact any business in the
Partnership's name or have the power to sign documents for or otherwise bind the
Partnership. The transaction of any such business by the General Partner, any of
its Affiliates or any officer, director, employee, partner, agent or trustee of
the General Partner, the Partnership or any of their Affiliates, in their
capacity as such, shall not affect, impair or eliminate the limitations on the
liability of the Limited Partners or Assignees under this Agreement.
Section 8.3 Outside Activities of Limited Partners
----------- --------------------------------------
Subject to any agreements entered into pursuant to Section 7.6.E hereof and
any other agreements entered into by a Limited Partner or its Affiliates with
the Partnership or any of its Subsidiaries, any Limited Partner (other than the
Company) and any officer, director, employee, agent, trustee, Affiliate or
shareholder of any Limited Partner (other than the Company) shall be entitled to
and may have business interests and engage in business activities in addition to
those relating to the Partnership, including business interests and activities
that are in direct competition with the Partnership or that are enhanced by the
activities of the Partnership. Neither the Partnership nor any Partners shall
have any rights by virtue of this Agreement in any business ventures of any
Limited Partner or Assignee. None of the Limited Partners (other than the
Company) nor any other Person shall have any rights by virtue of this Agreement
or the Partnership relationship established hereby in any business ventures of
any other Person and such Person shall have no obligation pursuant to this
Agreement to offer any interest in any such business ventures to the
Partnership, any Limited Partner or any such other Person, even if such
opportunity is of a character which, if presented to the Partnership, any
Limited Partner or such other Person, could be taken by such Person.
Section 8.4 Return of Capital
----------- -----------------
Except pursuant to the right of redemption set forth in Section 8.6, no
Limited Partner shall be entitled to the withdrawal or return of its Capital
Contribution, except to the extent of distributions made pursuant to this
Agreement or upon termination of the Partnership as provided herein. Except to
the extent provided by Exhibit C hereof or as otherwise expressly provided in
this Agreement, no Limited Partner or Assignee shall have priority over any
other Limited Partner or Assignee, either as to the return of Capital
Contributions or as to profits, losses or distributions.
Section 8.5 Rights of Limited Partners Relating to the Partnership
----------- ------------------------------------------------------
A. In addition to the other rights provided by this Agreement or by the
Act, and except as limited by Section 8.5.C hereof, each Limited Partner shall
have the right, for a purpose reasonably related to such Limited Partner's
interest as a limited partner in the Partnership, upon written demand with a
statement of the purpose of such demand and at such Limited Partner's own
expense (including such copying and administrative charges as the General
Partner may establish from time to time):
(1) to obtain a copy of the most recent annual and quarterly reports
filed with the Securities and Exchange Commission by the Company pursuant
to the Securities Exchange Act of 1934;
(2) to obtain a copy of the Partnership's federal, state and local
income tax returns for each Partnership Year;
(3) to obtain a current list of the name and last known business,
residence or mailing address of each Partner;
(4) to obtain a copy of this Agreement and the Certificate and all
amendments thereto, together with executed copies of all powers of attorney
pursuant to which this Agreement, the Certificate and all amendments
thereto have been executed; and
(5) to obtain true and full information regarding the amount of cash
and a description and statement of any other property or services
contributed by each Partner and which each Partner has agreed to contribute
in the future, and the date on which each became a Partner.
B. The Partnership shall notify each Limited Partner, upon request, of the
then current Conversion Factor.
C. Notwithstanding any other provision of this Section 8.5, the General
Partner may keep confidential from the Limited Partners, for such period of time
as the General Partner determines in its sole and absolute discretion to be
reasonable, any information that (i) the General Partner reasonably believes to
be in the nature of trade secrets or other information, the disclosure of which
the General Partner in good faith believes is not in the best interests of the
Partnership or could damage the Partnership or its business; or (ii) the
Partnership is required by law or by agreements with an unaffiliated third party
to keep confidential.
Section 8.6 Redemption Right
----------- ----------------
A. Subject to Sections 8.6.B and 8.6.C hereof, on or after the date one (1)
year after _______________________, each Limited Partner (other than the
Company) shall have the right (the "Redemption Right") to require the
Partnership to redeem on a Specified Redemption Date all or a portion of the
Partnership Units held by such Limited Partner at a redemption price per Unit
equal to and in the form of the Cash Amount to be paid by the Partnership. The
Redemption Right shall be exercised pursuant to a Notice of Redemption delivered
to the Partnership (with a copy to the Company) by the Limited Partner who is
exercising the redemption right (the "Redeeming Partner"); provided, however,
that the Partnership shall not be obligated to satisfy such Redemption Right if
the Company elects to purchase the Partnership Units subject to the Notice of
Redemption pursuant to Section 8.6.B. A Limited Partner may not exercise the
Redemption Right for less than one thousand (1,000) Partnership Units or, if
such Limited Partner holds less than one thousand (1,000) Partnership Units, all
of the Partnership Units held by such Partner. The Redeeming Partner shall have
no right, with respect to any Partnership Units so redeemed, to receive any
distributions paid on or after the Specified Redemption Date. The Assignee of
any Limited Partner may exercise the rights of such Limited Partner pursuant to
this Section 8.6, and such Limited Partner shall be deemed to have assigned such
rights to such Assignee and shall be bound by the exercise of such rights by
such Assignee. In connection with any exercise of such rights by an Assignee on
behalf of a Limited Partner, the Cash Amount shall be paid by the Partnership
directly to such Assignee and not to such Limited Partner.
B. Notwithstanding the provisions of Section 8.6.A, a Limited Partner that
exercises the Redemption Right shall be deemed to have offered to sell the
Partnership Units described in the Notice of Redemption to the Company, and the
Company may, in its sole and absolute discretion, elect to purchase directly and
acquire such Partnership Units by paying to the Redeeming Partner either the
Cash Amount or the REIT Shares Amount, as elected by the Company (in its sole
and absolute discretion), on the Specified Redemption Date, whereupon the
Company shall acquire the Partnership Units offered for redemption by the
Redeeming Partner and shall be treated for all purposes of this Agreement as the
owner of such Partnership Units. If the Company shall elect to exercise its
right to purchase Partnership Units under this Section 8.6.B with respect to a
Notice of Redemption, it shall so notify the Redeeming Partner within five
Business Days after the receipt by it of such Notice of Redemption. Unless the
Company (in its sole and absolute discretion) shall exercise its right to
purchase Partnership Units from the Redeeming Partner pursuant to this Section
8.6.B, the Company shall not have any obligation to the Redeeming Partner or the
Partnership with respect to the Redeeming Partner's exercise of the Redemption
Right. In the event the Company shall exercise its right to purchase Partnership
Units with respect to the exercise of a Redemption Right in the manner described
in the first sentence of this Section 8.6.B, the Partnership shall have no
obligation to pay any amount to the Redeeming Partner with respect to such
Redeeming Partner's exercise of such Redemption Right, and each of the Redeeming
Partner, the Partnership, and the Company shall treat the transaction between
the Company and the Redeeming Partner, for federal income tax purposes, as a
sale of the Redeeming Partner's Partnership Units to the Company. Each Redeeming
Partner agrees to execute such documents as the Company may reasonably require
in connection with the issuance of REIT Shares upon exercise of the Redemption
Right.
C. Notwithstanding the provisions of Section 8.6.A and Section 8.6.B, a
Partner shall not be entitled to exercise the Redemption Right pursuant to
Section 8.6.A if the delivery of REIT Shares to such Partner on the Specified
Redemption Date by the Company pursuant to Section 8.6.B (regardless of whether
or not the Company would in fact exercise its rights under Section 8.6.B) would
be prohibited under the Declaration of Trust of the Company.
ARTICLE 9
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1 Records and Accounting
----------- ----------------------
The General Partner shall keep or cause to be kept at the principal office
of the Partnership those records and documents required to be maintained by the
Act and other books and records deemed by the General Partner to be appropriate
with respect to the Partnership's business, including, without limitation, all
books and records necessary to provide to the Limited Partners any information,
lists and copies of documents required to be provided pursuant to Section 9.3
hereof. Any records maintained by or on behalf of the Partnership in the regular
course of its business may be kept on, or be in the form of, punch cards,
magnetic tape, photographs, micrographics or any other information storage
device, provided that the records so maintained are convertible into clearly
legible written form within a reasonable period of time. The books of the
Partnership shall be maintained, for financial and tax reporting purposes, on an
accrual basis in accordance with generally accepted accounting principles, or
such other basis as the General Partner determines to be necessary or
appropriate.
Section 9.2 Fiscal Year
----------- -----------
The fiscal year of the Partnership shall be the calendar year.
Section 9.3 Reports
----------- -------
A. As soon as practicable, but in no event later than one hundred five
(105) days after the close of each Partnership Year, the General Partner shall
cause to be mailed to each Limited Partner as of the close of the Partnership
Year, an annual report containing financial statements of the Partnership, or of
the Company if such statements are prepared solely on a consolidated basis with
the Company, for such Partnership Year, presented in accordance with generally
accepted accounting principles, such statements to be audited by a nationally
recognized firm of independent public accountants selected by the General
Partner.
B. As soon as practicable, but in no event later than one hundred five
(105) days after the close of each calendar quarter (except the last calendar
quarter of each year), the General Partner shall cause to be mailed to each
Limited Partner as of the last day of the calendar quarter, a report containing
unaudited financial statements of the Partnership, or of the Company, if such
statements are prepared solely on a consolidated basis with the Company, and
such other information as may be required by applicable law or regulation, or as
the General Partner determines to be appropriate.
ARTICLE 10
TAX MATTERS
Section 10.1 Preparation of Tax Returns
------------ --------------------------
The General Partner shall arrange for the preparation and timely filing of
all returns of Partnership income, gains, deductions, losses and other items
required of the Partnership for federal and state income tax purposes and shall
use all reasonable efforts to furnish, within ninety (90) days of the close of
each taxable year, the tax information reasonably required by Limited Partners
for federal and state income tax reporting purposes.
Section 10.2 Tax Elections
------------ -------------
Except as otherwise provided herein, the General Partner shall, in its sole
and absolute discretion, determine whether to make any available election
pursuant to the Code. Notwithstanding the above, in making any such tax election
the General Partner shall take into account the tax consequences to the Limited
Partners resulting from any such election. The General Partner shall make such
tax elections on behalf of the Partnership as the Limited Partners holding a
majority of the Percentage Interests of the Limited Partners (excluding Limited
Partner Interests held by the Company) request, provided that the General
Partner believes that such election is not adverse to the interests of the
General Partner, including its interest in preserving its qualification as a
REIT under the Code. The General Partner intends to elect the so-called
"traditional method" of making Section 704(c) allocations pursuant to
Regulations Section 1.704-3 with respect to property contributed as of the date
hereof. The General Partner shall have the right to seek to revoke any tax
election it makes (including, without limitation, the election under Section 754
of the Code) upon the General Partner's determination, in its sole and absolute
discretion, that such revocation is in the best interests of the Partners.
Section 10.3 Tax Matters Partner
------------ -------------------
A. The General Partner shall be the "tax matters partner" of the
Partnership for federal income tax purposes. Pursuant to Section 6230(e) of the
Code, upon receipt of notice from the IRS of the beginning of an administrative
proceeding with respect to the Partnership, the tax matters partner shall
furnish the IRS with the name, address, taxpayer identification number, and
profit interest of each of the Limited Partners and the Assignees; provided,
however, that such information is provided to the Partnership by the Limited
Partners and the Assignees.
B. The tax matters partner is authorized, but not required:
(1) to enter into any settlement with the IRS with respect to any
administrative or judicial proceedings for the adjustment of Partnership
items required to be taken into account by a Partner for income tax
purposes (such administrative proceedings being referred to as a "tax
audit" and such judicial proceedings being referred to as "judicial
review"), and in the settlement agreement the tax matters partner may
expressly state that such agreement shall bind all Partners, except that
such settlement agreement shall not bind any Partner (i) who (within the
time prescribed pursuant to the Code and Regulations) files a statement
with the IRS providing that the tax matters partner shall not have the
authority to enter into a settlement agreement on behalf of such Partner;
or (ii) who is a "notice partner" (as defined in Section 6231(a)(8) of the
Code) or a member of a "notice group" (as defined in Section 6223(b)(2) of
the Code);
(2) in the event that a notice of a final administrative adjustment at
the Partnership level of any item required to be taken into account by a
Partner for tax purposes (a "final adjustment") is mailed to the tax
matters partner, to seek judicial review of such final adjustment,
including the filing of a petition for readjustment with the Tax Court or
the filing of a complaint for refund with the United States Claims Court or
the District Court of the United States for the district in which the
Partnership's principal place of business is located;
(3) to intervene in any action brought by any other Partner for
judicial review of a final adjustment;
(4) to file a request for an administrative adjustment with the IRS
and, if any part of such request is not allowed by the IRS, to file an
appropriate pleading (petition or complaint) for judicial review with
respect to such request;
(5) to enter into an agreement with the IRS to extend the period for
assessing any tax which is attributable to any item required to be taken
account of by a Partner for tax purposes, or an item affected by such item;
and
(6) to take any other action on behalf of the Partners or the
Partnership in connection with any tax audit or judicial review proceeding
to the extent permitted by applicable law or regulations.
The taking of any action and the incurring of any expense by the tax
matters partner in connection with any such proceeding, except to the extent
required by law, is a matter in the sole and absolute discretion of the tax
matters partner and the provisions relating to indemnification of the General
Partner set forth in Section 7.7 of this Agreement shall be fully applicable to
the tax matters partner in its capacity as such.
C. The tax matters partner shall receive no compensation for its services.
All third party costs and expenses incurred by the tax matters partner in
performing its duties as such (including legal and accounting fees and expenses)
shall be borne by the Partnership. Nothing herein shall be construed to restrict
the Partnership from engaging an accounting firm to assist the tax matters
partner in discharging its duties hereunder, so long as the compensation paid by
the Partnership for such services is reasonable.
Section 10.4 Organizational Expenses
------------ -----------------------
The Partnership shall elect to deduct expenses, if any, incurred by it in
organizing the Partnership ratably over a sixty (60) month period as provided in
Section 709 of the Code.
Section 10.5 Withholding
------------ -----------
Each Limited Partner hereby authorizes the Partnership to withhold from, or
pay on behalf of or with respect to, such Limited Partner any amount of federal,
state, local, or foreign taxes that the General Partner determines that the
Partnership is required to withhold or pay with respect to any amount
distributable or allocable to such Limited Partner pursuant to this Agreement,
including, without limitation, any taxes required to be withheld or paid by the
Partnership pursuant to Sections 1441, 1442, 1445, or 1446 of the Code. Any
amount paid on behalf of or with respect to a Limited Partner shall constitute a
loan by the Partnership to such Limited Partner, which loan shall be repaid by
such Limited Partner within fifteen (15) days after notice from the General
Partner that such payment must be made unless (i) the Partnership withholds such
payment from a distribution which would otherwise be made to the Limited
Partner; or (ii) the General Partner determines, in its sole and absolute
discretion, that such payment may be satisfied out of the available funds of the
Partnership which would, but for such payment, be distributed to the Limited
Partner. Any amounts withheld pursuant to the foregoing clauses (i) or (ii)
shall be treated as having been distributed to such Limited Partner. Each
Limited Partner hereby unconditionally and irrevocably grants to the Partnership
a security interest in such Limited Partner's Partnership Interest to secure
such Limited Partner's obligation to pay to the Partnership any amounts required
to be paid pursuant to this Section 10.5. In the event that a Limited Partner
fails to pay any amounts owed to the Partnership pursuant to this Section 10.5
when due, the General Partner may, in its sole and absolute discretion, elect to
make the payment to the Partnership on behalf of such defaulting Limited
Partner, and in such event shall be deemed to have loaned such amount to such
defaulting Limited Partner and shall succeed to all rights and remedies of the
Partnership as against such defaulting Limited Partner. Without limitation, in
such event the General Partner shall have the right to receive distributions
that would otherwise be distributable to such defaulting Limited Partner until
such time as such loan, together with all interest thereon, has been paid in
full, and any such distributions so received by the General Partner shall be
treated as having been distributed to the defaulting Limited Partner and
immediately paid by the defaulting Limited Partner to the General Partner in
repayment of such loan. Any amounts payable by a Limited Partner hereunder shall
bear interest at the lesser of (A) the base rate on corporate loans at large
United States money center commercial banks, as published from time to time in
the Wall Street Journal, plus four (4) percentage points, or (B) the maximum
lawful rate of interest on such obligation, such interest to accrue from the
date such amount is due (i.e., fifteen (15) days after demand) until such amount
is paid in full. Each Limited Partner shall take such actions as the Partnership
or the General Partner shall request in order to perfect or enforce the security
interest created hereunder.
ARTICLE 11
TRANSFERS AND WITHDRAWALS
Section 11.1 Transfer
------------ --------
A. The term "transfer," when used in this Article 11 with respect to a
Partnership Unit, shall be deemed to refer to a transaction by which the General
Partner purports to assign all or any part of its General Partner Interest to
another Person or by which a Limited Partner purports to assign all or any part
of its Limited Partner Interest to another Person, and includes a sale,
assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange or any
other disposition by law or otherwise. The term "transfer" when used in this
Article 11 does not include any redemption of Partnership Interests by the
Partnership from a Limited Partner or any acquisition of Partnership Units from
a Limited Partner by the Company pursuant to Section 8.6.
B. No Partnership Interest shall be transferred, in whole or in part,
except in accordance with the terms and conditions set forth in this Article 11.
Any transfer or purported transfer of a Partnership Interest not made in
accordance with this Article 11 shall be null and void.
Section 11.2 Transfer of the Company's General Partner Interest and Limited
Partner Interest
----------- -------------------------------------------------------------
The Company may not transfer any of its General Partner Interest or
withdraw as General Partner, or transfer any of its Limited Partner Interest,
unless Limited Partners holding a majority of the Percentage Interests of the
Limited Partners (other than Limited Partner Interests held by the Company)
consent to such transfer or withdrawal or such transfer is to an entity which is
wholly-owned by the Company and is a Qualified REIT Subsidiary under Section
856(i) of the Code.
Section 11.3 Limited Partners' Rights to Transfer
------------ ------------------------------------
A. Subject to the provisions of Sections 11.3.C, 11.3.D, 11.3.E, and 11.4,
a Limited Partner (other than the Company) may transfer, with or without the
consent of the General Partner, all or any portion of its Partnership Interest,
or any of such Limited Partner's economic rights as a Limited Partner.
B. If a Limited Partner is subject to Incapacity, the executor,
administrator, trustee, committee, guardian, conservator or receiver of such
Limited Partner's estate shall have all of the rights of a Limited Partner, but
not more rights than those enjoyed by other Limited Partners, for the purpose of
settling or managing the estate and such power as the Incapacitated Limited
Partner possessed to transfer all or any part of his or its interest in the
Partnership. The Incapacity of a Limited Partner, in and of itself, shall not
dissolve or terminate the Partnership.
C. The General Partner may prohibit any transfer by a Limited Partner of
its Partnership Units if, in the opinion of legal counsel to the Partnership,
such transfer would require filing of a registration statement under the
Securities Act of 1933 or would otherwise violate any federal or state
securities laws or regulations applicable to the Partnership or the Partnership
Units.
D. No transfer by a Limited Partner of its Partnership Units may be made to
any Person if (i) in the opinion of legal counsel for the Partnership, it would
result in the Partnership being treated as an association taxable as a
corporation; (ii) it is made within one year after __________________; (iii)
such transfer is effectuated through an "established securities market" or a
"secondary market (or the substantial equivalent thereof)" with the meaning of
Section 7704 of the Code; (iv) such transfer would cause the Partnership to
become, with respect to any employee benefit plan subject to Title I of ERISA, a
"party-in-interest" (as defined in Section 3(14) of ERISA) or a "disqualified
person" (as defined in Section 4975(c) of the Code); (v) such transfer would, in
the opinion of legal counsel for the Partnership, cause any portion of the
assets of the Partnership to constitute assets of any employee benefit plan
pursuant to Department of Labor Regulations Section 2510.2-101; or (vi) such
transfer would subject the Partnership to be regulated under the Investment
Company Act of 1940, the Investment Advisors Act of 1940 or the Employee
Retirement Income Security Act of 1974, each as amended.
E. No transfer of any Partnership Units may be made to a lender to the
Partnership or any Person who is related (within the meaning of Section
1.752-4(b) of the Regulations) to any lender to the Partnership whose loan
constitutes a Nonrecourse Liability, without the consent of the General Partner,
in its sole and absolute discretion; provided that as a condition to such
consent the lender will be required to enter into an arrangement with the
Partnership and the General Partner to redeem for the Cash Amount any
Partnership Units in which a security interest is held simultaneously with the
time at which such lender would be deemed to be a partner in the Partnership for
purposes of allocating liabilities to such lender under Section 752 of the Code.
Section 11.4 Substituted Limited Partners
------------ ----------------------------
A. No Limited Partner shall have the right to substitute a transferee as a
Limited Partner in his place. The General Partner shall, however, have the right
to consent to the admission of a transferee of the interest of a Limited Partner
pursuant to this Section 11.4 as a Substituted Limited Partner, which consent
may be given or withheld by the General Partner in its sole and absolute
discretion. The General Partner's failure or refusal to permit a transferee of
any such interests to become a Substituted Limited Partner shall not give rise
to any cause of action against the Partnership or any Partner.
B. A transferee who has been admitted as a Substituted Limited Partner in
accordance with this Article 11 shall have all the rights and powers and be
subject to all the restrictions and liabilities of a Limited Partner under this
Agreement.
C. Upon the admission of a Substituted Limited Partner, the General Partner
shall amend Exhibit A to reflect the name, address, number of Partnership Units,
and Percentage Interest of such Substituted Limited Partner and to eliminate or
adjust, if necessary, the name, address and interest of the predecessor of such
Substituted Limited Partner.
Section 11.5 Assignees
------------ ---------
If the General Partner, in its sole and absolute discretion, does not
consent to the admission of any permitted transferee as a Substituted Limited
Partner, as described in Section 11.4, such transferee shall be considered an
Assignee for purposes of this Agreement. An Assignee shall be deemed to have had
assigned to it, and shall be entitled to receive distributions from the
Partnership and the share of Net Income, Net Losses, Recapture Income, and any
other items, gain, loss deduction and credit of the Partnership attributable to
the Partnership Units assigned to such transferee, but shall not be deemed to be
a holder of Partnership Units for any other purpose under this Agreement, and
shall not be entitled to vote such Partnership Units in any matter presented to
the Limited Partners for a vote (such Partnership Units being deemed to have
been voted on such matter in the same proportion as all other Partnership Units
held by Limited Partners are voted). In the event any such transferee desires to
make a further assignment of any such Partnership Units, such transferee shall
be subject to all of the provisions of this Article 11 to the same extent and in
the same manner as any Limited Partner desiring to make an assignment of
Partnership Units.
Section 11.6 General Provisions
------------ ------------------
A. No Limited Partner may withdraw from the Partnership other than as a
result of a permitted transfer of all of such Limited Partner's Partnership
Units in accordance with this Article 11 or pursuant to redemption of all of its
Partnership Units under Section 8.6.
B. Any Limited Partner who shall transfer all of its Partnership Units in a
transfer permitted pursuant to this Article 11 shall cease to be a Limited
Partner upon the admission of all Assignees of such Partnership Units as
Substitute Limited Partners. Similarly, any Limited Partner who shall transfer
all of its Partnership Units pursuant to a redemption of all of its Partnership
Units under Section 8.6 shall cease to be a Limited Partner.
C. Transfers pursuant to this Article 11 may only be made on the first day
of a fiscal quarter of the Partnership, unless the General Partner otherwise
agrees.
D. If any Partnership Interest is transferred or assigned during any
quarterly segment of the Partnership's fiscal year in compliance with the
provisions of this Article 11 or redeemed or transferred pursuant to Section 8.6
on any day other than the first day of a Partnership Year, then Net Income, Net
Losses, each item thereof and all other items attributable to such interest for
such Partnership Year shall be divided and allocated between the transferor
Partner and the transferee Partner by taking into account their varying
interests during the Partnership Year in accordance with Section 706(d) of the
Code, using the interim closing of the books method. Solely for purposes of
making such allocations, each of such items for the calendar month in which the
transfer or assignment occurs shall be allocated to the transferee Partner, and
none of such items for the calendar month in which a redemption occurs shall be
allocated to the Redeeming Partner; provided, however, that the General Partner
may adopt such other conventions relating to allocations in connection with
transfers, assignments or redemptions as it determines are necessary or
appropriate. All distributions of Available Cash attributable to such
Partnership Unit with respect to which the Partnership Record Date is before the
date of such transfer, assignment, or redemption shall be made to the transferor
Partner or the Redeeming Partner, as the case may be, and in the case of a
transfer or assignment other than a redemption, all distributions of Available
Cash thereafter attributable to such Partnership Unit shall be made to the
transferee Partner.
ARTICLE 12
ADMISSION OF PARTNERS
Section 12.1 Admission of Successor General Partner
------------ --------------------------------------
A successor to all of the General Partner Interest pursuant to Section 11.2
hereof who is proposed to be admitted as a successor General Partner shall be
admitted to the Partnership as the General Partner, effective upon such
transfer. Any such transferee shall carry on the business of the Partnership
without dissolution. In each case, the admission shall be subject to the
successor General Partner executing and delivering to the Partnership an
acceptance of all of the terms and conditions of this Agreement and such other
documents or instruments as may be required to effect the admission. In the case
of such admission on any day other than the first day of a Partnership Year, all
items attributable to the General Partner Interest for such Partnership Year
shall be allocated between the transferring General Partner and such successor
as provided in Section 11.6.D hereof.
Section 12.2 Admission of Additional Limited Partners
------------ ----------------------------------------
A. After the admission to the Partnership of the initial Limited Partners
on the date hereof, a Person who makes a Capital Contribution to the Partnership
in accordance with this Agreement shall be admitted to the Partnership as an
Additional Limited Partner only upon furnishing to the General Partner (i)
evidence of acceptance in form satisfactory to the General Partner of all of the
terms and conditions of this Agreement, including, without limitation, the power
of attorney granted in Section 2.4 hereof and (ii) such other documents or
instruments as may be required in the discretion of the General Partner in order
to effect such Person's admission as an Additional Limited Partner.
B. Notwithstanding anything to the contrary in this Section 12.2, no Person
shall be admitted as an Additional Limited Partner without the consent of the
General Partner, which consent may be given or withheld in the General Partner's
sole and absolute discretion. The admission of any Person as an Additional
Limited Partner shall become effective on the date upon which the name of such
Person is recorded on the books and records of the Partnership, following the
consent of the General Partner to such admission.
C. If any Additional Limited Partner is admitted to the Partnership on any
day other than the first day of a Partnership Year, then Net Income, Net Losses,
each item thereof and all other items allocable among Partners and Assignees for
such Partnership Year shall be allocated among such Additional Limited Partner
and all other Partners and Assignees by taking into account their varying
interests during the Partnership Year in accordance with Section 706(d) of the
Code, using the interim closing of the books method. Solely for purposes of
making such allocations, each such item for the calendar month in which an
admission of any Additional Limited Partner occurs shall be allocated among all
of the Partners and Assignees, including such Additional Limited Partner;
provided, however, that the General Partner may adopt such other conventions
relating to allocations to Additional Limited Partners as it determines are
necessary or appropriate. All distributions of Available Cash with respect to
which the Partnership Record Date is before the date of such admission shall be
made solely to Partners and Assignees, other than the Additional Limited
Partner, and all distributions of Available Cash thereafter shall be made to all
of the Partners and Assignees, including such Additional Limited Partner.
Section 12.3 Amendment of Agreement and Certificate
of Limited Partnership
------------ ---------------------------------------
For the admission to the Partnership of any Partner, the General Partner
shall take all steps necessary and appropriate under the Act to amend the
records of the Partnership and, if necessary, to prepare as soon as practical an
amendment of this Agreement (including an amendment of Exhibit A) and, if
required by law, shall prepare and file an amendment to the Certificate and may
for this purpose exercise the power of attorney granted pursuant to Section 2.4
hereof.
ARTICLE 13
DISSOLUTION, LIQUIDATION AND TERMINATION
Section 13.1 Dissolution
------------ -----------
The Partnership shall not be dissolved by the admission of Substituted
Limited Partners or Additional Limited Partners or by the admission of a
successor General Partner in accordance with the terms of this Agreement. Upon
the withdrawal of the General Partner, any successor General Partner shall
continue the business of the Partnership. The Partnership shall dissolve, and
its affairs shall be wound up, only upon the first to occur of any of the
following ("Liquidating Events"):
A. the expiration of its term as provided in Section 2.5 hereof;
B. an event of withdrawal of the General Partner, as defined in the
Act (other than an event of bankruptcy), unless, within ninety (90) days
after such event of withdrawal a majority in interest of the remaining
Partners agree in writing to continue the business of the Partnership and
to the appointment, effective as of the date of withdrawal, of a successor
General Partner;
C. from and after the date of this Agreement through December 31,
2055, an election to dissolve the Partnership made by the General Partner
with the Consent of Partners holding 85% of the Percentage Interests of the
Limited Partners (including Limited Partner Interests held by the Company);
D. on or after January 1, 2056, an election to dissolve the
Partnership made by the General Partner, in its sole and absolute
discretion;
E. entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Act;
F. the sale of all or substantially all of the assets and properties
of the Partnership; or
G. a final and non-appealable judgment is entered by a court of
competent jurisdiction ruling that the General Partner is bankrupt or
insolvent, or a final and non-appealable order for relief is entered by a
court with appropriate jurisdiction against the General Partner, in each
case under any federal or state bankruptcy or insolvency laws as now or
hereafter in effect, unless prior to the entry of such order or judgment
all of the remaining Partners agree in writing to continue the business of
the Partnership and to the appointment, effective as of a date prior to the
date of such order or judgment, of a substitute General Partner.
Section 13.2 Winding Up
------------ ----------
A. Upon the occurrence of a Liquidating Event, the Partnership shall
continue solely for the purposes of winding up its affairs in an orderly manner,
liquidating its assets, and satisfying the claims of its creditors and Partners.
No Partner shall take any action that is inconsistent with, or not necessary to
or appropriate for, the winding up of the Partnership's business and affairs.
The General Partner, or, in the event there is no remaining General Partner, any
Person elected by a majority in interest of the Limited Partners (the General
Partner or such other Person being referred to herein as the "Liquidator"),
shall be responsible for overseeing the winding up and dissolution of the
Partnership and shall take full account of the Partnership's liabilities and
property and the Partnership property shall be liquidated as promptly as is
consistent with obtaining the fair value thereof, and the proceeds therefrom
(which may, to the extent determined by the General Partner, include shares of
common stock in the Company) shall be applied and distributed in the following
order:
(1) First, to the payment and discharge of all of the Partnership's
debts and liabilities to creditors other than the Partners;
(2) Second, to the payment and discharge of all of the Partnership's
debts and liabilities to the General Partner;
(3) Third, to the payment and discharge of all of the Partnership's
debts and liabilities to the other Partners; and
(4) The balance, if any, to the General Partner and Limited Partners
in accordance with their Capital Accounts, after giving effect to all
contributions, distributions, and allocations for all periods.
The General Partner shall not receive any additional compensation for any
services performed pursuant to this Article 13.
B. Notwithstanding the provisions of Section 13.2.A hereof which require
liquidation of the assets of the Partnership, but subject to the order of
priorities set forth therein, if prior to or upon dissolution of the Partnership
the Liquidator determines that an immediate sale of part or all of the
Partnership's assets would be impractical or would cause undue loss to the
Partners, the Liquidator may, in its sole and absolute discretion, defer for a
reasonable time the liquidation of any assets except those necessary to satisfy
liabilities of the Partnership (including to those Partners as creditors) and/or
distribute to the Partners, in lieu of cash, as tenants in common and in
accordance with the provisions of Section 13.2.A hereof, undivided interests in
such Partnership assets as the Liquidator deems not suitable for liquidation.
Any such distributions in kind shall be made only if, in the good faith judgment
of the Liquidator, such distributions in kind are in the best interest of the
Partners, and shall be subject to such conditions relating to the disposition
and management of such properties as the Liquidator deems reasonable and
equitable and to any agreements governing the operation of such properties at
such time. The Liquidator shall determine the fair market value of any property
distributed in kind using such reasonable method of valuation as it may adopt.
C. In the discretion of the Liquidator, a pro rata portion of the
distributions that would otherwise be made to the General Partner and Limited
Partners pursuant to this Article 13 may be:
(1) distributed to a trust established for the benefit of the General
Partner and Limited Partners for the purposes of liquidating Partnership
assets, collecting amounts owed to the Partnership, and paying any
contingent or unforeseen liabilities or obligations of the Partnership or
the General Partner arising out of or in connection with the Partnership.
The assets of any such trust shall be distributed to the General Partner
and Limited Partners from time to time, in the reasonable discretion of the
Liquidator, in the same proportions as the amount distributed to such trust
by the Partnership would otherwise have been distributed to the General
Partner and Limited Partners pursuant to this Agreement; or
(2) withheld or escrowed to provide a reasonable reserve for
Partnership liabilities (contingent or otherwise) and to reflect the
unrealized portion of any installment obligations owed to the Partnership,
provided that such withheld or escrowed amounts shall be distributed to the
General Partner and Limited Partners in the manner and order of priority
set forth in Section 13.2.A as soon as practicable.
Section 13.3 Compliance with Timing Requirements of Regulations
------------ --------------------------------------------------
In the event the Partnership is "liquidated" within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made pursuant
to this Article 13 to the General Partner and Limited Partners who have positive
Capital Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2).
If any Partner has a deficit balance in his Capital Account (after giving effect
to all contributions, distributions and allocations for all taxable years,
including the year during which such liquidation occurs), such Partner shall
have no obligation to make any contribution to the capital of the Partnership
with respect to such deficit, and such deficit shall not be considered a debt
owed to the Partnership or to any other Person for any purpose whatsoever.
Section 13.4 Deemed Distribution and Recontribution
------------ --------------------------------------
Notwithstanding any other provision of this Article 13, in the event the
Partnership is considered "liquidated" within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g), but no Liquidating Event has occurred, the Partnership's
property shall not be liquidated, the Partnership's liabilities shall not be
paid or discharged, and the Partnership's affairs shall not be wound up.
Instead, for federal income tax purposes and for purposes of maintaining Capital
Accounts pursuant to Exhibit B hereto, the Partnership shall be deemed to have
distributed the property in kind to the General Partner and Limited Partners,
who shall be deemed to have assumed and taken such property subject to all
Partnership liabilities, all in accordance with their respective Capital
Accounts. Immediately thereafter, the General Partner and Limited Partners shall
be deemed to have recontributed the Partnership property in kind to the
Partnership, which shall be deemed to have assumed and taken such property
subject to all such liabilities.
Section 13.5 Rights of Limited Partners
------------ --------------------------
Except as otherwise provided in this Agreement, each Limited Partner shall
look solely to the assets of the Partnership for the return of its Capital
Contributions and shall have no right or power to demand or receive property
other than cash from the Partnership. Except as otherwise provided in this
Agreement, no Limited Partner shall have priority over any other Partner as to
the return of its Capital Contributions, distributions, or allocations.
Section 13.6 Notice of Dissolution
------------ ---------------------
In the event a Liquidating Event occurs or an event occurs that would, but
for the provisions of an election or objection by one or more Partners pursuant
to Section 13.1, result in a dissolution of the Partnership, the General Partner
shall, within thirty (30) days thereafter, provide written notice thereof to
each of the Partners.
Section 13.7 Termination of Partnership and Cancellation of
Certificate of Limited Partnership
------------ ----------------------------------
Upon the completion of the liquidation of the Partnership's assets, as
provided in Section 13.2 hereof, the Partnership shall be terminated, a
certificate of cancellation shall be filed, and all qualifications of the
Partnership as a foreign limited partnership in jurisdictions other than the
State of Delaware shall be cancelled and such other actions as may be necessary
to terminate the Partnership shall be taken.
Section 13.8 Reasonable Time for Winding-Up
------------ ------------------------------
A reasonable time shall be allowed for the orderly winding-up of the
business and affairs of the Partnership and the liquidation of its assets
pursuant to Section 13.2 hereof, in order to minimize any losses otherwise
attendant upon such winding-up, and the provisions of this Agreement shall
remain in effect between the Partners during the period of liquidation.
Section 13.9 Waiver of Partition
------------ -------------------
Each Partner hereby waives any right to partition of the Partnership
property.
ARTICLE 14
AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS
Section 14.1 Amendments
------------ ----------
A. Amendments to this Agreement may be proposed by the General Partner or
by any Limited Partners (other than the Company) holding twenty percent (20%) or
more of the Partnership Interests. Following such proposal, the General Partner
shall submit any proposed amendment to the Limited Partners. The General Partner
shall seek the written vote of the Partners on the proposed amendment or shall
call a meeting to vote thereon and to transact any other business that it may
deem appropriate. For purposes of obtaining a written vote, the General Partner
may require a response within a reasonable specified time, but not less than
fifteen (15) days, and failure to respond in such time period shall constitute a
vote which is consistent with the General Partner's recommendation with respect
to the proposal. Except as provided in Section 7.3.A, 7.3.B, 13.1.C, 14.1.B,
14.1.C or 14.1.D, a proposed amendment shall be adopted and be effective as an
amendment hereto if it is approved by the General Partner and it receives the
Consent of Partners holding a majority of the Percentage Interests of the
Limited Partners (including Limited Partner Interests held by the Company).
B. Notwithstanding Section 14.1.A, the General Partner shall have the
power, without the consent of the Limited Partners, to amend this Agreement as
may be required to facilitate or implement any of the following purposes:
(1) to add to the obligations of the General Partner or surrender
any right or power granted to the General Partner or any Affiliate of
the General Partner for the benefit of the Limited Partners;
(2) to reflect the admission, substitution, termination, or
withdrawal of Partners in accordance with this Agreement;
(3) to set forth the designations, rights, powers, duties, and
preferences of the holders of any additional Partnership Interests
issued pursuant to Section 4.2.A hereof;
(4) to reflect a change that is of an inconsequential nature and
does not adversely affect the Limited Partners in any material
respect, or to cure any ambiguity, correct or supplement any provision
in this Agreement not inconsistent with law or with other provisions,
or make other changes with respect to matters arising under this
Agreement that will not be inconsistent with law or with the
provisions of this Agreement; and
(5) to satisfy any requirements, conditions, or guidelines
contained in any order, directive, opinion, ruling or regulation of a
federal or state agency or contained in federal or state law.
The General Partner shall provide notice to the Limited Partners when any
action under this Section 14.1.B is taken.
C. Notwithstanding Section 14.1.A and 14.1.B hereof, this Agreement shall
not be amended without the Consent of each Partner adversely affected if such
amendment would (i) convert a Limited Partner's interest in the Partnership into
a General Partner Interest; (ii) modify the limited liability of a Limited
Partner in a manner adverse to such Limited Partner; (iii) alter rights of the
Partner to receive distributions pursuant to Article 5 or Article 13, or the
allocations specified in Article 6 (except as permitted pursuant to Section 4.2
and Section 14.1.B(3) hereof); (iv) alter or modify the Redemption Right and
REIT Shares Amount as set forth in Sections 8.6 and 11.2.B, and the related
definitions, in a manner adverse to such Partner; (v) cause the termination of
the Partnership prior to the time set forth in Sections 2.5 or 13.1; or (vi)
amend this Section 14.1.C. Further, no amendment may alter the restrictions on
the General Partner's authority set forth in Section 7.3.B without the Consent
specified in that section.
D. Notwithstanding Section 14.1.A or Section 14.1.B hereof, the General
Partner shall not amend Sections 4.2.A, 7.5, 7.6, 11.2 or 14.2 without the
Consent of Limited Partners holding a majority of the Percentage Interests of
the Limited Partners, excluding Limited Partner Interests held by the General
Partner.
Section 14.2 Meetings of the Partners
------------ ------------------------
A. Meetings of the Partners may be called by the General Partner and shall
be called upon the receipt by the General Partner of a written request by
Limited Partners (other than the Company) holding twenty percent (20%) or more
of the Partnership Interests. The request shall state the nature of the business
to be transacted. Notice of any such meeting shall be given to all Partners not
less than seven (7) days nor more than thirty (30) days prior to the date of
such meeting. Partners may vote in person or by proxy at such meeting. Whenever
the vote or Consent of the Partners is permitted or required under this
Agreement, such vote or Consent may be given at a meeting of the Partners or may
be given in accordance with the procedure prescribed in Section 14.1.A hereof.
Except as otherwise expressly provided in this Agreement, the Consent of holders
of a majority of the Percentage Interests held by Limited Partners (including
Limited Partnership Interests held by the Company) shall control.
B. Any action required or permitted to be taken at a meeting of the
Partners may be taken without a meeting if a written consent setting forth the
action so taken is signed by a majority of the Percentage Interests of the
Partners (or such other percentage as is expressly required by this Agreement).
Such consent may be in one instrument or in several instruments, and shall have
the same force and effect as a vote of a majority of the Percentage Interests of
the Partners (or such other percentage as is expressly required by this
Agreement). Such consent shall be filed with the General Partner. An action so
taken shall be deemed to have been taken at a meeting held on the effective date
so certified.
C. Each Limited Partner may authorize any Person or Persons to act for him
by proxy on all matters in which a Limited Partner is entitled to participate,
including waiving notice of any meeting, or voting or participating at a
meeting. Every proxy must be signed by the Limited Partner or his
attorney-in-fact. No proxy shall be valid after the expiration of eleven (11)
months from the date thereof unless otherwise provided in the proxy. Every proxy
shall be revocable at the pleasure of the Limited Partner executing it, such
revocation to be effective upon the Partnership's receipt of written notice of
such revocation from the Limited Partner executing such proxy.
D. Each meeting of the Partners shall be conducted by the General Partner
or such other Person as the General Partner may appoint pursuant to such rules
for the conduct of the meeting as the General Partner or such other Person deems
appropriate. Without limitation, meetings of Partners may be conducted in the
same manner as meetings of the shareholders of the Company and may be held at
the same time, and as part of, meetings of the shareholders of the Company.
ARTICLE 15
GENERAL PROVISIONS
Section 15.1 Addresses and Notice
------------ --------------------
Any notice, demand, request or report required or permitted to be given or
made to a Partner or Assignee under this Agreement shall be in writing and shall
be deemed given or made when delivered in person or when sent by first class
United States mail or by other means of written communication to the Partner or
Assignee at the address set forth in Exhibit A or such other address of which
the Partner shall notify the General Partner in writing.
Section 15.2 Titles and Captions
------------ -------------------
All article or section titles or captions in this Agreement are for
convenience only. They shall not be deemed part of this Agreement and in no way
define, limit, extend or describe the scope or intent of any provisions hereof.
Except as specifically provided otherwise, references to "Articles" and
"Sections" are to Articles and Sections of this Agreement.
Section 15.3 Pronouns and Plurals
------------ --------------------
Whenever the context may require, any pronoun used in this Agreement shall
include the corresponding masculine, feminine or neuter forms, and the singular
form of nouns, pronouns and verbs shall include the plural and vice versa.
Section 15.4 Further Action
------------ --------------
The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
Section 15.5 Binding Effect
------------ --------------
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
Section 15.6 Creditors
------------ ---------
Other than as expressly set forth herein with respect to the Indemnities,
none of the provisions of this Agreement shall be for the benefit of, or shall
be enforceable by, any creditor of the Partnership.
Section 15.7 Waiver
------------ ------
No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach or any other covenant, duty, agreement or condition.
Section 15.8 Counterparts
------------ ------------
This Agreement may be executed in counterparts, all of which together shall
constitute one agreement binding on all of the parties hereto, notwithstanding
that all such parties are not signatories to the original or the same
counterpart. Each party shall become bound by this Agreement immediately upon
affixing its signature hereto.
Section 15.9 Applicable Law
------------ --------------
This Agreement shall be construed and enforced in accordance with and
governed by the laws of the State of Delaware, without regard to the principles
of conflicts of law.
Section 15.10 Invalidity of Provisions
------------- ------------------------
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
Section 15.11 Entire Agreement
------------- ----------------
This Agreement contains the entire understanding and agreement among the
Partners with respect to the subject matter hereof and any other prior written
or oral understandings or agreements among them with respect thereto.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
GENERAL PARTNER:
VININGS INVESTMENT PROPERTIES TRUST
By: /s/ Peter D. Anzo
--------------------
Name: Peter D. Anzo
Title: President
LIMITED PARTNER SIGNATURE PAGE
The undersigned, desiring to become one of the within named Limited
Partners of Vinings Investment Properties, L.P., hereby becomes a party to the
Restated Agreement of Limited Partnership of Vinings Investment Properties, L.P.
by and among Vinings Investment Properties Trust and such Limited Partners,
dated as of June 11, 1996. The undersigned agrees that this signature page may
be attached to any counterpart of said Agreement of Limited Partnership.
Signature line for Limited Partner:
VININGS HOLDINGS, INC.
By: /s/ Stephanie A. Reed
-------------------------
Name: Stephanie A. Reed
Title: Vice President
Address of Limited Partner: 3111 Paces Mill Road, Suite A-200
Atlanta, GA 30339
MANAGEMENT AGREEMENT
This MANAGEMENT AGREEMENT ("Agreement") made in Atlanta, Georgia between
The Thicket Apartments, L.P. ("Owner") and Vinings Properties, Inc., ("Agent") a
Georgia corporation, shall become effective as of the 25th day of June, 1996.
NOW THEREFORE in consideration of the promises and the mutual covenants
contained herein, Owner appoints Vinings Properties, Inc. as the exclusive
property manager for the property known as The Thicket Apartments located in
Georgia and consisting of 254 units.
ARTICLE I
Definition
1.01 Budget: A written estimate or projection of all receipts and
expenditures for the operation of the Property during a Fiscal Year, including,
without limitation, all estimated rentals (including ancillary income) and all
estimated repairs, maintenance and capital repairs.
1.02 Property: The property represented is as follows: consisting of 254
units, located in Atlanta, Georgia.
1.03 Fiscal Year: Each calendar year ending December 31, all or a part of
which falls within the term of this Agreement.
1.04 Gross Receipts: All Gross Receipts of every kind and nature derived
from the operation of the Property during a specified period determined on a
cash basis, including, without limitation, laundry income and recreation area
fees; excluding only: (a) security deposits (to the extent not applied to
delinquent rents or damages); (b) proceeds from a sale or refinance; (c)
proceeds from insurance payments for reimbursement of loss or damage to the
Property, except that insurance payments for "Lost Rent" will be considered as
part of Gross Receipts; (d) condemnation awards or payments received in lieu of
condemnation of the Property, or any part thereof; and (e) any trade discounts
and rebates received in connection with the purchase of Personal Property or
services in connection with the operation of the Property.
1.05 Personal Property: All equipment, supplies, furnishings, furniture and
all other items of Personal Property now or hereafter owned by Owner and located
upon or used, or useful for, or necessary or adapted for the operation of the
Property.
1.06 Property: The Land, the Building and the Personal Property,
collectively.
ARTICLE II
Term of Agreement
The initial term of this Agreement is two (2) years, commencing on June 25,
1996 and ending on June 24, 1998. Either party shall have the right to cancel
this Agreement upon sixty (60) days written notice to the other party at any
time. At the end of the initial term, this Agreement shall continue for an
additional one year period until such time that a new Agreement is executed. If
the Agreement is cancelled by the Owner at any time other than at the end of the
initial term or the extended term, a cancellation fee equal to one months fee
will become due and payable.
ARTICLE III
Appointment
Owner hereby grants to Agent the sole and exclusive right to manage and
operate the Property, subject to the terms and provisions of this Agreement.
During the term of this Agreement, Owner shall not participate in the day-to-day
operation of the Property and shall not at any time directly order or instruct
any employees or other personnel engaged in the management or operation of the
Property. Owner, however, reserves the right to participate in the approval of
all policy matters not specifically covered in this Agreement.
ARTICLE IV
Management
4.01 Costs of Operation: All costs incurred by Agent in connection with the
management and operation of the Property shall be borne by Owner, including, but
not limited to, copies, phone charges, postage, and computer charges, etc.
except for the following costs which shall be borne by Agent:
(a) costs relating to bookkeeping services required to be performed by
Agent hereunder; and
(b) salaries and payroll expenses of executives, personnel and
employees of Agent other than budgeted salaries, expenses and benefits of
personnel employed for the operation or management of the Property in
accordance with Section 4.04 hereof.
4.02 General Management Duties: Agent shall use diligence to manage and
operate the Property in a professional manner, and shall consult with Owner and
keep Owner advised as to all major or extraordinary matters and without
limitation, at Owner's expense, perform the following services and duties for
Owner in a faithful, diligent and efficient manner:
(a) Maintain businesslike relations with tenants of the Property whose
service requests shall be received, considered and recorded in systematic
fashion in order to show the action taken with respect to each. Complaints
of a serious nature shall, after thorough investigation, be reported to
Owner with appropriate recommendations;
(b) Collect all rents and other sums and charges due from tenants,
subtenants, licensees and concessionaires of the Property and, if required,
retain attorneys or collection agencies for such purpose;
(c) Prepare or cause to be prepared for execution and filing all
forms, reports and returns required by all federal, state and local laws in
connection with unemployment insurance, worker's compensation, insurance,
disability benefits, Social Security and other similar taxes now in effect
or hereafter imposed, and also any other requirements relating to the
employment of personnel for the Property; however, Agent shall not be
obligated to prepare any of Owner's local, state, or federal income tax
returns;
(d) Pay all sums and make all deposits becoming due and payable under
the provisions of any ground lease or any loan secured by a mortgage or
trust deed against the Property, or any part thereof, and otherwise perform
all covenants and obligations required to be performed under the provisions
of any such ground lease, mortgage or trust deed (to the extent that the
performance of such covenants and obligations are within the control of
Agent); and
(f) Perform such other acts and deeds as are reasonable, necessary and
proper in the discharge of its management duties under this Agreement.
4.03 Budgets: Agent shall prepare and submit for approval of Owner not
later than thirty (30) days prior to each Fiscal Year, a proposed budget with
respect to the operation and management of the Property for the ensuing Fiscal
Year. In the event Owner, in Owner's sole and reasonable judgement, disapproves
of any proposed Budget submitted by Agent, Owner shall give Agent written notice
thereof, in which event Agent shall make all revisions thereto which Owner shall
direct and resubmit the proposed Budget to Owner for approval. In the absence of
such written notice of disapproval within thirty (30) days after delivery of the
Budget to Owner, the Budget shall be deemed to have been approved by Owner. Each
approved Budget shall constitute the control instrument under which Agent shall
operate for the Fiscal Year covered thereby. Approval of the Budget shall be
deemed to be approval by Owner of all items specified therein. Agent shall not
incur or permit to be incurred, expenses in any approved Budget (excluding
utility expenses, general real estate taxes, insurance premiums, financing costs
and emergency expenses) in excess of ten percent (10%) of the amount set forth
in the Budget for any single expense classification (e.g., cleaning expenses,
H.V.A.C. expenses, etc.) or in excess of five percent (5%) of the aggregate
expenditures therein. Except as set forth herein and in Section 4.06, there
shall be no variance from any approved Budget, without the prior written consent
of Owner.
4.04 Property Personnel: In accordance with approved Budgets, Agent shall,
at Owner's expense, hire, employ, supervise and discharge all employees required
in connection with the operation and management of the Property. All employees
working on the property are considered to be employees of the Owner and not the
Agent even though salaries and benefits may be paid through a master agency
account. All salaries, taxes, insurance and other benefits paid to such
employees through a master agency account shall be reimbursed immediately and
shall not be considered an expense of the management company. The Agent shall
not grant any non-budgeted employee fringe benefits and plans not required by
laws or union contract without written consent of Owner. Agent will not
discriminate against any employee or applicant for employment because of race,
creed, color, sex or national origin. Said employees shall include those persons
as Agent reasonably deems necessary and as approved in the budget.
4.05 Contracts and Supplies: Agent shall, at Owner's expense, upon the best
terms available, enter into contracts on behalf of Owner for the furnishing to
the Property of required utility services, heating and air conditioning services
and other maintenance, security protection, pest control, and any other services
and concessions which are required in connection with the maintenance and
operation of the Property. Agent shall also place purchase orders for supplies
and Personal Property as are necessary to properly maintain the Property. All
such contracts and orders shall be subject to the limitations set forth in the
approved Budget. When taking bids or issuing purchase orders, Agent shall use
its best efforts to secure for and credit to Owner, any discounts, commissions
or rebates obtainable as a result of such purchases or services. Agent shall use
its best efforts to make purchases and (where necessary or desirable) get bids
for necessary labor and materials at the lowest possible cost as in its
judgement is consistent with good quality, workmanship and service standards.
Agent shall not incur any obligation to any person or entity in which Agent or
any of Agent's officers has a financial interest at a price or fee higher than
that which would have been charged as a result of bona fide arms-length
negotiations.
4.06 Alterations, Repairs and Maintenance:
(a) Agent shall, at Owner's expense, perform or cause to be performed
all necessary or desirable repairs, maintenance, cleaning, painting and
decorating, alterations, replacements and improvements in and to the
Property as are customarily made in the operation of properties of the
kind, size and quality of the Property; provided, however, that no
unbudgeted alterations, additions or improvements involving a fundamental
change in the character of any of the buildings or constituting a major new
construction program shall be made without the prior written approval of
Owner. No unbudgeted expenditures shall be made except as provided for in
Section 4.03, or unless such repairs are immediately necessary for the
preservation or the safety of the Property, or for the safety of the
tenants of the Property, or required to avoid the suspension of any
necessary service to the Property or required by any judicial or
governmental authority having jurisdiction. These repairs may be made by
the Agent without prior approval and regardless of the cost limitations
imposed by this Section 4.06(a); further, provided that Agent shall as soon
as practicable give written notice to Owner of any such emergency repairs
for which prior approval is not required.
(b) In accordance with the terms of approved Budgets or upon written
request of Owner, Agent shall, from time to time during the term hereof, at
Owner's expense, make or cause to be made all required capital
improvements, replacements or repairs to the Property; provided, however,
if Agent is required to perform extraordinary services in connection with
such improvements, repairs or replacements, which services exceed those
customarily rendered by managing agents of properties similar to the
Property, then Agent shall receive an additional fee therefore in an amount
mutually agreed upon by Owner and Agent in advance of providing such
services.
(c) Agent shall give Owner written notice of any material defect in
the Property and all parts thereof immediately after ascertainment thereof
by Agent, including without limitation, material defects in the roofs,
foundations and walls of the buildings and in the sewer, water, electrical,
structural, plumbing, heating, ventilation and air conditioning systems;
provided, however, that Agent shall have no obligation to inspect the
buildings in order to discover any such condition.
4.07 Licenses and Permits: Agent shall, at Owner's expense, obtain and
maintain in the name of Owner all licenses and permits required of Owner or
Agent in connection with the management and operation of the Property. Owner
agrees to execute and deliver any and all applications and other documents to
otherwise cooperate with Agent in applying for, obtaining and maintaining such
licenses and permits.
4.08 Compliance with Laws: Agent shall, at Owner's expense, comply with all
laws, regulations and requirements for any federal, state or municipal
government having jurisdiction respecting the use or manner of use of the
Property or the maintenance of operation thereof.
4.09 Legal Proceedings: Agent shall, at Owner's expense, institute any and
all legal and/or administrative actions or proceedings to collect charges, rents
or other income from the Property, to dispossess tenants or other persons in
possession, to cancel or terminate any lease, license or concession agreement
for the breach thereof or default thereunder by the tenant, licensee or
concessionaire and to protest increases in taxes and/or assessments levied
against the Property, or any portion thereof.
4.10 Inventory: Agent shall maintain an annual inventory of all Personal
Property.
4.11 Insurance Coverage: Owner, or Agent at the request of Owner, at
Owner's expense, shall procure and maintain throughout the term hereof, the
following insurance coverage with respect to the Property, in amounts and issued
by companies approved by Owner:
(a) fire and extended coverage insurance;
(b) worker's compensation insurance;
(c) comprehensive public liability insurance for injury or death to
persons and damage to or loss to property;
(d) burglary and theft insurance;
(e) boiler insurance (if applicable)
(f) such other insurance which Owner shall direct of as Agent shall
reasonably deem appropriate for the protection of Owner against claims,
losses and liabilities arising out of the operation and improvement of the
Property; and
(g) fidelity bond of not less than $500,000.
All such policies of insurance shall name the Owner, Agent and such
other parties as Owner shall direct as the named insureds thereunder, as
their respective interests may appear. Agent shall promptly investigate and
report to the Owner and the insurance company involved all accidents and
claims for damage relating to the ownership, operation and maintenance of
the Property and any damage or destruction to the Property.
4.12 Signs: Owner agrees to allow Agent to place one or more signs on or
about the Property stating that Agent is providing management for the Property,
provided that the signs and location thereof shall be subject to Owner's
approval.
4.13 Debts of Owner: In the performance of its duties as managing Agent of
the Property, Agent shall act as the agent of the Owner. All debts and
liabilities to third persons and employees of the Property incurred by Agent in
the course of its operation and management of the Property shall be the debts
and liabilities of the Owner only, and Agent shall not be liable for any such
debts or liabilities, except to the extent Agent has exceeded its authority
hereunder.
4.14 Allocation of Costs: The parties hereto acknowledge that the Property
may be operated in conjunction with other properties managed by Agent, and
certain costs may be allocated or shared among such properties.
4.15 Partnership Duties: Agent may provide other duties such as oversee
major property renovation, new construction lease up, coordinate partnership
audits, tax returns, bankruptcy filings, loan refinancings, etc. as requested by
Owner for additional fees to be mutually agreed upon by Owner and Agent.
4.16 Exclusivity: Agent is not precluded from providing management or other
services to other Owners or properties even if such properties might be in
direct competition with subject Property.
ARTICLE V
Management Fees
5.01 Compensation of Agent: As consideration for the performance by Agent
of all its management obligations under this Agreement, Owner agrees to pay
Agent a management fee each month during the term of this Agreement in an amount
not to exceed five percent (5%), of Gross Receipts. Said management fee shall be
paid not later than the 10th day of the month following the month for which such
fee is earned. Provided that Agent is not in default under this Agreement, Agent
shall be entitled to pay itself the monthly management fee herein provided from
the Property bank account referred to in Article VI hereof. In addition, Agent
shall be allowed to charge an accounting/computer fee of $5 per unit per month.
5.02 Reimbursement of Agent's Expenses: Owner agrees to reimburse Agent for
any monies which Agent may elect to advance for the account of Owner, although
Agent shall be under no obligation at any time to advance funds for the account
of the Owner. Owner shall further reimburse Agent for all of Agent's expenses
incurred in connection with the operation of the Property or as a result of
Agent's compliance with this Agreement during the preceding month, including,
without limitation copies, postage, Agent's long distance travel and long
distance phone expenses and expenses relating to the duties set forth in Article
IV herein. Agent shall be responsible for the cost of Agent's overhead and
administrative personnel.
ARTICLE VI
Procedure for Handling Receipts and Operating Capital
6.01 Bank Deposits: Agent shall maintain bank accounts as deemed
appropriate into which all monies received by Agent for or on behalf of Owner in
connection with the operation and management of the Property shall be deposited.
6.02 Disbursement of Deposits: Agent shall disburse and pay from the bank
account specified in Section 6.01 hereof, such amounts and at such times as the
same are required in connection with the management and operation of the
Property in accordance with the provision of this Agreement. As requested by
Owner, and in accordance with this Agreement and any applicable laws,
regulations, mortgages, or other limitations, Agent shall disburse any excess
funds to Owner after providing for sufficient reserves.
6.03 Authorized Signatories: Designated officers and employees of Owner and
Agent shall be the authorized signatories on the bank account established by
Agent pursuant to Section 6.01 hereof and shall have authority to make
disbursements from such account. ARTICLE VII Accounting
7.01 Books and Records: Agent shall maintain at the central office of
Agent, a comprehensive system of office records, books and accounts pertaining
to the Property, which records, books and accounts shall be available for
examination by Owner and its agents, accountants and attorneys at regular
business hours. Agent shall preserve all records, books and accounts for a
period of three (3) years.
7.02 Periodic Statements; Audits:
(a) On or before fifteen (15) days following the end of each month
during the term of this Agreement, Agent shall deliver or cause to be
delivered to Owner, and any other parties requested, basic financial
statement information as agreed upon by Owner and Agent for the preceding
calendar month and the Fiscal Year to date;
(b) Within sixty (60) days after the end of each Fiscal Year, Agent
will have prepared and delivered to Owner, at Owner's expense, an income
and expense statement showing the results of operation of the Property
during the preceding Fiscal Year, which statement shall be prepared (and at
Owner's request certified) by a certified public accountant as designated
by Agent. At Owner's request and at Owner's expense, Agent shall prepare
financial reports and perform bookkeeping services in addition to those
provided herein. Agent shall prepare any other report which is customary in
the industry at the request of Owner - all other special reports or tax
returns will be prepared for an additional fee at the request of Owner.
ARTICLE VIII
Indemnification
Owner agrees as follows: (a) to hold and save Agent free and harmless from
damages as a result of injuries to person or property by reason of any cause
whatsoever either in and about the Property or elsewhere when Agent is carrying
out the provisions of this Agreement; (b) to reimburse Agent, upon demand, for
any money which the Agent is required to pay for any reason whatsoever in
connection with the Property, including payment for operating expenses,
attorneys' fees or costs, fees and judgements in connection with the defense of
any claim, civil or criminal action, proceeding, charge, or prosecution made,
instituted or maintained against Agent or Owner, jointly or severally, affecting
or due to the condition or use of the Property, or acts or omissions of Agent,
agents and employees of Agent, Owner against any employees of Owner, or arising
out of or based upon any law, regulation requirement, contract, or award
relating to the hours of employment, working conditions, wages and/or
compensation of employees or former employees of Agent, or any other cause in
connection with the Property; and (c) to defend promptly and diligently, at
Owner's sole expense, any claim, action or proceeding in connection with any of
the foregoing; and (d) to hold harmless or fully indemnify Agent from any
judgement, loss or settlement on account thereof, including reasonable
attorneys' fees. It is expressly understood and agreed that the foregoing
provisions shall survive the termination of this Agreement to the extent the
cause arose prior to termination. Notwithstanding the foregoing, Owner shall not
be required to indemnify Agent against damages suffered as a result of gross
negligence or willful misconduct on the part of Agent, its agent, or employees.
ARTICLE IX
Miscellaneous Provisions
9.01 Notices: Any notice or communication hereunder must be in writing, and
shall be personally delivered or mailed by registered or certified mail, return
receipt requested, and if mailed shall be deemed to have been given and received
two (2) days after its mailing. Such notices or communications shall be given to
the parties hereto at their following addresses:
To Agent: Vinings Properties, Inc.
3111 Paces Mill Road, A-200
Atlanta, Georgia 30339
Attn: Martin H. Petersen
To Owner: The Thicket Apartments, L.P.
3111 Paces Mill Road, A-200
Atlanta, Georgia 30339
Attn: Peter D. Anzo
Any party hereto may at any time by giving ten (10) days written notice to
the other party hereto designate any other address in substitution of the
foregoing address to which such notice or communications shall be given.
9.02 Severability: If any term, covenant or condition of this Agreement or
the application thereof to any person or circumstance shall, to any extent, be
held to be invalid or unenforceable, the remainder of this Agreement, or the
application of such term, covenant or condition to persons or circumstances
other than those as to which it is held invalid or unenforceable, shall not be
affected thereby, and each term, covenant or condition of this Agreement shall
be valid and shall be enforced to the fullest extent permitted by law.
9.03 Attorney's Fees: Should either party retain attorneys to enforce any
of the provisions hereof or to protect its interest in any manner arising under
this Agreement, or to recover damages for the breach of this Agreement, the
non-prevailing party in any action (the finality of which is not legally
contested) agrees to pay to the prevailing party all reasonable costs, damages
and expenses, including attorney's fees, expended or incurred in connection
therewith.
9.04 Total Agreement: This agreement is a total and complete integration of
any and all representations and agreements existing between Agent and Owner and
supersedes any prior oral or written representations and agreements between
them.
9.05 Article and Section Headings: Article and section headings contained
in this Agreement are for reference only, and shall not be deemed to have any
substantive effect of to limit or define the provisions contained therein.
9.06 Successors and Assigns: This Agreement shall be binding upon and shall
insure to the benefit of the parties hereto and their respective successors and
permitted assigns; provided, however, that Agent shall not have the right to
assign this Agreement without the prior written consent of Owner.
9.07 Governing Law: This Agreement shall be construed in accordance with
the laws of the State of Georgia.
IN WITNESS WHEREOF, this Agreement has been executed in Atlanta, Georgia,
effective as of the date first above written.
OWNER: The Thicket Apartments, L.P.
By /s/Peter D. Anzo
- -------------------
Peter D. Anzo
AGENT: Vinings Properties, Inc.
By /s/Martin H. Petersen
- ------------------------
Martin H. Petersen
SCHEDULE OF SUBSIDIARIES OF VININGS INVESTMENT PROPERTIES TRUST
Jurisdiction of
Subsidiary Organization
- ---------- ------------
Vinings Investment Properties, L.P. Delaware
Thicket Apartments, L.P. Delaware
Vinings Holdings, Inc. Delaware
Thicket Holdings, Inc. Delaware
PBC Acquisition, Inc. Delaware
2105 West El Segundo Blvd. Corp. * Delaware
MP GP, Inc. * Delaware
* In the process of being dissolved.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This Schedule contains summary financial information extracted from the
consolidated balance sheet and statement of operations for Vinings Investment
Properties Trust for the period ended December 31, 1996 and is qualified in its
entirety by reference to such financial statements as contained in the Form 10-K
report for the year ended December 31, 1996.
</LEGEND>
<CIK> 759174
<NAME> Vinings Investment Properties Trust
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<EXCHANGE-RATE> 1
<CASH> 364347
<SECURITIES> 0
<RECEIVABLES> 50674
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 11472454
<DEPRECIATION> 613918
<TOTAL-ASSETS> 11519469
<CURRENT-LIABILITIES> 0
<BONDS> 8939780
0
0
<COMMON> 0
<OTHER-SE> 2232548
<TOTAL-LIABILITY-AND-EQUITY> 11519469
<SALES> 0
<TOTAL-REVENUES> 1796917
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2171476
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 408719
<INCOME-PRETAX> (810,078)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (810,078)
<EPS-PRIMARY> (0.75)
<EPS-DILUTED> 0
</TABLE>
