-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Eh1YeJvf5uKUdw4plJTv8kJZBrvKFWW52/bWIJEy2/JL7AuFrVAOcDqtTsGVHD8D lWwTKMgnh3tX1ManS/W4Rw== 0000759174-99-000005.txt : 19990419 0000759174-99-000005.hdr.sgml : 19990419 ACCESSION NUMBER: 0000759174-99-000005 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 14 CONFORMED PERIOD OF REPORT: 19981231 FILED AS OF DATE: 19990416 FILER: COMPANY DATA: COMPANY CONFORMED NAME: VININGS INVESTMENT PROPERTIES TRUST/GA CENTRAL INDEX KEY: 0000759174 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 136850434 STATE OF INCORPORATION: MA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 000-13693 FILM NUMBER: 99595676 BUSINESS ADDRESS: STREET 1: 311 PACES MILL RD STREET 2: STE A-200 CITY: ATLANTA STATE: GA ZIP: 30339 BUSINESS PHONE: 7709849500 MAIL ADDRESS: STREET 1: 3111 PACES MILL RD STREET 2: SUITE A-200 CITY: ATLANTA STATE: GA ZIP: 30339 10-K 1 YEAR ENDED 1998 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10 - K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ending December 31, 1998 Commission file number 0-13693 - ------------------------------------------- ------------------------------ VININGS INVESTMENT PROPERTIES TRUST AND SUBSIDIARIES (Exact name of registrant as specified in its charter) Massachusetts 13-6850434 ------------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 3111 Paces Mill Road, Suite A-200, Atlanta, GA 30339 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (770) 984-9500 -------------------- Securities registered pursuant to Section 12(b) of the Act: None Securities registered pursuant to Section 12(g) of the Act: Shares of Beneficial Interest without par value (Title of Class) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No ----- ----- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. __ Based on the average bid and asking price on March 4, 1999 the aggregate market value of the Registrant's shares held by non-affiliates of the Registrant was $4,470,802. The number of shares outstanding as of March 15, 1999 was 1,100,505. DOCUMENTS INCORPORATED BY REFERENCE Portions of the Trust's Proxy Statement relating to its 1999 Annual Meeting of Shareholders are incorporated by reference into Part III. VININGS INVESTMENT PROPERTIES TRUST AND SUBSIDIARIES INDEX TO FORM 10-K PART I............................................................... ..3 ITEM 1 - Business..................................................3 ITEM 2 - Properties................................................8 ITEM 3 - Legal Proceedings.........................................8 ITEM 4 - Submission of Matters to a Vote of Shareholders...........8 PART II.............................................................. ..9 ITEM 5 - Market for Registrant's Shares of Beneficial Interest.....9 ITEM 6 - Selected Financial Information...........................10 ITEM 7 - Management's Discussion and Analysis of Financial ITEM 7A - Quantitative and Qualitative Disclosures About Market Risk..............................................19 ITEM 8 - Financial Statements and Supplementary Data..............19 ITEM 9 - Changes in and Disagreements with Accountants on Accounting and Financial Disclosure......................19 PART III...............................................................20 ITEM 10 - Directors and Executive Officers of the Registrant.......20 ITEM 11 - Executive Compensation...................................20 ITEM 12 - Security Ownership of Certain Beneficial Owners and Management...........................................20 ITEM 13 - Certain Relationships and Related Transactions...........20 PART IV................................................................21 ITEM 14 - Exhibits, Financial Statements and Schedule and Reports on Form 8-K....................................................21 Signatures ............................................................24 This Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. The Trust's actual results could differ materially from those projected in the forward-looking statements. Certain factors that might cause such a difference are set forth in the section entitled "Certain Factors Affecting Future Operating Results," in the relevant paragraphs of "Management's Discussion and Analysis of Results of Operations and Financial Condition," and elsewhere in this report. PART I ====== ITEM 1 - BUSINESS - ----------------- General Development of Business - ------------------------------- Vinings Investment Properties Trust, a Massachusetts business trust ("Vinings" or the "Trust") (formerly known as Mellon Participating Mortgage Trust, Commercial Properties Series 85/10), was organized on December 7, 1984 as a twenty year finite-life real estate investment trust ("REIT"). Its original purpose was to invest in participating, shared appreciation, convertible and fixed rate mortgages and joint venture financing secured by office, industrial and retail facilities located throughout the United States. The Declaration of Trust provided, among other things, that the Trustees would use their best efforts to terminate the Trust within approximately ten years; provided, however, that the Trustees would have the absolute discretion to determine in good faith such termination date as would be in the best interests of the shareholders of the Trust. The Trustees proceeded with the orderly liquidation of assets and the distribution of proceeds to the shareholders. As of December 31, 1995 all of the assets to be liquidated had been sold except the Hawthorne Note, which was sold on January 3, 1996. In connection with the liquidation, per share final distributions of $15.60 and $1.28 (adjusted for the Share Split, as hereinafter defined) were paid on February 2, 1996 and March 8, 1996, respectively. The remaining assets of the Trust were Peachtree Business Center ("Peachtree") and approximately $163,000 in cash. On January 31, 1996, Vinings Investment Properties, Inc. (the "Purchaser") commenced a cash tender offer (the "Tender Offer") for a minimum of a majority and a maximum of 85% of the outstanding shares of beneficial interest, without par value, (the "Shares") of the Trust at a price of $0.47 per Share ($3.76 adjusted for the Share Split, as hereinafter defined). The Tender Offer expired in accordance with its terms at midnight on February 28, 1996. The Purchaser accepted an aggregate of 6,337,279 Shares (792,159 Shares adjusted for the Share Split, as hereinafter defined) validly tendered pursuant to the Tender Offer, representing approximately 73.3% of the outstanding Shares. The purpose of the Tender Offer was for the Purchaser to acquire control of the Trust and to rebuild Vinings' assets by expanding into the multifamily property markets. In connection with the consummation of the Tender Offer, all of the trustees and officers of the Trust resigned and were replaced with designees of the Purchaser. In addition, prior to the Tender Offer, the Trust was an externally advised REIT for which it paid advisory fees to an unrelated third party (the "Advisor"). Upon consummation of the Tender Offer, the relationship with the Advisor was terminated and the Trust became self-administered. On June 11, 1996, Vinings Investment Properties, L.P. (the "Operating Partnership"), a Delaware limited partnership, was organized. The Trust is the sole general partner and an 80.94% limited partner in the Operating Partnership at December 31, 1998. During the fourth quarter of the fiscal year ended December 31, 1997 ("fiscal 1997"), 242,546 limited partnership units in the Operating Partnership ("Units") were issued, of which 224,330 Units were issued in connection with the acquisition of Windrush, as defined below. The Units are redeemable by their holders for Shares of the Trust on a one-for-one basis or for cash, at the option of the Trust. (This structure is commonly referred to as an umbrella partnership REIT or "UPREIT"). On July 1, 1996, Vinings effected a 1-for-8 reverse share split (the "Share Split") of its 8,645,000 outstanding Shares pursuant to which shareholders of the Trust received one Share for every eight Shares owned. Vinings has purchased and continues to purchase any fractional Shares at a cost of $5.50 per Share. As of December 31, 1998, fractional Shares totaling 120 had been repurchased and retired and 1,100,505 Shares were outstanding. At December 31, 1998, approximately ninety two percent (92%) of Vinings' total assets were invested in three real estate assets. They were: (1) The Thicket Apartments ("Thicket"), a 254-unit apartment complex located in Atlanta, Georgia, owned through Thicket Apartments, L.P., a Delaware limited partnership, of which the Operating Partnership is a 99% limited partner and Thicket Holdings, Inc., a Delaware corporation and wholly-owned subsidiary of the Trust, is the sole general partner; (2) Windrush Apartments ("Windrush"), a 202-unit apartment community located in Atlanta, Georgia, owned through Vinings Communities, L.P., a Delaware limited partnership of which the Operating Partnership is a 99% limited partner and the Trust is the sole general partner and; and (3) Peachtree, an approximately 75,000 square foot, single-story business park located in Atlanta, Georgia, owned by the Operating Partnership. On June 18, 1998 Vinings entered into 18 separate contracts to purchase 14 multifamily communities totaling 2,184 units located in various markets in Mississippi. On February 15, 1999, Vinings renegotiated 17 of the contracts to purchase 13 communities totaling 2,032 units (the "Portfolio") and terminated one of the contracts. The renegotiated purchase price of the Portfolio is $94,300,000, consisting of cash and the assumption of approximately $81,000,000 in existing debt (the "Acquisition Transaction"). Five of the communities, totaling 976 units, will be purchased through a joint venture structure between the Operating Partnership and a private investor and the remaining eight communities, totaling 1,056 units, will be purchased by subsidiaries of the Operating Partnership. In connection with the Acquisition Transaction, an acquisition fee will be paid to an entity affiliated with Management, however, the amount and form of such fee have not yet been determined. Vinings has completed its due diligence review and the contracts are subject only to satisfactory title conditions. Vinings has received conditional commitments for most of its equity financing and is in the process of finalizing its equity commitments. If Vinings receives all approvals and obtains sufficient capital to finance the transaction, the closing of the Portfolio could take place early in the second quarter of 1999, however, there can be no assurance that the Acquisition Transaction will take place. Vinings has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended. As a REIT, Vinings will generally not be subject to federal income taxation on that portion of its income that qualifies as REIT taxable income to the extent that it distributes at least 95% of its taxable income to its shareholders and satisfies certain other requirements. Vinings' executive offices are located at 3111 Paces Mill Road, Suite A-200, Atlanta, Georgia 30339, (770) 984-9500. Financial Information About Industry Segments - --------------------------------------------- Vinings' operations and identifiable long-term assets have been attributed to the real estate industry for the entirety of its existence. While investments prior to the Tender Offer were primarily mortgage loans, currently Vinings' assets are equity investments. Management plans to continue making equity investments in the multifamily real estate markets. Narrative Description of Business - -------------------------------- Vinings' primary objective is to continue to expand into the multifamily real estate markets through the acquisition of garden style apartment communities, which are leased to middle-income residents. The middle-income resident is a more stable and broader based market, often referred to as "the renter by necessity." Management believes that middle market properties provide greater potential for appreciation through increased revenues and cash flows than the more expensive high-end apartment communities, which cater to "the renter by choice." Management believes that these investments will provide attractive sources of income to Vinings, which will not only provide cash available for future distributions, but will increase the value of Vinings' real estate portfolio as well. In the past, Vinings has reviewed each real estate investment in its portfolio on a quarterly basis. Management plans to continue this review as well as to carefully review each acquisition to insure that Vinings makes sound investments on behalf of its shareholders. In this regard, Vinings has established an Acquisition Committee comprised of four members of the Board of Trustees, one of which is also an officer. The Board has also established certain investment criteria, which must be met. The Acquisition Committee must review and approve each potential acquisition before it is presented to the Board for final approval. Growth and Expansion Strategy - ----------------------------- Management intends to implement its growth and expansion strategy by targeting properties that have been under managed and/or under maintained, and purchase such properties at a price which is below replacement cost. Through strategic value added and return oriented capital improvements and intensive property management, the Trust believes that cash flow, and in turn value, will be increased. Vinings currently anticipates that future acquisitions may include certain properties within the existing multifamily property portfolios of entities that are affiliated with Management, as well as properties acquired from unaffiliated third parties such as the Acquisition Transaction. These properties may be acquired either for cash, through debt financing, in exchange for Shares of the Trust or Units or any combination thereof. In addition, the Trust may seek to raise capital through private offerings for specific acquisitions. Competition - ----------- Vinings competes with a number of housing alternatives for its residents including other multifamily communities and single family homes available for rent as well as purchase. This competition could have an effect not only on the properties' ability to lease rental units but also on the rents charged. Vinings also competes with other investors for potential acquisitions, some of which may have greater resources with which to purchase projects that the Trust may be interested in acquiring. Advisory and Property Management Services - ----------------------------------------- Since the consummation of the Tender Offer, Vinings has been self-administered. Vinings has entered into management agreements with an affiliate of certain officers and trustees of the Trust for property management services for Thicket, Windrush and Peachtree for a fee equal to a percentage of gross revenues collected. Up until December 31, 1998, Peachtree was managed by a third-party property management firm not affiliated with management. In addition, as a commitment to the rebuilding of the Trust, The Vinings Group, Inc., also an affiliate of certain officers and trustees of the Trust, has provided numerous services to the Trust during the fiscal year ended December 31, 1998 ("fiscal 1998") relating to administration, acquisition, and capital and asset advisory services at little cost to Vinings. The Trust does not anticipate that these services will continue to be provided free of charge. However, while Vinings has been in its rebuilding stages, the officers and trustees have been committed to providing as many services as possible to promote the Trust's growth. Employees - --------- Vinings does not currently have its own employees as The Vinings Group, Inc. has been providing services to the Trust as described above. However, employees have been hired through the managing agent to provide on-site property management services for Vinings. At December 31, 1998, Thicket and Windrush had 11 employees who performed these on-site management services for the communities and were paid with funds generated from Thicket and Windrush. In addition, during fiscal 1998 the Trust paid a total of $45,000 to affiliated entities for shareholder services performed exclusively for the Trust by one of its employees and a total of $105,000 for the reimbursement of overhead expenses, which includes salaries and benefits for other employees hired by The Vinings Group, Inc. for the benefit of the Trust. The only compensation received by the officers of Vinings from the Trust for their services was in the form of a Share bonus totaling $80,000. (See Notes 6 and 13 to Vinings' December 31, 1998 Consolidated Financial Statements.) Environmental Policy - -------------------- Investments in real property create a potential for environmental liability on the part of the Trust. Owners of real property may be held liable for all costs and liabilities relating to hazardous substances present on or emanating from their properties. Current management assesses on an as needed basis, measures that may need to be taken to comply with environmental laws and regulations. In the event that there is a potential of environmental responsibility, the costs to comply with environmental laws and regulations would be estimated at that time. At December 31, 1998, Vinings was not aware of any potential environmental contamination relating to investments in its portfolio. Certain Factors Affecting Future Operating Results - -------------------------------------------------- This Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Vinings' actual results could differ materially from those set forth in the forward-looking statements. Certain factors that might cause such a difference include the following: the failure of the Trust's systems or software, or the systems and software of a third party on which the Trust relies, to be Year 2000 compliant, the inability of Vinings to identify multifamily properties or property portfolios for acquisition which will have a strategic fit with Vinings, the inability of Vinings to close the transactions currently anticipated, including the Acquisition Transaction or such other contracts as Vinings may enter into in the future, the less than satisfactory performance of any property which might be acquired by Vinings, the inability to access the capital markets in order to fund Vinings' present growth and expansion strategy, the cyclical nature of the real estate market generally and locally in Georgia and the surrounding southeastern states, the national economic climate, the local economic climate in Georgia and the surrounding southeastern states, and the local real estate conditions and competition in Georgia and the surrounding southeastern states. There can be no assurance that, as a result of the foregoing factors, Vinings' growth and expansion strategy will be successful or that the business and operations of Vinings will not be adversely affected thereby. ITEM 2 - PROPERTIES - ------------------- As of December 31, 1998, all of Vinings investments were equity investments in real estate. While Vinings still owns Peachtree, a single-story business park, it intends to continue investing only in multifamily communities. Vinings' real estate investments are summarized below by property: ---------- ---------- ----------- Amount of Investment Occupancy Investment Percentage at 12/31/98 ---------- ---------- ----------- The Thicket Apartments $ 7,997,056 45% 98% Windrush Apartments 7,428,038 42% 98% Peachtree Business Center 2,219,640 13% 100% ============ ======== Totals $17,644,734 100% ============ ======== The above investment amounts are net of accumulated depreciation. Both Thicket and Windrush are encumbered by fixed rate mortgage loans and Peachtree serves as security for the line of credit. Vinings incorporates herein by reference the description of owned real property on Schedule III and the notes thereto. ITEM 3 - LEGAL PROCEEDINGS - -------------------------- None of Vinings' properties are presently subject to any material litigation nor, to Vinings' knowledge, is any material litigation threatened against the Trust or any of its properties, other than routine actions or claims and administrative proceedings arising in the ordinary course of business. Some of these claims are expected to be covered by insurance and all of which collectively are not expected to have a material adverse effect on the business, the financial condition, or the results of operations of Vinings. ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS - -------------------------------------------------------- No matters were submitted to a vote of the Trust's shareholders during the fourth quarter of fiscal 1998. PART II ======= ITEM 5 - MARKET FOR REGISTRANT'S SHARES OF BENEFICIAL INTEREST - -------------------------------------------------------------- Stock Quotation - --------------- Vinings' Shares are currently traded on the Over-the-Counter Bulletin Board under the symbol "VIPIS." On March 31, 1999, the closing sales price for Vinings' Shares, as reported on the Over-the-Counter Bulletin Board, was $4.00. Market Information - ------------------ The high and low sales prices for each quarterly period during fiscal 1998 and fiscal 1997, which reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions, are as follows: --------------------- --------------------- 1998 1997 --------------------- --------------------- Quarter Ended High Low High Low - ------------- ---- --- ---- --- March 31 5 3 1/4 4 5/8 4 3/8 June 30 5 3 4 7/8 4 3/8 September 30 5 7/8 3 3/4 4 7/8 4 December 31 4 3/4 3 7/8 5 1/4 3 3/4 Dividends - --------- No dividends were declared or paid during fiscal 1998. In an effort to rebuild the Trust's assets, all operating cash flow has been reserved for future growth and expansion. However, as assets are acquired and operating cash flow increases, Vinings intends to pay distributions to shareholders in amounts at least sufficient to enable the Trust to qualify as a REIT. Holders - ------- Vinings had 704 holders of record of its Shares as of March 23, 1999. ITEM 6 - SELECTED FINANCIAL INFORMATION - --------------------------------------- The following table sets forth selected financial information for Vinings and should be read in conjunction with "Management's Discussion and Analysis of Financial Condition and Results of Operations, " as well as Vinings' December 31, 1998 Consolidated Financial Statements, which are made a part of this report. All share and per share information have been restated to reflect the Share Split.
------------------------------------------------------------------------- For the year ended December 31, ------------------------------------------------------------------------- 1998 1997 1996 1995 1994 ------------- ------------- ------------- ------------- ------------- Revenues $4,102,003 $2,478,824 $1,796,917 $3,244,908 $4,159,170 Expenses 3,998,110 3,146,005 2,580,195 1,779,475 2,477,923 ------------- ------------- ------------- ------------- ------------- Income (loss) before loss on real estate investments 103,893 (667,181) (783,278) 1,465,433 1,681,247 Loss on real estate investments - - (26,800) (886,887) (816,307) ------------- ------------- ------------- ------------- ------------- Income (loss) before minority interest 103,893 (667,181) (810,078) 578,546 864,940 Minority interest (18,900) 5,464 - - - ------------- ------------- ------------- ------------- ------------- Net income (loss) $ 84,993 $ (661,717) $ (810,078) $ 578,546 $ 864,940 ============= ============= ============= ============= ============= Net income (loss) per share - basic and diluted $ 0.08 $ (0.61) $ (0.75) $ 0.54 $ 0.80 ============= ============= ============= ============= ============= Weighted average shares outstanding - basic 1,090,701 1,080,513 1,080,528 1,080,625 1,080,625 ============= ============= ============= ============= ============= Weighted average shares outstanding - diluted 1,336,391 1,089,435 1,080,528 1,080,625 1,080,625 ============= ============= ============= ============= ============= Dividends declared and paid: Ordinary income $ - $ - $ - $ - $ 0.08 Return of capital - - 16.88 12.24 24.64 ------------- ------------- ------------- ------------- ------------- Total dividends declared and paid $ - $ - $ 16.88 $ 12.24 $ 24.72 ============= ============= ============= ============= ============= Total assets $19,148,178 $18,989,558 $11,519,469 $21,878,357 $34,348,242 ============= ============= ============= ============= ============= Shareholders' equity $ 2,426,972 $ 2,268,803 $ 2,232,548 $21,284,112 $33,932,908 ============= ============= ============= ============= =============
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS - ---------------------------------------------------------- Overview - -------- Vinings Investment Properties Trust ("Vinings" or the "Trust") was organized on December 7, 1984 as a twenty year finite-life real estate investment trust ("REIT") whose original purpose was to invest in participating, shared appreciation, convertible and fixed rate mortgages and joint venture financing secured by office, industrial and retail facilities located throughout the United States. The Declaration of Trust provided, among other things, that the Trustees would use their best efforts to liquidate and terminate the Trust within approximately ten years. The Trustees proceeded with the orderly liquidation of assets and the distribution of proceeds to the shareholders. The remaining assets of the Trust were Peachtree Business Center, a 75,000 square foot business park located in Atlanta, Georgia ("Peachtree") and approximately $163,000 in cash. On January 31, 1996, Vinings Investment Properties, Inc. (the "Purchaser") commenced a cash tender offer (the "Tender Offer") which expired in accordance with its terms at midnight on February 28, 1996. The Purchaser accepted approximately 73.3% of the outstanding Shares and appointed new trustees and officers ("Management"). The purpose of the Tender Offer was for Management to acquire control of the Trust and to rebuild Vinings' assets by expanding into the multifamily real estate markets through the acquisition of garden style apartment communities which are leased to middle-income residents. Management believes that these investments will provide attractive sources of income to Vinings which will not only increase net income and provide cash available for future distributions, but will increase the value of Vinings' real estate portfolio as well. On June 11, 1996, Vinings Investment Properties, L.P. (the "Operating Partnership"), was organized with the Trust as the sole general partner in an effort to facilitate acquisitions. This structure is commonly referred to as an umbrella partnership REIT or "UPREIT". Much of Management's efforts during the fiscal year ended December 31, 1997 ("fiscal 1997") were focused on the acquisition of Windrush Apartments, a 202-unit apartment community located in Atlanta, Georgia ("Windrush"), Vinings' first UPREIT transaction in exchange for units in the Operating Partnership ("Units"). In addition, Management spent a good portion of fiscal 1997 negotiating for a 2,365-unit portfolio, the contract for which was terminated by the seller thirty days prior to closing (the "Portfolio Transaction"). (See Note 14 to Vinings' December 31, 1998 Consolidated Financial Statements). The costs incurred during fiscal 1997 associated with the Portfolio Transaction are included in the results of operations for fiscal 1997. During the first half of the fiscal year ended December 31, 1998 ("fiscal 1998") Management focused on the settlement of the Portfolio Transaction. The proceeds received, net of litigation costs incurred during fiscal 1998, have been included in the results of operations for fiscal 1998. During the second half of fiscal 1998, Management aggressively pursued its growth strategy by negotiating contracts for the acquisition of 13 multifamily communities totaling 2,032 units located in various markets in Mississippi (the "Portfolio"). The aggregate purchase price of the Portfolio is $94,300,000, consisting of cash and the assumption of the existing debt (the "Acquisition Transaction"). Five of the communities, totaling 976 units, will be purchased through a joint venture structure between the Operating Partnership and a private investor and the remaining eight communities, totaling 1,056 units, will be purchased by subsidiaries of the Operating Partnership. (See Note 10 to Vinings' December 31, 1998 Consolidated Financial Statements). However, there can be no assurance that the Acquisition Transaction will take place. The following discussion and analysis of the financial condition and results of operations should be read in conjunction with the accompanying consolidated financial statements of Vinings and the notes thereto. Results of Operations - --------------------- Because Vinings has begun to implement its growth and expansion strategy, net income has increased steadily from fiscal year ended December 31, 1996 ("fiscal 1996") to fiscal 1997 and fiscal 1998. In addition, the nature of the operating expenses has shifted from administrative expenses and advisory fees to property operating expenses and mortgage interest expense connected with Vinings' income producing assets. As a result of the liquidation of assets, change in management, and the redirection of the Trust's business objectives, substantially all of the income producing assets held prior to the Tender Offer are no longer held by Vinings, with the exception of Peachtree. Comparison of Operating Results of 1998 to Operating Results of 1997 - -------------------------------------------------------------------- Total revenues increased $1,623,179, or 65%, from $2,478,824 to $4,102,003 primarily due to the fact that Vinings continued to implement its growth and expansion strategy with the acquisition of Windrush in December, 1997. Rental and other property revenues increased $1,623,174, or 66%, from $2,476,746 to $4,099,920 due primarily to the revenues generated in connection with Vinings' ownership of Windrush for an entire year during fiscal 1998 as compared to less than one month during fiscal 1997. Revenues from Thicket and Peachtree also increased by $122,340 and $29,190, respectively. Property operating and maintenance expense increased $659,281, or 66%, from $992,926 to $1,652,207. Of this increase, $633,662 represents expenses generated in connection with Vinings' ownership of Windrush for an entire year during fiscal 1998 as compared to less than one month during fiscal 1997. Peachtree's operating and maintenance expense increased $24,889 from fiscal 1997 to fiscal 1998 due to various maintenance and repair items, while Thicket's remained constant. Depreciation and amortization increased $214,749, or 50%, from $433,011 to $647,760. Of this increase, $193,541 relates to Vinings' ownership of Windrush for an entire year during fiscal 1998 as compared to less than one month during fiscal 1997. Depreciation on Thicket and Peachtree increased only slightly due to additional improvements made during fiscal 1998. Interest expense increased $512,726, or 63% from $816,551 to $1,329,277 primarily due to Vinings' ownership of Windrush for an entire year during fiscal 1998 as compared to less than one month during fiscal 1997. Interest expense on the line of credit increased $22,894 due to the increased balance during fiscal 1998. General and administrative expense increased $262,498 or 78%, from $336,375 to $598,873. Of this increase, $105,000 represents overhead reimbursements to The Vinings Group (see Note 6 to Vinings' December 31, 1998 Consolidated Financial Statements); $80,000 represents compensation expense relating to the Restricted Stock awarded on July 1, 1998 (see Note 13 to Vinings' December 31, 1998 Consolidated Financial Statements); $51,589 represents legal and accounting fees; and $23,628 relates to travel and abandoned pursuit costs. The unusual item, net included in operating expenses in fiscal 1998 relates to the costs incurred, net of the settlement proceeds received in connection with the Portfolio Transaction totaling $260,910. The costs incurred during fiscal 1997 of $532,185 include due diligence costs incurred in connection with the Portfolio Transaction such as environmental and engineering reports, independent financial analysis, investor appraisal costs and legal contract negotiations. The net cost to Vinings in connection with the entire Portfolio Transaction totaled $271,275. (See Note 14 to Vinings' December 31, 1998 Consolidated Financial Statements). Vinings had income before minority interest of $103,893 for fiscal 1998 as compared to a loss of $667,181 for fiscal 1997, representing an increase of $771,074. The minority interest of ($5,464) for fiscal 1997 represents the allocation of losses for the short period in December 1997 during which Units in the Operating Partnership were held. The minority interest for fiscal 1998 totaled $18,900. Comparison of Operating Results of 1997 to Operating Results of 1996 - -------------------------------------------------------------------- Total revenues increased $681,907, or 38%, from $1,796,917 to $2,478,824 due to the fact that Vinings had begun to pursue its growth and expansion strategy. Rental and other property revenues increased $924,263, or 60%, from $1,552,483 to $2,476,746 due primarily to the revenues generated in connection with Vinings' ownership of Thicket for an entire year during fiscal 1997 as compared to six months during fiscal 1996. Revenues from Peachtree remained fairly constant. Immaterial amounts of revenue were generated for the twelve days Windrush was owned during fiscal 1997. Interest income decreased by $90,579, or 98%, from $92,657 to $2,078. In fiscal 1996, interest income was generated from cash investments primarily in the first two months of the year, prior to the payment of liquidating dividends. Since that time there have been relatively small cash balances. Property operating and maintenance expense increased $406,496, or 69%, from $586,430 to $992,926, primarily due to the expenses generated in connection with Vinings' ownership of Thicket for an entire year during fiscal 1997 as compared to six months during fiscal 1996. Depreciation and amortization increased $188,901, or 77%, from $244,110 to $433,011. Depreciation on Thicket increased $185,165 due to Vinings' ownership of Thicket for an entire year during fiscal 1997 as compared to six months during fiscal 1996 as well as additional depreciation on improvements made during fiscal 1997. Depreciation on Peachtree decreased slightly. Interest expense increased $407,832, or 100% from $408,719 to $816,551 due to Vinings' ownership of Thicket for an entire year during fiscal 1997 as compared to six months during fiscal 1996. General and administrative expense decreased $651,598 or 66%, from $987,973 to $336,375. The majority of the decrease relates to costs associated with the Tender Offer and structural reorganization of the Trust during fiscal 1996 that did not recur during fiscal 1997. The following expense categories included in general and administrative decreased from fiscal 1996 to fiscal 1997: professional fees by $398,733, directors' and officers' insurance by $176,768, trustee expense by $31,312, annual report and proxy costs by $27,361 and filing fees by $17,425. There were no investment advisor's fees incurred during fiscal 1997. All of the advisor's fees during fiscal 1996 were incurred during January and February as the services of the Advisor were terminated at the consummation of the Tender Offer. The unusual item, net of $532,185 included in operating expenses during fiscal 1997 relates to costs incurred in connection with the Portfolio Transaction. These expenses include due diligence costs such as environmental and engineering reports, independent financial analysis, investor appraisal costs and legal contract negotiations. (See Note 14 to Vinings' December 31, 1998 Consolidated Financial Statements). There were no gains or losses on real estate investments during fiscal 1997. The loss on real estate investment of $26,800 in fiscal 1996 represents commissions and fees on the sale of the Hawthorne Note. (See Note 4 to Vinings' December 31, 1998 Consolidated Financial Statements). Vinings incurred a loss before minority interest of $667,181 for fiscal 1997 as compared to $810,078 for fiscal 1996, representing a decrease of $142,897, even with the unusual item described above. Had Vinings not incurred the unusual item associated with the Portfolio Transaction, the loss before minority interest for fiscal 1997 would have been $134,996. The minority interest of ($5,464) represents the allocation of losses for the short period in December 1997 during which Units in the Operating Partnership were held. Liquidity and Capital Resources - ------------------------------- Operating activities provided net cash of $624,783 for fiscal 1998 as compared to $152,536 for fiscal 1997. As discussed previously, the settlement proceeds, litigation costs and transaction costs relating to the Portfolio Transaction have been included in operating activities and totaled a net amount of $260,910 in income during fiscal 1998 and $532,185 in expense during fiscal 1997. (See Note 14 to Vinings' December 31, 1998 Consolidated Financial Statements). The balance of the increased cash provided by operating activities for fiscal 1998 relates to Vinings' ownership of Windrush for an entire year during fiscal 1998 as compared to less than one month during fiscal 1997. As a result of the implementation of Management's growth and expansion strategy, cash flows from investing and financing activities have changed dramatically from fiscal years 1996 to 1997 to 1998. In fiscal 1996, $673,200 was generated from the sale of investments in connection with prior management's liquidation of the Trust's assets and approximately $8,700,000 was invested in Thicket. While Windrush was acquired during fiscal 1997, it was not acquired with cash but through the assumption of debt and the issuance of Units. Approximately $3,800 in cash was spent in connection with the Windrush acquisition and approximately $135,000 was used to make improvements to Thicket and Peachtree. During fiscal 1998, $612,000 was invested in the Acquisition Transaction and approximately $146,000 was used to make improvements to the existing assets. Cash flows provided by or used in financing activities were comprised of (1) distributions to shareholders, and (2) debt incurred. Final liquidating dividends totaling $18,240,950 were made to shareholders during fiscal 1996, with no distributions during fiscal 1997 or fiscal 1998. During fiscal 1996, Vinings received net proceeds of $7,392,000 from a mortgage note payable, in addition to $1,568,104 in proceeds from a secured line of credit, all of which were used in the acquisition of Thicket. During fiscal 1997, an additional $150,000 was drawn from the line of credit. In addition, during fiscal 1997, a mortgage note in the amount of $6,464,898, was assumed in connection with the acquisition of Windrush and is not considered a cash transaction. During fiscal 1998, $281,896 was drawn from the line of credit and mortgage notes payable were reduced by $144,501. Many of the costs associated with the liquidation of the Trust's assets and the subsequent Tender Offer and organizational restructuring that were incurred during fiscal 1996, have not continued into fiscal 1997 or 1998. The cash held by Vinings at December 31, 1998, plus the cash flow from Vinings' assets, including the Acquisition Transaction, is expected to provide sources of liquidity to allow the Trust to meet current operating obligations. The line of credit held by the Trust, which expired in December 1998,was purchased from the bank by one of the Trustees. The line in now due on demand and Vinings is paying interest monthly to the Trustee on the outstanding balance at an annual rate of 8.50%. The Trustee has agreed that he will not demand payment on the note prior to January 1, 2000, unless alternate financing is arranged or Peachtree, which serves as security for the note, is sold. Vinings has agreed that it will use its best efforts to obtain a new line of credit or alternative financing to repay the outstanding balance. (For additional information regarding the line of credit see Note 5 to Vinings December 31, 1998 Consolidated Financial Statements.) In addition, Vinings continues negotiations with a number of capital sources regarding the Acquisition Transaction and intends to continue ongoing discussions with capital sources, both public and private, as well as explore financing alternatives, so as to allow Vinings to expand and grow its income producing investments. (See "Growth and Expansion Strategy".) Recent Accounting Pronouncements - -------------------------------- Vinings adopted Statements of Financial Accounting Standards ("SFAS") No. 130, "Reporting of Comprehensive Income," during 1998, which establishes standards for reporting and display of comprehensive income and its components. Comprehensive income is the total of net income and all other nonowner changes in shareholders' equity. As of December 31, 1998, Vinings had no items of other comprehensive income. Vinings also adopted SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information," during 1998, which establishes new standards for disclosure of segment information on the so called "management approach." The management approach is based on the way that the chief operating decision maker organizes segments within a company for making operating decisions and assessing performance. Since Vinings' real estate portfolio has similar economic characteristics, customers, and products and services, Vinings evaluates the operating performance of its real estate portfolio as one reportable segment, on the same basis of presentation for internal and external reporting. Therefore, no additional segment information is presented herein. Year 2000 - --------- The statements in the following section include "Year 2000 readiness disclosure" within the meaning of the Year 2000 Information and Readiness Disclosure Act of 1998. The "Year 2000 issue" is the term used to describe the various problems caused from the improper processing of dates and date sensitive information by computers and other machinery and equipment. The Year 2000 issue is the result of many computer programs recognizing a date ending with "00" as the year 1900 rather than the year 2000, causing potential system failures or miscalculations which could result in disruptions of normal business operations. Vinings is currently assessing the potential impact Year 2000 will have on its operations. A compliance program has been implemented, which will 1) determine Vinings state of readiness for the Year 2000, including the Trust's information technology ("IT") systems, its non-IT systems and the state of readiness of Vinings material suppliers and third party vendors; 2) assess where potential risks may occur, recognizing that date sensitive systems may fail at different points in time depending on their function, and prioritize those risks; 3) determine what steps need to be taken in order to bring remaining software, hardware and systems, including embedded systems, into Year 2000 compliance; 4) implement, test and re-evaluate all solutions in time to minimize any significant detrimental effects on operations; and 5) determine a contingency plan in the event that the Trust or any of its material suppliers or third party vendors will not be Year 2000 compliant (the "Compliance Program"). Vinings believes that its testing of all systems should be complete by the end of the third quarter, 1999. Vinings believes that most of its computer systems and related software are already Year 2000 compliant. These systems include the on-site resident management software and associated hardware as well as corporate financial and accounting software and related hardware. The costs incurred to date for new on-site hardware and software total approximately $6,200. The financial and accounting systems are shared with The Vinings Group. The costs incurred to upgrade these systems total approximately $70,000 and are in the form of monthly lease payments of $1,178, which expire in November 2002. Currently these lease payments are not a cost of the Trust. Any additional costs to upgrade or modify these systems are not expected to be material. Vinings is still in the process of determining whether many of its other operational systems are Year 2000 compliant and therefore cannot determine at this time the potential impact on the Trust's financial condition and results of operations. These systems include administrative systems as well as mechanical systems. However, Vinings has been in contact with the suppliers and manufacturers of these systems and believes that all material systems within its control will be Year 2000 compliant well in advance of January 1, 2000. Vinings' most reasonably likely worst case scenario relates to Year 2000 non-compliance by third party vendors and service providers. Vinings' relies on a number of suppliers for utility services, financial services, materials, etc. Interruption of suppliers' operations due to Year 2000 issues could have a material adverse effect on the Trust's future financial condition and results of operations. Vinings' has taken steps to evaluate the status of suppliers' efforts in order to determine whether any of these suppliers will have an adverse material effect. Once evaluation is complete, Vinings will determine any required alternatives and contingency plan requirements. The information provided above regarding Vinings' Year 2000 compliance includes forward-looking statements based on management's best estimates of future events. Such forward-looking statements involve risks and uncertainties including the availability of resources, the ability to identify and correct potential Year 2000 sensitive problems that could have a serious impact on operations and the ability of third party suppliers to bring their systems into Year 2000 compliance. There can be no assurance that any of the factors or statements regarding the Trust's Year 2000 preparedness will not change and that any change will not affect the accuracy of the Trust's forward-looking statements. Other Matters - ------------- Vinings was informed on April 3, 1998 by NASDAQ that its shares no longer met certain maintenance requirements for continued listing on the SmallCap Market. Although the Trust believed that all requirements were met, it made the strategic decision not to submit a proposal for achieving compliance so that its listing would be transferred from the SmallCap Market to the Over-the-Counter Bulletin Board. Vinings made this decision because it feels that its growth would have been severely hindered by newly implemented SmallCap requirements pertaining to shareholder approval of new share issuances. Therefore, effective April 28, 1998, Vinings' shares are traded on the Bulletin Board under the symbol "VIPIS." This Form 10-K contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. Vinings' actual results could differ materially from those set forth in the forward-looking statements. Certain factors that might cause such a difference include the following: the failure of the Trust's systems or software, or the systems and software of a third party on which the Trust relies, to be Year 2000 compliant, the inability of Vinings to identify multifamily properties or property portfolios for acquisition which will have a strategic fit with Vinings, the inability of Vinings to close the transactions currently anticipated, including the Acquisition Transaction or such other contracts as Vinings may enter into in the future, the less than satisfactory performance of any property which might be acquired by Vinings, the inability to access the capital markets in order to fund Vinings' present growth and expansion strategy, the cyclical nature of the real estate market generally and locally in Georgia and the surrounding southeastern states, the national economic climate, the local economic climate in Georgia and the surrounding southeastern states, and the local real estate conditions and competition in Georgia and the surrounding southeastern states. There can be no assurance that, as a result of the foregoing factors, Vinings' growth and expansion strategy will be successful or that the business and operations of Vinings will not be adversely affected thereby. ITEM 7A - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK - -------------------------------------------------------------------- Vinings is exposed to market risk from changes in interest rates, which may adversely affect its financial position, results of operations and cash flows. In seeking to minimize the risks from interest rate fluctuations, Vinings manages exposures through its regular operating and financing activities. Vinings does not use financial instruments for trading or other speculative purposes. Vinings is exposed to interest rate risk primarily through its borrowing activities, which are described in Note 5 to Vinings' December 31, 1998 Consolidated Financial Statements. All of Vinings' borrowings are under fixed rate instruments. Vinings has determined that there is no material market risk exposure to its consolidated financial position, results of operations or cash flows. The following table presents principal reductions and related weighted average interest rates by year of expected maturity for Vinings' debt obligations:
- --------------------------------------------------------------------------------------------------------------------------- There- Fair Value (In Thousands) 1999 2000 2001 2002 2003 after Total December 31, 1999 - --------------------------------------------------------------------------------------------------------------------------- Principal Reductions In Mortgage Notes $ 157 $170 $184 $200 $7,103 $5,826 $13,640 $13,640 Average Interest Rates 8.27% 8.27% 8.27% 8.27% 8.27% 7.5% 8.27% 8.27% Line Of Credit $2,000 - - - - - $ 2,000 $ 2,000 Interest Rate(1) 8.50% - - - - - 8.50% 8.50% - -------------------------------------- (1) Based on prime rate as of 12/31/98
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA - ---------------------------------------------------- The consolidated financial statements and supplementary data are listed under Item 14(a) and filed as part of this report on the pages indicated. ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE - ---------------------------------------------------------- The information required by this Item 9 was previously reported in a Current Report on Form 8-K filed with the Securities and Exchange Commission on January 14, 1997. PART III ======== ITEM 10 - DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT - ------------------------------------------------------------ The information concerning the Trustees and Executive Officers of the Registrant required by Item 10 shall be included in the Proxy Statement to be filed relating to the 1999 Annual Meeting of the Registrant's shareholders and is incorporated herein by reference. ITEM 11 - EXECUTIVE COMPENSATION - -------------------------------- The information concerning the Trustees and Executive Officers of the Registrant required by Item 11 shall be included in the Proxy Statement to be filed relating to the 1999 Annual Meeting of the Registrant's shareholders and is incorporated herein by reference. ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT - ------------------------------------------------------------------------ The information concerning Ownership of Certain Beneficial Owners and Management required by Item 12 shall be included in the Proxy Statement to be filed relating to the 1999 Annual Meeting of the Registrant's shareholders and is incorporated herein by reference. ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - -------------------------------------------------------- The information concerning Certain Relationships and Related Transactions required by Item 13 shall be included in the Proxy Statement to be filed relating to the 1999 Annual Meeting of the Registrant's shareholders and is incorporated herein by reference. PART IV ======= ITEM 14 - EXHIBITS, FINANCIAL STATEMENTS AND SCHEDULE AND REPORTS ON FORM 8-K - --------------------------------------------------------- 14(a) (1) and (2) Index to Consolidated Financial Statements and Schedule Page ---- Report of Independent Public Accountants 25 Consolidated Balance Sheets--As of December 31, 1998 and 1997 26 Consolidated Statements of Operations--For the years ended December 31, 1998, 1997 and 1996 27 Consolidated Statements of Shareholders' Equity--For the years ended December 31, 1998, 1997 and 1996 28 Consolidated Statements of Cash Flows--For the years ended December 31, 1998, 1997 and 1996 29 Notes to Consolidated Financial Statements--For the years ended December 31, 1998, 1997 and 1996 30 Consolidated Financial Statement Schedule 48 14(a) (3) Exhibits
Exhibit No. Description - ----------- ----------- 3.1 Second Amended and Restated Declaration of Trust of Vinings (filed herewith). 3.2 Amendment No. 1 to the Second Amended and Restated Declaration of Trust of the Trust (filed herewith). 3.3 Amendment No. 2 to the Second Amended and Restated Declaration of Trust of the Trust (filed herewith). 3.4 Amended and Restated Bylaws of the Trust (incorporated by reference to Exhibit 3.2 to Vinings' Registration Statement on Form S-11, No. 2-94776). 10.1 Amended and Restated Agreement of Limited Partnership of Vinings Investment Properties, L.P. (incorporated by reference to Exhibit 10.1 to Vinings' Annual Report on Form 10-K for the fiscal year ended December 31, 1997, No. 0-13693). 10.2 First Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings Investment Properties, L.P. (incorporated by reference to Exhibit 10.2 to the Vinings' Annual Report on Form 10-K for the fiscal year ended December 31, 1997, No. 0-13693). 10.3 Second Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings Investment Properties, L.P. (incorporated by reference to Exhibit 10.3 to the Vinings' Annual Report on Form 10-K for the fiscal year ended December 31, 1997, No. 0-13693). 10.4 Third Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings Investment Properties, L.P. (filed herewith). 10.5 Fourth Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings Investment Properties, L.P. (filed herewith). 10.6 Fifth Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings Investment Properties, L.P. (filed herewith) 10.7 Agreement to Contribute, dated April 1, 1997, between Vinings Investment Properties, L.P. and Windrush Partners, Ltd. (incorporated by reference to Exhibit 10.1 to the Trust's Current Report on Form 8-K filed December 29, 1997, No. 0-13693). 10.8 Amendment to Agreement to Contribute, dated August 11, 1997, between Vinings Investment Properties, L.P. and Windrush Partners, Ltd. (incorporated by reference to Exhibit 10.2 to the Trust's Report on Form 8-K filed December 29, 1997, No. 0-13693). 10.9 Second Amendment to Agreement to Contribute, dated October 30, 1997, between Vinings Investment Properties, L.P. and Windrush Partners, Ltd. (incorporated by reference to Exhibit 10.3 to the Trust's Report on Form 8-K filed December 29, 1997, No. 0-13693). 10.10 Management Contract dated December 19, 1997 between Vinings Communities, L.P. and Vinings Properties, Inc. (incorporated by reference to Exhibit 10.10 to Vinings' Annual Report on Form 10-K for the fiscal year ended December 31 1997, No. 0-13693). 10.11 Management Contract dated January 1, 1999, between Thicket Apartments, L.P. and VIP Management, LLC (filed herewith). 10.12 Management Contract dated January 1, 1999, between Vinings Communities, L.P. and VIP Management, LLC (filed herewith). 10.13 Management Contract dated January 1, 1999, between Vinings Investment Properties, L.P. and VIP Management, LLC (filed herewith). 10.14 Form of Amended and Restated Agreement of Purchase and Sale for The Acquisition Transition with attached Schedule of Material Differences For All Properties (filed herewith). 10.15 Commercial Credit Agreement between Hardwick Bank and Trust Company and the Trustees of the Trust dated June 28, 1997 (incorporated by reference to Exhibit 10.13 to Vinings' Annual Report on Form 10-K for the fiscal year ended December 31 1997, No. 0-13693). 10.16 Amendment to Commercial Credit Agreement between Hardwick Bank and Trust Company and the Trustees of the Trust dated July 1, 1998 (filed herewith). 21.1 Subsidiaries of the Trust (filed herewith). 27 Financial Data Schedule (filed herewith).
14(b) Reports on Form 8-K ------------------------- Current Report on Form 8-K/A, originally dated December 29, 1997, was filed with the Securities and Exchange Commission on March 3, 1998, with respect to the Trust's acquisition of Windrush. SIGNATURES ========== Pursuant to the requirements of Sections 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. VININGS INVESTMENT PROPERTIES TRUST By: /s/ Peter D. Anzo - --------------------- Peter D. Anzo President and Chief Executive Officer Dated: April 15, 1999 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. Signature Title Date --------- ----- ---- /s/ Peter D. Anzo Chief Executive Officer, April 15, 1999 - ------------------------- President and Trustee Peter D. Anzo /s/ Stephanie A. Reed Vice President, Treasurer, April 15, 1999 - ------------------------- Secretary and Trustee Stephanie A. Reed /s/ Phill D. Greenblatt Trustee April 15, 1999 - ------------------------- Phill D. Greenblatt /s/ Henry Hirsch Trustee April 15, 1999 - ----------------- Henry Hirsch /s/ Martin H. Petersen Trustee April 15, 1999 - ------------------------- Martin H. Petersen /s/ James D. Ross Trustee April 15, 1999 - ------------------------- James D. Ross /s/ Gilbert H. Watts, Jr. Trustee April 15, 1999 - ------------------------- Gilbert H. Watts, Jr. REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ======================================== To Vinings Investment Properties Trust: We have audited the accompanying consolidated balance sheets of Vinings Investment Properties Trust and subsidiaries (the "Trust") as of December 31, 1998 and 1997 and the related consolidated statements of operations, shareholders' equity, and cash flows for each of the three years in the period ended December 31, 1998. These consolidated financial statements and the schedule referred to below are the responsibility of the Trust's management. Our responsibility is to express an opinion on these consolidated financial statements and schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Vinings Investment Properties Trust and subsidiaries as of December 31, 1998 and 1997, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1998 in conformity with generally accepted accounting principles. Our audits were made for the purpose of forming an opinion on the basic financial statements taken as a whole. The schedule listed in the index to financial statements is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic financial statements. This schedule has been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly states in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole. ARTHUR ANDERSEN LLP /s/ Arthur Andersen LLP Atlanta, Georgia February 26, 1999 VININGS INVESTMENT PROPERTIES TRUST AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS ===================================
---------------------------------- December 31, ---------------------------------- 1998 1997 --------------- --------------- ASSETS Real estate assets: Land $ 2,884,500 $ 2,884,500 Buildings and improvements 15,399,690 15,267,009 Furniture, fixtures & equipment 1,025,222 1,011,483 Less: accumulated depreciation (1,664,678) (1,036,311) --------------- --------------- Net real estate assets 17,644,734 18,126,681 Cash and cash equivalents 286,481 282,851 Cash escrows 330,698 314,684 Receivables and other assets 694,998 63,402 Deferred financing costs, less accumulated amortization of $77,258 and $54,459 at December 31, 1998 and 1997, respectively 139,064 169,968 Deferred leasing costs, less accumulated amortization of $32,861 and $39,087 at December 31, 1998 and 1997, respectively 52,203 31,972 --------------- --------------- Total assets $ 19,148,178 $18,989,558 =============== =============== LIABILITIES AND SHAREHOLDERS' EQUITY Mortgage notes payable $ 13,640,065 $13,784,566 Line of credit 2,000,000 1,718,104 Accounts payable and accrued liabilities 546,249 708,876 --------------- --------------- Total liabilities 16,186,314 16,211,546 --------------- --------------- Minority interest of unitholders in Operating Partnership 534,892 509,209 --------------- --------------- Commitments and Contingencies (Note 10) Shareholders' equity: Shares of beneficial interest, without par value, unlimited shares authorized, 1,100,505 and 1,080,512 shares issued and outstanding at December 31, 1998 and 1997, respectively 19,502,911 19,429,735 Cumulative earnings 37,302,590 37,217,597 Cumulative distributions (54,378,529) (54,378,529) --------------- --------------- Total shareholders' equity 2,426,972 2,268,803 --------------- --------------- Total liabilities and shareholders' equity $ 19,148,178 $18,989,558 =============== =============== The accompanying notes are an integral part of these consolidated financial statements.
VININGS INVESTMENT PROPERTIES TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS =====================================
----------------------------------------------- For the years ended December 31, ----------------------------------------------- 1998 1997 1996 ------------- ------------- ----------- REVENUES Rental revenues $ 3,946,828 $ 2,392,072 $ 1,482,419 Other property revenues 153,092 84,674 70,064 Interest income 1,519 2,078 92,657 Other income 564 - 151,777 ------------- ------------- ----------- 4,102,003 2,478,824 1,796,917 ------------- ------------- ----------- EXPENSES Property operating and maintenance 1,652,207 992,926 586,430 Depreciation and amortization 647,760 433,011 244,110 Amortization of deferred financing costs 30,903 34,957 19,502 Interest expense 1,329,277 816,551 408,719 General and administrative 598,873 336,375 987,973 Investment advisor's fee - - 333,461 Unusual item, net (260,910) 532,185 - ------------- ------------- ----------- 3,998,110 3,146,005 2,580,195 ------------- ------------- ----------- Loss on real estate investments - - (26,800) Income (loss) before minority interest 103,893 (667,181) (810,078) ------------- ------------- ----------- Minority interest of unitholders in Operating Partnership (18,900) 5,464 - ------------- ------------- ----------- Net income (loss) $ 84,993 $ (661,717) $(810,078) ============= ============= =========== NET INCOME (LOSS) PER SHARE - BASIC $ 0.08 $ (0.61) $ (0.75) ============= ============= =========== NET INCOME (LOSS) PER SHARE - DILUTED $ 0.08 $ (0.61) $ (0.75) ============= ============= =========== WEIGHTED AVERAGE SHARES OUTSTANDING - BASIC 1,090,701 1,080,513 1,080,528 ============= ============= =========== WEIGHTED AVERAGE SHARES OUTSTANDING - DILUTED 1,336,391 1,089,435 1,080,528 ============= ============= =========== The accompanying notes are an integral part of these consolidated financial statements.
VININGS INVESTMENT PROPERTIES TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY For the years ended December 31, 1996, 1997 and 1998 ====================================================
-------------- -------------- -------------- -------------- Shares of Total beneficial Cumulative Cumulative shareholders' interest earnings distributions equity -------------- -------------- -------------- -------------- BALANCE AT DECEMBER 31, 1995 $36,973,249 $38,689,392 $(54,378,529) $21,284,112 Net loss - (810,078) - (810,078) Retirement of shares (536) - - (536) Distributions to shareholders ($16.88 per share return of capital for federal income tax purposes) (18,240,950) - (18,240,950) -------------- -------------- -------------- -------------- BALANCE AT DECEMBER 31, 1996 18,731,763 37,879,314 (54,378,529) 2,232,548 Adjustment for minority interest of unitholders and issuance of units in Operating Partnership 698,056 698,056 Net loss - (661,717) - (661,717) Retirement of shares (84) - - (84) -------------- -------------- -------------- -------------- BALANCE AT DECEMBER 31, 1997 19,429,735 37,217,597 (54,378,529) 2,268,803 Net income - 84,993 - 84,993 Adjustment for minority interest of unitholders in Operating Partnership (6,781) - - (6,781) Issuance of shares to officers and directors 80,000 - - 80,000 Retirement of shares (43) - - (43) -------------- -------------- -------------- -------------- BALANCE AT DECEMBER 31, 1998 $19,502,911 $37,302,590 $(54,378,529) $2,426,972 ============== ============== ============== ============== The accompanying notes are an integral part of these consolidated financial statements.
VININGS INVESTMENT PROPERTIES TRUST AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS =====================================
----------------------------------------- For the years ended December 31, ----------------------------------------- 1998 1997 1996 ---------- ----------- ------------ CASH FLOWS FROM OPERATING ACTIVITIES: Net income (loss) $84,993 $(661,717) $ (810,078) ---------- ----------- ------------ Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: Depreciation and amortization 647,760 433,011 244,110 Amortization of deferred financing costs 30,903 34,957 19,502 Minority interest of unitholders in Operating Partnership 18,900 (5,464) - (Gain) loss on real estate investments - - 26,800 Noncash compensation expense 80,000 - - Changes in assets and liabilities: Cash escrows (16,014) 75,745 (192,611) Receivables and other assets (19,511) 22,600 260,055 Capitalized leasing costs (39,621) (36,931) (5,639) Accounts payable and accrued liabilities (162,627) 290,335 (247,104) ---------- ----------- ------------ Total adjustments 539,790 814,253 105,113 ---------- ----------- ------------ Net cash provided by (used in) operating activities 624,783 152,536 (704,965) ---------- ----------- ------------ CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of the Thicket Apartments - - (8,660,900) The Thicket capital expenditures (46,129) (109,333) (49,635) Peachtree capital expenditures (33,712) (26,205) (29,862) Windrush capital expenditures (66,579) (3,791) - Refundable deposits and acquisition costs (612,085) - - Sale proceeds from real estate investments - - 673,200 ---------- ----------- ------------ Net cash used in investing activities (758,505) (139,329) (8,067,197) ---------- ----------- ------------ CASH FLOWS FROM FINANCING ACTIVITIES: Net proceeds from line of credit 281,896 150,000 1,568,104 Net proceeds from mortgage note payable - - 7,392,000 Deferred financing costs - - (224,427) Principal repayments on mortgage notes payable (144,501) (52,008) (20,324) Purchase of retired shares (43) (84) (536) Distributions to shareholders - - (18,240,950) ---------- ----------- ------------ Net cash provided by (used in) financing activities 137,352 97,908 (9,526,133) ---------- ----------- ------------ NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 3,630 111,115 (18,298,295) CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 282,851 171,736 18,470,031 ---------- ----------- ------------ CASH AND CASH EQUIVALENTS AT END OF YEAR $286,481 $282,851 $ 171,736 ========== =========== ============ The accompanying notes are an integral part of these consolidated financial statements.
VININGS INVESTMENT PROPERTIES TRUST AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS December 31, 1998, 1997 and 1996 ========================================== NOTE 1 - FORMATION AND ORGANIZATION - ---------------------------------- Vinings Investment Properties Trust ("Vinings" or the "Trust") was organized on December 7, 1984 as a twenty year finite-life real estate investment trust ("REIT") whose original purpose was to invest in participating, shared appreciation, convertible and fixed rate mortgages and joint venture financing secured by office, industrial and retail facilities located throughout the United States. The Declaration of Trust provided, among other things, that the Trustees would use their best efforts to terminate the Trust within approximately ten years. The Trustees proceeded with the orderly liquidation of assets and the distribution of proceeds to the shareholders. The remaining assets of the Trust were Peachtree Business Center, a 75,000 square foot business park located in Atlanta, Georgia ("Peachtree") and approximately $163,000 in cash. On January 31, 1996, Vinings Investment Properties, Inc. (the "Purchaser") commenced a cash tender offer (the "Tender Offer") for a minimum of a majority and a maximum of 85% of the outstanding shares of beneficial interest, without par value (the "Shares"), of the Trust. The Tender Offer expired in accordance with its terms at midnight on February 28, 1996, and the Purchaser accepted approximately 73.3% of the outstanding Shares. In connection with the consummation of the Tender Offer, all of the Trustees and officers of the Trust resigned and were replaced with designees of the Purchaser ("Management"). In addition, the Trust was an externally advised REIT for which it paid advisory fees to an unrelated third party (the "Advisor"). Upon consummation of the Tender Offer, the relationship with the Advisor was terminated and Vinings became self-administered. The purpose of the Tender Offer was for Management to acquire control of the Trust and to rebuild Vinings' assets by expanding into the multifamily real estate markets through the acquisition of garden style apartment communities that are leased to middle-income residents. Management believes that these investments will provide attractive sources of income to Vinings which will not only increase net income and provide cash available for future distributions, but will increase the value of Vinings' real estate portfolio as well. On June 11, 1996, Vinings Investment Properties, L.P. (the "Operating Partnership"), a Delaware limited partnership, was organized. As of December 31, 1998, the Trust was the sole 1% general partner and an 80.94% limited partner in the Operating Partnership. (This structure is commonly referred to as an umbrella partnership REIT or "UPREIT"). Vinings currently owns three real estate assets, which are: (1) The Thicket Apartments ("Thicket"), a 254-unit apartment complex located in Atlanta, Georgia, owned through Thicket Apartments, L.P., a Delaware limited partnership of which the Operating Partnership is a 99% limited partner and Thicket Holdings, Inc., a Delaware corporation and wholly-owned subsidiary of the Trust, is the sole general partner; (2) Windrush Apartments ("Windrush"), a 202-unit apartment community located in Atlanta, Georgia owned through Vinings Communities, L.P., a Delaware limited partnership of which the Operating Partnership is a 99% limited partner and the Trust is the sole general partner; and (3) Peachtree, an approximately 75,000 square foot, single-story business park located in Atlanta, Georgia, owned by the Operating Partnership. At December 31, 1998, Thicket, Windrush and Peachtree were 98%, 98% and 100% leased, respectively. On July 1, 1996, Vinings effected a 1-for-8 reverse share split (the "Share Split") of its 8,645,000 outstanding Shares. Shareholders tendered their Shares and received one Share for every eight Shares owned. Vinings has purchased and continues to purchase any fractional Shares at a cost of $5.50 per share. As of December 31, 1998, fractional Shares totaling 120 had been repurchased and retired. All share and per share data included in the accompanying financial statements and notes thereto have been restated to reflect the Share Split. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - -------------------------------------------------- Basis of Presentation --------------------- The accompanying consolidated financial statements of Vinings include the consolidated accounts of the Trust and its subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The minority interest of the unitholders in the Operating Partnership on the accompanying balance sheet is calculated based on the minority interest ownership percentage (18.06% as of December 31, 1998) multiplied by the Operating Partnership's net assets. The minority interest of the unitholders in the income or loss of the Operating Partnership on the accompanying statement of operations is calculated based on the weighted average number of Shares and Units (as hereinafter defined) outstanding during the period. The term "Vinings" or "Trust" hereinafter refers to Vinings Investment Properties Trust and its subsidiaries, including the Operating Partnership. Income Taxes ------------ Vinings has elected to be taxed as a REIT under the Internal Revenue Code of 1986, as amended (the "Code"). As a result, Vinings will generally not be subject to federal income taxation on that portion of its income that qualifies as REIT taxable income to the extent that Vinings distributes at least 95% of its taxable income to its shareholders and satisfies certain other requirements. Accordingly, no provision for federal income taxes has been included in the accompanying consolidated financial statements. Cash and Cash Equivalents ------------------------- Vinings considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. Cash Escrows ------------ Cash escrows consist of real estate tax, insurance and replacement reserve escrows held by mortgagees. These escrows are funded monthly from property operations and released solely for the purpose for which they were established. Use of Estimates ---------------- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Real Estate Assets ------------------ Real estate assets are stated at depreciated cost less reductions for impairment, if any. In identifying potential impairment, management considers such factors as declines in a property's operating performance or market value, a change in use, or adverse changes in general market conditions. In determining whether an asset is impaired, management estimates the future cash flows expected to be generated from the asset's use and its eventual disposition. If the sum of these estimated future cash flows on an undiscounted basis is less than the asset's carrying cost, the asset is written down to its fair value. In management's opinion, there has been no impairment of Vinings' real estate assets as of December 31, 1998. Ordinary repairs and maintenance are expensed as incurred. Major improvements and replacements are capitalized and depreciated over their estimated useful lives when they extend the useful life, increase capacity or improve efficiency of the related asset. Depreciation is computed on a straight-line basis over the useful lives of the real estate assets (buildings and improvements, 5-40 years; furniture, fixtures and equipment, 3-5 years; and tenant improvements, generally over the life of the related lease). Revenue Recognition ------------------- All leases are classified as operating leases and rental income is recognized when earned which materially approximates revenue recognition on a straight-line basis. Deferred Financing Costs and Amortization ----------------------------------------- Deferred financing costs include fees and costs incurred to obtain financing and are capitalized and amortized over the term of the related debt. Net Income (Loss) Per Share --------------------------- The following is a reconciliation of net income (loss) available to the common shareholders and the weighted average shares used in Vinings' basic and diluted net income (loss) per share computations: ---------------------------------------- 1998 1997 1996 ---------------------------------------- Net income (loss) - basic $ 84,993 $(661,717) $(810,078) Minority interest 18,900 (5,464) - ----------------------------------------- Net income (loss) - diluted $103,893 $(667,181) $(810,078) ========================================= Weighted average shares - basic 1,090,701 1,080,513 1,080,528 Dilutive Securities Weighted average Units in Operating Partnership 242,546 8,922 - Share options 3,144 - - ----------------------------------------- Weighted average shares - diluted 1,336,391 1,089,435 1,080,528 ========================================= Units in the Operating Partnership held by the minority unitholders are redeemable for Shares of the Trust on a one-for-one basis, or for cash, at the option of the Trust. For the twelve months ended December 31, 1998 options to purchase 27,500 shares were excluded and for the twelve months ended December 31, 1997 options to purchase 26,000 shares were excluded as the impact of such options was antidilutive. Recent Accounting Pronouncement ------------------------------- Vinings adopted Statements of Financial Accounting Standards ("SFAS") No. 130, "Reporting of Comprehensive Income," during 1998, which establishes a standard for reporting and display of comprehensive income and its components. Comprehensive income is the total of net income and all other nonowner changes in shareholders' equity. As of December 31, 1998, Vinings had no items of other comprehensive income. Vinings also adopted SFAS No. 131, "Disclosures About Segments of an Enterprise and Related Information," during 1998, which establishes new standards for disclosure of segment information on the so called "management approach." The management approach is based on the way that the chief operating decision maker organizes segments within a company for making operating decisions and assessing performance. Since Vinings' real estate portfolio has similar economic characteristics, customers, and products and services, Vinings evaluates the operating performance of its real estate portfolio as one reportable segment, on the same basis of presentation for internal and external reporting. Therefore, no additional segment information is presented herein. Reclassification ---------------- Certain 1997 and 1996 financial statement amounts have been reclassified to conform with the current year presentation. NOTE 3 - REAL ESTATE ASSETS - --------------------------- Windrush Apartments ------------------- On December 19, 1997, Vinings acquired Windrush for a purchase price of $7,555,000 consisting of the assumption of an existing mortgage loan in the amount of $6,464,898 and other liabilities and the issuance of 224,330 limited partnership units in the Operating Partnership ("Units"). The Thicket Apartments ---------------------- On June 28, 1996, Vinings acquired Thicket for a purchase price of $8,650,000. The acquisition was financed by a mortgage loan on the property in the amount of $7,392,000 and borrowings from Vinings' line of credit. Peachtree Business Center ------------------------- Vinings acquired Peachtree through a deed-in-lieu of foreclosure on April 12, 1990. Peachtree was recorded at $1,700,000, its fair market value, which was less than the book value of the Trust's mortgage investment at the date of foreclosure. Subsequent to the acquisition, approximately $1,121,800 of improvements have been capitalized. Acquisition Transaction ----------------------- Vinings has entered into 17 separate contracts to purchase 13 multifamily communities totaling 2,032 units located in various markets in Mississippi (the "Portfolio"). The aggregate purchase price of the Portfolio is $94,300,000, consisting of cash and the assumption of existing debt (the "Acquisition Transaction"). Five of the communities, totaling 976 units, will be purchased through a joint venture structure between the Operating Partnership and a private investor, and the remaining eight communities, totaling 1,056 units, will be purchased by subsidiaries of the Operating Partnership. For more information regarding the Acquisition Transaction, see Note 10 to Vinings December 31, 1998 Consolidated Financial Statements. NOTE 4 - REAL ESTATE INVESTMENTS - -------------------------------- Hawthorne Note -------------- The Trust acquired the Hawthorne Research and Development Complex ("Hawthorne") in 1992 through foreclosure of its mortgage note. The Trust's investment in the property was written down from 1992 through 1994 to $4,605,702 to reflect its anticipated net realizable value. On March 30, 1995, the Trust sold Hawthorne for $5,095,000 of which $3,500,000 was paid at closing. The balance of $1,595,000 (the "Hawthorne Note") was payable pursuant to a nonrecourse purchase money note and was subordinate to first mortgage liens totaling $10,360,000. In connection with the sale of Hawthorne, the Trust reported a gain of $152,825. In connection with the liquidation of assets, the Trust entered into an agreement with the first mortgage lien holder to sell the Hawthorne Note for $700,000. At December 31, 1995, the Trust established a valuation allowance of $895,000 to reflect its net realizable value of $700,000. On January 3, 1996, the Trust closed on the sale of the Hawthorne Note and recorded commissions and fees for a loss on the sale of $26,800. NOTE 5 - NOTES PAYABLE - --------------------- Mortgage Notes Payable ---------------------- At December 31, 1998, Vinings had the following mortgage notes payable: 1) 9.04% mortgage note payable in the original principal amount of $7,392,000, which is secured by Thicket and which matures on July 1, 2003. Principal and interest are payable in monthly installments of $59,691. 2) 7.5% mortgage note payable which was assumed on December 19, 1997 with a principal balance of $6,464,898, which is secured by Windrush and which matures on July 1, 2024. Principal and interest are payable in monthly installments of $47,457. At December 31, 1998, the total outstanding principal for both notes was $13,640,065. Scheduled maturities of the mortgage notes payable as of December 31, 1998 are as follows: 1999 $ 156,664 2000 169,860 2001 184,179 2002 199,716 2003 7,103,494 Thereafter 5,826,152 ------------ Total $13,640,065 ============ Line of Credit ------------- On June 28, 1998 Vinings renewed its line of credit in the amount of $2,000,000 for six months, which expired on December 28, 1998. Vinings did not renew the line of credit at that time and the bank informally extended the due date to February 4, 1999 with interest continuing to be paid monthly until Vinings secured alternate financing. On February 4, 1999 one of the independent Trustees purchased the line of credit from the bank and Vinings is now paying interest to the Trustee monthly at the annual rate of 8.50%. The Trustee has agreed that he will not demand payment on the line of credit prior to January 1, 2000, unless Vinings obtains alternative finanacing or unless the Trust sells Peachtree, which secures the note. Vinings has agreed that is will use its best efforts to obtain a new line of credit or alternative financing as soon as possible, which if obtained will be used to repay the outstanding indebtedness. NOTE 6 - RELATED PARTY TRANSACTIONS - ----------------------------------- Vinings entered into management agreements with Vinings Properties, Inc., an affiliate of certain officers and Trustees of Vinings, to provide property management services for Thicket and Windrush for a fee equal to a percentage of gross revenues plus a fee for data processing. A total of $188,032, $93,235 and $44,459 in management fees and $27,360, $15,240 and $7,620 in data processing fees were incurred by Vinings during 1998, 1997 and 1996, respectively. On January 1, 1999, Vinings entered into new management agreements with VIP Management, LLC, also an affiliate of certain officers and Trustees of Vinings, to provide property management services for Thicket, Windrush and Peachtree on substantially the same terms as the previous agreements. In addition, as a commitment to the rebuilding of Vinings, prior to 1998 The Vinings Group, Inc., the parent corporation of Vinings Properties, Inc. (collectively, "The Vinings Group"), provided numerous services at no cost to Vinings relating to administration, acquisition, and capital and asset advisory services. Certain direct costs paid on Vinings' behalf were reimbursed to The Vinings Group and beginning January 1, 1998, The Vinings Group charged Vinings for certain overhead charges. However, while Vinings has been in its initial growth stages, The Vinings Group has been committed to providing as many services as possible to promote the Trust's growth. A total of $45,000, $45,000 and $15,000 was paid for 1998, 1997 and 1996, respectively, to The Vinings Group for shareholder services provided for the sole benefit of Vinings by one of The Vinings Group's employees. In addition, a total of $105,000 has been incurred for the year ended December 31, 1998 to The Vinings Group for the reimbursement of overhead expenses, which includes salaries and benefits for other employees hired by The Vinings Group for the benefit of the Trust. The officers of the Trust have not received compensation from Vinings for their services during the three year period ended December 31, 1998 except for the Restricted Stock, as hereinafter defined, which was awarded on July 1, 1998. (See Note 13.) On February 4, 1999 one of the independent Trustees purchased the Trust's line of credit, which expired on December 28, 1998 and Vinings is now paying interest to the Trustee monthly at the annual rate of 8.50%. (See Note 5.) On December 19, 1997, the Trust acquired Windrush from Windrush Partners, Ltd. (the "Partnership"), a Georgia limited partnership, whose general partner was Hallmark Group Services Corp ("Hallmark"). At the time of the transaction, Hallmark was an affiliate of the officers and certain trustees of the Trust. In connection with the acquisition of Windrush, an advisor's fee of $75,550 was paid by the Partnership to MFI Realty, Inc.("MFI"), a wholly owned subsidiary of The Vinings Group, Inc. In connection with the acquisition of Thicket on June 28, 1996, a broker's commission of $150,000 was paid by the seller of the property to MFI. In addition, the Trust paid a total of $21,000 during 1997 to Northshore Communications, Inc., a company affiliated with one of the Trustees, for the design and production of Vinings' 1996 annual report. NOTE 7 - ADVISORY AGREEMENT - --------------------------- Prior to the consummation of the Tender Offer, the Trust had engaged the Advisor to provide investment advisory services and act as the administrator of Trust operations. The agreement with the Advisor, which was terminated upon consummation of the Tender Offer, provided for the payment of administrative, asset management and other servicing fees to the Advisor for services rendered in administering the Trust's operations. The Advisor earned administrative, asset management, special services, and mortgage servicing fees aggregating $333,461 for the year ended December 31, 1996. NOTE 8 - DISTRIBUTIONS - --------------------- There were no distributions declared or distributed for the years ended December 31, 1998 and 1997. Distributions declared and distributed for the year ended December 31, 1996 aggregated $18,240,950, or $16.88 per share. For federal income tax purposes, all distributions received by shareholders for the year ended December 31, 1996 represented a return of capital. Since the consummation of the Tender Offer, management has not declared any dividends. In an effort to rebuild Vinings' assets, all operating cash flow has been reserved for future growth and expansion. However, as assets are acquired and operating cash flow increases, Vinings intends to pay distributions to shareholders in amounts at least sufficient to enable the Trust to qualify as a REIT. NOTE 9 - LEASING ACTIVITY - ------------------------- The following is a schedule of future minimum rents due under operating leases that have initial or remaining noncancellable lease terms in excess of one year as of December 31, 1998, at Peachtree: 1999 $ 541,410 2000 412,217 2001 313,573 2002 120,557 ------------ Total $1,387,757 ============ One tenant generated 50% of Peachtree's revenues for the period ended December 31, 1998. The same tenant accounts for 70% of the future minimum lease payments. NOTE 10 - Commitments and CONTINGENCIES - --------------------------------------- Acquisition Transaction ----------------------- On June 18, 1998 Vinings entered into 18 separate contracts to purchase 14 multifamily communities totaling 2,184 units located in various markets in Mississippi. On February 15, 1999, Vinings renegotiated 17 of the contracts to purchase 13 communities totaling 2,032 units (the "Portfolio") and terminated one of the contracts. The renegotiated purchase price of the Portfolio is $94,300,000, consisting of cash and the assumption of existing debt (the "Acquisition Transaction"). Five of the communities, totaling 976 units, will be purchased through a joint venture structure between the Operating Partnership and a private investor and the remaining eight communities, totaling 1,056 units, will be purchased by subsidiaries of the Operating Partnership. Vinings has completed its due diligence review and the contracts are subject only to satisfactory title conditions. Vinings has received conditional commitments for most of its equity financing and is in the process of finalizing its equity commitments. If Vinings receives all approvals and obtains sufficient capital to finance the transaction, the closing of the Portfolio could take place early in the second quarter of 1999, however, there can be no assurance that the Acquisition Transaction will take place. Miscellaneous ------------- Vinings is, from time to time, subject to various claims that arise in the ordinary course of business. These matters are generally covered by insurance. While the resolution of these matters cannot be predicted with certainty, management believes that the final outcome of such matters will not have a material adverse effect on the financial position or results of operations of Vinings. NOTE 11 - SUPPLEMENTAL CASH FLOW INFORMATION - -------------------------------------------- Vinings paid interest of $1,299,005, $800,388 and $353,032 during 1998, 1997 and 1996, respectively. In connection with the December 19, 1997 Windrush acquisition, Vinings assumed a mortgage note payable in the amount of $6,464,898 and related cash escrow accounts. In addition, 242,546 limited partnership units in the Operating Partnership were issued during 1997 valued at $1,212,729. NOTE 12 - DISCLOSURE ABOUT FAIR VALUE OF FINANCIAL INSTRUMENTS - -------------------------------------------------------------- Based on interest rates and other pertinent information available to Vinings as of December 31, 1998 and 1997, the Trust estimates that the carrying value of cash and cash equivalents, the mortgage notes payable, the line of credit, and other liabilities approximate their fair values when compared to instruments of similar type, terms and maturity. Disclosure about fair value of financial instruments is based on pertinent information available to management as of December 31, 1998 and 1997. Although management is not aware of any factors that would significantly affect its estimated fair value amounts, such amounts have not been comprehensively revalued for purposes of these financial statements since December 31, 1998. NOTE 13 - 1997 STOCK OPTION AND INCENTIVE PLAN - ---------------------------------------------- Vinings' 1997 Stock Option and Incentive Plan (the "Plan") provides incentives to officers, employees, Trustees, and other key persons including the grant of share options, share appreciation rights, restricted and unrestricted share awards, performance share awards, and dividend equivalent rights. Under the Plan, the maximum number of shares that may be reserved and available for issuance is 10% of the total number of outstanding shares at any time plus 10% of the number of Units outstanding at any time that are subject to redemption rights. At December 31, 1998 the total number of shares available for issuance under the Plan was 134,305. Options granted under the Plan expire ten years from the date of grant. During 1998 and 1997, Vinings granted non-qualified share options to the officers, Trustees and certain key persons. The options vest in full after one year from the date of the grant. Of the options granted in 1998, 81,250 have an exercise price of $4.00 per share as compared to a fair value of $3.63 on the date of the grant and 1,500 have an exercise price of $4.75 per share, which is equal to the fair value on the date of grant. The options granted in 1997 have an exercise price of $5.00 per share as compared to a fair value of $4.56 per share on the date of the grant. On July 1, 1998 Vinings awarded 20,000 shares of restricted stock to the officers and certain trustees (the "Restricted Stock"), representing a total value of $80,000 (based on the fair market value of a share of the Trust on the award date) which has been reflected in compensation expense in the second quarter and in shareholders' equity as of December 31, 1998. The Restricted Stock was awarded as compensation for services to the Trust provided by such officers and trustees as well as by The Vinings Group. The Trust accounts for share options issued under the Plan in accordance with APB Opinion No. 25, "Accounting for Stock Issued to Employees," under which no compensation cost has been recognized since all options have been granted with an exercise price equal to or above the fair value of the Trust's shares on the date of grant. In accordance with SFAS No. 123 "Accounting for Stock-Based Compensation," the Trust has estimated the fair value of the Options using a binomial option pricing model with the following weighted average assumptions: ---------- ---------- 1998 1997 ---------- ---------- Risk free rate 5.50% 6.12% Expected life 5 years 5 years Expected volatility 30% 30% Expected dividend yield 3.6% 3.6% Using these assumptions, the estimated fair value of the options granted were $87,112 and $38,000 for 1998 and 1997, respectively, which would be included in compensation expense over the life of the vesting period. Accordingly, had Vinings accounted for the Plan under SFAS 123, Vinings' pro forma net income (loss) and net income (loss) per share for the year ended December 31, 1998 and 1997 would have been as follows: ------------------- --------------- 1998 1997 ------------------- --------------- Net income: As reported $84,993 ($661,717) =================== =============== Pro forma $29,799 ($680,717) =================== =============== Net income per share: As reported $0.08 ($0.61) =================== =============== Pro forma $0.03 ($0.63) =================== =============== The pro forma annual compensation cost included in determining pro forma net income may not be representative of future pro forma annual compensation cost since the estimated fair value of stock options is included in compensation expense over the vesting period, and additional stock options may be granted in future years. A summary of stock option activity under the Plan is presented in the following table:
-------------------------------------- ----------------------------------- 1998 1997 ------------ ------------------------- ---------- ------------------------ Weighted Average Weighted Average Shares Exercise Price Shares Exercise Price Options outstanding, beginning of year 26,000 $ 5.00 - - Granted 82,750 $ 4.01 26,000 $5.00 ------------ ------------------------- ---------- ------------------------ Options outstanding, end of year 108,750 $ 4.25 26,000 $5.00 ============ ========================= ========== ======================== Options exercisable, end of year 26,000 $ 5.00 - - ============ ========================= ========== ======================== Weighted average per share value of options granted $ 1.05 $1.46 ========================= ======================== Options outstanding: Exercise price range $4.00-$5.00 $5.00 ========================= ======================== Weighted average remaining life 9.11 9.5 ========================= ========================
NOTE 14 - UNUSUAL ITEM - ---------------------- In August 1997, Vinings, through the Operating Partnership, began contract negotiations for the acquisition of a 2,365-unit portfolio of 16 multifamily properties. The sellers, which were 16 individual partnerships (the "Sellers"), were to contribute the properties to the Operating Partnership in exchange for a combination of Units and/or cash and the assumption of existing mortgage indebtedness (the "Portfolio Transaction"). The officers of Vinings spent substantial amounts of time and the Trust spent substantial amounts of money in its due diligence on the properties and in contract negotiations specifically for this portfolio. Vinings believes that it secured a binding commitment from the Sellers for the Portfolio Transaction. Conditional commitments for equity financing were obtained and Vinings was prepared to close on the transaction in early 1998. Within thirty days of closing, the general partner of the Sellers terminated the contract for reasons Vinings believes to be pretextual, in breach of the contract and not in the best interests of the partners of the selling partnerships or the shareholders of the Trust. On February 3, 1998, Vinings commenced an action against the Sellers, their general partners and a related property management company seeking specific enforcement of the contract and damages for the defendant's willful breach of contract, lack of good faith negotiation and tortious interference in connection with the breach and termination of the contract. In a related case, the Sellers filed an action on January 29, 1998 seeking a declaratory judgement that the contract was not valid, binding and enforceable against them. Because of the uncertainty of the legal action at December 31, 1997, Vinings expensed as unrecoverable due diligence, contract negotiation and other acquisition costs totaling $532,185 which has been shown as Unusual item, net on the Statement of Operations for 1997. On June 3, 1998, a settlement was agreed to between the parties pursuant to a Settlement Agreement and Mutual Release, the terms of which are confidential. All pending claims have been dismissed. Amounts received under the Settlement Agreement and Mutual Release, net of legal fees incurred in connection with the litigation, totaled $260,910, which has been shown as Unusual item, net on the Statement of Operations for 1998. VININGS INVESTMENT PROPERTIES TRUST SCHEDULE III - REAL ESTATE AND ACCUMULATED DEPRECIATION December 31, 1998 =======================================================
--------------------------- Initial Cost to Trust --------------------------- Improvements Capitalized Building and Subsequent to Description Encumbrance Land Improvements Acquisition Land - -------------------------------------------------------------------------- -------------- ------------- Peachtree Business Center $ 2,000,000 $ 400,000 $ 1,300,000 $1,121,835 $ 400,000 The Thicket Apartments 7,262,759 1,070,500 7,590,400 205,098 1,070,500 Windrush Apartments 6,377,306 1,414,000 6,141,000 66,579 1,414,000 --------------------------------------------- -------------- ------------- $15,640,065 $2,884,500 $15,031,400 $1,393,512 $2,884,500 ============================================= ============== ============= ---------------------------------------------- Gross amounts at which carried at close of period ---------------------------------------------- Life on which Date of Building and Accumulated Depreciation Date Original Description Improvements Total Depreciation is Computed Acquired Construction - ---------------------------------------------------------------------------------------------------------------------------------- Peachtree Business Center $ 2,421,835 $ 2,821,835 $ 602,195 5-40 Years 4/90 1984 The Thicket Apartments 7,795,498 8,865,998 868,942 5-40 Years 6/96 1989 Windrush Apartments 6,207,579 7,621,579 193,541 5-40 Years 12/97 1983 ---------------------------------------------- $16,424,912 $19,309,412 $1,664,678 ============================================== The accompanying notes are an integral part of this schedule.
VININGS INVESTMENT PROPERTIES TRUST NOTES TO SCHEDULE III December 31, 1998 =================================== (A) The Peachtree investment was acquired through a deed in-lieu of foreclosure of an original mortgage note investment. In June 1996, the Trust obtained a $2,000,000 line of credit, which was secured by Peachtree. At December 31, 1998, $2,000,000 was outstanding on the line. (B) The Thicket Apartments was acquired on June 28, 1996 for a purchase price of $8,650,000. It was financed by a mortgage loan in the original amount of $7,392,000 and borrowings from the Trust's line of credit, which is secured by Peachtree. (C) Windrush Apartments was acquired on December 19, 1997, for a purchase price of $7,555,000 consisting of the assumption of an existing mortgage loan in the amount of $6,464,898 and other liabilities and the issuance of 224,330 limited partnership units in the Operating Partnership. (D) Gross capitalized costs of real estate assets are summarized as follows: --------------------------------------------- 1998 1997 1996 --------------------------------------------- Balance at beginning of period $19,162,992 $11,472,454 $ 2,732,057 -------------- -------------- ------------- Additions during period: Additions - 7,555,000 8,660,900 Improvements 146,420 135,538 79,497 -------------- -------------- ------------- Total additions 146,420 7,690,538 8,740,397 -------------- -------------- ------------- Balance at close of period $19,309,412 $19,162,992 $11,472,454 ============== ============== ============= (E) Accumulated depreciation on real estate assets is as follows: ------------- ------------ ------------- 1998 1997 1996 ------------- ------------ ------------- Balance at beginning of period $1,036,311 $ 613,918 $374,524 ------------- -------------- ------------- Additions during period: Peachtree Business Center 76,979 74,263 76,429 The Thicket Apartments 357,847 348,130 162,965 Windrush Apartments 193,541 - - ------------- ------------ ------------- Total additions 628,367 422,393 239,394 ------------- ------------ ------------- Balance at close of period $1,664,678 $1,036,311 $613,918 ============= ============ ============= INDEX TO EXHIBITS =================
Exhibit No. Description - ----------- ----------- 3.1 Second Amended and Restated Declaration of Trust of Vinings (filed herewith). 3.2 Amendment No. 1 to the Second Amended and Restated Declaration of Trust of the Trust (filed herewith). 3.3 Amendment No. 2 to the Second Amended and Restated Declaration of Trust of the Trust (filed herewith). 3.4 Amended and Restated Bylaws of the Trust (incorporated by reference to Exhibit 3.2 to Vinings' Registration Statement on Form S-11, No. 2-94776). 10.1 Amended and Restated Agreement of Limited Partnership of Vinings Investment Properties, L.P. (incorporated by reference to Exhibit 10.1 to Vinings' Annual Report on Form 10-K for the fiscal year ended December 31, 1997, No. 0-13693). 10.2 First Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings Investment Properties, L.P. (incorporated by reference to Exhibit 10.2 to the Vinings' Annual Report on Form 10-K for the fiscal year ended December 31, 1997, No. 0-13693). 10.3 Second Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings Investment Properties, L.P. (incorporated by reference to Exhibit 10.3 to the Vinings' Annual Report on Form 10-K for the fiscal year ended December 31, 1997, No. 0-13693). 10.4 Third Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings Investment Properties, L.P. (filed herewith). 10.5 Fourth Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings Investment Properties, L.P. (filed herewith). 10.6 Fifth Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings Investment Properties, L.P. (filed herewith) 10.7 Agreement to Contribute, dated April 1, 1997, between Vinings Investment Properties, L.P. and Windrush Partners, Ltd. (incorporated by reference to Exhibit 10.1 to the Trust's Current Report on Form 8-K filed December 29, 1997, No. 0-13693). 10.8 Amendment to Agreement to Contribute, dated August 11, 1997, between Vinings Investment Properties, L.P. and Windrush Partners, Ltd. (incorporated by reference to Exhibit 10.2 to the Trust's Report on Form 8-K filed December 29, 1997, No. 0-13693). 10.9 Second Amendment to Agreement to Contribute, dated October 30, 1997, between Vinings Investment Properties, L.P. and Windrush Partners, Ltd. (incorporated by reference to Exhibit 10.3 to the Trust's Report on Form 8-K filed December 29, 1997, No. 0-13693). 10.10 Management Contract dated December 19, 1997 between Vinings Communities, L.P. and Vinings Properties, Inc. (incorporated by reference to Exhibit 10.10 to Vinings' Annual Report on Form 10-K for the fiscal year ended December 31 1997, No. 0-13693). 10.11 Management Contract dated January 1, 1999, between Thicket Apartments, L.P. and VIP Management, LLC (filed herewith). 10.12 Management Contract dated January 1, 1999, between Vinings Communities, L.P. and VIP Management, LLC (filed herewith). 10.13 Management Contract dated January 1, 1999, between Vinings Investment Properties, L.P. and VIP Management, LLC (filed herewith). 10.14 Form of Amended and Restated Agreement of Purchase and Sale for The Acquisition Transition with attached Schedule of Material Differences For All Properties (filed herewith). 10.15 Commercial Credit Agreement between Hardwick Bank and Trust Company and the Trustees of the Trust dated June 28, 1997 (incorporated by reference to Exhibit 10.13 to Vinings' Annual Report on Form 10-K for the fiscal year ended December 31 1997, No. 0-13693). 10.16 Amendment to Commercial Credit Agreement between Hardwick Bank and Trust Company and the Trustees of the Trust dated July 1, 1998 (filed herewith). 21.1 Subsidiaries of the Trust (filed herewith). 27 Financial Data Schedule (filed herewith).
EX-3.(I) 2 3.1 SECOND AMENDED & RESTATED DECLARATION OF TRUST SECOND AMENDED AND RESTATED DECLARATION OF TRUST OF MELLON PARTICIPATING MORTGAGE TRUST COMMERCIAL PROPERTIES SERIES 85/10 ---------------------------------- INDEX - ----- Page ---- THE TRUST; DEFINITIONS 2 Name 2 Place of Business 2 Nature of Trust 3 Purpose of the Trust 3 Definitions 3 INVESTMENT POLICY 9 General Statement of Policy 9 Additional Investments 9 TRUSTEES 10 Number, Term of Office, Qualifications of Trustees 10 Compensation and Other Remuneration 10 Resignation, Removal and Death of Trustees 10 Vacancies 11 Successor and Additional Trustees 11 Actions by Trustees 11 Unaffiliated Trustees 12 Committees 12 TRUSTEES' POWERS 13 Power and Authority of Trustees 13 Specific Powers and Authorities 13 By-Laws 18 Employment of Adviser, Employees, Agents, etc 18 Term 19 Activities of Adviser 19 Adviser Compensation 19 Operating Expenses 20 PROHIBITED ACTIVITIES 20 Prohibited Investments and Activities 20 Obligor's Default 22 Percentage Determinations 22 Shares 22 Legal Ownership of Trust Estate 23 Shares Deemed Personal Property 23 Share Record, Issuance and Transferability of Shares 23 Dividends and Distributions to Shareholders 24 Transfer Agent, Dividend Disbursing Agent and Registrar 24 Shareholders' Meetings and Consents 25 Proxies 25 Reports to Shareholders 25 Fixing Record Date 26 Notice to Shareholders 26 Shareholders' Disclosure; Trustees' Right to Refuse to Transfer Shares; Limitation on Holdings; Redemption of Shares 26 Inspection by Shareholders 29 Limitation of Liability of Trustees and Officers 29 Limitation of Liability of Shareholders, Trustees and Officers 29 Express Exculpatory Clauses in Instruments 29 Indemnification and Reimbursement of Trustees and Officers 29 Right of Trustees and Officers to Own Shares or Other Property and to Engage in Other Business 30 Transactions with Affiliates 31 Persons Dealing With Trustees or Officers 31 Reliance 32 Duration and Termination of Trust 32 Merger, etc 33 Amendment Procedure 34 Amendment, etc. Prior to First Public Offering of Shares 34 Applicable Law 34 Filing of Copies; References; Headings 35 Provisions of the Trust in Conflict With Law or Regulations 35 Binding Effect; Successors in Interest 37 Signatures and Acknowledgments SECOND AMENDED AND RESTATED DECLARATION OF TRUST OF MELLON PARTICIPATING MORTGAGE TRUST COMMERCIAL PROPERTIES SERIES 85/10 ----------------------------------- THE DECLARATION OF TRUST of Mellon Participating Mortgage Trust, Series 85/10 dated as of the 7th day of December, 1984, and previously amended January 11, 1985 is hereby amended, effective February 6, 1985 by the undersigned Trustees, who constitute all the Trustees of Mellon Participating Mortgage Trust, Series 85/10, to make the amendments as set forth in the following Amended and Restated Declaration of Trust of Mellon Participating Mortgage Trust Commercial Properties Series 85/10: The undersigned Trustees of Mellon Participating Mortgage Trust, Commercial Properties Series 85/10 hereby declare that all property, real, personal or mixed, tangible or intangible or of any other description now held or hereafter acquired by or transferred to them in their capacity as Trustees hereunder, together with the income and profits therefrom and the proceeds thereof, shall be held by them in trust and shall be received, managed and disposed of for the benefit of the Shareholders hereunder and in the manner and subject to the terms and conditions herein provided. WHEREAS, the Trustees named herein desire to form a trust for the purposes of raising capital and utilizing such capital primarily to invest in mortgage loans and other real estate related investments; and WHEREAS, the Trustees named herein desire that such trust qualify as a Real Estate Investment Trust under Sections 856-858 of the Internal Revenue Code of 1954, as amended; and WHEREAS, the beneficial interest in the assets of such trust shall be divided into transferable shares of beneficial interest, evidenced by certificates therefor, as hereinafter provided; NOW THEREFORE, the Trustees named herein hereby declare that they will hold all investments of every type and description which they may acquire as such Trustees, together with the proceeds from the sale or other disposition thereof, in trust, to manage, improve, hold and dispose of the same for the benefit of the holders of record from time to time of the certificates for shares of beneficial interest of such trust being issued and to be issued hereunder and in the manner and subject to the provisions hereof, to wit: ARTICLE I THE TRUST; DEFINITIONS 1.1 NAME. The Trust created by this Declaration of Trust is herein referred to as the "Trust" and shall be known by the name "Mellon Participating Mortgage Trust, Commercial Properties Series 85/10." So far as may be practicable, legal and convenient, the affairs of the Trust shall be conducted and transacted under that name, which name shall not refer to the Trustees individually or personally or to the beneficiaries or Shareholders of the Trust, or to any officers, employees or agents of the Trust. Under circumstances in which the Trustees determine that the use of the name "Mellon Participating Mortgage Trust, Commercial Properties Series 85-10" is not practicable, legal or convenient, they may as appropriate use and adopt another name under which the Trust may hold property or operate in any jurisdiction. Legal title to all the properties subject from time to time to this Declaration of Trust shall be transferred to, vested and held by the Trustees as joint tenants with right of survivorship as Trustees of this Trust; provided that the Trustees shall have the power to cause legal title to any property of the Trust to be held by and/or in the name of one or more of the Trustees, or any other Person as nominee, on such terms, in such manner, and with such powers as the Trustees may determine; and further provided that the Trustees shall have the power to cause any property of the Trust to be held in the custody of (i) any bank and that such bank may hold the property of the Trust in the name of any nominee, partnership or nontaxable corporation, and (ii) any depository system for the central handling of Securities. Notwithstanding the foregoing provisions of this Section 1.1, it is hereby acknowledged that Mellon Bank Corporation has a proprietary interest in the name "Mellon." Accordingly, and in recognition of this right, at any time that the Trust ceases to retain a subsidiary or affiliate of Mellon Bank Corporation to perform the services of Adviser, the Trustees will, promptly after receipt of a written request of Mellon Bank Corporation (if such request is made within three months after such subsidiary or affiliate ceases to perform such services of Adviser), change the name of the Trust to a name that does not contain the name "Mellon" or any other word or words that might, in the sole discretion of Mellon Bank Corporation, be susceptible of indication of some form of relationship between the Trust and Mellon Bank Corporation or any subsidiary or affiliate thereof. Consistent with the foregoing, it is specifically recognized that Mellon Bank Corporation or one or more of its affiliates has in the past and may in the future organize, sponsor or otherwise permit to exist other investment vehicles (including vehicles for investment in real estate) and financial and service organizations having the word "Mellon" as part of their name, all without the need for any consent (and without the right to object thereto) by the Trust. 1.2 PLACE OF BUSINESS. The Trust shall maintain an office, and shall designate a resident agent for the service of process (whose name and address shall be reported from time to time to the Secretary of State of Massachusetts), in New York, New York. The Trust may have such other offices or places of business within or without the Commonwealth of Massachusetts as the Trustees may from time to time determine. 1.3 NATURE OF TRUST. The Trust is a trust or voluntary association of the type referred to in Section 1 of Chapter 182 of the General Laws of the Commonwealth of Massachusetts and commonly known as a business trust. It is intended that the Trust elect to carry on business as a real estate investment trust as described in the REIT Provisions of the Internal Revenue Code as soon as and as long as it is deemed by the Trustees to be in the best interest of the Shareholders to make such election. The Trust is not intended to be, shall not be deemed to be, and shall not be treated as, a general partnership, limited partnership, joint venture, corporation, or joint stock company or association (but nothing herein shall preclude the Trust from being taxable as an association under the REIT Provisions of the Internal Revenue Code) nor shall the Trustees or Shareholders or any of them for any purpose be deemed to be or be treated in any way whatsoever to be, liable or responsible hereunder as partners or joint venturers or as agents of one another. The relationship of the Shareholders to the Trustees shall be solely that of beneficiaries of the Trust and their rights shall be limited to those conferred upon them by this Declaration. 1.4 PURPOSE OF THE TRUST. The purpose of the Trust is to purchase, hold, lease, manage, sell, exchange, develop, subdivide, joint venture, mortgage, finance and improve real property and interests in real property, including notes, bonds and other obligations secured by mortgages or deeds of trust on real property, and in general to carry on any other acts in connection with or arising out of the foregoing and to have and exercise all powers that are available to voluntary associations formed under the laws of the Commonwealth of Massachusetts and to do any or all of the things herein set forth to the same extent as natural persons might or could do. 1.5 DEFINITIONS. The terms defined in this Section 1.5 whenever used in this Declaration shall, unless the context otherwise requires, have the respective meanings hereinafter specified in this Section 1.5. In this Declaration, words in the singular number include the plural and in the plural number include the singular. 1.5.1 ADVISER. "Adviser" shall mean Mellon Real Estate Investment Management Corporation or any other person (other than any individual who is a direct employee of the Trust) retained by the Trustees consistent with the provisions of Article V to manage and administer the day-to-day affairs of the Trust. 1.5.2 AFFILIATED PERSON. An "Affiliated Person" of another Person shall mean any Person who owns beneficially, directly or indirectly, 1% or more of the outstanding capital stock, shares or equity interests of such other Person or of any other Person which controls, is controlled by or is under common control with such other Person or who is an officer, director, employee, partner or trustee (excluding Unaffiliated Trustees not otherwise affiliated with the entity) of such Person or of any other Person which controls, is controlled by or is under common control with such Person. 1.5.3 ANNUAL MEETING OF SHAREHOLDERS. "Annual Meeting of Shareholders" shall mean the meeting referred to in the first sentence of Section 7.7. 1.5.4 ANNUAL REPORT. "Annual Report" shall mean the Report referred to in Section 7.9. 1.5.5 Book Value. "Book Value" shall mean the value of an asset or assets of the Trust on the books of the Trust before reserves for depreciation or bad debts or other similar non-cash reserves, and before deducting any Indebtedness or other liability in respect thereto. 1.5.6 BY-LAWS. "By-Laws shall mean the By-Laws referred to in Section 4.3, if adopted. 1.5.7 DECLARATION. "Declaration" shall mean this Amended and Restated Declaration of Trust of Mellon Participating Mortgage Trust, Commercial Properties Series 85-10 and all amendments or modifications hereof. References in this Declaration to "herein" and "hereunder" shall be deemed to refer to this Declaration and shall not be limited to the particular text, Article or Section in which such words appear. 1.5.8 FIRST MORTGAGE. "First Mortgage" shall mean a Mortgage which takes priority or precedence over all other charges or liens upon the same Real Property, other than a lessee's interest therein, and which must be satisfied before such other charges are entitled to participate in the proceeds of any sale. Such Mortgage may be upon a lessee's interest in Real Property. Such priority shall not be deemed abrogated by liens for taxes, assessments which are not delinquent or remain payable without penalty, contracts (other than contracts for repayment of borrowed moneys) or leases, mechanics' and materialmen's liens for work performed and materials furnished which are not in default or are in good faith being contested, and other claims normally deemed in the local jurisdiction not to abrogate the priority of a First Mortgage. 1.5.9 FIRST MORTGAGE LOAN. "First Mortgage Loan" shall mean a Mortgage Loan secured or collateralized by a First Mortgage. 1.5.10 INDEBTEDNESS. "Indebtedness" shall mean the amount of all obligations of the Trust for money borrowed, including all obligations issued or assumed by the Trust as full or partial payment for property, in each case except to the extent money shall have been set aside or deposited for the payment thereof. "Indebtedness" shall be computed without any discount due to the fact that the interest rate on financing associated with one or more property acquisitions of the Trust is below a market rate of interest at the time of any such acquisition. 1.5.11 JUNIOR MORTGAGE. "Junior Mortgage" shall mean a Mortgage which (I) has the same priority or precedence over charges or encumbrances upon Real Property as that required for a First Mortgage except that it is subject to the priority of one or more Mortgages and (ii) must be satisfied before such other charges or liens (other than prior Mortgages) are entitled to participate in the proceeds of any sale. 1.5.12 JUNIOR MORTGAGE LOAN. "Junior Mortgage Loan" shall mean a Mortgage Loan secured or collateralized by a Junior Mortgage, and also includes any Subordinated Land Purchase-Leaseback. 1.5.13 LAND PURCHASE-LEASEBACK. "Land Purchase-Leaseback" shall mean a transaction involving the purchase of the land on which improvements are or are to be constructed, and the lease, generally to the seller, of the land pursuant to a land or ground lease. In a "Subordinated Land Purchase-Leaseback" transaction, the Trust's interest in the land will be subject to a First Mortgage and other liens or security interests which are liens on the entire Real Property, including the land. 1.5.14 LIMIT. "Limit" shall mean the number of Shares described in Section 7.12.3. 1.5.15 MORTGAGE. "Mortgage" shall mean the security interest in Real Property granted to secure a Mortgage Loan. 1.5.16 MORTGAGE LOAN. "Mortgage Loan" shall mean a note, bond or other evidence of indebtedness or obligation which is secured or collateralized by an interest in Real Property. 1.5.17 NET INCOME. "Net Income" for any period shall mean the net income of the Trust for such period computed on the basis of its results of operations for such period, excluding (i) any disposition fee or any incentive fee payable to the Adviser, (ii) gains from the disposition of assets of the Trust (including realized gains from the sale of Real Estate Investments), (iii) amortization, depreciation or depletion of the assets of the Trust and (iv) extraordinary items. 1.5.18 PERSON. "Person" shall include individuals, corporations, limited partnerships, general partnerships, joint stock companies or associations, joint ventures, associations, consortia, companies, trusts, banks, trust companies, land trusts, common law trusts, business trusts, or other entities and governments and agencies and political subdivisions thereof. 1.5.19 REAL ESTATE INVESTMENT. "Real Estate Investment" shall mean any direct or indirect investment in any interest in Real Property (including Land Purchase- Leaseback transactions) or in any Mortgage Loan, or in any entity, partnership or venture whose principal purpose is to make any such investment or investments. 1.5.20 REAL ESTATE INVESTMENT TRUST. "Real Estate Investment Trust" and "REIT" shall mean a real estate investment trust as defined in the REIT Provisions of the Internal Revenue Code, at such time as it is the policy of the Trust (or, if applicable to a Person other than this Trust, then of such other Person) to obtain the favorable federal income tax benefits available to a qualified real estate investment trust. 1.5.21 REAL PROPERTY. "Real Property" shall mean and include land, rights and interests in land, leasehold interests (including but not limited to interests of a lessor or lessee therein), and any buildings, structures, improvements, fixtures and equipment located on or to be located on or used or to be used in connection with land, leasehold interests and rights in land or interests in land, but does not include Mortgages, Mortgage Loans, or interests therein. 1.5.22 REIT PROVISIONS OF THE INTERNAL REVENUE CODE. "REIT Provisions of the Internal Revenue Code" shall mean Parts II and III of Subchapter M of Chapter 1 of Subtitle A of the Internal Revenue Code of 1954, as now enacted or hereafter amended, or successor statutes, other sections of said Code referred to or incorporated in, or referring to or incorporating, any other provisions of said Parts II or III, and applicable regulations under and rulings with respect to the aforesaid provisions of said Code. 1.5.23 SECURITIES. "Securities" shall mean any stock, shares, voting trust certificates, bonds, debentures, notes or other evidences of Indebtedness or ownership or in general any instruments commonly known as "securities" or any certificates of interest, shares or participations in temporary or interim certificates for, receipts for, guarantees of, or warrants, options or rights to subscribe, to purchase or acquire any of the foregoing. 1.5.24 SHARES. "Shares" shall mean the shares of beneficial interest in the Trust as described in Section 7.1. "Excess Shares" shall mean Shares described as such in Section 7.12.3. 1.5.25 SHAREHOLDERS. "Shareholders" shall mean as of any particular time the holders of record of outstanding Shares at such time. 1.5.26 TOTAL ASSETS; Invested Assets; Net Assets; Base Assets. "Total Assets" shall mean the total invested assets of the Trust, without deducting therefrom any liabilities of the Trust and including depreciable assets therein at the cost of such assets on the books of the Trust. "Invested Assets" shall mean the aggregate Book Values of the Real Estate Investments of the Trust. "Average Invested Assets" shall mean for any period the average of the values of Invested Assets at the beginning of the period and at the end of each month during such period. "Base Assets" shall mean the Book Value, or such other value as the Trustees (including a majority of the Trustees not affiliated with the Adviser) may determine to be the fair value of Total Assets under management less cash and unsecured indebtedness; and "Average Base Assets" for any period shall be the average of Base Assets at the beginning of the period and at the end of each month during such period. "Net Assets" shall mean Total Assets (other than intangibles) less total liabilities, calculated at least quarterly on a basis consistently applied. Notwithstanding any other provision of this Section 1.5.26, Total Assets, Invested Assets, Average Invested Assets, Base Assets, Average Base Assets and Net Assets shall be computed without any discount in the carrying amount of any assets due to the fact that the interest rate on financing associated with one or more property acquisitions of the Trust is below market rate of interest at the time of such acquisition. 1.5.28 TOTAL OPERATING EXPENSES. "Total Operating Expenses" for any period shall mean all cash operating expenses, including additional expenses paid directly or indirectly by the Trust to the Adviser, Affiliated Persons of the Adviser, or third parties based upon their relationship with the Trust, including loan administration, servicing, engineering, inspection and all other expenses paid by the Trust, exclusive of: (i) Interest and discounts; (ii) Taxes and license fees; (iii) Expenses connected directly with the issuance, sale and distribution, or listing on a stock exchange, of Securities of the Trust, including but not limited to underwriting and brokerage discounts and commissions, private placement fees and expenses, legal and accounting costs, printing, engraving and mailing costs, and listing and registration fees; and (iv) Expenses connected directly with the acquisition, disposition, operation or ownership of Trust assets, including but not limited to costs of foreclosure; maintenance, repair and improvement of property; maintenance and protection of the lien of mortgages; property management fees; legal fees; premiums for insurance on property owned by or mortgaged to the Trust; taxes; brokerage and acquisition fees and commissions; appraisals fees; title insurance and abstract expenses; provisions for depreciation, depletion and amortization; disposition fees and subordinated real estate commissions; and losses on the disposition of assets and provisions for such losses. 1.5.29 TRUST. "Trust" shall mean the trust created by this Declaration. 1.5.30 TRUSTEES. "Trustees" shall mean, as of any particular time, Trustees holding office under this Declaration at such time, whether they be the Trustees named herein or additional or successor Trustees, and shall not include the officers, representatives or agents of the Trust or the Shareholders; but nothing herein shall be deemed to preclude the Trustees from also serving as officers, representatives or agents of the Trust or owning Shares. 1.5.31 TRUST ESTATE. "Trust Estate" shall mean as of any particular time any and all property, real, personal or otherwise, tangible or intangible, transferred, conveyed or paid to the Trust or Trustees, and all rents, income, profits and gains therefrom which at such time is owned or held by the Trust or the Trustees. 1.5.32 UNAFFILIATED TRUSTEE. "Unaffiliated Trustee" shall mean a Trustee who (i) is not an Affiliated Person of the Adviser or of any Affiliated Person of the Adviser owns no interest in the Adviser or in any Affiliated Person of the Adviser, and (ii) any Trustee who performs no services for the Trust except in his capacity as a Trustee and who has no business or professional relationship with the Adviser or any Affiliate of the Adviser. If a member of a Trustee's immediate family could not be an Unaffiliated Trustee, such Trustee shall not be considered an Unaffiliated Trustee. 1.5.33 UNIMPROVED REAL PROPERTY. "Unimproved Real Property" shall mean an investment in Real Property which (a) is an equity interest in Real Property which has not been acquired for the purpose of producing rental or other operating income and (b) relates to land on which (i) no development or construction is in progress, and (ii) no development or construction is planned in good faith to commence within one year. 1.5.34 VALUATION. "Valuation" shall mean a determination, by the Trustees or by a Person having no economic interest in such Real Property, who in the sole judgment of the Trustees is properly qualified to make such a determination, of the market value, as of the date of the valuation, of Real Property in its existing state or in a state to be created. ARTICLE II INVESTMENT POLICY 2.1 GENERAL STATEMENT OF POLICY. It is the general policy of the Trust that the Trustees invest the Trust Estate principally in investments which will conserve and protect the Trust's invested capital, produce cash distributions, and offer the potential for capital appreciation to be realized upon the sale, refinancing or other disposition of such investments. To achieve this objective the Trustees intend to invest the assets of the Trust in Mortgage Loans and Land Purchase-Leasebacks, including those with equity enhancements, and other real estate investments which offer the potential to achieve such objective. The consideration paid for Real Property acquired by the Trust shall ordinarily be based on the fair market value of the property as determined by a majority of the Trustees. In cases where a majority of the Unaffiliated Trustees so determine, such fair market value shall be as determined by a qualified independent real estate appraiser selected by the Trustees, including a majority of the Unaffiliated Trustees. The Trustees, including a majority of the Unaffiliated Trustees, shall at least annually review the investment policies of the Trust to determine that the policies being followed by the Trust are in the best interests of the Shareholders, and each such determination and the basis therefor shall be set forth in the minutes of meetings of the Trustees. 2.2 ADDITIONAL INVESTMENTS. To the extent that the Trust has assets not otherwise invested in accordance with Section 2.1, the Trustees may invest such assets in: 2.2.1 Obligations of or guaranteed or insured by the United States Government or any agencies or political subdivisions thereof; 2.2.2 Obligations of or guaranteed by any state, territory or possession of the United States of America or any agencies or political subdivisions thereof; 2.2.3 Evidences of deposits in, or obligations of, banking institutions, state and federal savings and loan associations and savings institutions which are members of the Federal Deposit Insurance Corporation or of the Federal Home Loan Bank System, or shares in money market funds (whether or not insured), including those issued by an Affiliated Person of the Adviser; 2.2.4 Shares of other REITs, to the extent permitted by the REIT provisions of the Internal Revenue Code; or 2.2.5 Other Securities and property to the extent not inconsistent with the REIT Provisions of the Internal Revenue Code. ARTICLE III TRUSTEES 3.1 NUMBER, TERM OF OFFICE, QUALIFICATIONS OF TRUSTEES. There shall be no fewer than 3 nor more than 9 Trustees, at least a majority of whom shall be Unaffiliated Trustees. The initial Trustees shall be the signatories hereto. The Trustees from time to time may fix the number of Trustees within the range established in the Declaration of Trust and may change the range in the authorized number of Trustees, provided that the lower end of the authorized range shall not be fewer than three. Subject to the provisions of Section 3.3, each Trustee shall hold office for a term of one year or until the election and qualification of his successor. At each Annual Meeting of Shareholders, the Shareholders shall elect successors to the Trustees, unless the number of Trustees is then being reduced. There shall be no cumulative voting in the election of Trustees. Trustees may be re-elected without limit as to the number of times. A Trustee shall be an individual at least 21 years of age who is not under legal disability. Unless otherwise required by law or by action of the Trustees, no Trustee shall be required to give bond, surety or security in any jurisdiction for the performance of any duties or obligations hereunder. The Trustees in their capacity as Trustees shall not be required to devote their entire time to the business and affairs of the Trust. 3.2 COMPENSATION AND OTHER REMUNERATION. The Trustees (other than the Unaffiliated Trustees) shall be entitled to receive such reasonable compensation for their services as Trustees as they may determine from time to time. The Trustees shall also be entitled to receive, directly or indirectly, remuneration for services rendered to the Trust in any other capacity, including, without limitation, services as an officer of or consultant to the Trust, legal, accounting or other professional services, or services as a transfer agent, or underwriter, or otherwise. The Trustees shall be reimbursed for their reasonable expenses incurred in connection with their services as Trustees. 3.3 RESIGNATION, REMOVAL AND DEATH OF TRUSTEES. A Trustee may resign at any time by giving written notice to the remaining Trustees at the principal offices of the Trust. Such resignation shall take effect on the date such notice is given or at any later time specified in the notice without need for prior accounting. A Trustee may be removed at any time with or without cause by vote or written consent of holders of a majority of the outstanding Shares entitled to vote thereon or with cause by all remaining Trustees. For purposes of the immediately preceding sentence "cause" shall include physical and/or mental inability, due to a condition or illness which is expected to be of permanent or indefinite duration, to perform the duties of a Trustee. A Trustee may be removed at a special meeting of Shareholders. Upon the resignation or removal of any Trustee, or his otherwise ceasing to be a Trustee, he shall execute and deliver such documents as the remaining Trustees shall require for the conveyance of any Trust property held in his name, shall account to the remaining Trustee or Trustees as they require for all property which he holds as Trustee and shall thereupon be discharged as Trustee. Upon the incapacity or death of any Trustee, his legal representative shall perform the acts set forth in the preceding sentence and the discharge mentioned therein shall run to such legal representative and to the incapacitated Trustee or the estate of the deceased Trustee as the case may be. 3.4 VACANCIES. If any or all of the Trustees cease to be Trustees hereunder, whether by reason of resignations, removal, incapacity, death or otherwise, such event shall not terminate the Trust or affect its continuity. Until vacancies are filled, the remaining Trustee or Trustees (even though fewer than three) may exercise the powers of the Trustees hereunder. Vacancies (including vacancies created by increases in the number of Trustees) may be filled for the unexpired term by the remaining Trustee or by a majority of the remaining Trustees (which majority shall include a majority of the remaining Trustees that are Unaffiliated Trustees if the vacant position was formerly held by an Unaffiliated Trustee). If at any time there shall be no Trustees in office, successor Trustees shall be elected by the Shareholders as provided in Section 7.7. 3.5 SUCCESSOR AND ADDITIONAL TRUSTEES. The right, title, and interest of the Trustees in and to the Trust Estate shall also vest in successor and additional Trustees upon their qualification, and they shall thereupon have all the rights and obligations of Trustees hereunder. Such right, title and interest shall vest in the Trustees whether or not conveyancing documents have been executed and delivered pursuant to Section 3.3 or otherwise. Appropriate written evidence of the election and qualification of successor and additional Trustees shall be filed with the records of the Trust and in such other offices or places as the Trustees may deem necessary, appropriate or desirable. Upon the resignation, removal or death of a Trustee, he (and in the event of his death, his estate) shall automatically cease to have any right, title or interest in or to any of the Trustee property, and the right, title and interest in such Trustee in and to the Trust Estate shall vest automatically in the remaining Trustees without any further act. 3.6 ACTIONS BY TRUSTEES. The Trustees may act with or without a meeting. A quorum for all meetings of the Trustees shall be a majority of the Trustees. Unless specifically provided otherwise in this Declaration, any action of the Trustees may be taken at a meeting by vote of a majority of the Trustees present at such meeting if a quorum is present, or without a meeting by written consent of all of the Trustees. The decision of the Trust to invest in any Real Estate Investment shall require the approval of a majority of the Unaffiliated Trustees. Any agreement, deed, Mortgage, lease or other instrument or writing executed by any one or more of the Trustees or by any one or more authorized Persons shall be valid and binding upon the Trustees and upon the Trust when authorized by action of the Trustees or as provided in the By-Laws, if the same are adopted. Trustees and members of any committee of the Trustees may conduct meetings by conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting. An annual meeting of the Trustees shall be held at substantially the same time as the Annual Meeting of Shareholders. Regular meetings, if any, shall be held at such other times as shall be fixed by the Trustees. No notice shall be required of an annual or a regular meeting of Trustees. Special meetings of the Trustees shall be called by the Chairman or the President upon the request of any two Trustees and may be called by the Chairman or the President on his own motion, on not less than two days' notice to each Trustee if the meeting is to be held in person, and/or not less than eight hours' notice if the meeting is to be held by conference telephone or similar equipment. Such notice, which need not state the purpose of the meeting, shall be by oral, telegraphic, telephonic or written communication stating the time and place therefor. Notice of any special meeting need not be given to any Trustee entitled thereto who submits a written and signed waiver of notice, either before or after the meeting, or who attends the meeting without protesting, prior thereto or at its commencement, the lack of notice to him. Regular or special meetings of the Trustees may be held within or without the Commonwealth of Massachusetts, at such places as shall be designated by the Trustees. The Trustees may adopt such rules and regulations for their conduct and the management of the affairs of the Trust as they may deem proper and as are not inconsistent with this Declaration. 3.7 UNAFFILIATED TRUSTEES. In order that a majority of the Trustees shall be Unaffiliated Trustees, if at any time, by reason of one or more vacancies, there shall not be such a majority, then within 120 days after such vacancy occurs, the continuing Trustee or Trustees then in office shall appoint, pursuant to Section 3.4, a sufficient number of other Persons who are Unaffiliated Trustees, so that there shall be such a majority. Notwithstanding the provisions of Section 3.1, of the preceding sentence of this Section 3.7, or of any other provision of this Declaration of Trust, however, there shall be no requirement as to the election, appointment or incumbency of, or as to any action by, Unaffiliated Trustees at any time that all of the outstanding Shares of the Trust are owned by the Adviser and Affiliated Persons of the Adviser and by employees of the Adviser and of such Affiliated Persons. 3.8 COMMITTEES. The Trustees may appoint from among their number an executive committee and such other standing committees, including without limitation investment, audit, nominating, and compensation committees, or special committees as the Trustees determine. Each standing committee shall consist of three or more members, a majority of whom shall not be Affiliated Persons of the Adviser. Each committee shall have such powers, duties and obligations as may be required by any governmental agency or other regulatory body or as the Trustees may be deem necessary and appropriate. Without limiting the generality of the foregoing, the executive committee shall have the power to conduct the business and affairs of the Trust during periods between meetings of the Trustees. The executive committee and other committees shall report their activities periodically to the Trustees. ARTICLE IV TRUSTEES' POWERS 4.1 POWER AND AUTHORITY OF TRUSTEES. The Trustees, subject only to the specific limitations contained in this Declaration, shall have, without further or other authorization, and free from any power of control on the part of the Shareholders, full, absolute and exclusive power, control and authority over the Trust Estate and over the business and affairs of the Trust to the same extent as if the Trustees were the sole owners thereof in their own right, and to do all such acts and things as in their sole judgment and discretion are necessary or incidental to, or desirable for, the carrying out of any of the purposes of the Trust or conducting the business or the Trust. Any determination made in good faith by the Trustees of the purposes of the Trust or the existence of any power or authority hereunder shall be conclusive. In construing the provisions of this Declaration, presumption shall be in favor of the grant of powers and authority to the Trustees. The enumeration of any specific power or authority herein shall not be construed as limiting the general powers or authority or any other specified power or authority conferred herein upon the Trustees. 4.2 SPECIFIC POWERS AND AUTHORITIES. Subject only to the express limitations contained in this Declaration and in addition to any powers and authorities conferred by this Declaration or which the Trustees may have by virtue of any present or future statute or rule of law, the Trustees without any action or consent by the Shareholders shall have and may exercise, at any time and from time to time, the following powers and authorities which may or may not be exercised by them in their sole judgment and discretion, and in such manner, and upon such terms and conditions as they may, from time to time, deem proper: 4.2.1 To retain, invest and reinvest the capital or other funds of the Trust and, for such consideration as they deem proper, to purchase or otherwise acquire for cash or other property or through the issuance of Shares or other Securities of the Trust and hold for investment real or personal property of any kind, tangible or intangible, in entirety or in participation, all without regard to whether any such property is authorized by law for the investment of trust funds, and to possess and exercise all the rights, powers and privileges appertaining to the ownership of the Trust Estate with respect thereto. 4.2.2 To sell, rent, lease, hire, exchange, release, partition, assign, mortgage, pledge, hypothecate, grant security interests in, encumber, negotiate, convey, transfer or otherwise dispose of or grant interests in all or any portion of the Trust Estate by deeds, financing statements, security agreements and other instruments, trust deeds, assignments, bills of sale, transfers, leases or Mortgages, for any of such purposes. 4.2.3 To enter into leases, contracts, obligations, and other agreements for a term extending beyond the term of office of the Trustees and beyond the possible termination of the Trust or for a lesser term. 4.2.4 To borrow money and give negotiable or non-negotiable instruments therefor; to guarantee, indemnify or act as surety with respect to payment or performance of obligations of third parties; to enter into other obligations on behalf of the Trust; and to assign, convey, transfer, mortgage, subordinate, pledge, grant security interests in, encumber or hypothecate the Trust Estate to secure any of the foregoing. 4.2.5 To lend money, whether secured or unsecured, to any Person, including any Affiliated Person. 4.2.6 To create reserve funds for any purpose. 4.2.7 To incur and pay out of the Trust Estate any charges or expenses, and disburse any funds of the Trust, which charges, expenses or disbursements are, in the opinion of the Trustees, necessary or incidental to or desirable for the carrying out of any of the purposes of the Trust or conducting the business of the Trust, including, without limitation, taxes and other governmental levies, charges and assessments, of whatever kind or nature, imposed upon or against the Trustees in connection with the Trust or the Trust Estate or upon or against the Trust Estate or any part thereof, and for any of the purposes herein. 4.2.8 To deposit funds of the Trust in or with banks, trust companies, savings and loan associations, money market organizations and other depositories or issuers of depository-type accounts, whether or not such deposits will draw interest or be insured, the same to be subject to withdrawal or redemption on such terms and in such manner and by such Person or Persons (including any one or more Trustees, officers, agents or representatives) as the Trustees may determine. 4.2.9 To enter into hedging transactions to minimize the effect of interest rate fluctuations on investments made pursuant to Section 2.2 of this Declaration. 4.2.10 To possess and exercise all the rights, powers and privileges appertaining to the ownership of all or any Mortgages or Securities issued or created by, or interests in, any Person, forming part of the Trust Estate, to the same extent that an individual might and, without limiting the generality of the foregoing, to vote or give consent, request or notice, or waive any notice, either in person or by proxy or power of attorney, with or without power of substitution, to one or more Persons, which proxies and powers of attorney may be for meetings or action generally or for any particular meeting or action, and may include the exercise of discretionary powers. 4.2.11 To cause to be organized or assist in organizing any Person under the laws of any jurisdiction to acquire the Trust Estate or any part or parts thereof or to carry on any business in which the Trust shall directly or indirectly have any interest, and to sell, rent, lease, hire, convey, negotiate, assign, exchange or transfer the Trust Estate or any part of parts thereof to or with any such Person in exchange for the Securities thereof or otherwise, and to lend money to, subscribe for the Securities of, and enter into any contracts with, any such Person in which the Trust holds or is about to acquire Securities or any other interest. 4.2.12 To enter into joint ventures, general or limited partnerships and any other lawful combinations or associations. 4.2.13 To elect or appoint officers of the Trust (which shall include a Chairman, who will be a Trustee, and a President, a Treasurer and a Secretary, and which may include one or more Vice Presidents and other officers as the trustees may determine, and none of whom needs be a Trustee), who may be removed or discharged at the discretion of the Trustees, such officers to have such powers and duties, and to serve such terms, as may be prescribed by the Trustees or by the By-Laws of the Trust, if adopted, or as may pertain to such officers; subject to the provisions of article V, to retain an Adviser and to pay the Adviser for its services so retained; subject to the provisions of Section 8.5 and 8.6, to engage or employ any persons as agents, representatives, employees, or independent contractors (including without limitation, real estate advisers, investment advisers, transfer agents, registrars, underwriters, accountants, attorneys at law, real estate agents, managers, appraisers, brokers, architects, engineers, construction managers, general contractors or otherwise) in one or more capacities, in connection with the management of the Trust's affairs or otherwise, and to pay compensation from the Trust for services in as many capacities as such Person may be so engaged or employed and notwithstanding that any such Person is, or is an Affiliated Person of, a Trustee or officer of the Trust; and, except as prohibited by law, to delegate any of the powers and duties of the Trustees to any one or more Trustees, agents, representatives, officers, employees, independent contractors or other Persons, provided, however, that no such delegation shall be made to an Affiliated Person of the Adviser except with the approval of a majority of the Unaffiliated Trustees. 4.2.14 To determine whether moneys, Securities or other assets received by the Trust shall be charged or credited to income or capital or allocated between income and capital, including the power to amortize or fail to amortize any part or all of any premium or discount, to treat all or any part of the profit resulting from the maturity or sale of any asset, whether purchased at a premium or at a discount, as income or capital, or apportion the same between income and capital, to apportion the sales price of any asset between income and capital, and to determine in what manner any expenses or disbursements are to be borne as between income and capital, whether or not in the absence of the power and authority conferred by this subsection such moneys, Securities or other assets would be regarded as income or as capital or such expense or disbursement would be charged to income or to capital; to treat any dividend or other distribution on any investment as income or capital or to apportion the same between income and capital; to provide or fail to provide reserves for depreciation, amortization or obsolescence in respect of all or any part of the Trust Estate subject to depreciation, amortization or obsolescence in such amounts and by such methods as they shall determine; and to determine the method or form in which the accounts and records of the Trust shall be kept and to change from time to time such method or form. 4.2.15 To determine from time to time the value of all or any part of the Trust Estate and of any services, Securities, property or other consideration to be furnished to or acquired by the Trust, and from time to time to revalue all or any part of the Trust Estate in accordance with such Valuations or other information, which Valuations or other information may be provided by the Adviser and/or by other Persons retained for the purpose, as the Trustees, in their sole judgment, may deem necessary. 4.2.16 To collect, sue for, and receive all sums of money coming due to the Trust, and to engage in, intervene in, prosecute, join, defend, compound, compromise, abandon or adjust, by arbitration or otherwise, any actions, suits, proceedings, disputes, claims, controversies, demands or other litigation relating to the Trust, the Trust Estate or the Trust's affairs, to enter into agreements therefor, whether or not any suit is commenced or claim accrued or asserted and, in advance of any controversy, to enter into agreements regarding arbitration, adjudication or settlement thereof. 4.2.17 To renew, modify, release, compromise, extend, consolidate, or cancel, in whole or in part, any obligation to or of the Trust. 4.2.18 To purchase and pay for out of the Trust Estate insurance contracts and policies insuring the Trust Estate against any and all risks and insuring the Trust, the Trustees, the Shareholders, the officers of the Trust, the Adviser or any or all of them, against any and all claims and liabilities of every nature asserted by any person arising by reason of any action alleged to have been taken or omitted by the Trust or by the Trustees, Shareholders, officers, or the Adviser. 4.2.19 To cause legal title to any of the Trust Estate to be held by or in the name of the Trustees or, except as prohibited by law, by or in the name of the Trust or one or more of the Trustees or any other Person as the Trustees may determine, on such terms and in such manner and with such powers (not inconsistent with Section 1.1), and with or without disclosure that the Trust or Trustees are interested therein. 4.2.20 To adopt a fiscal year and accounting method for the Trust, and from time to time to change such fiscal year and accounting method, and to engage a firm of independent public accountants to audit the financial records of the Trust. 4.2.21 To adopt and use a seal (but the use of a seal shall not be required for the execution of instruments or obligations of the Trust). 4.2.22 With respect to any Securities issued by the Trust, to provide that the same may be signed by the manual signature of one or more Trustees or officers, or Persons who have theretofore been Trustees or officers or by the facsimile signature of any such Person (with or without countersignature by a transfer agent, registrar, authenticating agent or other similar Person), and to provide that ownership of such Securities may be conclusively evidenced by the books and records of the Trust or any appropriate agent of the Trust without the necessity of any certificate, all as determined by the Trustees from time to time to be consistent with normal commercial practices. 4.2.23 To declare and pay dividends and distributions as provided in Section 7.5. 4.2.24 To adopt a dividend or distribution reinvestment or similar such plan for the Trust, and to provide for the cost of the administration thereof to be borne by the Trust. 4.2.25 To file any and all documents and take any and all such other action as the Trustees in their sole judgment may deem necessary in order that the Trust may lawfully conduct its business in any jurisdiction. 4.2.26 To participate in any reorganization, readjustment, consolidation, merger, dissolution, sale or purchase of assets, lease or similar proceedings of any corporation, partnership or other organization in which the Trust shall have an interest and in connection therewith to delegate discretionary powers to any reorganization, protective or similar committee and to pay assessments and other expenses in connection therewith. 4.2.27 To cause to be organized or assist in organizing any Person, which may or may not be a subsidiary of the Trust, under the laws of any jurisdiction to acquire the Trust Estate or any part or parts thereof or to carry on any business in which the Trust shall directly or indirectly have any interest; and, also, subject to the provisions of this Declaration, to cause the Trust to merge with such Person or any existing Person or to sell, rent, lease, hire, convey, negotiate, assign, exchange or transfer the Trust Estate or any part or parts thereof to or with any such Person or any existing Person in exchange for the Securities thereof or otherwise, and to lend money to, subscribe for the Securities of, and enter into any contracts with, any such Person in which the Trust holds or is about to acquire Securities or any other interest. 4.2.28 To determine whether or not, at any time or from time to time, to attempt to cause the Trust to qualify or to cease to qualify for taxation as a Real Estate Investment Trust, and to take all action deemed by the Trustees appropriate in connection with maintaining or ceasing to maintain such qualification. 4.2.29 To make any indemnification payment authorized by this Declaration of Trust. 4.2.30 To do all other such acts and things as are incident to the foregoing, and to exercise all powers which are necessary or useful to carry on the business of the Trust, to promote any of the purposes for which the Trust is formed, and to carry out the provisions of this Declaration. 4.3 BY-LAWS. The Trustees may, but are not required to, make, adopt, amend or repeal By-Laws containing provisions relating to the business of the Trust, the conduct of its affairs, its rights or powers and the rights or powers of its Shareholders, Trustees or officers not inconsistent with law or with this Declaration. Such By-Laws may provide for the appointment by the Chairman and President of assistant officers or of agents of the Trust in addition to those provided for in the foregoing Section 4.2.12, subject however to the right of the Trustees to remove or discharge such officers or agents. ARTICLE V ADVISER, OTHER AGENTS AND OPERATING EXPENSES 5.1 EMPLOYMENT OF ADVISER, EMPLOYEES, AGENTS, ETC. The Trustees are responsible for the general policies of the Trust and for such general supervision of the business of the Trust conducted by all officers, agents, employees, advisers, managers or independent contractors of the Trust as may be necessary to ensure that such business conforms to the provisions of this Declaration. However, the Trustees are not, and shall not be, required personally to conduct the business of the Trust and, consistent with their ultimate responsibility as stated above, the Trustees shall have the power to retain an Adviser and/or to appoint, employ or contract with any Person (including one or more of themselves or any corporation, partnership, or trust in which one or more of them may be directors, officers, stockholders, partners or trustees) as the Trustees may deem necessary or proper for the transaction of the business of the Trust, and for such purpose may grant or delegate such authority to any such Person as the Trustees may in their sole discretion deem necessary or desirable without regard to whether such authority is normally granted or delegated by trustees; provided, however, that any determination to retain an Adviser which is an Affiliated Person of a Trustee shall be valid only if made or ratified with the approval of a majority of the Unaffiliated Trustees. It shall be the duty of the Trustees to evaluate the performance of the Adviser before entering into or renewing an advisory contract, and the Unaffiliated Trustees have a fiduciary duty to the Shareholders to supervise the relationship of the Trust with the Adviser. The Trustees (subject to the provisions of Section 5.5) shall have the power to determine the terms and compensation of the Adviser or any other Person whom they may employ or with whom they may contract. The Trustees may exercise broad discretion in allowing the Adviser to administer and regulate the operations of the Trust, to act as agent for the Trust, to execute documents on behalf of the Trustees, and to make executive decisions which conform to general policies and general principles previously established by the Trustees. 5.2 TERM. The Trustees shall not enter into any contract with an Adviser unless such contract has an initial term of not more than one year, provides for annual renewal or extension thereafter and provides that it may be terminated at any time by the Trustees, without penalty, upon 60 days written notice or by the Adviser without penalty, upon 120 days written notice. Termination of the Adviser's contract by the Trust may be by a majority of the Trustees or a majority of the Unaffiliated Trustees. In the event of such termination, the Adviser will cooperate with the Trust and take all reasonable steps requested to assist the Trustees in making an orderly transition of such advisory function. 5.3 ACTIVITIES OF ADVISER. The Adviser may administer the Trust as its sole and exclusive function, or engage in other activities including, without limitation, the rendering of advice to other investors and the management of other investments or other real estate investment trusts with similar investment objectives, including without limitation investors and investments advised, sponsored or organized by the Adviser, except that, until 60% of the Trust's assets are invested in Real Estate Investments, the Adviser and its Affiliates shall not sponsor or act as investment adviser or manager for any other real estate investment trust with investment objectives similar to the Trust's. The Trustees may request the Adviser to engage in certain other activities which complement the Trust's investments, including real estate acquisition and disposition services, renovation and rehabilitation services, and the placement or brokerage of long-term mortgage loans or secondary mortgage financing, which activities may include providing services requested by the prospective mortgagees or mortgagors. Nothing in this Declaration shall limit or restrict the right of any director, officer, employee or shareholder of the Adviser, whether or not also a Trustee, officer or employee of the Trust, to engage in any other business or to render services of any kind to any other partnership, corporation, firm, individual, trust or association. The Adviser may, with respect to any loan or other investment in which the Trust may participate or allot a participation, render advice and service, with or without remuneration, to each and every participant in that loan or other investment. 5.4 ADVISER COMPENSATION. The Trustees, including a majority of the Unaffiliated Trustees, shall at least annually review generally the performance of the Adviser in order to determine whether the compensation which the Trust has contracted to pay to the Adviser is reasonable in relation to the nature and quality of services performed and whether the provisions of the contract with the Adviser are being carried out. Each such determination shall be based on such of the following and other factors as the Trustees (including the Unaffiliated Trustees) deem relevant, and shall be reflected in the minutes of the meetings of the Trustees: 5.4.1 the size of the advisory fee in relation to the size, composition and profitability of the Invested Assets of the Trust; 5.4.2 the success of the Adviser in generating opportunities that meet the investment objectives of the Trust; 5.4.3 the rates charged to other REITs and to investors other than REITs by advisers performing similar services; 5.4.4 additional revenues realized by the Adviser and its Affiliated Persons through their relationship with the Trust, including loan administration, underwriting or brokerage commissions, servicing, engineering, inspection and other fees, whether paid by the Trust or by others with whom the Trust does business; 5.4.5 the quality and extent of service and advice furnished by the Adviser; 5.4.6 the performance of the Invested Assets of the Trust, including income, conservation or appreciation of capital, frequency of problem investments and competence in dealing with distress situations; and 5.4.7 the quality of the Invested Assets of the Trust in relationship to any investments generated by the Adviser for its own account. 5.5 Operating Expenses. Within 60 days after the end of any fiscal quarter of the Trust for which Total Operating Expenses (for the 12 months then ended) exceed limits adopted by the North American Securities Administrators Association's Statement of Investment Policy For Real Estate Investment Trusts, the Unaffiliated Trustee shall send to the Shareholders a written disclosure of such fact. ARTICLE VI PROHIBITED ACTIVITIES 6.1 PROHIBITED INVESTMENTS AND ACTIVITIES. The Trust shall not engage in any of the following investment practices or activities: 6.1.1 Invest in any Junior Mortgage Loan unless (a) the capital invested in such mortgage loan is adequately secured on the basis of the equity of the borrower in the property underlying such investment and the ability of the borrower to repay the mortgage loan, (b) the total amount of a Junior Mortgage Loan which, taken together with all other Indebtedness secured by the underlying Real Property, does not exceed 100% of the value of the security therefor, (c) the total amount of a Junior Mortgage Loan which, taken together with all other Indebtedness secured by the underlying Real Property and senior or pari passu to that held by the Trust, does not exceed 90% of the value of the security therefor, (d) the senior mortgage is held by a person other than the Adviser or one of its Affiliates, and (3) total Junior Mortgage Loans will not exceed 25% of the Trust's assets. 6.1.2 Invest in commodities, or in commodity future contracts or effect short sales of commodities or Securities. Such limitation is not intended to apply to investments in interest rate futures or short sales, when used solely for hedging purposes. 6.1.3 Invest more than 1% of its Total Assets in contracts for the sale of Real Property, unless such contracts are recordable in the chain of title. 6.1.4 Issue Securities redeemable at the option of the holders thereof. 6.1.5 Grant options or warrants to purchase Shares at an exercise price, or for consideration which consists of services or is otherwise than for cash, that in the judgment of the Trustees (including a majority of the Unaffiliated Trustees in the case of the grant of any operation or warrant to the Adviser or to any officer, director or employee of the Adviser or of the Trust) is less than the fair market value of such Shares on the date of grant, or which may be exercisable for a period in excess of 5 years from the date of grant, or which are for a number of Shares that (when added to the number of other Shares exercisable pursuant to all then outstanding options and warrants) is in excess of 9.8% of the number of Shares on the date of grant. Warrants, options or Share purchase rights that are issued ratably to the holders of all Shares or another class of Securities, or as part of a financing arrangement are not prohibited by, or to be included within the limitations of, the preceding sentence of this Section 6.1.5. 6.1.6 Engage in underwriting or the agency distribution of Securities issued by others. 6.1.7 Invest more than 10% of Total Assets in Unimproved Real Property, or Mortgage Loans on Unimproved Real Property. 6.1.8 Engage in trading, as compared with investment, activities. 6.1.9 Allow the aggregate borrowings of the Trust, secured and unsecured, to exceed 100% of the Net Assets of the Trust, in the absence of a determination by the Trustees (including a majority of the Unaffiliated Trustees) that a higher level of borrowing is appropriate and in the interest of the Trust; provided, however, that no higher level of borrowing shall be made which if unsecured exceeds the limit provided in Section 6.1.10 or if secured exceeds 300% of the net asset value of the property securing such borrowing as determined by the lender. Any borrowing in excess of such 100% level shall be disclosed to the Shareholders in the next quarterly report of the Trust. 6.1.10 Make any unsecured borrowing if such borrowing will result in an asset coverage of less than 300% unless at the time of borrowing at least 80% of the Trust's Total Assets consist of First Mortgage Loans. "Asset coverage" for the purpose of this Section 6.1.10 means the ratio which the Trust's Total Assets, less all liabilities other than Indebtedness for unsecured borrowings, bears to the aggregate amount of all unsecured borrowings of the Trust. 6.1.11 Acquire Securities in any company holding investments or engaging in activities prohibited by this Section 6.1. 6.1.12 Pay fees and costs associated with (i) the organization of the Trust, (ii) the sale of its Shares pursuant to its initial public offering of Shares and (iii) the acquisition (including brokerage expenses) of investments with the proceeds of such initial public offering, if the aggregate amount for all such fees and costs covered by (i), (ii) and (iii) exceed 20% of the gross selling price of such Shares in such initial public offering; or pay fees of the type described in Section IV, Subdivisions F, G, H and I of the North American Securities Administrators Association's Statement of Policy regarding Real Estate Programs effective July 1, 1984 in amounts exceeding the limitations set forth in such Subdivisions. 6.1.13 Issue debt securities unless the historical debt service coverage (in the most recently completed fiscal year) as adjusted for known changes is sufficient to property service that higher level of debt. 6.2 OBLIGOR'S DEFAULT. Notwithstanding any provision in any Article of this Declaration, when an obligor to the Trust is in default under the terms of any obligation to the Trust, the Trustees shall have the power to pursue any remedies permitted by law which in their sole judgment are in the interest of the Trust and the Trustees shall have the power to enter into any necessary investment, commitment or obligation of the Trust resulting from the pursuit of such remedies that are necessary or desirable to dispose of property acquired in the pursuit of such remedies. 6.3 PERCENTAGE DETERMINATIONS. Whenever standards contained in this Article VI are expressed in terms of a percentage, whether of value, Total Assets, cost or otherwise, such percentage shall be determined at the time of the issuance of a commitment by the Trust for a transaction covered by such standard hereunder. ARTICLE VII SHARES AND SHAREHOLDERS 7.1 SHARES. The beneficial interest in the Trust shall be divided into transferable units of a single class, all of which are designated as Shares, each without par value, and each Share shall (except as provided in Section 7.12) be identical in all respects with every other Share. The total number of Shares the Trust shall have authority to issue shall be unlimited. The Shares may be issued for such consideration as the Trustees shall determine, including upon the conversion of convertible debt, or by way of share dividend or share split in the discretion of the Trustees. Outstanding Shares shall be transferable and assignable in like manner as are shares of stock of a Massachusetts business corporation. Shares reacquired by the Trust shall no longer be deemed outstanding and shall have no voting or other rights unless and until reissued. Shares reacquired by the Trust may be canceled by action of the Trustees. All Shares shall be fully paid and nonassessable by or on behalf of the Trust upon receipt of full consideration for which they have been issued or without additional consideration if issued by way of share dividend, share split, or upon the conversion of convertible debt. The Shares shall not entitle the holder to preference, preemptive, conversion, or exchange rights of any kind, except as the Trustees may specifically determine with respect to any Shares at the time of issuance of such Shares and except as specifically provided by law. 7.2 LEGAL OWNERSHIP OF TRUST ESTATE. The legal ownership of the Trust Estate and the right to conduct the business of the Trust are vested exclusively in the Trustees, and the Shareholders shall have no interest therein other than the beneficial interest in the Trust conferred by their Shares issued hereunder, and they shall have no right to compel any partition, division, dividend or distribution of the Trust or any of the Trust Estate, nor can they be called upon to share or assume any losses of the Trust or suffer an assessment of any kind by virtue of their ownership of Shares. 7.3 SHARES DEEMED PERSONAL PROPERTY. The Shares shall be personal property and shall confer upon the holders thereof only the interest and rights specifically set forth in this Declaration. The death, insolvency or incapacity of a Shareholder shall not dissolve or terminate the Trust or affect its continuity nor give his legal representative any rights whatsoever, whether against or in respect of other Shareholders, the Trustees or the Trust Estate or otherwise except the sole right to demand and, subject to the provisions of this Declaration, the By-Laws, if adopted, and any requirements of law, to receive a new certificate for Shares registered in the name of such legal representative, in exchange for the certificate held by such Shareholder. 7.4 SHARE RECORD, ISSUANCE AND TRANSFERABILITY OF SHARES. Records shall be kept by or on behalf of and under the direction of the Trustees, which shall contain the names and addresses of the Shareholders, the number of Shares held by them respectively, and the number of the certificates, if any, representing the Shares, and in which there shall be recorded all transfers of Shares. The Persons in whose names Shares or certificates therefor are registered on the records of the Trust shall be deemed the absolute owners of such Shares for all purposes of this Trust; but nothing herein shall be deemed to preclude the Trustees or officers, or their agents or representatives, from inquiring as to the actual ownership of Shares. Until a transfer is duly registered on the records of the Trust, the Trustees shall not be affected by any notice of such transfer, either actual or constructive. The payment thereof to the Person in whose name any Shares are registered on the records of the Trust or to the duly authorized agent of such Person (or if such Shares are so registered in the names of more than one Person, to any one of such Persons or to the duly authorized agent of such Person) shall be sufficient discharge for all dividends or distributions payable or deliverable in respect of such Shares and from all liability to see to the application thereof. In case of the loss, mutilation or destruction of any certificate for Shares, the Trustees may issue or cause to be issued a replacement certificate on such terms and subject to such rules and regulations as the Trustees may from time to time prescribe. Nothing in this Declaration shall impose upon the Trustees or a transfer agent a duty, or limit their rights to inquire into adverse claims. In lieu of issuing certificates for Shares, the Trustees may adopt procedures for the Shares to be considered as uncertificated Securities to the same extent that such procedures would be available for shares of capital stock of a Massachusetts business corporation. Unless the Trustees shall have determined that the Trust shall no longer qualify as a REIT, any issuance, redemption or transfer of Trust Shares which would operate to disqualify the Trust as a real estate investment trust for purposes of Federal income tax, is null and void, and such transaction will be canceled when so determined in good faith by the Trustees. 7.5 DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS. The Trustees may from time to time declare and pay to Shareholders such dividends or distributions in cash or other property, out of current or accumulated income, capital, capital gains, principal, surplus, proceeds from the increase or refinancing of Trust obligations, for the repayment of loans made by the Trust, from the sale of portions of the Trust Estate, or from any other source as the Trustees in their discretion shall determine; but, in any event, the Trustees, shall, from time to time, declare and pay to the Shareholders such distributions as may be necessary to continue to qualify the Trust as a Real Estate Investment Trust, so long as such qualification, in the opinion of the Trustees, is in the best interest of the Shareholders. Shareholders shall have no right to any dividend or distribution unless and until declared by the Trustees. A written statement disclosing the source shall be sent to each Shareholder who received the distribution not later than (i) 60 days after the close of the fiscal year in which the distribution was made, or (ii) promptly after the independent auditors of the Trust have completed, or undertaken sufficient actions toward completion of, the annual audit of the Trust, so that the Trustees can determine the source of such distribution, whichever event shall occur later. 7.6 TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND REGISTRAR. The Trustees shall have power to employ one or more transfer agents, dividend disbursing agents, dividend or distribution reinvestment plan agents, and registrars and to authorize them on behalf of the Trust: to keep records, to hold and disburse any dividends and distributions and to have and perform powers and duties customarily had and performed by transfer agents, dividend disbursing agents, dividend or distribution reinvestment plan agents, and registrars as may be conferred upon them by the Trustees. 7.7 SHAREHOLDERS' MEETINGS AND CONSENTS. The Trustees shall cause to be called and held an Annual Meeting of the Shareholders at such time and such place as they may determine, at which Trustees shall be elected any other proper business may be conducted. The Annual Meeting of Shareholders shall be held within six months after the end of each fiscal year, after not fewer than 10 days nor more than 60 days written notice of such meeting has been sent to Shareholders by the Trustees and after delivery to the Shareholders of the Annual Report for the fiscal year then ended. Special meetings of Shareholders may be called by a majority of the Trustees, a majority of the Unaffiliated Trustees, or the Chairman or other chief executive officer of the Trust, and shall be called by any officer of the Trust upon the written request of Shareholders holding not less than 10% of the outstanding Shares of the Trust entitled to vote. Upon receipt of a written request either in person or by registered mail stating the purpose(s) of the meeting requested by Shareholders, the Trust shall provide all Shareholders written notice (either in person or by mail) of a meeting and the purpose of such meeting to be held on a date not fewer than 10 days nor more than 60 days after the date of such notice, at a time and place determined by the Trustees. If there shall be no Trustees, a special meeting of the Shareholders shall be held promptly for the election of successor Trustees. The call and notice of any special meeting shall state the purpose of the meeting and no other business shall be considered at such meeting. A majority of the outstanding Shares entitled to vote at any meeting represented in person or by proxy shall constitute a quorum at such meeting. Whenever Shareholders are required or permitted to take any action, such action may be taken, except as otherwise provided by this Declaration or required by law, by a majority of the votes cast at a meeting of Shareholders at which a quorum is present by holders of Shares entitled to vote thereon, or without a meeting by written consent setting forth the action so taken signed by holders of all outstanding Shares entitled to vote thereon. Notwithstanding this or any other provision of this Declaration, no vote or consent of Shareholders shall be required to approve the sale, exchange or other disposition by the Trustees of one or more assets of the Trust or the pledging, hypothecating, granting security interests in, mortgaging, encumbering or leasing of all or any of the Trust Estate. 7.8 PROXIES. Whenever the vote or consent of Shareholders is required or permitted under this Declaration, such vote or consent may be give either directly by the Shareholder or by a proxy. The Trustees may solicit such proxies from the Shareholders or any of them in any matter requiring or permitting the Shareholders' vote or consent. 7.9 REPORTS TO SHAREHOLDERS. The Trustees shall cause to be prepared and mailed not later than 120 days after the close of each fiscal year of the Trust a report of the business and operation of the Trust during such fiscal year to the Shareholders, which report shall constitute the accounting of the Trustees for such fiscal year. The report shall be in such form and have such content as the Trustees deem proper, but shall in any event include a balance sheet, an income statement and a surplus statement, each prepared in accordance with generally accepted accounting principles, shall be audited by an independent certified public accountant and shall be accompanied by the report of such accountant thereon. The Trustees shall also publish to the Shareholders quarterly with respect to the Trust (1) the ratio of the costs of raising capital during the quarter to the capital raised, and (2) the aggregate amount of advisory fees and the aggregate amount of other fees paid to the Adviser and all affiliates of the Adviser by the Trust and including fees or charges paid to the Adviser and all Affiliates of the Adviser by third parties doing business with the Trust. 7.10 FIXING RECORD DATE. For the purpose of determining the Shareholders who are entitled to vote or act at any meeting or any adjournment thereof, or who are entitled to participate in any dividend or distribution, or for the purpose of any other action, the Trustees may from time to time close the transfer books for such period, not exceeding 30 days, as the Trustees may determine; or without closing the transfer books the Trustees may fix a date not more than 60 days prior to the date of any meeting of Shareholders or dividend payment or other action as a record date for the determination of Shareholders entitled to vote at such meeting or any adjournment thereof or to receive such dividend or to take any other action. Any Shareholder who was a Shareholder at the time so fixed shall be entitled to vote at such meeting or any adjournment thereof or to receive such dividend or to take such other action, even though he has since that date disposed of his Shares, and no Shareholder becoming such after that date shall be so entitled to vote at such meeting or any adjournment thereof or to receive such dividend or to take such other action. 7.11 NOTICE TO SHAREHOLDERS. Any notice of meeting or other notice, communication or report to any Shareholder shall be deemed duly delivered to such Shareholder when such notice, communication or report is deposited, with postage thereon prepaid, in the United States mail, addressed to such Shareholder at his address as it appears on the records of the Trust or is delivered in person to such Shareholder. 7.12 Shareholders' Disclosure; Trustees' Right to Refuse to Transfer Shares; Limitation on Holdings; Redemption of Shares: 7.12.1 The Shareholders shall upon demand disclose to the Trustees in writing such information with respect to direct and indirect ownership of the Shares as the Trustees deem necessary to comply with the REIT Provisions of the Internal Revenue Code or to comply with the requirements of any taxing authority or governmental agency. 7.12.2 Whenever it is deemed by them to be reasonably necessary to protect the tax status of the Trust as a REIT, the Trustees may require a statement or affidavit from each Shareholder or proposed transferee of Shares setting forth the number of Shares already owned by him and any related Person specified in the form prescribed by the Trustees for that purpose. If, in the opinion of the Trustees, the proposed transfer may jeopardize the qualification of the Trust as a REIT, the Trustees shall have the right, but not a duty, to refuse to transfer the Shares to the proposed transferee. All contracts for the sale or other transfer of Shares shall be subject to this provision. 7.12.3 Notwithstanding any other provision of this Declaration of Trust to the contrary and subject to the provisions of subsection 7.12.5, no Person, or Persons acting as a group, shall at any time directly or indirectly acquire ownership in the aggregate of more than 9.8% of the outstanding Shares of the Trust (the "Limit"). Shares owned by a Person or group of Persons in excess of the Limit at any time shall be deemed "Excess Shares." For the purposes of this Section 7.12, the term "ownership" shall be defined in accordance with or by reference to the qualification requirements of the REIT Provisions of the Internal Revenue Code and shall also mean ownership as defined in Rule 13d-3 promulgated by the Securities and Exchange Commission under the Securities Exchange Act of 1934, and the term "group" shall have the same meaning as that term has for purposes of Section 13(d)(3) of such Act as amended. All Shares which any Person has the right to acquire upon exercise of outstanding rights, options and warrants, and upon conversion of any Securities convertible into Shares, if any, shall be considered outstanding for purposes of the Limit if such inclusion will cause such person to own more that the Limit. 7.12.4 The Trustees, by notice to the holder thereof, may redeem any or all Shares that are Excess Shares (including Shares that remain or become Excess Shares because of the decrease in outstanding Shares resulting from such redemption); and from and after the date of giving of such notice of redemption ("redemption date") the Shares called for redemption shall cease to be outstanding and the holder thereof shall cease to be entitled to dividends, voting rights and other benefits with respect to such Shares excepting only the right to payment by the Trust of the redemption price determined and payable as set forth in the following two sentences. Subject to the limitation on payment set forth in the following sentence, the redemption price of each Excess Share called for redemption shall be the average daily per Share closing sales price if the Shares of the Trust are listed on a national securities exchange, and if the Shares are not so listed shall be the mean between the average per Share closing bid prices and the average per Share closing asked prices, in each case during the 30 day period ending on the business day prior to the redemption date, or if there have been no sales on a national securities exchange and no published bid quotations and no published asked quotations with respect to Shares of the Trust during such 30 day period, the redemption price shall be the price determined by the Trustees in good faith. Unless the Trustees determine that it is in the interest of the Trust to make earlier payment of all of the amount determined as the redemption price per Share in accordance with the preceding sentence, the redemption price shall by payable only upon the liquidation of the Trust and shall not exceed an amount which is the sum of the per Share distributions designated as liquidating distributions and return of capital distributions declared with respect to unredeemed Shares of the Trust of record subsequent to the redemption date, and no interest shall accrue with respect to the period subsequent to the redemption date to the date of such payment; provided, however, that in the event that within 30 days after the redemption date the Person from whom the Excess Shares have been redeemed sells (and notifies the Trust of such sale) a number of the remaining Shares owned by him at least equal to the number of such Excess Shares (and such sale is to a Person in whose hands the Shares sold would not be Excess Shares), then the Trust shall rescind the redemption of the Excess Shares if following such rescission such Person would not be the holder of Excess Shares, except that if the Trust receives an opinion of its counsel that such recission would jeopardize the tax status of the Trust as a REIT then the Trust shall in lieu of recission make immediate payment of the redemption price. 7.12.5 The Limit set forth in Section 7.12.3 shall not apply to acquisitions Shares pursuant to a cash tender offer made for all outstanding Shares of the Trust (including Securities convertible into Shares) in conformity with applicable federal and sate securities laws where two-thirds of the outstanding Shares (not including Shares or Securities convertible into Shares held by the tender offerer and/or any "affiliates" or "associates" thereof within the meaning of the Act) are duly tendered and accepted pursuant to the cash tender offer; nor shall the Limit apply to the acquisition of Shares by an underwriter in a public offering of Shares, or in any transaction involving the issuance of Shares by the Trust, in which a majority of the Trustees determine that the underwriter or other person or party initially acquiring such Shares will make a timely distribution of such Shares to or among other holders such that, following such distribution, none of such Shares will be Excess Shares. The Trustees in their discretion may exempt from the Limit ownership of certain designated Shares while owned by a person who has provided the Trustees with evidence and assurances acceptable to the Trustees that the qualification of the Trust as a REIT would not be jeopardized thereby. 7.12.6 Notwithstanding any other provision of this Declaration of Trust to the contrary, any purported acquisition of Shares of the Trust which would result in the disqualification of the Trust as a REIT shall be null and void. 7.12.7 Nothing contained in this Section 7.12 or in any other provision of this Declaration of Trust shall limit the authority of the Trustees to take such other action as they deem necessary or advisable to protect the Trust and the interests of the Shareholders by preservation of the Trust's qualification as a REIT under the REIT Provisions of the Internal Revenue Code. 7.12.8 If any provision of this Section 7.12 or any application of any such provision is determined to be invalid by any Federal or state court having jurisdiction over the issues, the validity of the remaining provisions shall not be affected and other applications of such provision shall be affected only to the extent necessary to comply with the determination of such court. To the extent this Section 7.12 may be inconsistent with any other provision of this Declaration of Trust, this Section 7.12 shall be controlling. 7.13 INSPECTION BY SHAREHOLDERS. Shareholders of record of the Trust shall have the same right to inspect the records of the Trust as has a stockholder in a Massachusetts business corporation. ARTICLE VIII LIABILITY OF TRUSTEES, SHAREHOLDERS AND OFFICERS, AND OTHER MATTERS 8.1 LIMITATION OF LIABILITY OF TRUSTEES AND OFFICERS. No Trustee or officer of the Trust shall be liable to the Trust or to any Trustee or Shareholder for any act or omission of any other Trustee, Shareholder, officer or agent of the Trust or be held to any personal liability whatsoever in tort, contract or otherwise in connection with the affairs of this Trust, except only that arising from his own bad faith, willful misfeasance, gross negligence, or reckless disregard of his duties. 8.2 LIMITATION OF LIABILITY OF SHAREHOLDERS, TRUSTEES AND OFFICERS. The Trustees and officers in incurring any debts, liabilities or obligations, or in taking or omitting any other actions for or in connection with the Trust are, and shall be deemed to be, acting as Trustees or officers of the Trust and not in their own individual capacities. Except to the extent provided in Section 8.1 no Trustee or officer shall, nor shall any Shareholder, be liable for any debt, claim, demand, judgment, decree, liability or obligation of any kind of, against or with respect to the Trust arising out of any action taken or omitted for or on behalf of the Trust and the Trust shall be solely liable therefor and resort shall be had solely to the Trust Estate for the payment or performance thereof. Each Shareholder shall be entitled to pro rata indemnity from the Trust Estate if, contrary to the provisions hereof, such Shareholder shall be held to any such personal liability. 8.3 EXPRESS EXCULPATORY CLAUSES IN INSTRUMENTS. As far as practicable, the Trustees shall cause any written instrument creating an obligation of the Trust to include a reference to this Declaration and to provide that neither the Shareholders nor the Trustees nor the officers of the Trust shall be liable thereunder and that the other parties to such instrument shall look solely to the Trust Estate for the payment of any claim thereunder or for the performance thereof; however, the omission of such provision form any such instrument shall not render the Shareholders or any Trustee or officer of the Trust liable nor shall the Trustees or any officer of the Trust be liable to anyone for such omission. 8.4 INDEMNIFICATION AND REIMBURSEMENT OF TRUSTEES AND OFFICERS. Any Person made a party to any action, suit or proceeding or against whom a claim or liability is asserted by reason of the fact that he, his testator or intestate was or is a Trustee or officer or active in such capacity on behalf of the Trust shall be indemnified and held harmless by the Trust against judgments, fines, amounts paid on account thereof (whether in settlement or otherwise) and reasonable expenses, including attorneys' fees, actually and reasonably incurred by him in connection with the defense of such action, suit, proceeding, claim or alleged liability or in connection with any appeal therein, whether or not the same proceeds to judgment or is settled or otherwise brought to a conclusion; provided, however, that no such Person shall be so indemnified or reimbursed for any claim, obligation or liability which arose out of the Trustee's or officer's bad faith, willful misfeasance, gross negligence or reckless disregard of his duties; and provided, further, that such Person gives prompt notice of such action, suit or proceeding, executes such documents and takes such action as will permit the Trust to conduct the defense or settlement thereof and cooperates therein. In the event of a settlement approved by the Trustees of any such claim, alleged liability, action, suit or proceeding, indemnification and reimbursement shall be provided except as to such matters covered by the settlement which the Trust is advised by its counsel arose from the Trustee's or officer's bad faith, willful misfeasance, gross negligence, or reckless disregard of his duties; provided, however, that such advice by counsel shall not preclude any Trustee or officer from seeking a judicial determination that he did not act in bad faith, willful misfeasance, gross negligence or reckless disregard of his duties and is entitled to indemnification and reimbursement hereunder. Expenses may be paid in advance by the Trust upon receipt of an undertaking by or on behalf of a Person indemnified to pay over the amount unless it shall ultimately be determined he is entitled to be indemnified by the Trust as authorized herein. Such rights of indemnification and reimbursement shall be satisfied only out of the Trust Estate. The rights accruing to any Person under these provisions shall not exclude any other right to which he may be lawfully entitled, nor shall anything contained herein restrict the right of the Trust to indemnify or reimburse any such Person in any proper case even though not specifically provided for herein, nor shall anything contained herein restrict such right of a Trustee to contribution as may be available under applicable law. The Trust shall have power to purchase and maintain liability insurance on behalf of any Person entitled to indemnity hereunder, whether or not the Trust would have the power to indemnify against that liability. 8.5 RIGHT OF TRUSTEES AND OFFICERS TO OWN SHARES OR OTHER PROPERTY AND TO ENGAGE IN OTHER BUSINESS. Any Trustee or officer may acquire, own, hold and dispose of Shares in the Trust, for his individual account, and may exercise all rights of a Shareholder to the same extent and in the same manner as if he were not a Trustee or officer. Any Trustee or officer may have personal business interests and may engage in personal business activities, which interests and activities may include the acquisition, syndication, holding, management, development, operation or deposit in, for his own account or for the account of others, of interests in Real Property or Persons engaged in the real estate business, even if the same directly compete with the actual business being conducted by the Trust. Subject to the provisions of Article V, any Trustee or officer may be interested as trustee, officer, director, stockholder, partner, member, Adviser, or employee, or otherwise have a direct or indirect interest in any Person who may be engaged to render advice or services to the Trust, and may receive compensation from such Person as well as compensation as Trustee, officer or otherwise hereunder and no such activities shall be deemed to conflict with his duties and powers as Trustee or officer. 8.6 TRANSACTIONS WITH AFFILIATES. The Trust shall not knowingly invest, either directly or indirectly, in any Real Estate Investment or entity in which any Trustee or Adviser or any of its Affiliates is an investor, creditor or owner. The Trust shall not engage in transactions with the Adviser, any Trustee, officer, or any Affiliated Person of such Adviser, Trustee or officer, except to the extent that each such transaction has, after disclosure of such affiliation, been approved or ratified by the affirmative vote of a majority of the Trustees (or, in the case of a transaction with a person other than the Adviser or its Affiliate, a majority of the Trustees not having any interest in such transaction) after a determination by them that: 8.6.1 The transaction is fair and reasonable to the Trust and its Shareholders; 8.6.2 The terms of such transaction are at least as favorable as the terms of any comparable transactions made on an arm's length basis that are known to such Trustees; 8.6.3 Payments to the Adviser or to any Trustee or officer for services rendered in a capacity other than that as Adviser, Trustee, or officer may only be made upon determination that: (i) the compensation is not in excess of their compensation paid for any comparable services; and (ii) the compensation is not greater than the charges for comparable services available from others who are competent and not affiliated with any of the parties involved. The provisions of this Section 8.6 shall not prohibit the Trust from participating in any investment on a pari passu basis with any other entity whose trustees or directors are the same persons as the Trustees of the Trust and as a result there are no Trustees of the Trust who may not also have an interest in said investment as trustees or directors of such other entity. 8.7 PERSONS DEALING WITH TRUSTEES OR OFFICERS. Any act of the Trustees or officers purporting to be done in their capacity as such shall, as to any Persons dealing with such Trustees or officers, be conclusively deemed to be within the purposes of this Trust and within the powers of the Trustees and officers. No Person dealing with the Trustees or any of them, or with the authorized officers, agents or representatives of the Trust shall be bound to see to the application of any funds or property passing into their hands or control. The receipt of the Trustees or any of them, or of authorized officers, agents, or representatives of the Trust, for moneys or other consideration, shall be binding upon the Trust. 8.8 RELIANCE. The Trustees and officers may consult with counsel (which may be a firm in which one or more of the Trustees or officers is or are members) and the advice or opinion of such counsel shall be full and complete personal protection to all of the Trustees and officers in respect of any action taken or suffered by them in good faith and in reliance on or in accordance with such advice or opinion. In discharging their duties, Trustees and officers, when acting in good faith, may rely upon financial statements of the Trust represented to them to be correct by the President or the officer of the Trust having charge of its books of account, or stated in a written report by an independent certified public accountant fairly to present the financial position of the trust. The Trustees may rely, and shall be personally protected in acting, upon any instrument or other document believed by them to be genuine. ARTICLE IX DURATION, TERMINATION, AMENDMENT AND REORGANIZATION OF TRUST 9.1 DURATION AND TERMINATION OF TRUST. The Trustees will use their best efforts to terminate the Trust within approximately 10 years from the date of this Declaration of Trust. However, it shall be in the absolute discretion of the Trustees to determine in good faith such termination date as will be in the best interests of the Shareholders of the Trust, taking into consideration the investments of the Trust at the time at which termination is considered; but in any event the Trust shall terminate no later than 20 years from the date of this Declaration. The holders of a majority of the outstanding shares entitled to vote thereon may amend this Declaration to extent this period. Any determination by the Trustees of the date upon which termination shall occur shall be reflected in a vote of or written instrument singed by a majority of all of the Trustees then in office, including a majority of the Unaffiliated Trustees; provided, however, that any plan for the termination of the Trust which contemplates the distribution to the Shareholders of Securities or other property in kind (other than the right promptly to receive cash) shall require the vote or consent of the holders of a majority of the outstanding Shares entitled to vote thereon; and also provided that the Trust shall be subject to termination at any time by the vote or consent of the holders of a majority of the outstanding Shares entitled to vote thereon. 9.1.1 Upon the termination of the Trust and unless otherwise provided in a plan for termination approved by the holders of a majority of the outstanding Shares and agreeable to a majority of the Trustees: (i) the Trust shall carry on no business except for the purpose of winding up its affairs; (ii) the Trustees shall proceed to wind up the affairs of the Trust and all of the powers of the Trustees under this Declaration shall continue until the affairs of the Trust shall have been wound up, including the power to fulfill or discharge the contracts of the Trust, collect its assets, sell, convey, assign, exchange, transfer or otherwise dispose of all or any part of the remaining Trust Estate to one or more Persons at public or private sale for consideration which may consist in whole or in part of cash, Securities or other property of any kind, discharge or pay its liabilities, and do all other acts appropriate to liquidate its business (and provided that the Trustees may, if permitted by applicable law, and if they deem it to be in the best interest of the Shareholders, appoint a liquidating trust, or agent, or other entity, to perform one or more of the foregoing functions); and (iii) after paying or adequately providing for the payment of all liabilities, and upon receipt of such releases, indemnities and refunding agreements, as they deem necessary for their protection, the Trustee or any liquidating trust, agent or other entity appointed by them, shall distribute the remaining Trust Estate among the Shareholders pro rata according to the number of Shares held by each. If any plan for the termination of the Trust approved by the holders of a majority of the outstanding Shares and agreeable to a majority of the Trustees provides for actions of the Trustees other than as aforesaid, the Trustees shall have full authority to take all action as in their opinion is necessary or appropriate to implement said plan. 9.1.2 After termination of the Trust and distribution to the Shareholders as provided herein or in any said plan so approved by the Shareholders, the Trustees shall execute and lodge among the records of the Trust an instrument in writing setting forth the fact of such termination, and the Trustees shall thereupon be discharged from all further liabilities and duties hereunder and the rights and interests of all Shareholders hereunder shall thereupon cease. No Person dealing with the Trust or any Person or Persons purporting to act as Trustees shall at any time (whether or not after 15 years from the date of this Declaration of Trust) have any obligation to inquire whether or not the Trust is terminated. 9.2 MERGER, ETC. Upon the vote or written consent of a majority of the Trustees, including a majority of the Unaffiliated Trustees, and with the approval of the holders of a majority of the Shares then outstanding and entitled to vote, at a meeting the notice for which included a statement of the proposed action, the Trustees may (a) merge the Trust into, or sell, convey and transfer the Trust Estate to, any corporation, association, trust or other organization in exchange for shares or Securities thereof, or beneficial interests therein, or other consideration, and the assumption by such transferee of the liabilities of the Trust and (b) thereupon terminate the Trust and, subject to Section 9.1, distribute such shares, securities, beneficial interests, or other consideration, ratably among the Shareholders in redemption of their Shares. 9.3 AMENDMENT PROCEDURE. This Declaration may be amended by the vote or written consent of a majority of the Trustees and of the holders of a majority of the outstanding Shares entitled to vote thereon; provided, however, that no amendment which would reduce the priority of payment or amount payable to any class of Shares of the Trust upon liquidation of the Trust or that would diminish or eliminate any voting rights pertaining to any class of Shares shall be made unless approved by the vote or consent of the holders of two-thirds of the outstanding Shares of such class. The Trustees may also amend this Declaration by the vote of two-thirds of the Trustees without the vote or consent of Shareholders at any time to the extent deemed by the Trustees in good faith to be necessary to meet the requirements for qualification as a Real Estate Investment Trust under the REIT Provisions of the Internal Revenue Code or any interpretation thereof by a court or other governmental agency of competent jurisdiction, but the Trustees shall not be liable for failing so to do. Actions by the Trustees pursuant to the third paragraph of Section 1.1 hereof or pursuant to subsection 10.3.1 hereof that result in amending this Declaration may also be effected without vote or consent of any Shareholder. 9.4 AMENDMENT, ETC. Prior to First Public Offering of Shares. Notwithstanding any other provision of this Declaration, at such time as there is only one holder of all of the outstanding Shares and prior to the issuance of Shares pursuant to a registration statement under the Securities Act of 1933, said holder of all of the outstanding Shares may, without any vote or consent of the Trustees, (a) amend this Declaration in whole or in part, (b) terminate this Trust, (c) remove and/or replace any or all of the Trustees, and (d) instruct the investment and disposition of any funds or properties held by the Trustees. ARTICLE X MISCELLANEOUS 10.1 APPLICABLE LAW. This Declaration of Trust is made in The Commonwealth of Massachusetts; the situs, domicile and residency of the Trust for all purposes is Massachusetts; and the Trust is created under and is to be governed by and construed and administered according to the laws of said Commonwealth, including the Massachusetts Business Corporation Law as the same may be amended from time to time, to which reference is made with the intention that matters not specifically covered herein or as to which an ambiguity may exist shall be resolved as if the Trust were a Massachusetts business corporation, but the reference to said Business Corporation Law is not intended to and shall not give the Trust, the Trustees, the Shareholders or any other person any right, power, authority or responsibility available only to or in connection with an entity organized in corporate form. 10.2 FILING OF COPIES; REFERENCES; HEADINGS. The original or a copy of this instrument and of each amendment hereto shall be kept at the office of the Trust where it may be inspected by any Shareholder. A copy of this instrument and of each amendment hereto shall be filed by the Trust with the Secretary of The Commonwealth of Massachusetts and with the Boston City Clerk, as well as any other governmental office where such filing may from time to time be required, but the failure to make any such filing shall not impair the effectiveness of this instrument or any such amendment. Anyone dealing with the Trust may rely on a certificate by an officer of the Trust as to whether or not any such amendments have been made, as to the identities of the Trustees and officers, and as to an matters in connection with the Trust hereunder; and, with the same effect as if it were the original, may rely on a copy certified by an officer of the Trust to be a copy of this instrument or of any such amendments. In this instrument and in any such amendment, references to this instrument, and all expressions like "herein", "hereof", and "hereunder" shall be deemed to refer to this instrument as a whole as the same may be amended or affected b any such amendments. The masculine gender shall include the feminine and neuter genders. Headings are placed herein for convenience of reference only and shall not be taken as part hereof or control or affect the meaning, construction or effect of this instrument. This instrument may be executed in any number of counterparts each of which shall be deemed an original. 10.3 PROVISIONS OF THE TRUST IN CONFLICT WITH LAW OR REGULATIONS. 10.3.1 The provisions of this Declaration are severable, and if the Trustees shall determine, with the advice of counsel, that any one or more of such provisions (the "Conflicting Provisions") could have the effect of preventing the Trust from qualifying as a real estate investment trust under the REIT Provisions of the Internal Revenue Code (and if the Trustees have determined the Trust should elect to be taxed as a REIT under the Internal Revenue Code) or are in conflict with other applicable federal or state laws or regulations, the Conflicting Provisions shall be deemed never to have constituted a part of the Declaration; provided, however, that such determination by the Trustees shall not affect or impair any of the remaining provisions of this Declaration or render invalid or improper any action taken or omitted (including but not limited to the election of Trustees) prior to such determination. A certification signed by a majority of the Trustees setting forth any such determination and reciting that it was duly adopted by the Trustees, or a copy of this Declaration, with the Conflicting Provisions removed pursuant to such a determination, signed by a majority of the Trustees, shall be conclusive evidence (except as to Shareholders, as to whom it shall only be prima facie evidence) of such determination when lodged in the records of the Trust. The Trustees shall not be liable for failure to make any determination under this Section 10.3.1. Nothing in this Section 10.3.1 shall in any way limit or affect the right of the Trustees to amend this Declaration as provided in Section 9.2. 10.3.2 If any provision of this Declaration shall be held invalid or unenforceable, such invalidity or unenforceability shall attach only to such provision and shall not in any manner affect or render invalid or unenforceable any other provision of this Declaration, and this Declaration shall be carried out as if any such invalid or unenforceable provisions were not contained herein. 10.4 BINDING EFFECT; SUCCESSORS IN INTEREST. Each Person who becomes a Shareholder shall, as a result thereof, be deemed to have agreed to and to be bound by the provisions of this Declaration of Trust. This Declaration shall be binding upon and inure to the benefit of the Trustees and the Shareholders and the respective successors, assigns, heirs, distributees and legal representatives of each of them. IN WITNESS WHEREOF, the undersigned have executed this Declaration as of the 6th day of February, 1985. /s/ James L. Mooney /s/ Robert L. Kinney James L. Mooney Robert L. Kinney Address: Address: 157 Linden Street Mellon Real Estate Investment Ridgewood, New Jersey 07450 Management Corporation Mellon Financial Center 551 Madison Avenue New York, New York 10022 /s/ Mercer L. Jackson /s/ James T. Foran Mercer L. Jackson James T. Foran Address: Address: 3825 North 37th Street Mellon Real Estate Investment Arlington, Virginia 22207 Management Corporation Mellon Financial Center 551 Madison Avenue New York, New York 10022 /s/ Patrick E. McCarthy /s/ Arthur C. Karlin Patrick E. McCarthy Arthur C. Karlin Address: Address: 43 Highland Avenue E.F. Hutton & Company, Inc. Bangor, Maine 04401 595 Madison Avenue New York, New York 10022 /s/ Irving E.Cohen Irving E. Cohen Address: E.F. Hutton & Company, Inc. 595 Madison Avenue New York, New York 10022 STATE OF New York COUNTY OF New York Then personally appeared Irving E. Cohen, to me known to be one of the Trustees who executed the foregoing Declaration of Trust and acknowledged the same to be his free act and deed, this 11th day of February, 1985. /s/ Kathleen M. Keenan Notary Public My commission expires: 3/30/85 STATE OF New York COUNTY OF New York Then personally appeared Arthur C. Karlin, to me known to be one of the Trustees who executed the foregoing Declaration of Trust and acknowledged the same to be his free act and deed, this 11th day of February, 1985. /s/ Kathleen M. Keenan Notary Public My commission expires: 3-30-85 STATE OF New York COUNTY OF New York Then personally appeared James T. Foran, to me known to be one of the Trustees who executed the foregoing Declaration of Trust and acknowledged the same to be his free act and deed, this 8th day of February, 1985. /s/ Kathleen M. Keenan Notary Public My commission expires: 3-30-85 EX-3.(I) 3 3.2 AMENDMENT NO. 1 MELLON PARTICIPATING MORTGAGE TRUST COMMERCIAL PROPERTIES SERIES 85/10 AMENDMENT NO. 1 TO SECOND AMENDED AND RESTATED DECLARATION OF TRUST ---------------------------------------------- AMENDMENT NO. 1 (the "Amendment") to the Second Amended and Restated Declaration of Trust (the "Declaration of Trust") of MELLON PARTICIPATING MORTGAGE TRUST COMMERCIAL PROPERTIES SERIES 85/10 (the "Trust") dated February 6, 1985, made at Atlanta, Georgia this 13th day of March, 1996 by the Board of Trustees hereunder. WHEREAS, the third paragraph of Section 1.1 of the Declaration of Trust provides, among other things, that upon receipt of a written request by Mellon Bank Corporation ("Mellon"), the Trustees shall change the name of the Trust to a name that does not contain the name "Mellon." WHEREAS, Section 9.3 of the Declaration of Trust provides that actions by the Trustees pursuant to the third paragraph of Section 1.1 of the Declaration of Trust that result in amending the Declaration of Trust may be effected without the vote or consent of any shareholder of the Trust; WHEREAS, Mellon has requested that the Trust no longer use the name "Mellon" in the Trust's name; and WHEREAS, the Board of Trustees desires to amend the Declaration of Trust to change the name of the Trust from "Mellon Participating Mortgage Trust Commercial Properties Series 85/10" to "Vinings Investment Properties Trust"; NOW, THEREFORE, the undersigned, being all the Trustees of the Trust, do hereby state: 1. In accordance with Sections 1.1 and 9.3 of the Declaration of Trust, (a) The first sentence of the first paragraph of Section 1.1 of the Declaration of Trust is hereby amended in its entirety to read as follows: "This Trust created by this Declaration of Trust is herein referred to as the "Trust" and shall be known by the name "Vinings Investment Properties Trust." (b) All references to "Mellon Participating Mortgage Trust Commercial Properties Series 85/10" (or any similar words) in the Declaration of Trust shall hereafter be deemed to be references to "Vinings Investment Properties Trust." 2. This Amendment may executed in separate counterparts, each of which so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument. EXECUTED as of the 13th day of March, 1996. TRUSTEES /s/ Peter D. Anzo - ----------------------- Peter D. Anzo /s/ Martin H. Petersen - ----------------------- Martin H. Petersen /s/ Stephanie A. Reed - ----------------------- Stephanie A. Reed /s/ Gilbert H. Watts, Jr. - ----------------------- Gilbert H. Watts, Jr. /s/ Phill D. Greenblatt - ----------------------- Phill D. Greenblatt EX-3.(I) 4 3.3 AMENDMENT NO. 2 VININGS INVESTMENT PROPERTIES TRUST AMENDMENT NO. 2 TO SECOND AMENDED AND RESTATED DECLARATION OF TRUST ---------------------------------------------- AMENDMENT NO. 2 (the "Amendment") to the Second Amended and Restated Declaration of Trust of VININGS INVESTMENT PROPERTIES TRUST (the "Trust") dated February 6, 1985, as amended (the "Declaration of Trust"), made at Atlanta, Georgia this 25th day of June, 1996 by the Board of Trustees hereunder. WHEREAS, Section 9.3 of the Declaration of Trust provides that the Declaration of Trust may be amended by the vote or written consent of a majority of the Trustees and of the holders of a majority of the outstanding shares of beneficial interest of the Trust entitled to vote thereon; WHEREAS, the Board of Trustees desires to amend the Declaration of Trust to (i) authorize the Board of Trustees to combine outstanding shares of beneficial interest of the Trust by way of reverse share split, (ii) provide that to achieve the general policy objective of the Trust, the Trustees intend to invest the assets of the Trust in multifamily apartment properties and other real estate properties which offer the potential to achieve such objective, and (iii) eliminate certain restrictions on the Trust's investment practices and activities (collectively, the "Amendments"); WHEREAS, in accordance with Section 9.3 of the Declaration of Trust, the Trustees have approved the Amendments pursuant to a unanimous written consent dated May 23, 1996; and WHEREAS, in accordance with Section 9.3 of the Declaration of Trust, the Amendments have been approved at a meeting of shareholders held on June 25, 1996, by the holders of a majority of the outstanding shares of beneficial interest of the Trust entitled to vote thereon; NOW, THEREFORE, the undersigned, being all the Trustees of the Trust, do hereby state: 1. Section 2.1 of the Declaration of Trust is hereby amended in its entirety to read as follows (new language appearing in italics): "2.1 GENERAL STATEMENT OF POLICY. It is the general policy of the Trust that the Trustees invest the Trust Estate principally in investments which will conserve and protect the Trust's invested capital, produce cash distributions, and offer the potential for capital appreciation to be realized upon the sale, refinancing or other disposition of such investments. To achieve this objective, the Trustees intend to invest the assets of the Trust in Mortgage Loans and Land Purchase-Leasebacks, including those with equity enhancements, multifamily apartment properties and other real estate properties and investments which offer the potential to achieve such objective. The consideration paid for Real Property acquired by the Trust shall ordinarily be based on the fair market value of the property as determined by a majority of the Trustees. In cases where a majority of the Unaffiliated Trustees so determine, such fair market value shall be as determined by a qualified independent real estate appraiser selected by the Trustees, including a majority of the Unaffiliated Trustees. The Trustees, including a majority of the Unaffiliated Trustees, shall at least annually review the investment policies of the Trust to determine that the policies being followed by the Trust are in the best interests of the Shareholders, and each such determination and the basis therefor shall be set forth in the minutes of meetings of the Trustees." 2. Article VI of the Declaration of Trust is hereby deleted in its entirety. 3. Section 7.1 of the Declaration of Trust is hereby amended in its entirety to read as follows (new language appearing in italics): "7.1 SHARES. The beneficial interest in the Trust shall be divided into transferable units of a single class, all of which are designated as Shares, each without par value, and each Share shall (except as provided in Section 7.12) be identical in all respects with every other Share. The total number of Shares the Trust shall have authority to issue shall be unlimited. The Shares may be issued for such consideration as the Trustees shall determine, including upon the conversion of convertible debt, or by way of share dividend or share split in the discretion of the Trustees. In addition to the issuance of Shares by way of share dividend or share split, the Trustees may combine outstanding Shares by way of reverse share split and provide for the payment of cash in lieu of any fractional interest in a combined Share; and the mechanics authorized by the Trustees to implement any such combination shall be binding upon all Shareholders, holders of convertible debt, optionees and others with any interest in Shares. Outstanding Shares shall be transferable and assignable in like manner as are shares of stock of a Massachusetts business corporation. Shares reacquired by the Trust shall no longer be deemed outstanding and shall have no voting or other rights unless and until reissued. Shares reacquired by the Trust may be cancelled by action of the Trustees. All Shares shall be fully paid and nonassessable by or on behalf of the Trust upon receipt of full consideration for which they have been issued or without additional consideration if issued by way of share dividend, share split or combination or upon the conversion of convertible debt. The Shares shall not entitle the holder to preference, preemptive, conversion, or exchange rights of any kind, except as the Trustees may specifically determine with respect to any Shares at the time of issuance of such Shares and except as specifically provided by law." 4. This Amendment may executed in separate counterparts, each of which so executed and delivered shall be an original, but all such counterparts shall together constitute one and the same instrument. 5. Pursuant to Section 10.2 of the Declaration of Trust, a copy of this Amendment shall be filed with the Secretary of The Commonwealth of Massachusetts and with the Boston City Clerk. EXECUTED as of the 25th day of June, 1996. TRUSTEES /s/ Peter D. Anzo - ------------------------- Peter D. Anzo /s/ Martin H. Petersen - ------------------------- Martin H. Petersen /s/ Stephanie A. Reed - ------------------------- Stephanie A. Reed /s/ Gilbert H. Watts, Jr. - ------------------------- Gilbert H. Watts, Jr. /s/ Phill D. Greenblatt - ------------------------- Phill D. Greenblatt /s/ Henry Hirsch - ------------------------- Henry Hirsch EX-10 5 10.4 THIRD AMENDMENT VININGS INVESTMENT PROPERTIES, L.P. THIRD AMENDMENT TO THE AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP ----------------------------------------------------- This Third Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings Investment Properties, L.P. is made as of December 19, 1997 by Vinings Investment Properties Trust, a Massachusetts business trust (the "Trust"), Vinings Holdings, Inc., a Delaware corporation ("Holdings") and the Trust as general partner (the "General Partner") of Vinings Investment Properties, L.P., a Delaware limited partnership (the "Partnership") for the purpose of amending the Amended and Restated Agreement of Limited Partnership of the Partnership dated June 30, 1997, as amended (the "Partnership Agreement"). All capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed to them in the Partnership Agreement. WHEREAS, both the Trust and Holdings have made capital contributions and have been admitted as Limited Partners of the Partnership; and WHEREAS, Holdings desires to withdraw as a Limited Partner from the Partnership (the "Withdrawing Limited Partner") and transfer its Limited Partner interest in the Partnership to the Trust and the General Partner has consented to such transfer; NOW THEREFORE, in consideration of the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: Section 1. Transfer of Limited Partner's Interest. (a) Holdings does hereby sell, grant, convey, transfer, assign, set over and deliver unto the Trust all of its interest in the Partnership (the "Interest"). To have and to hold the Interest, together with all and singular rights, privileges and appurtenances thereto, and anywise belonging or in any way appertaining to Holdings unto the Trust, its successors and assigns, forever. (b) Holdings hereby represents and warrants that Holdings is the sole owner of legal and beneficial title to all of the Interest and Holdings has made no previous assignment of the Interest. (c) Pursuant to Section 11.4 of the Partnership Agreement, the General Partner hereby consents to the transfer of the Interest from Holdings to the Trust pursuant to Section 11.3 A of the Partnership Agreement. (d) The change in limited partnership interests in the Partnership shall become effective as of the date of this Agreement. THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH (13) OF CODE SECTION 10-5-9 OF THE GEORGIA SECURITIES ACT OF 1973, AND EXEMPTIONS FROM THE SECURITIES ACT OF 1933, AND MAY NOT BE SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH ACTS OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACTS. SECTION 2. AMENDMENT TO PARTNERSHIP AGREEMENT. Pursuant to Section 14.1 B of the Partnership Agreement, the General Partner, as general partner of the Partnership and as attorney-in-fact for its Limited Partners, hereby amends the Partnership Agreement by deleting Exhibit A thereto in its entirety and replacing it with the Exhibit A attached hereto. IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first written above. VININGS INVESTMENT PROPERTIES TRUST VININGS HOLDINGS, INC. As General Partner As Withdrawing Limited Partner By: /s/ Peter D. Anzo By: /s/ Stephanie A. Reed ------------------------- --------------------------- Name: Peter D. Anzo Name: Stephanie A. Reed Title: President Title: Vice President VININGS INVESTMENT PROPERTIES TRUST As Limited Partner By: /s/ Peter D. Anzo ------------------------- Name: Peter D. Anzo Title: President Vinings Investment Properties, L.P. Third Amendment to the Amended and Restated Partnership Agreement ----------------------------------------------------------------- Exhibit A --------- Name and Address Percentage Number of of Contributor Interest Units Issued - ----------------- -------- ------------ GENERAL PARTNER: Vinings Investment Properties Trust 1.00% 13,232 LIMITED PARTNERS: Vinings Investment Properties Trust 80.67% 1,067,393 The Vinings Group, Inc. .69% 9,108 Hallmark Group Real Estate Service Corp. .69% 9,108 Windrush Partners, Ltd. 16.95% 224,330 ------ --------- Total 100.00% 1,323,171 EX-10 6 10.5 FOURTH AMENDMENT VININGS INVESTMENT PROPERTIES, L.P. FOURTH AMENDMENT TO THE AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP ----------------------------------------------------- This Fourth Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings Investment Properties, L.P. is made as of July 1, 1998 by Vinings Investment Properties Trust, a Massachusetts business trust (the "Trust"), as general partner (the "General Partner") of Vinings Investment Properties, L.P., a Delaware limited partnership (the "Partnership"), and the Trust, limited partner of the Partnership for the purpose of amending the Amended and Restated Agreement of Limited Partnership of the Partnership dated June 30, 1997, as amended (the "Partnership Agreement"). All capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed to them in the Partnership Agreement. WHEREAS, the Trust has made a capital contribution and has been admitted as a Limited Partner of the Partnership; WHEREAS, the Trust has purchased and retired a total of 117 of its shares of beneficial interest ("Shares") and the General Partner wishes to adjust the interests in the Partnership pursuant to Section 4.1 of the Partnership Agreement to accurately reflect such redemption; WHEREAS, the Trust has also issued a total of 20,000 additional Shares and has made an additional capital contribution to the Partnership and the General Partner has issued to the Trust additional units in the Partnership (the "Units") pursuant to Section 4.2 of the Partnership Agreement; NOW THEREFORE, in consideration of the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: SECTION 1. CHANGE IN PERCENTAGE INTEREST. (a) Pursuant to Section 4.2 of the Partnership Agreement, the Trust's interest in the Partnership shall decrease by the number of Units associated with the redemption of Shares and shall increase by the number of Units issued in connection with the issuance of Shares as reflected on Exhibit A; (b) The change in limited partnership interests in the Partnership shall become effective as of the date of this Agreement. SECTION 2. AMENDMENT TO PARTNERSHIP AGREEMENT. Pursuant to Section 4.1 of the Partnership Agreement, the General Partner, as general partner of the Partnership, hereby amends the Partnership Agreement by deleting Exhibit A thereto in its entirety and replacing it with the Exhibit A attached hereto. IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first written above. VININGS INVESTMENT PROPERTIES, L.P. By: Vinings Investment Properties Trust General Partner By: /s/ Peter D. Anzo ---------------------------- Peter D. Anzo President VININGS INVESTMENT PROPERTIES TRUST By: /s/ Peter D. Anzo ---------------------------- Peter D. Anzo President Vinings Investment Properties, L.P. Fourth Amendment to the Amended and Restated Partnership Agreement Exhibit A --------- Percentage Number of Name and Address of Contributor Interest Units Issued - ------------------------------- ----------------------------------- GENERAL PARTNER: - ---------------------- Vinings Investment Properties Trust 1.00% 13,432 LIMITED PARTNERS: - ------------------ Vinings Investment Properties Trust 80.94% 1,087,193 The Vinings Group, Inc. 0.67% 9,108 Hallmark Group Real Estate Service Corp. 0.67% 9,108 ASSIGNEES: - ------------- Irving Abrams 0.49% 6,598 Tim R. Altman 0.25% 3,299 William E. & Mary E. Butler 0.25% 3,299 Donald E. Chace 0.49% 6,598 Terry D. Douglass 0.49% 6,598 Hazel E. Earsley 0.25% 3,299 Stanley D. Eason 0.49% 6,598 C.W. Gustav & Janice S. Eifrig 0.25% 3,299 Jane L. Finchum 0.12% 1,649 Esty Foster 0.49% 6,598 Robert Hesseltine 0.49% 6,598 Betty T. Hinds 0.49% 6,598 Albert H. Hooper, Jr. 0.49% 6,598 Mary Susan Leahy, Executor for the Estate of Joseph Dunbar Shields, Jr. 0.49% 6,598 Trustmark National Bank, Agent for Kathryn D. Little, Investment 0.49% 6,598 Patrick Paul McCarthy 0.25% 3,299 James A. Melvin, Jr. 0.49% 6,598 John R. Mileski 0.49% 6,598 J. Cary Monroe 0.25% 3,299 E. Ray Morris 0.49% 6,598 Thomas W. Orcutt, M.D. 0.49% 6,598 Thomas D. Price 0.25% 3,299 Frederick R. Radcliffe 0.25% 3,299 Joseph D. Shields, III, M.D. 0.25% 3,299 M.F. Soukkar 0.49% 6,598 Virginia G. Sturwold 0.25% 3,299 Oliver H. Tallman, II 0.25% 3,299 Lewis F. Wood, Jr. 0.49% 6,598 Homer R. Yook 0.25% 3,299 Alice C. Young 0.25% 3,299 The Vinings Group, Inc. 0.12% 1,650 Hallmark Group Real Estate Service Corp 0.12% 1,649 Robert L. Bell, M.D. 0.49% 6,598 William G. Beshears, Jr. 0.49% 6,598 Joseph Bonsall, Jr. 0.49% 6,598 Harold J. DeBlanc, Jr., M.D. 0.49% 6,598 William A. Hall 1.96% 26,391 Robert G. Randall 0.49% 6,598 Thomas L. Williams 0.25% 3,299 Don M. Updegraff, Jr. 0.12% 1,649 Majed S. Zakaria 0.49% 6,598 ----------- ------------- Total 100.00% 1,343,171 ========== ============= EX-10 7 10.6 FIFTH AMENDMENT VININGS INVESTMENT PROPERTIES, L.P. FIFTH AMENDMENT TO THE AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP ----------------------------------------------------- This Fifth Amendment to the Amended and Restated Agreement of Limited Partnership of Vinings Investment Properties, L.P. is made as of January 1, 1999 by Vinings Investment Properties Trust, a Massachusetts business trust (the "Trust"), as general partner (the "General Partner") of Vinings Investment Properties, L.P., a Delaware limited partnership (the "Partnership"), Windrush Partners, Ltd. ("Windrush"), a limited partner, and the individuals listed in Exhibit B, (the "Additional Limited Partners") for the purpose of amending the Amended and Restated Agreement of Limited Partnership of the Partnership dated June 30, 1997, as amended (the "Partnership Agreement"). All capitalized terms used herein and not otherwise defined shall have the respective meanings ascribed to them in the Partnership Agreement. WHEREAS, Windrush has made a capital contribution and has been admitt- ed as a Limited Partner of the Partnership; WHEREAS, Windrush has previously assigned and transferred, pursuant to Section 11.3 of the Partnership Agreement, its interest as a Limited Partner of the Partnership to its limited partners; WHEREAS, Windrush desires to dissolve and to withdraw as a Limited Partner from the Partnership (the "Withdrawing Limited Partner") and the Additional Limited Partners wish to be admitted to the Partnership as Substitute Limited Partners (as defined in the Partnership Agreement); Whereas, each Additional Limited Partner has previously granted Hallmark Group Real Estate Services, Corp., the general partner of Windrush (the "Windrush General Partner"), a special power of attorney to permit the Windrush General Partner to execute and deliver any instrument necessary to admit such Additional Limited Partner as a Substitute Limited Partner in the Partnership; and WHEREAS, The consent of the General Partner of the Partnership is required under the Partnership Agreement for the Additional Limited Partners to be admitted as Substitute Limited Partners of the Partnership. NOW THEREFORE, in consideration of the mutual covenants contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: SECTION 1. ADMISSION OF THE ADDITIONAL LIMITED PARTNERS. (a) Pursuant to Section 11.4 of the Partnership Agreement, the General Partner hereby consents to the admission of each of the Additional Limited Partners as Substitute Limited Partners. (b) The change in limited partnership interests in the Partnership shall become effective as of the date of this Agreement. SECTION 2. AMENDMENT TO PARTNERSHIP AGREEMENT. Pursuant to Section 14.1 B of the Partnership Agreement, the General Partner, as general partner of the Partnership and as attorney-in-fact for its Limited Partners, hereby amends the Partnership Agreement by deleting Exhibit A thereto in its entirety and replacing it with the Exhibit A attached hereto. IN WITNESS WHEREOF, the parties hereto have executed this Amendment as of the date first written above. VININGS INVESTMENT PROPERTIES, L.P. By: Vinings Investment Properties Trust General Partner By: /s/ Peter D. Anzo - --------------------- Peter D. Anzo President WINDRUSH PARTNERS, LTD. Withdrawing Limited Partner By: Hallmark Group Real Estate Services Corp. General Partner By: /s/ Martin H. Petersen - -------------------------- Martin H. Petersen President SUBSTITUTE LIMITED PARTNERS By: Hallmark Group Real Estate Services Corp. As Attorney-in-Fact By: /s/ Martin H. Petersen - --------------------------- Martin H. Petersen President Vinings Investment Properties, L.P. Fifth Amendment to the Amended and Restated Partnership Agreement Exhibit A --------- Percentage Number of Name and Address of Contributor Interest Units Issued - ------------------------------- -------- ------------ Vinings Investment Properties Trust 1.00% 13,432 LIMITED PARTNERS: Vinings Investment Properties Trust 80.94% 1,087,193 The Vinings Group, Inc. 0.67% 9,108 Hallmark Group Real Estate Service Corp. 0.67% 9,108 Irving Abrams 0.49% 6,598 Tim R. Altman 0.25% 3,299 William E. & Mary E. Butler 0.25% 3,299 Donald E. Chace 0.49% 6,598 Terry D. Douglass 0.49% 6,598 Hazel E. Earsley 0.25% 3,299 Stanley D. Eason 0.49% 6,598 C.W. Gustav & Janice S. Eifrig 0.25% 3,299 Jane L. Finchum 0.12% 1,649 Esty Foster 0.49% 6,598 Robert Hesseltine 0.49% 6,598 Betty T. Hinds 0.49% 6,598 Albert H. Hooper, Jr. 0.49% 6,598 Mary Susan Leahy, Executor for the Estate of Joseph Dunbar Shields, Jr. 0.49% 6,598 Trustmark National Bank, Agent for Kathryn D. Little, Investment 0.49% 6,598 Patrick Paul McCarthy 0.25% 3,299 James A. Melvin, Jr. 0.49% 6,598 John R. Mileski 0.49% 6,598 J. Cary Monroe 0.25% 3,299 E. Ray Morris 0.49% 6,598 Thomas W. Orcutt, M.D. 0.49% 6,598 Thomas D. Price 0.25% 3,299 Frederick R. Radcliffe 0.25% 3,299 Joseph D. Shields, III, M.D. 0.25% 3,299 M.F. Soukkar 0.49% 6,598 Virginia G. Sturwold 0.25% 3,299 Oliver H. Tallman, II 0.25% 3,299 Lewis F. Wood, Jr. 0.49% 6,598 Homer R. Yook 0.25% 3,299 Alice C. Young 0.25% 3,299 The Vinings Group, Inc. 0.12% 1,650 Hallmark Group Real Estate Service Corp 0.12% 1,649 ASSIGNEES: Robert L. Bell, M.D. 0.49% 6,598 William G. Beshears, Jr. 0.49% 6,598 Joseph Bonsall, Jr. 0.49% 6,598 Harold J. DeBlanc, Jr., M.D. 0.49% 6,598 William A. Hall 1.96% 26,391 Robert G. Randall 0.49% 6,598 Thomas L. Williams 0.25% 3,299 Don M. Updegraff, Jr. 0.12% 1,649 Majed S. Zakaria 0.49% 6,598 - ---------------- ----- --------- Total 100% 1,343,171 ===== ========= Vinings Investment Properties, L.P. Fifth Amendment to the Amended and Restated Partnership Agreement Exhibit B --------- Additional Limited Partner No. of Units -------------------------- ------------ Irving Abrams 6,598 Tim R. Altman 3,299 William E. & Mary E. Butler 3,299 Donald E. Chace 6,598 Terry D. Douglass 6,598 Stanley D. Eason 6,598 Hazel E. Earsley 3,299 C.W. Gustav & Janice S. Eifrig 3,299 Jane L. Finchum 1,648 Esty Foster 6,598 Robert Hesseltine 6,598 Betty T. Hinds 6,598 Albert H. Hooper, Jr. 6,598 Kathryn D. Little 6,598 Patrick Paul McCarthy 3,299 James A. Melvin, Jr. 6,598 John R. Mileski 6,598 J. Cary Monroe 3,299 E. Ray Morris 6,598 Thomas W. Orcutt, M.D. 6,598 Thomas D. Price 3,299 Frederick R. Radcliffe 3,299 Joseph D. Shields, III, M.D. 3,299 J. Dunbar Shields, Jr., M.D. 6,598 M.F. Soukkar 6,598 Virginia G. Sturwold 3,299 Oliver H. Tallman, III 3,299 Lewis F. Wood, Jr. 6,598 Homer R. Yook 3,299 Alice C. Young 3,299 The Vinings Group, Inc. 1,650 Hallmark Group Real Estate Services, Corp. 1,649 =============== Subtotal 153,402 =============== EX-10 8 10.11 MANAGEMENT CONTRACT MANAGEMENT AGREEMENT -------------------- This MANAGEMENT AGREEMENT made in Atlanta, Georgia between The Thicket Apartments, L.P. ("Owner"), and VIP Management, LLC, ("Agent") a Georgia Limited Liability Company, shall become effective as of January 1, 1999. NOW THEREFORE in consideration of the promises and mutual covenants contained herein, Owner appoints VIP Management, LLC as the exclusive Property management and leasing Agent for the Property as defined below. ARTICLE I Definition ---------- 1.01 Affiliate. (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. 1.02 Budget. A written estimate or projection of all receipts and expenditures for the operation of the Property during a Fiscal Year, including, without limitation, all estimated rentals (including ancillary income) and all estimated repairs, maintenance and capital projects. 1.03 Fiscal Year. Each calendar year ending December 31, all or a part of which falls within the term of this Agreement, unless otherwise stipulated herein. 1.04 Gross Receipts. All Gross Receipts of every kind and nature derived from the operation of the Property during a specified period, without limitation, laundry income, application fees, late fees, and recreation area fees; excluding only: (a) security deposits (to the extent not applied to delinquent rents or damages); (b) proceeds from a sale or refinance of the Property: (c) proceeds from insurance for the reimbursement of loss or damage to the Property, or any part thereof, except that insurance payments for loss of rents will be considered as part of Gross Receipts; (c) condemnation awards or payments received in lieu of condemnation of the Property, or any part thereof; and (d) any trade discounts and rebates received in connection with the purchase of Personal Property or services in connection with the operation of the Property. 1.05 Personal Property. All equipment, supplies, furnishings, furniture and all other items of Personal Property now or hereafter owned by Owner and located upon or used, or useful for, or necessary or adapted for the operation of the Property. 1.06 Property. The 254 unit apartment community known and doing business as The Thicket Apartments, located at 10 Thicket Way, Decatur, Georgia 30035. The term Property used herein includes all of the Land, Building(s) and the Personal Property collectively associated with the above mentioned apartment community. ARTICLE II Term of Agreement ----------------- 2.01 The initial term of this Agreement is two (2) years, commencing on January 1, 1999 and ending on December 31, 2000. This Agreement shall automatically renew for consecutive one (1) year periods, under the same terms and conditions as the initial term, unless either party delivers written notice of non-renewal, at least sixty (60) days prior to the expiration date of the initial term or subsequent renewal term. 2.02 This contract is exclusive and non-cancelable except as stipulated herein. This contract may only be immediately terminated, with notice in writing, under one or more of the following conditions: (a) mutual agreement of Owner and Agent; (b) sale or transfer of ownership in an arms length transaction; (c) gross violation by the Agent of the terms and responsibilities outlined in this agreement; (d) any criminal action or gross negligence on the part of the Agent, its employees or assigns including such acts as fraud, misappropriation of funds, etc.; (e) in the event a petition of bankruptcy is filed by or against either the Agent or Owner, or in the event either makes an assignment for the benefit of creditors or takes advantage of any insolvency act. 2.03 If this Agreement is cancelled at any time or for any reason, other than at the end of the initial term or subsequent renewal term, with the exception of 2.02(c) or 2.02(d) above, a cancellation fee equal to two months fee will become due and payable. ARTICLE III Appointment ----------- Owner hereby grants to Agent, or an Affiliate, the sole and exclusive right to manage, lease and operate the Property, subject to the terms and provisions of this Agreement. During the term of this Agreement, Owner shall not participate in the day-to-day operation of the Property and shall not at any time directly order or instruct any Employees or other personnel engaged in the management or operation of the Property. ARTICLE IV Management ---------- 4.01 Costs of Operation: All costs incurred by Agent in connection with the management, leasing and operation of the Property shall be borne by Owner, including, but not limited to, copies, phone charges, postage, payroll processing, and computer charges, etc. except for the following costs which shall be borne by Agent: (a) costs relating to bookkeeping services required to be performed hereunder that are performed at the Agent's home office; and (b) Salaries and payroll expenses of multi-site and home office Employees of Agent; however budgeted salaries, expenses and benefits of personnel employed for the operation or management of the Property in accordance with Section 4.04 hereof shall be paid by the Owner. 4.02 General Management Duties: Agent shall use diligence to manage, lease and operate the Property in a professional manner, and shall consult with Owner and keep Owner advised as to all major or extraordinary matters and without limitation, at Owner's expense, perform the following services and duties for Owner in a faithful, diligent and efficient manner: (a) Maintain businesslike relations with tenants of the Property whose service requests shall be received, considered and recorded in systematic fashion in order to show the action taken with respect to each. Complaints of a serious nature shall, after thorough investigation, be reported to Owner with appropriate recommendations; (b) Collect all rents and other sums and charges due from tenants, subtenants, licensees and concessionaires of the Property and, if required, retain attorneys or collection agencies for such purpose; (b) Pay all expenses of the property, to the extent funds are available, in a timely fashion from funds collected and deposited into Property back accounts; (c) Prepare or cause to be prepared for execution and filing all forms, reports and returns required by all federal, state and local laws in connection with unemployment insurance, worker's compensation, insurance, disability benefits, Social Security and other similar taxes now in effect or hereafter imposed, and also any other requirements relating to the employment of personnel for the Property; however, Agent shall not be obligated to prepare any of Owner's local, state, or federal income tax returns; (d) Pay all sums and make all deposits becoming due and payable under the provisions of any ground lease or any loan secured by a mortgage or trust deed against the Property, or any part thereof, and otherwise perform all covenants and obligations required to be performed under the provisions of any such ground lease, mortgage or trust deed (to the extent that the performance of such covenants and obligations are within the control of Agent); and (e) Perform such other acts and deeds as are reasonable, necessary and proper in the discharge of its management duties under this Agreement. 4.03 Budgets: Agent shall prepare and submit for approval of Owner not later than thirty (30) days prior to the end of each Fiscal Year, a proposed budget with respect to the operation and management of the Property for the ensuing Fiscal Year. Such Budget shall include all Gross Receipts expected to be collected, as well as all cash expenditures of the property including but not limited to all salaries and benefits, leasing and advertising costs, administrative costs, maintenance and repair items, utilities, taxes and insurance, debt service and capital or replacement reserve items. In the event Owner, in Owner's sole and reasonable judgement, disapproves of any proposed Budget submitted by Agent, Owner shall give Agent written notice thereof, in which event Agent shall make all revisions thereto which Owner shall direct and resubmit the proposed Budget to Owner for approval. In the absence of such written notice of disapproval within thirty (30) days after delivery of the Budget to Owner, the Budget shall be deemed to have been approved by Owner. Each approved Budget shall constitute the control instrument under which Agent shall operate for the Fiscal Year covered thereby. Approval of the Budget shall be deemed to be approval by Owner of all items specified therein. Agent shall not incur or permit to be incurred, expenses in any approved Budget (excluding utility expenses, general real estate taxes, insurance premiums, financing costs and emergency expenses) in excess of ten percent (10%) of the amount set forth in the Budget for any single line item in an expense classification, on a year to date basis, (e.g., cleaning expenses, H.V.A.C. expenses, etc.) or in excess of five percent (5%) of the aggregate expenditures in each expense classification, on a year to date basis. Except as set forth herein and in Section 4.06, there shall be no variance from any approved Budget, without the prior written consent of Owner. 4.04 Property Personnel: In accordance with approved Budgets, Agent shall, at Owner's expense, hire, employ, supervise and discharge all Employees required in connection with the operation and management of the Property. All Employees working on the Property are considered to be Employees of the Owner and not the Agent even though salaries and benefits may be paid through a master agency account. All salaries, taxes, insurance and other benefits paid to such Employees through a master agency account shall be reimbursed immediately and shall not be considered an expense of the management company. The Agent shall not grant any non-budgeted Employee fringe benefits and plans not required by laws or union contract without written consent of Owner. Agent will not discriminate against any Employee or applicant for employment because of race, creed, color, sex or national origin. Said Employees shall include the following: (a) Site Manager: A person who is experienced in the administration and operation of residential Property. (b) Rental Consultant: A person who is trained to lease apartments to qualified prospective Residents, as apartments become vacant throughout the year. (c) Such other sales, office and maintenance personnel required to operate and maintain the Property including air-conditioning mechanics, electricians, plumbers, painters, carpenters, grounds keepers, janitorial and custodial persons, as Agent reasonably deems necessary. 4.05 Contracts and Supplies: Agent shall, at Owner's expense, upon the best terms available, enter into contracts on behalf of Owner for the furnishing to the Property of required utility services, heating and air conditioning services, pest control, other maintenance, and any other services and concessions which are required in connection with the maintenance and operation of the Property. Agent shall also place purchase orders for services and Personal Property as are necessary to properly maintain the Property. All such contracts and orders shall be subject to the limitations set forth in the approved Budget. When taking bids or issuing purchase orders, Agent shall use its best efforts to secure for and credit to Owner, any discounts, commissions or rebates obtainable as a result of such purchases or services. Agent shall use its best efforts to make purchases and (where necessary or desirable) obtain bids for necessary labor and materials at the lowest possible cost as in its judgement is consistent with good quality, workmanship and service standards. Agent shall not incur any obligation to any person or entity in which Agent or any of Agent's officers has a financial interest at a price or fee higher than that which would have been charged as a result of bona fide arms-length negotiations. 4.06 Alterations, Repairs and Maintenance: (a) Agent shall, at Owner's expense, perform or cause to be performed all necessary or desirable repairs, maintenance, cleaning, painting and decorating, alterations, replacements and improvements in and to the Property as are customarily made in the operation of properties of the kind, size and quality of the Property; provided, however, that no unbudgeted alterations, additions or improvements involving a fundamental change in the character of any of the buildings or constituting a major new construction program shall be made without the prior written approval of Owner (unless performed pursuant to any lease or budget previously approved by Owner). In addition, no unbudgeted expenditure in excess of $2,000 per item shall be made except as provided for in Section 4.03, or unless such repairs are immediately necessary for the preservation or the safety of the Property, or for the safety of the tenants of the Property, or required to avoid the suspension of any necessary service to the Property, or are required by any judicial or governmental authority having jurisdiction. These repairs may be made by the Agent without prior approval and regardless of the cost limitations imposed by this Section 4.06(a); further, provided that Agent shall as soon as practicable give written notice to Owner of any such emergency repairs for which prior approval is not required. (b) In accordance with the terms of approved Budgets or upon written request of Owner, Agent shall, from time to time during the term hereof, at Owner's expense, make or cause to be made all required capital improvements, replacements or repairs to the Property; provided, however, if Agent is required to perform extraordinary services in connection with such improvements, repairs or replacements, which services exceed those customarily rendered by managing agents of properties similar to the Property, then Agent shall receive an additional fee therefore in an amount mutually agreed upon by Owner and Agent in advance of the rendition of such services. (c) Agent shall give Owner written notice of any material defect in the Property and all parts thereof immediately after ascertainment thereof by Agent, including without limitation, material defects in the roofs, foundations and walls of the buildings and in the sewer, water, electrical, structural, plumbing, heating, ventilation and air conditioning systems; provided, however, that Agent shall have no obligation to inspect the buildings in order to discover any such condition. 4.07 Licenses and Permits: Agent shall, at Owner's expense, obtain and maintain in the name of Owner all licenses and permits required of Owner or Agent in connection with the management and operation of the Property. Owner agrees to execute and deliver any and all applications and other documents to otherwise cooperate with Agent in applying for, obtaining and maintaining such licenses and permits. 4.08 Compliance with Laws: Agent shall, at Owner's expense, comply with all laws, regulations and requirements for any federal, state or municipal government having jurisdiction respecting the use or manner of use of the Property or the maintenance of operation thereof. Agent shall immediately inform Owner of all notices, summons, suits, fines or violations sent to or served upon Agent regarding the Property. 4.09 Legal Proceedings: Agent shall, at Owner's expense, institute any and all legal and/or administrative actions or proceedings to collect charges, rents or other income from the Property, to dispossess tenants or other persons in possession, to cancel or terminate any lease, license or concession agreement for the breach thereof or default thereunder by the tenant, licensee or concessionaire and to protest increases in taxes and/or assessments levied against the Property, or any portion thereof. 4.10 Inventory: The Agent shall maintain a current inventory of all Personal Property. 4.11 Insurance Coverage: Owner shall procure and maintain throughout the term hereof, the following insurance coverages with respect to the Property: (a) Fire and extended coverage insurance; (b) Worker's compensation insurance; (c) Comprehensive public liability insurance for injury or death to persons and damage to or loss to Property of not less than $2,000,000 / $1,000,000 per occurrence; (d) Burglary and theft insurance; (e) Boiler insurance; (f) Fidelity Bond or crime coverage of not less than $500,000; (g) Employment practices liability insurance; and (h) Such other insurance which Owner shall direct or as Agent shall reasonably deem appropriate for the protection of Owner and Agent against claims, losses and liabilities arising out of the operation and improvement of the Property. Agent shall, at Owner's request, procure such coverages on behalf of Owner, at Owner's expense. All such policies of insurance shall name the Owner, Agent and such other parties as Owner or Agent shall direct as the named insured thereunder, as their respective interests may appear. Agent shall promptly investigate and report to the Owner and the insurance company involved all accidents and claims for damage relating to the ownership, operation and maintenance of the Property and any damage or destruction to the Property. 4.12 Signs: Owner agrees to allow Agent to place one or more signs on or about the Property stating that Agent is providing management for the Property, provided that the signs and location thereof shall be subject to Owner's approval. 4.13 Debts of Owner: In the performance of its duties as managing Agent of the Property, Agent shall act as the agent of the Owner. All debts and liabilities to third persons and Employees of the Property incurred by Agent in the course of its operation and management of the Property shall be the debts and liabilities of the Owner only, and Agent shall not be liable for any such debts or liabilities, except to the extent Agent has exceeded its authority hereunder. 4.14 Allocation of Costs: The parties hereto acknowledge that the Property may be operated in conjunction with other properties managed by Agent, and certain costs may be allocated or shared among such properties with such costs being reimbursed to Agent. 4.15 Other Duties: Agent may provide other duties such as oversee major property renovation, new construction or renovation lease up, coordinate partnership audits, tax returns, bankruptcy filings, loan refinancing, etc. as requested by Owner for additional fees to be mutually agreed upon by Owner and Agent. 4.16 Exclusivity: Agent is not precluded from providing management or other services to other owners or properties even if such properties might be in direct competition with the subject Property. ARTICLE V Management Fees --------------- 5.01 Compensation of Agent: As consideration for the performance by Agent of all its management obligations under this Agreement, Owner agrees to pay Agent a management fee each month during the term of this Agreement in an amount equal to five percent (5%) of Gross Receipts. Said management fee shall be paid not later than the 10th day of the month following the month for which such fee is earned. Provided that Agent is not in default under this Agreement, Agent shall be entitled to pay itself the monthly management fee herein provided from the Property bank account referred to in Article VI hereof. In addition, Agent shall charge and collect an accounting/computer fee of five dollars ($5.00) per unit per month, to be paid in the same manner described herein. 5.02 Reimbursement of Agent's Expenses: Owner agrees to reimburse Agent upon demand therefore for any monies that Agent may elect to advance for the account of Owner. It is expressly understood that Agent is under no obligation to advance any monies for the account of the Owner. Owner shall further reimburse Agent for all of Agent's expenses incurred in connection with the operation of the Property or as a result of Agent's compliance with this Agreement during the preceding month, including, without limitation copies, postage, Agent's long distance travel and long distance phone expenses and expenses relating to the duties set forth in this Agreement. ARTICLE VI Procedure for Handling Receipts and Operating Capital ----------------------------------------------------- 6.01 Bank Deposits: Agent shall establish and maintain, at cost of Owner, separate bank accounts in the name of the Property, as Agent deems appropriate, into which all monies received by Agent for or on behalf of Owner in connection with the operation and management of the Property shall be deposited by Agent. 6.02 Disbursement of Deposits: Agent shall disburse and pay from the bank account specified in Section 6.01 hereof, such amounts and at such times as the same are required in connection with the management and operation of the Property in accordance with the provision of this Agreement. As requested by Owner, Agent will disburse to Owner all funds as in the Agent's sole discretion, after providing sufficient reserves, shall be considered available for Owner. 6.03 Authorized Signatories: Designated officers and/or Employees of Agent shall be the authorized signatories on the bank account established by Agent pursuant to Section 6.01 hereof and shall have authority to make disbursements from such account. ARTICLE VII Accounting ---------- 7.01 Books and Records: Agent shall maintain at the central office of Agent, a comprehensive system of office records, books and accounts pertaining to the Property, which records, books and accounts shall be available for examination by Owner and its agents, accountants and attorneys at regular business hours with reasonable notice. Agent shall preserve all records, books and accounts for a period of three (3) years. 7.02 Periodic Statements; Audits: (a) On or before fifteen (15) days following the end of each month during the term of this Agreement, Agent shall deliver or cause to be delivered to Owner a summary of Gross Receipts and disbursements for the preceding calendar month and the Fiscal Year to date showing variances from the approved Budget; (b) Within sixty (60) days after the end of each Fiscal Year, Agent will deliver or cause to be delivered to Owner, at Owner's expense, an income and expense statement showing the results of operation of the Property during the preceding Fiscal Year. At Owner's request, such statement shall be prepared and audited by a certified public accountant as designated by Owner. At Owner's request and at Owner's expense, Agent shall prepare, or cause to be prepared, other financial reports and perform other bookkeeping services in addition to those provided herein. ARTICLE VIII Indemnification --------------- 8.01 Indemnification: Owner agrees to: a) hold and save Agent harmless from damages as a result of injuries to person or Property by reason of any cause whatsoever either in and about the Property or elsewhere when Agent is carrying out the provisions of this Agreement; b) reimburse Agent, upon demand, for any money which the Agent is required to pay for any reason whatsoever in connection with the Property, including payment for operating expenses, attorneys' fees or costs, fees and judgements in connection with the defense of any claim, civil or criminal action, proceeding, charge, or prosecution made, instituted or maintained against Agent or Owner, jointly or severally, affecting or due to any of the following: i. the condition or use of the Property; ii. acts or omissions of Agent, employees or agents of Agent, and employees of Owner; iii. claims made by or against any employees of Owner; iv. claims arising out of or based upon any law, regulation requirement, contract, or award relating to employment, working conditions, wages and/or compensation of employees or former employees of Owner; or v. any other cause in connection with the Property. c) defend promptly and diligently, at Owner's sole expense, any claim, action or proceeding in connection with any of the foregoing; d) hold harmless or fully indemnify Agent from any judgement, loss or settlement on account thereof, including reasonable attorneys' fees. It is expressly understood and agreed that the foregoing provisions shall survive the termination of this Agreement to the extent the cause arose prior to termination. 8.02 Gross Negligence: Notwithstanding the foregoing, Owner shall not be required to indemnify Agent against damages suffered as a result of gross negligence or willful misconduct on the part of Agent, its agents, employees or employees of Owner. ARTICLE IX Miscellaneous Provisions ------------------------ 9.01 Notices: Any notice or communication hereunder must be in writing, and shall be personally delivered or mailed by registered or certified mail, return receipt requested, and if mailed shall be deemed to have been given and received two (2) days after its mailing. Such notices or communications shall be given to the parties hereto at their following addresses: To Agent: VIP Management, LLC, 3111 Paces Mill Road, A-200 Atlanta, Georgia 30339 Attn: Douglas D. Chasick To Owner: The Thicket Apartments, L.P. 3111 Paces Mill Road, A-200 Atlanta, Georgia 30339 Attn: Peter D. Anzo Any party hereto may at any time by giving ten (10) days written notice to the other party hereto designate any other address in substitution of the foregoing address to which such notice or communications shall be given. 9.02 Severability: If any term, covenant or condition of this Agreement or the application thereof to any person or circumstance shall, to any extent, be held to be invalid or unenforceable, the remainder of this Agreement, or the application of such term, covenant or condition to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term, covenant or condition of this Agreement shall be valid and shall be enforced to the fullest extent permitted by law. 9.03 Attorney's Fees: Should either party retain attorneys to enforce any of the provisions hereof or to protect its interest in any manner arising under this Agreement, or to recover damages for the breach of this Agreement, each party agrees to pay its own attorney's fees expended or incurred in connection therewith. 9.04 Total Agreement: This agreement is a total and complete integration of any and all representations and agreements existing between Agent and Owner and supersedes any prior oral or written representations and agreements between them. 9.05 Article and Section Headings: Article and section headings contained in this Agreement are for reference only, and shall not be deemed to have any substantive effect or to limit or define the provisions contained therein. 9.06 Successors and Assigns: This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns; provided, however, that Agent shall not have the right to assign this Agreement without the prior written consent of Owner unless to an Affiliate. 9.07 Governing Law: This Agreement shall be construed in accordance with the laws of the State of Georgia. IN WITNESS WHEREOF, this Agreement has been executed in Atlanta, Georgia, effective as of the date first above written. OWNER: The Thicket Apartments, L.P. By: /s/ Peter D. Anzo - --------------------- Peter D. Anzo AGENT: VIP Management, LLC By /s/ Douglas D. Chasick - ------------------------ Douglas D. Chasick EX-10 9 10.12 MANAGEMENT CONTRACT MANAGEMENT AGREEMENT -------------------- This MANAGEMENT AGREEMENT made in Atlanta, Georgia between Vinings Communities, L.P. ("Owner"), and VIP Management, LLC, ("Agent") a Georgia Limited Liability Company, shall become effective as of January 1, 1999. NOW THEREFORE in consideration of the promises and mutual covenants contained herein, Owner appoints VIP Management, LLC as the exclusive Property management and leasing Agent for the Property as defined below. ARTICLE I Definition ---------- 1.01 Affiliate. (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. 1.02 Budget. A written estimate or projection of all receipts and expenditures for the operation of the Property during a Fiscal Year, including, without limitation, all estimated rentals (including ancillary income) and all estimated repairs, maintenance and capital projects. 1.03 Fiscal Year. Each calendar year ending December 31, all or a part of which falls within the term of this Agreement, unless otherwise stipulated herein. 1.04 Gross Receipts. All Gross Receipts of every kind and nature derived from the operation of the Property during a specified period, without limitation, laundry income, application fees, late fees, and recreation area fees; excluding only: (a) security deposits (to the extent not applied to delinquent rents or damages); (b) proceeds from a sale or refinance of the Property: (c) proceeds from insurance for the reimbursement of loss or damage to the Property, or any part thereof, except that insurance payments for loss of rents will be considered as part of Gross Receipts; (c) condemnation awards or payments received in lieu of condemnation of the Property, or any part thereof; and (d) any trade discounts and rebates received in connection with the purchase of Personal Property or services in connection with the operation of the Property. 1.05 HUD. U.S. Department of Housing and Urban Development. 1.06 Personal Property. All equipment, supplies, furnishings, furniture and all other items of Personal Property now or hereafter owned by Owner and located upon or used, or useful for, or necessary or adapted for the operation of the Property. 1.07 Property. The 202 unit apartment community known and doing business as Windrush Apartments, located at 3841 Kensington Road, Decatur, Georgia 30032. The term Property used herein includes all of the Land, Building(s) and the Personal Property collectively associated with the above mentioned apartment community. ARTICLE II Term of Agreement ----------------- 2.01 The initial term of this Agreement is two (2) years, commencing on January 1, 1999 and ending on December 31, 2000. This Agreement shall automatically renew for consecutive one (1) year periods, under the same terms and conditions as the initial term, unless either party delivers written notice of non-renewal, at least sixty (60) days prior to the expiration date of the initial term or subsequent renewal term. 2.02 This contract is exclusive and non-cancelable except as stipulated herein. This contract may only be immediately terminated, with notice in writing, under one or more of the following conditions: (a) mutual agreement of Owner and Agent; (b) sale or transfer of ownership in an arms length transaction; (c) gross violation by the Agent of the terms and responsibilities outlin- ed in this agreement; (d) any criminal action or gross negligence on the part of the Agent, its employees or assigns including such acts as fraud, misappropriation of funds, etc.; (e) in the event a petition of bankruptcy is filed by or against either the Agent or Owner, or in the event either makes an assignment for the benefit of creditors or takes advantage of any insolvency act. 2.03 If this Agreement is cancelled at any time or for any reason, other than at the end of the initial term or subsequent renewal term, with the exception of 2.02(c) or 2.02(d) above, a cancellation fee equal to two months fee will become due and payable. 2.04 Notwithstanding any of the above, HUD and/or the lender has the right to terminate this agreement pursuant to the Project Owner's/Management Agent's Certification signed in conjunction with this agreement. ARTICLE III Appointment ----------- Owner hereby grants to Agent, or an Affiliate, the sole and exclusive right to manage, lease and operate the Property, subject to the terms and provisions of this Agreement. During the term of this Agreement, Owner shall not participate in the day-to-day operation of the Property and shall not at any time directly order or instruct any Employees or other personnel engaged in the management or operation of the Property. ARTICLE IV Management ---------- 4.01 Costs of Operation: All costs incurred by Agent in connection with the management, leasing and operation of the Property shall be borne by Owner, including, but not limited to, copies, phone charges, postage, payroll processing, and computer charges, etc. except for the following costs which shall be borne by Agent: (a) costs relating to bookkeeping services required to be performed hereunder that are performed at the Agent's home office; and (b) Salaries and payroll expenses of multi-site and home office Employees of Agent; however budgeted salaries, expenses and benefits of personnel employed for the operation or management of the Property in accordance with Section 4.04 hereof shall be paid by the Owner. 4.02 General Management Duties: Agent shall use diligence to manage, lease and operate the Property in a professional manner, and shall consult with Owner and keep Owner advised as to all major or extraordinary matters and without limitation, at Owner's expense, perform the following services and duties for Owner in a faithful, diligent and efficient manner: (a) Maintain businesslike relations with tenants of the Property whose service requests shall be received, considered and recorded in systematic fashion in order to show the action taken with respect to each. Complaints of a serious nature shall, after thorough investigation, be reported to Owner with appropriate recommendations; (b) Collect all rents and other sums and charges due from tenants, subtenants, licensees and concessionaires of the Property and, if required, retain attorneys or collection agencies for such purpose; (b) Pay all expenses of the property, to the extent funds are available, in a timely fashion from funds collected and deposited into Property back accounts; (c) Prepare or cause to be prepared for execution and filing all forms, reports and returns required by all federal, state and local laws in connection with unemployment insurance, worker's compensation, insurance, disability benefits, Social Security and other similar taxes now in effect or hereafter imposed, and also any other requirements relating to the employment of personnel for the Property; however, Agent shall not be obligated to prepare any of Owner's local, state, or federal income tax returns; (d) Pay all sums and make all deposits becoming due and payable under the provisions of any ground lease or any loan secured by a mortgage or trust deed against the Property, or any part thereof, and otherwise perform all covenants and obligations required to be performed under the provisions of any such ground lease, mortgage or trust deed (to the extent that the performance of such covenants and obligations are within the control of Agent); and (e) Perform such other acts and deeds as are reasonable, necessary and proper in the discharge of its management duties under this Agreement. 4.03 Budgets: Agent shall prepare and submit for approval of Owner not later than thirty (30) days prior to the end of each Fiscal Year, a proposed budget with respect to the operation and management of the Property for the ensuing Fiscal Year. Such Budget shall include all Gross Receipts expected to be collected, as well as all cash expenditures of the property including but not limited to all salaries and benefits, leasing and advertising costs, administrative costs, maintenance and repair items, utilities, taxes and insurance, debt service and capital or replacement reserve items. In the event Owner, in Owner's sole and reasonable judgement, disapproves of any proposed Budget submitted by Agent, Owner shall give Agent written notice thereof, in which event Agent shall make all revisions thereto which Owner shall direct and resubmit the proposed Budget to Owner for approval. In the absence of such written notice of disapproval within thirty (30) days after delivery of the Budget to Owner, the Budget shall be deemed to have been approved by Owner. Each approved Budget shall constitute the control instrument under which Agent shall operate for the Fiscal Year covered thereby. Approval of the Budget shall be deemed to be approval by Owner of all items specified therein. Agent shall not incur or permit to be incurred, expenses in any approved Budget (excluding utility expenses, general real estate taxes, insurance premiums, financing costs and emergency expenses) in excess of ten percent (10%) of the amount set forth in the Budget for any single line item in an expense classification, on a year to date basis, (e.g., cleaning expenses, H.V.A.C. expenses, etc.) or in excess of five percent (5%) of the aggregate expenditures in each expense classification, on a year to date basis. Except as set forth herein and in Section 4.06, there shall be no variance from any approved Budget, without the prior written consent of Owner. 4.04 Property Personnel: In accordance with approved Budgets, Agent shall, at Owner's expense, hire, employ, supervise and discharge all Employees required in connection with the operation and management of the Property. All Employees working on the Property are considered to be Employees of the Owner and not the Agent even though salaries and benefits may be paid through a master agency account. All salaries, taxes, insurance and other benefits paid to such Employees through a master agency account shall be reimbursed immediately and shall not be considered an expense of the management company. The Agent shall not grant any non-budgeted Employee fringe benefits and plans not required by laws or union contract without written consent of Owner. Agent will not discriminate against any Employee or applicant for employment because of race, creed, color, sex or national origin. Said Employees shall include the following: (a) Site Manager: A person who is experienced in the administration and operation of residential Property. (b) Rental Consultant: A person who is trained to lease apartments to qualified prospective Residents, as apartments become vacant throughout the year. (c) Such other sales, office and maintenance personnel required to operate and maintain the Property including air-conditioning mechanics, electricians, plumbers, painters, carpenters, grounds keepers, janitorial and custodial persons, as Agent reasonably deems necessary. 4.05 Contracts and Supplies: Agent shall, at Owner's expense, upon the best terms available, enter into contracts on behalf of Owner for the furnishing to the Property of required utility services, heating and air conditioning services, pest control, other maintenance, and any other services and concessions which are required in connection with the maintenance and operation of the Property. Agent shall also place purchase orders for services and Personal Property as are necessary to properly maintain the Property. All such contracts and orders shall be subject to the limitations set forth in the approved Budget. When taking bids or issuing purchase orders, Agent shall use its best efforts to secure for and credit to Owner, any discounts, commissions or rebates obtainable as a result of such purchases or services. Agent shall use its best efforts to make purchases and (where necessary or desirable) obtain bids for necessary labor and materials at the lowest possible cost as in its judgement is consistent with good quality, workmanship and service standards. Agent shall not incur any obligation to any person or entity in which Agent or any of Agent's officers has a financial interest at a price or fee higher than that which would have been charged as a result of bona fide arms-length negotiations. 4.06 Alterations, Repairs and Maintenance: (a) Agent shall, at Owner's expense, perform or cause to be performed all necessary or desirable repairs, maintenance, cleaning, painting and decorating, alterations, replacements and improvements in and to the Property as are customarily made in the operation of properties of the kind, size and quality of the Property; provided, however, that no unbudgeted alterations, additions or improvements involving a fundamental change in the character of any of the buildings or constituting a major new construction program shall be made without the prior written approval of Owner (unless performed pursuant to any lease or budget previously approved by Owner). In addition, no unbudgeted expenditure in excess of $2,000 per item shall be made except as provided for in Section 4.03, or unless such repairs are immediately necessary for the preservation or the safety of the Property, or for the safety of the tenants of the Property, or required to avoid the suspension of any necessary service to the Property, or are required by any judicial or governmental authority having jurisdiction. These repairs may be made by the Agent without prior approval and regardless of the cost limitations imposed by this Section 4.06(a); further, provided that Agent shall as soon as practicable give written notice to Owner of any such emergency repairs for which prior approval is not required. (b) In accordance with the terms of approved Budgets or upon written request of Owner, Agent shall, from time to time during the term hereof, at Owner's expense, make or cause to be made all required capital improvements, replacements or repairs to the Property; provided, however, if Agent is required to perform extraordinary services in connection with such improvements, repairs or replacements, which services exceed those customarily rendered by managing agents of properties similar to the Property, then Agent shall receive an additional fee therefore in an amount mutually agreed upon by Owner and Agent in advance of the rendition of such services. (c) Agent shall give Owner written notice of any material defect in the Property and all parts thereof immediately after ascertainment thereof by Agent, including without limitation, material defects in the roofs, foundations and walls of the buildings and in the sewer, water, electrical, structural, plumbing, heating, ventilation and air conditioning systems; provided, however, that Agent shall have no obligation to inspect the buildings in order to discover any such condition. 4.07 Licenses and Permits: Agent shall, at Owner's expense, obtain and maintain in the name of Owner all licenses and permits required of Owner or Agent in connection with the management and operation of the Property. Owner agrees to execute and deliver any and all applications and other documents to otherwise cooperate with Agent in applying for, obtaining and maintaining such licenses and permits. 4.08 Compliance with Laws: Agent shall, at Owner's expense, comply with all laws, regulations and requirements for any federal, state or municipal government having jurisdiction respecting the use or manner of use of the Property or the maintenance of operation thereof. Agent shall immediately inform Owner of all notices, summons, suits, fines or violations sent to or served upon Agent regarding the Property. 4.09 Legal Proceedings: Agent shall, at Owner's expense, institute any and all legal and/or administrative actions or proceedings to collect charges, rents or other income from the Property, to dispossess tenants or other persons in possession, to cancel or terminate any lease, license or concession agreement for the breach thereof or default thereunder by the tenant, licensee or concessionaire and to protest increases in taxes and/or assessments levied against the Property, or any portion thereof. 4.10 Inventory: The Agent shall maintain a current inventory of all Personal Property. 4.11 Insurance Coverage: Owner shall procure and maintain throughout the term hereof, the following insurance coverages with respect to the Property: (a) Fire and extended coverage insurance; (b) Worker's compensation insurance; (c) Comprehensive public liability insurance for injury or death to persons and damage to or loss to Property of not less than $2,000,000 / $1,000,000 per occurrence; (d) Burglary and theft insurance; (e) Boiler insurance; (f) Fidelity Bond or crime coverage of not less than $500,000; (g) Employment practices liability insurance; and (h) Such other insurance which Owner shall direct or as Agent shall reasonably deem appropriate for the protection of Owner and Agent against claims, losses and liabilities arising out of the operation and improvement of the Property. Agent shall, at Owner's request, procure such coverages on behalf of Owner, at Owner's expense. All such policies of insurance shall name the Owner, Agent and such other parties as Owner or Agent shall direct as the named insured thereunder, as their respective interests may appear. Agent shall promptly investigate and report to the Owner and the insurance company involved all accidents and claims for damage relating to the ownership, operation and maintenance of the Property and any damage or destruction to the Property. 4.12 Signs: Owner agrees to allow Agent to place one or more signs on or about the Property stating that Agent is providing management for the Property, provided that the signs and location thereof shall be subject to Owner's approval. 4.13 Debts of Owner: In the performance of its duties as managing Agent of the Property, Agent shall act as the agent of the Owner. All debts and liabilities to third persons and Employees of the Property incurred by Agent in the course of its operation and management of the Property shall be the debts and liabilities of the Owner only, and Agent shall not be liable for any such debts or liabilities, except to the extent Agent has exceeded its authority hereunder. 4.14 Allocation of Costs: The parties hereto acknowledge that the Property may be operated in conjunction with other properties managed by Agent, and certain costs may be allocated or shared among such properties with such costs being reimbursed to Agent. 4.15 Other Duties: Agent may provide other duties such as oversee major property renovation, new construction or renovation lease up, coordinate partnership audits, tax returns, bankruptcy filings, loan refinancing, etc. as requested by Owner for additional fees to be mutually agreed upon by Owner and Agent. 4.16 Exclusivity: Agent is not precluded from providing management or other services to other owners or properties even if such properties might be in direct competition with the subject Property. ARTICLE V Management Fees --------------- 5.01 Compensation of Agent: As consideration for the performance by Agent of all its management obligations under this Agreement, Owner agrees to pay Agent a management fee each month during the term of this Agreement in an amount equal to five percent (5%) of Gross Receipts. Said management fee shall be paid not later than the 10th day of the month following the month for which such fee is earned. Provided that Agent is not in default under this Agreement, Agent shall be entitled to pay itself the monthly management fee herein provided from the Property bank account referred to in Article VI hereof. In addition, Agent shall charge and collect an accounting/computer fee of five dollars ($5.00) per unit per month, to be paid in the same manner described herein. 5.02 Reimbursement of Agent's Expenses: Owner agrees to reimburse Agent upon demand therefore for any monies that Agent may elect to advance for the account of Owner. It is expressly understood that Agent is under no obligation to advance any monies for the account of the Owner. Owner shall further reimburse Agent for all of Agent's expenses incurred in connection with the operation of the Property or as a result of Agent's compliance with this Agreement during the preceding month, including, without limitation copies, postage, Agent's long distance travel and long distance phone expenses and expenses relating to the duties set forth in this Agreement. ARTICLE VI Procedure for Handling Receipts and Operating Capital ----------------------------------------------------- 6.01 Bank Deposits: Agent shall establish and maintain, at cost of Owner, separate bank accounts in the name of the Property, as Agent deems appropriate, into which all monies received by Agent for or on behalf of Owner in connection with the operation and management of the Property shall be deposited by Agent. 6.02 Disbursement of Deposits: Agent shall disburse and pay from the bank account specified in Section 6.01 hereof, such amounts and at such times as the same are required in connection with the management and operation of the Property in accordance with the provision of this Agreement. As requested by Owner, Agent will disburse to Owner all funds as in the Agent's sole discretion, after providing sufficient reserves, shall be considered available for Owner. 6.03 Authorized Signatories: Designated officers and/or Employees of Agent shall be the authorized signatories on the bank account established by Agent pursuant to Section 6.01 hereof and shall have authority to make disbursements from such account. ARTICLE VII Accounting ---------- 7.01 Books and Records: Agent shall maintain at the central office of Agent, a comprehensive system of office records, books and accounts pertaining to the Property, which records, books and accounts shall be available for examination by Owner and its agents, accountants and attorneys at regular business hours with reasonable notice. Agent shall preserve all records, books and accounts for a period of three (3) years. 7.02 Periodic Statements; Audits: (a) On or before fifteen (15) days following the end of each month during the term of this Agreement, Agent shall deliver or cause to be delivered to Owner a summary of Gross Receipts and disbursements for the preceding calendar month and the Fiscal Year to date showing variances from the approved Budget; (b) Within sixty (60) days after the end of each Fiscal Year, Agent will deliver or cause to be delivered to Owner, at Owner's expense, an income and expense statement showing the results of operation of the Property during the preceding Fiscal Year. At Owner's request, such statement shall be prepared and audited by a certified public accountant as designated by Owner. At Owner's request and at Owner's expense, Agent shall prepare, or cause to be prepared, other financial reports and perform other bookkeeping services in addition to those provided herein. 7.03 Disclosure: Upon request of the U.S. Department of Housing and Urban Development ("HUD"), the lender holding the deed of trust secured by the Property (the "Lender"), or the Owner, Agent will make available, at a reasonable time and place, its records and records of identity-of-interest companies which relate to goods and services charged to the project. Records and information will be sufficient to permit HUD or the Lender to determine the services performed, the dates the services were performed, the location at which the services were performed, the time consumed in providing the services, the charges made for materials, and the per-unit and total charges levied for said services. ARTICLE VIII Indemnification --------------- 8.01 Indemnification: Owner agrees to: a) hold and save Agent harmless from damages as a result of injuries to person or Property by reason of any cause whatsoever either in and about the Property or elsewhere when Agent is carrying out the provisions of this Agreement; b) reimburse Agent, upon demand, for any money which the Agent is required to pay for any reason whatsoever in connection with the Property, including payment for operating expenses, attorneys' fees or costs, fees and judgements in connection with the defense of any claim, civil or criminal action, proceeding, charge, or prosecution made, instituted or maintained against Agent or Owner, jointly or severally, affecting or due to any of the following: i. the condition or use of the Property; ii. acts or omissions of Agent, employees or agents of Agent, and employees of Owner; iii. claims made by or against any employees of Owner; iv. claims arising out of or based upon any law, regulation requirement, contract, or award relating to employment, working conditions, wages and/or compensation of employees or former employees of Owner; or v. any other cause in connection with the Property. c) defend promptly and diligently, at Owner's sole expense, any claim, action or proceeding in connection with any of the foregoing; d) hold harmless or fully indemnify Agent from any judgement, loss or settlement on account thereof, including reasonable attorneys' fees. It is expressly understood and agreed that the foregoing provisions shall survive the termination of this Agreement to the extent the cause arose prior to termination. 8.02 Gross Negligence: Notwithstanding the foregoing, Owner shall not be required to indemnify Agent against damages suffered as a result of gross negligence or willful misconduct on the part of Agent, its agents, employees or employees of Owner. ARTICLE IX Miscellaneous Provisions ------------------------ 9.01 Notices: Any notice or communication hereunder must be in writing, and shall be personally delivered or mailed by registered or certified mail, return receipt requested, and if mailed shall be deemed to have been given and received two (2) days after its mailing. Such notices or communications shall be given to the parties hereto at their following addresses: To Agent: VIP Management, LLC, 3111 Paces Mill Road, A-200 Atlanta, Georgia 30339 Attn: Douglas D. Chasick To Owner: Vinings Communities, L.P. 3111 Paces Mill Road, A-200 Atlanta, Georgia 30339 Attn: Peter D. Anzo Any party hereto may at any time by giving ten (10) days written notice to the other party hereto designate any other address in substitution of the foregoing address to which such notice or communications shall be given. 9.02 Severability: If any term, covenant or condition of this Agreement or the application thereof to any person or circumstance shall, to any extent, be held to be invalid or unenforceable, the remainder of this Agreement, or the application of such term, covenant or condition to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term, covenant or condition of this Agreement shall be valid and shall be enforced to the fullest extent permitted by law. 9.03 Attorney's Fees: Should either party retain attorneys to enforce any of the provisions hereof or to protect its interest in any manner arising under this Agreement, or to recover damages for the breach of this Agreement, each party agrees to pay its own attorney's fees expended or incurred in connection therewith. 9.04 Total Agreement: This agreement is a total and complete integration of any and all representations and agreements existing between Agent and Owner and supersedes any prior oral or written representations and agreements between them. 9.05 Article and Section Headings: Article and section headings contained in this Agreement are for reference only, and shall not be deemed to have any substantive effect or to limit or define the provisions contained therein. 9.06 Successors and Assigns: This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns; provided, however, that Agent shall not have the right to assign this Agreement without the prior written consent of Owner unless to an Affiliate. 9.07 Governing Law: This Agreement shall be construed in accordance with the laws of the State of Georgia. IN WITNESS WHEREOF, this Agreement has been executed in Atlanta, Georgia, effective as of the date first above written. OWNER: Vinings Communities, L.P. BY: Vinings Investment Properties Trust, General Partner By: /s/ Peter D. Anzo - ---------------------- Peter D. Anzo Chief Executive Officer & President AGENT: VIP Management, LLC By: /s/ Douglas D. Chasick - -------------------------- Douglas D. Chasick Manager EX-10 10 10.13 MANAGEMENT CONTRACT MANAGEMENT AGREEMENT -------------------- This MANAGEMENT AGREEMENT made in Atlanta, Georgia between Vinings Investment Properties, L.P. ("Owner"), and VIP Management, LLC, ("Agent") a Georgia Limited Liability Company, shall become effective as of January 1, 1999. NOW THEREFORE in consideration of the promises and mutual covenants contained herein, Owner appoints VIP Management, LLC as the exclusive Property management and leasing Agent for the Property as defined below. ARTICLE I Definition ---------- 1.01 Affiliate. (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. 1.02 Budget. A written estimate or projection of all receipts and expenditures for the operation of the Property during a Fiscal Year, including, without limitation, all estimated rentals (including ancillary income) and all estimated repairs, maintenance and capital projects. 1.03 Fiscal Year. Each calendar year ending December 31, all or a part of which falls within the term of this Agreement, unless otherwise stipulated herein. 1.04 Gross Receipts. All Gross Receipts of every kind and nature derived from the operation of the Property during a specified period, without limitation, laundry income, application fees, late fees, and recreation area fees; excluding only: (a) security deposits (to the extent not applied to delinquent rents or damages); (b) proceeds from a sale or refinance of the Property: (c) proceeds from insurance for the reimbursement of loss or damage to the Property, or any part thereof, except that insurance payments for loss of rents will be considered as part of Gross Receipts; (c) condemnation awards or payments received in lieu of condemnation of the Property, or any part thereof; and (d) any trade discounts and rebates received in connection with the purchase of Personal Property or services in connection with the operation of the Property. 1.05 Personal Property. All equipment, supplies, furnishings, furniture and all other items of Personal Property now or hereafter owned by Owner and located upon or used, or useful for, or necessary or adapted for the operation of the Property. 1.06 Property. The office building known and doing business as Peachtree Business Center, located at 3039 Amwiler Road, Atlanta, GA 30360. The term Property used herein includes all of the Land, Building(s) and the Personal Property collectively associated with the above mentioned office building. ARTICLE II Term of Agreement ----------------- 2.01 The initial term of this Agreement is two (2) years, commencing on January 1, 1999 and ending on December 31, 2000. This Agreement shall automatically renew for consecutive one (1) year periods, under the same terms and conditions as the initial term, unless either party delivers written notice of non-renewal, at least sixty (60) days prior to the expiration date of the initial term or subsequent renewal term. 2.02 This contract is exclusive and non-cancelable except as stipulated herein. This contract may only be immediately terminated, with notice in writing, under one or more of the following conditions: (a) mutual agreement of Owner and Agent; (b) sale or transfer of ownership in an arms length transaction; (c) gross violation by the Agent of the terms and responsibilities outlined in this agreement; (d) any criminal action or gross negligence on the part of the Agent, its employees or assigns including such acts as fraud, misappropriation of funds, etc.; (e) in the event a petition of bankruptcy is filed by or against either the Agent or Owner, or in the event either makes an assignment for the benefit of creditors or takes advantage of any insolvency act. 2.03 If this Agreement is cancelled at any time or for any reason, other than at the end of the initial term or subsequent renewal term, with the exception of 2.02(c) or 2.02(d) above, a cancellation fee equal to two months fee will become due and payable. ARTICLE III Appointment ----------- Owner hereby grants to Agent, or an Affiliate, the sole and exclusive right to manage, lease and operate the Property, subject to the terms and provisions of this Agreement. During the term of this Agreement, Owner shall not participate in the day-to-day operation of the Property and shall not at any time directly order or instruct any Employees or other personnel engaged in the management or operation of the Property. ARTICLE IV Management ---------- 4.01 Costs of Operation: All costs incurred by Agent in connection with the management, leasing and operation of the Property shall be borne by Owner, including, but not limited to, copies, phone charges, postage, payroll processing, and computer charges, etc. except for the following costs which shall be borne by Agent: (a) costs relating to bookkeeping services required to be performed hereunder that are performed at the Agent's home office; and (b) Salaries and payroll expenses of multi-site and home office Employees of Agent; however budgeted salaries, expenses and benefits of personnel employed for the operation or management of the Property in accordance with Section 4.04 hereof shall be paid by the Owner. 4.02 General Management Duties: Agent shall use diligence to manage and operate the Property in a professional manner, and shall consult with Owner and keep Owner advised as to all major or extraordinary matters and without limitation, at Owner's expense, perform the following services and duties for Owner in a faithful, diligent and efficient manner: (a) Maintain businesslike relations with tenants of the Property whose service requests shall be received, considered and recorded in systematic fashion in order to show the action taken with respect to each. Complaints of a serious nature shall, after thorough investigation, be reported to Owner with appropriate recommendations; (b) Collect all rents and other sums and charges due from tenants, subtenants, licensees and concessionaires of the Property and, if required, retain attorneys or collection agencies for such purpose; (b) Pay all expenses of the property, to the extent funds are available, in a timely fashion from funds collected and deposited into Property back accounts; (c) Prepare or cause to be prepared for execution and filing all forms, reports and returns required by all federal, state and local laws in connection with unemployment insurance, worker's compensation, insurance, disability benefits, Social Security and other similar taxes now in effect or hereafter imposed, and also any other requirements relating to the employment of personnel for the Property; however, Agent shall not be obligated to prepare any of Owner's local, state, or federal income tax returns; (d) Pay all sums and make all deposits becoming due and payable under the provisions of any ground lease or any loan secured by a mortgage or trust deed against the Property, or any part thereof, and otherwise perform all covenants and obligations required to be performed under the provisions of any such ground lease, mortgage or trust deed (to the extent that the performance of such covenants and obligations are within the control of Agent); and (e) Perform such other acts and deeds as are reasonable, necessary and proper in the discharge of its management duties under this Agreement. 4.03 Budgets: Agent shall prepare and submit for approval of Owner not later than thirty (30) days prior to the end of each Fiscal Year, a proposed budget with respect to the operation and management of the Property for the ensuing Fiscal Year. Such Budget shall include all Gross Receipts expected to be collected, as well as all cash expenditures of the property including but not limited to all salaries and benefits, leasing and advertising costs, administrative costs, maintenance and repair items, utilities, taxes and insurance, debt service and capital or replacement reserve items. In the event Owner, in Owner's sole and reasonable judgement, disapproves of any proposed Budget submitted by Agent, Owner shall give Agent written notice thereof, in which event Agent shall make all revisions thereto which Owner shall direct and resubmit the proposed Budget to Owner for approval. In the absence of such written notice of disapproval within thirty (30) days after delivery of the Budget to Owner, the Budget shall be deemed to have been approved by Owner. Each approved Budget shall constitute the control instrument under which Agent shall operate for the Fiscal Year covered thereby. Approval of the Budget shall be deemed to be approval by Owner of all items specified therein. Agent shall not incur or permit to be incurred, expenses in any approved Budget (excluding utility expenses, general real estate taxes, insurance premiums, financing costs and emergency expenses) in excess of ten percent (10%) of the amount set forth in the Budget for any single line item in an expense classification, on a year to date basis, (e.g., cleaning expenses, H.V.A.C. expenses, etc.) or in excess of five percent (5%) of the aggregate expenditures in each expense classification, on a year to date basis. Except as set forth herein and in Section 4.06, there shall be no variance from any approved Budget, without the prior written consent of Owner. 4.04 Property Personnel: In accordance with approved Budgets, Agent shall, at Owner's expense, hire, employ, supervise and discharge all Employees required in connection with the operation and management of the Property. All salaries, taxes, insurance and other benefits paid to such Employees shall be an expense of the Owner and shall not be considered an expense of the management company. The Agent shall not grant any non-budgeted Employee fringe benefits and plans not required by laws or union contract without written consent of Owner. Agent will not discriminate against any Employee or applicant for employment because of race, creed, color, sex or national origin. 4.05 Contracts and Supplies: Agent shall, at Owner's expense, upon the best terms available, enter into contracts on behalf of Owner for the furnishing to the Property of required utility services, heating and air conditioning services, pest control, other maintenance, and any other services and concessions which are required in connection with the maintenance and operation of the Property. Agent shall also place purchase orders for services and Personal Property as are necessary to properly maintain the Property. All such contracts and orders shall be subject to the limitations set forth in the approved Budget. When taking bids or issuing purchase orders, Agent shall use its best efforts to secure for and credit to Owner, any discounts, commissions or rebates obtainable as a result of such purchases or services. Agent shall use its best efforts to make purchases and (where necessary or desirable) obtain bids for necessary labor and materials at the lowest possible cost as in its judgement is consistent with good quality, workmanship and service standards. Agent shall not incur any obligation to any person or entity in which Agent or any of Agent's officers has a financial interest at a price or fee higher than that which would have been charged as a result of bona fide arms-length negotiations. 4.06 Alterations, Repairs and Maintenance: (a) Agent shall, at Owner's expense, perform or cause to be performed all necessary or desirable repairs, maintenance, cleaning, painting and decorating, alterations, replacements and improvements in and to the Property as are customarily made in the operation of properties of the kind, size and quality of the Property; provided, however, that no unbudgeted alterations, additions or improvements involving a fundamental change in the character of any of the buildings or constituting a major new construction program shall be made without the prior written approval of Owner (unless performed pursuant to any lease or budget previously approved by Owner). In addition, no unbudgeted expenditure in excess of $2,000 per item shall be made except as provided for in Section 4.03, or unless such repairs are immediately necessary for the preservation or the safety of the Property, or for the safety of the tenants of the Property, or required to avoid the suspension of any necessary service to the Property, or are required by any judicial or governmental authority having jurisdiction. These repairs may be made by the Agent without prior approval and regardless of the cost limitations imposed by this Section 4.06(a); further, provided that Agent shall as soon as practicable give written notice to Owner of any such emergency repairs for which prior approval is not required. (b) In accordance with the terms of approved Budgets or upon written request of Owner, Agent shall, from time to time during the term hereof, at Owner's expense, make or cause to be made all required capital improvements, replacements or repairs to the Property; provided, however, if Agent is required to perform extraordinary services in connection with such improvements, repairs or replacements, which services exceed those customarily rendered by managing agents of properties similar to the Property, then Agent shall receive an additional fee therefore in an amount mutually agreed upon by Owner and Agent in advance of the rendition of such services. (c) Agent shall give Owner written notice of any material defect in the Property and all parts thereof immediately after ascertainment thereof by Agent, including without limitation, material defects in the roofs, foundations and walls of the buildings and in the sewer, water, electrical, structural, plumbing, heating, ventilation and air conditioning systems; provided, however, that Agent shall have no obligation to inspect the buildings in order to discover any such condition. 4.07 Licenses and Permits: Agent shall, at Owner's expense, obtain and maintain in the name of Owner all licenses and permits required of Owner or Agent in connection with the management and operation of the Property. Owner agrees to execute and deliver any and all applications and other documents to otherwise cooperate with Agent in applying for, obtaining and maintaining such licenses and permits. 4.08 Compliance with Laws: Agent shall, at Owner's expense, comply with all laws, regulations and requirements for any federal, state or municipal government having jurisdiction respecting the use or manner of use of the Property or the maintenance of operation thereof. Agent shall immediately inform Owner of all notices, summons, suits, fines or violations sent to or served upon Agent regarding the Property. 4.09 Legal Proceedings: Agent shall, at Owner's expense, institute any and all legal and/or administrative actions or proceedings to collect charges, rents or other income from the Property, to dispossess tenants or other persons in possession, to cancel or terminate any lease, license or concession agreement for the breach thereof or default thereunder by the tenant, licensee or concessionaire and to protest increases in taxes and/or assessments levied against the Property, or any portion thereof. 4.10 Inventory: The Agent shall maintain a current inventory of all Personal Property. 4.11 Insurance Coverage: Owner shall procure and maintain throughout the term hereof, the following insurance coverages with respect to the Property: (a) Fire and extended coverage insurance; (b) Worker's compensation insurance; (c) Comprehensive public liability insurance for injury or death to persons and damage to or loss to Property of not less than $2,000,000/$1,000,000 per occurrence; (d) Burglary and theft insurance; (e) Boiler insurance; (f) Fidelity Bond or crime coverage of not less than $500,000; (g) Employment practices liability insurance; and (h) Such other insurance which Owner shall direct or as Agent shall reasonably deem appropriate for the protection of Owner and Agent against claims, losses and liabilities arising out of the operation and improvement of the Property. Agent shall, at Owners request, procure such coverages on behalf of Owner, at Owner's expense. All such policies of insurance shall name the Owner, Agent and such other parties as Owner or Agent shall direct as the named insured thereunder, as their respective interests may appear. Agent shall promptly investigate and report to the Owner and the insurance company involved all accidents and claims for damage relating to the ownership, operation and maintenance of the Property and any damage or destruction to the Property. 4.12 Signs: Owner agrees to allow Agent to place one or more signs on or about the Property stating that Agent is providing management for the Property, provided that the signs and location thereof shall be subject to Owner's approval. 4.13 Debts of Owner: In the performance of its duties as managing Agent of the Property, Agent shall act as the agent of the Owner. All debts and liabilities to third persons and Employees of the Property incurred by Agent in the course of its operation and management of the Property shall be the debts and liabilities of the Owner only, and Agent shall not be liable for any such debts or liabilities, except to the extent Agent has exceeded its authority hereunder. 4.14 Allocation of Costs: The parties hereto acknowledge that the Property may be operated in conjunction with other properties managed by Agent, and certain costs may be allocated or shared among such properties with such costs being reimbursed to Agent. 4.15 Other Duties: Agent may provide other duties such as lease space, oversee major property renovation, new construction or renovation lease up, coordinate partnership audits, tax returns, bankruptcy filings, loan refinancing, etc. as requested by Owner for additional fees to be mutually agreed upon by Owner and Agent. 4.16 Exclusivity: Agent is not precluded from providing management or other services to other owners or properties even if such properties might be in direct competition with the subject Property. ARTICLE V Management Fees --------------- 5.01 Compensation of Agent: As consideration for the performance by Agent of all its management obligations under this Agreement, Owner agrees to pay Agent a management fee each month during the term of this Agreement in an amount equal to five percent (5%) of Gross Receipts. Said management fee shall be paid not later than the 10th day of the month following the month for which such fee is earned. Provided that Agent is not in default under this Agreement, Agent shall be entitled to pay itself the monthly management fee herein provided from the Property bank account referred to in Article VI hereof. 5.02 Reimbursement of Agent's Expenses: Owner agrees to reimburse Agent upon demand therefore for any monies that Agent may elect to advance for the account of Owner. It is expressly understood that Agent is under no obligation to advance any monies for the account of the Owner. Owner shall further reimburse Agent for all of Agent's expenses incurred in connection with the operation of the Property or as a result of Agent's compliance with this Agreement during the preceding month, including, without limitation copies, postage, Agent's long distance travel and long distance phone expenses and expenses relating to the duties set forth in this Agreement. ARTICLE VI Procedure for Handling Receipts and Operating Capital ----------------------------------------------------- 6.01 Bank Deposits: Agent shall establish and maintain, at cost of Owner, separate bank accounts in the name of the Property, as Agent deems appropriate, into which all monies received by Agent for or on behalf of Owner in connection with the operation and management of the Property shall be deposited by Agent. 6.02 Disbursement of Deposits: Agent shall disburse and pay from the bank account specified in Section 6.01 hereof, such amounts and at such times as the same are required in connection with the management and operation of the Property in accordance with the provision of this Agreement. As requested by Owner, Agent will disburse to Owner all funds as in the Agent's sole discretion, after providing sufficient reserves, shall be considered available for Owner. 6.03 Authorized Signatories: Designated officers and/or Employees of Agent shall be the authorized signatories on the bank account established by Agent pursuant to Section 6.01 hereof and shall have authority to make disbursements from such account. ARTICLE VII Accounting ---------- 7.01 Books and Records: Agent shall maintain at the central office of Agent, a comprehensive system of office records, books and accounts pertaining to the Property, which records, books and accounts shall be available for examination by Owner and its agents, accountants and attorneys at regular business hours with reasonable notice. Agent shall preserve all records, books and accounts for a period of three (3) years. 7.02 Periodic Statements; Audits: (a) On or before fifteen (15) days following the end of each month during the term of this Agreement, Agent shall deliver or cause to be delivered to Owner a summary of Gross Receipts and disbursements for the preceding calendar month and the Fiscal Year to date showing variances from the approved Budget; (b) Within sixty (60) days after the end of each Fiscal Year, Agent will deliver or cause to be delivered to Owner, at Owner's expense, an income and expense statement showing the results of operation of the Property during the preceding Fiscal Year. At Owner's request, such statement shall be prepared and audited by a certified public accountant as designated by Owner. At Owner's request and at Owner's expense, Agent shall prepare, or cause to be prepared, other financial reports and perform other bookkeeping services in addition to those provided herein. ARTICLE VIII Indemnification --------------- 8.01 Indemnification: Owner agrees to: a) hold and save Agent harmless from damages as a result of injuries to person or Property by reason of any cause whatsoever either in and about the Property or elsewhere when Agent is carrying out the provisions of this Agreement; b) reimburse Agent, upon demand, for any money which the Agent is required to pay for any reason whatsoever in connection with the Property, including payment for operating expenses, attorneys' fees or costs, fees and judgements in connection with the defense of any claim, civil or criminal action, proceeding, charge, or prosecution made, instituted or maintained against Agent or Owner, jointly or severally, affecting or due to any of the following: i. the condition or use of the Property; ii. acts or omissions of Agent, employees or agents of Agent, and employees of Owner; iii. claims made by or against any employees of Owner; iv. claims arising out of or based upon any law, regulation requirement, contract, or award relating to employment, working conditions, wages and/or compensation of employees or former employees of Owner; or v. any other cause in connection with the Property. c) defend promptly and diligently, at Owner's sole expense, any claim, action or proceeding in connection with any of the foregoing; d) hold harmless or fully indemnify Agent from any judgement, loss or settlement on account thereof, including reasonable attorneys' fees. It is expressly understood and agreed that the foregoing provisions shall survive the termination of this Agreement to the extent the cause arose prior to termination. 8.02 Gross Negligence: Notwithstanding the foregoing, Owner shall not be required to indemnify Agent against damages suffered as a result of gross negligence or willful misconduct on the part of Agent, its agents, employees or employees of Owner. ARTICLE IX Miscellaneous Provisions ------------------------ 9.01 Notices: Any notice or communication hereunder must be in writing, and shall be personally delivered or mailed by registered or certified mail, return receipt requested, and if mailed shall be deemed to have been given and received two (2) days after its mailing. Such notices or communications shall be given to the parties hereto at their following addresses: To Agent: VIP Management, LLC, 3111 Paces Mill Road, A-200 Atlanta, Georgia 30339 Attn: Douglas D. Chasick To Owner: Vinings Investment Properties, L.P. 3111 Paces Mill Road, A-200 Atlanta, Georgia 30339 Attn: Peter D. Anzo Any party hereto may at any time by giving ten (10) days written notice to the other party hereto designate any other address in substitution of the foregoing address to which such notice or communications shall be given. 9.02 Severability: If any term, covenant or condition of this Agreement or the application thereof to any person or circumstance shall, to any extent, be held to be invalid or unenforceable, the remainder of this Agreement, or the application of such term, covenant or condition to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term, covenant or condition of this Agreement shall be valid and shall be enforced to the fullest extent permitted by law. 9.03 Attorney's Fees: Should either party retain attorneys to enforce any of the provisions hereof or to protect its interest in any manner arising under this Agreement, or to recover damages for the breach of this Agreement, each party agrees to pay its own attorney's fees expended or incurred in connection therewith. 9.04 Total Agreement: This agreement is a total and complete integration of any and all representations and agreements existing between Agent and Owner and supersedes any prior oral or written representations and agreements between them. 9.05 Article and Section Headings: Article and section headings contained in this Agreement are for reference only, and shall not be deemed to have any substantive effect or to limit or define the provisions contained therein. 9.06 Successors and Assigns: This Agreement shall be binding upon and shall inure to the benefit of the parties hereto and their respective successors and permitted assigns; provided, however, that Agent shall not have the right to assign this Agreement without the prior written consent of Owner unless to an Affiliate. 9.07 Governing Law: This Agreement shall be construed in accordance with the laws of the State of Georgia. IN WITNESS WHEREOF, this Agreement has been executed in Atlanta, Georgia, effective as of the date first above written. OWNER: Vinings Investment Properties, L.P. By: /s/ Peter D. Anzo - --------------------- Peter D. Anzo AGENT: VIP Management, LLC By /s/ Douglas D. Chasick - ----------------------- Douglas D. Chasick EX-10 11 10.15 AMENDMENT TO COMMERCIAL CREDIT AGREEMENT AMENDMENT TO COMMERCIAL CREDIT AGREEMENT --------------------------- THIS AMENDMENT TO COMMERCIAL CREDIT AGREEMENT (this "Amendment"), is made and entered into as of the 1st day of July, 1998, by and between HARDWICK BANK AND TRUST COMPANY ("Hardwick"), and the TRUSTEES OF THE VININGS INVESTMENT PROPERTIES TRUST, a Massachusetts business trust ("Borrower")- WITNESSETH: WHEREAS, Hardwick and Borrower have heretofore entered into a certain Commercial Credit Agreement (hereafter the "Credit Agreement"), dated June 28, 1997, pursuant to the terms of which Hardwick, among other things, opened and extended to Borrower a line of credit in the amount of TWO MILLION AND NO/100 DOLLARS ($2,000,000.00); and WHEREAS, the Borrower has requested that Hardwick extend the Credit Line Termination Date established in said Credit Agreement, and Hardwick is willing to do so upon the terms and conditions of this Agreement; NOW, THEREFORE, in consideration of the premises and One Dollar ($1.00) in hand paid by each party to the other, and further good and valuable considerations, the receipt and legal sufficiency of which are hereby acknowledge, the parties hereto do mutually agree as follows: Section 1. The "Credit Line Termination Date" as set forth in Section 1.08 of the Credit Agreement is hereby deleted and the following is substituted therefore: 1.08 "Credit Line Termination Date": December 28, 1998. Section 2. Representations and Warranties of Borrower. As an inducement to Hardwick to enter into this Amendment, the Borrower hereby represents, covenants and warrants as follows: (a) The Borrower has duly executed and delivered this Amendment free of duress, coercion and other defenses to the execution, delivery and performance hereof. This Amendment, the Credit Agreement, and all Financing Documents (as defined in Credit Agreement) are the valid, binding and legally enforceable obligations of the Borrower, enforceable against the Borrower in accordance with their respective terms. (b) Each of the representations, warranties and certifications of the Borrower contained in the Credit Agreement and this Amendment is accurate and complete in all respects on the date of this Amendment. (c) There does not now exist any condition which with the giving of notice or the lapse of time, or both, would constitute a default or Event of Default under the terms of the Agreement. Section 3. Construction of the Credit Agreement. From and after the date hereof, the Credit Agreement and each of the Financing Documents (as defined in the Agreement) shall be construed, interpreted and enforced by reference to this Amendment, and to the extent that the terms of this Amendment vary from or contradict the terms of the Credit Agreement the terms of this Amendment shall govern. Section 4. Binding Effect. The Credit Agreement, as amended by this Amendment, shall remain in full force and effect except to the extent specifically set forth herein. This Amendment shall inure to the benefit of and be binding upon the parties hereto and their respective executors, legal representatives, successors and assigns. Section 5. Governing Law. This Amendment has been prepared and entered into in the State of Georgia and with the intention that the laws of the State of Georgia shall govern its construction, interpretation and enforcement. IN WITNESS WHEREOF, the parties hereto have hereunto affixed their hands and seals on the day and year first above written. VININGS INVESTMENT PROPERTIES TRUST HARDWICK BANK AND TRUST COMPANY By: /s/ Peter D. Anzo By: /s/ Marshall Mauldin - --------------------------------- ------------------------------- Peter D. Anzo, Authorized Trustee, Title: President on behalf of all of the Trustees EX-10 12 10.16 FORM OF AMENDED AND RESTATED AGREEMENT FORM OF AMENDED AND RESTATED AGREEMENT OF PURCHASE AND SALE FOR ACQUISITION TRANSITION ARTICLE 1. PARTIES ------------------ 101. The parties to this Agreement are _______________________________ ("Seller"), and __________________________, L.P., or its assigns ("Purchaser"). ARTICLE 2. PROPERTY TO BE PURCHASED ----------------------------------- 201. In consideration of Ten Dollars ($10.00) cash in hand paid by Purchaser to Seller, the receipt and sufficiency of which are hereby acknowledged, Seller agrees to sell to Purchaser and Purchaser agrees to purchase from Seller, on the terms and conditions hereinafter set forth, that certain parcel(s) of land (the "Land") owned by Seller as identified and particularly described in Exhibit "A", attached hereto and incorporated herein by this reference, together with the following property: (a) all buildings, structures and other improvements located on the Land, and all fixtures and appurtenances thereto, (herein collectively called the "Improvements"); (b) all appliances and installed equipment owned by Seller, located at, on or in the Improvements or Land listed in Exhibit "B" attached hereto and incorporated herein by this reference (herein collectively called the "Equipment"); (c) any portion of the Land lying in the right-of-way of any alley, passageway, street, road, highway or avenue, proposed, open, or closed, adjoining all or any part of the Land and in any and all strips, gores and rights-of-way; (d) all riparian rights, hereditament, easements and other rights, privileges and immunities appurtenant to the Land; (e) all leases, rents and profits accruing with respect to the Land's Improvements and Equipment after the Closing; and (f) all of the Seller's right, title and interest in all transferable (to the extent, if any, such rights are transferable) intangible property of every nature whatsoever pertaining to the Land and Improvements, including without limitation, all the Service Agreements, licenses, permits, escrow deposits, contract rights, instruments, claims, chooses in action, building and property names and signs, property phone numbers, booklets, manuals and transferable utility contracts, but excluding all cash, bank accounts, utility deposits, and other revenues and income accruing prior to Closing. All of the foregoing real and personal property is hereinafter collectively called the "Property". ARTICLE 3. PURCHASE PRICE ------------------------- The Purchase Price for the Property shall be $____________ inclusive of all amounts owed to the existing first lienholder identified in Exhibit "A", with the cash portion being subject to all prorations and adjustments provided herein. The cash portion of the Purchase Price shall be paid as follows: 301. On or prior to the Effective Date, Purchaser shall deposit in cash or by check, with Taylor, Covington & Smith, P.A., as agents for Mississippi Valley Title Insurance Company (the "Escrow Agent") the sum of $25,000.00 as earnest money deposit (the "Earnest Money"). Escrow Agent shall immediately deposit the Earnest Money in an interest bearing insured account acceptable to Purchaser. Escrow Agent shall hold and administer the Earnest Money in accordance with the terms and conditions of this Agreement. At Closing, Escrow Agent shall pay the Earnest Money to Seller and Purchaser shall receive a credit for said amount against the cash portion of the Purchase Price. The terms of the escrow arrangement shall be as described in Exhibit "D" attached hereto. 302. The remainder of the Purchase Price, less the Earnest Money credited to Purchaser and the balance of the existing secured debt currently encumbering the Property as of the closing date in an amount not exceeding the amount set forth in Exhibit "A", shall be paid at Closing by (a) certified check drawn on a national or state bank, (b) cashier's check issued by a national or state bank, or (c) bank wire transfer. The Property shall be conveyed to Seller subject to the existing mortgage described herein on terms acceptable to Purchaser. Purchaser and Seller agree to execute all documents requested by the current lienholder of the Property and HUD to evidence a transfer of the Property subject to such debt. Purchaser and Seller agree to fully cooperate with HUD and the current lienholder to effectuate transfer of the Property subject to the existing lien described in Exhibit "A". ARTICLE 4. CASH ADJUSTMENTS AND CLOSING COSTS --------------------------------------------- 401. The following items shall be apportioned between Seller and Purchaser as of 11:59 p.m. on the Closing Date or a date to be agreed upon by the parties, and the net amount of all such adjustments shall increase or decrease, as the case may be, the net amount payable by Purchaser to Seller at Closing pursuant to Section 302 hereof: 401.1 All rent paid, prepaid or collected by Seller with respect to any leases, rental agreements or occupancy agreements for the Property (collectively, the "Leases"), including, without limitation, those items described in Exhibit "C" attached hereto and incorporated herein by this reference, collected during the month of Closing. All unprorated rents for the period prior to closing belong to the Seller. 401.2 All real and personal property taxes and other taxes imposed on the ownership of the Property for the 1999 tax year. If 1999 taxes are unknown, said tax proration shall be estimated based on the taxes paid for the year 1998. All special assessments assessed prior to the Closing Date shall be paid by Seller. If taxes are prorated based on an estimate, and if actual 1999 taxes vary from the estimate, the parties shall re-prorate when the 1999 taxes become known. This re-proration obligation shall survive closing. 401.3 Utility charges, payable by the owner of the Property, including without limitation, water, sewer, electric, gas, telephone, trash removal, and garbage removal. To the extent practicable, the parties shall cooperate in seeking to obtain a transfer to the utility accounts on the Closing Date, with a full release of Seller. If any utility accounts are not transferred on the Closing Date, the parties shall cooperate in arranging for said transfer as soon as practicable after the Closing Date. 401.4 All charges under any and all contracts for goods and services furnished to the Property. If Purchaser does not choose to assume any of such contracts, Purchaser shall so inform Seller within fifteen (15) days of the Effective Date, in which event Seller shall cancel at Closing all contracts cancelable by their terms prior to Closing, and if not cancelable by their terms prior to Closing, Seller, at its option, may either (i) work out some mutual agreement with Purchaser, or (ii) terminate this Agreement. At Closing Seller and Purchaser shall execute an agreement in which each party indemnifies the other for any claims arising out of such assumed contracts, which, as to Seller's indemnity, shall be for the period through the date of Closing and which, as to Purchaser's indemnity, shall be for the period after Closing. 402. Any item of income or expense required to be apportioned under this Article that for any reason is not apportioned at Closing shall be apportioned as soon thereafter as practicable. If any mutual mistake, including without limitation, any erroneous mathematical calculation, is made in any apportionment at Closing, Seller and Purchaser shall, promptly, correct said mistake and make any payment required to produce an accurate apportionment. These obligations shall survive the Closing. 403. Seller shall pay at Closing all recording costs for any release or title clearance documents and the State of Mississippi transfer or stamp tax. Purchaser shall pay the cost of recording the limited warranty deed. Each party shall be responsible for and shall pay its own attorneys' fees and expenses, together with any other costs and expenses incurred by a party and not specifically allocated herein. 404. Seller acknowledges that Section 1445 of the Internal Revenue Code of 1986, as amended and applicable state laws (the "Codes") may require Purchaser to withhold a portion of the net proceeds payable to Seller at Closing unless Seller establishes to the satisfaction of counsel to Purchaser that withholding is not required under the Codes. 405. At closing, Seller shall transfer and pay to Purchaser in good funds, or Purchaser shall receive a credit, for all tenant and pet security deposits or deposits collected by Seller applicable to all Leases described in Exhibit "C" as revised to take into account move-outs and new leases through closing. 406. Purchaser shall purchase the balance of any tax and insurance escrow account or replacement reserve account established with Seller's first in priority secured lender as of the Closing from Seller provided such balances are transferred at closing. 407. Seller shall provide, deliver and pay for the preparation and issuance of an Owner's title insurance commitment insuring the Purchaser for the full amount of the Purchase Price with no exceptions other than the Permitted Exceptions and including all endorsements as the Secretary of the United States Department of Housing and Urban Development may require as a condition of closing. Purchaser shall pay for the cost of any title insurance premiums. 408. Each party shall be responsible for and pay its own attorney's fees in connection with this transaction. 409. Purchaser shall pay to HUD the required fee for the processing of the Application for the Transfer of Physical Assets and all costs and expenses charged by the holder of the HUD insured loan for processing and granting its approval or consent to the transfer of the Property and the assumption of its loan. ARTICLE 5. CLOSING DATE AND PLACE --------------------------------- 501. Unless extended in accordance with this Agreement, the Closing of this transaction shall take place on or before ten (10) days from Purchaser's receipt of the written consents required in Articles 902 and 903 for all of the entities listed in Exhibit "E", unless waived by Purchaser, and in accordance with the terms of this Agreement. The Closing date shall be set by the Purchaser upon no less than five (5) days prior notice to Seller from Purchaser. Closing shall occur at the offices of Taylor, Covington & Smith, 315 Tombigbee Street, Jackson, Mississippi 39201 or such other date and place as the parties may mutually agree. 502. The Purchaser may extend the closing date for an additional thirty days by depositing additional earnest money in the amount of $25,000.00 with the Escrow Agent for such extension prior to the Closing Date. ARTICLE 6. TITLE AND SURVEY --------------------------- 601. Seller shall convey to Purchaser by limited warranty deed good, marketable and insurable title to the Property free and clear of all liens, leases, encumbrances, tenants, encroachments, restrictions, covenants, assessments, charges, agreements, taxes and easements, except for the Permitted Title Exceptions determined in accordance with this Section 601. The Permitted Title Exceptions shall include only the following: (i) 1999 state, county and municipal ad valorem taxes on the Property which are a lien but not yet due and payable as of Closing; (ii) the Leases; (iii) easements for the maintenance of public utilities that serve and benefit the Property, and slope and right-of-way easements for adjacent public rights-of-way which do not affect the use or value of the Property; and (iv) the existing lien documents set forth in Exhibit "A" attached hereto provided that the amount secured thereunder does not exceed the amount set forth in Article 302; and (v) the exceptions listed in Schedule B of the Title Insurance Commitment previously furnished Purchaser, except for 1998 property taxes; however Permitted Title Exceptions shall not be deemed to include any matters occurring after the effective date of the aforesaid Title Insurance Commitment. Purchaser shall have the right to re-examine title to the Property on or immediately prior to the day of Closing. If such examination reveals any new defects or encumbrances, Purchaser may object thereto in writing on or before the date of Closing, and in such event Seller shall have up to five (5) days thereafter to cure same or Purchaser may cancel this Agreement and receive a full return of its Earnest Money. Seller agrees that it shall not voluntarily encumber title to the Property after the date of final execution hereof. 602. Seller has previously delivered to Purchaser, at Seller's expense, a survey of the Property prepared to ALTA\ACSM and HUD standards by a Mississippi registered land surveyor ("Purchaser's Survey"). At least ten (10) days prior to Closing, Seller shall furnish to Purchaser, at Seller's expense, an updated survey of the Property showing new exceptions appearing since the date of the Title Commitment referenced in Article 601(v). ARTICLE 7. REPRESENTATIONS AND WARRANTIES OF SELLER --------------------------------------------------- As a material inducement to Purchaser to enter into this Agreement and to consummate the transaction provided for herein, Seller hereby represents, warrants and agrees to Purchaser, as of the Contract Date as to the matters set forth below. At Closing, Seller shall again represent and warrant said matters. 701. No service agreements or contracts exist as to the Property except as listed in Exhibit "B-1" attached hereto and incorporated herein by this reference. 702. (a) Seller owns good, marketable, insurable, indefeasible fee simple title to the Property, subject only to the Permitted Title Exceptions, and is in undisputed and peaceful possession of the Property subject to the Leases; (b) no other Person claims or is entitled to possession of all or any portion of the Property except for the tenants pursuant to the Leases; and (c) there are no unpaid or unsatisfied security deeds, mortgages, claims of lien special assessments or bills for sewerage, water, street improvements, taxes or similar charges that constitute a lien against the Property or any of the Improvements, other than the Permitted Title Exceptions and other Encumbrances that Seller will release or cause to be released from the Property on or before Closing. 703. There is no litigation (other than eviction proceedings commenced by Seller in which no counterclaims against Seller have been asserted), condemnation, zoning or administrative proceeding or real estate tax protest or proceeding pending or threatened against or affecting (a) Seller, which pertains to the Property, or (b) all or any part of the Property. 704. Seller has not received any written notice, nor to the best of its knowledge any oral, or informal notice of (a) any alleged violation of any private covenant or legal requirement, including without limitation, applicable zoning laws, building codes, anti-pollution laws, health, safety and fire laws, sewerage laws, environmental laws or regulations or any covenant, condition or restriction affecting the Property; (b) any possible widening of any streets adjoining the Property; (c) any possible condemnation of all or any portion of the Property; or (d) any possible imposition of any special tax or assessment against all or any portion of the Property; (e) any lack or deficiency or surface or subsurface support relating to the Property or any portion thereof; (f) the need or advisability of special flood or water damage insurance; or (g) any possible special assessments, increases in tax rates or insurance rates for all or any portion of the Property. 705. To the best of Seller's knowledge: all utilities facilities, including, but not limited to, water, sanitary sewer, storm sewer, electricity, telephone, trash removal, and garbage removal are in good working order and good repair; all utilities services are available to said utilities facilities and operating for the benefit of the Property in such a manner and capacities as are necessary and appropriate for the operation of the Improvements for their present use at standard rates, without any requirement for the payment of any tap-on fees or other extraordinary charges. 706. Seller has not received any written notice or to the best of its knowledge any oral or informal notice of any possible curtailment of any utility service supplied to the Property. 707. To the best of Seller's knowledge, the Property has all appurtenant easements that are necessary and appropriate (a) for the installation, maintenance and use of all necessary and appropriate facilities for water, sanitary sewer, storm sewer, electricity, gas, telephone services, trash disposal and garbage disposal and (b) to connect all said facilities to the appropriate sources of said services. 708. To the best of Seller's knowledge, the Equipment and the Improvements and all portions thereof, including without limitation, all roofs, walls, windows, foundations, footings, columns, supports, joists, heating ventilating and cooling systems, electrical systems, plumbing systems, paving, and parking facilities, are in good order, repair and operating condition. Without limiting the generality of the foregoing sentence, to the best of Seller's knowledge (a) there is no termite or other pest infestation, dry rot or similar damage with respect to the improvements; (b) all of the improvements are water tight; (c) there is no subsistence or other soil condition that presently does or may in the future adversely affect the Property; and (d) Seller has no knowledge or any defects in the foregoing improvements. 709. To the best of Seller's knowledge, there is legal access to the Property from public streets, and any and all curb cuts and similar permits or licenses necessary or appropriate to provide or facilitate such access have been properly issued and remain in full force and effect. 710. Seller has not used any portion of the Land, and to Seller's knowledge, no portion of the Land has been used, as a landfill or dump. 711. Seller knows of no underground petroleum tanks on the Property. Further, to the best of Seller's knowledge, the Property has not been used for the manufacture, storage, use or disposal of any hazardous, polluting, radioactive or other dangerous material or substance. 712. Seller has the right, power and authority to enter into this Agreement, and the right, power and authority to convey the Property in accordance with the terms, provisions and conditions of this Agreement. The entry by Seller into this Agreement with Purchaser does not violate any other agreement relating to the Property regardless of whether Seller is a party thereto, and Seller is capable of complying with all the terms, provisions and conditions contained in this Agreement. 713. The only lease agreements, occupancy agreements or other rental agreements with respect to the Property are the Leases identified in Exhibit "C", and the rentals, security deposits, terms and other conditions of the Leases as expressed in the rent roll described in Exhibit "C" attached hereto are true and accurate, except for any tenant subleases of which Seller has no knowledge. To the best of its knowledge, Seller is not in default of any of its obligations contained in the Leases, and except as otherwise disclosed to Purchaser in writing, no tenant under any Lease is currently in default of its obligations under its Lease. Seller has not collected any rent due with respect to the Leases except for the month during which the execution of this Agreement falls except as shown in Exhibit "C". Seller will make available to Purchaser for copying and inspection at the Property, copies of all of the Leases, and Seller represents and warrants that such documents are true, correct and full copies of each of the Leases and that no other modifications of the Leases exist, whether written or oral, formal or informal. 714. Each of the Leases is fully assignable by Seller to Purchaser without approval by any tenant under the Leases. ARTICLE 8. COVENANTS OF SELLER ------------------------------ 801. Seller hereby covenants and agrees with Purchaser that, from the Contract Date until Closing, Seller shall: (a) maintain and operate the Property in substantially the same manner as previously operated by Seller; (b) maintain the Improvements in their current repair, working order and condition; (c) pay all expenses incurred in connection with the ownership, maintenance, repair and operation of the Property as and when they come due; (d) maintain, manage, insure and operate the Property and all portions thereof in compliance with any and all legal requirements and private covenants applicable thereto; (e) make all payments and perform all other obligations of Seller as and when required by all other encumbrances on the Property and the service agreements; (f) except due to a lessee's default maintain each of the Leases in full force and effect, and will not modify, amend, alter any of the Leases or waive any default by any tenant under each of the Leases; (g) perform each and every obligation of Seller under the terms of each of the Leases; (h) not collect any prepaid rent under the Leases for more than one month in advance of the current month. 801(A). Seller hereby covenants and agrees with Purchaser that all appliances (air conditioners, refrigerators, stoves etc.) in place as of the Contract Date hereof shall be in operating order and in place on the Property as of the date of closing and if unoccupied at closing, the apartment shall be in rent ready condition and if not, then Purchaser shall be entitled to a credit of $150 per apartment unit for making the apartment unit rent ready, exclusive of the cost of replacing any non-turnkey damage and missing appliances for which Purchaser shall be entitled to an additional credit. For the purpose of this Agreement, "turnkey" shall mean cleaning and repainting the apartments and minor sheetrock and carpet repairs. 802. Seller hereby covenants and agrees with Purchaser that, from the Contract Date until Closing, Seller shall not, without the prior written consent of Purchaser; (a) enter into any new lease affecting the Property not in the ordinary course of business and under no circumstance shall any lease or renewal have a lease term of less than six (6) months, nor more than twelve (12) months or have a rental rate not agreed to by the Purchaser and Seller; (b) terminate, modify, amend or supplement any of the Service Agreements; (c) place any Encumbrance on all or any portion of the Property; (d) terminate, modify, alter, or supplement any appurtenant easement or any of the Permitted Title Exceptions; (e) engage in any transaction out of the ordinary course of business with respect to the Property or any portion thereof; (f) transfer, assign, convey or sell all or any portion of the Property; or (g) enter into encumbrance with respect to all or any portion of the Property. 803. On the Effective Date, Seller shall make available for inspection and copying by Purchaser in one location mutually acceptable to the Purchaser and Seller and if the parties cannot agree, then at the offices of Taylor, Covington & Smith, P.A., true, correct, complete and legible copies of the following items which have not been previously delivered to Purchaser, including without limitation copies of all the following items which have come into existence on or after August 28, 1998: 803.1 All documents evidencing any and all portions of the Property that constitute intangible property. 803.2 All insurance policies maintained by Seller with respect to the Property. 803.3 All existing architectural plans and specifications pursuant to which the Improvements were constructed. 803.4 Any and all termite inspection reports and guarantees with respect to all or any portion of the Improvements, if Seller has any such reports or guaranties. 803.5 Any and all building permits, certificates of occupancy, zoning certificates, subdivision approvals and other material permits, licenses and approvals in Seller's possession required by any Government Authority in connection with the ownership, use, operation or maintenance of the Property. 803.6 All existing engineering studies, test results and reports with respect to the Land, the Improvements, or both, including without limitation, those relating to water, sewerage and drainage with respect to the existing Improvements and any possible future renovation, remodeling or additional development of the Property and planning, soil, hydrology, and similar studies relating to the Property. 803.7 Any and all material permits, licenses, reports or other similar documents in Seller's possession relating to compliance or noncompliance of the Property or any portion thereof with any and all applicable land use, zoning, building, fire, health, safety, environmental, subdivision, water quality air quality and sanitation laws, regulations and other similar types of control. 803.8 Copies of all 1996, 1997 and 1998 Property Tax bills. 803.9 All of the Leases. 803.10 All of the service agreements referenced in Section 701 hereunder. 803.11 1996, 1997, 1998 and year to date 1999 capital improvement and deferred maintenance reports and evaluations and operating and year end operating statements for the Property. 803.12 All correspondence with the United States Department of Housing and Urban Development, including all physical and management reviews and inspection reports and replacement reserve draws and statements; 803.13. All loan documents for any indebtedness encumbering the Property or to be assumed by Purchaser at closing, including all regulatory agreements. 804. Seller hereby covenants and agrees with Purchaser that, from the Contract Date until Closing, Seller shall maintain in full force and effect liability, fire and extended coverage insurance on the Property. 805. Seller hereby covenants and agrees with Purchaser that, from the Effective Date until Closing, Purchaser and its agents, representatives and contractors, shall have the right to enter upon the Property at reasonable times for any lawful purpose, including without limitation, to make investigations, surveys, tests and studies, provided, however (a) Purchaser shall not interfere with the normal operation of the Property and the quiet enjoyment of the Tenant, and (b) Purchaser shall promptly pay for all work performed by order of Purchaser, its agents, representatives, or contractors with respect to the Property and shall not cause the creation of any lien with respect to the Property in favor of any Person, including without limitation, any contractor, subcontractor, materialmen, mechanic, surveyor, architect or laborer. Purchaser shall indemnify Seller from all claims, losses or damages as a result of the activities of Purchaser or its agents or representatives making inspections and tests on the Property. 806. The debt owed to the first lienholder as identified in Exhibit "A" shall not exceed the amount set forth in Exhibit "A" as of the Closing Date and there are not presently and shall be no defaults pursuant to the mortgage documents identified in Exhibit "A" or otherwise associated with such debt. ARTICLE 9. CONDITIONS PRECEDENT FOR THE BENEFIT OF PURCHASER ------------------------------------------------------------ Notwithstanding any other provision of this Agreement, Purchaser shall not be obligated to purchase the Property unless and until each and every of the following conditions precedent shall have been satisfied in full or waived by Purchaser. The conditions precedent referred to in this Article are: 901. At Closing: (a) Purchaser shall have received all items required by this Agreement to be delivered by Seller at or prior to Closing; (b) there shall not exist any default, event of default, or event that with the passage of time, the giving of notice, or both, would constitute a default or event or default by Seller under this Agreement; and (c) each and every covenant, representation and warranty made by Seller in this Agreement shall be true and correct in all material respects. 902. The Parties acknowledge that the Property is subject to a mortgage, insured by the United States Department of Housing and Urban Development's ("HUD") as referred to in Exhibit "A". Purchaser's obligation under this Agreement to purchase the Property is made expressly subject to the following: (1) The Purchaser's receipt of written preliminary approval by HUD of the application for transfer of physical assets. (2) HUD issuing a Form 2530 clearance of the Purchaser and all of Purchaser's principals for whom HUD Form 2530 Clearance is required under HUD's regulations. (3) HUD issuing a Form 2530 clearance of CMS Multifamily II Partners and CMS Diversified Partners, LP, or such other entities as CMS may designate as a limited partner of the Purchaser, but only to the extent HUD requires such forms. (4) HUD agreeing in writing to a transfer of the Property subject to the existing first lien debt as identified in Exhibit "A" attached hereto on terms satisfactory to the Purchaser, including that the debt remain non-recourse. Purchaser shall promptly, but not later than fourteen (14) days from the Effective Date, submit to HUD all information necessary to obtain the foregoing approvals and clearance and any approvals required in Section 903. If the foregoing conditions have not been satisfied within ninety (90) days of the Effective Date, or waived in writing by Purchaser, then Purchaser shall have the option of terminating this Agreement and having all Earnest Money returned to Purchaser immediately and neither party shall have any further rights under this Agreement. Notwithstanding the foregoing, Purchaser shall have the right to have this Agreement remain in full force and effect provided that the additional Earnest Money provided for in Article 502 has been paid in accordance therewith. If at the conclusion of this thirty (30) day extension period the conditions of this Article 902 has not been satisfied or waived in writing by Purchaser, then Purchaser shall have the right to terminate this Agreement and receive a full refund of its Earnest Money. Seller shall cooperate with Purchaser in obtaining all necessary consents and approval, including providing such information from its records and from its accounts and other professionals, and shall execute such documents and provide such information as may be required by the current lender or HUD in order to satisfy the requirements and conditions of this Article 902. 903. This Agreement is expressly conditioned upon preliminary approval by HUD of the transaction as set forth in Form HUD 92266, Application for Transfer of Physical Assets, and supporting documents submitted to HUD. No transfer of any interest in the project under this sale agreement shall be effective prior to such HUD approval. Purchaser will not take possession of the project nor assume benefits of project ownership prior to such approval by HUD. The Purchaser, his heirs, executors, administrators or assigns, shall have no right upon any breach by Seller hereunder to seek damages, directly or indirectly, from the FHA Project which is the subject of this transaction, including from any assets, rents, issues or profits thereof, and Purchaser shall have no right to effect a lien upon this project or the assets, rents, issues, or profits thereof. 904. All of Purchaser's rights of termination hereunder are cumulative. In the event Purchaser terminates this Agreement prior to Closing for any reason, then Purchaser agrees to return all documents and written information furnished to Purchaser by Seller, its attorneys and agents and provide Seller with a sample copy of the HUD Form 92266, Application for Transfer of Physical Assets, and supporting documents, submitted by Purchaser to the United States Department of Housing and Urban Development in connection with this transaction for one of the properties listed on Exhibit "E" with any proprietary or confidential information redacted. Seller shall also have the right to purchase and receive an assignment of Purchaser's rights in and to all of the environmental studies and reports obtained by Purchaser on each of the Properties listed in Exhibit "E" by reimbursing Purchaser for the amount paid by it for such reports. ARTICLE 10. ITEMS TO BE DELIVERED BY SELLER AT CLOSING ------------------------------------------------------ At Closing, Seller shall deliver to Purchaser: 1001. A duly executed limited warranty deed and quitclaim deed, in form acceptable for recording and acceptable to HUD, conveying the Land and the Improvements, subject only to the Permitted Title Exceptions. 1002. A duly executed limited warranty bill of sale assigning and transferring good and marketable title to Purchaser of all the Equipment subject only to the Permitted Title Exceptions and acceptable to HUD. 1003. A duly executed assignment of all transferable warranties and guaranties, if any, of which Seller is the beneficiary with respect to any portion of the Property, to the extent, if any, such warranties and guarantees are transferable. Seller shall also deliver to Purchaser all originals of the warranties and guaranties assigned pursuant to this Section, to the extent that Seller has them in its possession or is able to obtain them prior to Closing. 1004. A duly executed certificate with respect to the Codes stating, among other things, that Seller is not a foreign corporation or non-resident alien, as defined in the Codes and regulations issued pursuant thereto. 1005. A duly executed affidavit of title with respect to the Property in form and substance reasonably satisfactory to Purchaser's Title Company for the purpose of marking the Title Commitment and issuing the Title Policy with an Effective Date on the Closing Date without exception for mechanic's or materialmen's liens, other statutory liens, or the rights of Persons in possession (except for those persons identified in Exhibit "C") together with all evidence of corporate or entity authority to deliver the documents required at the closing and to consummate the transaction contemplated by this Agreement. 1006. Physical possession of all the Property subject to the rights of those persons identified in "Exhibit "C". 1007. A duly executed Assignment of Leases and Rents transferring all of Seller's right, title and interest in and to all of the Leases. The form of the Assignment shall be acceptable to Purchaser and Purchaser's counsel, and shall contain an indemnification from Seller for all obligations of Seller under the Leases prior to the Closing Date and an indemnification from Purchaser for all obligations of Purchaser under the Leases after closing. The Assignment shall also contain a provision requiring Seller to turn over to Purchaser any rents collected under the Leases after the date of Closing. 1008. A standard wood infestation\termite inspection report from a company acceptable to Purchaser and properly licensed in the State of Mississippi dated as of a date after the Effective Date stating that the improvements on the Property are free of active termite infestation. At the option of the Purchaser, Seller may be relieved of this obligation and Purchaser shall receive a credit for the Seller's cost of such report. 1009. Such documents as Purchaser and Purchaser's counsel shall deem necessary to verify that all contractors and suppliers relating to the construction of the Improvements have no lien rights against the Property. 10010. The originals of all items to be transferred to Purchaser prior to Closing in Seller's possession (e.g. tenant leases). 10011. Such other instruments, documents, certificates, affidavits, closing statements or agreements reasonably requested by Purchaser's counsel, HUD and the current mortgage holder. 10012. A cancellation of all service, maintenance, management and other goods and services contracts or services, including those identified in Exhibit "B-1", except to the extent specifically assumed by Purchaser as contemplated by Article 401.4 or for which Seller has advised Purchaser in writing it will or cannot cancel by written notice within twenty one (21) days from the Contract Date. ARTICLE 11. ITEMS TO BE DELIVERED BY PURCHASER AT CLOSING --------------------------------------------------------- At Closing, Purchaser shall deliver to Seller the funds required to be paid pursuant to Section 302 and any other documents required of Purchaser by this Agreement and any assignment of Purchaser's rights under this Agreement. ARTICLE 12. DAMAGE, DESTRUCTION OR CONDEMNATION ----------------------------------------------- 1201. If prior to Closing there shall occur any damage or destruction to the Improvements by fire or other casualty, Seller shall give prompt written notice thereof to Purchaser and Purchaser shall have the option, in its sole judgment and discretion, (a) to receive an assignment at Closing of all insurance proceeds payable to Seller as a result of such damage or destruction, other than any proceeds representing loss of rental income prior to the closing which shall belong to Seller; or (b) to terminate this Agreement. If Purchaser elects to terminate this Agreement, Purchaser shall give written notice thereof to Seller and to Brokers within thirty (30) days after Purchaser shall have received written notice of such damage or destruction. If Purchaser does not give such notice within such time period, then Purchaser shall be conclusively deemed to have elected to proceed with the Closing, subject to receipt of the insurance proceeds described above, and shall not have any further right to terminate this Agreement as a result of such damage or destruction. All payments from loss of rent insurance for rent due or as prorated through the Closing Date shall belong to the Seller. 1202. If, prior to Closing, there shall occur any Condemnation of the Property, Seller shall give prompt written notice thereof to Purchaser, and Purchaser shall have the option, in its sole judgment and discretion, either (a) to terminate this Agreement by giving written notice of termination within thirty (30) days after Purchaser shall have received written notice of such Condemnation; or (b) to complete the transaction provided for in this Agreement, in which event all Condemnation proceeds collected by Seller prior to Closing if any shall be credited against the Purchase Price and, at Closing, Seller shall assign to Purchaser any and all condemnation proceeds that have not been paid at that time. If Purchaser does not give such notice within such time period, then Purchaser shall be deemed to have conclusively elected to proceed with the Closing, subject to the receipt of assignment of condemnation proceeds as provided above, and shall have no further right to terminate this Agreement as a result of such condemnation. 1203. Seller shall be obligated to perform up to $25,000 of remedial work to repair any termite damage and eradicate any termite infestation discovered during the Inspection Period through closing which work shall be completed prior to the Closing Date. If the cost of such work will exceed $25,000, then Seller may either elect to perform such work and complete it prior to the Closing Date, or it may terminate this Agreement upon written notice to Purchaser delivered not later than ten (10) days after receipt of the termite report, but in no event later than ten (10) days prior to the Closing Date, whereupon this Agreement shall terminate and Purchaser shall be entitled to the immediate return of all of its Earnest Money. If Seller fails to give written notice to the Purchaser, then it shall be deemed to have elected to make the repairs and proceed with the sale. If at the Closing Date, the repairs have not been completed then Seller shall escrow the unpaid cost of the required work with a title company designated by Purchaser until such time as the work has been completed in accordance with the terms of this Agreement. ARTICLE 13. RESERVED -------------------- ARTICLE 14. REMEDIES ON DEFAULT ------------------------------- 1401. If Purchaser shall default in its performance of this Agreement, and such default shall continue uncured for more than fifteen (15) days after Purchaser shall have received written notice from Seller of said default, then, in such event, Seller shall have the option to terminate this Agreement by giving written notice of termination to Purchaser and Escrow Agent whereupon Escrow Agent shall pay to Seller all the Earnest Money being held by Escrow Agent, as liquidated damages, which shall be the sole remedy of Seller against Purchaser under this Agreement, Seller hereby expressly waiving any right to specific performance and to damages in excess of said liquidated amount. Seller and Purchaser hereby agree that if Purchaser should default under this Agreement, the amount of damages to Seller would be difficult, if not impossible, to determine, and such liquidated damages are just, fair and reasonable. 1402. If Seller shall be in default in respect in its performance of this Agreement, and said default shall remain uncured for more than ten (10) days after Seller shall have received written notice thereof, then, in such event, Purchaser shall have the right to either: (A) seek specific performance; or (B) to terminate this Agreement, receive a complete return of all Earnest Money and receive liquidated damages of $25,000.00, Purchaser hereby expressly waiving any right to damages in excess of said liquidated amount. Seller and Purchaser hereby agree that if Seller should default under this Agreement, the amount of damages to Purchaser would be difficult, if not impossible, to determine, and such liquidated damages are just, fair and reasonable 1403. If at closing, any entity listed in Exhibit "E" fails or refuses to close the sale of their property as listed in Exhibit "E" to Purchaser simultaneously with the closing of the Property, then Purchaser may terminate this Agreement at closing without notice and receive a full and complete return of all Earnest Money. If, at closing, any entity purchasing one of the apartment complexes listed in Exhibit "E" breaches its contract for sale and fails or refuses to close the purchase of such complex, then Seller may terminate this Agreement at Closing without notice and retain all Earnest Money as liquidated damages, notwithstanding any provision of this Contract to the contrary. ARTICLE 15. RESERVED -------------------- ARTICLE 16. OTHER TERMS AND CONDITIONS -------------------------------------- 1601. Time is of the essence of each and every provision in this Agreement. 1602. All representations, warranties, covenants, indemnities, agreements and obligations of Seller under this agreement shall survive the Closing for a period of twelve (12) months. 1603. This Agreement shall inure to the benefit of and be binding upon the parties hereto and their respective representatives, heirs, successors and assigns. 1604. Any notice, or other communication (a "Notice") to be given to any party with respect to this Agreement may be given either by the party or its counsel and shall be deemed to have been properly sent and given when delivered by hand to the specific named individual or when sent by certified mail, return receipt requested or by same-day or overnight receipted courier service. If delivered by hand, a Notice shall be deemed to have been sent, given and received when actually received by the addressee. If sent by certified mail, a Notice shall be deemed to have been sent and given when properly deposited with the United States Postal Service with the proper address and postage paid therewith, and shall be deemed to have been received on the date of delivery or first date of refusal of delivery as shown by the return receipt. The addresses to which Notices shall be sent are: If to Seller: Heritage Properties 16 Northtown Drive, Suite 200 Jackson, Mississippi 39211 Attn: James Carney With a copy to: Bobby Covington, Esq. Taylor, Covington & Smith 315 Tombigbee Street Jackson, Mississippi 39201 If to Purchaser: Vinings Holdings, Inc. 3111 Paces Mill Road Suite A-200 Atlanta, Georgia 30339 Attn: Peter Anzo With a copy to: Schreeder, Wheeler & Flint, LLP Attention: John A. Christy, Esq. 1600 Candler Building 127 Peachtree Street, N.E. Atlanta, Georgia 30303-1845 Each party shall have the right to change the address to which Notices to it are to be sent by giving written notice of said change to the other parties as provided in this Section. 1605. This Agreement constitutes the sole and entire agreement between the parties hereto, and no modification, alteration, or amendment of this Agreement shall be binding unless signed by the party against whom such modification, alteration, or amendment is sought to be enforced. No representation, warranty, covenant, inducement or obligation not included in this Agreement shall be binding upon either party hereto. 1606. This Agreement shall be governed by and construed in accordance with the laws of the state of Mississippi. If all or any portion of any provision of this Agreement shall be declared invalid or unenforceable under applicable law, then the performance of such portion shall be excused to the extent of such invalidity or unenforceability, but the remainder of this Agreement shall remain in full force and effect; provided, however, that if the excused performance of such unenforceable provision shall materially adversely affect the interest of either party, the party so affected shall have the right to terminate this Agreement by written notice thereof to the other party and Broker, whereupon this Agreement shall become null and void, except for those indemnities that are specified in this Agreement to survive the termination of this Agreement prior to Closing. 1607. Whenever in this Agreement there is any reference to any article, section, or exhibit, unless the context shall clearly indicate otherwise, such reference shall be interpreted to refer to an article, section, or exhibit in or to this Agreement. Each exhibit referred to in this Agreement in the same manner as if it were restated verbatim herein. The titles and captions of the articles and sections of this Agreement are included for ease of reference only, are not intended to represent the full scope of the matters included or excluded from such provisions, and shall not be used to interpret this agreement or to construe the intent of the parties. 1608. This Agreement may be executed in multiple counterparts, each of which shall be an original and all of which together shall constitute one and the same Agreement. It shall not be necessary that each party executes each counterpart, or that any one counterpart be executed by more than one party, so long as each party executes at least one counterpart. 1609. The parties acknowledge that each party and its counsel have participated in the negotiation and preparation of this Agreement. This Agreement shall be construed without regard to any presumption or other rule requiring construction against the party causing the Agreement to be drafted. If any provision of this Agreement requires that action be taken on or before a particular date that falls on a day that is not a Business Day, the time for the taking of such action shall automatically be postponed until the next following Business Day. 1610. All words and phrases used in this Agreement, including, without limitation, all defined words and phrases, regardless of the number or gender in which used, shall be deemed to include any other number or gender as may be reasonably required by the context. If Seller is designated in this Agreement to be more than one Person, then, in such event, each Person so designated shall be jointly and severally liable for all duties, obligations and liabilities of Seller. 1611. This Agreement may be assigned by Purchaser to an affiliate of Purchaser or an entity organized by Purchaser without Seller's consent, provided that the assignee, as a condition of said assignment, shall assume all of the obligations of Purchaser pursuant to this Agreement and that such assignment shall not release Purchaser from its obligations hereunder. 1612. If any act required by this Agreement must be taken on a Saturday, Sunday or legal holiday in the States of Georgia or Mississippi, then the time period for taking or performing such action shall be extended until the next business day. 1613. The Purchaser shall reimburse the Seller for up to $5,000.00 of documented costs for the purchase of new computers by Seller after September 30, 1998, for use at the Property and which is included in the personalty to be conveyed at closing to Purchaser. 1614. Purchaser's obligation to purchase the Property is expressly contingent on its having simultaneously purchased and closed the acquisition of the adjoining property owned by Bradford Place Apartments II, L.P., identified in Exhibit "E" attached hereto. If Purchaser does not close the acquisition of the property owned by Bradford Place Apartments II, L.P. simultaneously with the closing of the Property, then it may terminate and cancel this Agreement and receive a full return of its Earnest Money. 1615. If Purchaser elects to terminate this Agreement on or prior to Closing, then Purchaser shall reimburse Seller for all of its direct out-of-pocket expenses paid to third parties in connection with providing all due diligence and other materials pursuant to this Agreement, provided, however, that the sum paid hereunder shall when aggregated with any sums paid pursuant to the Agreements for Sale and Purchase of the properties identified in Exhibit "E" shall not exceed $50,000.00. ARTICLE 17. OFFER AND ACCEPTANCE -------------------------------- 1701. Purchaser's execution of this Agreement is intended as a continuing offer by purchaser to purchase the property from Seller, in accordance with the terms hereof, until 5:00 P.M. on the seventh (7th) day after Purchaser executes and dates this Agreement. If Seller does not accept this offer by delivering to Escrow Agent an unaltered, executed copy of this agreement by that time, then this offer shall be deemed to have been revoked and withdrawn by Purchaser prior to Seller's acceptance. 1702. This Agreement shall be retroactive to June 25, 1998; however, the Effective Date of this Agreement is the date on which the last party to this Agreement executes it and all parties listed on Exhibit "E" have executed and delivered agreements in a form acceptable to Seller for the sale of the properties listed on Exhibit "E" to Seller. 1703. The Contract Date is the date on which the Purchaser executes it. IN WITNESS WHEREOF, the parties hereto have executed this Agreement under seal as on dates indicated by their signatures. Signed, sealed and delivered SELLING ENTITY on the 17th day of February, 1999 in the presence of: By:/s/ James P. Carney ----------------------------- /s/ Brenda O. Perry - --------------------- Title: General Partner Witness Date: February 17, 1999 /s/ Beatrice Lee Ratcliffe [SEAL] - ------------------------------ Notary Public Signed, sealed and delivered PURCHASER: on the 15th day of February, 1999 in the presence of: _______________________, L.P. By:Vinings Holdings, Inc. Its sole General Partner By:/s/ Stephanie A. Reed ------------------------------ Stephanie Reed /s/ Amanda A. Davis - -------------------------- Amanda A. Davis Title: Vice President Witness Date: February 17, 1999 /s/ Cynthia M. Samuels - --------------------------- Cynthia M. Samuels Notary Public [SEAL] As to Article 301 only, Taylor, Covington & Smith, P.A. joins in this Agreement. Taylor, Covington & Smith, P.A. /s/ Brenda O. Perry /s/ Bobby A. Covington - ---------------------- ------------------------- Brenda O. Perry By: Bobby A. Covington Witness Its: Shareholder Date: February 17, 1999 /s/ Beatrice Lee Ratcliffe - ------------------------- Beatrice Lee Ratcliffe Notary Public [SEAL] Exhibit "A"- Property Description and First Lien Debt Exhibit "B"- List of Equipment and Personal Property Exhibit "B-1"-List of Service Contracts Exhibit "C"- Rent Roll Exhibit "D"- Escrow Conditions Exhibit "E"- Other Properties VININGS INVESTMENT PROPERTIES TRUST FORM OF AMENDED AND RESTATED AGREEMENT OF PURCHASE AND SALE SCHEDULE OF MATERIAL DIFFERENCES FOR ALL PROPERTIES ------------------
- -------------------------------------------------------------------------------------------------------------------------------- Purchase Property Seller Purchaser Price - -------------------------------------------------------------------------------------------------------------------------------- Bradford Place Apartments Crystal Ridge Apartments, L.P. Bradford Place I, L.P. $5,650,363 Bradford Place II Apartments Bradford Place Apartments II, L.P. Bradford Place II, L.P. 5,700,377 Cambridge Apartments Cambridge Apartments Partnership Cambridge Apartments, L.P. 5,823,555 Cottonwood Apartments Cottonwood Apartments, LLC Cottonwood, L.P. 4,962,120 Delta Bluff Apartments Delta Bluff Apartments, LLC Delta Bluff, L.P. 7,228,973 Foxgate Apartments Foxgate Apartments and Racquet Club, LLC Foxgate, L.P. 7,622,024 Hampton House Apartments Hampton House Apartments, LLC Hampton House, L.P. 5,930,980 Heritage Place Apartments Heritage Place Apartments, LLC Heritage Place, L.P. 3,339,382 The Landings Apartments The Landings Apartments, L.L.C. The Landings I, L.P. 6,321,935 Northwood Place Apartments Northwood Place Apartments Partnership Northwood Place, L.P. 5,808,026 River Pointe Apartments River Pointe Apartments, LLC River Pointe, L.P. 7,228,973 Riverchase Apartments Riverchase Apartments, L.P. Riverchase I, L.P. 3,270,926 Riverchase II Apartments Riverchase Apartments II, L.P. Riverchase II, L.P. 6,164,447 Riverchase III Apartments Riverchase Apartments III, L.P. Riverchase III, L.P. 5,091,991 Southwind Apartments Southwind Apartments Partnership Southwind I, L.P. 3,192,856 Southwind II Apartments Southwind Apartments II, L.P. Southwind II Apartments, L.P. 5,418,153 Trace Ridge Apartments Trace Ridge Apartments, L.L.C. Trace Ridge, L.P. 5,544,918 - --------------------------------------------------------------------------------------------------------------------------------
EX-21 13 SCHEDULE OF SUBSIDIARIES VININGS INVESTMENT PROPERTIES TRUST SCHEDULE OF SUBSIDIARIES OF December 31, 1998 ----------------- - --------------------------------------------------------- Jurisdiction of Subsidiary Organization - --------------------------------------------------------- Bradford Place I, L.P. Delaware Bradford Place II, L.P. Delaware Cambridge Apartments, L.P. Delaware Cottonwood, L.P. Delaware Delta Bluff, L.P. Delaware Foxgate, L.P. Delaware Hampton House, L.P. Delaware Heritage Place, L.P. Delaware The Landings I, L.P. Delaware Laurelwood, L.P. Delaware Northwood Place, L.P. Delaware River Pointe L.P. Delaware Riverchase I, L.P. Delaware Riverchase II, L.P. Delaware Riverchase III, L.P. Delaware Southwind I, L.P. Delaware Southwind II Apartments, L.P. Delaware Thicket Apartments, L.P. Delaware Thicket Holdings, Inc. Delaware Trace Ridge, L.P. Delaware Vinings Communities, L.P. Delaware Vinings Holdings, Inc. Delaware Vinings Investment Properties, L.P. Delaware EX-27 14 ART. 5 FDS FOR YEAR ENDED DEC-31-1998
5 This Schedule contains summary financial information extracted from the consolidated balance sheet and statement of operations for Vinings Investment Properties Trust for the period ended December 31, 1998 and is qualified in its entirety by reference to such financial statements as contained in the Form 10-K report for the year ended December 31, 1998. 0000759174 Vinings Investment Properties Trust 1 US DOLLARS Year DEC-31-1998 JAN-01-1998 DEC-31-1998 1 617179 0 56008 0 0 0 19309412 1664678 19148178 0 15640065 0 0 0 2426972 19148178 0 4102003 0 0 2668833 0 1329277 84993 0 0 0 0 0 84993 .08 .08
-----END PRIVACY-ENHANCED MESSAGE-----