<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-------------------------------
FORM 8-K/A
AMENDMENT NO. 1
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
----------------------------------
Date of Report (Date of earliest event reported): APRIL 29, 1999
VININGS INVESTMENT PROPERTIES TRUST
-------------------------------------------------
(Exact name of Registrant as specified in charter)
MASSACHUSETTS 0-13693
- ---------------------------- -----------------------
(State or other jurisdiction (Commission file number)
of incorporation)
13-6850434
-------------------
(IRS employer
identification no.)
3111 PACES MILL ROAD, ATLANTA, GEORGIA 30339
-------------------------------------------------
(Address of principal executive offices) (Zip Code)
(770) 984-9500
--------------------------------------------------
(Registrant's telephone number, including area code)
<PAGE>
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
On May 1, 1999, Vinings Investment Properties Trust, through its subsidiaries,
(together "Vinings") completed the acquisition of thirteen multifamily
communities (collectively, the "Portfolio Properties") from seventeen limited
partnerships and limited liability companies. Eight of the Portfolio Properties
(the "Vinings Properties") were purchased through subsidiaries of Vinings
Investment Properties, L.P. (the "Operating Partnership"). The remaining
Portfolio Properties (the "Joint Venture Properties") were purchased through a
joint venture in which Vinings has a 20% interest (the "Joint Venture"). For
additional details regarding the description of this acquisition and the
Portfolio Properties, see Item 2 of the Current Report on Form 8-K filed with
the Securities and Exchange Commission on May 7, 1999.
ITEM 5. OTHER EVENTS
On April 29, 1999, in a private transaction, the Operating Partnership issued
1,958,823 Series A Units of the Partnership (the "Preferred Units"), for an
aggregate purchase price of $8,325,000 pursuant to a Securities Purchase
Agreement (the "Purchase Agreement").
On June 7, 1999, in a private transaction, an additional 29,412 Preferred Units
were issued for $125,000 pursuant to the Purchase Agreement for a total of
1,988,235 Preferred Units at an aggregate purchase price of $8,450,000.
The Operating Partnership used the proceeds of such sales of Preferred Units to
pay the cash consideration for the Operating Partnership's interests in the
Joint Venture and in the property partnerships that acquired the Vinings
Properties. For additional details regarding the terms of the Purchase
Agreement, see Item 5 of the Current Report on Form 8-K filed with the
Securities and Exchange Commission on May 7, 1999.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
(a) Financial Statements of Business Acquired
The financial statements required by Item 7(a) relating to the acquisition
of the Vinings Properties and the Joint Venture Properties are attached
hereto as Exhibit 99.1 and 99.2, respectively, and incorporated herein by
reference.
(b) Pro Forma Financial Information
The unaudited pro forma financial information required by Item 7(b)
relating to the acquisition of the Portfolio Properties is attached hereto
as Exhibit 99.3 and incorporated herein by reference.
<PAGE>
(c) Exhibits
Exhibit
No. Description
- --------- ----------------------------------------------------------------------
99.1 Combined Statements of Revenues Over Specific Operating Expenses for
the Vinings Properties for the Period from January 1, 1999 to March
31, 1999 (unaudited) and the year ended December 31, 1998.
99.2 Combined Statements of Revenues Over Specific Operating Expenses for
the Joint Venture Properties for the Period from January 1, 1999 to
March 31, 1999 (unaudited) and the year ended December 31, 1998.
99.3 Unaudited Pro Forma Consolidated Financial Statements
10.1 Vinings/CMS Master Partnership, L.P., Agreement of Limited Partnership
10.2 Sixth Amendment, dated as of April 29, 1999, to the Amended and
Restated Agreement of Limited Partnership of Vinings Investment
Properties, L.P. (incorporated by reference to Exhibit 4.1 to the
Registrant's current report on Form 8-K filed with the Securities and
Exchange Commission on May 7, 1999).
10.3 Securities Purchase Agreement, dated as of April 29, 1999, Relating to
Series A Convertible Preferred Partnership Units of Vinings Investment
Properties, L.P., by and among Vinings Investment Properties Trust,
Vinings Investment Properties, L.P. and the Purchasers named therein
(incorporated by reference to Exhibit 10.1 to the Registrant's current
report on Form 8-K filed with the Securities and Exchange Commission
on May 7, 1999).
10.4 Form of Registration Rights and Lock Up Agreement, dated as of April
29, 1999 (incorporated by reference to Exhibit 10.2 to the
Registrant's current report on Form 8-K filed with the Securities and
Exchange Commission on May 7, 1999).
23.1 Consent of Arthur Andersen LLP - Independent Public Accountants
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
VININGS INVESTMENT PROPERTIES TRUST
Date: July 15, 1999 By: /s/ Stephanie A. Reed
---------------------
Stephanie A. Reed
Vice President and Treasurer
<PAGE>
INDEX TO EXHIBITS
Exhibit
No. Description
- --------- ----------------------------------------------------------------------
99.1 Combined Statements of Revenues Over Specific Operating Expenses for
the Vinings Properties for the Period from January 1, 1999 to March
31, 1999 (unaudited) and the year ended December 31, 1998.
99.2 Combined Statements of Revenues Over Specific Operating Expenses for
the Joint Venture Properties for the Period from January 1, 1999 to
March 31, 1999 (unaudited) and the year ended December 31, 1998.
99.3 Unaudited Pro Forma Consolidated Financial Statements
10.1 Vinings/CMS Master Partnership, L.P., Agreement of Limited Partnership
10.2 Sixth Amendment, dated as of April 29, 1999, to the Amended and
Restated Agreement of Limited Partnership of Vinings Investment
Properties, L.P. (incorporated by reference to Exhibit 4.1 to the
Registrant's current report on Form 8-K filed with the Securities and
Exchange Commission on May 7, 1999).
10.3 Securities Purchase Agreement, dated as of April 29, 1999, Relating to
Series A Convertible Preferred Partnership Units of Vinings Investment
Properties, L.P., by and among Vinings Investment Properties Trust,
Vinings Investment Properties, L.P. and the Purchasers named therein
(incorporated by reference to Exhibit 10.1 to the Registrant's current
report on Form 8-K filed with the Securities and Exchange Commission
on May 7, 1999).
10.4 Form of Registration Rights and Lock Up Agreement, dated as of April
29, 1999 (incorporated by reference to Exhibit 10.2 to the
Registrant's current report on Form 8-K filed with the Securities and
Exchange Commission on May 7, 1999).
23.1 Consent of Arthur Andersen LLP - Independent Public Accountants
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To Vinings Investment Properties Trust:
We have audited the accompanying combined statement of revenues over specific
operating expenses of the Vinings Properties (see Note 1) for the year ended
December 31, 1998. This combined financial statement is the responsibility of
management. Our responsibility is to express an opinion on this combined
financial statement 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 combined statement of revenues
over specific operating expenses is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the combined statement of revenues over specific operating
expenses. 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.
As described in Note 1, this combined financial statement excludes certain
expenses that would not be comparable with those resulting from the operations
of the Vinings Properties after acquisition by the Trust. The accompanying
combined statement of revenues over specific operating expenses was prepared
for the purpose of complying with the rules and regulations of the Securities
and Exchange Commission and is not intended to be a complete presentation of
the Vinings Properties' revenues and expenses.
In our opinion, the combined statement of revenues over specific operating
expenses presents fairly, in all material respects, the revenues over specific
operating expenses of the Vinings Properties for the year ended December 31,
1998 in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Atlanta, Georgia
June 30, 1999
<PAGE>
VININGS PROPERTIES
COMBINED STATEMENTS OF REVENUES OVER
SPECIFIC OPERATING EXPENSES
-------------------------------------
For the Period
From
January 1, 1999 to Year Ended
March 31, 1999 December 31,
(Unaudited) 1998
------------------- ------------
REVENUES:
Rental revenues $ 1,772,002 $7,026,704
Other property revenues 91,250 432,968
----------------- ------------
Total property revenues 1,863,252 7,459,672
----------------- ------------
SPECIFIC OPERATING EXPENSES:
Property operating and maintenance 661,773 2,672,206
Interest expense 957,564 3,853,806
----------------- ------------
Total specific operating expenses 1,619,337 6,526,012
----------------- ------------
REVENUES OVER SPECIFIC OPERATING EXPENSES $ 243,915 $ 933,660
================= ============
See accompanying notes to financial statements.
<PAGE>
VININGS PROPERTIES
NOTES TO COMBINED STATEMENTS OF REVENUES
OVER SPECIFIC OPERATING EXPENSES
FOR THE PERIOD FROM JANUARY 1, 1999 TO
MARCH 31, 1999 (UNAUDITED) AND
FOR THE YEAR ENDED DECEMBER 31, 1998
---------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Description of Real Estate Property Acquired
--------------------------------------------
On May 1, 1999, Vinings Investment Properties Trust (the "Trust" or
"Vinings"), through its subsidiaries, completed the acquisition of thirteen
multifamily communities (collectively, the "Portfolio Properties") from
seventeen limited partnerships and limited liability companies. Eight of
the Portfolio Properties (the "Vinings Properties") were purchased through
subsidiary partnerships of Vinings Investment Properties, L.P. (the
"Operating Partnership"), a majority-owned subsidiary of the Trust. The
remaining Portfolio Properties (the "Joint Venture Properties") were
purchased through a joint venture in which the Operating Partnership has a
20% interest (the "Joint Venture").
Properties Purchased through Operating Partnership
--------------------------------------------------
The Vinings Properties, totaling 1,064 units, were purchased by eight
individual partnerships in each of which Vinings Holdings, Inc., a wholly
owned subsidiary of the Trust, owns a .1% general partnership interest and
the Operating Partnership owns a 99.9% limited partnership interest. The
aggregate purchase price for the Vinings Properties was $47,665,396
(excluding closing costs), which included the assumption of debt of
approximately $41,693,000 and the balance being paid in cash. A total of
approximately $749,200 in escrows held by the mortgagees was also
purchased.
Properties Purchased Through Joint Venture
------------------------------------------
The Joint Venture Properties, totaling 968 units, were purchased by nine
individual partnerships in each of which Vinings Holdings, Inc. owns a .1%
general partnership interest and Vinings/CMS Master Partnership, L.P. (the
"Joint Venture") owns a 99.9% limited partnership interest. The Operating
Partnership is the general partner and a 19.98% limited partner in the
Joint Venture, for which it paid $1,705,000. The remaining limited
partnership interests in the Joint Venture are held by an unaffiliated
third party. The Joint Venture was formed on March 22, 1999, primarily to
acquire the limited partner interest in limited partnerships that acquire,
operate, manage, hold and sell certain real property, specifically the
Joint Venture Properties. The aggregate purchase price paid by the property
partnerships for the Joint Venture Properties was $46,634,603 (excluding
closing costs), which included the assumption of approximately $39,265,000
of debt and the balance being paid in cash. A total of approximately
$716,400 in escrows held by the mortgagees was also purchased.
<PAGE>
Use of Estimates
----------------
The preparation of the accompanying combined statements of revenues over
specific operating expenses in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
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.
Basis of Presentation
---------------------
The accompanying combined statements of revenues over specific operating
expenses include the combined operations of the Vinings Properties, which
were owned by parties not related to the Trust prior to their acquisition.
The accompanying combined statements of revenues over specific operating
expenses have been prepared in accordance with the applicable rules and
regulations of the Securities and Exchange Commission for real estate
properties acquired. Accordingly, the statements exclude certain historical
expenses not comparable to the operations after acquisition by the Trust,
such as management fees, depreciation and amortization.
2. RELATED PARTY TRANSACTIONS
In connection with the acquisition of the Vinings Properties, MFI Realty,
Inc., an affiliate of the officers, who are also trustees of the Trust,
received a fee totaling $167,103, which was paid by Vinings. In addition,
the Vinings Properties will be managed by an affiliate of the officers of
the trust for a percentage of gross revenues.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
----------------------------------------
To Vinings Investment Properties Trust:
We have audited the accompanying combined statement of revenues over specific
operating expenses of the Joint Venture Properties (see Note 1) for the year
ended December 31, 1998. This combined financial statement is the
responsibility of management. Our responsibility is to express an opinion on
this combined financial statement 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 combined statement of revenues
over specific operating expenses is free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the combined statement of revenues over specific operating
expenses. 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.
As described in Note 1, this combined financial statement excludes certain
expenses that would not be comparable with those resulting from the operations
of the Joint Venture Properties after acquisition by the Trust. The
accompanying combined statement of revenues over specific operating expenses
was prepared for the purpose of complying with the rules and regulations of
the Securities and Exchange Commission and is not intended to be a complete
presentation of the Joint Venture Properties' revenues and expenses.
In our opinion, the combined statement of revenues over specific operating
expenses presents fairly, in all material respects, the revenues over specific
operating expenses of the Joint Venture Properties for the year ended December
31, 1998 in conformity with generally accepted accounting principles.
/s/ Arthur Andersen LLP
Atlanta, Georgia
June 30, 1999
<PAGE>
JOINT VENTURE PROPERTIES
COMBINED STATEMENTS OF REVENUES OVER
SPECIFIC OPERATING EXPENSES
------------------------------------
For the Period
From
January 1, 1999 to Year Ended
March 31, 1999 December 31,
(Unaudited) 1998
------------------ ------------
REVENUES:
Rental revenues $ 1,668,069 $6,708,599
Other property revenues 75,012 258,939
---------------- ------------
Total property revenues 1,758,081 6,967,538
---------------- ------------
SPECIFIC OPERATING EXPENSES:
Property operating and maintenance 650,981 2,738,818
Interest expense 866,143 3,485,860
---------------- ------------
Total specific operating expenses 1,517,124 6,224,678
---------------- ------------
REVENUES OVER SPECIFIC OPERATING EXPENSES $ 240,957 $ 742,860
================ ============
See accompanying notes to financial statements.
<PAGE>
JOINT VENTURE PROPERTIES
NOTES TO COMBINED STATEMENTS OF REVENUES
OVER SPECIFIC OPERATING EXPENSES
FOR THE PERIOD FROM JANUARY 1, 1999 TO
MARCH 31, 1999 (UNAUDITED) AND
FOR THE YEAR ENDED DECEMBER 31, 1998
----------------------------------------
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
Description of Real Estate Property Acquired
--------------------------------------------
On May 1, 1999, Vinings Investment Properties Trust (the "Trust" or
"Vinings"), through its subsidiaries, completed the acquisition of thirteen
multifamily communities (collectively, the "Portfolio Properties") from
seventeen limited partnerships and limited liability companies. Eight of
the Portfolio Properties (the "Vinings Properties") were purchased through
subsidiary partnerships of Vinings Investment Properties, L.P. (the
"Operating Partnership"), a majority-owned subsidiary of the Trust. The
remaining Portfolio Properties (the "Joint Venture Properties") were
purchased through a joint venture in which the Operating Partnership has a
20% interest (the "Joint Venture").
Properties Purchased through Operating Partnership
--------------------------------------------------
The Vinings Properties, totaling 1,064 units, were purchased by eight
individual partnerships in each of which Vinings Holdings, Inc., a wholly
owned subsidiary of the Trust, owns a .1% general partnership interest and
the Operating Partnership owns a 99.9% limited partnership interest. The
aggregate purchase price for the Vinings Properties was $47,665,396
(excluding closing costs), which included the assumption of debt of
approximately $41,693,000 and the balance being paid in cash. A total of
approximately $749,200 in escrows held by the mortgagees was also
purchased.
Properties Purchased Through Joint Venture
------------------------------------------
The Joint Venture Properties, totaling 968 units, were purchased by nine
individual partnerships in each of which Vinings Holdings, Inc. owns a .1%
general partnership interest and Vinings/CMS Master Partnership, L.P. (the
"Joint Venture") owns a 99.9% limited partnership interest. The Operating
Partnership is the general partner and a 19.98% limited partner in the
Joint Venture, for which it paid $1,705,000. The remaining limited
partnership interests in the Joint Venture are held by an unaffiliated
third party. The Joint Venture was formed on March 22, 1999, primarily to
acquire the limited partner interest in limited partnerships that acquire,
operate, manage, hold and sell certain real property, specifically the
Joint Venture Properties. The aggregate purchase price paid by the property
partnerships for the Joint Venture Properties was $46,634,603 (excluding
closing costs), which included the assumption of approximately $39,265,000
of debt and the balance being paid in cash. A total of approximately
$716,400 in escrows held by the mortgagees was also purchased.
<PAGE>
Use of Estimates
----------------
The preparation of the accompanying combined statements of revenues over
specific operating expenses in accordance with generally accepted
accounting principles requires management to make estimates and assumptions
that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those estimates.
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.
Basis of Presentation
---------------------
The accompanying combined statements of revenues over specific operating
expenses include the combined operations of the Joint Venture Properties,
which were owned by entities that are not related to the Joint Venture or
the Trust prior to their acquisition.
The accompanying combined statements of revenues over specific operating
expenses have been prepared in accordance with the applicable rules and
regulations of the Securities and Exchange Commission for real estate
properties acquired. Accordingly, the statements exclude certain historical
expenses not comparable to the operations after acquisition by the Joint
Venture, such as management fees, depreciation and amortization.
2. RELATED PARTY TRANSACTIONS
In connection with the acquisition of the Joint Venture Properties, MFI
Realty, Inc., an affiliate of the officers, who are also trustees of the
Trust, received a fee totaling $233,173, which was paid by the Joint
Venture. In addition, the Joint Venture Properties will be managed by an
affiliate of the officers of the trust for a percentage of gross revenues.
<PAGE>
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
------------------------------------------------
The unaudited consolidated statements of operations are presented as if the
Trust acquired the Vinings Properties and the Trust's interest in the Joint
Venture as of January 1, 1998. The unaudited pro forma consolidated statements
of operations of the Trust for the three months ended March 31, 1999 and for the
year ended December 31, 1998 include the historical revenues and specific
operating expenses of the Vinings Properties, and the Trust's 20% interest in
the historical revenues and specific operating expenses of the Joint Venture
Properties under the equity method of accounting. In management's opinion, all
adjustments necessary to present fairly the effects of the acquisition of the
Vinings Properties and the Trust's interest in the Joint Venture have been made.
The unaudited consolidated statements of operations of the Trust should be read
in conjunction with the unaudited pro forma consolidated balance sheet of the
Trust included herein, the consolidated financial statements and accompanying
notes thereto of the Trust included in its Annual Report on Form 10-K for the
year ended December 31, 1998, and the unaudited consolidated financial
statements and accompanying notes thereto of the Trust included in its March 31,
1999 Quarterly Report on Form 10-Q.
The unaudited pro forma statements of operations are not necessarily indicative
of what the actual results of operations of the Trust would have been assuming
the Trust had acquired the Vinings Properties and the Trust's interest in the
Joint Venture as of January 1, 1998, nor do they purport to represent the
results of operations for future periods.
<PAGE>
<TABLE>
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE THREE MONTHS ENDED MARCH 31, 1999
(UNAUDITED)
-----------------------------------------------
<CAPTION>
Pro Forma
Historical Acquisition
(A) Adjustments Pro Forma
----------- ----------------- --------------
REVENUES
<S> <C> <C> <C>
Rental revenues $ 998,389 $ 1,772,002 (B) $2,770,391
Other property revenues 40,374 91,250 (B) 131,624
Other income 12,000 - 12,000
----------- --------------- -----------
1,050,763 1,863,252 2,914,015
----------- --------------- -----------
EXPENSES
Property operating and maintenance 397,549 661,773 (B) 1,124,536
65,214 (C)
Depreciation and amortization 166,557 384,146 (D) 550,703
Amortization of deferred financing costs 7,726 - 7,726
Interest expense 332,079 957,564 (E) 1,289,643
General and administrative 143,537 - 143,537
----------- --------------- -----------
1,047,448 2,068,697 3,116,145
----------- --------------- -----------
Income (loss) before equity in loss of unconsolidated
joint venture and minority interests 3,315 (205,445) (202,130)
Equity in loss of unconsolidated joint venture - (41,009)(F) (41,009)
----------- --------------- -----------
Income (loss) before minority interests 3,315 (246,454) (243,139)
Minority interest in Operating Partnership:
Preferred partnership interests - (232,375)(G) (232,375)
Common partnership interests (599) 86,473 (H) 85,874
---------- --------------- -----------
Net income (loss) $ 2,716 $ (392,356) $ (389,640)
=========== =============== ===========
NET INCOME PER SHARE - BASIC $ 0.00 $ (0.35)
=========== ===========
NET INCOME PER SHARE - DILUTED $ 0.00 $ (0.35)
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC 1,100,505 1,100,505
=========== ===========
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED (I) 1,343,051 1,343,051
=========== ===========
<FN>
See accompanying notes to financial statements.
</FN>
</TABLE>
<TABLE>
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
PRO FORMA CONSOLIDATED STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
(UNAUDITED)
----------------------------------------------
<CAPTION>
Pro Forma
Historical Acquisition
(A) Adjustments Pro Forma
------------- --------------- ------------
REVENUES
<S> <C> <C> <C>
Rental revenues $3,946,828 $ 7,026,704 (B) $10,973,532
Other property revenues 153,092 425,803 (B) 578,895
Interest income 1,519 7,165 (B) 8,684
Other income 564 - 564
------------- --------------- ------------
4,102,003 7,459,672 11,561,675
------------- --------------- ------------
EXPENSES
Property operating and maintenance 1,652,207 2,672,206 (B) 4,585,502
261,089 (C)
Depreciation and amortization 647,760 1,536,583 (D) 2,184,343
Amortization of deferred financing costs 30,903 - 30,903
Interest expense 1,329,277 3,853,806 (E) 5,183,083
General and administrative 598,873 - 598,873
Unusual item, net (260,910) - (260,910)
------------- --------------- ------------
3,998,110 8,323,684 12,321,794
------------- --------------- ------------
Income (loss) before equity in loss of unconsolidated
joint venture and minority interests 103,893 (864,012) (760,119)
Equity in loss of unconsolidated joint venture - (206,923)(F) (206,923)
------------- --------------- ------------
Income (loss) before minority interests 103,893 (1,070,935) (967,042)
Minority interests in Operating Partnership:
Preferred partnership interests - (1,347,029)(G) (1,347,029)
Common partnership interests (18,900) 439,879 (H) 420,979
------------- --------------- ------------
Net income (loss) $ 84,993 $(1,978,085) $(1,893,092)
============= =============== ============
NET INCOME PER SHARE - BASIC $0.08 $(1.74)
============= ============
NET INCOME PER SHARE - DILUTED $0.08 $(1.74)
============= ============
WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC 1,090,701 1,090,701
============= ============
WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED (I) 1,336,391 1,336,391
============= ============
<FN>
See accompanying notes to pro forma financial statements.
</FN>
</TABLE>
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
NOTES AND ASSUMPTIONS TO UNAUDITED PRO FORMA
CONSOLIDATED STATEMENTS OF OPERATIONS
----------------------------------------------
(A) Represents the Trust's unaudited historical consolidated statement of
operations contained in its Quarterly Report on Form 10-Q for the three
months ended March 31, 1999 and the Trust's historical consolidated
statement of operations contained in its Annual Report on Form 10-K for the
year ended December 31, 1998, as applicable.
(B) Represents the pro forma adjustments necessary to reflect the historical
rental revenues, other property revenues, and property operating and
maintenance expenses for the Vinings Properties for the three months ended
March 31, 1999 and for the year ended December 31, 1998, respectively, as
derived from the statements of revenues over specific operating expenses
included herein.
(C) Represents the pro forma adjustments necessary to reflect management fees
for the three months ended March 31, 1999 and for the year ended December
31, 1998, respectively, calculated at 3.5% of gross revenues, which will be
paid to an affiliate of the officers of the Trust.
(D) Represents the pro forma adjustments necessary to reflect depreciation
expense for the three months ended March 31, 1999 and for the year ended
December 31, 1998, respectively, calculated based on the costs associated
with the acquisition of the Vinings Properties using the straight-line
method of depreciation over a 40-year life for buildings and improvements
and a 5-year life for furniture, fixtures and equipment.
(E) Represents the pro forma adjustments necessary to reflect historical
interest expense, including the FHA insurance premium associated with the
mortgages, which were assumed at closing for the three months ended March
31, 1999 and for the year ended December 31, 1998, respectively, as derived
from the statements of revenues over specific operating expenses included
herein.
(F) Represents the pro forma adjustments necessary to reflect the Trust's 20%
interest in the historical rental revenues, other property revenues,
property operating and maintenance expenses, and interest expense for the
Joint Venture Properties for the three months ended March 31, 1999 and for
the year ended December 31, 1998, respectively, as derived from the
statements of revenues over specific operating expenses included herein,
adjusted for management fees calculated at 4.25% of gross revenues, which
will be paid to an affiliate of the officers of the Trust, and for
depreciation expense calculated based on the costs associated with the
acquisition of the Joint Venture Properties using the straight-line method
of depreciation over a 40-year life for buildings and improvements and a
5-year life for furniture, fixtures and equipment. The Trust accounts for
its investment in the Joint Venture using the equity method of accounting
as follows:
<PAGE>
For the Period
From
January 1, 1999 to Year Ended
March 31, 1999 December 31,
(Unaudited) 1998
---------------- --------------
Revenues over specific operating expenses $ 240,957 $ 742,860
Less pro forma adjustments for:
Management fees 74,718 296,121
Depreciation 371,283 1,481,353
-------------- --------------
Pro forma revenues over specific
operating expenses (205,044) (1,034,614)
Trust's interest in Joint Venture 20% 20%
-------------- --------------
Pro forma equity in loss of
unconsolidated Joint Venture $ (41,009) $ (206,923)
============== ==============
(G) Represents the accrued preferred 11% return on the preferred partnership
interests for the three months ended March 31, 1999 and for the year ended
December 31, 1998, respectively, and the accrued liquidation preference of
$.21 per preferred partnership unit for the year ended December 31, 1998.
(H) Represents the 18% minority common partnership interests in income before
minority interest and after the accrued preferred return.
(I) The diluted weighted average shares outstanding do not include 1,988,235
preferred partnership units that are convertible into common shares of the
Trust on a one-for-one basis as the impact of these preferred partnership
units was antidilutive.
<PAGE>
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
(UNAUDITED)
------------------------------------
The unaudited pro forma consolidated balance sheet is presented as if the Trust
acquired the Vinings Properties and the Trust's interest in the Joint Venture as
of March 31, 1999. The unaudited pro forma consolidated balance sheet is not
necessarily indicative of what the actual financial position of the Trust would
have been at March 31, 1999, nor does it purport to represent the future
financial position of the Trust.
The unaudited consolidated balance sheet should be read in conjunction with the
unaudited pro forma consolidated statements of operations of the Trust included
herein, the consolidated financial statements and accompanying notes thereto of
the Trust included in its Annual Report on Form 10-K for the year ended December
31, 1998, and the unaudited consolidated financial statements and accompanying
notes thereto of the Trust included in its March 31, 1999 Quarterly Report on
Form 10-Q.
<PAGE>
<TABLE>
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
PRO FORMA CONSOLIDATED BALANCE SHEET
AS OF MARCH 31, 1999
(UNAUDITED)
-------------------------------------
<CAPTION>
Pro Forma
Historical Acquisition
(A) Adjustments Pro Forma
------------ --------------- ------------
ASSETS
<S> <C> <C> <C>
Real estate assets:
Land $ 2,884,500 $ 5,363,400 (B) $ 8,247,900
Buildings and improvements 15,519,694 40,008,128 (B) 55,527,822
Furniture, fixtures & equipment 1,034,124 2,687,292 (B) 3,721,416
Less: accumulated depreciation (1,824,545) - (1,824,545)
------------ --------------- ------------
Net real estate assets 17,613,773 48,058,820 65,672,593
Investment in unconsolidated partnership - 1,705,000 (C) 1,705,000
Cash and cash equivalents 243,978 - 243,978
Restricted cash 472,860 1,025,471 (B) 1,498,331
Receivables and other assets 688,988 85,494 (B) 149,118
(625,364)(B)
Deferred financing costs, less accumulated amortization
of $84,984 at March 31, 1999 131,339 - 131,339
Deferred leasing costs, less accumulated amortization of
$39,552 at March 31, 1999 57,354 - 57,354
------------ --------------- ------------
Total Assets $19,208,292 $50,249,421 $69,457,713
============ =============== ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Mortgage notes payable $13,602,078 $41,692,503 (B) $55,294,581
Line of credit 2,000,000 - 2,000,000
Accounts payable and accrued liabilities 641,038 106,918 (B) 747,956
------------ --------------- ------------
Total Liabilities 16,243,116 41,799,421 58,042,537
------------ --------------- ------------
Minority interest in Operating Partnership:
Preferred partnership interest - 8,450,000 (D) 8,450,000
Common partnership interest 535,491 - 535,491
------------ --------------- ------------
Total minority interest 535,491 8,450,000 8,985,491
Shareholders' Equity:
Shares of beneficial interest, without par value 19,502,908 - 19,502,908
Cumulative earnings 37,305,306 - 37,305,306
Cumulative distributions (54,378,529) - (54,378,529)
------------ --------------- ------------
Total Shareholders' Equity 2,429,685 - 2,429,685
------------ --------------- ------------
Total Liabilities and Shareholders' Equity $19,208,292 $50,249,421 $69,457,713
============ =============== ============
<FN>
See accompanying notes to pro forma financial statements.
</FN>
</TABLE>
VININGS INVESTMENT PROPERTIES TRUST
AND SUBSIDIARIES
NOTES AND ASSUMPTIONS TO UNAUDITED PRO FORMA BALANCE SHEET
----------------------------------------------------------
(A) Represents the Trust's unaudited historical consolidated balance sheet
contained in its Quarterly Report on Form 10-Q for the three months ended
March 31, 1999.
(B) Represents the proforma adjustments necessary to reflect the aggregate
acquisition costs of the Vinings Properties, the assumption of related
mortgage indebtedness and related liabilities and the acquisition of the
tax, insurance and replacement reserve escrows and security deposit cash
accounts.
(C) Represents the proforma adjustment necessary to reflect the Trust's
investment in the Joint Venture.
(D) Represents the proforma adjustment necessary to reflect the issuance of
1,988,235 preferred operating partnership units in Vinings Investment
Properties, L.P. in connection with the acquisition of the Vinings
Properties and the Trust's investment in the Joint Venture, which are
convertible into common shares of the Trust on a one-for-one basis.
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the incorporation of our
reports included in this Form 8-K, into the Company's previously filed
Registration Statement on Form S-8 (File No. 333-76487).
/s/ Arthur Andersen LLP
Atlanta, Georgia
June 30, 1999
Vinings/CMS Master Partnership, L.P.
Agreement of Limited Partnership
This Agreement is made as of April 27, 1999, by and among Vinings
Investment Properties, L.P. ("Vinings"), a Delaware limited partnership, as
general partner (the "General Partner"), and Vinings, CMS Multifamily II
Partners, a Delaware general partnership, and CMS Diversified Partners, L.P., a
Delaware limited partnership (with CMS Multifamily II Partners "CMS"), as
limited partners (collectively the "Limited Partners"). The General Partner and
the Limited Partners are hereinafter sometimes referred to individually as a
"Partner" and collectively as the "Partners."
WITNESSETH THAT
WHEREAS, the Partners have formed a partnership by filing a Certificate of
Limited Partnership under the Uniform Limited Partnership Act of the State of
Delaware on March 22, 1999, to acquire the limited partner interest in a number
of limited partnerships (the "Property Partnerships") which will acquire,
operate, manage, hold and sell certain real property
NOW, THEREFORE, in consideration of the mutual promises made herein and
other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the parties hereto intending to be legally bound agree as
follows:
ARTICLE 1.
DEFINED TERMS
1.01. "Accountant" or "Partnership Accountants" means such firm of independent
certified public accountants as may be engaged from time to time by the General
Partner, which firm shall be approved by CMS.
1.02. "Acquisition Fee" means the fee payable by the Partnership pursuant to
Section 3.04 hereof.
1.03. "Act" means the Delaware Revised Uniform Limited Partnership Act, as from
time to time amended.
1.04. "Adjusted Capital Account Deficit" means, with respect to any Partner, the
deficit balance, if any, in such Partner's Capital Account as of the end of the
relevant Fiscal Year, after giving effect to the following adjustments.
(a) Credit to such Capital Account any amounts which such Partner is
obligated, or is treated as obligated, to restore with respect to any
deficit balance in its Capital Account by reason of Regulations
Section 1.704-1(b)(2)(ii)(b)(3) and 1.704-1(b)(2)(ii)(c)(3) or is
deemed to be obligated to restore to its Capital Account pursuant to
the penultimate sentence of Regulations Sections 1.704.2(g)(1) and
1.704-2(i)(5); and
(b) Debit to such Capital Account the items described in Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), (5) and (6). The foregoing
definition of Adjusted Capital Account Deficit is intended to comply
with the provisions of Section 1.704-1(b)(2)(ii)(d) of the Regulations
and shall be interpreted consistently therewith.
1.05. "Adjusted Capital Contributions" means, as of any day, a Partner's Capital
Contributions reduced by the amount of cash and the Gross Asset Value of any
Partnership Property distributed to such Partner pursuant to Sections 7.1, 7.2
and 13.2(d), and increased by the amount of Partnership liabilities which, in
connection with distributions pursuant to such Sections, are assumed by the
Partner or are secured by any Partnership Property distributed to such Partner.
In the event any Partner transfers all or any portion of his or her interest in
accordance with the terms of this Agreement, his or her transferee shall succeed
to the Adjusted Capital Contributions of the transferor to the extent it relates
to the transferred interest.
1.06. "Affiliate" means:
(a) any person directly or indirectly controlling, controlled by or under
common control with, another person;
(b) any person owning or controlling 10% or more of the outstanding voting
securities of such other person; and
(c) any officer, manager, director, partner or trustee of such person. The
term "person" means an individual, corporation, partnership, limited
liability company, association, joint stock company, trust or
unincorporated organization.
1.07. "Agreement" means this Amended and Restated Limited Partnership Agreement
as it may be amended from time to time.
1.08. "Bankruptcy" means with respect to any Partner:
(a) the filing by the Partner in any court, pursuant to any statute of the
United States of any state, of a petition in bankruptcy or insolvency,
or its filing for reorganization or for the appointment of a receiver
or trustee of all (or a material portion of) the Partner's Property;
(b) an assignment for the benefit of creditors;
(c) an admission by the Partner in writing of its inability to pay its
debts as they fall due or consenting to or acquiescing in the
appointment of a trustee, receiver liquidator of any material portion
of its Property;
(d) a filing against the Partner in any court, pursuant to any statute of
the United States or of any state, of a petition in bankruptcy,
insolvency, reorganization, or for the appointment of a receiver or a
trustee of all (or material portion of) the Partner's Property, and
within ninety (90) days after the commencement of any such proceeding
against the Partners such petition shall not have been dismissed (or
satisfactory evidence that such Partner is diligently contesting such
petition shall not have been received by the other Partners). In
addition, if the whole or any portion of the Interest of any Partner
is subject to levy or attachment, and such levy or attachment, and
such levy or attachment is not released or discharged within sixty
(60) days, such Partner shall be deemed "bankrupt" for purposes of
this Agreement.
1.09. "Capital Account" means the Capital Account of each of the Partners
determined and adjusted from time to time in accordance with the rules of
Regulations Section 1.704-1(b)(2)(iv), as the same may be amended or revised. In
the event that the treatment called for in such Regulations is inconsistent with
the provisions of this Agreement, then the provisions of this Agreement shall
control.
1.10. "Capital Contribution" means, with respect to any partner, the amount of
money and the initial Gross Asset Value of any property (other than money)
contributed to the Partnership with respect to the interest in the Partnership
held by such Partner.
1.11. "Cash Flow" means, with respect to any Fiscal Year, or portion thereof,
the total annual cash gross receipts of the Partnership, excluding distributions
received from the Property Partnerships relating to proceeds from the sale,
refinance, exchange, condemnation (or similar eminent domain taking), casualty
(excluding any business interruption insurance proceeds), or other disposition
of all or substantially all of any Property, minus all cash expenditures of the
Partnership including, without limitation, all Partnership operating expenses,
all amounts owed to a Partner or an Affiliate of a Partner with respect to fees
described in the Agreement, all amounts paid either to a Partner or to a third
party for outside legal and accounting costs, accounting, duplicating or
bookkeeping services, travel expenses properly chargeable to the Partnership,
telephone and other expenses incurred by the Partnership, and minus any cash set
aside by the General Partner to provide reasonable reserves for working capital.
For purposes hereof, the working capital reserve shall be equal to $50,000 which
will be withheld from the first semiannual distribution received from the
Property. Such reserve will be replenished from future receipts of distributions
from Property Partnerships and will be maintained by the Partnership at all
times until such time as the Partners shall mutually agree to a different
amount. Cash Flow shall not be reduced by expenditures included in or reserves
funded from Net Proceeds of a Sale or Refinance Transaction. No item set forth
herein shall be accounted for more than once.
1.12. "Closing" means the settlement of the transaction pursuant to which the
Property Partnerships take title to the Properties and the Capital Contributions
are funded to the Partnership.
1.13. "Closing Costs" shall mean title insurance premiums and costs, transfer
taxes, survey costs and other customary real estate closing costs (other than
attorneys', accountants' and other advisory and consulting fees and brokerage,
finders' and other similar fees or commissions).
1.14. "Code" means the Internal Revenue Code of 1986, as amended from time to
time.
1.15. "Dissolution Event" means the happening of any of the following events
which shall cause a dissolution of the Partnership:
(a) The expiration of the term of the Partnership under 2.05 hereof;
(b) The death, Bankruptcy, withdrawal or Dissolution of the General
Partner, unless, within sixty (60) days after such event, a majority
in Percentage Interest of the Partners elects in writing to continue
the business of the Partnership, in which event the Partnership shall
be continued;
(c) The sale of the last Property and the winding up and dissolution of
the last Property Partnership;
(d) The bankruptcy of the Partnership (applying the same definition as the
Bankruptcy of a Partner); or
(e) A determination by the Partners that the Partnership should be
dissolved.
1.16. "Dissolution" means:
(a) In the case of a corporate Partner, the earlier of the adoption of a
plan of liquidation by such Partner or the effective date of
dissolution in accordance with applicable statutory law; and
(b) In the case of a partnership or limited liability company Partner, the
earlier of the date of dissolution and termination of such partnership
or limited liability company in accordance with the provisions of the
governing partnership or operating agreement or applicable statutory
law, or the date on which such partnership or limited liability
company disposes of all or substantially all of its assets.
1.17. "Economic Risk of Loss" means economic risk of loss within the meaning of
Regulations Section 1.752-2.
1.18. "Exempt Income" means any income and gain of the Partnership that is
exempt from federal income tax.
1.19. "Fiscal Year" means the fiscal year of the Partnership, which shall be the
calendar year.
1.20. "GAAP" means generally accepted accounting principles consistently
applied.
1.21. "Gross Asset Value" means with respect to any asset, the asset's adjusted
basis for federal income tax purposes, except as follows:
(a) The initial Gross Asset Value of any asset contributed by a Partner to
the Partnership shall be the gross fair market value of such asset on
the date of contribution, as determined by the contributing Partner
and the Partnership;
(b) The Gross Asset Values of all Partnership assets shall be adjusted to
equal their respective gross fair market values (taking Code Section
7701(g) into account), as determined by the General Partner as of the
following times:
(i) 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;
(ii) the distribution by the Partnership to a Partner of more than a
de minimis amount of assets as consideration for an Interest in
the Partnership; and
(iii)the liquidation of the Partnership within the meaning of
Regulation Section 1.704-1(b)(2)(ii)(g).
(c) the Gross Asset Value of any Partnership asset distributed to any
Partner shall be the gross fair market value (taking code Section
7701(g) into account) of such asset as determined by the General
Partner on the date of distribution; and
(d) the Gross Asset Values of Partnership assets shall be increased (or
decreased) to reflect any adjustments to the adjusted basis of such
assets pursuant to Code Section 734(b) or Code Section 743(b), but
only to the extent that such adjustments are taken into account in
determining Capital Accounts pursuant to Regulations Section
1.704-1(b)(2)(iv)(m). If the Gross Asset Value of an asset has been
determined or adjusted pursuant to (a), (b) or (d) hereof, such Gross
Asset Value shall thereafter be adjusted by the Depreciation taken
into account with respect to such asset for purposes of computing
Profits and Losses.
1.22. "HUD" means the U.S. Department of Housing and Urban Development.
1.23. "Interest" means the interest of each Partner in the Partnership,
including the rights granted to each Partner under this Agreement, subject to
the responsibilities of each Partner imposed under this Agreement.
1.24. "Management Agent" means Vinings Properties, Inc., its Affiliate or any
Affiliate of the General Partner that will manage the day-to-day operations of
the Properties owned by the Property Partnerships.
1.25. "Management Agreement" means the agreement to be entered into between the
Property Partnerships and the Management Agent described in Section 3.04 hereof
pursuant to which the Management Agent will manage the day-to-day operations of
the Properties. 1.26. "Minimum Gain Attributable to a Partner Nonrecourse Debt"
means minimum gain attributable to such Partner Nonrecourse Debt, as determined
in accordance with the provisions of Regulations Section 1.704-2(i)(3).
1.27. "Net Proceeds of a Sale or Refinance Transaction" means the distribution
received from any of the Property Partnerships of proceeds from the sale,
exchange, condemnation (or similar eminent domain taking), receipt of casualty
insurance proceeds (excluding any business interruption insurance proceeds), or
any disposition, financing or refinancing of all or substantially all of the
Property owned by the Property Partnership minus all cash expenditures of the
Property Partnership incurred in connection with such disposition, financing or
refinancing (including the repayment of principal of or interest on any note or
other obligation received by the Property Partnership in connection with sales
or dispositions (other than in the ordinary course of business) of Property
Partnership property), minus all amounts paid to a Partner in satisfaction of
the principal of or interest on any Loans pursuant to Sections 5.02 and 5.03
hereof, and minus any amounts used to establish reserves, all as determined by
the General Partner.
1.28. "Nondeductible Expenditure" means an expenditure described in Code Section
705(a)(2)(B) or treated as such an expenditure under Regulations Section
1.704-2(b)(1) and Section 1.704-1(b)(2)(iv)(i).
1.29. "Nonrecourse Deductions" means the nonrecourse deductions as determined in
accordance with the provisions of Regulations Section 1.704-2(c).
1.30. "Partner(s)" means collectively the General Partner and the Limited
Partners, and such successors, assigns or additional partners as may be
admitted, from time to time, pursuant to the terms of this Agreement.
1.31. "Partner Nonrecourse Debt" means any nonrecourse debt (within the meaning
of Regulations Section 1.704-2(b)(4)) for which a Partner bears the Economic
Risk of Loss.
1.32. "Partnership" means the Partnership formed by and governed pursuant to
this Agreement, as such Partnership may from time to time be constituted and
amended.
1.33. "Partnership Minimum Gain" means partnership minimum gain as determined in
accordance with the provisions of Regulations Section 1.704-2(b)(2) and Section
1.704-2(d).
1.34. "Partnership Nonrecourse Liability" means any Partnership liability (or
portion thereof) for which no Partner bears the Economic Risk of Loss pursuant
to Regulations Section 1.752-1(a)(2).
1.35. "Percentage Interest" shall mean, with respect to each Partner, the
percentage interest set forth opposite such Partner's name in Section 5.01
hereof.
1.36. "Primary Preferred Return" means a sum equal to twelve percent (12%) per
annum, determined on the basis of 365 or 366 days, as the case may be, for the
actual number of days in the period for which the Primary Preferred Return is
being determined, cumulatively (but not compounded) to the extent not
distributed in any period pursuant to Section 7.01(a) or Section 7.02(a) hereof,
of the aggregate Adjusted Capital Contributions of the Partners from time to
time during the period to which the Primary Preferred Return relates, commencing
on the first day any limited partner is admitted to the Partnership.
1.37. "Profits and Losses" means, for each Fiscal Year or other period, an
amount equal to the Partnership's taxable income or loss for such year or
period, 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 any adjustments required under Regulations Section
1.704-1(b); provided, however, that any special allocations of income, gain,
deduction or loss pursuant to Sections 6.02 and 6.04 hereof shall not be taken
into account in computing Profits and Losses.
1.38. "Property" or "Properties" means the real estate to be acquired by any or
all of the Property Partnerships.
1.39. "Property Partnership" means those partnerships listed in Exhibit A.
1.40. "Purchase Agreement" means the agreement entered into by each of the
Property Partnerships with the seller thereof for the purchase and sale of its
respective Property.
1.41. "Regulation" 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.
1.42. "Secondary Preferred Return" means a sum equal to twenty percent (20%) per
annum, determined on the basis of a year of 365 or 366 days, as the case may be,
for the actual number of days in the period for which the Secondary Preferred
Return is being determined, cumulatively (but not compounded) to the extent not
distributed in any given period pursuant to Section 7.01(b) or Section 7.02(b)
hereof, of the Adjusted Capital Contributions of the Partners from time to time
during the period to which the Secondary Preferred Return relates, commencing on
the first date any Limited Partners have been admitted to the Partnership.
1.43. "State" means the State of Delaware.
1.44. "Tax Liquidation" means the liquidation of the Partnership within the
meaning of Regulations Section 1.704-1(b)(2)(ii)(g).
1.45. "Unreturned Capital Contribution" means the aggregate Capital Contribution
of a Partner pursuant to Section 5.01 hereof reduced by distributions to the
Partner pursuant to Article 7 hereof.
<PAGE>
ARTICLE 2.
THE PARTNERSHIP
2.01. Formation. The Partnership was formed as a limited partnership on March
22, 1999 for the purposes and upon the terms and conditions hereinafter set
forth in this Agreement.
2.02. Name. The partnership shall be conducted under the name of Vinings/CMS
Master Partnership, L.P. (the "Partnership").
2.03. Principal Office. The principal office of the Partnership is c/o the
General Partner, 3111 Paces Mill Road, Suite A-200, Atlanta, Georgia, 30339.
2.04. Purpose. The purposes of the Partnership shall be (i) to hold interests in
the Property Partnerships; (ii) to conduct any business that may be lawfully
conducted by a limited partnership organized pursuant to the Act; and (iii) in
connection with or incidental to the accomplishment of said purposes, to enter
into, perform and carry out contracts and activities of every nature and
description.
2.05. Term. The term of the Partnership shall commence upon the filing of the
Certificate of Limited Partnership with the Delaware Secretary of State, and the
Partnership shall continue until December 31, 2049, unless sooner terminated as
hereinafter provided.
2.06. Fiscal Year. The fiscal year of the Partnership shall be the calendar
year, or such other year as is required by the Code, and the Treasury
Regulations promulgated thereunder.
2.07. No Partner Benefit. The credit and assets of the Partnership shall be used
solely for the benefit of the Partnership and shall not be used to further the
personal gain of any Partner. No asset of the Partnership shall be transferred
or encumbered for or in payment of any individual obligation of a Partner.
2.08. Powers. The Partnership shall have the power granted to limited
partnerships under the Act. Notwithstanding anything to the contrary contained
herein, no partner, in its capacity as a Partner (other than the General
Partner) or otherwise, shall have the power to execute documents on behalf of or
otherwise bind the Partnership, all such power being vested in the General
Partner.
2.09. Other Business, Conflicts, Waiver.
(a) Other Business. Nothing in this Agreement shall be deemed to restrict
in any way the rights of any Partner, or any of its shareholders,
partners or Affiliates to conduct any business or activity whatsoever
without any accountability to the Partnership or to any other Partner
even if such business or activity competes with the business of the
Partnership, it being understood by each Partner that any other
Partners or their respective shareholders, partners or affiliates may
be interested, directly or indirectly, in various other businesses and
undertakings not included in the Partnership. (b) Conflicts. Each
Partner understands and acknowledges that the conduct of the business
of the Partnership may involve business dealings with such other
businesses or undertakings of a Partner or its shareholders, partners
or affiliates. The creation of the Partnership and the assumption by
each of the Partners of its duties hereunder shall be without
prejudice to their respective rights (or the rights of their
respective shareholders, partners or affiliates) to maintain such
other interests and activities and to receive and enjoy profits or
compensation therefrom, and each Partner waives any rights it might
otherwise have to share or participate in such other interest or
activities of each other Partner or its shareholders, partners or
affiliates.
2.10. Statutory Compliance.
(a) The Partnership shall exist under, be governed by and this Agreement
shall be construed in accordance with the applicable laws of the
State, including the Act. The Partnership, shall make all filings and
disclosures required by, and shall otherwise comply with, all such
laws. All real and personal Property owned by the Partnership shall be
deemed owned by the Partnership as an entity, in its name, and no
Partner shall have any ownership interest in such Property in its
individual name.
(b) The Certificate of Limited Partnership, which is hereby ratified and
approved, has been filed prior to the date hereof. The Partnership
and/or the Partners shall execute and file in the appropriate records
such other documents and instruments as may be necessary or
appropriate with respect to the formation of, and conduct of business
by, the Partnership.
ARTICLE 3.
CONTROL AND MANAGEMENT
3.01. Management and Operation.
(a) Management by the General Partner. Except as otherwise restricted
herein, and subject to Sections 3.01(b), 3.01(c) and 12.01 hereof, the
management and control of the Partnership's business shall be
exercised by the General Partner. The General Partner shall devote
such time to the affairs of the Partnership as is reasonably necessary
to manage its affairs. Except for the reimbursement of its reasonable
out-of-pocket expenses incurred on behalf of the Partnership, the
General Partner shall receive no compensation for its services and for
performing its duties as General Partner of the Partnership. Subject
to the limitations otherwise provided in this Agreement, particularly
those set forth in Section 3.01(b), the General Partner shall have
full, complete and exclusive authority, power and discretion to make
all decisions with respect to the business and affairs of the
Partnership, including but not limited to the power to:
(i) open, maintain and close bank accounts and draw checks or other
orders for the payment of money;
(ii) receive, dispose of and deal in all checks, moneys and other
personal Property of the Partnership;
(iii)employ employees, attorneys, accountants, engineers, consultants
and agents and terminate such employment;
(iv) expend the capital and revenues of the Partnership in furtherance
of the Partnership's purposes and business;
(v) enter into agreements and contracts with third parties, terminate
such agreements and institute, defend and settle litigation
arising therefrom, and give receipts, releases and discharges
with respect to all of the foregoing and any matters incident
thereto;
(vi) sell, lease, trade, exchange or otherwise dispose of all or any
portion of the Property of the Partnership;
(vii)employ, on behalf of the Partnership, such firms, persons or
corporations as the General Partner, in its sole judgment, deems
necessary or advisable for the operation of the Partnership's
business on such terms and for such compensation as it shall
determine;
(viii) maintain at the expense of the Partnership such insurance
coverage for workers' compensation, comprehensive general
liability, product liability, and property liability and any and
all other insurance necessary or appropriate to the business of
the Partnership, in such amounts and of such types as it shall
determine from time to time;
(ix) borrow money and issue evidences of indebtedness necessary,
convenient or incidental to the accomplishment of the purposes of
the Partnership, secured by a mortgage, pledge or other lien on
any of the Partnership's properties or assets;
(x) execute, in furtherance of any purpose of the Partnership, any
deed, lease, mortgage, deed of trust, mortgage note, promissory
note, bill of sale, contract or other instrument purporting to
convey or encumber the real or personal Property of the
Partnership and amendments thereof;
(xi) determine the accounting methods and conventions to be used in
the preparation of the Partnership's financial statements and tax
returns and make any and all elections under the tax laws of the
United States, the several states and other relevant
jurisdictions as to the treatment of items of income, gain, loss,
deduction and credit of the Partnership, or any other method or
procedure related to the preparation of the Partnership's
financial statements and tax returns; and
<PAGE>
(xii)engage in any kind of activity and perform and carry out
contracts of any kind necessary to, or in connection with, or
convenient or incidental to the accomplishment of the purpose of
the Partnership, as may be lawfully carried on or performed by a
limited partnership under the laws of the State.
(b) Limitations on Powers. The General Partner shall not enter into any
commitment or other obligation binding upon the Partnership, except
for (a) actions expressly provided for in this Agreement or (b)
actions by the General Partner within the scope of its authority
granted in this Agreement. Subject to Section 12.01 hereof and
notwithstanding the powers set forth in Section 3.01(a) hereof, the
General Partner shall not be permitted to make any decision to effect
the following major transactions of the Partnership without the prior
written consent of CMS, which consent may be withheld in the sole
reasonable discretion of CMS (provided that reasonableness shall not
be required with respect to the unilateral rights of CMS described in
Section 12.01 below):
(i) a sale or other disposition of any of the Properties;
(ii) a refinancing of the indebtedness of the Property Partnerships or
the obtaining of any other indebtedness secured by any portion of
any Property;
(iii)the approval of capital expenditures in excess of the amounts
set forth in the annual budget in accordance with the Management
Agreement;
(iv) the approval of any agreement or contract with Affiliates of the
General Partner;
(v) subject to Section 3.04 hereof, selecting, hiring, engaging,
changing, replacing or firing any party performing property
management services for the Property Partnerships; and
(vi) making any decisions or consenting to any actions on behalf of
the Partnership in its capacity as a limited partner of any
Property Partnership pursuant to the Management Agreement,
including approval of Budgets (as defined in the Management
Agreement) submitted from time to time by the Management Agent.
(c) Special Limitations on Powers. Notwithstanding any other provisions of
this Agreement to the contrary, neither the General Partner nor the
Partnership shall, without the unanimous consent of all Partners,
undertake or permit the Partnership to (i) institute proceedings to be
adjudicated bankrupt or insolvent; (ii) consent to the institution of
bankruptcy or insolvency proceedings against it; (iii) file a petition
seeking or consenting to reorganization or relief under any applicable
federal or state law relating to bankruptcy; (iv) seek or consent to
the appointment of a receiver, liquidator, assignee, trustee,
sequestrator (or other similar official) of all or a substantial part
of the property of the Partnership; (v) make any assignment for the
benefit of creditors; (vi) admit in writing its inability to pay its
debts generally as they become due; or (vii) take any partnership
action in furtherance of the foregoing actions;
(d) Duties of General Partner. The General Partner (in certain instances
acting through an Affiliate) shall be responsible on behalf of the
Partnership for carrying out the purposes of the Partnership described
in Section 2.04 hereof in a reasonably commercial manner. Subject to
the limitations contained herein, the General Partner shall have the
same fiduciary duties to the Partnership and the Partners as a general
partner would have to the partnership of which it is general partner
and the limited partners thereof, and the General Partner shall have
no other fiduciary duties to the Partnership or the Partners.
(e) Contractual Relationships with Partners. The general partner of each
of the Property Partnerships has caused or will cause each Property
Partnership to acquire the Property pursuant to the Purchase
Agreement, and each Partner hereby ratifies and accepts the terms of
the Purchase Agreement. In addition, the General Partner shall be
permitted on behalf of the Partnership to enter into an agreement, the
terms of which shall be subject to the approval of the Limited
Partners, with the General Partner or an Affiliate of the General
Partner pursuant to which the General Partner or such Affiliate will
receive the fees or other compensation described in Sections 3.04
hereof.
3.02. Tax Matters Partners. The General Partner shall serve as the "Tax Matters
Partner" which has the meaning of "tax matters partners" as set forth in Section
6231(a)(7) of the Code. The Tax Matters Partner shall apply for the
Partnership's federal tax identification number and generally serve as the
liaison between the Partnership and the Internal Revenue Service in the event of
an audit of the Partnership, and as the primary coordinator of Partnership
actions in connection with such audit. The Tax Matters Partner shall provide to
the other Partners copies of all notices sent to the Partnership by the Internal
Revenue Service and shall keep the other Partners informed of the progress of
the tax audit. The Tax Matters Partner shall have similar responsibilities and
obligations with respect to any state and/or local tax audits.
3.03 Limitation on Liability of Partners: Indemnification.
(a) No Partner or its shareholders, partners, employees, agents or
affiliates shall have any liability to the Partnership or to any
Partners for any loss, cost or expenses suffered or incurred by the
Partnership or its Partners which arises out of or relates to any
action or inaction of any of such person provided such action or
omission to act was not the result of any action by such Partners, its
members, shareholders, partners, employees, agents or Affiliates taken
in bad faith, and/or in violation of this Agreement and/or which
constitutes gross negligence or willful misconduct.
(b) Each Partner and its members, shareholders, partners, employees,
agents and affiliates shall be indemnified by the Partnership against
any losses, judgments, liabilities and expenses incurred in settling
any claim or incurred in any finally adjudicated legal proceeding,
including reasonable attorneys' fees and costs of removing any liens
affecting property of the indemnitee, and/or amounts paid in
settlement of any claims sustained by it arising from or relating to
the Partnership, provided that the same were not the result of actions
by such Partners, its members, shareholders, partners, employees,
agents or Affiliates taken in bad faith and/or in violation of this
Agreement and/or which constitute gross negligence or willful
misconduct.
(c) This Section 3.03 shall inure to the benefit of the Partners, their
members, shareholders, partners, employees, agents and affiliates, and
their respective heirs, executors, administrators, successors and
assigns.
3.04 Acquisition Fee. The Partnership shall pay at Closing an acquisition fee to
MFI Realty, Inc. or its affiliate in connection with the purchase and sale of
the Properties to be purchased by the Property Partnerships in an amount equal
to $233,173.
ARTICLE 4.
ACCOUNTING RECORDS.
4.01. Tax Elections. Partnership tax elections shall be made by the General
Partner, except that upon the written request of CMS, the Partnership shall make
the election pursuant to Section 754 of the Code, to adjust the basis of the
Partnership's property as required under Sections 734 and 743 of the Code.
4.02. Tax Returns. Each tax return and other statement to be filed by the
Partnership with the Internal Revenue Service or any other taxing authority
shall be prepared by the Partnership Accountants and copies of each such return
and statement shall be distributed to all of the Partners.
4.03. Books. Proper books of account shall be kept for the Partnership on an
accrual basis in accordance with GAAP for financial accounting purposes and in
accordance with this Agreement for tax accounting purposes, and entries shall be
made therein of all monies expended and received by the Partnership as well as
other matters relating to the Partnership usually or properly entered in books
of accounts. Such books and all papers, correspondence and other instruments
relating or belonging to the Partnership shall be kept at the principal office
of the Partnership, and each Partner shall have the right upon reasonable notice
to examine and inspect the books, records, accounts and other papers of the
Partnership at all times during normal business hours. The General Partner shall
deliver to any Partner, upon request, monthly operating statements for the
Partnership.
4.04. Fiscal Year. The Fiscal Year of the Partnership shall be the calendar
year. As used in this Agreement, a Fiscal Year shall include any partial Fiscal
Year at the beginning and ending of the term of the Partnership.
4.05. Annual Audit or Review.
(a) The General Partner shall endeavor to deliver within sixty (60) days
of the end of each Fiscal Year but in no event later than seventy-five
(75) days to each Partner a statement (Form K-1) showing such
Partner's share of the Profits and Losses and capital of the
Partnership. Within one hundred twenty (120) days after the end of
each Fiscal Year of the Partnership, a general accounting and, as
determined by the Partners, an audit shall be completed by the
Partnership Accountants at the expense of the Partnership, in
accordance with generally accepted auditing standards, covering the
assets, liabilities and net worth of the Partnership and also its
dealings, transactions and operations during such fiscal year, and all
other matters customarily included in such audit.
(b) Each Partner shall be furnished with financial statements which shall
contain a balance sheet as of the end of the Fiscal Year, statements
of income and changes in Partners' Capital Accounts and a statement of
cash flow for the Fiscal Year then ended.
4.06. Partnership Funds. All funds of the Partnership shall be kept in
segregated accounts of investments in the name of the Partnership and shall not
be commingled with any other funds. To the extent practicable, all funds of the
Partnership shall be invested in short-term U.S. government securities or bank
certificate of deposit or shall be deposited in interest-bearing bank or
money-market accounts. Any remaining funds of the Partnership shall be kept in a
Partnership account or accounts in such bank or banks as the General Partner
shall select and be disbursed by the General Partner in accordance with the
Agreement.
4.07. Title to Partnership Property. All property owned by the Partnership shall
be owned by the Partnership as an entity and, insofar as permitted by applicable
law, no Partner shall have any ownership interest in any Partnership property in
its individual name or right, and each Partner's Partnership Interest shall be
personal property for all purposes.
4.08. Separateness/Operations Matters. The Partnership shall:
(a) maintain books and records and bank accounts separate from those of
any other person;
(b) maintain its assets in such a manner that it is not costly or
difficult to segregate, identify or ascertain such assets;
(c) hold regular meetings, as appropriate, to conduct the business of the
Partnership, and observe all customary organizational and operational
formalities;
(d) hold itself out to creditors and the public as a legal entity separate
and distinct from any other entity;
(e) prepare separate tax returns and financial statements, or if part of a
consolidated group, then it will be shown as a separate member of such
group;
(f) allocate and charge fairly and reasonably any common employee or
overhead shared with affiliates;
(g) transact all business with affiliates on an arm's-length basis and
pursuant to enforceable agreements;
(h) conduct business in its own name;
(i) not commingle its assets or funds with those of any other person;
(j) not assume, guarantee or pay the debts or obligations of any other
person;
(k) correct any known misunderstanding as to its separate identity;
(l) not permit any affiliate to guarantee or pay its obligations (other
than limited guarantees set forth in the Mortgage or related
documents); and
(m) not make loans or advances to any other person.
ARTICLE 5.
CAPITAL CONTRIBUTIONS
5.01. Capital Contributions. Each Partner's initial Capital Contribution
hereunder shall consist of the cash contributions which each Partner has made
and shall make on or before the closing, as the case may be, as follows:
- ------------------------------------------------------------------------
PARTNER'S CAPITAL
PARTNER % INTEREST CONTRIBUTION
- ------------------------------------------------------------------------
Vinings Investment Properties, L.P.,
General Partner .10% $ 100
Vinings Investment Properties, L.P. 19.98% 1,705,000
CMS Multifamily Investment Partners 71.93% 6,274,400
CMS Diversified Partners, L.P. 7.99% 545,600
------ ----------
TOTAL 100.00% $8,525,100
- -------------------------------------------------------------------- ----
5.02. Additional Capital Contributions. If, in the judgment of the General
Partner, the Partnership requires additional capital to contribute to any of the
Property Partnerships for the rehabilitation of any Property owned by the
Property Partnerships requiring the additional capital, the Partners shall make
additional Capital Contributions to the Partnership of the additional capital
that is required. Such additional Capital Contributions shall be made by the
Partners in accordance with their Percentage Interests; provided, however, that
no Partner shall be obligated to make aggregate additional Capital Contributions
pursuant to this Section 5.02 of more than ten percent (10%) of the initial
Capital Contribution set forth in Section 5.01 hereof. If a Partner defaults in
its obligation to make an additional Capital Contribution pursuant to this
Section 5.02 in whole or in part, the additional Capital Contribution made by
the other Partner, and the unfunded additional Capital Contribution of the
defaulting Partner, if the other Partner elects in its sole discretion to fund
such amount (in accordance with its Percentage Interests or as otherwise agreed
to by the other Partner), shall be treated as a Loan to the Partnership having
the same terms as a voluntary loan pursuant to Section 5.03 hereof.
5.03. Voluntary Loans. If, in the judgment of the General Partner, the
Partnership requires working capital or any of the Property Partnerships require
additional contributions in excess of amounts required to be contributed to the
Partnership pursuant to Section 5.02 hereof, such additional working capital or
additional contributions may be provided by voluntary loans (the "Loans") by the
General Partner or one or more of the Partners, such Loans to bear interest at
15%, and shall be repaid out of Cash Flow or Net Proceeds of a Sale or Refinance
Transaction before any distributions are made pursuant to Article 7 hereof. In
the event that more than one Partner desires to make a Loan, the amount that
each such Partner shall be entitled to lend shall be (y) the total amount of the
additional working capital that the General Partner determines is required,
divided by (z) the number of Partners desiring to make the Loan. Any and all
loans made pursuant to this Section 5.03 shall be repaid pari passu; provided,
however, that the principal of all Loans shall be prepaid before payment of any
interest thereof.
5.04. Capital Accounts; Loans.
(a) Each Partner shall have a Capital Account.
(b) Except as specifically provided herein, no Partner may contribute to,
or withdraw capital from, the Partnership.
(c) Loans by any Partner to the Partnership shall not be considered
Capital Contributions, and shall not increase the Capital Account of
the lending Partner.
(d) No interest shall be paid on any Capital Contribution to the
Partnership by any Partner.
ARTICLE 6.
ALLOCATIONS
6.01 Profits. After giving effect to the special allocations set forth in
Sections 6.03, 6.04, 6.05(b) and 6.05(e)(i) hereof, Profits for any Fiscal Year
shall be allocated in the following order and priority:
(a) First, to the Limited Partners in an amount equal to the excess, if
any, of (i) the cumulative Losses allocated pursuant to Section
6.02(a)(iv) hereof for all prior Fiscal Years, over (ii) the
cumulative Profits allocated pursuant to this Section 6.1(a) for all
prior Fiscal Years;
(b) Second, to the Limited Partners in an amount equal to the excess, if
any, of (i) the sum of (A) the cumulative Primary Preferred Return
from the inception of the Partnership to the last day of such Fiscal
Year, and (B) the cumulative Losses allocated pursuant to Section
6.02(iii) for all prior Fiscal Years, over (ii) the cumulative Profits
allocated pursuant to this Section 6.01(b) for all prior Fiscal Years;
(c) Third, to the Limited Partners in an amount equal to the excess, if
any, of (i) the sum of (A) the cumulative Secondary Preferred Return
from the inception of the Partnership to the last day of such Fiscal
Year, and (B) the cumulative Losses allocated pursuant to Section
6.02(a)(ii) for all prior Fiscal Years, over (ii) the cumulative
Profits allocated pursuant to this Section 6.01(c) for all prior
Fiscal Years; and
(d) The balance, if any, seventy-five percent (75%) to the Limited
Partners and twenty-five percent (25%) to the General Partner.
6.02. Losses. After giving effect to the special allocations set forth in
Sections 6.03 and 6.04 hereof, Losses for any Fiscal Year shall be allocated as
set forth in Section 6.02(a) below, subject to the limitations in Section
6.02(b) below.
(a) Losses for any Fiscal Year shall be allocated in the following order
and priority:
(i) First, seventy-five percent (75%) to the Limited Partners and
twenty-five percent (25%) to the General Partner in an amount
equal to the excess, if any, of (A) the cumulative Profits
allocated pursuant to Section 6.01(d) hereof for all prior Fiscal
Years, over (B) the cumulative Losses allocated pursuant to this
Section 6.02(a)(i) for all prior Fiscal Years;
(ii) Second, one hundred percent (100%) to the Limited Partners in an
amount equal to the excess, if any, of (A) the cumulative Profits
allocated pursuant to Section 6.01(c) hereof for all prior Fiscal
Years, over (B) the cumulative Losses allocated pursuant to this
Section 6.02(a)(ii) for all prior Fiscal Years;
(iii)Third, one hundred percent (100%) to the Limited Partners in an
amount equal to the excess, if any, of (A) the cumulative Profits
allocated pursuant to Section 6.01(b) hereof for all prior Fiscal
Years, over (B) the cumulative Losses allocated pursuant to this
Section 6.02(a)(iii) for all prior Fiscal Years; and
(iv) The balance, if any, one hundred percent (100%) to the Limited
Partners.
(b) The Losses allocated pursuant to Section 6.02(a) hereof shall not
exceed the maximum amount of Losses that can be so allocated without
causing any Limited Partner to have an Adjusted Capital Account
Deficit at the end of any Fiscal Year. In the event some but not all
of the Limited Partners would have Adjusted Capital Account Deficits
as a consequence of an allocation of Losses pursuant to Section
6.02(a), the limitation set forth in this Section 6.02(b) shall be
applied on a Limited Partner by Limited Partner basis so as to
allocate the maximum permissible Losses to each Limited Partner under
Section 1.704-1(b)(2)(ii)(d) of the Regulations. All Losses in excess
of the limitation set forth in this Section 6.02(b) shall be allocated
to the General Partner.
6.03. Special Allocations. The following special allocations shall be made in
the following order:
(a) Minimum Gain Chargeback. Except as otherwise provided in Section
1.704-2(f) of the Regulations, notwithstanding any other provision of
this Section 6, if there is a net decrease in Partnership Minimum Gain
during any Partnership Fiscal Year, each General Partner and Limited
Partner shall be specially allocated items of Partnership income and
gain for such Fiscal Year (and, if necessary, subsequent Fiscal Years)
in an amount equal to such Person's share of the net decrease in
Partnership Minimum Gain, determined in accordance with 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 General Partner and Limited Partner pursuant
thereto. The items to be so allocated shall be determined in
accordance with Sections 1.704-2(f)(6) and 1.704-2(j)(2) of the
Regulations. This Section 6.03(a) is intended to comply with the
minimum gain chargeback requirement in Section 1.704-2(f) of the
Regulations and shall be interpreted consistently therewith.
(b) Partner Minimum Gain Chargeback. Except as otherwise provided in
Section 1.704-2(i)(4) of the Regulations, notwithstanding any other
provision of this Section 6, if there is a net decrease in Partner
Nonrecourse Debt Minimum Gain attributable to a Partner Nonrecourse
Debt during any Partnership Fiscal Year, each Person who has a share
of the Partner Nonrecourse Debt Minimum Gain attributable to such
Partner Nonrecourse Debt, determined in accordance with Section
1.704-2(i)(5) of the Regulations, shall be specially allocated items
of Partnership income and gain for such Fiscal Year (and, if
necessary, subsequent Fiscal Years) in an amount equal to such
Person's share of the net decrease in Partner Nonrecourse Debt Minimum
Gain attributable to such Partner Nonrecourse Debt, determined in
accordance with Regulations Section 1.704-2(i)(4). Allocations
pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each General Partner
and Limited Partner pursuant thereto. The items to be so allocated
shall be determined in accordance with Sections 1.704-2(i)(4) and
1.704-2(j)(2) of the Regulations. This Section 6.03(b) is intended to
comply with the minimum gain chargeback requirement in Section
1.704-2(i)(4) of the Regulations and shall be interpreted consistently
therewith.
(c) Qualified Income Offset. In the event any Limited Partner unexpectedly
receives any adjustments, allocations or distributions described in
Regulations Section 1.704-1(b)(2)(ii)(d)(4), Regulations Section
1.704-1(b)(2)(ii)(d)(5), or Regulations Section
1.704-1(b)(2)(ii)(d)(6), items of Partnership income and gain shall be
specially allocated to each such Limited Partner in an amount and
manner sufficient to eliminate, to the extent required by the
Regulations, the Adjusted Capital Account Deficit of such Limited
Partner as quickly as possible, provided that an allocation pursuant
to this Section 6.03(c) shall be made if and only to the extent that
such Limited Partner would have an Adjusted Capital Account Deficit
after all other allocations provided for in this Section 6 have been
tentatively made as if this Section 6.03(c) were not in the Agreement.
(d) Gross Income Allocation. In the event any Limited Partner has a
deficit Capital Account at the end of any Partnership Fiscal Year
which is in excess of the sum of (i) the amount such Limited Partner
is obligated to restore (pursuant to the terms of such Limited
Partner's Promissory Note or otherwise), and (ii) the amount such
Limited Partner 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), each such Limited Partner shall be specially allocated
items of Partnership income and gain in the amount of such excess as
quickly as possible, provided that an allocation pursuant to this
Section 6.03(d) shall be made if and only to the extent that such
Limited Partner would have a deficit Capital Account in excess of such
sum after all other allocations provided for in this Section 6 have
been tentatively made as if this Section 6.03(d) and Section 6.03(c)
hereof were not in the Agreement.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal Year
shall be specially allocated to the Limited Partners.
(f) Partner Nonrecourse Deductions. Any Partner Nonrecourse Deductions for
any Fiscal Year shall be specially allocated to the General Partner or
Limited Partners 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)(1).
(g) Section 754 Adjustment. To the extent an adjustment to the adjusted
tax basis of any Partnership asset pursuant to Code Section 734(b) or
Code Section 743(b) is required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m)(2) or Regulations Section
1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining
Capital Accounts as the result of a distribution to a General Partner
or Limited Partner in complete liquidation of his interest in the
Partnership, 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 gain or loss shall be specially allocated to the General
Partner and Limited Partners in accordance with their interests in the
Partnership in the event that Regulations Section
1.704-1(b)(2)(iv)(m)(2) applies, or to the General Partner and Limited
Partners to whom such distribution was made in the event that
Regulations Section 1.704-1(b)(2)(iv)(m)(4) applies.
(h) Imputed Interest. To the extent the Partnership has taxable interest
income with respect to any Promissory Note pursuant to Section 483 or
Sections 1271 through 1288 of the Code:
(i) Such interest income shall be specially allocated to the Limited
Partner to whom such Promissory Note relates; and
(ii) The amount of such interest income shall be excluded from the
Capital Contributions credited to such Limited Partner's Capital
Account in connection with payments of principal with respect to
such Promissory Note. (i) Basis Increases. In the event the
adjusted tax basis of any Code Section 38 property that has been
placed in service by the Partnership is increased pursuant to
Code Section 50(c), such increase shall be specially allocated
among the General Partner and Limited Partners (as an item in the
nature of income or gain) in the same proportions as the
investment tax credit that is recaptured with respect to such
property is shared among the General Partner and Limited
Partners.
(j) Basis Reductions. Any reduction in the adjusted tax basis (or cost) of
Partnership Code Section 38 property pursuant to Code Section 50(c)
shall be specially allocated among the General Partner and Limited
Partners (as an item in the nature of expenses or losses) in the same
proportions as the basis (or cost) of such property is allocated
pursuant to Regulations Section 1.46-3(f)(2)(i).
(k) Allocations Relating to Taxable Issuance of Partnership Interests. Any
income, gain, loss, or deduction realized as a direct or indirect
result of the issuance of an interest in the Partnership by the
Partnership to a Partner (the "Issuance Items") shall be allocated
among the Partners so that, to the extent possible, the net amount of
such Issuance Items, together with all other allocations under this
Agreement to each Partner, shall be equal to the net amount that would
have been allocated to each such Partner if the Issuance Items had not
been realized.
(l) Curative Allocations. The allocations set forth in Sections 6.02(b),
6.03(a), 6.03(b), 6.03(c), 6.03(d), 6.03(e), 6.03(f), and 6.03(g)
hereof (the "Regulatory Allocations") are intended to comply with
certain requirements of the Regulations. It is the intent of the
Partners that, to the extent possible, all Regulatory Allocations
shall be offset either with other Regulatory Allocations or with
special allocations of other items of Partnership income, gain, loss,
or deduction pursuant to this Section 6.04. Therefore, notwithstanding
any other provision of this Section 6 (other than the Regulatory
Allocations), the General Partner shall make such offsetting special
allocations of Partnership income, gain, loss, or deduction in
whatever manner it determines appropriate so that, after such
offsetting allocations are made, each General Partner's and Limited
Partner's Capital Account balance is, to the extent possible, equal to
the Capital Account balance such General Partner or Limited Partner
would have had if the Regulatory Allocations were not part of the
Agreement and all Partnership items were allocated pursuant to
Sections 6.01, 6.02(a), 6.03(h), 6.03(i), 6.03(j), 6.03(k), and 6.05.
In exercising its discretion under this Section 6.04, the General
Partner shall take into account future Regulatory Allocations under
Sections 6.03(a) and 6.03(b) that, although not yet made, are likely
to offset other Regulatory Allocations previously made under Sections
6.03(e) and 6.03(f).
6.04 Other Allocation Rules.
(a) The basis (or cost) of any Partnership Code Section 38 property shall
be allocated among the General Partner and Limited Partners in
accordance with Regulations Section 1.46-3(f)(2)(i). All tax credits
(other than the investment tax credit) shall be allocated among the
General Partner and Limited Partners in accordance with applicable
law.
(b) In the event Partnership Code Section 38 property is disposed of
during any taxable year, Profits for such taxable year (and, to the
extent such Profits are insufficient, Profits for subsequent taxable
years) in an amount equal to the excess, if any, of (i) the reduction
in the adjusted tax basis (or cost) of such property pursuant to Code
Section 50(c), over (ii) any increase in the adjusted tax basis of
such property pursuant to Code Section 50(c) caused by the disposition
of such property, shall be excluded from the Profits allocated
pursuant to Section 6.01 hereof and shall instead be allocated among
the General Partner and Limited Partners in proportion to their
respective shares of such excess, determined pursuant to Sections
6.03(j) and 6.03(k) hereof. In the event more than one item of such
property is disposed of by the Partnership, the foregoing sentence
shall apply to such items in the order in which they are disposed of
by the Partnership, so that Profits equal to the entire amount of such
excess with respect to the first such property disposed of shall be
allocated prior to any allocations with respect to the second such
property disposed of, and so forth.
(c) Generally, all Profits and Losses allocated to the Limited Partners
shall be allocated among them in proportion to their Percentage
Interests. In the event more than one Person is a General Partner,
Profits or Losses allocated to the General Partners shall be divided
among them as they may agree. In the event additional Limited Partners
are admitted to the Partnership on different dates during any Fiscal
Year, the Profits (or Losses) allocated to the Partners for each such
Fiscal Year shall be allocated among the Limited Partners in
proportion to their respective Percentage Interests from time to time
during such Fiscal Year in accordance with Code Section 706, using any
convention permitted by law and selected by the General Partner. In
such event, subsequent allocations of Losses (or Profits) pursuant to
Section 6.02(a)(i), Section 6.02(a)(ii), Section 6.02(a)(iii), or
Section 6.01(b) hereof shall be allocated (i) first, so as to offset
the Profits (or Losses) allocated for such Fiscal Year or Fiscal
Years, and (ii) the balance, if any, to the Limited Partners in
proportion to the Percentage Interests held by each. Clause (i) in the
preceding sentence shall be disregarded to the extent the Profits (or
Losses) described in such clause have effectively been offset as a
consequence of the application of Section 6.02(b) hereof.
(d) For purposes of determining the Profits, Losses or any other items
allocable to any period, Profits, Losses, and any such other items
shall be determined on a daily, monthly, or other basis, as determined
by the General Partner using any permissible method under Code Section
706 and the Regulations thereunder.
(e) The Partners are aware of the income tax consequences of the
allocations made by this Section 6 and hereby agree to be bound by the
provisions of this Section 6 in reporting their shares of Partnership
income and loss for income tax purposes.
(f) Solely for purposes of determining a General Partner's or Limited
Partner's proportionate share of the "excess nonrecourse liabilities"
of the Partnership within the meaning of Regulations Section
1.752-3(a)(3), the General Partner's and Limited Partners' interests
in Partnership profits are in proportion to the Partners' Percentage
Interests.
<PAGE>
(g) To the extent permitted by Sections 1.704-2(h)(3) of the Regulations,
the General Partner shall endeavor to treat distributions of Cash Flow
or Net Proceeds of a Sale or Refinance Transaction as having been made
from the proceeds of a Nonrecourse Liability or a Partner Nonrecourse
Debt only to the extent that such distributions would cause or
increase an Adjusted Capital Account Deficit for any Limited Partner.
6.06 Tax Allocations: Code Section 704(c). In accordance with Code Section
704(c) and the Regulations thereunder, income, gain, loss, and deduction with
respect to any property contributed to the capital of the Partnership shall,
solely for tax purposes, be allocated among the General Partner and Limited
Partners so as to take account of any variation between the adjusted basis of
such property to the Partnership for federal income tax purposes and its initial
Gross Asset Value (computed in accordance with Section 1.23(d) hereof).
In the event the Gross Asset Value of any Partnership asset is adjusted pursuant
to Section 1.23(d) hereof, subsequent allocations of income, gain, loss, and
deduction with respect to such asset shall take account of any variation between
the adjusted basis of such asset for federal income tax purposes and its Gross
Asset Value in the same manner as under Code Section 704(c) and the Regulations
thereunder.
Any elections or other decisions relating to such allocations shall be made by
the General Partner in any manner that reasonably reflects the purpose and
intention of this Agreement. Allocations pursuant to this Section 6.06 are
solely for purposes of federal, state, and local taxes and shall not affect, or
in any way be taken into account in computing, any Person's Capital Account or
share of Profits, Losses, other items, or distributions pursuant to any
provision of this Agreement.
6.07 Tax Termination of the Partnership.
(a) Notwithstanding any other provision of this Agreement to the contrary,
the transfer, sale or other disposition of an Interest in the
Partnership, or any right, title or interest therein or thereto, will
not be permitted if the Partnership Interest sought to be transferred,
sold or disposed of, when added to the total of all other Partnership
Interests transferred, sold or disposed of within the period of twelve
(12) consecutive months ending with the proposed date of the transfer,
sale or other disposition, results in a termination of the Partnership
under Section 708 of the Code.
(b) A transferee of a Partnership Interest will succeed to the capital
account relating to a Partnership Interest transferred; provided,
however, that if the transfer causes a termination of the Partnership
under Section 708(b)(1)B) of the Code, the Partnership shall be deemed
to have contributed all of its assets and liabilities to a new
partnership in exchange for an interest in the new partnership; and,
immediately thereafter, the terminated partnership distributes
interests in the new partnership to the purchasing Partner and the
other remaining partners in proportion to their respective interests
in the terminated partnership in liquidation of the terminated
partnership, either for the continuation of the business by the new
partnership or for its dissolution and winding up. The capital
accounts of the new partnership shall be maintained in accordance with
the principles set forth herein.
<PAGE>
ARTICLE 7.
DISTRIBUTIONS
7.01. Distribution of Cash Flow. Except as otherwise provided herein, Cash Flow
shall be distributed not later than the 45th day following the six-month periods
ending June 30 and December 31 of each year in the following order and
priority:
(a) First, to the Limited Partners, in an amount equal to the excess, if
any, of (i) the cumulative Primary Preferred Return from the inception
of the Partnership to the end of such semi-annual period, over (ii)
the sum of all prior distributions to the Limited Partners pursuant to
Sections 7.01(c), 7.02(a), and 7.02(c) hereof and this Section
7.01(a);
(b) Second, fifteen percent (15%) to the General Partner, and eighty-five
percent (85%) to the Limited Partners in accordance with their
Percentage Interests until such time as the Limited Partners shall
receive an amount equal to the excess, if any, of (i) the cumulative
Secondary Preferred Return from the inception of the Partnership to
the end of such semi-annual period, over (ii) the sum of all prior
distributions to the Limited Partners pursuant to Sections 7.01(a),
7.01(c), 7.02(a), and 7.02(c) hereof and this Section 7.01(b); and
(c) The balance, if any, twenty-five percent (25%) to the General Partner
and seventy-five percent (75%) to the Limited Partners in accordance
with their Percentage Interests.
In the event that any distribution of Cash Flow is based upon an estimate of the
net cash flow from operations and it is later determined that the actual Cash
Flow was less than the estimated amount, the General Partner shall then have the
right to either (i) offset the amount of such excess distributions against
future distributions, or (ii) to cause the Partners to repay such excess
distributions to the Partnership, without interest. Except as otherwise required
by law, no distribution of property in kind by the Partnership shall be
permitted without the prior written consent of the Partners.
7.02. Distributions of Net Proceeds of a Sale or Refinancing Transaction. Except
as otherwise provided in Section 5.03 hereof, Net Proceeds of a Sale or
Refinance Transaction shall be distributed, at such time as the General Partner
may determine, in the following order and priority:
(a) First, to the Limited Partners in an amount equal to the excess, if
any, of (i) the cumulative Primary Preferred Return from the inception
of the Partnership to the date such distribution is made, over (ii)
the sum of all prior distributions to the Limited Partners pursuant to
Section 7.01(a), 7.01(b), 7.01(c), 7.02(d) and 7.02(e) hereof and this
Section 7.02(a);
(b) Second, to the Partners in proportion to and up to the amount of their
respective Unreturned Capital Contributions;
(c) Third, fifteen percent (15%) to the General Partner or its affiliate
and eighty-five percent (85%) to the Limited Partners in accordance
with their Percentage Interests until such time as the Limited
Partners have receive, in the aggregate, an amount equal to the
excess, if any, of (i) the cumulative Secondary Preferred Return from
the inception of the Partnership to the date such distribution is
made, over (ii) the sum of all prior distributions to the Limited
Partners pursuant to Sections 7.01(a), 7.01(b), 7.01(c), 7.02(a) and
7.02(d) hereof and this Section 7.02(c); and
(d) The balance, if any, twenty-five percent (25%) to the General Partner
and seventy-five percent (75%) to the Limited Partners in accordance
with their Percentage Interests.
7.03 Division Among the General Partners and Limited Partners. All distributions
to the Limited Partners pursuant to this Section 7 shall be divided among them
in proportion to their Percentage Interests. In the event there is more than one
General Partner, all amounts to be distributed to the General Partners pursuant
to this Section 7 shall be divided among them as they may agree.
7.04 Amounts Withheld. All amounts withheld pursuant to the Code or any
provision of any state or local tax law with respect to any payment,
distribution or allocation to the Partnership, the General Partner, or the
Limited Partners shall be treated as amounts distributed to the General Partner
and the Limited Partners pursuant to this Section 7 for all purposes under this
Agreement. The General Partner is authorized to withhold from distributions, or
with respect to allocations, to the General Partner and the Limited Partners and
pay over to federal, state or local governments any amounts required to be so
withheld pursuant to the Code and any provisions of any other federal, state or
local law and shall allocate such amounts to the General Partner and the Limited
Partners with respect to which such amount was withheld.
ARTICLE 8.
TRANSFER OF LIMITED PARTNERSHIP INTEREST;
ADMISSION OF SUBSTITUTED LIMITED PARTNERS
8.01. A Limited Partner may assign or transfer all or a portion of such
Partner's interest in the Partnership only if (i) the Partner obtains the
written consent of the General Partner to the assignment or transfer, and (ii) a
duly executed and acknowledged written instrument of assignment or transfer in a
form satisfactory to the General Partner, the terms of which are not in
contravention of any of the provisions of this Agreement, is filed with the
Partnership. Notwithstanding the foregoing, CMS may transfer or assign all or
any portion of its limited partnership interest to any affiliate of CMS provided
that such transfer does not violate the provisions of Article 14 of this
Agreement and does not cause a termination for tax purposes pursuant to the Code
or any state of local law.
8.02. No assignee of the whole or any portion of a Limited Partner's interest in
the Partnership shall have the right to become a substituted Limited Partner in
place of its assignor unless all of the following conditions are satisfied:
(a) The duly executed and acknowledged written instrument of assignment
which has been filed with the Partnership sets forth the intention of
the assignor that the assignee become a substituted Limited Partner
with respect to the assigned interest;
(b) The assignor and assignee execute and acknowledge such other
instruments as the General Partner may deem necessary or desirable to
effect such admission, including the written acceptance and adoption
by the assignee of the provisions of this Agreement; and
(c) The written consent of each Partner to such substitution shall be
obtained, the granting or denial of which shall be within the sole and
absolute discretion of each Partner.
8.03. Nothing herein shall preclude the General Partner or any Limited
Partner from acquiring the interest of a transferring Limited Partner pursuant
to the provisions of Sections 8.01 and 8.02 hereof and, as to the acquired
interest, becoming a substituted Limited Partner.
ARTICLE 9.
TRANSFER OF GENERAL PARTNER INTEREST;
ADMISSION OF SUCCESSOR GENERAL PARTNER
9.01. The General Partner may not transfer any of its General Partner interest
in the Partnership, unless (i) a majority in interest of the Limited Partners
consent to such transfer in writing, the granting or denial of which consent
shall be within the sole and absolute discretion of each Partner, (ii) such
transfer is to an entity which is directly or indirectly controlled by the
General Partner or any of its subsidiaries, and (iii) a duly executed and
acknowledged written instrument of assignment, the terms of which are not in
contravention of any of the provisions of this Agreement, is filed with the
Partnership. An assignee of the whole or any portion of the General Partner's
interest in the Partnership shall be entitled to receive distributions of cash
or other property from the Partnership applicable to the interest acquired by
reason of such assignment.
9.02. A successor to all of the General Partner's interest in the Partnership
pursuant to Section 9.01 hereof who is proposed to be admitted as a successor
General Partner shall be admitted to the Partnership as the General Partner,
effective upon (i) the completion of such transfer in accordance with section
9.01, and (ii) the execution and delivery to the Partnership by the successor
General Partner of 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. Any such transferee shall carry on the business of the
Partnership without dissolution.
<PAGE>
ARTICLE 10.
ADMISSION OF ADDITIONAL LIMITED PARTNERS
10.01. Except as otherwise provided in Articles 8 and 14, additional Limited
Partners shall be admitted to the Partnership only with the consent of the
General Partner. Any such new Partners shall fulfill the conditions of Section
8.02(b) hereof and shall receive a capital account and a percentage of
partnership interest as shall be provided in an amendment to this Agreement.
ARTICLE 11.
DISSOLUTION AND LIQUIDATION
11.01. Dissolution Events.
(a) The bankruptcy, death, dissolution, liquidation, termination or
adjudication of incompetency of a Partner shall not cause the
termination or dissolution of the Partnership and the business of the
Partnership shall continue. Upon any such occurrence, the trustee,
receiver, executor, administrator, committee, guardian or conservator
of such Partner shall have all the rights of such Partner for the
purpose of settling or managing its estate or property, subject to
satisfying conditions precedent to the admission of such assignee as a
substitute Partner. The transfer by such trustee, receiver, executor,
administrator, committee, guardian or conservator of any Partnership
Interest shall be subject to all of the restrictions hereunder to
which such transfer would have been subject if such transfer had been
made by such bankrupt, deceased, dissolved, liquidated, terminated or
incompetent Partner.
(b) Dissolution of the Partnership shall be effective on the day on which
a Dissolution Event occurs, but the Partnership shall not terminate
until all of the Cash Flow and other available assets of the
Partnership shall have been distributed as provided in this Agreement.
Notwithstanding the dissolution of the Partnership prior to the
termination of the Partnership, as aforesaid, the business of the
Partnership and the affairs of the Partners as such shall continue to
be governed by this Agreement.
(c) Notwithstanding anything in this Agreement to the contrary, upon a
sale of all or substantially all of the assets of the Partnership
where all or any portion of the consideration payable to the
Partnership is to be received by the Partnership more than ninety (90)
days after the date on which such sale occurs, the Partnership shall
continue solely for purposes of collecting the deferred payments and
making distributions to the Partners. In such event, (i) the deferred
obligation payable to the Partnership shall be valued at its fair
market value as of the date of sale (as determined by the General
Partner or, at the General Partner's election, as determined by an
independent appraisal paid for by the Partnership), (ii) Profits,
Losses and other items of income and gain recognized and Cash Flow
distributed in any year as a result of such sale shall be allocated
and distributed among the Partners in the same proportion as such
Profits, Losses and other items of income and gain and Cash Flow would
have been allocated and distributed were the entire gain resulting
from such sale required to be recognized for Federal income tax
purposes in the year in which such sale occurred; and (iii) income
attributed to interest on any deferred payments shall be allocated
between, and such interest shall be distributed to, the Partners as if
the deferred payment obligations received by the Partnership had been
distributed in-kind to the Partners under Section 9.02 hereof in the
proportions provided for in Section 7.02 hereof.
(d) Notwithstanding anything to the contrary in this agreement, in no
event shall the Partnership be dissolved as long as any of the
Property Partnerships are subject to a regulatory agreement with HUD
relating to any Project, as defined in the Property Partnerships..
11.02. Liquidation.
(a) Upon the occurrence of a Dissolution Event, the Partners shall
liquidate the assets of the Partnership, apply and distribute the Cash
Flow thereof and all other available assets of the Partnership as
contemplated by this Agreement and in compliance with the timing
requirements of Regulations Section 1.704-1(b)(2)(ii)(b)(2). As soon
as possible after the Dissolution Event, a full account of the assets
and liabilities of the Partnership shall be taken, and a statement
shall be prepared by the Partnership Accountants setting forth the
assets and liabilities of the Partnership. A copy of such statement
shall be furnished to each of the Partners within ninety (90) days
after such Dissolution Event. The assets of the Partnership shall be
liquidated as promptly as possible, the expenses of the liquidation
and the debts of the Partnership shall be paid, and the net proceeds
thereof and the other available assets of the Partnership shall be
distributed in accordance with the positive Capital Account balances
of the Partners as such Capital Account balances are determined after
making any and all allocations under Article 6 hereof of Profits,
Losses, income gain or other items for the Fiscal Year of liquidation.
Any reserves shall be established or continued which the General
Partner deems reasonably necessary for any contingent or unforeseen
liabilities or obligations of the Partnership. Such reserves shall be
held by the Partnership for the payment of any of the aforementioned
contingencies, and at the expiration of such period as the General
Partner shall deem advisable, the Partnership shall distribute the
balance thereafter remaining to the Partners in accordance with this
Section.
(b) Upon dissolution and liquidation of the Partnership, each Partner
shall look solely to the assets of the Partnership for the return of
its investment, and, subject to Section 9.02(c) hereof, if the
Partnership's assets remaining after payment and discharge of debts
and liabilities of the Partnership, including any debts and
liabilities owed, is not sufficient to satisfy the rights of a
Partner, it shall have no recourse or further right or claim against
the Partnership, or any other Partner.
(c) In the event that, upon liquidation, any Limited Partner has an
Adjusted Capital Account Deficit (as determined after all allocations
of Profits, Losses, income, gain or other item to the Partners'
Capital Accounts are made pursuant to Article 4 hereof), such Partner
shall have no obligation to restore such deficit or otherwise
contribute cash or assets necessary to eliminate an Adjusted Capital
Account Deficit.
<PAGE>
ARTICLE 12.
SALE OF THE PROPERTY
12.01. Sale of any Property. During the first 36 months following the date of
the Property Partnerships' acquisition of any Property, all decisions by the
Partnership as a limited partner in the Property Partnerships regarding any sale
of a Property or an interest therein shall be made by the mutual consent of the
Limited Partners and the General Partner. Notwithstanding anything in Section
3.01 hereof to the contrary, CMS at all times after the initial 36 months
following the date of Closing shall have the unilateral right to determine
whether the Partnership should consent to the sale or other disposition of any
Property and the terms pursuant to which such a sale or disposition should
occur. The General Partner covenants to CMS to fully cooperate in connection
with any disposition of all or a portion of any Property pursuant to this
Section 12.01 including, without limitation, by executing in its capacity as the
general partner of the limited partner of any of the Property Partnerships, any
document reasonably requested by the Property Partnership to effect a
disposition of the Property permitted pursuant to this Section 12.01.
ARTICLE 13.
REPRESENTATIONS AND WARRANTIES OF PARTNERS
Each Limited Partner, severally and not jointly, hereby represents and warrants
to the General Partner as follows with respect to itself only:
(a) Limited Partner is purchasing its respective Interest for investment
purposes only, and not with a view to re-selling such Interest.
Limited Partner acknowledges that its Interest has not been registered
under the Securities Act of 1933, as amended (the "Securities Act"),
or any state securities law.
(b) Limited Partner is an "accredited investor" as that term is defined in
Rule 501(a) of Regulation D, promulgated pursuant to Section 4(2) and
3(b) of the Securities Act.
(c) Limited Partner has had an opportunity to review this Agreement and
the investment in the Partnership, including the tax consequences of
participating in the Partnership, with independent counsel and to
request and obtain materials from, and ask questions of,
representatives of the General Partner regarding the Partnership and
the Property.
(d) Limited Partner believes that the acquisition of its Interest is
suitable for such Partner based upon Partner's investment objections
and financial needs.
<PAGE>
(e) Limited Partner has adequate means for providing for Limited Partner's
current and long-term financial needs, has no need for liquidity of
investment with respect to its Interest, is in a financial position to
hold its Interest for an indefinite period of time, and is able to
bear the economic risk of, and can withstand, a complete loss of its
investment in the Partnership.
(f) Limited Partner has such knowledge and experience in financial and
business matters that Limited Partner is capable of (i) requesting,
reviewing and understanding the information and Limited Partner has
acquired regarding the Partnership and its operations, management and
control and (ii) evaluating the merits and risks of the acquisition of
its Interest. Limited Partner has had prior business dealings with the
owners and management personnel of General Partner and its Affiliates.
(g) Limited Partner has obtained, to the extent Limited Partner deems
necessary, Limited Partner's own personal and professional advice with
respect to the risks inherent in the acquisition of its Interest and
the suitability of such acquisition in view of Limited Partner's
financial condition and investment needs.
(h) Limited Partner understands that: (i) an investment in its Interest is
speculative; (ii) no federal or state agency has made any finding or
determination as to the fairness of the investment or any
recommendation or endorsement of the Interests; (iii) no assurance can
be given that the investment objectives of the Partnership will be
achieved; (iv) the forecast financial information furnished to Limited
Partner are based on certain assumptions regarding future events, many
of which may not occur and, therefore, actual results of operations
will vary from projected results and variations may be material; and
(v) there are restrictions upon the transferability of the Interests
contained herein and no public market for the Interests is expected to
develop, and accordingly, Limited Partner may not be able to dispose
of its Interest when desired (even in the event of an emergency).
ARTICLE 14.
HUD REQUIREMENTS
14.01. So long as the Secretary (the "Secretary") of HUD or the Secretary's
successors or assigns is the insurer or holder of any note secured by a deed of
trust or other encumbrance on any Property owned by any of the Property
Partnerships, no amendment to this Agreement that results in any of the
following will have any force or effect without the prior written consent of the
Secretary:
(a) Any amendment that activates the requirement that a HUD previous
participation certification be obtained;
(b) A change in the General Partner or preapproved successor General
Partner;
14.02. Any incoming General Partner or incoming Limited Partner with a 25% or
greater financial interest must meet the applicable requirements for HUD
previous participation clearance.
14.03. All Partners, and any assignee of any Partner, agree to be liable in
their individual capacities to HUD with respect to the following matters:
(a) For funds or property of any Property coming into their hands, which
by the provisions of any Regulatory Agreement with respect to any
Property, they are not entitled to retain; and
(b) For their own acts and deeds, or acts and deeds of others which they
have authorized, in violation of the provisions of any Regulatory
Agreement with respect to any Property.
ARTICLE 15.
MISCELLANEOUS
15.01. Notices. Any notice which may or is required to be given hereunder shall
be deemed given when actually received. If such notice is mailed, it shall be
deposited, registered or certified, return receipt requested, in the United
States mail, or by commercial overnight courier such as Federal Express,
addressed to the Partners at the addresses set forth after their respective
names below, or at such different addresses as to any Partner as it shall have
theretofore given notice hereunder.
General Partner: Vinings Investment Properties, L.P.
3111 Paces Mill Road, Suite A-200
Atlanta, Georgia 30339
Attn: Peter D. Anzo
Limited Partners: Vinings Investment Properties, L.P.
3111 Paces Mill Road, Suite A-200
Atlanta, Georgia 30339
Attn: Peter D. Anzo
CMS Multifamily II Partners
C/o CMS Affiliated Partnerships
Two Bala Plaza, Suite 300
333 City Line Avenue
Bala Cynwyd, Pennsylvania 19104
Attn: Jeffrey M. Rotter
<PAGE>
CMS Diversified Partners, L.P.
C/o CMS Affiliated Partnerships
Two Bala Plaza, Suite 300
333 City Line Avenue
Bala Cynwyd, Pennsylvania 19104
Attn: Jeffrey M. Rotter
With a copy to:
CMS Companies
1926 Arch Street
Philadelphia, Pa 19103
Attn: John S. Green, Esq.
15.02. Successors and Assigns. Subject to the restrictions on transfer set forth
herein, this Agreement shall bind and inure to the benefit of the parties hereto
and their respective legal representatives, successors and assigns.
15.03. Waiver of Partition. Unless otherwise expressly authorized in this
Agreement, no Partner shall, either directly or indirectly, take any action to
require partition or appraisement of the Partnership or of any of its assets or
properties or cause the sale of any Partnership property, and notwithstanding
any provisions of applicable law to the contrary, each Partner (and its legal
representative, successor or assign) hereby irrevocably waives any and all
rights to maintain any action for partition or to compel any sale with respect
to its interest in, or with respect to any assets or properties of, the
Partnership, except as expressly provided in this Agreement.
15.04. No Oral Modifications; Amendment. No oral amendment of this Agreement
shall be binding on the Partners. This Agreement shall be amended only with the
consent of each of the Partners. No modification or amendment of this Agreement
may be effectuated only by a writing signed by all the Partners.
15.05. Captions; References. Any titles or captions contained in this Agreement
and the table of contents are for convenience of reference only and shall not be
deemed a part of this Agreement. References in this Agreement to any articles or
sections shall be deemed to be references to articles or sections of this
Agreement unless otherwise indicated.
15.06. Terms. Common nouns and pronouns shall be deemed to refer to the
masculine, feminine, neuter, singular and plural, as the identity of the person
or persons, firm or corporation may in the context require. Any reference to the
Code or other statutes or laws shall include all amendments, modifications or
replacements of the specific sections and provisions concerned.
15.07. Invalidity. If any provision of this Agreement shall be held invalid, the
same shall not affect in any respect whatsoever the validity of the remainder of
this Agreement.
15.08. Counterparts. This Agreement may be executed in counterparts, each of
which shall be deemed an original and all of which, when taken together, shall
constitute one and the same instrument, binding on the parties hereto. 15.09.
Further Assurances. The parties hereto agree that they will cooperate with each
other and will execute and deliver, or cause to be executed and delivered, all
such other instruments, and will take all such other actions, as any party
hereto may reasonably request from time to time in order to effectuate the
provisions and purposes hereof.
15.10. Complete Agreement. This Agreement constitutes the complete and exclusive
statement of the agreement among the Partners with respect to this Partnership.
It supersedes all prior written and oral statements and no representation,
statements, condition or warranty not contained in this Agreement shall be
binding on the Partners or have any force or effect whatsoever.
15.11. Governing Laws. This Agreement shall be construed and enforced in
accordance with the laws of Delaware.
(The remainder of this page intentionally left blank)
<PAGE>
IN WITNESS WHEREOF the parties have hereunto set their hands and seals as of the
date first set forth above.
GENERAL PARTNER:
VININGS INVESTMENT PROPERTIES, L.P.
By: Vinings Investment Properties Trust
General Partner
By: /s/ Peter D. Anzo
------------------
Peter D. Anzo
President
LIMITED PARTNERS:
VININGS INVESTMENT PROPERTIES, L.P.
By: Vinings Investment Properties Trust
General Partner
By: /s/ Peter D. Anzo
------------------
Peter D. Anzo
President
CMS MULTIFAMILY II PARTNERS
By: CMS Multifamily Investment Fund II, L.P.
Joint Venture Partner
By: CMS Multifamily II Associates, L.P.
General Partner
By: MSPS Multifamily II, Inc.
General Partner
By: /s/ John S. Green
------------------
Name: John S. Green
Title: Vice President
By: CMS 1997 Investment Partners, L.P.
General Partner
By: CMS 1997, Inc.
General Partner
By: /s/ John S. Green
------------------
Name: John S. Green
Title: Vice President
By: CMS Multifamily Investment Fund II-Q, L.P.
Joint Venture Partner
By: CMS Multifamily II Associates, L.P.
General Partner
By: MSPS Multifamily II, Inc.
General Partner
By: /s/ John S. Green
------------------
Name: John S. Green
Title: Vice President
By: CMS 1997 Investment Partners, L.P.
General Partner
By: CMS 1997, Inc.
General Partner
By: /s/ John S. Green
------------------
Name: John S. Green
Title: Vice President
CMS DIVERSIFIED PARTNERS, L.P.
By: CMS/DP Associates, L.P.
General Partner
By: MSPS/DP, Inc.
General Partner
By: /s/ John S. Green
------------------
Name: John S. Green
Title: Vice President
By: CMS 1995 Investment Partners, L.P.
General Partner
By: CMS 1995, Inc.
General Partner
By: /s/ John S. Green
------------------
Name: John S. Green
Title: Vice President
