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, 1997 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 16, 1998, the aggregate
market value of the Registrant's shares held by non-affiliates of the Registrant
was $2,291,302.
The number of shares outstanding as of March 16, 1998 was 1,080,508.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Trust's Proxy Statement relating
to its 1998 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..............18
ITEM 9 - Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure...............18
PART III..............................................................19
ITEM 10 - Directors and Executive Officers of the Registrant......19
ITEM 11 - Executive Compensation..................................19
ITEM 12 - Security Ownership of Certain Beneficial Owners
and Management..................................19
ITEM 13 - Certain Relationships and Related Transactions..........19
PART IV...............................................................20
ITEM 14 - Exhibits, Financial Statements and Schedule and
Reports on Form 8-K.............................21
Signatures ...........................................................22
<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 ten 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, per share 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 ("Peachtree") 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 without
par value (the "Shares"), of the Trust 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 an 80.67% limited partner in the Operating Partnership
at December 31, 1997. During the fourth quarter of the fiscal year ended
December 31, 1997 ("fiscal 1997"), 242,546 limited partnership units in the
Operating Partnership ("Units") were issued, of which 224,330 Units were in
connection with the acquisition of Windrush, as defined below. The Units are
redeemable by their holders for Shares of the Trust on a one-for-one basis or
for cash, at the option of the Trust. (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 pursuant to which shareholders of
the Trust 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, 1997, fractional Shares totaling 113 had been
repurchased and retired leaving 1,080,512 Shares outstanding.
At December 31, 1997, approximately ninety three percent (93%) of the Trust's
total assets were invested in three 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; (2) Windrush Apartments ("Windrush"), a 202-unit
apartment community located in Atlanta, Georgia, owned through Vinings
Communities, L.P., a Delaware limited partnership of which the Operating
Partnership is a 99% limited partner and the Trust is the sole general partner
and; and (3) Peachtree, an approximately 75,000 square foot, single-story
business park located in Atlanta, Georgia, owned by the Operating Partnership.
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.
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, currently the 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 Units or any combination thereof. In addition, the Trust believes it
can raise capital through private offerings for specific acquisitions.
<PAGE>
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 rental 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, 1997 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
management agreements with Vinings Properties, Inc. for property management
services for Thicket and Windrush 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") provided numerous services to the Trust during
fiscal 1997 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 has been in its rebuilding stages, the officers and
trustees have been committed to providing as many services as possible to
promote the Trust's growth. Peachtree is managed by a third-party property
management firm not affiliated with management.
Employees
- ---------
At December 31, 1997, Thicket and Windrush had 10 employees who performed
on-site property management services for the communities and were paid with
funds generated from Thicket and Windrush. In addition, the Trust paid a total
of $45,000 to Vinings for 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, 1997, 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, 1997, 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 real estate investments are summarized below by property:
Amount of Investment Occupancy
Investment Percentage at 12/31/97
---------- ------------ -----------
The Thicket Apartments $ 8,308,773 46% 99%
Windrush Apartments 7,555,000 42% 93%
Peachtree Business Center 2,262,908 12% 100%
============ ===========
Totals $18,126,681 100%
============ ===========
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, 1997 Consolidated Financial Statements.
ITEM 3 - LEGAL PROCEEDINGS
In August 1997, the Trust, through the Operating Partnership, began contract
negotiations for the acquisition of a 2,365-unit portfolio of 16 multifamily
properties. The sellers, which were 16 individual partnerships (the "Sellers"),
were to contribute the properties to the Operating Partnership in exchange for a
combination of Units and/or cash and the assumption of existing mortgage
indebtedness (the "Portfolio Transaction"). The officers of the Trust spent
substantial amounts of time and the Trust spent substantial amounts of money in
its due diligence on the properties and in contract negotiations specifically
for this portfolio. The Trust believes that it secured a binding commitment from
the Sellers for the Portfolio Transaction. Conditional commitments for equity
financing were obtained and the Trust was prepared to close on the transaction
in early 1998. Within thirty days of closing, the general partner of the Sellers
terminated the contract for reasons the Trust believes to be pretextual, in
breach of the contract and not in the best interests of the partners of the
selling partnerships or the shareholders of the Trust.
On February 3, 1998, the Trust commenced an action against the Sellers, their
general partners and a related property management company seeking specific
enforcement of the contract and damages for the defendant's willful breach of
contract, lack of good faith negotiation and tortious interference in connection
with the breach and termination of the contract. In a related case, the Sellers
filed an action on January 29, 1998 seeking a declaratory judgement that the
contract is not valid, binding and enforceable against them. The Trust is
vigorously pursuing its claim. However, there can be no assurances that the
Trust will prevail in its action or recover any damages.
None of the Trust's properties are presently subject to any material litigation
nor, to the Trust's knowledge, is any material litigation threatened against the
Trust or any of its properties, other than the above complaint and 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 fiscal 1997.
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".
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,
1997, fractional Shares totaling 113 had been repurchased and retired leaving
1,080,512 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 1997 and the fiscal year ended December 31, 1996 ("fiscal
1996"), which reflect inter-dealer prices, without retail mark-up, mark-down or
commission and may not necessarily represent actual transactions, are as
follows:
--------------------- ---------------------
1997 1996
--------------------- ---------------------
QUARTER ENDED HIGH LOW HIGH LOW
- ------------- ---- --- ---- ---
March 31 4 5/8 4 3/8 22 3
June 30 4 7/8 4 3/8 6 1/2 3
September 30 4 7/8 4 6 4
December 31 5 1/4 3 3/4 5 4 3/8
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 (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
fiscal 1996. For fiscal 1997 the Trust did not pay or declare cash
distributions. On March 16, 1998, the closing sales price for the Trust's
Shares, as reported on the Nasdaq SmallCap Market, was $4.25.
The Trust has paid quarterly cash distributions to shareholders sufficient to
enable the Trust to qualify as a REIT. For fiscal 1996 the Trust declared cash
distributions per Share in accordance with 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 10 of
the Trust's December 31, 1997 Consolidated Financial Statements.
------------------------------------
1996
------------------------------------
Payment Date Distributions
February 2, 1996 $15.60
March 8, 1996 1.28
---------
Total $16.88
=========
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 745 holders of record of its Shares as of March 16, 1998.
<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, 1997, 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,
-------------------------------------------------------------------------------
1997 1996 1995 1994 1993
-------------- ------------- -------------- -------------- -------------
<S> <C> <C> <C> <C> <C>
Revenues $ 2,478,824 $ 1,796,917 $ 3,244,908 $ 4,159,170 $ 6,668,425
Expenses 3,146,005 2,580,195 1,779,475 2,477,923 2,163,286
-------------- ------------- -------------- -------------- -------------
Income (loss) before loss on
real estate investments (667,181) (783,278) 1,465,433 1,681,247 4,505,139
Loss on real estate investments - (26,800) (886,887) (816,307) (1,325,000)
-------------- ------------- -------------- -------------- -------------
Net income (loss) before minority interest (667,181) (810,078) 578,546 864,940 3,180,139
Minority interest (5,464) - - - -
-------------- ------------- -------------- -------------- -------------
Net income (loss) $ (661,717) $ (810,078) $ 578,546 $ 864,940 $ 3,180,139
============== ============= ============== ============== =============
Net income (loss) per share - basic
and diluted $ (0.61) $ (0.75) $ 0.54 $ 0.80 $ 2.94
============== ============= ============== ============== =============
Weighted average shares outstanding-basic 1,080,513 1,080,528 1,080,625 1,080,625 1,080,625
============== ============= ============== ============== =============
Weighted average shares outstanding-diluted 1,089,435 1,080,528 1,080,625 1,080,625 1,080,625
============== ============= ============== ============== =============
Dividends declared and paid:
Ordinary income $ - $ - $ - $ 0.08 $ 4.08
Return of capital - 16.88 12.24 24.64 -
-------------- ------------- -------------- -------------- -------------
Total dividends declared and paid $ - $ 16.88 $ 12.24 $ 24.72 $ 4.08
============== ============= ============== ============== =============
Total assets $ 18,989,558 $ 11,519,469 $ 21,878,357 $ 34,348,242 $ 60,514,634
============== ============= ============== ============== =============
Shareholders' equity $ 2,268,803 $ 2,232,548 $ 21,284,112 $ 33,932,908 $ 59,781,018
============== ============= ============== ============== =============
</TABLE>
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 ten 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, a 75,000 square foot business park
located in Atlanta, Georgia ("Peachtree") 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, without
par value (the "Shares"), of the Trust. 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"), a Delaware limited partnership, was organized. At December 31,
1997, the Trust is the sole general partner and an 80.67% limited partner in the
Operating Partnership. During the fourth quarter of fiscal year end December 31,
1997 ("fiscal 1997"), a total of 242,546 limited partnership units in the
Operating Partnership ("Units") were issued, of which 224,330 Units were in
connection with the acquisition of Windrush, as defined below. The Units are
redeemable for Shares of the Trust on a one-for-one basis or for cash, at the
option of the Trust. (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, 1997, fractional Shares totaling 113 had been repurchased and
retired leaving 1,080,512 Shares outstanding.
Much of Management's efforts during fiscal 1997 were focused on the acquisition
of Windrush Apartments, a 202-unit apartment community located in Atlanta,
Georgia ("Windrush"), the Trust's first UPREIT transaction in exchange for
Units, as well as negotiating for a 2,365-unit portfolio transaction, the
contract for which was terminated by the Seller thirty days prior to closing
(the "Portfolio Transaction"). (See Item 3-Legal Proceedings and Note 9 to the
Trust's December 31, 1997 Consolidated Financial Statements). At December 31,
1997, the Trust's real estate assets were The Thicket Apartments, a 254-unit
apartment community located in Atlanta, Georgia ("Thicket"), Windrush and
Peachtree, which were 100%, 93% and 100% 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 liquidate and terminate after
approximately ten years, the net income, as well as the asset value, of the
Trust decreased during the liquidating years of fiscal year ended December 31,
1995 ("fiscal") and fiscal year ended December 31, 1996 ("fiscal") and have
begun to increase in fiscal 1997 with the Tender Offer and Management's
redirection and rebuilding of the Trust. Revenues decreased from fiscal 1995 to
fiscal 1996 as a result of the liquidation of the Trust's assets and increased
from fiscal 1996 to fiscal 1997 with continued growth as the Trust pursued its
expansion strategy. Operating expenses, however, increased substantially in
fiscal 1996 due to a number of non-recurring costs associated with the Tender
Offer and the structural reorganization of the Trust and increased again in
fiscal 1997 as a result of the costs incurred in connection with the Portfolio
Transaction. In addition, the nature of the operating expenses has shifted from
administrative expenses and advisory fees to property operating expenses and
mortgage interest expense connected with the Trust's income producing assets.
All of the gains (losses) on real estate investments since fiscal 1995 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 1995 are no longer held by the Trust, with the
exception of Peachtree.
Comparison of Operating Results of 1997 to Operating Results of 1996
- --------------------------------------------------------------------
Total revenues increased $681,907, or 38%, from $1,796,917 to $2,478,824 due to
the fact that the Trust had begun to pursue its growth and expansion strategy.
Rental and other property revenues increased $924,263, or 60%, from $1,552,483
to $2,476,746 due primarily to the revenues generated in connection with the
Trust's ownership of Thicket for an entire year during fiscal 1997 as compared
to six months during fiscal 1996. Revenues from Peachtree remained fairly
constant. Immaterial amounts of revenue were generated for the twelve days
Windrush was owned during fiscal 1997.
Interest income decreased by $90,579, or 98%, from $92,657 to $2,078. In fiscal
1996, interest income was generated from cash investments primarily in the first
two months of the year, prior to the payment of liquidating dividends. Since
that time there have been relatively small cash balances.
Property operating and maintenance expense increased $406,496, or 69%, from
$586,430 to $992,926, primarily to the expenses generated in connection with the
Trust's ownership of Thicket for an entire year during fiscal 1997 as compared
to six months during fiscal 1996.
Depreciation increased $182,036, or 76%, from $240,357 to $422,393. Depreciation
on Thicket increased $185,165 due to the Trust's ownership of Thicket for an
entire year during fiscal 1997 as compared to six months during fiscal 1996 as
well as additional depreciation on improvements made during fiscal 1997.
Depreciation on Peachtree decreased slightly.
Interest expense increased $407,832, or 100% from $408,719 to $816,551 due to
the Trust's ownership of Thicket for an entire year during fiscal 1997 as
compared to six months during fiscal 1996.
General and administrative expense decreased $651,598 or 66%, from $987,973 to
$336,375. The majority of the decrease relates to costs associated with the
Tender Offer and structural reorganization of the Trust during 1996 that did not
recur during fiscal 1997. The following expense categories included in general
and administrative decreased from fiscal 1996 to fiscal 1997: professional fees
by $398,733, directors' and officers' insurance by $176,768, trustee expense by
$31,312, annual report and proxy costs by $27,361 and filing fees by $17,425.
There were no investment advisor's fees incurred during fiscal 1997. All of the
advisor's fees during fiscal 1996 were incurred during January and February as
the services of the Advisor were terminated at the consummation of the Tender
Offer.
The unusual item of $532,185 included in operating expenses during fiscal 1997
relates to costs incurred in connection with the Portfolio Transaction. These
expenses include due diligence costs such as environmental and engineering
reports, independent financial analysis, investor appraisal costs and legal
contract negotiations.
(See Note 9 to the Trust's December 31, 1997 Consolidated Financial Statements).
There were no gains or losses on real estate investments during fiscal 1997. The
loss on real estate investment of $26,800 in fiscal 1996 represents commissions
and fees on the sale of the Hawthorne Note, as hereinafter defined.
The Trust incurred a net loss before minority interest of $667,181 for fiscal
1997 as compared to $810,078 for fiscal 1996, representing a decrease of
$142,897, even with the unusual item described above. Had the Trust not incurred
the unusual item associated with the Portfolio Transaction, the net loss before
minority interest for fiscal 1997 would have been $134,996. The minority
interest of $5,464 represents the allocation of losses for the short period in
December 1997 during which Units in the Operating Partnership were held.
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.
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 fiscal 1996 was its investment in
mortgage loan receivables. Interest earned on these investments generated the
Trust's interest income in fiscal 1995. In fiscal 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 fiscal
1996, as compared to $277,601 in fiscal 1995. The Thicket generated depreciation
of $162,965 for the six months held in fiscal 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, 1997 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 Hawthorne Note as hereinafter defined. The Hawthorne Research
and Development Complex 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 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.
Liquidity and Capital Resources
- -------------------------------
Operating activities provided net cash of $152,536 for fiscal 1997 as compared
to net cash used in operating activities of $704,965 for fiscal 1996, which was
the result of the liquidating and restructuring of the Trust during fiscal 1996.
As a result of the Tender Offer and the implementation of Management's growth
and expansion strategy, cash flows from investing and financing activities have
changed dramatically from fiscal years 1995 to 1996 to 1997. During fiscal 1995,
cash provided by investing activities was the result of the Trust's liquidation
of investments. In fiscal 1996, $673,200 was generated from the sale of
investments and approximately $8,700,000 was invested in Thicket. While Windrush
was acquired during fiscal 1997, it was not acquired with cash but through the
assumption of debt, escrow accounts and the issuance of Units. Approximately
$3,800 in cash was spent in connection with the Windrush acquisition and
approximately $135,000 was used to make improvements to Thicket and Peachtree.
Cash flows used in financing activities were comprised of (1) distributions to
shareholders, and (2) debt incurred. Distributions to shareholders have
decreased from $13,277,342 during fiscal 1995, to $9,526,133 during fiscal 1996,
with no distributions during fiscal 1997. All distributions were the result of
final liquidating dividends paid to shareholders. During fiscal 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. During fiscal 1997, an additional $150,000 was drawn
from the line of credit. A mortgage note in the amount of $6,464,898, was
assumed in connection with the acquisition of Windrush and is not considered a
cash transaction.
Many of the costs associated with the liquidation of Trust's assets and the
subsequent Tender Offer and organizational restructuring that were incurred
during fiscal 1996, have not continued into fiscal 1997. The cash held by the
Trust at December 31, 1997, plus the cash flow from the Trust's assets, is
expected to provide sources of liquidity to allow the Trust to meet all current
operating obligations. In addition, the remaining balance of $281,896 on the
Trust's $2,000,000 line of credit may be drawn for working capital needs or
acquisition funding. It is anticipated that the line of credit, which is due in
June 1998, will be renewed, refinanced or repaid through the issuance of new
equity. (For additional information regarding the line of credit see Note 6 to
the Trust's December 31, 1997 Consolidated Financial Statements). Management
intends to continue ongoing discussions with 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".)
Recent Accounting Pronouncements
- --------------------------------
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share" ("SFAS 128"), which
supersedes the authoritative literature and related interpretations for earnings
per share under Accounting Principles Board Opinion No. 15. Effective for the
quarter and year ended December 31, 1997, the Trust computes net income (loss)
per share under the provisions of SFAS No. 128. As prescribed by SFAS No. 128,
all prior period net income (loss) per share data has been restated to conform
with the provisions of SFAS No. 128. Under SFAS No. 128, basic net income (loss)
per share is computed based upon the weighted average number of common shares
outstanding during the period. Diluted net income (loss) per share is computed
to reflect the potential dilution of all instruments or securities which are
convertible into common shares of the Trust. Previously reported net income
(loss) per share under prior accounting standards was equal to basic and diluted
net income (loss) per share under SFAS no. 128.
Impact of Inflation
- -------------------
Substantially all of the residential leases at Thicket and Windrush are for
periods of one year or less which will enable the Trust to seek increased rents
upon renewal of existing leases or upon commencement of new leases. Although
there can be no assurance that rental increases may be obtained, the short term
nature of these leases generally serves to reduce the risk to the Trust of the
adverse effects of inflation.
Substantially all of the tenant leases at Peachtree have remaining terms of five
years or less and contain clauses which require the tenants to pay their
prorated share of operating expenses, including common area maintenance, real
estate taxes, and insurance. This serves to reduce the risk of increased costs
and operating expenses resulting from inflation. In addition, the Trust may seek
increased base rents upon renewal of existing leases or upon commencement of new
leases in order to offset any adverse effects of inflation. However, there can
be no assurance that rental increases may be obtained.
Other Matters
- -------------
The Trust is currently assessing the potential impact of the year 2000 on the
processing of date sensitive information. The year 2000 issue is the result of
many computer programs recognizing a date ending with "00" as the year 1900
rather than the year 2000, causing potential system failures or miscalculations
which could result in disruptions of normal business operations. However, year
2000 computer issues are not expected to have a material adverse impact on the
Trust's financial position, results of operations or cash flows in future
periods. The Trust's software systems are either currently year 2000 compliant
or will be compliant well in advance of January 1, 2000.
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 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 1998 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 1998 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 1998 Annual Meeting of the Registrant's shareholders and is
incorporated herein by reference.
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 1998 Annual Meeting of the Registrant's shareholders and is
incorporated herein by reference.
PART IV
ITEM 14 - EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULE AND
REPORTS ON FORM 8-K
14(A) (1) AND (2) INDEX TO CONSOLIDATED FINANCIAL
STATEMENTS AND SCHEDULE Page
----
Report of Independent Public Accountants--As of December 31, 1997
and 1996 and for the years then ended 24
Report of Independent Auditors--For the year ended December 31, 1995 25
Consolidated Balance Sheets--As of December 31, 1997 and 1996 26
Consolidated Statements of Operations--For the years ended
December 31, 1997, 1996 and 1995. 27
Consolidated Statements of Shareholders' Equity--For the years ended
December 31, 1997, 1996 and 1995 28
Consolidated Statements of Cash Flows--For the years ended
December 31, 1997, 1996 and 1995 29
Notes to Consolidated Financial Statements--For the years ended
December 31, 1997, 1996 and 1995 30
Consolidated Financial Statement Schedule 42
<PAGE>
<TABLE>
<CAPTION>
14(A) (3) EXHIBITS
<S> <C> <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 --- Amendment No. 1 to the Second Amended and Restated Declaration of Trust of the Trust
(incorporated by reference to Exhibit 3.3 to the Trust's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996, No. 0-13693).
3.3 --- Amendment No. 2 to the Second Amended and Restated Declaration of Trust of the Trust
(incorporated by reference to Exhibit 3.4 to the Trust's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996, No. 0-13693).
3.4 --- 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).
10.1 --- Amended and Restated Agreement of Limited Partnership of Vinings Investment Properties,
L.P. (filed herewith).
10.2 --- First Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings
Investment Properties, L.P. (filed herewith).
10.3 --- Second Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings
Investment Properties, L.P. (filed herewith).
10.4 --- Management Contract, dated June 25, 1996, between Thicket Apartments, L.P. and Vinings
Properties, Inc. (incorporated by reference to Exhibit 10.8 to the Trust's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996, No. 0-13693).
10.5 --- Management Contract, dated July 6, 1990, between PBC Acquisition, Inc. and Carter and
Associates Enterprises, Inc. (incorporated by reference to Exhibit 10.9 to the Trust's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996, No. 0-13693).
10.6 --- Agreement to Contribute, dated April 1, 1997, between Vinings Investment Properties,
L.P. and Windrush Partners, Ltd. (incorporated by reference to Exhibit 10.1 to the
Trust's Current Report on Form 8-K filed December 29, 1997, No. 0-13693).
10.7 --- Amendment to Agreement to Contribute, dated August 11, 1997, between Vinings Investment
Properties, L.P. and Windrush Partners, Ltd. (incorporated by reference to Exhibit 10.2
to the Trust's Current Report on Form 8-K filed December 29, 1997, No. 0-13693).
10.8 --- Second Amendment to Agreement to Contribute, dated October 30, 1997, between Vinings
Investment Properties, L.P. and Windrush Partners, Ltd. (incorporated by reference to
Exhibit 10.3 to the Trust's Current Report on Form 8-K filed December 29, 1997, No.
0-13693).
10.9 --- Agreement of Limited Partnership of Vinings Communities, L.P. (incorporated by reference
to Exhibit 10.1 to the Trust's Current Report on Form 8-K/A filed March 3, 1998, No.
0-13693).
10.10 --- Management Contract dated December 19, 1997 between Vinings Communities, L.P. and
Vinings Properties, Inc. (filed herewith).
10.11 --- Limited Warranty Deed, dated December 19, 1997, by and between Windrush Partners, L.P.
and Vinings Communities, L.P. (incorporated by reference to Exhibit 10.2 to the Trust's
Current Report on Form 8-K/A filed March 3, 1998, No. 0-13693).
10.12 --- Assumption Agreement, dated December 19 1997, by Vinings Communities, L.P. in favor of
Reilly Mortgage Group, Inc. (incorporated by reference to Exhibit 10.3 to the Trust's
Current Report on Form 8-K/A filed March 3, 1998, No. 0-13693).
10.13 --- Commercial Credit Agreement between Hardwick Bank and Trust Company and the Trustees of
the Trust dated June 28, 1997 (filed herewith).
21.1 --- Subsidiaries of the Trust (filed herewith).
27 --- Financial Data Schedule (filed herewith).
</TABLE>
14(B) REPORTS ON FORM 8-K
Current Report on Form 8-K, dated December 19, 1997, was filed with the
Securities and Exchange Commission on December 29, 1997, with respect
to the Trust's acquisition of Windrush.
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 30, 1998
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 30, 1998
- ------------------------- President and Trustee
Peter D. Anzo
/s/ Stephanie A. Reed Vice President, Treasurer, March 30, 1998
- ------------------------- Secretary and Trustee
Stephanie A. Reed
/s/ Martin H. Petersen Trustee March 30, 1998
- -------------------------
Martin H. Petersen
/s/ Gilbert H. Watts, Jr. Trustee March 30, 1998
- -------------------------
Gilbert H. Watts, Jr.
/s/ Phill D. Greenblatt Trustee March 30, 1998
- -------------------------
Phill D. Greenblatt
/s/ Henry Hirsch Trustee March 30, 1998
- -------------------------
Henry Hirsch
/s/ Thomas B. Bender Trustee March 30, 1998
- -------------------------
Thomas B. Bender
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Vinings Investment Properties Trust:
We have audited the accompanying consolidated balance sheets of Vinings
Investment Properties Trust and subsidiaries (the "Trust") as of December 31,
1997 and 1996 and the related consolidated statements of operations,
shareholders' equity and cash flows for the years 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 audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the 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, 1997 and 1996, and the
results of their operations and their cash flows for the years then ended in
conformity with generally accepted accounting principles.
Our audits were 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 audits 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.
ARTHUR ANDERSEN LLP
/s/ Arthur Andersen LLP
- -----------------------
Atlanta, Georgia
March 6, 1998
REPORT OF INDEPENDENT AUDITORS
To the Shareholders of Vinings Investment Properties Trust:
We have audited the accompanying consolidated balance sheet (not included
herein) 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 the related consolidated statements of
operations, changes in shareholders' equity and cash flows for the year ended
December 31, 1995. Our audit also included the financial statement schedules
listed in the index as Item 6 and 14(a). These financial statements and
schedules are the responsibility of the Trust's management. Our responsibility
is to express an opinion of 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 consolidated financial position of the
Trust as of December 31, 1995 and the consolidated results of their operations
and their cash flows for the year 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.
Ernst & Young LLP
/s/ Ernst & Young LLP
- ---------------------
New York, New York
February 23, 1996
<PAGE>
<TABLE>
<CAPTION>
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
December 31,
----------------------------------
1997 1996
-------------- --------------
ASSETS
- ------
<S> <C> <C>
Real estate assets:
Land $ 2,884,500 $ 1,470,500
Buildings and improvements 15,267,009 9,218,263
Furniture, fixtures & equipment 1,011,483 783,691
Less: accumulated depreciation (1,036,311) (613,918)
-------------- --------------
Net real estate assets 18,126,681 10,858,536
Cash and cash equivalents 282,851 171,736
Cash escrows 314,684 192,611
Receivables and other assets 63,402 86,002
Deferred financing costs, less accumulated amortization of
$54,459 and $19,502 at December 31, 1997 and 1996,
respectively 169,968 204,925
Deferred leasing costs, less accumulated amortization of
$39,087 and $28,470 at December 31, 1997 and 1996,
respectively 31,972 5,659
-------------- --------------
Total assets $ 18,989,558 $ 11,519,469
============== ==============
LIABILITIES AND SHAREHOLDERS' EQUITY
- ------------------------------------
Mortgage notes payable $ 13,784,566 $ 7,371,676
Line of credit 1,718,104 1,568,104
Accounts payable and accrued liabilities 708,876 347,141
-------------- --------------
Total liabilities 16,211,546 9,286,921
-------------- --------------
Minority interest in Operating Partnership 509,209 -
-------------- --------------
Contingencies (Note 12)
Shareholders' equity:
Shares of beneficial interest, without par value,
unlimited shares authorized, 1,080,512 and 1,080,528
shares issued and outstanding at December 31,
1997 and 1996, respectively 19,429,735 18,731,763
Cumulative earnings 37,217,597 37,879,314
Cumulative distributions (54,378,529) (54,378,529)
-------------- --------------
Total shareholders' equity 2,268,803 2,232,548
-------------- --------------
Total liabilities and shareholders' equity $ 18,989,558 $ 11,519,469
============== ==============
<FN>
The accompanying notes are an integral part of these consolidated financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
For the years ended December 31,
-----------------------------------------------------
1997 1996 1995
------------ ------------ ------------
REVENUES
- --------
<S> <C> <C> <C>
Rental revenues $ 2,392,072 $ 1,482,419 $ 576,216
Other property revenues 84,674 70,064 24,238
Income from partnership - - 1,730,508
Interest income 2,078 92,657 891,499
Other income - 151,777 22,447
------------ ------------ ------------
2,478,824 1,796,917 3,244,908
------------ ------------ ------------
EXPENSES
- --------
Property operating and maintenance 992,926 586,430 290,548
Depreciation and amortization 433,011 244,110 361,013
Amortization of deferred financing costs 34,957 19,502 -
Interest expense 816,551 408,719 -
General and administrative 336,375 987,973 766,346
Investment advisor's fees - 333,461 361,568
Unusual item 532,185 - -
------------ ------------ ------------
3,146,005 2,580,195 1,779,475
------------ ------------ ------------
Income (loss) before gain (loss) on real estate investments (667,181) (783,278) 1,465,433
------------ ------------ ------------
GAIN (LOSS) ON REAL ESTATE INVESTMENTS
- --------------------------------------
Gain (loss) on real estate investments - (26,800) 1,655,113
Allowance to reduce real estate investments
to fair market value - - (2,542,000)
------------ ------------ ------------
- (26,800) (886,887)
------------ ------------ ------------
Income (loss) before minority interest (667,181) (810,078) 578,546
Minority interest (5,464) - -
------------ ------------ ------------
Net income (loss) $ (661,717) $ (810,078) $ 578,546
============ ============ ============
NET INCOME (LOSS) PER SHARE - BASIC AND DILUTED $ (0.61) $ (0.75) $ 0.54
============ ============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC 1,080,513 1,080,528 1,080,625
============ ============ ============
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED 1,089,435 1,080,528 1,080,625
============ ============ ============
<FN>
The accompanying notes are an integral part of these consolidated financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY For
the years ended December 31, 1995, 1996 and 1997
Shares of Total
beneficial Cummulative Cummulative shareholders'
interest earnings distributions equity
------------- ------------ -----------------------------
<S> <C> <C> <C> <C>
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
Adjustment for minority interest of
unitholders and issuance of units
in Operating Partnership 698,056 698,056
Net loss - (661,717) - (661,717)
Retirement of shares (84) - - (84)
------------- ------------ ------------- -------------
BALANCE AT DECEMBER 31, 1997 $ 19,429,735 $ 37,217,597 $(54,378,529) $ 2,268,803
============= ============ ============= =============
<FN>
The accompanying notes are an integral part of these consolidated financial statements
</FN>
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the years ended December 31,
-----------------------------------------------
1997 1996 1995
------------- ------------- -------------
CASH FLOWS FROM OPERATING ACTIVITIES:
- -------------------------------------
<S> <C> <C> <C>
Net income (loss) $ (661,717) $ (810,078) $ 578,546
Adjustments to reconcile net income (loss) to net cash provided
by (used in) operating activities:
Depreciation and amortization 433,011 244,110 409,450
Amortization of deferred financing costs 34,957 19,502 -
Loan discount amortization - - (101,800)
Minority interest of unitholders in Operating Partnership (5,464)
Estimated allowance to reduce real
estate to fair value - - 2,542,000
(Gain) loss on real estate investments - 26,800 (1,655,113)
Changes in assets and liabilities:
Cash escrows 75,745 (192,611) -
Receivables and other assets 22,600 260,055 3,768
Capitalized leasing costs (36,931) (5,639) -
Accounts payable, accrued liabilities and due to affiliate 290,335 (247,104) 43,470
------------- ------------- -------------
Total adjustments 814,253 105,113 1,241,775
------------- ------------- -------------
Net cash provided by (used in) operating activities 152,536 (704,965) 1,820,321
------------- ------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
- -------------------------------------
Purchase of The Thicket Apartments - (8,660,900) -
Purchase of Windrush Apartments, net of cash acquired (3,791) - -
The Thicket capital expenditures (109,333) (49,635) -
Peachtree capital expenditures (26,205) (29,862) (16,751)
Principal payments on notes receivable - - 2,000,000
Sales proceeds from real estate investments - 673,200 25,338,141
------------- ------------- -------------
Net cash provided by (used in) investing activities (139,329) (8,067,197) 27,321,390
------------- ------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
- -------------------------------------
Net proceeds from mortgage note payable - 7,392,000 -
Net proceeds from line of credit 150,000 1,568,104 -
Deferred financing costs - (224,427) -
Principal repayments on mortgage payable (52,008) (20,324) -
Purchase of retired shares (84) (536) -
Distributions to shareholders - (18,240,950) (13,227,342)
------------- ------------- -------------
Net cash provided by (used in) financing activities 97,908 (9,526,133) (13,227,342)
------------- ------------- -------------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 111,115 (18,298,295) 15,914,369
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 171,736 18,470,031 2,555,662
------------- ------------- -------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 282,851 $ 171,736 $ 18,470,031
============= ============= =============
<FN>
The accompanying notes are an integral part of these consolidated financial statements
</FN>
</TABLE>
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1997, 1996 AND 1995
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 ("Peachtree") 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. As of
December 31, 1997, the Trust is the sole 1% general partner and an
80.67% limited partner in the Operating Partnership. During the fourth
quarter of 1997, 242,546 limited partnership units in the Operating
Partnership ("Units") were issued, of which 224,330 Units were in
connection with the acquisition of Windrush, as defined below. The
Units are redeemable for shares of the Trust on a one-for-one basis
or cash, at the option of the Trust. (This structure is commonly
referred to as an umbrella partnership REIT or "UPREIT").
The Trust currently owns three real estate assets. They are (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; (2)
Windrush Apartments ("Windrush"), a 202-unit apartment community
located in Atlanta, Georgia owned through Vinings Communities, L.P., a
Delaware limited partnership of which the Operating Partnership is a
99% limited partner and the Trust is the sole general partner; and (3)
Peachtree, an approximately 75,000 square foot, single-story business
park located in Atlanta, Georgia, owned by the Operating Partnership.
At December 31, 1997, Thicket, Windrush and Peachtree were 100%, 93%
and 100% 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, 1997,
fractional Shares totaling 113 had been repurchased and retired leaving
1,080,512 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 minority interest of the unitholders in the
Operating Partnership on the accompanying balance sheet is calculated
based on the minority interest ownership percentage (18.33% as of
December 31, 1997) multiplied by the Operating Partnership's net
assets. The minority interest of the unitholders in the income or loss
of the Operating Partnership on the accompanying statement of
operations is calculated based on the weighted average number of Shares
and Units outstanding during the period. 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.
Cash Escrows
------------
Cash escrows consist of real estate tax, insurance, replacement reserve
and repair escrows held by mortgagees. 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.
Real Estate Assets
------------------
Real estate assets are stated at depreciated cost less reductions for
impairment, if any. In identifying potential impairment, management
considers such factors as declines in a property's operating
performance or market value, a change in use, or adverse changes in
general market conditions. In determining whether an asset is impaired,
management estimates the future cash flows expected to be generated
from the asset's use and its eventual disposition. If the sum of these
estimated future cash flows on an undiscounted basis is less than the
asset's carrying cost, the asset is written down to its fair value. In
management's opinion, there has been no impairment of the Trust's real
estate assets as of December 31, 1997.
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.)
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.
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.
Net Income (Loss) Per Share
---------------------------
Effective for the quarter and year ended December 31, 1997, the Trust
computes net income (loss) per share under the provisions of Statement
of Financial Accounting Standards ("SFAS") No. 128, "Earnings per
Share." As prescribed by SFAS No. 128, all prior period net income
(loss) per share data has been restated to conform with the provisions
of SFAS No. 128. Under SFAS No. 128, basic net income (loss) per share
is computed based upon the weighted average number of common shares
outstanding during the period. Diluted net income (loss) per share is
computed to reflect the potential dilution of all instruments or
securities which are convertible into common shares of the Trust.
Previously reported net income (loss) per share under prior accounting
standards was equal to basic and diluted net income (loss) per share
under SFAS No. 128.
The following is a reconciliation of net income (loss) available to the
common shareholders and the weighted average shares used in the Trust's
basic and diluted net income (loss) per share computations:
<TABLE>
1997 1996 1995
----------- ----------- ----------
<S> <C> <C> <C>
Net income (loss) - basic $(661,717) $(810,078) $578,546
Minority interest (5,464) - -
=========== =========== ==========
Net income (loss) - diluted $(667,181) $(810,078) $578,546
=========== =========== ==========
Weighted average shares - basic 1,080,513 1,080,528 1,080,625
Dilutive Securities
Weighted average Units in Operating
Partnership 8,922 - -
Share options - - -
----------- ----------- ----------
Weighted average shares - diluted 1,089,435 1,080,528 1,080,625
=========== =========== ==========
</TABLE>
The dilutive effect of the share options on the Trust's net income
(loss) per share calculation was excluded, as the impact of such share
options was antidilutive.
Reclassification
----------------
Certain 1996 and 1995 financial statement amounts have been
reclassified to conform with the current year presentation.
NOTE 3 - REAL ESTATE ASSETS
Windrush Apartments
-------------------
On December 19, 1997, the Trust acquired Windrush for a purchase price
of $7,555,000 consisting of the assumption of an existing mortgage loan
in the amount of $6,464,898 and other liabilities and the issuance of
224,330 limited partnership units in the Operating Partnership.
The Thicket Apartments
----------------------
On June 28, 1996, the Trust acquired Thicket 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
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 Notes Payable
----------------------
At December 31, 1997, the Trust had the following mortgage notes
payable:
1) 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.
2) 7.5% mortgage note payable which was assumed on December 19, 1997
with a principal balance of $6,464,898, which is secured by
Windrush and which matures on July 1, 2024. Principal and interest
are payable in monthly installments of $47,457.
At December 31, 1997, the total outstanding principal for both notes
was $13,784,566. Scheduled maturites of the mortgage notes payable as
of December 31, 1997 are as follows:
1998 $ 144,501
1999 156,664
2000 169,860
2001 184,179
2002 199,716
Thereafter 12,929,646
==============
Total $13,784,566
==============
Line of Credit
--------------
The Trust renewed its one year line of credit in the amount of
$2,000,000 on June 27, 1997, which bears interest at the bank's base
rate which approximates prime. At December 31, 1997, the interest rate
was 8.50%. Interest is payable monthly with the entire principal
balance due on June 28, 1998. It is anticipated that the line of credit
will be renewed at that time. The line of credit is secured by
Peachtree. At December 31, 1997, the outstanding balance of the line of
credit was $1,718,104.
NOTE 7 - RELATED PARTY TRANSACTIONS
The Trust entered into management agreements with Vinings Properties,
Inc. to provide property management services for Thicket and Windrush
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 $93,235 and $44,459 in
management fees and $15,240 and $7,620 in data processing fees were
incurred by the Trust during 1997 and 1996, respectively.
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 has been in its initial
growth stages, the officers and trustees have been committed to
providing as many services as possible to promote the growth of the
Trust. A total of $45,000 and $15,000 were paid during 1997 and 1996,
respectively, to Vinings for shareholder services provided for the sole
benefit of the Trust by one of Vinings' employees. The officers did not
receive compensation from the Trust for their services.
On December 19, 1997, the Trust acquired Windrush from Windrush
Partners, Ltd. (the "Partnership"), a Georgia limited partnership,
whose general partner is Hallmark Group Services Corp ("Hallmark").
Hallmark is an affiliate of the officers and certain trustees of the
Trust. In connection with the acquisition of Windrush, an advisor's fee
of $75,550 was paid by the Partnership to MFI Realty, Inc.("MFI"), a
wholly owned subsidiary of The Vinings Group, Inc.
In connection with the acquisition of Thicket on June 28, 1996, a
broker's commission of $150,000 was paid by the seller of the property
to MFI.
In addition, the Trust paid a total of $21,000 during 1997 to
Northshore Communications, Inc., a company affiliated with one of the
Trustees, for the design and production of the Trust's 1996 annual
report.
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 and
$290,684 for the years ended December 31, 1996 and 1995, respectively.
The Trust also amortized deferred loan acquisition fees of $70,884 for
the year ended December 31, 1995, which is recorded as investment
advisor's fees in the accompanying financial statements.
NOTE 9 - UNUSUAL ITEM
In August 1997, the Trust, through the Operating Partnership, began
contract negotiations for the acquisition of a 2,365-unit portfolio of
16 multifamily properties. The sellers, which were 16 individual
partnerships (the "Sellers"), were to contribute the properties to the
Operating Partnership in exchange for a combination of Units and/or
cash and the assumption of existing mortgage indebtedness (the
"Portfolio Transaction"). The officers of the Trust spent substantial
amounts of time and the Trust spent substantial amounts of money in its
due diligence on the properties and in contract negotiations
specifically for this portfolio. The Trust believes that it secured a
binding commitment from the Sellers for the Portfolio Transaction.
Conditional commitments for equity financing were obtained and the
Trust was prepared to close on the transaction in early 1998. Within
thirty days of closing, the general partner of the Sellers terminated
the contract for reasons the Trust believes to be pretextual, and
in breach of the contract and not in the best interests of the partners
of the selling partnerships or the shareholders of the Trust.
On February 3, 1998, the Trust commenced an action against the Sellers,
their general partners and a related property management company
seeking specific enforcement of the contract and damages for the
defendant's willful breach of contract, lack of good faith negotiation
and tortious interference in connection with the breach and termination
of the contract. In a related case, the Sellers filed an action on
January 29, 1998 seeking a declaratory judgement that the contract is
not valid, binding and enforceable against them. The Trust is
vigorously pursuing its claim. However, there can be no assurances that
the Trust will prevail in its action or recover any damages. Therefore,
because of the uncertainty of any legal action, the Trust has written
off as unrecoverable the due diligence, contract negotiation and other
acquisition costs totaling $532,185 associated with the Portfolio
Transaction that were incurred during the fourth quarter of 1997.
NOTE 10 - DISTRIBUTIONS
There were no distributions declared or distributed for the year ended
December 31, 1997. Distributions declared and distributed for the years
ended December 31, 1996 and 1995 aggregated $18,240,950 and
$13,227,342, respectively, or $16.88 and $12.24 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.
NOTE 11 - 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, 1997, at Peachtree:
1998 $ 543,118
1999 540,930
2000 403,665
2001 318,864
2002 132,860
------------
Total $1,939,437
============
One tenant generated 57% of Peachtree's revenues for the fiscal year
ended December 31, 1997. The same tenant accounts for 73% 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 renegotiating to eliminate such provision.
NOTE 12 - 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 will not have a material adverse effect on the financial
position or results of operations of the Trust.
NOTE 13 - SUPPLEMENTAL CASH FLOW INFORMATION
The Trust paid interest of $800,388 and $353,032 during 1997 and 1996,
respectively.
Significant noncash investing and financing activities were as follows:
1. In connection with the December 19, 1997 Windrush acquisition the
Trust assumed a mortgage note payable in the amount of $6,464,898
and related cash escrow accounts. In addition, 242,546 limited
partnership units in the Operating Partnership were issued during
1997 valued at $1,212,729.
2. The Hawthorne Research and Development Complex was sold on
March 30, 1995 for $5,095,000 at which time the Trust received a
note for $1,595,000.
NOTE 14 - DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS
Based on interest rates and other pertinent information available to
the Trust as of December 31, 1997 and 1996, the Trust estimates that
the carrying value of cash and cash equivalents, the mortgage notes
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, 1997
and 1996. 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, 1997.
NOTE 15 - 1997 STOCK OPTION AND INCENTIVE PLAN
At the 1997 annual shareholders meeting held on July 1, 1997, the Trust
adopted the Vinings Investment Properties Trust 1997 Stock Option and
Incentive Plan (the "Plan") in order to provide incentives to officers,
employees, trustees, and other key persons. The Plan provides for the
grant of share options, share appreciation rights, restricted and
unrestricted share awards, performance share awards, and dividend
equivalent rights.
Under the Plan the maximum number of shares reserved and available for
issuance is 10% of the total number of outstanding shares at any time
plus 10% of the number of Units outstanding at any time that are
subject to redemption rights. At December 31, 1997 the total number of
shares reserved under the plan totaled 132,305.
On July 1, 1997, the Trust granted a total of 26,000 non-qualified
share options (the "Options") to the officers, trustees and certain key
persons. The Options are exercisable at a price of $5.00 (based on a
closing sales price of a share of the Trust on the Nasdaq SmallCap
Market on June 30, 1997 of $4.56) to vest over a one year period. No
options had been exercised as of December 31, 1997.
The Trust accounts for share options issued under the Plan in
accordance with APB Opinion No. 25, "Accounting for Stock Issued to
Employees," under which no compensation cost has been recognized since
all options have been granted with an exercise price equal to or above
the fair value of the Trust's shares on the date of grant. In
accordance with Statement of Financial Accounting Standard No. 123
(SFAS 123) "Accounting for Stock-Based Compensation," the Trust has
estimated the fair value of the Options using a binomial option pricing
model with the following weighted average assumptions: risk free
interest rate of 6.12%, expected option life of five years, expected
volatility of 30% and expected dividend yield of 3.6%. Using these
assumptions, the estimated fair value of the Options was $38,000, which
would be included in compensation expense over the life of the vesting
period. Accordingly, had the Trust accounted for the Plan under SFAS
123, the Trust's pro forma net loss and net loss per share for the year
ended December 31, 1997 would have been as follows:
Net loss:
As reported $(661,717)
===========
Pro forma $(680,717)
===========
Net loss per share:
As reported $(0.61)
===========
Pro forma $(0.63)
===========
<PAGE>
NOTE 16 - SELECTED QUARTERLY FINANCIAL INFORMATION (UNAUDITED)
Unaudited summarized quarterly results of operations for the years
ended December 31, 1997 and 1996 are as follows:
<TABLE>
<CAPTION>
- ----------------------------- --------------- ---------------- -------------- ----------------
1997 FIRST SECOND THIRD FOURTH
- ----------------------------- --------------- ---------------- -------------- ----------------
<S> <C> <C> <C> <C>
Total revenues $ 596,364 $ 600,046 $635,736 $ 646,678
=============== ================ ============== ================
Net loss $ (51,820) $ (59,171) $(18,625) $ (532,101)
=============== ================ ============== ================
Net loss per share -
Basic and diluted $ (0.05) $ (0.05) $ (0.02) $ (0.49)
=============== ================ ============== ================
- ----------------------------- --------------- ---------------- -------------- ----------------
1996 FIRST SECOND THIRD FOURTH
- ----------------------------- --------------- ---------------- -------------- ----------------
Total revenues $ 393,473 $ 169,281 $613,310 $ 620,853
=============== ================ ============== ================
Net loss $(407,671) $(127,349) $(76,093) $(198,965)
=============== ================ ============== ================
Net loss per share -
basic and diluted $ (0.38) $ (0.12) $ (0.07) $ (0.18)
=============== ================ ============== ================
Dividends declared and paid $ 16.88 $ - $ - $ -
=============== ================ ============== ================
</TABLE>
<TABLE>
<PAGE>
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
--------------------- -------------------------------
Improvements
Capitalized
Buildings and Subsequent to Buildings and
Description Encumbrance Land Improvements Acquisition Land Improvements Total
- -----------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Peachtree Business Center $ 1,718,104 $ 400,000 $ 1,300,000 $1,088,124 $ 400,000 $ 2,388,124 $ 2,788,124
The Thicket Apartments 7,319,668 1,070,500 7,590,400 158,968 1,070,500 7,749,368 8,819,868
Windrush Apartments 6,464,898 1,414,000 6,141,000 - 1,414,000 6,141,000 7,555,000
------------------------------------------------------------------------------------------------
Totals $15,502,670 $2,884,500 $15,031,400 $1,247,092 $2,884,500 $16,278,492 $19,162,992
================================================================================================
Life on which Date of
Accumulated Depreciation Date Original
Description Depreciation is Computed Acquired Construction
- ---------------------------------------------------------------------------------------------
Peachtree Business Center $ 450,953 5-40 Years 4/90 1984
The Thicket Apartments 162,965 5-40 Years 6/96 1989
Windrush - 5-40 Years 12/97 1983
----------------------------------------------------------------
Totals $ 1,036,311
============
The accompanying notes are an integral part of this schedule.
</TABLE>
<PAGE>
VININGS INVESTMENT PROPERTIES TRUST
NOTES TO SCHEDULE III
DECEMBER 31, 1997
(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, 1997, $1,718,104 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) Windrush Apartments was acquired on December 19, 1997, for a purchase
price of $7,555,000 consisting of the assumption of an existing
mortgage loan in the amount of $6,464,898 and other liabilities and the
issuance of 224,330 limited partnership units in the Operating
Partnership.
(D) Gross capitalized costs of real estate assets are summarized as
follows:
------------- -------------- -------------
1997 1996 1995
------------- -------------- -------------
Balance at beginning of period $11,472,454 $ 2,732,057 $7,445,666
----------- -------------- -----------
Additions during period:
Additions 7,555,000 8,660,900 -
Improvements 135,538 79,497 16,751
----------- -------------- -----------
Total additions 7,690,538 8,740,397 16,751
----------- -------------- -----------
Deductions during period:
Hawthorne - - 4,730,360
----------- ------------- -----------
Balance at close of period $19,162,992 $11,472,454 $2,732,057
=========== ============== ===========
(E) Accumulated depreciation on real estate assets is as follows:
-------------- ----------- -----------
1997 1996 1995
-------------- ----------- -----------
Balance at beginning of period $ 613,918 $374,524 $424,332
-------------- ----------- -----------
Additions during period:
Peachtree Business Center 74,263 76,429 75,480
The Thicket Apartments 348,130 162,965 -
-------------- ----------- -----------
Total additions 422,393 239,394 75,480
-------------- ----------- -----------
Deductions during period:
Retirements/sales - - (125,288)
-------------- ----------- -----------
Total deductions - - (125,288)
-------------- ----------- -----------
Balance at close of period $1,036,311 $613,918 $374,524
============== =========== ===========
<TABLE>
<CAPTION>
<PAGE>
INDEX TO EXHIBITS
<S> <C> <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 --- Amendment No. 1 to the Second Amended and Restated Declaration of Trust of the Trust
(incorporated by reference to Exhibit 3.3 to the Trust's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996, No. 0-13693).
3.3 --- Amendment No. 2 to the Second Amended and Restated Declaration of Trust of the Trust
(incorporated by reference to Exhibit 3.4 to the Trust's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996, No. 0-13693).
3.4 --- 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).
10.1 --- Amended and Restated Agreement of Limited Partnership of Vinings Investment Properties,
L.P. (filed herewith).
10.2 --- First Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings
Investment Properties, L.P. (filed herewith).
10.3 --- Second Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings
Investment Properties, L.P. (filed herewith).
10.4 --- Management Contract, dated June 25, 1996, between Thicket Apartments, L.P. and Vinings
Properties, Inc. (incorporated by reference to Exhibit 10.8 to the Trust's Annual Report
on Form 10-K for the fiscal year ended December 31, 1996, No. 0-13693).
10.5 --- Management Contract, dated July 6, 1990, between PBC Acquisition, Inc. and Carter and
Associates Enterprises, Inc. (incorporated by reference to Exhibit 10.9 to the Trust's
Annual Report on Form 10-K for the fiscal year ended December 31, 1996, No. 0-13693).
10.6 --- Agreement to Contribute, dated April 1, 1997, between Vinings Investment Properties,
L.P. and Windrush Partners, Ltd. (incorporated by reference to Exhibit 10.1 to the
Trust's Current Report on Form 8-K filed December 29, 1997, No. 0-13693).
10.7 --- Amendment to Agreement to Contribute, dated August 11, 1997, between Vinings Investment
Properties, L.P. and Windrush Partners, Ltd. (incorporated by reference to Exhibit 10.2
to the Trust's Current Report on Form 8-K filed December 29, 1997, No. 0-13693).
10.8 --- Second Amendment to Agreement to Contribute, dated October 30, 1997, between Vinings
Investment Properties, L.P. and Windrush Partners, Ltd. (incorporated by reference to
Exhibit 10.3 to the Trust's Current Report on Form 8-K filed December 29, 1997, No.
0-13693).
10.9 --- Agreement of Limited Partnership of Vinings Communities, L.P. (incorporated by reference
to Exhibit 10.1 to the Trust's Current Report on Form 8-K/A filed March 3, 1998, No.
0-13693).
10.10 --- Management Contract dated December 19, 1997 between Vinings Communities, L.P. and
Vinings Properties, Inc. (filed herewith).
10.11 --- Limited Warranty Deed, dated December 19, 1997, by and between Windrush Partners, L.P.
and Vinings Communities, L.P. (incorporated by reference to Exhibit 10.2 to the Trust's
Current Report on Form 8-K/A filed March 3, 1998, No. 0-13693).
10.12 --- Assumption Agreement, dated December 19 1997, by Vinings Communities, L.P. in favor of
Reilly Mortgage Group, Inc. (incorporated by reference to Exhibit 10.3 to the Trust's
Current Report on Form 8-K/A filed March 3, 1998, No. 0-13693).
10.13 --- Commercial Credit Agreement between Hardwick Bank and Trust Company and the Trustees of
the Trust dated June 28, 1997 (filed herewith).
21.1 --- Subsidiaries of the Trust (filed herewith).
27 --- Financial Data Schedule (filed herewith).
</TABLE>
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
VININGS INVESTMENT PROPERTIES, L.P.
June 30, 1997
<PAGE>
<TABLE>
<CAPTION>
Page
TABLE OF CONTENTS
-----------------
<S> <C> <C>
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 16
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 21
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 25
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 28
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 31
Section 9.3 Reports 31
ARTICLE 10 TAX MATTERS 32
Section 10.1 Preparation of Tax Returns 32
Section 10.2 Tax Elections 32
Section 10.3 Tax Matters Partner 32
Section 10.4 Organizational Expenses 34
Section 10.5 Withholding 34
ARTICLE 11 TRANSFERS AND WITHDRAWALS 35
Section 11.1 Transfer 35
Section 11.2 Transfer of the Company's General Partner Interest and
Limited Partner Interest 35
Section 11.3 Limited Partners' Rights to Transfer 36
Section 11.4 Substituted Limited Partners 37
Section 11.5 Assignees 37
Section 11.6 General Provisions 38
ARTICLE 12 ADMISSION OF PARTNERS 38
Section 12.1 Admission of Successor General Partner 38
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 42
Section 13.4 Deemed Distribution and Recontribution 43
Section 13.5 Rights of Limited Partners 43
Section 13.6 Notice of Dissolution
Section 13.7 Termination of Partnership and Cancellation of Certificate
of Limited Partnership 43
Section 13.8 Reasonable Time for Winding-Up 43
Section 13.9 Waiver of Partition 44
ARTICLE 14 AMENDMENT OF PARTNERSHIP AGREEMENT; MEETINGS 44
Section 14.1 Amendments 44
Section 14.2 Meetings of the Partners 45
ARTICLE 15 GENERAL PROVISIONS 46
Section 15.1 Addresses and Notice 46
Section 15.2 Titles and Captions 46
Section 15.3 Pronouns and Plurals 47
Section 15.4 Further Action 47
Section 15.5 Binding Effect 47
Section 15.6 Creditors 47
Section 15.7 Waiver 47
Section 15.8 Counterparts 47
Section 15.9 Applicable Law 47
Section 15.10 Invalidity of Provisions 48
Section 15.11 Entire Agreement 48
</TABLE>
EXHIBITS
--------
Exhibit A Partners Contributions and Partnership Interests
Exhibit B Capital Account Maintenance
Exhibit C Special Allocation Rules
Exhibit D Notice of Redemption
AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
VININGS INVESTMENT PROPERTIES, L.P.
THIS AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF VININGS
INVESTMENT (this "Agreement"), dated as of June 30, 1997, 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, desire to amend and restate in its entirety that
certain Agreement of Limited Partnership of Vinings Investment Properties, L.P.
(the "Partnership") dated as of June 11, l996; and
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
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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
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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
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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
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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.
ARTCLE 3
PURPOSE
Section 3.1 Purpose and Business
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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
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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 June 11, l996, 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
9Partnership 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 June 11, l996; (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 (i) any permitted transferee as a Substituted
Limited Partner, as described in Section 11.4, or (ii) any individual who has
made a capital contribution to the Partnership, then in each case 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, including, without limitation, with respect
to the redemption rights set forth in Section 8.6, 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. Persons making capital contribution to the
Partnership, directly or indirectly, who are not admitted as Additional Limited
Partners shall have only those rights of an Assignee as set forth herein
(including as set forth in Section 11.5). 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 canceled 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
-----------------------
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
Amended and 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
--------------------------
Stephanie A. Reed
Title: Vice President
Address of Limited Partner: 3111 Paces Mill Road, Suite A-200
Atlanta, GA 30339
<PAGE>
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
Amended and 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 INVESTMENT PROPERTIES TRUST
By: /s/ Peter D. Anzo
----------------------
Peter D. Anzo
Title: President
Address of Limited Partner: 3111 Paces Mill Road, Suite A-200
Atlanta, GA 30339
<TABLE>
<CAPTION>
A-1
Exhibit A
Partners' Contributions and Partnership Interests
- ---------------------------------- ------------------ ----------------- ----------------- ---------------- ---------------
Agreed
Value
of
Cash Contributed Total Partnership Percentage
Name of Partner Contribution Property Contribution Units Interest
- ---------------------------------- ------------------ ----------------- ----------------- ---------------- ---------------
<S> <C> <C> <C> <C>
General Partner:
Vinings Investment
Properties Trust $ 16,342 $ 16,342 1%
Limited Partners:
Vinings Investment
Properties Trust $1,601,516 $1,601,516 98%
Vinings Holdings, Inc. $ 16,342 $ 16,342 1%
</TABLE>
<PAGE>
B-1
Exhibit B
Capital Account Maintenance
1. Capital Accounts of the Partners
- -----------------------------------------
A. The Partnership shall maintain for each Partner a separate Capital
Account in accordance with the rules of Regulations Section 1.704-1(b)(2)(iv).
Such Capital Account shall be increased by (i) the amount of all Capital
Contributions and any other deemed contributions made by such Partner to the
Partnership pursuant to this Agreement; and (ii) all items of Partnership income
and gain (including income and gain exempt from tax) computed in accordance with
Section 1.B hereof and allocated to such Partner pursuant to Section 6.1.A of
the Agreement and Exhibit C hereof, and decreased by (x) the amount of cash or
Agreed Value of all actual and deemed distributions of cash or property made to
such Partner pursuant to this Agreement; and (y) all items of Partnership
deduction and loss computed in accordance with Section 1.B hereof and allocated
to such Partner pursuant to Section 6.1.B of the Agreement and Exhibit C hereof.
B. For purposes of computing the amount of any item of income, gain,
deduction or loss to be reflected in the Partners' Capital Accounts, unless
otherwise specified in this Agreement, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes determined in
accordance with Section 703(a) of the Code (for this purpose all items of
income, gain, loss or deduction required to be stated separately pursuant to
Section 703(a)(1) of the Code shall be included in taxable income or loss), with
the following adjustments:
(1) Except as otherwise provided in Regulations Section
1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss
and deduction shall be made without regard to any election under Section
754 of the Code which may be made by the Partnership, provided that the
amounts of any adjustments to the adjusted bases of the assets of the
Partnership made pursuant to Section 734 of the Code as a result of the
distribution of property by the Partnership to a Partner (to the extent
that such adjustments have not previously been reflected in the Partners'
Capital Accounts) shall be reflected in the Capital Accounts of the
Partners in the manner and subject to the limitations prescribed in
Regulations Section 1.704(b)(2)(iv)(m)(4).
(2) The computation of all items of income, gain, and deduction shall
be made without regard to the fact that items described in Sections
705(a)(1)(B) or 705(a)(2)(B) of the Code are not includable gross income or
are neither currently deductible nor capitalized for federal income tax
purposes.
(3) Any income, gain or loss attributable to the taxable disposition
of any Partnership property shall be determined as if the adjusted basis of
such property as of such date of disposition were equal in amount to the
Partnership's Carrying Value with respect to such property as of such date.
(4) In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss,
there shall be taken into account Depreciation for such fiscal year.
(5) In the event the Carrying Value of any Partnership Asset is
adjusted pursuant to Section 1.D hereof, the amount of any such adjustment
shall be taken into account as gain or loss from the disposition of such
asset.
C. Generally, a transferee (including an Assignee) of a Partnership Unit
shall succeed to a pro rata portion of the Capital Account of the transferor;
provided, however, that, if the transfer causes a termination of the Partnership
under Section 708(b)(1)(B) of the Code, the Partnership's properties shall be
deemed solely for federal income tax purposes, to have been distributed in
liquidation of the Partnership to the holders of Partnership Units (including
such transferee) and recontributed by such Persons in reconstitution of the
Partnership. In such event, the Carrying Values of the Partnership properties
shall be adjusted immediately prior to such deemed distribution pursuant to
Section 1.D(2) hereof. The Capital Accounts of such reconstituted Partnership
shall be maintained in accordance with the principles of this Exhibit B.
D. (1) Consistent with the provisions of Regulations Section
1.704-1(b)(2)(iv)(f), and as provided in Section 1.D(2), the Carrying Value of
all Partnership assets shall be adjusted upward or downward to reflect any
Unrealized Gain or Unrealized Loss attributable to such Partnership property, as
of the times of the adjustments provided in Section 1.D(2) hereof, as if such
Unrealized Gain or Unrealized Loss had been recognized on an actual sale of each
such property and allocated pursuant to Section 6.1 of the Agreement.
(2) Such adjustments shall be made as of the following times: (a)
immediately prior to the acquisition of an additional interest in the
Partnership by any new or existing Partner in exchange for more than a de
minimis Capital Contribution; (b) immediately prior to the distribution by
the Partnership to a Partner of more than a de minimis amount of property
as consideration for an interest in the Partnership; and (c) immediately
prior to the liquidation of the Partnership within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g), provided, however, that
adjustments pursuant to clauses (a) and (b) above shall be made only if the
General Partner determines that such adjustments are necessary or
appropriate to reflect the relative economic interests of the Partners in
the Partnership.
(3) In accordance with Regulations Section 1.704-1(b)(2)(iv)(e), the
Carrying Value of Partnership assets distributed in kind shall be adjusted
upward or downward to reflect any Unrealized Gain or Unrealized Loss
attributable to such Partnership property, as of the time any such asset is
distributed.
(4) In determining Unrealized Gain or Unrealized Loss for purposes of
this Exhibit B, the aggregate cash amount and fair market value of all
Partnership assets (including cash or cash equivalents) shall be determined
by the General Partner using such reasonable method of valuation as it may
adopt, or in the case of a liquidating distribution pursuant to Article 13
of the Agreement, shall be determined and allocated by the Liquidator using
such reasonable methods of valuation as it may adopt. The General Partner,
or the Liquidator, as the case may be, shall allocate such aggregate value
among the assets of the Partnership (in such manner as it determines in its
sole and absolute discretion to arrive at a fair market value for
individual properties).
E. The provisions of this Agreement (including this Exhibit B and other
Exhibits to this Agreement) relating to the maintenance of Capital Accounts are
intended to comply with Regulations Section 1.704-1(b), and shall be interpreted
and applied in a manner consistent with such Regulations. In the event the
General Partner shall determine that it is prudent to modify (i) the manner in
which the Capital Accounts, or any debits or credits thereto (including, without
limitation, debits or credits relating to liabilities which are secured by
contributed or distributed property or which are assumed by the Partnership, the
General Partner, or the Limited Partners) are computed; or (ii) the manner in
which items are allocated among the Partners for federal income tax purposes in
order to comply with such Regulations or to comply with Section 704(c) of the
Code, the General Partner may make such modification without regard to Article
14 of the Agreement, provided that it is not likely to have a material effect on
the amounts distributable to any Person pursuant to Article 13 of the Agreement
upon the dissolution of the Partnership. The General Partner also shall (i) make
any adjustments that are necessary or appropriate to maintain equality between
the Capital Accounts of the Partners and the amount of Partnership capital
reflected on the Partnership's balance sheet, as computed for book purposes, in
accordance with Regulations Section 1.704-1(b)(2)(iv)(q); and (ii) make any
appropriate modifications in the event unanticipated events might otherwise
cause this Agreement not to comply with Regulations Section 1.704-1(b). In
addition, the General Partner may adopt and employ such methods and procedures
for (i) the maintenance of book and tax capital accounts; (ii) the determination
and allocation of adjustments under Sections 704(c), 734 and 743 of the Code;
(iii) the determination of Net Income, Net Loss, taxable loss and items thereof
under this Agreement and pursuant to the Code; (iv) the adoption of reasonable
conventions and methods for the valuation of assets and the determination of tax
basis; (v) the allocation of asset value and tax basis; and (vi) conventions for
the determination of cost recovery, depreciation and amortization deductions, as
it determines in its sole discretion are necessary or appropriate to execute the
provisions of this Agreement, to comply with federal and state tax laws, and are
in the best interest of the Partners.
2. No Interest
- --------------------
No interest shall be paid by the Partnership on Capital Contributions or on
balances in Partners' Capital Accounts.
3. No Withdrawal
- ----------------------
No Partner shall be entitled to withdraw any part of his Capital
Contribution or his Capital Account or to receive any distribution from the
Partnership, except as provided in Articles 4, 5, 7 and 13 of the Agreement.
Exhibit C
Special Allocation Rules
1. Special Allocation Rules
- ---------------------------------
Notwithstanding any other provision of the Agreement or this Exhibit C, the
following special allocations shall be made in the following order:
A. Minimum Gain Chargeback. Notwithstanding the provisions of Section 6.1
of the Agreement or any other provisions of this Exhibit C, if there is a net
decrease in Partnership Minimum Gain during any Partnership taxable year, each
Partner shall be specially allocated items of Partnership income and gain for
such year (and, if necessary, subsequent years) in an amount equal to such
Partner's share of the net decrease in Partnership Minimum Gain, as determined
under Regulations Section 1.704-2(g). Allocations pursuant to the previous
sentence shall be made in proportion to the respective amounts required to be
allocated to each Partner pursuant thereto. The items to be so allocated shall
be determined in accordance with Regulations Section 1.704-2(f)(6). This Section
1.A is intended to comply with the minimum gain chargeback requirements in
Regulations Section 1.704-2(f) and shall be interpreted consistently therewith.
Solely for purposes of this Section 1.A, each Partner's Adjusted Capital Account
Deficit shall be determined prior to any other allocations pursuant to Section
6.1 of Partner Minimum Gain during such Partnership taxable year.
B. Partner Minimum Gain Chargeback. Notwithstanding any other provision of
Section 6.1 of this Agreement or any other provisions of this Exhibit C (except
Section 1.A hereof), if there is a net decrease in Partner Minimum Gain
attributable to a Partner Nonrecourse Debt during any Partnership taxable year,
each Partner who has a share of the Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Regulations Section
1.702-2(i)(5), shall be specially allocated items of Partnership income and gain
for such year (and, if necessary, subsequent years) in an amount equal to such
Partner's share of the net decrease in Partner Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Regulations Section
1.704-2(i)(5). Allocations pursuant to the previous sentence shall be made in
proportion to the respective amounts required to be allocated to each Partner
pursuant thereto. The items to be so allocated shall be determined in accordance
with Regulations Section 1.704-2(i)(4). This Section 1.B is intended to comply
with the minimum gain chargeback requirement in such Section of the Regulations
and shall be interpreted consistently therewith. Solely for purposes of the
Section 1.B, each Partner's Adjusted Capital Account Deficit shall be determined
prior to any other allocations pursuant to Section 6.1 of the Agreement or this
Exhibit with respect to such Partnership taxable year, other than allocations
pursuant to Section 1.A hereof.
C. Qualified Income Offset. In the event any Partner unexpectedly receives
any adjustments, allocations or distributions described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or 1.704-1(b)(2)(ii)(d)(6),
and after giving effect to the allocations required under Sections 1.A and 1.B
hereof such Partner has an Adjusted Capital Account Deficit, items of
Partnership income and gain (consisting of a pro rata portion of each item of
Partnership income, including gross income and gain for the Partnership taxable
year) shall be specially allocated to such Partner in an amount and manner
sufficient to eliminate, to the extent required by the Regulations, its Adjusted
Capital Account Deficit created by such adjustments, allocations or
distributions as quickly as possible.
D. Nonrecourse Deductions. Nonrecourse Deductions for any Partnership
taxable year shall be allocated to the Partners in accordance with their
respective Percentage Interests. If the General Partner determines in its good
faith discretion that the Partnership's Nonrecourse Deductions must be allocated
in a different ratio to satisfy the safe harbor requirements of the Regulations
promulgated under Section 704(b) of the Code, the General Partner is authorized,
upon notice to the Limited Partners, to revise the prescribed ratio to the
numerically closest ratio for such Partnership taxable year which would satisfy
such requirements.
E. Partner Nonrecourse Deductions. Any Partner Nonrecourse Deductions for
any Partnership taxable year shall be specially allocated to the Partner who
bears the economic risk of loss with respect to the Partner Nonrecourse Debt to
which such Partner Nonrecourse Deductions are attributable in accordance with
Regulations Section 1.704-2(i).
F. Code Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Section 734(b) or 743(b)
of the Code is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m),
to be taken into account in determining Capital Accounts, the amount of such
adjustment to the Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis, and such item of gain or loss shall be specially allocated
to the Partners in a manner consistent with the manner in which their Capital
Accounts are required to be adjusted pursuant to such Section of the
Regulations.
G. Curative Allocations. The allocations set forth in Section 1.A through
1.F of this Exhibit C (the "Regulatory Allocations") are intended to comply with
certain requirements of the Regulations under Section 704(b) of the Code. The
Regulatory Allocations may not be consistent with the manner in which the
Partners intend to divide Partnership distributions. Accordingly, the General
Partner is hereby authorized to divide other allocations of income, gain,
deduction and loss among the Partners so as to prevent the Regulatory
Allocations from distorting the manner in which Partnership distributions will
be divided among the Partners. In general, the Partners anticipate that, if
necessary, this will be accomplished by specially allocating other items of
income, gain, loss and deduction among the Partners so that the net amount of
the Regulatory Allocations and such special allocations to each person is zero.
However, the General Partner will have discretion to accomplish this result in
any reasonable manner; provided, however, that no allocation pursuant to this
Section 1.G shall cause the Partnership to fail to comply with the requirements
of Regulations Sections 1.704-1(b)(2)(ii)(d), -2(e) or -2(i).
2. Allocations for Tax Purposes
- -------------------------------------
A. Except as otherwise provided in this Section 2, for federal income tax
purposes, each item of income, gain, loss and deduction shall be allocated among
the Partners in the same manner as its correlative item of "book" income, gain,
loss or deduction is allocated pursuant to Section 6.1 of the Agreement and
Section 1 of this Exhibit C.
B. In an attempt to eliminate Book-Tax Disparities attributable to a
Contributed Property or Adjusted Property, items of income, gain, loss, and
deduction shall be allocated for federal income tax purposes among the Partners
as follows:
(1) (a) In the case of a Contributed Property, such items attributable
thereto shall be allocated among the Partners, consistent with the
principles of Section 704(c) of the Code and the Regulations thereunder, to
take into account the variation between the 704(c) Value of such property
and its adjusted basis at the time of contribution; and
(b) any item of Residual Gain or Residual Loss attributable to a
Contributed Property shall be allocated among the Partners in the same
manner as its correlative item of "book" gain or loss is allocated pursuant
to Section 6.1 of the Agreement and Section 1 of this Exhibit C.
(2) (a) In the case of an Adjusted Property, such items shall
(1) first, be allocated among the Partners in a manner consistent
with the principles of Section 704(c) of the Code and the Regulations
thereunder to take into account the Unrealized Gain or Unrealized Loss
attributable to such property and the allocations thereof pursuant to
Exhibit B; and
(2) second, in the event such property was originally a
Contributed Property, be allocated among the Partners in a manner
consistent with Section 2.B(1) of this Exhibit C; and
(b) any item of Residual Gain or Residual Loss attributable to an
Adjusted Property shall be allocated among the Partners in the same manner
its correlative item of "book" gain or loss is allocated pursuant to
Section 6.1 of the Agreement and Section 1 of this Exhibit C.
(3) all other items of income, gain, loss and deduction shall be
allocated among the Partners the same manner as their correlative item
of "book" gain or loss is allocated pursuant to Section 6.1 of the
Agreement and Section 1 of the Exhibit C.
C. To the extent that the Treasury Regulations promulgated pursuant to
Section 704(c) of the Code permit the Partnership to utilize alternative methods
to eliminate the disparities between the Carrying Value of property and its
adjusted basis, the General Partner shall have the authority to elect the method
to be used by the Partnership and such election shall be binding on all
Partners.
3. No Withdrawal
- ----------------------
No Partner shall be entitled to withdraw any part of his Capital
Contribution or his Capital Account or to receive any distribution from the
Partnership, except as provided in Articles 4, 5, 8 and 13 of the Agreement.
Exhibit D
Notice of Redemption
The undersigned Limited Partner hereby irrevocably (i) redeems __________
Limited Partnership Units in Vinings Investment Properties, L.P. in accordance
with the terms of the Agreement of Limited Partnership of Vinings Investment
Properties, L.P. and the Redemption Right referred to therein; (ii) surrenders
such Limited Partnership Units and all right, title and interest therein; and
(iii) directs that the Cash Amount or REIT Shares Amount (as determined by the
General Partner) deliverable upon exercise of the Redemption Right be delivered
to the address specified below, and if REIT Shares are to be delivered, such
REIT Shares be registered or placed in the name(s) and at the address(es)
specified below. The undersigned hereby, represents, warrants, and certifies
that the undersigned (a) has marketable and unencumbered title to such Limited
Partnership Units, free and clear of the rights or interests of any other person
or entity; (b) has the full right, power, and authority to redeem and surrender
such Limited Partnership Units as provided herein; and (c) has obtained the
consent or approval of all person or entities, if any, having the right to
consent or approve such redemption and surrender.
Dated:_________________________
Name of Limited Partner:____________________________________
Please Print
------------------------------------
(Signature of Limited Partner)
------------------------------------
(Street Address)
------------------------------------
(City) (State) (Zip Code)
Signature Guaranteed by:
------------------------------------
If REIT Shares are to be issued, issue to:
Name:_________________________________
Please insert social security or identifying number:__________________
VININGS INVESTMENT PROPERTIES, L.P.
FIRST AMENDMENT TO THE
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
This First Amendment to the Amended and Restated Agreement of Limited
Partnership of Vinings Investment Properties, L.P. is made as of November 30,
1997 by Vinings Investment Properties Trust, a Massachusetts trust, as general
partner (the "General Partner") of Vinings Investment Properties, L.P., a
Delaware limited partnership (the "Partnership") and the persons whose names are
set forth on Schedule A attached hereto for the purpose of amending the Amended
and Restated Agreement of Limited Partnership of the Partnership dated June 30,
1997, as amended (the "Partnership Agreement"). All capitalized terms used
herein and not otherwise defined shall have the respective meanings ascribed to
them in the Partnership Agreement.
WHEREAS, the Persons listed on Schedule A attached hereto (each, a
"Contributor," and, collectively, the "Contributors") have made the Capital
Contributions to the Partnership enumerated on such Schedule A in connection
with that Contribution Agreement by and among Vinings Investment Properties,
L.P., the Contributors and certain other Persons listed on the signature pages
thereto, dated as of April 1, 1997, as amended; and
WHEREAS, the General Partner desires to admit each Contributor to the
Partnership as an Additional Limited Partner.
NOW THEREFORE, in consideration of the mutual covenants contained
herein and in the Contribution Agreement, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
Section 1. Admission of Limited Partners.
- ----------------------------------------------
(a) Each of the Contributors has made the Capital Contribution set
forth next to such Contributor's name on Schedule A. In consideration of these
Capital Contributions and pursuant to Section 12.2.A of the Partnership
Agreement, each Contributor is hereby admitted as an Additional Limited Partner
of the Partnership.
(b) Pursuant to Section 12.2.B of the Partnership Agreement, the
General Partner hereby consents to the admission of each Contributor as an
Additional Limited Partner of the Partnership. Pursuant to Section 4.2.A of the
Partnership Agreement, the General Partner hereby issues to each Contributor the
number of Units set forth next to such Contributor's name on Schedule A.
(c) The admission of each Contributor as an Additional Limited Partner
of the Partnership shall become effective as of the date of this Agreement,
which shall also be the date upon which the name of each Contributor is recorded
on the books and records of the Partnership.
THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH (13)
OF CODE SECTION 10-5-9 OF THE GEORGIA SECURITIES ACT OF 1973, AND EXEMPTIONS
FROM THE SECURITIES ACT OF 1933, AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A
TRANSACTION WHICH IS EXEMPT UNDER SUCH ACTS OR PURSUANT TO AN EFFECTIVE
REGISTRATION UNDER SUCH ACTS.
Section 2. Amendment to Partnership Agreement.
- ---------------------------------------------------
Pursuant to Section 14.1.B of the Partnership Agreement, the General
Partner, as general partner of the Partnership and as attorney-in-fact for its
Limited Partners, hereby amends the Partnership Agreement by adding the
Contributors on the attached Exhibit A as Additional Limited Partners to the
existing Exhibit A attached thereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first written above.
GENERAL PARTNER:
VININGS INVESTMENT PROPERTIES TRUST
By:/s/ Stephanie A. Reed
------------------------
Name: Stephanie A. Reed
Title: Vice President
LIMITED PARTNERS:
VININGS INVESTMENT PROPERTIES TRUST
By:/s/ Stephanie A. Reed
------------------------
Name: Stephanie A. Reed
Title: Vice President
VININGS HOLDINGS, INC.
By:/s/ Stephanie A. Reed
------------------------
Name: Stephanie A. Reed
Title: Vice President
CONTRIBUTORS:
HALLMARK GROUP REAL ESTATE SERVICES CORP.,
a Georgia corporation
By: /s/ Peter D. Anzo
- ------------------------
Peter D. Anzo
President
THE VININGS GROUP, INC.,
a Georgia corporation
By: /s/ Stephanie A. Reed
- ---------------------------
Stephanie A. Reed
Vice President
<PAGE>
FIRST AMENDMENT TO THE AMENDED AND RESTATED PARTNERSHIP AGREEMENT
SCHEDULE A
Name and Address Value of Number of Units
of Contributor Capital Contribution Issued to Contributor
- --------------------------------------------------------------------------------
HALLMARK GROUP REAL $45,539 9,108
Estate Services Corp.
3111 Paces Mill Road
Suite A-200
Atlanta, GA 30339
THE VININGS GROUP, INC. $45,539 9,108
3111 Paces Mill Road
Suite A-200
Atlanta, GA 30339
VININGS INVESTMENT PROPERTIES, L.P.
SECOND AMENDMENT TO THE
AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
This Second Amendment to the Amended and Restated Agreement of Limited
Partnership of Vinings Investment Properties, L.P. is made as of December 19,
1997 by Vinings Investment Properties Trust, a Massachusetts trust, as general
partner (the "General Partner") of Vinings Investment Properties, L.P., a
Delaware limited partnership (the "Partnership") and the persons whose names are
set forth on Schedule A attached hereto for the purpose of amending the Amended
and Restated Agreement of Limited Partnership of the Partnership dated June 30,
1997, as amended (the "Partnership Agreement"). All capitalized terms used
herein and not otherwise defined shall have the respective meanings ascribed to
them in the Partnership Agreement.
WHEREAS, the Persons listed on Schedule A attached hereto (each, a
"Contributor," and, collectively, the "Contributors") have made the Capital
Contributions to the Partnership enumerated on such Schedule A in connection
with that Contribution Agreement by and among Vinings Investment Properties,
L.P., the Contributors and certain other Persons listed on the signature pages
thereto, dated as of April 1, 1997, as amended; and
WHEREAS, the General Partner desires to admit each Contributor to the
Partnership as an Additional Limited Partner.
NOW THEREFORE, in consideration of the mutual covenants contained
herein and in the Contribution Agreement, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto agree as follows:
Section 1. Admission of Limited Partners.
- ----------------------------------------------
(a) Each of the Contributors has made the Capital Contribution set
forth next to such Contributor's name on Schedule A. In consideration of these
Capital Contributions and pursuant to Section 12.2.A of the Partnership
Agreement, each Contributor is hereby admitted as an Additional Limited Partner
of the Partnership.
(b) Pursuant to Section 12.2.B of the Partnership Agreement, the
General Partner hereby consents to the admission of each Contributor as an
Additional Limited Partner of the Partnership. Pursuant to Section 4.2.A of the
Partnership Agreement, the General Partner hereby issues to each Contributor the
number of Units set forth next to such Contributor's name on Schedule A.
(c) The admission of each Contributor as an Additional Limited Partner
of the Partnership shall become effective as of the date of this Agreement,
which shall also be the date upon which the name of each Contributor is recorded
on the books and records of the Partnership.
THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH (13)
OF CODE SECTION 10-5-9 OF THE GEORGIA SECURITIES ACT OF 1973, AND EXEMPTIONS
FROM THE SECURITIES ACT OF 1933, AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A
TRANSACTION WHICH IS EXEMPT UNDER SUCH ACTS OR PURSUANT TO AN EFFECTIVE
REGISTRATION UNDER SUCH ACTS. Section 2. Amendment to Partnership Agreement.
Pursuant to Section 14.1.B of the Partnership Agreement, the General
Partner, as general partner of the Partnership and as attorney-in-fact for its
Limited Partners, hereby amends the Partnership Agreement by adding the
Contributors on the attached Exhibit A as Additional Limited Partners to the
existing Exhibit A attached thereto.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Amendment as
of the date first written above.
GENERAL PARTNER:
VININGS INVESTMENT PROPERTIES TRUST
By: /s/ Stephanie A. Reed
----------------------------
Name: Stephanie A. Reed
Title: Vice President
LIMITED PARTNERS:
VININGS INVESTMENT PROPERTIES TRUST
By: /s/ Stephanie A. Reed
----------------------------
Name: Stephanie A. Reed
Title: Vice President
VININGS HOLDINGS, INC.
By: Stephanie A. Reed
------------------------
Name: Stephanie A. Reed
Title: Vice President
HALLMARK GROUP REAL ESTATE SERVICES CORP.,
a Georgia corporation
By: Peter D. Anzo
-------------------
Peter D. Anzo
President
THE VININGS GROUP, INC.,
A Georgia corporation
By: /s/ Stephanie A. Reed
--------------------------
Stephanie A. Reed
Vice President
CONTRIBUTORS:
WINDRUSH PARTNERS, LTD.
By: Hallmark Group Real Estate Services
Corp., its General Partner
By: /s/ Peter D. Anzo
--------------------------
Peter D. Anzo
President
<PAGE>
SECOND AMENDMENT TO THE AMENDED AND RESTATED PARTNERSHIP AGREEMENT
SCHEDULE A
Name and Address Value of Number of Units
of Contributor Capital Contribution Issued to Contributor
- --------------------------------------------------------------------------------
WINDRUSH PARTNERS, LTD. $1,121,650 224,330
C/O HALLMARK GROUP REAL
ESTATE SERVICES CORP.
3111 Paces Mill Road
Suite A-200
Atlanta, GA 30339
MANAGEMENT AGREEMENT
This MANAGEMENT AGREEMENT ("Agreement") made in Atlanta, Georgia
between Vinings Communities, L.P. ("Owner") and Vinings Properties, Inc.,
("Agent") a Georgia corporation, shall become effective as of the 19th day of
December, 1997.
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 Windrush Apartments located in DeKalb
County, Georgia and consisting of 202 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: Windrush
Apartments consisting of 202 units, located at 3841 Kensington Road, Decatur,
Georgia, 30032, and as more fully described in Exhibit A attached hereto.
.
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
December 19, 1997 and ending on December 31, 1999. 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 canceled 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, payroll processing, 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, except as specified in Article V, Section 5.01; 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;
(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 shall be in
compliance with all applicable federal, state, and local employment laws. 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
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, including all bookkeeping functions and costs
associated with preparing monthly financial statements and other required
reports.
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.
<PAGE>
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: Douglas D. Chasick
To Owner: Vinings Communities, 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: VININGS COMMUNITIES, L.P.
By: Vinings Investment Properties Trust, General Partner
By: /s/ Peter D. Anzo
- ----------------------
Peter D. Anzo
Chief Executive Officer & President
AGENT: VININGS PROPERTIES, INC.
By: /s/ Douglas D. Chasick
- ---------------------------
Douglas D. Chasick
Director of Property Management
COMMERCIAL CREDIT AGREEMENT
THIS AGREEMENT made and entered into as of the 28th day of June 1997, by
and between HARDWICK BANK AND TRUST COMPANY ("Hardwick") and the TRUSTEES OF THE
VININGS INVESTMENT PROPERTIES TRUST, a Massachusetts business trust
("Borrower").
WITNESSETH:
WHEREAS, Borrower has requested that Hardwick extend a line of credit (the
Credit Line") to Borrower in amount not to exceed the principal sum of Two
Million and No/100 Dollars ($2,000,000);
WHEREAS, Hardwick is willing to extend the Credit Line to Borrower upon the
terms and conditions of the Agreement and the other Financing Documents
(hereinafter defined).
NOW, THEREFORE, in consideration of the premises and in further
consideration of the agreements, covenants, promises, conditions,
representations and warranties hereinafter set forth, the parties do hereby
agree as follows:
ARTICLE 1
TERMS AND DEFINITIONS
Certain terms used in this Agreement are defined herein. In addition to the
other terms hereinafter defined, the following terms shall have the meanings set
forth in this Article 1:
1.01. "Affiliate": means any trustee, officer or shareholder of Borrower or
any person, corporation, partnership or other entity who or which, directly or
indirectly or beneficially, owns any beneficial interest in Borrower, or any
member of the immediate family of any such officer, trustee or shareholder, or
any Person which is controlled by, controls, or is under common control with
Borrower.
1.02. "Agreement": means this Commercial Credit Agreement, as it may be
amended, modified or supplemented from time to time.
1.03. "Banking Day": means a day when Hardwick is open to the public for
ordinary banking business.
1.04. "Base Rate": means the variable rate of interest per annum defined as
the "Base Rate" in the Master Note (as referred to and defined in Article 2 of
this Agreement).
1.05. "Borrower": means the Trustees of the Vinings Investment Properties
Trust., a Massachusetts business trust, which was formerly known as Mellon
Participating Mortgage Trust Commercial Properties Series 85/10.
1.06 "Credit Line": means the line of credit established by Hardwick in
favor of Borrower pursuant to Section 4.01 of this Agreement in an amount not to
exceed at any time or times the principal sum of Two Million and No/100
($2,000,000).
1.07. "Credit Line Loan Account": means the account on the books of
Hardwick in which will be recorded loans and advances against the Credit Line,
payments made by Borrower on advances against the Credit Line and other
appropriate debits and credits as provided in this Agreement.
1.08. "Credit Line Termination Date": means June 28, 1997
1.09, "Depository Account": means the depository account of Borrower
maintained at Hardwick and identified as account number .
1.10. "Event of Default": means any one or more of the events defined as an
"Event of Default" in Article 8 of this Agreement.
1.11. "Financing Documents": Means collectively, this Agreement, the
documents referred to in Article 2 and all other documents and instruments
evidencing or securing or otherwise relating to the Credit Line.
1.12. "Governmental Authority": means the United States, the State or
Georgia, Gwinnett County, any municipality in which the Real Property may be
located, and any agency, department, commission, board, bureau or
instrumentality of any of them.
1.13. "Guarantors": means Gilbert H. Watts, Jr. ("Watts"), Peter D. Anzo
("Anzo"), and Martin H. Petersen ("Petersen"), Vinings Investment Properties,
Inc., a Maryland corporation ("Vinings"), and PBC Acquisition, Inc., a Delaware
corporation ("PBC").
1.14. "Hardwick": means Hardwick Bank and Trust Company, and its successors
and assigns.
1.15. "Loan Obligations": means the aggregate of all principal and interest
owing from time to time under the Master Note and all expenses, charges and
other amounts owing by Borrower to Hardwick under the Financing Documents.
1.16. "Master Note": means the Master Note, as defined in Article 2 of this
Agreement.
1.17. "Obligations": means all loans, advances, debts, liabilities,
obligations, covenants and duties owing by Borrower to Hardwick of every kind
and nature, present or future, whether or not evidenced by any note, guaranty or
other instrument, whether arising under the Financing Documents or any other
instrument or agreement, whether or not for the payment of money, whether
executed alone or together with another Person or Persons, whether arising by
reason of an extension of credit, opening of a letter of credit, loan, guaranty,
indemnification or in any other manner, whether direct or indirect, absolute or
contingent, now existing or hereafter arising or created, and however acquired.
The term includes, but not by way of limitation, all interest, charges,
expenses, attorneys fees, and other sums chargeable under this or any other
agreement or instrument.
1.18. "Person": means any individual, sole proprietorship, partnership,
joint venture, unincorporated organization, association, firm, corporation,
partnership, institution, entity, party or government (whether national,
federal, state, county, city, municipal or otherwise, including, without
limitation, any instrumentality, division, body, agency or department thereof).
1.19. "Real Property": shall mean the real property described in the
Security Deed (as defined in Article 2 hereof), together with all building
improvements now or hereafter located thereon.
1.20. "UCC": means the Uniform Commercial Code as adopted by the State of
Georgia, as amended from time to time.
ARTICLE 2
FINANCING DOCUMENTS
Borrower has duly authorized, executed and delivered to Hardwick, or caused
the same to be executed, the following documents:
2.01. Master Note. The promissory note (the "Master Note"), dated of even
date herewith, in the principal face of the Credit Line, payable to the order of
Hardwick, evidencing Borrower's obligation to pay the amounts advanced or
re-advanced by Hardwick against the Credit Line with interest and agreed charges
and all renewals, modifications, amendments and substitutions, if any, thereof.
2.02. Guaranty. The Guaranty (the "Guaranty") dated the date hereof whereby
the Guarantors have agreed, among other things, to guaranty to Hardwick the
payment by Borrower of all of its Obligations to Hardwick.
2.03. Security Deed. The Deed to Secure Debt and Security Agreement
(hereinafter the "Security Deed"), from PBC to Hardwick, dated of even date
herewith and conveying the Real Property to Hardwick to Secure the Guaranty;
which Security Deed is to be recorded in the office of the Clerk of the Superior
Court of Gwinnett County, Georgia on or about the date hereof.
2.04. Financing Statements. UCC Financing Statements from PBC in favor of
Hardwick giving notice of the security agreement contained in the Security Deed;
which Financing Statements are to be recorded in the offices of the Clerks of
the Superior Court of Gwinnett County, Georgia on or about the date hereof and
in all other public offices where the filing thereof is necessary to perfect the
security interest of Hardwick.
2.05. Lease Assignment. The Assignment of Leases, Rents and Profits
(hereinafter the "Lease Assignment"), from PBC to Hardwick, dated of even date
herewith and securing the Guaranty; which Lease Assignment is to be recorded in
the office of the Clerk of the Superior Court of Gwinnett County, Georgia, on or
about the date hereof.
ARTICLE 3
CONDITIONS TO DISBURSEMENT
Prior to the advance by Hardwick of any amount against the Credit Line
Borrower shall deliver, or cause to be delivered, to Hardwick, in each case in
form and substance to Hardwick and its counsel, the following (any of which can
be waived by Hardwick in its sole discretion):
3.01. Organizational Documents of Borrower. A copy of Borrower's
Declaration of Trust, together with all amendments thereto and a copy of the
by-laws of Borrower, as amended, each certified as being a true, correct and
complete by Borrower.
3.02. Proceedings of Borrower. Certified copies of all proceedings which
shall have been taken by Borrower to authorize the execution and deliver of this
Agreement and the other Financing Documents to be executed by Borrower and the
transactions contemplated hereby and thereby.
3.03. Corporate Documents of Vinings. A copy of Vinings' articles of
incorporation, certified by the Secretary of State and the State of Maryland,
together with a certificate from the Secretary of State of Maryland certifying
that Vinings is in good standing, and together with a certificate from the
Secretary of State of Georgia certifying that Vinings is a foreign corporation
authorized to do business in the State of Georgia and is in good standing.
3.04. Corporate Proceedings of Vinings. Certified copies of all corporate
proceedings which shall have been taken by Vinings to authorize the execution
and deliver of the Guaranty.
3.05. Corporate Documents of PBC. A copy of PBC' articles of incorporation,
certified by the Secretary of State of the State of Delaware, together with a
certificate from the Secretary of State of Delaware certifying that PBC is in
goody standing, and together with a certificate from the Secretary of State of
Georgia certifying that PBC is a foreign corporation authorized to do business
in the Sate of Georgia and is in good standing.
3.06. Corporate Proceedings of PBC. Certified copies of all corporate
proceedings which shall have been taken by PBC to authorize the execution and
deliver of the Guaranty, the Security Deed, the Lease Assignment and the
Financing Statements.
3.07. Financing Documents. This Agreement and the other Financing
Documents.
3.08. Insurance. The certificates of insurance or insurance policies as
required by Section 6.01 of this Agreement.
3.09. Title Opinion. An opinion of title with respect to the Real Property,
issued by a law firm of recognized expertise, certifying that, in the opinion of
such law firm, the Real Property is owned by Borrower free and clear of all
title defects, liens and encumbrances, except such as may be approved by
Hardwick, and including copies of all exceptions mentioned therein.
3.10. Costs of closing. Borrower shall pay or reimburse Hardwick for the
payment of all out of pocket expenses, including without limitation legal fees
and recording fees and expenses, including recording fees with respect to the
Financing Documents, paid or incurred by Hardwick as the result of the
transactions contemplated by this Agreement, including the out of pocket
expenses of Hardwick's counsel.
ARTICLE 4
CREDIT LINE
4.01. Credit Line. Contemporaneously with the execution and delivery of
this Agreement, the Master Note and the other Financing Documents, Hardwick is,
subject to the terms of this Agreement, hereby establishing in favor of Borrower
the Credit Line. Subject to the terms of this Agreement and if Borrower is not
in default hereunder, and if no condition exists which but for the giving of
notice or the lapse of time, or both, would constitute and Event of Default
hereunder, Borrower will be advanced funds against the Credit Line in accordance
with the terms of this Article 4, until the earlier of
(i) Credit Line Termination Date or (ii) the date that the Credit Line is
terminated as provided for in Section 9.01 hereof.
4.02. Interest. The outstanding principal balance of the Master Note shall
bear interest at a variable rate of interest per annum as provided for in the
Master Note. Borrower shall, in accordance with the terms of the Master Note
make monthly payments of interest to Hardwick on the outstanding principal
balance of the Master Note, and Borrower hereby irrevocably authorizes Hardwick
to draft the Depository Account for the interest due on the Master Note.
Interest on the amount of each advance under the Credit Line shall be calculated
from the date of each such advance.
4.03. Termination of Credit Line. The termination of the Credit Line
pursuant to the provisions of Section 4.01 or Section 9.01 shall not affect the
rights, liabilities and obligations of the parties with respect to advances made
Hardwick prior to the effective date of termination, and upon any termination of
the Credit Line, all provisions of this Agreement and the Financing Documents
shall remain in full force and effect, except for the obligation of Hardwick to
extend credit to Borrower under the Credit Line, until all Obligations of
Borrower to Hardwick shall have been paid in full.
4.04 Credit Line Loan Account. Hardwick shall establish on its books a
Credit Line Loan Account with respect to the Credit Line, and shall enter all
advances against the Credit Line in the Credit Line Loan Account. Hardwick shall
also record in the Credit Line Loan Account in accordance with customary
accounting practice all other charges, expenses and other items properly
chargeable to Borrower with respect to the Credit Line, including interest
charges, all payments made by Borrower on account of the Credit Line and the
interest payable thereon, and other appropriate debits and credits. The debit
balance in the Credit Line Loan Account shall reflect the amount of the
indebtedness of Borrower to Hardwick from time to time under the Credit Line by
reason of advances against the Credit Line and other appropriate charges,
including interest charges. At least once each month Hardwick shall render a
statement of account for the Credit Line Loan Account which statement shall be
considered correct and accepted by Borrower and conclusively binding upon
Borrower unless Borrower notifies Hardwick to the contrary within ten (10) days
of Hardwick's sending such statement to Borrower.
4.05 Advances Against Credit Line. Subject to the terms of this Agreement,
Borrower shall be advanced funds against the Credit Line upon written request,
signed by a duly authorized representative of the Borrower, or upon the verbal
request of a person duly authorized by the Borrower for such purpose. Borrower
agrees that all verbal requests for advances against the Credit Line shall be
confirmed in writing by a duly authorized representative of Borrower by
telecopier or facsimile transmission to Hardwick and by mailing of the original
of such confirmation to Hardwick. Until the Borrower shall direct otherwise, by
written notice actually received by an officer of Hardwick holding a title of
vice president or greater, any one or more of the following persons shall be
authorized to request advances against the Credit Line: Peter D. Anzo and Martin
H. Petersen. Borrower hereby specifically vests such persons with authority to
request advances against the Credit Line. Borrower may, with the prior written
approval of Hardwick and by written authorization of duly authorized officers of
Borrower delivered to Hardwick, change the designation of the persons authorized
to request advances against the Credit Line. In no event and at no time shall
more than three (3) persons be authorized by the Borrower to request advances
against the Credit Line. All advances against the Credit Line shall be made to
the Depository Account unless otherwise directed in writing by one of the
authorized representatives of Borrower. Hardwick agrees that if a request for an
advance against the Credit Line is made on or before 11:00 A. M. Eastern
Standard Time or Eastern Daylight Savings Time, as applicable, on a Banking Day,
such advance will be made on the same Banking Day. If such request is received
after said time, Hardwick may if able, but shall not be required, to make the
advance until the next Banking Day of Hardwick. Notwithstanding the foregoing it
is expressly agreed that in the event that Hardwick should make an advance
against the Credit Line at the request of a person reasonably believed by
Hardwick, its officers or employees, to be a person authorized to request
advances against the Credit Line, Borrower shall be liable for the payment of
same and interest thereon as provided in the Master Note, provided that the
advance is made in the manner provided for herein or the Borrower has otherwise
received the beneficial use of such funds. Hardwick shall have no duty or
obligation to make an advance against the Credit Line other than on a Banking
Day.
ARTICLE 5
WARRANTIES OF BORROWER
Borrower hereby warrants and represents and/or covenants to Hardwick as
follows:
5.01. Status and Authority of Borrower. That Borrower (i) is a business
trust duly organized, existing and in good standing under the laws of the State
of Massachusetts, (ii) is duly qualified to do business in and is in good
standing in every other jurisdiction in which the character of character of the
properties owned by it or in which the transaction of its business makes such
qualification necessary, (iii) has the power, authority and legal right to carry
on the business now being conducted by it and to engage in the transactions
contemplated by the Agreement and the other Financing Documents to be executed
by Borrower, and (iv) the execution and delivery of this Agreement and the
Financing Documents to be executed by Borrower and the performance and
observance of the provisions hereof and thereof have been duly authorized by all
necessary actions on the part of Borrower.
5.02. Validity and Enforceability of Financing Documents. That the
Agreement and the other Financing Documents are in all respects legal, valid and
binding in accordance with their respective terms, subject only to (i)
applicable bankruptcy, insolvency, reorganization, moratorium and other similar
laws affecting the enforcement of creditors' rights generally; and (ii) general
principals of equity.
5.03. Conflicting Transactions of Borrower. That the consummation of the
transactions hereby contemplated and the performance of the obligations of
Borrower under and by virtue of the Agreement and the other Financing Documents
to be executed by Borrower will not result in any breach of, or constitute a
default under, any mortgage, security deed, deed of trust, security agreement,
lease, bank loan or credit agreement, trust indenture, corporate charter or
by-laws or any other agreement or instrument to which Borrower is a party or by
which it is bound of affected.
5.04. Pending Litigation. Except as may have been disclosed to Hardwick in
writing, there are no actions, suits or proceedings pending, or to the knowledge
of Borrower threatened, against or affecting Borrower or the Real Property, at
law or in equity, or before or by any Governmental Authority.
5.05. Information Concerning Real Property. That, subject to any limitation
stated therein or in connection therewith, all information by or on the behalf
of Borrower or PBC concerning the Real Property or otherwise for the purpose of
obtaining the financial benefits contemplated by this Agreement, is or will be
at the time the same is furnished, accurate and complete in all material
respects and complete insofar as completeness may be necessary to give Hardwick
a true and accurate knowledge of the subject matter.
5.06. Financial Statements. That the financial statements of Borrower and
the Guarantors which have theretofore been delivered by Borrower or Guarantors
or on behalf of Borrower or Guarantors to Hardwick are materially true in all
respects, and that (i) the financial statements of Borrower, Vinings and PBC
have been prepared in accordance with generally accepted accounting practices,
and (ii) the financial statements of Watts, Petersen and Anzo each fairly
represent the financial condition of the subject thereof as of the respective
dates thereof; and there are no material liabilities, direct or indirect, fixed
or contingent, of Borrower or any Guarantor as of the date of such financial
statements which are not reflected thereon or in the notes thereto. There has
been no material adverse change in the financial condition, business operations
or prospects of Borrower or any Guarantor since the respective dates of said
financial statements; and that no additional borrowings have been made by
Borrower or any Guarantor since the respective dates thereof other than the
borrowing contemplated hereby or as otherwise expressly approved by Hardwick.
5.07. Taxes. Borrower has filed all federal, state and local tax returns
which are required to be filed and has paid, or made adequate provision for the
payment of, all taxes which have become due pursuant to said returns or to
assessments received by Borrower.
5.08. ERISA Requirements. Unless previously disclosed in writing to
Hardwick, Borrower has not established and is not a party to any stock option or
deferred compensation plan or contract for the benefit of its employees or
officers, any pension, profit sharing or retirement plan, or any other agreement
or arrangement with any officer, director or stockholder, member of their
families or trusts for their benefit, and Borrower is in compliance with all
applicable provisions of the Employee Retirement Security Act of 1974, as
amended ("ERISA").
5.09. Regulation U. None of the proceeds of the Credit Line shall be used
directly or indirectly for the purpose of purchasing or carrying any stock in
violation of Regulation U of the Board of Governors of the Federal Reserve
System.
5.10. No Events of Default under Financing Documents. That no Event of
Default by Borrower exists under this Agreement, or under any of the other
Financing Documents, and no event has occurred and is continuing which with
notice or the passage of time, or both, would constitute an Event of Default
under any of the Financing Documents.
ARTICLE 6
AFFIRMATIVE COVENANTS OF BORROWER
Borrower hereby covenants and agrees with Hardwick as follows.
6.01. Insurance. To obtain, or cause to be obtained, such insurance or
evidence of insurance as Hardwick may reasonable require, including, but not
limited to, the following:
(a) Property and Casualty Insurance. As required by the terms of the
Security Deed.
(b) Public Liability and Workmen's Compensation Insurance. A
certificate from an insurance company indicating that Borrower is covered
by public liability and workmen's compensation insurance to the reasonable
satisfaction of Hardwick.
6.02. Collection of Insurance Proceeds. To cooperate with Hardwick in
obtaining for Hardwick the benefits of any insurance or other proceeds lawfully
or equitably payable to Hardwick in connection with the transactions
contemplated hereby and to reimburse Hardwick for any expenses incurred in
connection therewith (including the payment by Borrower of the expense of an
independent appraisal on behalf of Hardwick in case of a fire or other casualty
affecting the Inventory, or any part thereof).
6.03. Change of Name or Use of Tradename. To give Hardwick at least thirty
(30) days prior written notice of (i) any proposes change in the location of the
principal offices or principal place of business of Borrower, (ii) any proposed
change in Borrower's corporate name, and (iii) any proposed use of a trade-name
or other fictitious name by Borrower.
6.04. Financial Statements. For so long as Borrower shall have any
Obligation to Hardwick, Borrower agrees to deliver to Hardwick the following
financial statements and reports:
(a) Financial Statements of Borrower.
(1) As soon as practicable after the end of each fiscal year of
Borrower, but in any event within ninety (90) days thereafter, a copy
of: (i) a balance sheet for Borrower at the end of such year, and (ii)
statements of income and surplus for Borrower for such year, setting
forth in each case in comparative form the figures for the previous
fiscal year of Borrower, all in reasonable detail and accompanied by
an unqualified opinion of a firm of independent certified public
accountants of recognized expertise, reasonably acceptable to
Hardwick, certifying that such financial statements have been prepared
in accordance with generally accepted accounting principles applied on
a consistent basis. At the time of the furnishing of such financial
statements Borrower shall, if requested by Hardwick, also furnish
Hardwick with a certificate from the president or the chief financial
officer of Borrower stating that he has reviewed this Agreement, the
other Financing Documents and the affairs of Borrower and that he is
unaware of the occurrence of an event which constitutes an Event of
Default hereunder or which would constitute an Event of Default
hereunder with the giving of notice or the lapse of time, or both, or,
if such an event has occurred, stating the facts with respect thereto.
(2) As soon as practicable after the close of each calendar
quarter of Borrower except the last quarter in each fiscal year of
Borrower, but in any event within thirty (30) days thereafter, a copy
of: (i) a balance sheet for Borrower as of the end of such quarter,
and (ii) statements of income and surplus of Borrower for such
quarter, all in reasonable detail and certified as complete and
correct, subject to changes resulting from year-end adjustments, by
the president or chief financial officer of Borrower. At the time of
the furnishing of such financial statements, Borrower shall, if
Hardwick so requests, also furnish Hardwick with a certificate signed
by the president or the chief financial officer of Borrower stating
that he has reviewed this Agreement, the other Financing Documents and
the affairs of Borrower and that he is unaware of the occurrence of an
event which constitutes an Event of Default hereunder or which would
constitute an Event of Default hereunder with the giving of notice or
the lapse of time, or both, or, if such an event has occurred, stating
the facts with respect thereto.
(3) Such other and further information respecting its affairs and
financial condition as Hardwick may, from time to time, reasonably
request.
6.05. Maintenance of Existence. Borrower will maintain its existence as a
business trust and, in each jurisdiction in which the nature of its business or
the character of the property owned by Borrower makes its qualification
necessary, maintain good standing.
6.06. Accrual of Taxes and Benefit Contributions. During each fiscal year,
accrue all current tax liabilities of all kinds, all required withholding of
income taxes and social security taxes of employees, all required old age and
unemployment contributions, all required payments to any employee benefit plans
maintained by Borrower, and pay the same as they become due.
6.07. Compliance with Laws. Comply with all applicable statues and
governmental regulations governing or regulating the business of Borrower.
6.08. Notice of Legal Action. Give Hardwick prompt notice of any suit or
proceeding against Borrower involving more than $50,000.
6.09. Notice of Damage to or Loss of Collateral. Immediately notify
Hardwick of any event causing a material loss or depreciation in value of the
Real Estate and the amount of such loss or depreciation, except Borrower shall
not be required to notify Hardwick of depreciation resulting from ordinary use.
ARTICLE 7
NEGATIVE COVENANTS OF BORROWER
Until the Loan Obligations have been paid in full, Borrower covenants and
agrees that it will not, without the prior written consent of Hardwick, which in
each case shall not be unreasonable withheld:
7.01. Merger or Consolidation. Merge or consolidate with or into any other
Person. In the event Hardwick consents to any such merger or consolidation and
as a condition thereto, Borrower shall deliver or cause to be delivered to
Hardwick such assurances, including opinions from Borrower's legal counsel,
acceptable to Hardwick, that the Loan Obligations and Hardwick's security
interest and lien on the Real Property are unaffected thereby.
7.02. Transactions with Affiliates. Purchase, acquire, or lease property
from, or sell, transfer or lease any property to any Affiliate, except on terms
which are no less favorable to Borrower than would be the case if such
transactions had been made with disinterested third parties.
7.03. Guaranty of Others Obligations. Be a surety, guarantor or endorser or
otherwise become liable to any Person, other than Hardwick, for or upon the
obligations of any other Person, other than by endorsement of instruments or
items or payment for deposit to the general account of Borrower.
7.07. Loans or Advances by Borrower. Make any loans or advances to any
Person, including officers, trustees and employees of Borrower, except in the
ordinary course of the business of Borrower.
7.08. Accountants. Maintain independent certified public accountants who
are not approved by Hardwick.
ARTICLE 8
DEFAULTS
An Event of Default shall be deemed to have occurred under this Agreement
if:
8.01. Default under Master Note. Borrower shall fail to pay when due and
payable any installment of interest or principal, or principal and interest, as
provided for the Master Note and the continuation of such default beyond any
grace period provided for in the Master Note; or
8.02. Breach of Covenant. Borrower breaches or fails to perform, observe or
meet any term, covenant or condition made herein or in any of the Financing
Documents executed by Borrower (other than a default as referred to in Section
8.01 above) and does not cure same within 10 days after written notice thereof,
with respect to such breaches or failures curable by the payment of money, or
within 15 days after written notice thereof, with respect to all other breaches
and failures, provided, however, that with respect to breaches or failures which
cannot be cured by the payment of money, and cannot reasonably be cured within
such period (but can be cured), no Event of Default shall exist hereunder so
long as Borrower promptly commences and thereafter diligently pursues the cure
thereof and continues to satisfy all of Borrower's monetary obligations under
the Financing Documents, but in any event such period shall not exceed 30 days
from the date of written notice of default or extend the maturity of the Master
Note; or
8.03. Breach of Warranty. Any warranties or representations made or agreed
to be made herein by Borrower shall be breached by Borrower or shall be
determined to have been false or incomplete in any material respect at the time
given or made; or
8.04. Breach Under Financing Documents. Any default or event of default
shall occur and be continuing under the Guaranty, the Security Deed or the Lease
Assignment;
8.05. Judgment Liens. A final judgment shall be rendered by a court of law
or equity against Borrower or any Guarantor and the same shall remain
undischarged for the period of thirty (30) days unless such judgment is fully
covered by collectible insurance. For purposes hereof, the term "final
judgement" shall mean a judgment of a court of competent jurisdiction which is
not subject to further direct review or appeal; or
8.06. Bankruptcy. (i) The fining by Borrower or any Guarantor of a
voluntary petition in bankruptcy under Title 11 of the United States Code, or
the issuing of an order for relief against Borrower or any Guarantor under Title
11 of the United States Code, or (ii) the filing by Borrower or any Guarantor of
any petition or answer seeking or acquiescing in any reorganization,
arrangement, composition, readjustment, liquidation, dissolution or similar
relief for Borrower or any Guarantor under any present or future federal, state
or other law or regulation relating to bankruptcy, insolvency or other relief
for debtors, or (iii) Borrower's or any Guarantor's seeking or consenting to or
acquiescing in the appointment of any custodian, trustee, receiver, conservator
or liquidator of Borrower or such Guarantor or of all or a substantial part of
the property of Borrower or any such Guarantor or of any or all of the rents,
issues, profits, revenues and royalties thereof, of (iv) the making by Borrower
or any Guarantor of a general assignment for the benefit of creditors, or (v)
the entry by a court of competent jurisdiction of an order judgment or decree
approving a petition filed against Borrower or any Guarantor seeking any
reorganization, arrangement, composition, readjustment, liquidation, dissolution
or similar relief under any present or future federal, state or other law or
regulation relating to bankruptcy, insolvency or other relief for debtors, or
(vi) the appointment of any custodian, trustee, receiver, conservator or
liquidator of Borrower or any Guarantor or of all or substantial part of the
property of Borrower or any such Guarantor or of any or all of the rents,
issues, profits, revenues and royalties thereof without the consent or
acquiescence of Borrower or the respective Guarantor; or
8.07. Secondary Financing and Sale of Real Property. PBC shall, without the
prior written consent of Hardwick, sell, transfer or convey all or any part of
its interest in the Real Property, or any portion thereof, or shall enter into
any secondary financing arrangement with respect to the Real Property, or any
part thereof, without the prior written consent of Hardwick; or
8.08. Ejectment from Real Property. PBC shall be ejected from the Real
Property or any part thereof or from the use and occupancy thereof by reason of
any defect in the title to the Real Property; or
8.09. Adverse Claims to Real Property. In any Person shall file any claim
in any legal or equitable proceeding challenging the priority of the lien and
security interest of Hardwick in the Real Property or any part thereof; or
8.10. Damage to or Loss of Real Property. If there shall occur any material
uninsured damage to or loss or destruction of the Real Property, or any part
thereof; or if the Real Property, or any material portion thereof, is subjected
to waste; or
8.11. Failure to Notify. Borrower shall fail to notify Hardwick in writing
immediately after damage or loss to the Real Property by reason of fire or other
casualty, and prior to the making of any repairs thereto, or to permit Hardwick
to inspect such damage or loss prior to the making of, during and upon
completion of any repairs thereto; or
8.12. Liquidation of Dissolution of Borrower of Corporate Guarantors. If
either Borrower, Vinings or PBC is liquidated or dissolved or its charter
expires or is revoked and is not reinstated within thirty (30) days; or
8.13. Default under Other Documents. If there shall occur any default or
event of default under and as defined in any other agreement now or hereafter
evidencing or securing any indebtedness or Obligation of Borrower or any
Guarantor to Hardwick; or
8.14. Revocation of Guaranty. If any one or more of the Guarantors shall
revoke or rescind or attempt to revoke or rescind the Guaranty or such
Guarantor's obligations thereunder; or
8.15. Death of Guarantor. If either Anzo, Watts or Petersen shall die; or
8.16. Insecurity. If Hardwick should otherwise reasonably deem itself, its
security interest, if any, or any indebtedness hereunder unsafe or insecure or
should Hardwick believe in good faith that the prospect of payment or other
performance by Borrower or any Guarantor is impaired, and Borrower fails upon
request of Hardwick to provide Hardwick such additional collateral as it shall
reasonably request; or
8.17. Failure to Disprove Default. Hardwick shall reasonably suspect the
occurrence of any one or more of the aforesaid Events of Default and Borrower,
upon the request of Hardwick, shall fail to provide evidence reasonably
satisfactory to Hardwick that such Event or Events of Default have not in fact
occurred.
ARTICLE 9
REMEDIES OF HARDWICK
Upon the occurrence of any one or more of the Events of Default set out in
Article 9 hereof, Hardwick, at its option and in addition to and not in lieu of
the remedies provided for in the other Financing Documents, shall be entitled to
proceed to exercise any of the following remedies:
9.01. Termination of Credit Line. Hardwick may immediately and without
notice to Borrower, terminate the Credit Line, whereupon Hardwick shall have no
further duty or obligation to make advances against the Credit Line to Borrower,
except that upon the occurrence of an Event of Default under Section 8.06 the
Credit Line shall automatically be terminated without the necessity of any act
or action on the part of Hardwick.
9.02. Default under Other Financing Documents. Borrower agrees that the
occurrence of such Event of Default shall constitute a default under each of the
other Financing Documents, thereby entitling Hardwick (i) to exercise any of the
various remedies therein and herein provided, including the acceleration of the
indebtedness evidenced by the Master Note and to exercise any or all of the
rights, remedies and powers contained herein and in the other Financing
Documents, and (ii) cumulatively to exercise all other rights, options and
privileges provided by law or in equity.
9.03. Offset and Setoff. Hardwick may, at its option, without any further
notice to Borrower (such notice being hereby expressly waived), set-off and
apply any and all deposits (general or special, time or demand, provisional or
final) at any time held by, or any other indebtedness at any time owing by
Hardwick to Borrower to or for the credit or the account of Borrower against the
Obligations, irrespective of whether any demand has been made hereunder or
whether such obligation is mature. The rights given hereunder are cumulative to
all other rights of set-off under this or any other agreement or by operation of
law or otherwise. Hardwick shall promptly notify Borrower of any such set-off
and application, but failure to do so shall not affect the validity thereof.
9.04. Attorneys' Fees and Expenses. In the event of the occurrence of an
Event of Default and as the result thereof Hardwick shall employ attorneys or
incur other expenses for the collection of payments due hereunder or under any
of the Financing Documents, or the enforcement or observance of any agreement
herein or therein contained, Borrower agrees that it will on demand pay to
Hardwick the reasonable fees and expenses of such attorneys and such other
expenses incurred by Hardwick, including without limitation the reasonable out
of pocket expenses of its attorneys.
9.05. No Waiver of Remedies. No delay or omission to exercise any right or
remedy accruing upon the occurrence of an Event of Default shall impair any such
right or remedy or shall be construed to be a waiver thereof, but each such
right and remedy may be exercised from time to time as often as may be deemed
expedient by Hardwick. No course of dealing between Hardwick and Borrower or any
delay on Hardwick's part in exercising any rights or remedies shall operate as a
waiver of Hardwick's rights or remedies.
9.06. Waiver of Events of Default. Hardwick shall not be liable for any
action or omission on the part of Hardwick, its officers, agents and employees,
except for those arising out of gross negligence or willful misconduct. The
failure by Hardwick at any time or times hereafter to require strict performance
by Borrower of any of the terms, provisions, representations, warranties and
covenants contained in the Agreement or any other of the Financing Documents
shall not waive, affect or diminish any right of Hardwick thereafter to demand
strict compliance and performance therewith and with respect to any other
provisions, warranties, terms and conditions contained herein and therein any
waiver of any Event of Default shall not waive or affect any other Event of
Default, whether prior or subsequent thereto, and whether the same or of a
different type. None of the warranties, conditions, provisions or terms of this
Agreement or the other Financing Documents shall be deemed to have been waived
by any act or knowledge of Hardwick, its agents, officers or employees, but only
by an instrument in writing signed by an officer of Hardwick and directed to
Borrower specifying such waiver. Hardwick may waive any Event of Default
hereunder and its consequences or rescind any declaration of the acceleration of
the Master Note. Such waiver shall also waive the corresponding Event of Default
hereunder and its consequences. In the event of any such waiver or rescission,
or in the event any proceeding taken by Hardwick on account of any Event of
Default shall have been discontinued or abandoned or determined adversely to
Hardwick, then, and in every such case, Hardwick and Borrower shall be restored
to their former positions, respectively, and rights hereunder and under the
other Financing Documents, but no such waiver or rescission shall extend to any
subsequent or other then existing Event of Default or impair any rights,
remedies or powers of Hardwick.
ARTICLE 10
MISCELLANEOUS
10.01. Addresses and Notices. Each notice, demand, election or request
which by any provision of this Agreement is required or permitted to be given
pursuant to this Agreement (hereinafter in this Section referred to as "Notice")
must be in writing and shall be deemed to have been properly given or served by
personal delivery or by depositing same in the United States mail, registered or
certified mail with return receipt requested, postage prepaid, addressed as
follows:
To Borrower: Vinings Investment Properties Trust
3111 Paces Mill Road
Suite A-200
Atlanta, Georgia 30339-5704
Attention: Peter D. Anzo
To Hardwick: Hardwick Bank and Trust Company
P. O. Box 1367
Dalton, Georgia 30722-1367
Attention: Dan Davis
Borrower and Hardwick, by notice given in accordance with this Section 10.01,
shall have the right to change their respective addresses for the giving of
notices and each shall have the right to specify as its address any other
address in the United States of America. Each notice shall be effective upon the
earlier of (i) being personally delivered or (ii) three days after the deposit
thereof in the United States Mail in accordance with this Section, and the time
period in which a response to any notice, demand or request must be given shall
commence to run from the effective date of such notice. Rejection or other
refusal to accept or the inability to deliver because of changed address of
which no notice was given shall be deemed to be receipt of the notice, demand or
request sent.
10.02. Construction of Agreement. This Agreement and the other Financing
Documents supersede and incorporate all representations, promises, and
statements, oral or written, made in connection with the Credit Line. The
Financing Documents are to be construed as part and parcel of this Agreement,
and, by this reference thereto, are incorporated herein and made a part hereof.
In the event of any conflict between the provisions of this Agreement and the
provisions of any of the Financing Documents, the provisions of this Agreement
shall govern. It is, however, the intention of the parties that the terms and
conditions of this Agreement and the Financing Documents shall be liberally
construed as mutually consistent, complementary, or supplementary, rather than
conflicting.
10.03. Assignment. Borrower may not assign this Agreement or any of its
rights or obligations hereunder without the prior written consent of Hardwick.
10.04. Binding Effect. Whenever in this Agreement one of the parties hereto
is named or referred to, the legal representative, successors and assigns of
such party shall be included in all covenants and agreements contained in this
Agreement by or on behalf of Borrower or by or on behalf of Hardwick shall bind
and inure to the benefit of their respective legal representatives, successors
and assigns.
10.05. Headings. The heading of the Articles, Sections and sub-sections of
this Agreement are for convenience of reference only, and not to be considered a
part hereof and shall not limit or otherwise affect the terms hereof.
10.06. Invalid Provisions Affect No Others. If fulfillment of any provision
hereof or any transaction related hereto at the time performance of such
provisions shall be due, shall involve transcending the limit of validity
presently prescribed by law, with regard to transactions of like character and
amount, the ipso facto, the obligation to be fulfilled shall be reduced to the
limits of such validity; and if any clause or provision herein contained
operates or would prospectively operate to invalidate this Agreement in whole or
in part, then such clause or provision only shall be held for naught, as though
not herein contained, and the remainder of this Agreement shall remain operative
and in full force and effect.
10.07. Number and Gender. Whenever the singular or plural number, or the
masculine, feminine or neuter gender is used herein, it shall equally include
the other.
10.08. Amendment and Modification. Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated orally, but only by a
written instrument signed by the party against whom enforcement of the change,
waiver, discharge or termination is sought.
10.09. Survival of Covenants. All covenants, agreements, representations
and warranties made herein and in certificates or reports delivered pursuant
hereto shall be deemed to have been material and relied upon by Hardwick, and
shall survive the execution and delivery of the Master Note and the other
Financing Documents.
10.10. Execution of Counterparts. This Agreement may be executed in several
counterparts, each of which, when executed and delivered, shall be deemed an
original, but such counterparts shall together constitute one and the same
instrument.
10.11. Governing Law. This Agreement shall be governed exclusively, and
shall construed and enforced in accordance with, the applicable laws of the
State of Georgia.
IN WITNESS WHEREOF, the parties have caused this Agreement to be executed
by their duly authorized officers and Borrower has caused its seal to be affixed
hereon as of the day and year first above written.
VININGS INVESTMENT PROPERTIES TRUST
By: /s/ Peter D. Anzo
------------------------
Peter D. Anzo, Authorized Trustee, on behalf of
all of the Trustees
HARDWICK BANK AND TRUST COMPANY
By: /s/ Daniel P. Davis
--------------------------
Vice President
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
Vinings Communities, LP Delaware
<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, 1997 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, 1997.
</LEGEND>
<CIK> 0000759174
<NAME> Vinings Investment Properties Trust
<MULTIPLIER> 1
<CURRENCY> US DOLLARS
<S> <C>
<PERIOD-TYPE> Year
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> DEC-31-1997
<EXCHANGE-RATE> 1
<CASH> 597535
<SECURITIES> 0
<RECEIVABLES> 35823
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 19162992
<DEPRECIATION> 1036311
<TOTAL-ASSETS> 18989558
<CURRENT-LIABILITIES> 0
<BONDS> 15502670
0
0
<COMMON> 0
<OTHER-SE> 2268803
<TOTAL-LIABILITY-AND-EQUITY> 18989558
<SALES> 0
<TOTAL-REVENUES> 2478824
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 2329454
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 816551
<INCOME-PRETAX> (661717)
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (661717)
<EPS-PRIMARY> (0.61)
<EPS-DILUTED> (0.61)
</TABLE>
