-----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, AECL1YlCmeGPcF+j2aqCgr9NCIKqypNwYVAczVrIcqqFTzpZUnVcBmU1uc8dN4l+ TPA+/ihiUi+AWLUBDCsOYg== 0000950134-96-000850.txt : 19960325 0000950134-96-000850.hdr.sgml : 19960325 ACCESSION NUMBER: 0000950134-96-000850 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19951231 FILED AS OF DATE: 19960322 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: MURRAY INCOME PROPERTIES II LTD CENTRAL INDEX KEY: 0000786163 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE [6500] IRS NUMBER: 752085586 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-17183 FILM NUMBER: 96537254 BUSINESS ADDRESS: STREET 1: 5550 LBJ FWY STE 675 CITY: DALLAS STATE: TX ZIP: 75240 BUSINESS PHONE: 2149919090 MAIL ADDRESS: STREET 1: 5550 LBJ FRWY STREET 2: STE 675 CITY: DALLAS STATE: TX ZIP: 75240 10-K 1 FORM 10-K FOR YEAR ENDED DECEMBER 31, 1995 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 -------------- FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (Mark One) X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES --- EXCHANGE ACT OF 1934 For the Fiscal Year Ended DECEMBER 31, 1995 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE --- SECURITIES EXCHANGE ACT OF 1934 For the transition period from to COMMISSION FILE NO. 0-17183 ------------------- MURRAY INCOME PROPERTIES II, LTD. (Exact Name of Registrant as Specified in its Charter) TEXAS 75-2085586 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 5550 LBJ FREEWAY, SUITE 675, DALLAS, TEXAS 75240 (Address of principal executive offices) (Zip Code) (214) 991-9090 (Registrant's Telephone Number, including Area Code) 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. / / 2 TABLE OF CONTENTS Page PART I Item 1. Business 1 Item 2. Properties 3 Item 3. Legal Proceedings 3 Item 4. Submission of Matters to a Vote of Security Holders 3 PART II Item 5. Market for the Partnership's Limited Partnership Interests and Related Security Holder Matters 4 Item 6. Selected Financial Data 5 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 5 Item 8. Financial Statements and Supplementary Data 10 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 21 PART III Item 10. Directors and Executive Officers of the Partnership 22 Item 11. Executive Compensation 23 Item 12. Security Ownership of Certain Beneficial Owners and Management 23 Item 13. Certain Relationships and Related Transactions 24 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 25 Signatures 31 Index to Exhibits 32 3 PART I ITEM 1. BUSINESS. General. Murray Income Properties II, Ltd. (the "Partnership") was formed December 23, 1985 under the Texas Uniform Limited Partnership Act to acquire recently constructed income-producing shopping centers located in growth markets. As of November, 1989, the Partnership became governed by the Texas Revised Limited Partnership Act. The General Partners of the Partnership are Murray Realty Investors IX, Inc., a Texas corporation, and Crozier Partners IX, Ltd., a Texas limited partnership. In September 1986, the Partnership acquired a 15% interest in Tower Place Joint Venture, which owns Tower Place Festival Shopping Center ("Tower Place"). The remaining 85% interest in the joint venture is owned by Murray Income Properties I, Ltd., a publicly-registered real estate limited partnership, the general partners of which are affiliates of the General Partners. The Partnership also acquired Paddock Place Shopping Center ("Paddock Place") on December 17, 1986, Germantown Collection Shopping Center ("Germantown") on February 9, 1988, and 1202 Industrial Place (an office/warehouse facility) on February 26, 1988. All acquisitions were paid for in cash. For a more detailed description of the joint venture interest and the properties acquired by the Partnership, see "Item 2. Properties". The Partnership is in competition for tenants for its properties with other real estate limited partnerships as well as with individuals, corporations, real estate investment trusts, pension funds and other entities engaged in the ownership and operation of retail real estate. When evaluating a particular location to lease, a tenant may consider many factors, including, but not limited to, space availability, rental rates, lease terms, access, parking, quality of construction, and quality of management. While the General Partners believe that the Partnership's properties are generally competitive with regard to these factors, there can be no assurance that, in the view of a prospective tenant, other retail properties will not be more attractive. Tower Place Festival Shopping Center. At December 31, 1995, Tower Place Festival Shopping Center was 99% leased. One tenant, General Cinema, leases 27.8% of the total rentable space of the property and another, J&K Cafeterias, leases 10.6% of the total rentable space. The General Cinema lease expires on September 30, 2006, with the tenant having the option to extend the term of the lease for two successive terms of five years each. The J&K Cafeteria lease expires on April 30, 2004, and the tenant has the option to renew for two periods of five years each. At December 31, 1994, Tower Place was 97% leased. Tower Place is subject to competition from similar types of properties in the vicinity in which it is located. The following information on such competitors has been obtained from sources believed reliable by the Partnership. The accuracy of this information was not independently verified by the Partnership.
Rentable Percent Leased at Property Square Feet December 31, 1995 -------- ----------- ----------------- 1 248,700 89% 2 40,800 91% 3 65,800 89%
1 4 Paddock Place Shopping Center. At December 31, 1995, Paddock Place was 94% leased. One tenant, Rafferty's, leases 11.6% of the total rentable space of the property. J. Alexander's, a full service restaurant, is occupying the space under a sub-lease. The Rafferty's lease expires on December 31, 2001 and the tenant has an option to extend the term of the lease for two successive periods of five years each. At December 31, 1994, Paddock Place was 100% leased. Paddock Place is subject to competition from similar types of properties in the vicinity in which it is located. The following information on such competitors has been obtained from sources believed reliable by the Partnership. The accuracy of this information was not independently verified by the Partnership.
Rentable Percent Leased at Property Square Feet December 31, 1995 -------- ----------- ----------------- 1 178,491 98% 2 108,000 93% 3 15,753 100%
Germantown Collection Shopping Center. At December 31, 1995, Germantown was 98% leased. One tenant, Chili's, leases 11% of the total rentable space. The Chili's lease expires on December 31, 2004, and the tenant has the option to extend the term of the lease for three consecutive terms of five years each. Another tenant, Sofa Connection, leases 16% of the total rentable space. This lease expires on December 31, 1997. At December 31, 1994, Germantown was 100% leased. Germantown is subject to competition from similar types of properties in the vicinity in which it is located. The following information on such competitors has been obtained from sources believed reliable by the Partnership. The accuracy of this information was not independently verified by the Partnership.
Rentable Percent Leased at Property Square Feet December 31, 1995 -------- ----------- ----------------- 1 88,500 95% 2 84,000 100% 3 38,000 100%
1202 Industrial Place. At December 31, 1995 and December 31, 1994, 1202 Industrial Place was 100% leased. The Pierce Family Partnership lease expires on October 31, 2002 and the tenant has an option to renew the lease for one additional term of five years. The Calidad Foods, Inc. lease expires on November 30, 1997. Calidad Foods has subleased its space to Care Management Enterprises. Care Management has signed a three year lease which commences December 1, 1997. Pierce Family Partnership leases 69% of the total rentable space of the property and Calidad Foods, Inc. leases 31% of the total rentable space. 1202 Industrial Place is subject to competition from similar types of properties in the vicinity in which it is located. The following information on such competitors has been obtained from sources believed reliable by the Partnership. The accuracy of this information was not independently verified by the Partnership.
Rentable Percent Leased at Property Square Feet December 31, 1995 -------- ----------- ----------------- 1 100,000 100% 2 80,000 100% 3 100,000 100%
The Partnership is reimbursed for 47% of the costs of four employees by Murray Income Properties I, Ltd., an affiliate of the Partnership. 2 5 For a definition of the terms used herein and elsewhere in this Form 10-K, see "Glossary" incorporated by reference herein as contained in the Prospectus dated February 20, 1986 filed as part of Amendment No. 1 to Registrant's Form S-11 Registration Statement (File No. 33-2394) attached hereto as Exhibit 28a. ITEM 2. PROPERTIES. The Partnership owns a 15% interest in Tower Place Joint Venture which owns the property described below: Location Description of Property Pineville (Charlotte), Tower Place Festival Shopping Center North Carolina A 114,562 square foot shopping center situated on 10.777 acres. At December 31, 1995, Tower Place was 99% leased at an average annual lease rate of $12.59. Lease rates range from $10.00 to $16.00 per square foot. The Partnership also owns the properties described below: Nashville, Tennessee Paddock Place Shopping Center A 69,260 square foot shopping center situated on 4.66 acres. At December 31, 1995, Paddock Place was 94% leased at an average annual lease rate of $13.11. Lease rates range from $9.72 to $18.00 per square foot. Germantown (Memphis), Germantown Collection Shopping Center Tennessee A 55,730 square foot shopping center situated on 11.4 acres. At December 31, 1995, Germantown Shopping Center was 98% leased at an average annual lease rate of $14.87. Lease rates range from $11.00 to $19.79 per square foot. Grand Prairie, Texas 1202 Industrial Place An office/warehouse facility containing 14,040 square feet of office space and 158,760 square feet of warehouse space situated on 8.6 acres. At December 31, 1995, 1202 Industrial Place was 100% leased at an average annual lease rate of $2.13. Lease rates range from $2.10 to $2.20 per square foot. ITEM 3. LEGAL PROCEEDINGS. There are no material legal proceedings to which the General Partners or the Partnership is a party or to which any of the Partnership's properties are subject. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. No matters were submitted to a vote of security holders during the fourth quarter of the year covered by this report through the solicitation of proxies or otherwise. 3 6 PART II ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS AND RELATED SECURITY HOLDER MATTERS. A public market for Interests does not exist and is not likely to develop. Consequently, a Limited Partner may not be able to liquidate its investment in the event of emergency or for any other reason, and Interests may not be readily accepted as collateral for a loan. Further, the transfer of Interests is subject to certain limitations. For a description of such limitations, see Article XIII of the Agreement of Limited Partnership as contained in the Prospectus dated February 20, 1986 filed as part of Amendment No. 1 to Registrant's Form S-11 Registration Statement (File No. 33-2394) attached hereto as Exhibit 28b. As of December 31, 1995, there were 2,335 record holders, owning an aggregate of 314,687 Interests. The Partnership made its initial Cash Distribution from Operations following the quarter ended November 30, 1986, the first complete quarter subsequent to the acceptance of subscriptions for the minimum number of Interests offered, and has continued to make distributions after each subsequent quarter. See "Item 6. Selected Financial Data" for the cash distributions per Interest during the years ended December 31, 1991 through December 31, 1995. The Partnership intends to continue making Cash Distributions from Operations on a quarterly basis. The Partnership Agreement provides that under certain circumstances, the General Partners may, in their sole discretion and upon the request of a Limited Partner, repurchase the Interests held by such Limited Partner. Murray Realty Investors IX, Inc. is obligated to set aside 25% of its share of Cash Distributions from Operations and Crozier Partners IX, Ltd. is obligated to set aside 25% of its 5% share of Cash Distributions from Operations that is subordinated to the prior receipt by the Limited Partners of a non-cumulative 7% annual return from Cash Distributions from Operations for this purpose. Any such repurchase shall be subject to the availability of funds set aside and the other terms and conditions set forth in the Partnership Agreement. For information on such terms and conditions, see Section 10.17 of the Agreement of Limited Partnership as contained in amendment number nine to the Agreement of Limited Partnership contained in the Proxy Statement dated October 11, 1989 attached hereto as Exhibit 99c. As of December 31, 1995, no funds were available for this purpose. 4 7 ITEM 6. SELECTED FINANCIAL DATA.
Year Ended December 31 ------------------------------------------------------------------- 1995 1994 1993 1992 1991 ---- ---- ---- ---- ---- Income $ 2,794,261 $ 2,743,911 $ 2,638,865 $ 2,512,659 $ 2,605,811 Net Earnings 1,121,097 1,064,413 861,425 827,225 818,607 Earnings per Limited Partnership Interest* 3.44 3.26 2.63 2.52 2.49 Distributions per Limited Partnership Interest* 6.00 5.63 5.00 4.25 6.19 Total Assets at Year End $20,934,041 $21,767,471 $22,519,206 $23,301,484 $23,750,179
* Based on limited partnership interests outstanding at year-end and net earnings or distributions allocated to the Limited Partners. The above selected financial data should be read in conjunction with the financial statements and related notes appearing in Item 8 of this report. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Liquidity and Capital Resources As of December 31, 1995, the Partnership had cash, cash equivalents and certificates of deposit of $1,816,646 which included $1,790,853 invested in certificates of deposit and other money market instruments. Such amounts represent cash generated from operations and working capital reserves. The increase in cash and cash equivalents from December 31, 1994 to December 31, 1995 is primarily due to an increase in the net cash flow generated from the operations of the Partnership's properties. Rental income from leases is accrued using the straight line method over the related lease terms. At December 31, 1995 and December 31, 1994, there were $239,622 and $232,922, respectively, of accounts receivable related to such accruals. Accounts receivable also consist of tenant receivables, receivables for rents collected (but not yet remitted to the Partnership by the property management companies managing the properties), and interest receivable on short-term investments. Accounts receivable (exclusive of bad debts/recoveries) remained flat from December 31, 1994 to December 31, 1995 with increases in receivables for rents collected (but not yet remitted to the Partnership by property management companies) and receivables related to the accruals described above at 1202 Industrial Place offset by decreases in tenant receivables at Germantown and Paddock Place. Other assets consist primarily of deferred leasing costs. The increase in other assets of $23,263 is primarily due to an increase (exclusive of amortization) in leasing commissions. During the year ended December 31, 1995, the Partnership made Cash Distributions from Operations totaling $1,926,638. Subsequent to December 31, 1995, the Partnership made a Cash Distribution from Operations of $461,590, which related to the three months ended December 31, 1995. The funds distributed were derived from the net cash flow generated from operations of the Partnership's properties and from interest earned, net of administrative expenses, on funds invested in short-term money market instruments and certificates of deposit. 5 8 Future liquidity is currently expected to result from cash generated from the operations of the Partnership's properties (which could be affected negatively in the event of weakened occupancies and/or rental rates), interest earned on funds invested in short-term money market instruments and certificates of deposit, and ultimately through the sale of the Partnership's properties. Market conditions continued improvement during 1995, as average occupancy remained 100% at two of the Partnership's properties and increased at a third property. The fourth property, Paddock Place, experienced a slight decrease in rental income and average occupancy. Like most markets, Nashville and Memphis have experienced an increase in shopping center construction. However, in both markets the lack of available land and restrictive zoning has prevented much development near Paddock Place and the Germantown Collection. Charlotte continued its trend of the construction of large anchored shopping centers. These properties, commonly known as "power centers", may not compete for the same size and type of tenants as Tower Place Festival, but they do provide competition for retail sales customers. The Dallas-Fort Worth industrial market has improved over the past year, as both occupancy levels and rental rates have increased. As demand for warehouse space has risen, construction of industrial properties has also increased. Results of Operations Rental income increased $19,420 (1%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. Rental income increased $101,756 (4%) for the year ended December 31, 1994 as compared to the year ended December 31, 1993. The following information details the rental income generated, bad debt expense incurred, and average occupancy for the years ended December 31, 1995, 1994, and 1993.
For the years ended December 31, ------------------------------------- 1995 1994 1993 ---- ---- ---- Paddock Place Shopping Center Rental income $1,059,154 $1,083,004 $981,253 Bad debt expense (recovery) $ (5,845) $ (5,652) $ 14,814 Average occupancy 95% 97% 95% Germantown Collection Shopping Center Rental income $1,044,327 $1,022,073 $988,320 Bad debt expense $ -0- $ -0- $ 924 Average occupancy 100% 100% 97% 1202 Industrial Place Rental income $ 476,701 $ 455,685 $489,433 Bad debt expense $ -0- $ -0- $ -0- Average occupancy 100% 100% 100%
Rental income at Paddock Place decreased $23,850 (2%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994, primarily due to a decrease in the reimbursement of real estate taxes partially offset by an increase in percentage rent received from J. Alexander's Restaurant. Rental income at Paddock Place increased $101,751 (10%) for the year ended December 31, 1994 as compared to the year ended December 31, 1993, primarily due to an increase in occupancy and an increase in the reimbursement of real estate taxes and insurance costs along with an increase in percentage rent received from J. Alexander's Restaurant. Paddock Place Shopping Center in Nashville, Tennessee averaged 95% occupancy for the year ended December 31, 1995, a two percent decrease from the previous year. One tenant occupying 5,222 square feet renewed its lease for one year and one tenant occupying 1,354 square feet renewed its lease for three years. One tenant who occupied 1,254 square feet vacated its space prior to the expiration of its lease. This tenant continued to pay rent until a replacement tenant was 6 9 found. One tenant who occupied 1,935 square feet vacated its space upon expiration of its lease. As of December 31, 1995, Paddock Place was 94% occupied. Rental income at Germantown increased $22,254 (2%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994 due to an increase in percentage rents received from two tenants and an increase in the reimbursement of insurance costs. Rental income at Germantown increased $33,753 (3%) for the year ended December 31, 1994 as compared to the year ended December 31, 1993 due to an increase in occupancy and an increase in the reimbursement of common area maintenance costs and real estate taxes. Occupancy at the Germantown Collection in Germantown (Memphis), Tennessee averaged 100% for the year ended December 31, 1995, unchanged from the previous year. One tenant who occupies 1,502 square feet renewed its lease for three years and one tenant who occupies 4,003 square feet renewed its lease for two years. One tenant who occupied 1,024 square feet vacated its space upon expiration of its lease. This space was subsequently re-leased and the new tenant took occupancy during the first quarter of 1996. As of December 31, 1995, The Germantown Collection was 98% occupied. Rental income at 1202 Industrial Place increased $21,016 (5%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994 primarily due to an increase in the reimbursement of real estate taxes and common area maintenance costs. Rental income at 1202 Industrial Place decreased $33,748 (7%) for the year ended December 31, 1994 as compared to the year ended December 31, 1993 primarily due to a decrease in the reimbursement of real estate taxes and common area maintenance costs. Occupancy at 1202 Industrial Place in Grand Prairie (Dallas), Texas averaged 100% for the year ended December 31, 1995, unchanged from the year ended December 31, 1994. One tenant who occupies 54,000 square feet subleased its space to another tenant. This sublessee also signed a three year lease which will commence when this sublease expires. As of December 31, 1995, 1202 Industrial Place was 100% occupied. Interest income increased $25,230 (34%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994 due to a higher average yield on invested funds and higher average monthly cash balances invested in interest bearing accounts during 1995 as compared to 1994. "Equity in earnings of joint venture" represents the Partnership's 15% interest in the earnings of Tower Place Joint Venture. Rental income at Tower Place increased $71,160 (5%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994 with increases in rental income and increases in reimbursements for real estate taxes and insurance costs. Rental income at Tower Place decreased slightly for the year ended December 31, 1994 as compared to the year ended December 31, 1993 with decreases in rental income being offset by increased reimbursements for real estate taxes and insurance costs. Lease termination fee income for Tower Place Joint Venture decreased $89,170 for the year ended December 31, 1994 as compared to the prior year. In 1993 the joint venture received a $108,000 lease termination fee from a drug store as consideration for terminating its lease, and in 1994 the joint venture received $18,830 from a pet store as consideration for terminating its lease. This reduction in lease termination fee income resulted in the joint venture's net income for the year ended December 31, 1994 decreasing by $61,488 (8%) as compared to the year ended December 31, 1993. The following information details the rental income generated, bad debt expense incurred, and average occupancy for the years ended December 31, 1995, 1994, and 1993: 7 10
For the years ended December 31, -------------------------------------- 1995 1994 1993 ---- ---- ---- Tower Place Festival Shopping Center Rental income $1,617,902 $1,546,742 $1,547,374 Bad debt expense (recovery) $ (5,521) $ 8,029 $ 1,628 Average occupancy 96% 92% 95%
The Partnership's share of income from the joint venture increased $5,700 (5%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994 for the reasons stated above. The Partnership's share of income from the joint venture decreased $9,223 (8%) for the year ended December 31, 1994 as compared to the year ended December 31, 1993 for the reasons stated above. Occupancy at Tower Place Festival in Pineville (Charlotte), North Carolina averaged 96% in 1995, a four percent increase over the previous year. Four tenants totalling 5,461 square feet renewed their leases for three years. One tenant occupying 3,220 square feet renewed its lease for five years and one tenant who occupies 2,100 square feet renewed its lease for one year. Two tenants who occupied 2,654 square feet vacated their space upon expiration of their leases. Eight leases totalling 13,268 square feet were signed with the tenants taking occupancy in 1995. Two leases totalling 4,980 square feet were executed and these tenants will take occupancy during the first quarter of 1996. One tenant who occupied 2,670 square feet moved to a space containing 1,260 square feet. As of December 31, 1995, Tower Place Festival was 98% occupied. Depreciation is provided over the estimated useful lives of the respective assets using the straight line method. The estimated useful lives of the building and improvements range from three to twenty-five years. Property operating expenses consist primarily of utility costs, repair and maintenance costs, leasing and promotion costs, real estate taxes, insurance and property management fees. Total property operating expenses increased $8,646 (1%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994. The increase was due to higher repair and maintenance costs and insurance costs. These increases were offset by lower utility costs, landscaping costs, legal fees and real estate taxes. Property operating expenses at Germantown increased $2,135 (1%) due primarily to increases in repair and maintenance costs. These increases were offset by decreases in utilities, landscaping costs and legal fees. Property operating expenses at Paddock Place increased $4,728 (2%) with increases in repair and maintenance costs, landscaping costs and trash removal costs offset by decreases in legal fees, insurance costs and property management fees. Property operating expenses at 1202 Industrial Place increased $1,783 (1%) with increases in insurance costs offset by decreases in repair and maintenance costs and real estate taxes. Property operating expenses decreased $8,029 (1%) for the year ended December 31, 1994 as compared to the year ended December 31, 1993. The decrease was due to lower repair and maintenance costs, leasing and promotion costs and real estate taxes. These decreases were offset by increases in property management fees and higher utilities and trash removal costs. General and administrative expenses incurred are related to legal and accounting costs, rent, investor services costs, salaries and benefits and various other costs required for the administration of the Partnership. General and administrative expenses decreased $8,389 (3%) for the year ended December 31, 1995 as compared to the year ended December 31, 1994, primarily as a result of lower amortization of organization costs. General and administrative expenses increased $5,443 (2%) for the year ended December 31, 1994 as compared to the year ended December 31, 1993 with increases in travel and education expenses and employee insurance costs being offset by decreases in office supplies and amortization of organization costs. Bad debt expense (recoveries), remained flat for the year ended December 31, 1995 as compared to the year ended December 31, 1994 with each of the Partnership's properties experiencing fewer collection problems. Also, the Partnership has been able to recover $5,845 in 8 11 previously reserved tenant receivables at Paddock Place. Bad debt expense decreased $21,390 for the year ended December 31, 1994 as compared to the year ended December 31, 1993 with each of the Partnership's properties experiencing fewer collection problems. The reduction is primarily due to intensive efforts by Partnership management and the property managers for each of the properties to recognize and resolve potential tenant problems as rapidly as possible, thereby reducing an accumulation of outstanding rent receivables. The effect of inflation on the results of operations for the years ended December 31, 1995, 1994 and 1993 was not significant. In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," (SFAS 121) which establishes the method of accounting for rental property when circumstances indicate that the carrying amount of an asset may not be recoverable. Management of the Partnership does not expect the implementation of SFAS 121 to have a material effect on the financial condition or results of operations of the Partnership. SFAS 121 is required to be implemented in 1996. 9 12 `ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA. The following financial statements are filed as a part of this report: Page Number ------ Independent Auditors' Report 11 Balance Sheets - December 31, 1995 and 1994 12 Statements of Earnings - Years ended December 31, 1995, 1994, and 1993 13 Statements of Changes in Partners' Equity - Years ended 14 December 31, 1995, 1994, and 1993 Statements of Cash Flows - Years ended December 31, 1995, 1994, and 1993 15 Notes to Financial Statements 16-20 10 13 INDEPENDENT AUDITORS' REPORT The Partners Murray Income Properties II, Ltd.: We have audited the accompanying balance sheets of Murray Income Properties II, Ltd. (a limited partnership) as of December 31, 1995 and 1994, and the related statements of earnings, changes in partners' equity and cash flows for each of the years in the three-year period ended December 31, 1995. These financial statements are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statements 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 financial statements referred to above present fairly, in all material respects, the financial position of Murray Income Properties II, Ltd. as of December 31, 1995 and 1994, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 1995, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Dallas, Texas February 27, 1996 11 14 MURRAY INCOME PROPERTIES II, LTD. (A LIMITED PARTNERSHIP) BALANCE SHEETS DECEMBER 31, 1995 AND 1994
1995 1994 ---- ---- ASSETS Investment properties, at cost (note 3): Land $ 5,789,291 $ 5,789,291 Buildings and improvements 17,392,710 17,389,603 ------------ ------------ 23,182,001 23,178,894 Less accumulated depreciation 6,257,762 5,515,370 ------------ ------------ Net investment properties 16,924,239 17,663,524 Investment in joint venture, at equity (note 4) 1,535,208 1,602,538 Cash and cash equivalents 921,646 919,644 Certificates of deposit 895,000 888,000 Accounts and notes receivable, net of allowance of $14,034 and $19,879 in 1995 and 1994, respectively (note 1) 439,157 432,684 Other assets, at cost, net of accumulated amortization of $346,707 and $281,154 in 1995 and 1994, respectively 218,791 261,081 ------------ ------------ $ 20,934,041 $ 21,767,471 ============ ============ LIABILITIES AND PARTNERS' EQUITY Accounts payable $ 8,808 $ 11,005 Accrued property taxes 267,722 268,290 Security deposits and other liabilities 91,468 95,778 Deferred income (note 3) 42,162 62,976 ------------ ------------ Total liabilities 410,160 438,049 ------------ ------------ Partners' equity: General Partners: Capital contributions 1,000 1,000 Cumulative net earnings 526,381 487,641 Cumulative cash distributions (530,515) (491,982) ------------ ------------ (3,134) (3,341) ------------ ------------ Limited Partners (314,687 Interests): Capital contributions, net of offering costs 27,029,395 27,029,395 Cumulative net earnings 9,702,625 8,620,268 Cumulative cash distributions (16,205,005) (14,316,900) ------------ ------------ 20,527,015 21,332,763 ------------ ------------ Total partners' equity 20,523,881 21,329,422 ------------ ------------ $ 20,934,041 $ 21,767,471 ============ ============
See accompanying notes to financial statements. 12 15 MURRAY INCOME PROPERTIES II, LTD. (A LIMITED PARTNERSHIP) STATEMENTS OF EARNINGS
Years Ended December 31 ------------------------------------- 1995 1994 1993 ---- ---- ---- Income: Rental (notes 3 and 7) $2,580,182 $2,560,762 $2,459,006 Interest 98,859 73,629 61,116 Equity in earnings of joint venture (note 4) 115,220 109,520 118,743 ---------- ---------- ---------- 2,794,261 2,743,911 2,638,865 ---------- ---------- ---------- Expenses: Depreciation 742,392 748,790 822,756 Property operating 660,832 652,186 660,215 General and administrative 275,785 284,174 278,731 Bad debts (recoveries), net (5,845) (5,652) 15,738 ---------- ---------- ---------- 1,673,164 1,679,498 1,777,440 ---------- ---------- ---------- Net earnings $1,121,097 $1,064,413 $ 861,425 ========== ========== ========== Earnings per limited partnership interest $ 3.44 $ 3.26 $ 2.63 ========== ========== ==========
See accompanying notes to financial statements. 13 16 MURRAY INCOME PROPERTIES II, LTD. (A LIMITED PARTNERSHIP) STATEMENTS OF CHANGES IN PARTNERS' EQUITY YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
General Limited Partners Partners Total -------- -------- ----- Year ended December 31, 1993: Balance at December 31, 1992 $ (7,960) $22,823,300 $22,815,340 Net earnings 35,126 826,299 861,425 Cash distributions ($5.00 per limited partnership interest) (32,110) (1,573,416) (1,605,526) -------- ----------- ----------- Balance at December 31, 1993 $ (4,944) $22,076,183 $22,071,239 -------- ----------- ----------- Year ended December 31, 1994: Net earnings 37,728 1,026,685 1,064,413 Cash distributions ($5.63 per limited partnership interest) (36,125) (1,770,105) (1,806,230) -------- ----------- ----------- Balance at December 31, 1994 $ (3,341) $21,332,763 $21,329,422 -------- ----------- ----------- Year ended December 31, 1995: Net earnings 38,740 1,082,357 1,121,097 Cash distributions ($6.00 per limited partnership interest) (38,533) (1,888,105) (1,926,638) -------- ----------- ----------- Balance at December 31, 1995 $ (3,134) $20,527,015 $20,523,881 ======== =========== ===========
See accompanying notes to financial statements. 14 17 MURRAY INCOME PROPERTIES II, LTD. (A LIMITED PARTNERSHIP) STATEMENTS OF CASH FLOWS
Years ended December 31 ----------------------------------------- 1995 1994 1993 ---- ---- ---- Cash flows from operating activities: Net earnings $ 1,121,097 $ 1,064,413 $ 861,425 Adjustments to reconcile net earnings to net cash provided by operating activities: Bad debts (recoveries), net (5,845) (5,652) 15,738 Depreciation 742,392 748,790 822,756 Equity in earnings of joint venture (115,220) (109,520) (118,743) Amortization of other assets 65,553 76,724 75,687 Amortization of deferred income (6,498) (6,498) (6,498) Change in assets and liabilities: Accounts and notes receivable (628) (21,933) (165,808) Other assets (23,263) (28,483) (35,408) Accounts payable (2,197) 4,572 (120,726) Accrued property taxes, security deposits and other liabilities and deferred income (19,194) (7,992) 89,047 ----------- ----------- ----------- Net cash provided by operating activities 1,756,197 1,714,421 1,417,470 ----------- ----------- ----------- Cash flows from investing activities: Additions to investment properties (3,107) (27,598) (76,593) Purchases of certificates of deposit (796,000) (590,000) (789,000) Proceeds from redemptions of certificates of deposit 789,000 590,000 792,000 Distributions from joint venture 182,550 174,600 162,750 ----------- ----------- ----------- Net cash provided by investing activities 172,443 147,002 89,157 ----------- ----------- ----------- Cash flows from financing activities - cash distributions (1,926,638) (1,806,230) (1,605,526) ----------- ----------- ----------- Net increase (decrease) in cash and cash equivalents 2,002 55,193 (98,899) Cash and cash equivalents at beginning of year 919,644 864,451 963,350 ----------- ----------- ----------- Cash and cash equivalents at end of year $ 921,646 $ 919,644 $ 864,451 =========== =========== ===========
See accompanying notes to financial statements. 15 18 MURRAY INCOME PROPERTIES II, LTD. (A LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS THREE YEARS ENDED DECEMBER 31, 1995 1. ORGANIZATION AND BASIS OF ACCOUNTING The Partnership was formed December 23, 1985 by filing a Certificate and Agreement of Limited Partnership with the Secretary of State of the State of Texas. The Partnership Agreement authorized the issuance of up to 500,000 limited partnership interests at a price of $100 each, of which 314,687 limited partnership interests were issued. Proceeds from the sale of limited partnership interests, net of related selling commissions, dealer-manager fees and other offering costs, are recorded as contributed capital. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates. Rental income is recognized as earned under the leases. Accordingly, the Partnership accrues rental income for the full period of occupancy using the straight line method over the related terms. At December 31, 1995 and 1994, there were $239,622 and $232,922, respectively, of accounts receivable related to such accruals. Other assets consist primarily of deferred leasing costs which are amortized using the straight line method over the lives of the related leases. Depreciation is provided over the estimated useful lives of the respective assets using the straight line method. The estimated useful lives of the buildings and improvements range from three to twenty-five years. In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of," (SFAS 121) which establishes the method of accounting for rental property when circumstances indicate that the carrying amount of an asset may not be recoverable. The Partnership periodically reevaluates the propriety of the carrying amounts of investment properties to determine whether current events and circumstances warrant an adjustment to such carrying amounts. Such evaluations are performed utilizing annual appraisals performed by independent appraisers as well as internally developed estimates of expected undiscounted future cash flows. In the event the carrying value of an individual property exceeds expected future undiscounted cash flows, the property is written down to the most recently appraised value. Since inception of the Partnership, none of the Partnership's properties have required write downs. No provision for income taxes has been made as the liabilities for such taxes are those of the individual Partners rather than the Partnership. The Partnership files its tax return on the accrual basis used for Federal income tax purposes. 16 (Continued) 19 MURRAY INCOME PROPERTIES II, LTD. (A LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS Earnings and cash distributions per limited partnership interest are based upon the limited partnership interests outstanding at year-end and the net earnings and cash distributions allocated to the Limited Partners in accordance with the terms of the Partnership Agreement, as amended. Certificates of deposit are held at commercial banks and are stated at cost, which approximates market. For purposes of reporting cash flows, the Partnership considers all certificates of deposit and highly liquid debt instruments with original maturities of three months or less to be cash equivalents. The following information relates to estimated fair values of the Partnership's financial instruments as of December 31, 1995 and 1994. For cash and cash equivalents, certificates of deposit, accounts and notes receivable, accounts payable, accrued property taxes payable, and security deposits, the carrying amounts approximate fair value because of the short maturity of these instruments. 2. PARTNERSHIP AGREEMENT Pursuant to the terms of the Partnership Agreement, net profits or losses of the Partnership and cash distributions are generally allocated 98% to the Limited Partners and 2% to the General Partners, except that all depreciation shall be allocated to those Limited Partners subject to Federal income taxes. Cash Distributions from the sale or refinancing of a property are allocated as follows: (a) First, all Cash Distributions from Sales or Refinancings shall be allocated 99% to the Limited Partners and 1% to the Non-corporate General Partner until the Limited Partners have been returned their Original Invested Capital from Cash Distributions from Sales or Refinancings, plus their Preferred Return from either Cash Distributions from Operations or Cash Distributions from Sales or Refinancings. (b) Next, all Cash Distributions from Sales or Refinancings shall be allocated 99% to the General Partners and 1% to the Non-corporate General Partner in an amount equal to any unpaid Cash Distributions from Operations subordinated to the Limited Partners' 7% non-cumulative annual return. Such 99% shall be allocated 62 1/2% to the Non-corporate General Partner and 37 1/2% to the Corporate General Partner. (c) Next, all Cash Distributions from Sales or Refinancings shall be allocated 1% to the Non-corporate General Partner and 99% to the Limited Partners and the General Partners. Such 99% will be allocated 85% to the Limited Partners and 15% to the General Partners. Such 15% shall be allocated 62 1/2% to the Non-corporate General Partner and 37 1/2% to the Corporate General Partner. 17 (Continued) 20 MURRAY INCOME PROPERTIES II, LTD. (A LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS 3. INVESTMENT PROPERTIES The Partnership owns and operates Paddock Place Shopping Center in Nashville, Tennessee, Germantown Collection Shopping Center located in Germantown (Memphis), Tennessee and 1202 Industrial Place (an office/warehouse facility) located in Grand Prairie, Texas. Operating leases with tenants range in terms from thirty-three months to fifteen years. Fixed minimum future rentals under existing leases at December 31, 1995 are as follows: 1996 $2,023,147 1997 1,749,202 1998 1,125,121 1999 971,785 2000 918,093 Thereafter 1,387,178 ---------- $8,174,526 ==========
Rental income includes $475,490, $472,225, and $433,915 in 1995, 1994, and 1993, respectively, related to reimbursements from tenants for common area maintenance costs, real estate taxes and insurance costs. During 1990, the Partnership reached a settlement with a tenant which provided for the receipt of $245,000 in settlement of all past due rent and a modification of future rental obligations. In connection with this settlement, $38,989 and $45,487 at December 31, 1995 and 1994, respectively, is classified as deferred income and recognized on a straight line basis over the remaining term of the lease. 4. INVESTMENT IN JOINT VENTURE The Partnership owns a 15% interest in Tower Place Joint Venture, a joint venture that owns and operates Tower Place Festival Shopping Center located in Pineville (Charlotte), North Carolina. The Partnership accounts for the joint venture using the equity method. The remaining 85% interest in the joint venture is owned by Murray Income Properties I, Ltd. ("MIP I"), an affiliated real estate limited partnership. The Tower Place Joint Venture Agreement provides that the Partnership will share profits, losses, and cash distributions according to the Partnership's 15% ownership interest in the joint venture. 18 (Continued) 21 MURRAY INCOME PROPERTIES II, LTD. (A LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS Summarized financial information for the joint venture is as follows:
December 31, -------------------------- 1995 1994 ---- ---- Total assets, principally investment property $10,477,771 $10,881,496 =========== =========== Total liabilities 243,053 197,913 Venturers' capital 10,234,718 10,683,583 ----------- ----------- $10,477,771 $10,881,496 =========== ===========
Years ended December 31 ---------------------------------------- 1995 1994 1993 ---- ---- ---- Income $1,643,520 $1,581,981 $1,667,503 Expenses 875,385 851,847 875,881 ---------- ---------- ---------- Net earnings $ 768,135 $ 730,134 $ 791,622 ========== ========== ==========
5. TRANSACTIONS WITH AFFILIATES During 1993, the Partnership and MIP I paid $17,968 for office rent to Shearson-Murray Real Estate Fund II, Ltd., an affiliated partnership. No such amounts were paid in 1995 or 1994. 19 (Continued) 22 MURRAY INCOME PROPERTIES II, LTD. (A LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS 6. RECONCILIATION OF FINANCIAL STATEMENT NET EARNINGS AND PARTNERS' EQUITY TO FEDERAL INCOME TAX BASIS NET EARNINGS AND PARTNERS' EQUITY Reconciliation of financial statement net earnings to Federal income tax basis net earnings is as follows:
Years Ended December 31 ----------------------------------------- 1995 1994 1993 ---------- ---------- -------- Net earnings - financial statement basis $1,121,097 $1,064,413 $861,425 ---------- ---------- -------- Financial statement basis depreciation/amortization over tax basis depreciation/amortization 112,371 108,816 184,737 Financial statement basis joint venture earnings under (over) tax basis joint venture earnings 7,527 (865) (1,739) Tax basis rental income under financial statement basis rental income (27,067) (55,960) (54,904) ---------- ---------- -------- Sub-total 92,831 51,991 128,094 ---------- ---------- -------- Net earnings - Federal income tax basis $1,213,928 $1,116,404 $989,519 ========== ========== ========
Reconciliation of financial statement partners' equity to Federal income tax basis partners' equity is as follows:
December 31 ------------------------------------------ 1995 1994 1993 ----------- ----------- ----------- Total partners' equity - financial statement basis $20,523,881 $21,329,422 $22,071,239 Current year tax basis net earnings over financial statement basis net earnings 92,831 51,991 128,094 Cumulative prior years tax basis net earnings over financial statement basis net earnings 933,272 881,281 753,187 ----------- ----------- ----------- Total partners' equity - Federal income tax basis $21,549,984 $22,262,694 $22,952,520 =========== =========== ===========
Because many types of transactions are susceptible to varying interpretations under Federal and state income tax laws and regulations, the amounts reported above may be subject to change at a later date upon final determination by the taxing authorities. 7. BUSINESS AND CREDIT CONCENTRATION As previously noted, the Partnership's properties are located in Nashville and Memphis, Tennessee, and Grand Prairie, Texas. The Partnership had no outstanding receivable balances at December 31, 1995 or 1994, which, individually, exceeded 5% of the Partnership's total assets. Rental income from a major customer was approximately $257,000 for each of the years ended 1995, 1994, and 1993, respectively. 20 23 ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. Not applicable 21 24 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP. Murray Realty Investors IX, Inc., a Texas corporation, and Crozier Partners IX, Ltd., a Texas limited partnership, are the General Partners of the Partnership. The Limited Partners voting a majority of the Interests may, without the consent of the General Partners, remove a General Partner and elect a successor General Partner. The Partnership Agreement provides that the Partnership will have an Investment Committee consisting initially of three members, appointed by Murray Realty Investors IX, Inc. (the "Corporate General Partner"). A person appointed to the Investment Committee may be removed by the Corporate General Partner, but the Corporate General Partner must name a replacement. The acquisition, sale, financing or refinancing of a Partnership property must be approved by a majority of the members of the Investment Committee. The members of the Investment Committee currently are Messrs. Jack E. Crozier, Mitchell L. Armstrong and W. Brent Buck. Murray Realty Investors IX, Inc. is owned 60% by Mr. Armstrong and 40% by Mr. Buck. The following is a brief description of Jack E. Crozier, a general partner of Crozier Partners IX, Ltd., a General Partner, and the directors and executive officers of the Corporate General Partner: Crozier Partners IX, Ltd, General Partner Jack E. Crozier, 67, General Partner. From 1954 through July 1989, Mr. Crozier was affiliated with Murray Financial Corporation and various of its affiliates. From 1977 through 1988, he was President of Murray Financial Corporation, and from 1982 until June 1989, he also served as President of Murray Savings Association, a principal affiliate of Murray Financial Corporation. He served as President or Director of various other subsidiaries of Murray Financial Corporation which were engaged in real estate finance, development and management. He also served as the general partner in a number of publicly registered limited partnerships, and a number of non-registered limited partnerships, all of which had real estate as their principal assets. Since June 1989, he has remained as a partner or limited partner in several real estate oriented limited partnerships. He is a consultant to several companies. Murray Realty Investors IX, Inc., Corporate General Partner The directors and executive officers of Murray Realty Investors IX, Inc., are: Mitchell L. Armstrong, 45, President and Director. Mr. Armstrong became President of Murray Realty Investors IX, Inc. on November 15, 1989. From September 1984 to that date, he was Senior Vice President - Product Development of Murray Realty Investors, Inc., and Murray Property Investors and Vice President - Tax for Murray Properties Company. From November 1988 to November 15, 1989, he also served as Secretary to these companies. From August 1983 to September 1984, he was Executive Vice President of Dover Realty Investors. From September 1980 to August 1983, he was with Murray Properties Company, in charge of tax planning and reporting. From July 1972 to August 1980, he was with the international accounting firm of Deloitte Haskins & Sells (now Deloitte & Touche). Mr. Armstrong is a Certified Public Accountant and a Certified Financial Planner and holds a Bachelor of Business Administration degree with high honors in Accounting from Texas Tech University. He is a member of the American Institute of Certified Public Accountants, and a member of the Institute of Certified Financial Planners. W. Brent Buck, 40, Executive Vice President and Director. Mr. Buck became Executive Vice President of Murray Realty Investors IX, Inc., on November 15, 1989. From September 1981 to November 15, 1989, Mr. Buck served in various capacities for Murray Properties Company and 22 25 certain subsidiaries. His primary responsibilities included property acquisitions and asset management. He was responsible for initially identifying and negotiating the purchase of all properties in the Partnership. Since their acquisitions to the present time, he has continued to oversee the management of all properties of the Partnership. Mr. Buck holds a Master of Business Administration degree in Finance and a Bachelor of Public Administration degree in Urban Administration from the University of Mississippi. He also holds a Texas real estate salesman license and is a member of the International Council of Shopping Centers. ITEM 11. EXECUTIVE COMPENSATION. Pursuant to an amendment to the Partnership Agreement effective November 15, 1989, Murray Income Properties II, Ltd. is reimbursed by Murray Income Properties I, Ltd. for forty-seven percent (47%) of executive compensation incurred in the management of the two partnerships. Murray Income Properties I, Ltd. is a real estate limited partnership the general partners of which are affiliates of the General Partners. The following table presents Murray Income Properties II, Ltd.'s share of executive compensation. SUMMARY COMPENSATION TABLE Annual Compensation
All Other Name and Principal Position Year Salary Compensation - --------------------------- ---- ------ ------------ Mitchell L Armstrong, 1995 $61,868 $329** President* 1994 60,241 329** 1993 58,658 329** W. Brent Buck, 1995 $46,072 $176** Executive Vice President* 1994 44,861 176** 1993 43,681 176**
* Offices held in Murray Realty Investors IX, Inc., the Corporate General Partner. ** The amounts reflected under the heading "All Other Compensation" represents the Partnership's share of the full premium cost of term insurance that will benefit the executive. The Partnership has not paid and does not propose to pay any bonuses or deferred compensation, compensation pursuant to retirement or other plans, or other compensation to the officers, directors or partners of the General Partners other than described in the above table. In addition, there are no restricted stock awards, options or stock appreciation rights, or any other long term incentive payouts. During the operational and liquidation stages of this Partnership, the General Partners and their affiliates receive various fees and distributions. For information on these types of remuneration, reference is made to the section entitled "Management Compensation" as contained in the Prospectus dated February 20, 1986 filed as part of Amendment No. 1 to Registrant's Form S-11 Registration Statement (File No. 33-2394) attached hereto as Exhibit 99d. See "Item 13. Certain Relationships and Related Transactions" for information on the fees and other compensation or reimbursements paid to the General Partners or their Affiliates during the year ended December 31, 1995. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. 23 26 No person (including any "group" as that term is used in Section 13 (d)(3) of the Securities Exchange Act of 1934) is known to the Partnership to be the beneficial owner of more than five percent of the outstanding voting Interests as of December 31, 1995. The following table presents certain information regarding the number of Interests owned, directly or indirectly, by (i) a general partner of a General Partner and executive officers and directors of a General Partner and (ii) a general partner of a General Partner and executive officers and directors of a General Partner as a group as of December 31, 1995:
Amount and Title Nature of Percent of Beneficial of Class Beneficial Owner Ownership Class - ------ ---------------- ---------- ------- Limited Partnership Interests, Mitchell L. Armstrong 377 (1) .12% $100 per W. Brent Buck 251 (2) .08% Interest Jack E. Crozier 736 (3) .23% Limited Partnership Interests, $100 per Interest All General Partners as a group 1,057 .34%
(1) The total of 377 Interests listed above includes 126 Interests owned beneficially and of record by First Trust Corporation, Trustee for the benefit of Mitchell L. Armstrong IRA; 195 Interests owned by Murray Realty Investors IX, Inc., a corporation in which Mr. Armstrong is an officer, director, and substantial owner; and 56 Interests owned by Crozier Partners IX, Ltd., a partnership in which Mr. Armstrong is a limited partner. (2) The total of 251 Interests listed above includes 195 Interests owned by Murray Realty Investors IX, Inc., a corporation in which Mr. Buck is an officer, director and substantial owner; and 56 Interests owned by Crozier Partners IX, Ltd., a partnership in which Mr. Buck is a limited partner. (3) The total of 736 interests listed above includes 272 Interests owned by Crozier Partners IX, Ltd., a partnership in which Mr. Crozier is a general partner and 464 Interests owned by Mrs. Irma Crozier as her separate property. No arrangements are known to the Partnership which may result in a change of control of the Partnership. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. During the year ended December 31, 1995 the Partnership was reimbursed by Murray Income Properties I, Ltd., ("MIP I") for forty seven percent (47%) of the costs associated with the management of the Partnership and MIP I. MIP I is a publicly-registered real estate limited partnership, the general partners of which are affiliates of the General Partners. The reimbursement has been accounted for as a reduction of general and administrative expenses. 24 27 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K. (a) 1. Financial Statements - See Index to Financial Statements in Item 8 of this Form 10-K. 2. Financial Statement Schedules with Independent Auditors' Report Thereon: (i) Valuation and Qualifying Accounts (Schedule II) - Years ended December 31, 1995, 1994, and 1993. (ii) Real Estate and Accumulated Depreciation (Schedule III) - December 31, 1995. All other schedules have been omitted because they are not required or the required information is shown in the financial statements or notes thereto. (b) Reports on Form 8-K filed during the last quarter of the year: None (c) Exhibits: 3a Agreement of Limited Partnership of Murray Income Properties II, Ltd. Reference is made to Exhibit A of the Prospectus dated February 20, 1986 contained in Amendment No. 1 to Partnership's Form S-11 Registration Statements filed with the Securities and Exchange Commission on February 13, 1986. (File No. 33-2294) 3b Amended and Restated Certificate and Agreement of Limited Partnership dated as of November 15, 1989. Reference is made to Exhibit 3b to the 1989 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1989. (File No. 0-17183) 3c Amended and Restated Certificate and Agreement of Limited Partnership dated as of January 10, 1990. Reference is made to Exhibit 3c to the 1989 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1989. (File No. 0-17183) 10a Form of Joint Venture Agreement between the Partnership and Murray Income Properties II, Ltd. Reference is made to Exhibit 10h to Post-Effective Amendment No. 1 to Partnership's Form S-11 Registration Statements, filed with the Securities and Exchange Commission on July 29, 1989. (File No. 33-2394) 10b Lease Agreement with General Cinema to lease certain premises as described within the Lease Agreement dated July 23, 1985 at Tower Place Festival Shopping Center. Reference is made to Exhibit 10q to the 1989 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1989. (File No. 0-17183) 10c Lease Agreement with Rafferty's Inc. to lease certain premises as described within the Lease Agreement dated August 12, 1985 at Paddock Place Shopping Center. Reference is made to Exhibit 10r to the 1989 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1989. (File No. 0-17183) 25 28 10d Lease Agreement with Chili's Inc. to lease certain premises as described within the Lease Agreement dated May 19, 1988 at Germantown Collection Shopping Center. Reference is made to Exhibit 10t to the 1989 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1989. (File No. 0-17183) 10e Settlement and Release Agreement with Rafferty's Inc. and Mid-South Management Group, Inc., dated December 1, 1990. Reference is made to Exhibit 10u to the 1990 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1991. (File No. 0-17183) 10f Management Agreement with JPI Partners, Inc. for management and operation services described in the Management Agreement dated February 14, 1994 (and assigned to Fuller Macfarlan Real Estate Services, Ltd. pursuant to a Consent to Assignment agreement effective May 4, 1994) at 1202 Industrial Place. Reference is made to Exhibit 10f to the 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 21, 1995. (File No. 0-17183) 10g Data Processing System Use Agreement between Murray Income Properties II, Ltd. and The Mavricc Management Systems, Inc., dated September 1, 1993. Reference is made to Exhibit 10p to the Form 10-Q for the Quarter ended September 30, 1993 filed with the Securities and Exchange Commission on November 10, 1993. (File No. 0-17183) 10h Management Agreement with CK Retail Charlotte Overhead Limited Partnership for management and operation services described in the Management Agreement dated December 12, 1994 at Tower Place Festival Shopping Center. Reference is made to Exhibit 10h to the 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 21, 1995. (File No. 0-17183) 10i Management Agreement with Trammell Crow SE, Inc. for management and operation services described in the Management Agreement dated August 8, 1990 (as extended pursuant to the Modification to Management Agreement dated January 1, 1995) at Germantown Collection Shopping Center. Filed herewith. 10j Management Agreement with Brookside Commercial Services for management and operation services described in the Management Agreement dated March 1, 1991 (as extended pursuant to the Extension of Property Management Agreement dated February 21, 1995 at Paddock Place Shopping Center. Filed herewith. 10k Lease Agreement with Calidad Foods, Inc. to lease certain premises as described within the Lease Agreement dated October 19, 1992, at 1202 Industrial Place (an office/warehouse facility). Reference is made to Exhibit 10v to the Form 10-Q for the Quarter ended September 30, 1992 filed with the Securities and Exchange Commission on November 13, 1992. (File No. 0-17183) 10l Lease Agreement with Pierce Family Partnership to lease certain premises as described within the Lease Agreement dated October 23, 1992, at 1202 Industrial Place (an office/warehouse facility). Reference is made to Exhibit 10x to the Form 10-Q for the Quarter ended September 30, 1992 filed with the Securities and Exchange Commission on November 13, 1992. (File No. 0-17183) 10m Amendment to Lease Agreement with Calidad Foods, Inc. dated December 28, 1992 at 1202 Industrial Place (an office/warehouse facility). Reference is made to Exhibit 10n to the 1992 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 19, 1993. (File No. 0-17183) 26 29 10n Lease Termination Agreement between Tower Place Joint Venture and Kerr Drug Stores, Inc. dated November 12, 1993, at Tower Place Festival Shopping Center. Reference is made to Exhibit 10p to the 1993 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 21, 1994. (File No. 0-17183) 10o Lease Agreement with Brown Group Retail, Inc. to lease certain premises as described within the Lease Agreement dated November 9, 1993 at Tower Place Festival Shopping Center. Reference is made to Exhibit 10p to the 1993 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 21, 1994. (File No. 0-17183) 10p Lease Agreement with Care Management Enterprises, Inc. to lease certain premises as described within the Lease Agreement dated November 16, 1995 at 1202 Industrial Place (an office/warehouse facility). Filed herewith. 27 Financial Data Schedule. Filed herewith. 99a Glossary as contained in the Prospectus dated February 20, 1986 filed as part of Amendment No. 2 to Registrant's Form S-11 Registration Statement (File No. 33-2394). Filed herewith. 99b Article XIII of the Agreement of Limited Partnership as contained in the Prospectus dated February 20, 1986 filed as part of Amendment No. 2 to Registrant's Form S-11 Registration Statement (File No. 33-2394). Filed herewith. 99c Amendment number nine to the Agreement of Limited Partnership contained in the Proxy Statement dated October 11, 1989. Filed herewith. 99d Management Compensation as contained in the Prospectus dated February 20, 1986 filed as part of Amendment No. 2 to Registrant's Form S-11 Registration Statement (File No. 33-2394). Filed herewith. (d) Financial Statement Schedules with Independent Auditors' Report Thereon: (i) Valuation and Qualifying Accounts (Schedule II) - Years ended December 31, 1995, 1994, and 1993. (ii) Real Estate and Accumulated Depreciation (Schedule III) - December 31, 1995. All other schedules have been omitted because they are not required or the required information is shown in the financial statements or notes thereto. 27 30 INDEPENDENT AUDITORS' REPORT The Partners Murray Income Properties II, Ltd.: Under date of February 27, 1996, we reported on the balance sheets of Murray Income Properties II, Ltd. (a limited partnership) as of December 31, 1995 and 1994, and the related statements of earnings, changes in partners' equity, and cash flows for each of the years in the three-year period ended December 31, 1995, as contained in Item 8 of this annual report on Form 10-K. In connection with our audits of the aforementioned financial statements, we also audited the related financial statement schedules as listed in Item 14(a)2 of this annual report on Form 10-K. These financial statement schedules are the responsibility of the Partnership's management. Our responsibility is to express an opinion on these financial statement schedules based on our audits. In our opinion, such financial statement schedules, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information set forth therein. KPMG Peat Marwick LLP Dallas, Texas February 27, 1996 28 31 Schedule II MURRAY INCOME PROPERTIES II, LTD. (A LIMITED PARTNERSHIP) VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED DECEMBER 31, 1995, 1994, AND 1993
Balance at Charged to Balance at beginning costs and end of Description of period expenses Deductions period ----------- ---------- ---------- ---------- ---------- Allowance for doubtful accounts: Year ended December 31, 1993 $34,687 15,738 17,722 32,703 ======= ====== ====== ====== Year ended December 31, 1994 $32,703 (5,652) 7,172 19,879 ======= ====== ====== ====== Year ended December 31, 1995 $19,879 (5,845) -0- 14,034 ======= ====== ====== ======
Deductions are primarily for writeoffs of accounts receivable deemed uncollectible by management. 29 32 Real Estate and Accumulated Depreciation Schedule III MURRAY INCOME PROPERTIES II, LTD. (A LIMITED PARTNERSHIP) REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1995
COSTS CAPITALIZED INITIAL COST SUBSEQUENT TO PARTNERSHIP(A) TO ACQUISITION ----------------- ----------------- BUILDINGS AND DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS ----------- ------------ ---- ------------- ------------ Shopping Center Nashville, Tennessee $0 $3,153,285 $ 6,615,549 $ 353,508 Shopping Center Germantown (Memphis) Tennessee $0 $1,751,518 $ 6,395,078 $1,024,117 Office/Warehouse Grand Prairie, Texas $0 $ 884,488 $ 2,895,376 $ 109,082 -- ---------- ----------- ---------- $0 $5,789,291 $15,906,003 $1,486,707 == ========== =========== ==========
GROSS AMOUNT AT WHICH CARRIED AT CLOSE OF PERIOD(D) ------------------------------------------------ BUILDINGS AND ACCUMULATED YEAR OF DESCRIPTION LAND IMPROVEMENTS TOTAL DEPRECIATION CONSTRUCTION ----------- ---- ------------ ----- ------------ ------------ Shopping Center Nashville, Tennessee $3,153,285 $ 6,969,057 $10,122,342 $2,703,399 1985/86 Shopping Center Germantown (Memphis) Tennessee $1,751,518 $ 7,419,195 $ 9,170,713 $2,560,923 1987 Office/Warehouse Grand Prairie, Texas $ 884,488 $ 3,004,458 $ 3,888,946 $ 993,440 1980 ---------- ----------- ----------- ---------- $5,789,291 $17,392,710 $23,182,001 $6,257,762 ========== =========== =========== ==========
LIFE ON WHICH DEPRECIATION IN FISCAL LATEST STATEMENT YEAR OF EARNINGS DESCRIPTION ACQUIRED IS COMPUTED ----------- -------- ---------------- Shopping Center 1986 3-25 YEARS Nashville, Tennessee Shopping Center Germantown (Memphis) 1988 3-25 YEARS Tennessee Office/Warehouse Grand Prairie, 1988 3-25 YEARS Texas
NOTES: (A) The initial cost to the Partnership represents the original purchase price of the properties. (B) Reconciliation of real estate owned for 1995, 1994 and 1993:
1995 1994 1993 ----------- ----------- ----------- Balance at beginning of period $23,178,894 $23,151,296 $23,074,703 Additions during period $ 3,107 $ 27,598 $ 76,593 Retirements during period $ 0 $ 0 $ 0 ----------- ----------- ----------- Balance at close of period $23,182,001 $23,178,894 $23,151,296 =========== =========== ===========
(C) Reconciliation of accumulated depreciation for 1995, 1994 and 1993:
1995 1994 1993 ---------- ---------- ---------- Balance at beginning of period $5,515,370 $4,766,580 $3,943,824 Depreciation expense $ 742,392 $ 748,790 $ 822,756 Retirements during period $ 0 $ 0 $ 0 ---------- ---------- ---------- Balance at close of period $6,257,762 $5,515,370 $4,766,580 ========== ========== ==========
(D) The aggregate cost of real estate at December 31, 1995 for Federal income tax purposes is $24,003,378. 30 33 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on behalf by the undersigned, thereunto duly authorized. MURRAY INCOME PROPERTIES II, LTD. By: Crozier Partners IX, Ltd. A General Partner Dated: March 21, 1996 By: /s/ Jack E. Crozier Jack E. Crozier A General Partner By: Murray Realty Investors IX, Inc. a General Partner Dated: March 21, 1996 By: /s/ Mitchell Armstrong Mitchell Armstrong President 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. Murray Realty Investors IX, Inc. A General Partner Dated: March 21, 1996 By: /s/ Brent Buck Brent Buck Executive Vice President Director Dated: March 21, 1996 By: /s/ Mitchell Armstrong Mitchell Armstrong Chief Executive Officer Chief Financial Officer Director 31 34 INDEX TO EXHIBITS Document Sequentially Number Description Numbered Page - -------- ----------- ------------- 3a Agreement of Limited Partnership of Murray Income Properties II, Ltd. Reference is made to Exhibit A of the Prospectus dated February 20, 1986 contained in Amendment No. 1 to Partnership's Form S-11 Registration Statements filed with the Securities and Exchange Commission on February 13, 1986. (File No. 33-2294) 3b Amended and Restated Certificate and Agreement of Limited Partnership dated as of November 15, 1989. Reference is made to Exhibit 3b to the 1989 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1989. (File No. 0-17183) 3c Amended and Restated Certificate and Agreement of Limited Partnership dated as of January 10, 1990. Reference is made to Exhibit 3c to the 1989 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1989. (File No. 0-17183) 10a Form of Joint Venture Agreement between the Partnership and Murray Income Properties II, Ltd. Reference is made to Exhibit 10h to Post-Effective Amendment No. 1 to Partnership's Form S-11 Registration Statements, filed with the Securities and Exchange Commission on July 29, 1989. (File No. 33-2394) 10b Lease Agreement with General Cinema to lease certain premises as described within the Lease Agreement dated July 23, 1985 at Tower Place Festival Shopping Center. Reference is made to Exhibit 10q to the 1989 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1989. (File No. 0-17183) 10c Lease Agreement with Rafferty's Inc. to lease certain premises as described within the Lease Agreement dated August 12, 1985 at Paddock Place Shopping Center. Reference is made to Exhibit 10r to the 1989 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1989. (File No. 0-17183) 10d Lease Agreement with Chili's Inc. to lease certain premises as described within the Lease Agreement dated May 19, 1988 at Germantown Collection Shopping Center. Reference is made to Exhibit 10t to the 1989 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1989. (File No. 0-17183) 32 35 10e Settlement and Release Agreement with Rafferty's Inc. and Mid-South Management Group, Inc., dated December 1, 1990. Reference is made to Exhibit 10u to the 1990 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 31, 1991. (File No. 0-17183) 10f Management Agreement with JPI Partners, Inc. for management and operation services described in the Management Agreement dated February 14, 1994 (and assigned to Fuller Macfarlan Real Estate Services, Ltd. pursuant to a Consent to Assignment agreement effective May 4, 1994) at 1202 Industrial Place. Reference is made to Exhibit 10f to the 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 21, 1995. (File No. 0-17183) 10g Data Processing System Use Agreement between Murray Income Properties II, Ltd. and The Mavricc Management Systems, Inc., dated September 1, 1993. Reference is made to Exhibit 10p to the Form 10-Q for the Quarter ended September 30, 1993 filed with the Securities and Exchange Commission on November 10, 1993. (File No. 0-17183) 10h Management Agreement with CK Retail Charlotte Overhead Limited Partnership for management and operation services described in the Management Agreement dated December 12, 1994 at Tower Place Festival Shopping Center. Reference is made to Exhibit 10h to the 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 21, 1995. (File No. 0-17183) 10i Management Agreement with Trammell Crow SE, Inc. for management and operation services described in the Management Agreement dated August 8, 1990 (as extended pursuant to the Modification to Management Agreement dated January 1, 1995) at Germantown Collection Shopping Center. Reference is made to Exhibit 10i to the 1994 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 21, 1995. (File No. 0-17183) 10j Management Agreement with Brookside Commercial Services for management and operation services described in the Management Agreement dated March 1, 1991 (as extended pursuant to the Extension of Property Management Agreement dated February 21, 1995) at Paddock Place Shopping Center. Filed herewith. 10k Lease Agreement with Calidad Foods, Inc. to lease certain premises as described within the Lease Agreement dated October 19, 1992, at 1202 Industrial Place (an office/warehouse facility). Reference is made to Exhibit 10v to the Form 10-Q for the Quarter ended September 30, 1992 filed with the Securities and Exchange Commission on November 13, 1992. (File No. 0-17183) 33 36 10l Lease Agreement with Pierce Family Partnership to lease certain premises as described within the Lease Agreement dated October 23, 1992, at 1202 Industrial Place (an office/warehouse facility). Reference is made to Exhibit 10x to the Form 10-Q for the Quarter ended September 30, 1992 filed with the Securities and Exchange Commission on November 13, 1992. (File No. 0-17183) 10m Amendment to Lease Agreement with Calidad Foods, Inc. dated December 28, 1992 at 1202 Industrial Place (an office/warehouse facility). Reference is made to Exhibit 10n to the 1992 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 19, 1993. (File No. 0-17183) 10n Lease Termination Agreement between Tower Place Joint Venture and Kerr Drug Stores, Inc. dated November 12, 1993, at Tower Place Festival Shopping Center. Reference is made to Exhibit 10p to the 1993 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 21, 1994. (File No. 0-17183) 10o Lease Agreement with Brown Group Retail, Inc. to lease certain premises as described within the Lease Agreement dated November 9, 1993 at Tower Place Festival Shopping Center. Reference is made to Exhibit 10q to the 1993 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 21, 1994. (File No. 0-17183) 10p Lease Agreement with Care Management Enterprises, Inc. to lease certain premises as described within the Lease Agreement dated November 16, 1995 at 1202 Industrial Place (an office/warehouse facility). Filed herewith. 27 Financial Data Schedule 99a Glossary as contained in the Prospectus dated February 20, 1986 filed as part of Amendment No. 2 to Registrant's Form S-11 Registration Statement (File No. 33-2394). Filed herewith. 99b Article XIII of the Agreement of Limited Partnership as contained in the Prospectus dated February 20, 1986 filed as part of Amendment No. 2 to Registrant's Form S-11 Registration Statement (File No. 33-2394). Filed herewith. 99c Amendment number nine to the Agreement of Limited Partnership contained in the Proxy Statement dated October 11, 1989. Filed herewith. 99d Management Compensation as contained in the Prospectus dated February 20, 1986 filed as part of Amendment No. 2 to Registrant's Form S-11 Registration Statement (File No. 33-2394). Filed herewith. 34
EX-10.I 2 MODIFICATION TO MANAGEMENT AGREEMENT 1 STATE OF TENNESSEE COUNTY OF SHELBY MODIFICATION TO MANAGEMENT AGREEMENT This Modification to Management Agreement is made and entered into this 1st day of January 1995, by and between Murray Income Properties, II, LTD a Texas limited Partnership ("Owner") and Trammell Crow SE, Inc., a Delaware Corporation ("Operator"). W I T N E S S E T H : Whereas, Owner and Operator entered into that certain Management Agreement for the managing and operating of certain improved real property, ("Project") commonly known as Germantown Collection, dated August 8, 1990 and extended December 30th, 1993. Whereas, the Owner and Operator desire to modify and amend the Management Agreement; Now, therefore, for and in consideration of the Modification to Management Agreement, the sum of Ten and 00/100 Dollars ($10.00) in hand paid by Owner to Operator, the mutual agreements herein contained and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the parties hereto do agree as follows: 1. Owner and Operator acknowledge and agree the Management Agreement shall be extended for a period of twelve (12) months, such extension shall commence on January 1, 1995 and expire on December 31, 1995. 2. All other terms and conditions of the Management Agreement not specifically amended by this Modification to Management Agreement, are hereby deemed to remain in full force and effect. IN WITNESS WHEREOF, the parties have executed the foregoing Modification as of the day and year written above. Owner: Operator: Murray Income Trammell Crow SE, Inc. Properties, II, LTD BY: Murray Realty Investors, IX, Inc. BY: /s/ Brent Buck BY: /s/ Phil Fawcett Title: Executive Vice President Title: Vice President Brent Buck Phil Fawcett EX-10.J 3 MANAGEMENT AGRMNT. WITH BROOKSIDE COMMERCIAL SERV. 1 EXTENSION OF PROPERTY MANAGEMENT AGREEMENT The Extension of Property Management Agreement entered into this 21st day of February, 1995 by and between Murray Income Properties II, Ltd., a Texas limited partnership (hereinafter called the "Owner") and Brookside Management Group, Inc., (hereinafter referred to as "Agent"). R E C I T A L S: 1. Ownership and Agent are parties to that certain Property Management Agreement dated March 1, 1991 covering the Paddock Place Shopping Center located at the southwest corner of White Bridge Road and Brookwood Terrace, Nashville, Tennessee. 2. The term of the aforesaid Property Management Agreement expired on February 28, 1994, and the Agreement was extended with an expiration date of February 28, 1995. The parties thereto are mutually desirous of extending the term of the Property Management Agreement. NOW, THEREFORE, it is hereby agreed as follows: 1. The expiration date of the Property Management Agreement shall be midnight, February 29, 1996. 2. All other terms and conditions of the Property Management Agreement shall remain unchanged and in full force and effect. IN WITNESS WHEREOF, the parties hereto have executed this document the day and year first above written. WITNESS: Brookside Management Group, Inc. /s/ Charles H. Warfield, Jr. /s/ W. Miles Warfield Charles H. Warfield, Jr. By: W. Miles Warfield WITNESS: Murray Income Properties II, Ltd., a Texas limited partnership by Murray Realty Investors IX, Inc., a Texas Corporation, its general partners (Owners) /s/ Mitchell Armstrong /s/ Brent Buck Mitchell Armstrong Brent Buck By: Executive Vice President EX-10.P 4 LEASE AGREEMENT WITH CARE MANAGEMENT ENTERPRISES 1 [R Realtor(R) Logo] [Equal Housing Opportunity Logo] GREATER DALLAS ASSOCIATION OF REALTORS(R), INC. NET COMMERCIAL LEASE AGREEMENT STATE OF TEXAS COUNTY OF DALLAS THIS LEASE AGREEMENT made and entered into by and between MURRAY INCOME PROPERTIES II, LTD. hereinafter referred to as "Landlord," and CARE MANAGEMENT ENTERPRISES, INC.; a Texas corporation hereinafter referred to as "Tenant;" WITNESSETH: Landlord hereby leases to Tenant, and Tenant hereby takes from Landlord the following described premises (hereinafter referred to as the "demised premises" or "premises") situated within the County of Tarrant, State of Texas. Being an approximate 54,000 square foot portion of an approximate 172,000 square foot office/warehouse building situated on an 8.66-Acre tract of land described a Site 3 of Block 7, of the Great Southwest Industrial District, and being locally known as 1248 Avenue R, Grand Prairie, Texas; and being more particularly described on Exhibit A attached hereto. together with all rights, privileges, easements and appurtenances belonging to or in any way pertaining to the demised premises and together with the building and other improvements now situated or to be erected upon the demised premises. TO HAVE AND TO HOLD the same for a term of thirty-six months, beginning on December 1, 1997 and expiring on November 30, 2000, upon the following terms, conditions and covenants: See Contingency, Special Conditions, Paragraph 32A attached hereto. 1. RENT: Tenant agrees to pay the Landlord herein, without offset or deduction, for the account of Landlord rent for the demised premises at the rate of See Rent Schedule, Special Conditions, Paragraph 32 B attached hereto Dollars ($ ) per month in advance. One such monthly installment shall be due and payable on or before the beginning date of this lease, and a like monthly installment shall be due and payable on or before the first day of each succeeding calendar month during the term hereof; provided that, in the event the term hereof shall commence or end during a calendar month, the rent for any fractional calendar month following the commencement or preceding the end of the term of this lease shall be pro rated by days. (If percentage rent is to be payable to Landlord, refer to Exhibit A attached to this lease, In such case Exhibit A shall be incorporated into and become a part of this lease when physically attached hereto.) Tenant will deposit with Landlord, upon commencement of this lease, Twenty nine thousand seven hundred and 00/100 Dollars ($29,700.00) to be applied as follows: (a) $14,175.00 for base rent for December 1, 1997 through December 31, 1997. (b) $15,525.00 as a security deposit. Such security deposit shall be held by Landlord without interest as security for the performance by 2 Tenant of Tenant's covenants and obligations under this . The security deposit is not an advance payment of rental the full measure of liquidated damages in case of default by Tenant. Upon the occurrence of any event of default, Landlord may, from time to time, without prejudice to any other remedy provided herein or provided by law, use the security deposit to the extent necessary to make good any arrears of rent and any other damage, injury, expense or liability caused to Landlord by such event of default. Following any such application of the security deposit. Tenant shall pay to Landlord, on demand, the amount so applied in order to restore the security deposit to its original amount. If Tenant is not in default, hereunder, any remaining balance of such deposit shall be returned by Landlord to Tenant upon expiration or termination of this lease. 2. ACCEPTANCE OF PREMISES: Tenant acknowledges that it has fully inspected the demised premises and accepts the demised premises, and any buildings and improvements situated thereon, as suitable for the purposes for which the same are leased in their present condition, except NONE 3. USE OF PREMISES: The demised premises shall be used and occupied only for the purpose of General offices, storage and distribution of medical products, excluding drugs and narcotics. See Special Conditions, Paragraph 32C, attached hereto. and not otherwise. Tenant shall at its own expense obtain any and all governmental licenses and permits necessary for such use. 4. COMPLIANCE WITH LAW: Tenant shall comply with all governmental laws, ordinances and regulations applicable to the use of the demised premises, and shall promptly comply with all governmental orders and directives for the correction, prevention and abatement of nuisances in or upon, or connected with the demised premises, all at Tenant's sole expense. 5. REAL ESTATE TAXES: (a) Tenant agrees to pay before they become delinquent all taxes (both general and special), assessments or governmental charges of any kind and nature whatsoever (hereinafter collectively referred to as the "taxes"), levied or assessed against the premises or any part thereof. Tenant shall furnish to Landlord not later than twenty (20) days before the date any such taxes become delinquent, official receipts of the appropriate taxing authority or other evidence satisfactory to Landlord evidencing payment thereof. If Tenant shall fail to pay any taxes, assessments, or governmental charges required to be paid by Tenant hereunder, in addition to any other remedies provided herein, Landlord may if it so elects pay such taxes, assessments, and governmental charges. Any sums so paid by Landlord shall be deemed to be so much additional rental owing by Tenant to Landlord and due and payable on written demand by Landlord together with interest thereon at the rate of ten percent (10%) per annum from date paid by Landlord to date of repayment by Tenant. (b) All real estate taxes and assessments on the demised premises owned by Landlord shall be prorated between Landlord and Tenant with respect to the tax years in which this lease commences or terminates. Tenant shall pay that part of the real estate taxes attributable to the portion of the tax year covered by this lease. (c) In the event the premises constitute a portion of a multiple occupancy building, in lieu of Tenant paying the "taxes" as above provided, Landlord agrees to pay before they become delinquent all "taxes" lawfully levied or assessed against such building and the grounds, parking areas, driveways and alleys around the said building, and during each month of the term of this Lease, Tenant shall make a monthly escrow deposit with Landlord equal to 1/12 of its proportionate share of the taxes on the building which will be due and payable for that year. Tenant's "proportionate share" as used throughout this lease, shall mean a fraction, the numerator of which is the space occupied by Tenant and the denominator of which is the entire gross space contained in the building. The current taxes are approximately $.55 per square foot on the building. In the event Landlord does not dispute and contest the taxes, then. (d) Tenant may, alone or along with any other tenants of said building, at its or their sole cost and expense, in its or their own name(s) and/or in the name of the Landlord, dispute and contest any "taxes" by appropriate proceedings diligently conducted in good faith, but only after Tenant and all other tenants, if any, joining with Tenant in such contest have deposited with Landlord the amount so contested and unpaid, or their proportionate shares thereof as the case may be, which shall be held by Landlord without obligations for interest until the termination of the proceedings, at which time the amount(s) deposited shall be applied by Landlord toward the payment of the items held valid (plus any court costs, interest, penalties and other liabilities associated with the proceedings), and Tenant's share of any excess shall be returned to Tenant. Tenant further agrees to pay Landlord upon demand Tenant's share (as among all tenants who participated in the contest) of all court costs, interest, penalties and other liabilities relating to such proceedings. Tenant hereby indemnifies and agrees to hold harmless the Landlord from and against any cost, damage or expense, including attorney's fees, in connection with any such proceedings. (e) If at any time during the term of this Lease, the present method of taxation shall be changed so that in lieu of the whole or any part of any taxes, assessments, levies or charges levied, assessed or imposed on real estate and the improvements thereon there shall be levied, assessed or imposed on Landlord a capital levy or other tax directly on the rents received therefrom and/or a franchise tax, assessment, levy or charge measured by or based, in whole or in part, upon such rents or the present or any future building or buildings on the premises, then all such taxes, assessments, levies or charges, or the part thereof so measured or based, shall be declined to be included within the term "taxes" for the purpose hereof. 6. REPAIRS AND MAINTENANCE: (a) Tenant shall at its own cost and expense keep, maintain and take good care of the premises and make all necessary repairs thereto, interior and exterior, non-structural, ordinary and extraordinary, and shall suffer no waste or nuisances; provided, however, that the cost of maintenance and repair of any common party wall (any wall, divider, partition or any other structure separating the premises from any adjacent premises occupied by other tenants) shall be shared equally by Tenant and the Tenant occupying adjacent premises. Tenant shall not damage any party wall or disturb the integrity and support provided by any party wall and shall, at its cost and expense, promptly repair any damage or injury to any party wall caused by Tenant or its employees, agents or invitees. At the end of the term or other termination of this lease, Tenant shall deliver the premises with all improvements thereon in good repair and condition, reasonable wear and tear only excepted. Landlord shall be responsible for maintaining the roof, exterior walls and foundation throughout lease term. (b) Tenant shall at its own cost and expense care for the grounds around the buildings on the premises, including the regular mowing of grass, care of shrubs and general landscaping, and maintenance of the parking areas, driveways, alleys and shall maintain the whole of the premises in a clean and sanitary condition. (c) In the event the premises constitute a portion of a multiple occupancy building, Tenant and its employees, customers, and licensees shall have the nonexclusive right to use, in common with the other parties occupying said building, the parking areas, driveways and alleys adjacent to said building, subject to such reasonable rules and regulations as Landlord may from time to time prescribe, and Tenant shall, in lieu of their obligations set forth under subparagraph (b) above, be liable for its proportionate share of the cost and expense of the care for the grounds around the said building, including but not limited to, the mowing of grass, care of shrubs, general landscaping, and maintenance of parking areas, driveways and alleys. Tenant shall reimburse Landlord monthly for the amount of its proportionate share of such costs and expenses in the event Landlord elects to perform or cause to be performed such work. (d) In the event Tenant shall fail to maintain the demised premises or any paving, landscaping or milroad siding in accordance with this paragraph 6, Landlord shall have the right (but not the obligation) to cause all repairs or other maintenance to be made and the reasonable costs therefor expended by Landlord shall be paid by Tenant on written demand. 7. ALTERATIONS, ADDITIONS AND IMPROVEMENTS Tenant shall not create any openings in the roof or exterior walls, or make any alterations, additions or improvements to the demised premises without prior written 3 consent of Landlord. Consent for non-structural alterations, additions or improvements shall not be unreasonably withheld by Landlord. Tenant shall have the right to erect or install shelves, bins, machinery, air conditioning or heating equipment and trade fixtures, provided that Tenant complies with all applicable governmental laws, ordinances and regulations. At the expiration or termination of this lease, Tenant shall have the right to remove such items so installed, provided Tenant is not in default at the time of such removal and provided further that Tenant shall, at the time of removal of such items, repair in a good and workmanlike manner any damage caused by installation or removal thereof. Tenant shall pay for all costs incurred or arising out of alterations, additions or improvements in or to the demised premises and shall not permit a mechanic's or materialman's lien to be asserted against the demised premises. Upon request by Landlord, Tenant shall deliver to Landlord proof of payment reasonably satisfactory to Landlord of all costs incurred or arising out of any such alterations, additions or improvements. All alterations, additions or improvements in or to the demised premises shall become the property of Landlord at the expiration or termination of this lease; however, Landlord may direct the removal of alterations, additions or improvements by giving written notice to Tenant prior to the expiration or termination of this lease. At the direction of Landlord, Tenant shall promptly remove all alterations, additions and improvements and any other property placed in the demised premises by Tenant, and Tenant shall repair in a good and workmanlike manner any damage caused by such removal. 8. SIGNS: Tenants shall not place or affix any signs or other objects upon or to the roof or exterior walls of the demised premises or paint or otherwise deface the exterior walls of the demised premises without the prior written consent of Landlord. Any signs installed by Tenant shall conform with applicable laws and deed and other restrictions. Tenant shall remove all signs at the termination of this lease and shall repair any damage and close any holes caused or revealed by such removal. 9. INSURANCE, FIRE AND CASUALTY DAMAGE: (a) Landlord agrees to maintain insurance covering the building of which the demised premises are a part in an amount not less than 90% (or such greater percentage as may be necessary to comply with the provisions of any co-insurance clauses of the policy) of the "replacement cost" thereof as such term is defined in the Replacement Cost Endorsement to be attached thereto, insuring against the perils of Fire, Lightning, Extended Coverage, Vandalism and Malicious Mischief, extended by Special Extended Coverage Endorsement to insure against all other Risks of Direct Physical Loss, such coverages and endorsements to be as defined, provided and limited in the standard bureau forms prescribed by the insurance regulatory authority for the State in which the demised premises are situated for use by insurance companies admitted in such state for the writing of such insurance on risks located within such state. Subject to the provisions of subparagraphs 9(b) and 9(c) below, such insurance shall be for the sole benefit of Landlord and under its sole control. Tenant agrees to pay Landlord's cost of maintaining such insurance on said building (or, in the event the premises constitute a portion of a multiple occupancy building, Tenant's full proportionate share of such cost). Said payments shall be made to Landlord within ten days after presentation to Tenant of Landlord's statement setting forth the amount due. Any payment to be made pursuant to this subparagraph (a) with respect to the year in which this lease commences or terminates shall bear the same ratio to the payment which would be required to be made for the full year as that part of such year covered by the terms of this lease bears to a full year. During each month of the term of this lease, Tenant shall make a monthly escrow deposit with Landlord equal to 1/12 of its proportionate share of the insurance on the building which will be due and payable for that year. (b) If the buildings situated upon the premises should be damaged or destroyed by any peril covered by the insurance to be provided by Landlord under subparagraph 9(a) above, Tenant shall give immediate notice thereof to Landlord, and Landlord shall at its sole cost and expense thereupon proceed with reasonable diligence to rebuild and repair such buildings to substantially the condition in which they existed prior to such damage or destruction, except that Landlord shall not be required to rebuild, repair or replace any part of the partitions, fixtures, additions or other improvements which may have been placed in, on or about the premises by Tenant and except that Tenant shall pay to Landlord upon demand any applicable deductible amounts specified under Landlord's insurance. The rent payable hereunder shall in no event abate by reason of any damage or destruction. (c) If the buildings situated upon the premises should be damaged or destroyed by a casualty other than a peril covered by the insurance to be provided by Landlord under subparagraph 9(a) above, or if any other improvements situated on the demised premises should be in any manner damaged or destroyed, Tenant shall at its sole cost and expense thereupon proceed with reasonable diligence to rebuild and repair such buildings and/or improvements to substantially the condition in which they existed prior to such damage or destruction, subject to Landlord's approval of the plans and specifications for such rebuilding and repairing, which approval shall not be unreasonably withheld. Tenant's obligation hereunder shall not include destruction of the premises by war, riot, civil disobedience, or flood. (d) Tenant covenants and agrees to maintain insurance on all alterations, additions, partitions and improvements erected by, or on behalf of, Tenant in, on or about the demised premises in an amount not less than 90% (or such greater percentage as may be necessary to comply with the provisions of any co-insurance clause of the policy) of the "replacement cost" thereof as such term is defined in the Replacement Cost Endorsement to be attached thereto. Such insurance shall insure against the perils and be in form, including stipulated endorsements, as provided in subparagraph 9(b) hereof. Such insurance shall be for the sole benefit of Tenant and under its sole control. All such policies shall be procured by Tenant from responsible insurance companies satisfactory to Landlord. Certified copies of policies of such insurance, together with receipt evidencing payment of premiums therefor shall be delivered to Landlord prior to the commencement date of this lease. Not less than fifteen (15) days prior to the expiration date of any such policies, certified copies of renewals thereof (bearing notations evidencing the payment of renewal premiums) shall be delivered to Landlord. Such policies shall further provide that not less than thirty (30) days written notice shall be given to Landlord before such policy may be cancelled or changed to reduce insurance provided thereby. (e) Notwithstanding anything herein to the contrary, in the event the holder of any indebtedness secured by a mortgage or deed of trust covering the premises required that the insurance proceeds be applied to such indebtedness then the Landlord shall have the right to terminate this lease by delivering written notice of termination to Tenant within fifteen (15) days after such requirement is made by any such holder, whereupon all rights and obligations hereunder shall cease and terminate. 10. WAIVER OF SUBROGATION: Each party hereto waives any and every claim which arises or may arise in its favor against the other party hereto during the term of this lease or any renewal or extension thereof for any and all loss of, or damage to, any of its property located within or upon, or constituting a part, the demised premises, which loss or damage is covered by valid and collectible fire and extended coverage insurance policies, to the extent that such loss or damage is recoverable under such insurance policies. Such mutual waivers shall be in addition to, and not in limitation or derogation of, any other waiver or release contained in this lease with respect to any loss of, or damage to, property of the parties hereto. Inasmuch as such mutual waivers will preclude the assignment of any aforesaid claim by way of subrogation or otherwise to an insurance company (or any other person), each party hereby agrees immediately to give to each insurance company which has issued to its policies of fire and extended coverage insurance, written notice of the terms of such mutual waivers, and to cause such insurance policies to be properly endorsed, if necessary, to prevent the invalidation of such insurance coverages by reason of such waivers. Landlord and its authorized agents shall have the right, during normal business hours, to enter the demised premises (i) to inspect the general condition and state of repair thereof, (ii) to make repairs required or permitted under this lease, (iii) to show the premises to any prospective tenant or purchaser or (iv) for any other reasonable purpose. During the final 150 days of the lease term, Landlord and its authorized agents shall have the right to erect and maintain on or about the demised premises customary signs advertising the property for lease or for sale. 11. UTILITY SERVICES: Tenant shall pay the cost of all utility services, including but not limited to initial connection charges, all charges for gas, water and electricity used on the demised premises, and for all electric lights, lamps and tubes. 12. ASSIGNMENT AND SUBLEASING: Tenant shall not, without the prior written consent of Landlord, assign this lease or sublet the demised premises or any portion thereof. Any assignment or subletting shall be expressly subject to all terms and provisions of this lease, including the provisions of paragraph 3 pertaining to the use of the demised premises. In the event of any assignment or subletting, Tenant shall remain fully liable for the full performance of all Tenant's obligations under this lease. Tenant shall not assign his rights hereunder or sublet the premises without first obtaining a written agreement from assignee or sublessee whereby assignee or sublessee agrees to be bound by the terms of this lease. No such assignment or subletting shall constitute a novation. In the event of the occurrence of an event of default while the demised premises are assigned or sublet, Landlord, in addition to any other remedies provided herein or by law, may at Landlord's option, collect directly from such assignee or subtenant all rents becoming due under such assignment of subletting and apply such rent against any sums due to Landlord hereunder. No direct collection by Landlord from any such assignee or subtenant shall release Tenant from the performance of its obligations hereunder. 4 13. INDEMNITY AND PUBLIC LIABILITY INSURANCE: (a) Landlord shall not be liable to Tenant or Tenant's employees, agents, patrons or visitors, or to any other person whomsoever, for any injury to person or damage to property on or about the premises, caused by the negligence or misconduct of Tenant, its agents, servants or employees, or any other person entering upon the premises under express or implied invitation of Tenant, or caused by the buildings and improvements located on the premises becoming out of repair, or caused by leakage of gas, oil, water or steam or by electricity emanating from the premises, or due to any cause whatsoever, and Tenant agrees to indemnify Landlord and hold it harmless from any loss, expenses or claims including attorney's fees, arising out of any such damage or injury, except injury to persons or damage to property the sole cause of which is the negligence of the Landlord. See Special Conditions, Paragraph 32D, attached hereto. (b) Tenant shall procure and maintain throughout the term of this lease a policy or policies of insurance, said insurance policy shall name Landlord as an additional insured, at its sole cost and expense, insuring both Landlord and Tenant against all claims, demands, or actions arising out of or in connection with: (i) the premises; (ii) the condition of the premises, the limits of such policy or policies to be in the amount of not less than $300,000 per person and $1,000,000 per occurrence in respect of injury to persons (including death), and in the amount of not less than $50,000 per occurrence in respect to property damage or destruction, including loss of use thereof. All such policies, shall be procured by Tenant from responsible insurance companies satisfactory to Landlord. Certified copies of such policies, together with receipt evidencing of premiums therefor, shall be delivered to Landlord prior to the commencement date of this lease. Not less than fifteen (15) days prior to the expiration date of any such policies, certified copies of the renewals thereof (bearing notations evidencing the payment of renewal premiums) shall be delivered to Landlord. Such policies shall further provide that not less than thirty (30) days written notice shall be given to Landlord before such policy may be cancelled or changed to reduce insurance provided thereby. (c) If Tenant should fail to comply with the foregoing requirements relating to insurance, Landlord may obtain such insurance, and Tenant shall pay to Landlord on demand, as additional rental hereunder, the premium cost thereof plus interest at the rate of ten per cent (10%) per annum from the date of payment by Landlord until repaid by Tenant. 14. CONDEMNATION: (a) If, during the term of this lease or any extension or renewal thereof, all or a substantial part of the demised premises should be taken for any public or quasi-public use under any governmental law, ordinance regulation or by right of eminent domain, or should be sold to the condemnity authority under threat of condemnation, this lease shall terminate and the rent shall be abated during the unexpired portion of this lease, effective from the date of taking of the demised premises by the condemnity authority. (b) If less than a substantial part of the demised premises is taken for public or quasi-public use under any governmental law, ordinance or regulation, or by right of eminent domain, or is sold to the condemnity authority under threat of condemnation, Landlord, at its option, may be written notice terminate this lease or shall forthwith at its sole expense restore and reconstruct the buildings and improvements (other than leasehold improvements made by Tenant or any assignee, subtenant or other occupant of the demised premises) situated on the demised premises in order to make the same reasonably tenantable and suitable for the uses for which the demised premises are leased as defined in paragraph 3. The rent payable hereunder during the unexpired portion of this lease shall be adjusted equitably. (c) All compensation awarded for any taking (or the proceeds from private sale in lieu thereof) of the demised premises or common area shall be the property of landlord and Tenant hereby assigns its interest in any such award to Landlord; provided however, Landlord shall have no interest in any award made to Tenant for loss of business or for the taking of Tenant's fixtures and other property if a separate award for such items is made to Tenant. 15. HOLDING OVER: Should Tenant, or any of its successors in interest fail to surrender the demised premises, or any part thereof, on the expiration of the term of this lease, such holding over shall constitute a tenancy from month to month, at a monthly rental equal to 150% of the rent paid for the last month of the term of this lease unless otherwise agreed in writing. 16. DEFAULT OF TENANT: The following events shall be deemed to be events of default under this lease: (a) Failure of Tenant to pay any installment of the rent or other sum payable to Landlord hereunder on the date that same is due and such failure shall continue for a period of 10 days. (b) Failure of Tenant to comply with any term, condition or covenant of this lease, other than the payment of rent or other sum of money, and such failure shall not be cured within 30 days after written notice thereof to Tenant. (c) Insolvency, the making of a transfer in fraud of creditors, or the making of an assignment for the benefit of creditors by Tenant or any guarantor of Tenant's obligations. (d) Filing of a petition under an section or chapter of the United States Bankruptcy Code, as amended, or under any similar law or statute of the United States or any State thereof by Tenant or any guarantor of Tenant's obligations or adjudication as a bankrupt or insolvent in proceedings filed against Tenant or such guarantor. (e) Appointment of a receiver or trustee for all or substantially all of the assets of Tenant or any guarantor of Tenant's obligation hereunder. (f) Abandonment by Tenant of any substantial portion of the demised premises or cessation of the use of the use of the demised premises for the purpose leased. 17. REMEDIES OF LANDLORD: Upon the occurrence of any of the events of default listed in Section 18, Landlord shall have the option to pursue any one or more of the following remedies without any notice or demand whatsoever: (a) Terminate this lease, in which event Tenant shall immediately surrender the demised premises to Landlord. If Tenant fails to so surrender such premises, Landlord may, without prejudice to any other remedy which it may have for possession of the demised premises or arrearages in rent, enter upon and take possession of the demised premises and expel or remove Tenant and any other person who may be occupying such premises or any part thereof, by force if necessary, without being liable for prosecution or any claim for damages therefor. Tenant shall pay to Landlord on demand the amount of all loss and damage which Landlord may suffer by reason of such termination, whether through inability to relet the demised premises on satisfactory terms or otherwise. (b) Enter upon and take possession of the demised premises, by force if necessary, without terminating this lease and without being liable for prosecution or for any claim for damages therefor, and expel or remove Tenant and any other person who may be occupying such premises or any part thereof. Landlord may relet the demised premises and receive the rent therefor. Tenant agrees to pay Landlord monthly or on demand from time to time any deficiency that may arise by reason of any such reletting. In determining the amount of such deficiency, the brokerage commission, attorney's fees, remodeling expenses and other costs of reletting shall be subtracted from the amount of rent received under such reletting. (c) Enter upon the demised premises, by force, if necessary, without terminating this lease and without being liable for any prosecution or for any claim for damages therefor, and do whatever Tenant is obligated to do under the terms of this lease. Tenant agrees to pay Landlord on demand for expenses which Landlord may incur in this effecting compliance with Tenant's obligations under this lease, together with interest thereon at the rate of 10% per annum from the date expended until paid. Landlord shall not be liable for any damages resulting to the Tenant from such action, whether caused by negligence of Landlord or otherwise. Pursuit of any of the foregoing remedies shall not preclude pursuit of any of the other remedies herein provided or any other remedies provided by law, nor shall pursuit of any remedy herein provided constitute a forfeiture or waiver of any rent due to Landlord hereunder or of any damages accruing to Landlord by reason of the violation of any of the terms, conditions and covenants herein contained. 18. LANDLORD'S LIEN: In addition to the statutory Landlord's lien, Tenant hereby grants to Landlord a security interest to accrue payment of all rent an other sums of money becoming due hereunder from Tenant, upon all goods, wares, equipment, fixtures, furniture and other personal property of Tenant situated in or upon the demised premises, together with the proceeds from the sale or lease thereof. Such property shall not be removed without the consent of Landlord until all arrearages in rent and other sums of money then due to Landlord hereunder shall first have been paid and discharged. Upon the occurrence of any event of default, Landlord may, in addition to any other remedies provided 5 herein or by law, enter upon the demised premises and take possession of any and all goods, wares, equipment, fixtures, furniture and other personal property of Tenant situated on the premises without liability for trespass or conversion, and sell the same at public or private sale, with or without having such property at the sale, after giving Tenant reasonable notice of the time and place of any such sale. Unless otherwise required by law, notice to Tenant of such sale shall be deemed sufficient if given in the manner prescribed in this lease at least 10 days before the time of the sale. Any public sale made under this paragraph shall be deemed to have been conducted in a commercially reasonable manner if held in the demised premises or where the property is located, after the time, place and method of sale and a general description of the types of property to be sold have been advertised in a daily newspaper published in Dallas and/or Tarrant County, Texas, for five consecutive days before the date of the sale. Landlord or its assigns may purchase at a public sale and, unless prohibited by law, at a private sale. The proceeds from any disposition dealt with in this paragraph, less any and all expenses connected with the taking of possession, holding and selling of the property (including reasonable attorneys' fees and legal expenses), shall be applied as a credit against the indebtedness secured by the security interest and granted herein. Any surplus shall be paid to Tenant or as otherwise required by law; Tenant shall pay any deficiencies forthwith. Upon request by Landlord, Tenant agrees to execute and deliver to Landlord a financing statement in form sufficient to perfect the security interest of Landlord in the aforementioned property and proceeds thereof under the provisions of the Business and Commerce Code in force in the State of Texas. The statutory lien for rent is expressly reserved; the security interest herein granted is in addition and supplementary thereto. 19. ATTORNEYS' FEES: If, on account of any breach or default by Landlord or Tenant of their respective obligations under this lease, it shall become necessary for the other to employ an attorney to enforce or defend any of its rights or remedies hereunder, and should such party prevail, it shall be entitled to any reasonable attorneys' fees incurred in such connection. 20. QUIET ENJOYMENT: Landlord warrants that it has full right and power to execute and perform this lease and to grant the estate demised herein and that Tenant, on payment of rent and performing the covenants herein contained, shall peaceably and quietly have, hold and enjoy the demised premises during the full term of this lease and any extension or renewal hereof; provided, however, that Tenant accepts this lease subject and subordinate to any recorded mortgage, deed of trust or other lien presently existing upon the demised premises. Landlord is hereby irrevocably vested with full power and authority to subordinate Tenant's interest hereunder to any mortgage, deed of trust or other lien hereafter placed on the demised premises, and Tenant agrees upon demand to execute such further instruments subordinating this lease as Landlord may request, provided such further subordination shall be upon the express condition that this lease shall be recognized by the mortgagee and that the rights of Tenant shall remain in full force and effect during the terms of this lease so long as Tenant shall continue to perform all of the covenants of this lease. 21. WAIVER OF DEFAULT: No waiver by the parties hereto of any default or breach of any term, condition or covenant of this lease shall be deemed to be waiver of any subsequent default or breach of the same or any other term, condition or covenant contained herein. 22. PROFESSIONAL SERVICE FEES: Professional service fees due to the undersigned Principal Broker shall be calculated and paid in accordance with paragraph (a) below: (a) Landlord agrees to pay to the undersigned Principal Broker a professional service fee for negotiating this lease equal to: Six percent (6%) of the total lease consideration to be split four percent (4%) to Mohr Partners, Inc. and two percent (2%) to Ken Wood Company. (b) All professional service fees shall be payable in Dallas County, Texas. If during the term of this lease (as the same may be renewed or extended) or within 10 years from the date hereof, whichever shall be the greater period of time, Tenant, its successors or assigns, shall (i) exercise any right or option to renew or extend the term of this lease (whether contained in this lease or in any amendment, supplement or other agreement pertaining hereto) or enter into a new lease or rental agreement with Landlord covering demised premises, or (ii) enter into any lease, extension, renewal, expansion or other rental agreement with Landlord demising to Tenant any premises located on or constituting all or part of any tract or parcel of real property adjoining, adjacent to or contiguous to the demised premises owned by Landlord on the date of this lease, Landlord shall pay to the Principal Broker provided Realtors are actively involved in the negotiations, an additional professional service fee covering the full period of such renewal, extension, lease, expansion or other rental agreement which shall be due on the date of exercise, in the case of the exercise of an option, or the execution, in the case of a lease or other agreement. Such professional service fees shall be computed under paragraph (a) above as if a new lease had been made for such period of time, In the event Tenant, its successors or assigns, should purchase the demised premises at any time, pursuant to a purchase option contained in this lease (or any lease, extension, renewal, expansion or other rental agreement upon which an additional professional service fee would be due under the above provisions) or, in the absence of any purchase option or exercise thereof, should purchase the demised premises within 10 years from the date hereof, Landlord shall pay to the undersigned Principal Broker a sales professional service fee in cash equal to Six percent (6%) of the first $500,000.00 and three percent (3%) of the balance of the purchase price, payable at closing. Upon closing of the sale, all lease professional service fees shall terminate if the lease professional service fees are payable monthly. (c) Tenant expressly acknowledges and agrees that if Tenant enters into any new lease, extension, renewal, expansion or other agreement to rent, occupy or purchase any property described in the preceding paragraph within the time period specified in the preceding paragraph, such agreement must be handled by and through the undersigned Principal Broker; otherwise, Tenant shall be jointly liable for any professional service fee due or to become due to Principal Broker. (d) In the event of a sale of the demised premises, or the assignment of this lease by Landlord, Landlord shall obtain from the purchaser an Assumption Agreement in recordable form whereby such assignee or purchaser agrees to pay the undersigned Principal Broker all professional service fees payable under this lease to deliver a fully executed counterpart thereof to Principal Broker on the date of closing of the sale of the demised premises or assignment of this lease, whereupon Landlord shall be released from all personal liability for subsequent payments of professional service fees. Landlord expressly agrees that it will not transfer, convey or sell the demised premises or assign this lease without first obtaining from the purchaser or assignee such Assumption Agreement. The form of such Assumption Agreement shall be furnished to the Principal Broker at the time Landlord enters into any contract for the sale of the demised premises or assignment of this lease. (e) If on account of any breach or default by any party hereto in his or its obligations to Principal Broker, it shall become necessary for Principal Broker to employ an attorney to enforce or defend any of Principal Broker's rights or remedies hereunder and should Principal Broker prevail, such parties agree to pay Principal Broker reasonable attorney's fees in connection therewith. 23. CERTIFICATE OF OCCUPANCY: Tenant may, prior to the commencement of the term of this lease, apply for a Certificate of Occupancy to be issued by the municipality in which the demised premises are located, but this lease shall not be contingent upon issuance thereof. Nothing herein contained shall obligate Landlord to install any additional electrical wiring, plumbing or plumbing fixtures which are not presently existing in the demised premises, or which have not been expressly agreed upon by Landlord in writing. 24. FORCE MAJEURE: In the event performance by Landlord of any term, condition or covenant in this lease is delayed or prevented by any Act of God, strike, lockout, shortage of material or labor restriction by any governmental authority, civil riot, flood, and any other cause not within the control of Landlord, the period for performance of such term, condition or covenant shall be extended for a period equal to the period Landlord is so delayed or hindered. 25. EXHIBITS: All exhibits, attachments, annexed instruments and addenda referred to herein shall be considered in part hereof for all purposes with the same force and effect as if copied at full length herein. 6 26. USE OF LANGUAGE: Words of any gender used in this lease shall be held and construed to include any other gender, and words in the singular shall be held to include the plural unless the context otherwise requires. 27. CAPTIONS: The captions or headings of paragraphs in this lease are inserted for convenience only and shall not be considered in construing the provisions hereof if any question of intent should arise. 28. SUCCESSORS: The terms, conditions and covenants contained in this lease shall apply to, inure to the benefit of, and be binding upon the parties hereto and their respective successors in interest and legal representatives except as otherwise herein expressly provided. All rights, powers, privileges, immunities and duties of Landlord under this lease, including, but not limited to, any notices required or permitted to be delivered by Landlord to Tenant hereunder, may, at Landlord's option, be exercised or performed by Landlord's agent or attorney. 29. SUBLEASE: If this lease is in fact a sublease, Tenant accepts this lease subject to all of the terms and conditions of the lease under which Landlord holds the demised premises as lessee. Tenant covenants that it will do no act or thing which would constitute a violation by Landlord of its obligation under such lease. 30. SEVERABILITY: If any provision in this lease should be held to be invalid or unenforceable, the validity and enforceability of the remaining provisions of this lease shall not be affected thereby. 31. NOTICES: Any notice or document required or permitted to be delivered hereunder may be delivered in person or shall be deemed to be delivered, whether actually received or not, when deposited in the United States mail, postage prepaid, registered or certified mail, return receipt requested, addressed to the parties at the addresses indicated below, or at such other addresses as may have theretofore been specified by written notice delivered in accordance herewith. LANDLORD: MURRAY INCOME PROPERTIES II, LTD. ----------------------------------- 5550 LBJ FREEWAY, SUITE 675 ----------------------------------- L8 #6 DALLAS, TX 75240 ----------------------------------- PRINCIPAL BROKER: KEN WOOD COMPANY ------------------------------- 5580 LBJ Freeway, Suite 270 ------------------------------- Dallas, Texas 75240-6265 TENANT: CARE MANAGEMENT ENTERPRISES, INC. ----------------------------------- 1248 AVENUE R ----------------------------------- GRAND PRAIRIE, TX 75050 ----------------------------------- 32. SPECIAL CONDITIONS: See Special Conditions attached hereto and made a part hereof. EXECUTED the 16th day of November , 1995 ------------- -------------------------- ------. ATTEST: LANDLORD: MURRAY INCOME PROPERTIES II, LTD. - ------------------------------ ----------------------------------- By Murray Realty Investors, IX, Inc. ------------------------------------ /s/ Brent Buck ------------------------------------ Title Brent Buck Executive Vice President ATTEST: TENANT: CARE MANAGEMENT ENTERPRISES, INC. - ------------------------------ ------------------------------------ /s/ Ronald G. Bays ------------------------------------ By VICE PRESIDENT ------------------------------------ Title Ronald G. Bays BROKERS MOHR PARTNERS, INC. KEN WOOD COMPANY - ------------------------------ ------------------------------------ Cooperating Broker Principal Broker, Member of the Greater Dallas Association of REALTORS(R), Inc. /s/ Huck Neuberry /s/ Ken Wood, President - ------------------------------ ------------------------------------ By By Ken Wood NOTE: If this Lease Agreement is negotiated by Principal Broker in cooperation with another Broker, Landlord shall be liable for payment of all professional service fees to Principal Broker only, whereupon Landlord shall be protected from any claims from said Cooperating Broker. 7 SPECIAL CONDITIONS TO THE LEASE AGREEMENT BY AND BETWEEN MURRAY INCOME PROPERTIES II, LTD., LANDLORD AND CARE MANAGEMENT ENTERPRISES, INC., TENANT 32. A. CONTINGENCY The commencement date of this Lease shall be subject to and contingent upon Tenant not being in default of any term, condition, or covenant contained in the Sublease which precedes this Lease, and attached hereto as Exhibit C. In the event Tenant is in default under said Sublease, then this Lease shall, as Landlord's sole option, be deemed to be null and void. B. RENT SCHEDULE: Rent, pursuant to Paragraph 1 of the Lease, shall be paid as follows: December 1, 1997 - November 30, 1998 at the rate of $14,175.00 per month; December 1, 1998 - November 30, 1999 at the rate of $14,850.00 per month; December 1, 1999 - November 30, 2000 at the rate of $15,525.00 per month. C. HAZARDOUS WASTE: The term "Hazardous Substances," as used in this lease shall mean pollutants, contaminants, toxic or hazardous wastes, or any other substances, the use and/or the removal of which is required or the use of which is restricted, prohibited or penalized by an "Environmental Law," which term shall mean any federal, state, or local law, ordinance or other statute of a governmental or quasi-governmental authority relating to pollution or protection of the environment. Tenant hereby agrees that (i) no activity will be conducted on the Premises that will produce any Hazardous Substance; (ii) the Premises will not be used in any manner for the storage of any Hazardous Substances; (iii) no portion of the Premises will be used as a landfill or a dump; (iv) Tenant will not install any underground tanks of any type; (v) Tenant will not allow any surface or subsurface conditions to exist or come into existence that constitute, or with the passage of time may constitute a public or private nuisance; (vi) Tenant will not permit any Hazardous Substances to be brought onto the Premises, and if so brought thereon, then the same shall be immediately removed with proper disposal, and all required cleanup procedures shall be diligently undertaken pursuant to all environmental laws. Landlord or Landlord's representative shall have the right but not the obligation to enter the Premises for the purpose of ensuring compliance with all Environmental Laws. If Tenant so contaminates the Premises, then Tenant shall diligently institute proper and thorough cleanup procedures at Tenant's sole cost, See Exhibit B-1 8 and Tenant agrees to indemnify and hold Landlord harmless from all claims, demands, actions, liabilities, costs, expenses, damages and obligations of any nature arising from or as a result of Tenant's failure to comply with this Paragraph 32 and/or the presence of Hazardous Substances in or on the Premises. The foregoing indemnification and the responsibilities of Tenant shall survive the termination or expiration of this Lease. D. LIABILITY In addition to the provisions in Paragraph 13 of the Lease, Tenant shall look solely to Landlord's interest in the Property for the satisfaction of any judgements or decrees requiring the payment of money by Landlord based upon any defaults hereunder, and no other property or asset of Landlord shall be subject to levy, execution or other enforcement procedure for the satisfaction of such judgement or decree. This provision shall apply as well to assignees or purchasers of Landlord. It is specifically agreed and understood between the parties hereto that there shall be absolutely no personal liability on the part of the Landlord, its successors, assignees, nominees, or designees, with respect to any of the terms, covenants and conditions of this Lease, and Tenant or any other party claiming by, through or under the Tenant shall look solely to the interests of the Landlord in the Property for the collection of any claim, demand, cost expense, judgement or other judicial process requiring the payment of money for any default or breach of Landlord of any of its obligations under this Lease. E. FINANCIAL STATEMENTS: Tenant has attached as Exhibit B to this Lease, copies of its current financial statements. Tenant certifies that to the best of Tenant's knowledge, these financial statements are true and correct. F. INSURANCE: Tenant shall not commit, or permit to be committed, any action or circumstance in, upon or about the Premises or the building which, directly or indirectly, would or might justify any insurance carrier in canceling or increasing the premium on any insurance policy covering the Premises, the building or the contents of either; and if any such action or circumstance is undertaken with Landlord's consent which results in an increase in any such insurance premium, Tenant shall reimburse Landlord for such increase upon demand. G. TENANT FINISH ALLOWANCE: Landlord shall pay to Tenant an allowance of up to $3,900.00 for reimbursement of the cost of constructing dock ramp at the dock door on the southeast corner of the premises. The allowance will be paid within twenty (20) days of Tenant furnishing Landlord with paid invoices and lien releases from all contractors and subcontractors. Landlord shall have the right to approve Tenant's contractor, approval not to be unreasonably withheld. 9 EXHIBIT A LEGAL DESCRIPTION BEING all of that certain lot, tract or parcel of land situated in Block 7, THIRD INSTALLMENT, INDUSTRIAL COMMUNITY NO. 5, GREAT SOUTHWEST INDUSTRIAL DISTRICT, an addition to the City of Grand Prairie, Tarrant County, Texas, as recorded in volume 388-78, page 58, of the Plat Records of Tarrant County, Texas, and Block 2, FOURTH INSTALLMENT, INDUSTRIAL COMMUNITY NO. 5, GREAT SOUTHWEST INDUSTRIAL DISTRICT, an addition to the City of Grand Prairie, Tarrant County, Texas, as recorded in volume 388-130, page 94 of the Plat Records of Tarrant County, Texas, and being more particularly described as follows: BEGINNING at the northwest corner of Site 1, Block 2 of the Fourth Installment of Industrial Community No. 5, Great Southwest Industrial District, an Addition to the City of Grand Prairie, Tarrant County, Texas, as recorded in volume 388-115, page 33, of the Plat Records of Tarrant County, Texas; said point also being on the south right-of-way line of Avenue R (a 60 foot right-of-way); THENCE South, 418.98 feet along the west line of Site 1 to an iron rod for corner; THENCE North 89 degrees 53 minutes 56 seconds West, 900.00 feet to an iron rod for corner on the east right-of-way line of Great Southwest Parkway (a 100.00 foot right-of-way); THENCE North, 392.39 feet with the east line of Great Southwest Parkway to an iron rod for corner at the beginning of a curve to the right having a central angle of 90 degrees 00 minutes 00 seconds and a radius of 25.00 feet; THENCE around said curve, a distance of 39.27 feet to an iron rod for corner on the south line of Avenue R; THENCE East, 875.00 feet with the south line of Avenue R to the PLACE OF BEGINNING and CONTAINING 376,231.59 square feet or 3.6371 acres of land, more or less. 10 EXHIBIT B FINANCIAL STATEMENTS 11 CARE MANAGEMENT ENTERPRISES, INC. AND SUBSIDIARIES BALANCE SHEET FOR THE PERIOD ENDING SEP-95
ASSETS Cash 165,808.19 A/R 1,431,757.09 Notes 54,296.67 Allowance (14,303.16) Inventory 569,712.50 --------------------------- Total Current Assets 2,207,271.29 FIXED ASSETS Furniture and Fixtures 132,496.11 Vehicles 210,380.51 Accumulated Depr. (124,428.24) --------------------------- Total Fixed Assets 218,448.38 OTHER ASSETS Deposits/Prepaid 9,315.11 Notes Receivable-LT 316,166.31 Investments 36,850.00 Intercompany 137,680.95 --------------------------- Total Other Assets 500,012.37 Total Assets 2,925,732.04
12 Exhibit B-1 (Murray Income Properties II, Ltd. and Care Management Enterprises) Tenant shall have no responsibility for any abatement, cleanup, or other remedial work with respect to Hazardous Substances, unless Tenant or its agents or invitees placed such substances on the premises, in which case, Tenant shall be responsible for all remedial work required under Environmental Laws in connection therewith and shall indemnify and hold Landlord harmless from all claims, demands, actions, liabilities, cost, expenses, damages and obligations of any nature arising from or as a result of Tenant's failure to comply with this paragraph 20. The foregoing indemnification and the responsibilities of Tenant shall survive the termination or expiration of the lease.
EX-27 5 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM (A) MURRAY INCOME PROPERTIES II, LTD. BALANCE SHEET AND STATEMENT OF EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH (B) FORM 10-K FOR THE YEAR ENDED DECEMBER 31, 1995. YEAR DEC-31-1995 JAN-01-1995 DEC-31-1995 921,646 895,000 453,191 14,034 0 2255,803 23182,001 6257,762 20934,041 276,530 0 0 0 0 20523,881 20934,041 0 2794,261 0 1403,224 0 (5845) 0 1121,097 0 1121,097 0 0 0 1121,097 3.44 3.44
EX-99.A 6 GLOSSARY 1 above are not met, the General Partners may repurchase a portion of such Interests or defer the repurchase of all such Interests. If the General Partners determine to defer all or a portion of the repurchase of certain Interests, the affected Limited Partners will be deemed to have priority over subsequent requests for repurchases. Investors should be aware that the General Partners have no obligation to repurchase Interests. If Interests are repurchased, the General Partner then owning such Interests shall in all respects be treated as a Limited Partner with respect to those Interests repurchased. Special Power of Attorney Under the Partnership Agreement and Subscription Agreement each Limited Partner irrevocably appoints the General Partners his attorneys-in-fact to make, execute, sign, acknowledge, swear to, deliver, record and file any document or instrument which may be considered necessary or desirable by the General Partners executing the same to carry out fully the provisions of the Partnership Agreement. Dissolution and Liquidation Article XV of the Partnership Agreement provides that the Partnership shall be dissolved and its business wound up upon the earliest to occur of (a) 180 days from the date of this Prospectus, unless subscriptions for 30,000 Interests are accepted by such date, (b) the date of disposition of all assets of the Partnership, (c) the date of the removal, resignation, adjudication of bankruptcy, insolvency or dissolution of a General Partner, unless the Limited Partners elect to continue the business of the Partnership, (d) that date on which Limited Partners holding a majority of Interests vote in favor of dissolution and termination, or (e) January 31, 2025. Upon the election by the Limited Partners to continue the business of the Partnership after an event specified in (c) above, the Partnership shall be required to purchase the General Partners' general partnership interest pursuant to Section 12.2 and Section 12.3 of the Partnership Agreement. Upon the completion of the liquidation of the Partnership, the General Partners have the authority to execute and record a certificate of cancellation of the Partnership, as well as any and all other documents required to effectuate the dissolution and termination of the Partnership. GLOSSARY As used in this Prospectus, the following definitions of terms are applicable: "Affiliate": (i) any person directly or indirectly controlling, controlled by, or under common control with, another person, (ii) a person owning or controlling 10% or more of the outstanding voting securities or beneficial interests of such other person, (iii) any officer, director, partner, general trustee, or any other person acting in a substantially similar capacity of such person, and (iv) if such other person is an officer, director, partner, trustee or holder of 10% or more of the voting securities or beneficial interests of such person, any other entity for which such person acts in any capacity. "Average Annual Unreturned Invested Capital": The total of all the Limited Partners' Original Invested Capital reduced by the total of all Cash Distributions from Sales or Refinancings (excluding Cash Distributions from Sales or Refinancings applied to the Limited Partners' Preferred Return) to Limited Partners (but not below zero), as reflected on the partnership's books and records, weighted on a daily average basis for the period. "Cash Distributions from Operations": Distributions of cash receipts from Gross Revenues after (i) operating expenses (without deduction for depreciation), (ii) amounts set aside for reasonable reserves, and (iii) payments on the Partnership's other current obligations. "Cash Distributions from Sales or Refinancings": Distributions of cash receipts from Net Proceeds from Sales or Refinancings realized by the Partnership from sales or refinancings of the 68 2 Partnership's properties after (i) amounts set aside for reasonable reserves, and (ii) payments on the Partnership's other current obligations. "Closing Date": Such date as designated by the General Partners as the date when the last Interest has been sold by the Partnership, but in no event later than 18 months after the Registration Statement first became effective. "Crozier Partners": Crozier Partners IX, Ltd. "Escrow Agent": MBank Dallas, N.A., Dallas, Texas, or its successor. "General Partners": Murray Realty Investors IX, Inc. and Crozier Partners IX, Ltd. "Gross Revenues": All Partnership revenues from whatever source derived, exclusive of revenues from the sale or refinancing of Partnership properties. "Initial Closing Date": The date on which subscriptions for the minimum of 30,000 Interests have been accepted by the General Partners. "Initial Limited Partner": Richard H. Shaw. "Interest": The limited partnership interest in the Partnership acquired by the payment of $100 to the Partnership. "Limited Partners": All subscribers for Interests who are admitted to the Partnership as limited partners and listed on Schedule A to the Partnership Agreement. "Minimum Deadline": The date that is 180 days after the date of this Prospectus. "MRI": Murray Realty Investors IX, Inc. "NASAA Guidelines": The guidelines for real estate programs as adopted by the North American Securities Administrators Association as they exist on the date the Partnership's Registration Statement is declared effective by the Securities and Exchange Commission. "Net Proceeds from Sales or Refinancings": The net cash realized by the Partnership from sales, refinancings or other dispositions of Partnership properties after the payment of all debts and expenses related to the transactions. "Organizational and Offering Expenses": Expenses incurred in connection with the organization of the Partnership and the offering of the Interests (excluding selling commissions and the dealer manager fee), including legal fees, accounting fees, printing costs, filing and qualification fees, reimbursement of expenses (excluding salaries and related salary expenses incurred during the organization of the Partnership) incurred by the General Partners or their Affiliates and other disbursements in connection with the sale and distribution of Interests. "Original Invested Capital": An amount equal to $100 per Interest. "Partner": Any General Partner, Limited Partner or, until the Initial Closing Date, the Initial Limited Partner. "Partnership": The partnership created under the Amended and Restated Certificate and Agreement of Limited Partnership attached as Exhibit A. "Partnership Agreement": The Amended and Restated Certificate and Agreement of Limited Partnership attached as Exhibit A. "Preferred Return": The cumulative preferred return to each Limited Partner equal to 10% per annum on his Average Annual Unreturned Invested Capital from either Cash Distributions from Operations or Cash Distributions from Sales or Refinancings. Such cumulative preferred return shall be calculated from the beginning of the first full fiscal quarter after such Limited Partner purchased such Interest. A Limited Partner shall be deemed to have purchased an Interest as of 69 3 the date on which the purchase of such Interest is reflected on the certificate of limited partnership filed with the Secretary of State of Texas. "Property Management Fee": The fee payable for property management services. "Prospectus": The prospectus contained in the Registration Statement, as amended or supplemented. "Registration Statement": The Partnership's Registration Statement on Form S-11 filed with the Securities and Exchange Commission and as amended from time to time. "Repurchase Fund": 25% of MRI's share of Cash Distributions from Operations to be used to repurchase Limited Partner Interests under certain circumstances. "Subordinated Amount": MRI's unpaid Cash Distributions from Operations subordinated to the Limited Partners' 7% noncumulative annual return. THE OFFERING Subject to the conditions set forth in this Prospectus and in accordance with the terms and conditions of the Partnership Agreement, the Partnership offers through the Dealer Manager 300,000 Interests at $100 per Interest, subject to the right of the Dealer Manager to increase the offering by up to an additional 200,000 Interests. Except for investors in certain states that have imposed higher purchase requirements as set forth in the Subscription Agreement, a form of which is included as Exhibit B, the minimum subscription for an Individual Retirement Account or a Keogh Plan is 20 Interests. The minimum subscription for other investors is 50 Interests. The Interests are being offered on a "best efforts" basis through Murray Securities Corporation (the "Dealer Manager"), an Affiliate of the General Partners. As compensation for their services in soliciting and obtaining subscribers for the purchase of the Interests, the Partnership has agreed to pay the Dealer Manager a commission of up to a maximum of 8% of the gross proceeds on all sales made directly by it or by other dealers in accordance with the following schedule:
Amount of Investment -------------------- Commission From To Rate ---------- -------- ---------- $ 2,000 $ 99,999 8% 100,000 249,999 7% 250,000 499,999 6% 500,000 749,999 5% 750,000 999,999 4% 1,000,000 and over 2%
Subscriptions may be combined for the purpose of determining the total commissions payable in the case of subscriptions made by any investor who, subsequent to his initial purchase of Interests, subscribes for the purchase of additional Interests. To be eligible for combination, subscriptions must be identical for all of the following: registration, type of ownership and tax identification or social security number. Any request to combine subscriptions will be subject to verification by the General Partners that all of such subscriptions were made by a single investor. In such an event, the commission payable with respect to the initial purchase of Interests will be computed using the commission schedule set forth above. The commission payable with respect to any subsequent purchase of Interests will equal the commission that would have been payable in accordance with the commission schedule set forth above if all purchases had been made simultaneously, less the commissions that previously have been paid with respect to all prior purchases of Interests by such an investor. The difference between 8% of the gross proceeds from the sale of Interests and the amount payable to the Dealer Manager with respect to such sale will be reimbursed to the Limited Partner as soon as possible after his admission to the Partnership or, at the option of such Limited Partner, as evidenced on his executed subscription agreement in the form of Exhibit B hereto, will be applied to 70
EX-99.B 7 AFTICLE XIII OF AGREEMENT OF LIMITED PARTNERSHIP 1 "Terminated General Partner") shall be purchased by the Partnership for a purchase price determined according to the provisions of Section 12.3 hereof. The last to remain of MRI and Crozier Partners, and the successors thereof, shall not resign or withdraw from the Partnership without the concurrence of a majority in interest of the Limited Partners. If such retirement or resignation is voluntary, the purchase price shall be paid in the form of a non-interest bearing unsecured promissory note with principal payable, if at all, from distributions which the Terminated General Partner otherwise would have received had the Terminated General Partner not resigned or retired. If such termination is involuntary, the Partnership shall have the option to pay the purchase price of such interest to the Terminated General Partner either in cash or by a promissory note of the Partnership, payable to such Terminated General Partner in a face amount equal to said purchase price and containing provisions as would be usual and customary in a commercial promissory note, including provisions for interest, at a rate equal to the prime rate of interest from time to time charged by MBank Dallas, N.A. to its best commercial customers (but in no event to exceed the maximum rate permitted by law to be paid to the Terminated General Partners by the Partnership), such interest to be payable at the time of each installment of principal, which shall be payable as the Terminated General Partner and the Partnership may agree, or if they cannot so agree, then annually over a period of five years from the date of the Terminated General Partner's removal, adjudication of bankruptcy, insolvency or dissolution. No prepayment penalty shall be charged to the Partnership for the early payment of its note. 12.3 The fair market value of the Terminated General Partner's interest to be purchased by the Partnership according to the provisions of Section 12.2 above shall be determined by agreement between the Terminated General Partner and the Partnership. If the Terminated General Partner and the Partnership cannot agree upon the fair market value of such Partnership interest within 90 days after the date of the Terminated General Partner's resignation, removal, adjudication of bankruptcy, insolvency or dissolution, then the Terminated General Partner and the Partnership shall each select an independent appraiser within the next thirty days. If such appraisers fail to agree on the fair market value of the Terminated General Partner's interest within the next 90 days, then the two appraisers shall jointly appoint a third appraiser whose determination shall be final and binding. The Terminated General Partner and the Partnership shall each compensate their respective appraisers, and the compensation of the third appraiser, if necessary, shall be borne equally by each party. If the Partnership or the Terminated General Partner fails to appoint an independent appraiser within the thirty day period provided for in this paragraph, then the fair market value of the Terminated General Partner's interest will be determined in accordance with the then current rules of the American Arbitration Association, and the expense of such arbitration shall be borne equally by the Terminated General Partner and the Partnership. 12.4 Within 90 days after the resignation, removal, adjudication of bankruptcy, insolvency or dissolution of a General Partner (except that a General Partner shall not voluntarily withdraw from the Partnership without complying with the terms of Section 12.2 and without at least 90 days' prior written notice to the other General Partner and the Limited Partners of intention to withdraw, and in such event, within the period from the date of the notice of intention to withdraw to the date of withdrawal specified in the notice of intention), Limited Partners holding a majority of the Interests may elect to continue the business of the Partnership and, if they desire to do so, may elect a successor General Partner or continue the business of the Partnership with the remaining General Partner. ARTICLE XIII TRANSFER OF A PARTNERSHIP INTEREST 13.1 The General Partners may, pursuant to this Article XIII, admit as a substituted Limited Partner any successor in interest to a Limited Partner who is either deceased or under legal disability or who is an assignee of a Limited Partner. 2 13.2 Subject to the provisions of this Article XIII, compliance with the suitability standards imposed by the Partnership, applicable "blue sky" laws and the applicable rules of any other governmental authority, a Limited Partner shall have the right to assign the whole or any portion of his Interests (but not less than 50 Interests unless to an Individual Retirement Account or Keogh Plan and then not less than 20 Interests) by a written assignment, the terms of which are not in contravention of any of the provisions of this Agreement. Any assignment in contravention of any of the provisions of this Article XIII shall be of no force and effect and shall not be binding upon or recognized by the Partnership. (a) Except as provided in (b) below, an assignee of a Limited Partner's Interest who is not admitted as a substituted Limited Partner shall have no right to require any information or account of the Partnership's transactions or to inspect the Partnership's books; he shall only be entitled to receive distributions from the Partnership and the share of income, gain, loss, deduction and credit attributable to the Interests acquired by reason of such assignment from the first day of the month following the month in which the written instrument of assignment, executed by the assignor and in form and substance reasonably satisfactory to the General Partners, and other documents reasonably deemed necessary or appropriate by the General Partners (as, for example, evidence that the assignee meets investor suitability standards) shall have been received by the Partnership. (b) Anything herein to the contrary notwithstanding, both the Partnership and the General Partners shall be entitled to (i) treat the assignor of such Interests as the absolute owner thereof in all respects, and shall incur no liability for allocations of income, gain, loss, deduction or credit or for distributions or for transmittal of reports and notices required to be given to holders of Interests, until the last day of the month in which the Partnership shall have received the written assignment executed by the assignor in form and substance reasonably satisfactory to the General Partners and other documents reasonably deemed necessary or appropriate by the General Partners (including evidence of the assignee's compliance with standards imposed by applicable "blue sky" laws) or (ii) treat the assignee as a substituted Limited Partner in the place of his assignor, should the General Partners deem, in their absolute discretion, that such treatment is in the best interests of the Partnership for any of its purposes or for any of the purposes of this Agreement. 13.3 No assignee shall have the right to become a substituted Limited Partner in place of his assignor unless all of the following conditions are satisfied: (a) The written consent of the General Partners to such substitution shall be obtained, the granting of which shall not be unreasonably withheld; (b) A duly executed written instrument of assignment setting forth the intention of the assignor that the assignee shall become a substituted Limited Partner in his place shall have been filed with the Partnership; (c) The Interests being acquired by the assignee shall consist of at least 20 Interests if such assignee is an Individual Retirement Account or Keogh Plan and at least 50 Interests if such assignee is not an Individual Retirement Account or Keogh Plan and, if the assignor shall retain any Interests, such retention shall consist of at least 20 Interests if such assignor is an Individual Retirement Account or Keogh Plan and at least 50 Interests if such assignor is not an Individual Retirement Account or Keogh Plan; (d) The assignor and assignee shall execute and acknowledge such other instruments as the General Partners reasonably deem necessary or desirable to effect such assignment and admission, including, but not limited to, evidence of the assignee's compliance with standards imposed by any applicable "blue sky" laws, the written acceptance and adoption by the assignee of the provisions of this Agreement and his execution, acknowledgement and delivery to the General A-21 3 Partners of a special power of attorney, the form and content of which are more fully described in Article XXI hereof; and (e) The Partnership shall have received from the assignor or assignee a transfer fee to cover all reasonable expenses of the transfer, not to exceed $500 per transaction, but such transfer fee may be waived by the General Partners, in their discretion. 13.4 Any person admitted to the Partnership as a substituted Limited Partner shall be subject to all of the provisions of this Agreement as if an original party to it. 13.5 The General Partners shall amend the certificate of limited partnership at least once each quarter to add assignees as substituted Limited Partners. 13.6 Upon the death or legal disability of an individual who is a Limited Partner, his personal representative shall have all of the rights of a Limited Partner for the purpose of settling or managing his estate, and such power as the decedent or incompetent possessed to constitute a successor as an assignee of his Interests and to join with such assignee in making application to substitute such assignee as a Limited Partner. However, such personal representative shall not have the right to become a substituted Limited Partner in the place of his predecessor in interest unless the conditions of this Article XIII (other than the requirement that the assignor execute and acknowledge instruments) are first satisfied. 13.7 Upon the adjudication of bankruptcy or insolvency, dissolution or other cessation of existence as a legal entity of a Limited Partner which is not an individual, the authorized representative of such entity shall have all of the rights of a Limited Partner for the purpose of effecting the orderly winding up and disposition of the business of such entity and such power as such entity possessed to constitute a successor as an assignee of its Interests and to join with such assignee in making application to substitute such assignee as a Limited Partner. However, such representative shall not have the right to become a substituted Limited Partner in the place of his predecessor in interest unless the conditions of this Article XIII (other than the requirement that the assignor execute and acknowledge instruments) are first satisfied. 13.8 A General Partner may not assign his or its interest as a General Partner to anyone other than the Partnership as provided in Article XII of this Agreement. 13.9 No assignment of any Interests may be made if the Interests sought to be assigned, when added to the total of all other Interests assigned within the period of 12 consecutive months prior to the proposed date of assignment, would, in the opinion of counsel for the Partnership, result in the termination of the Partnership under Section 708 of the Internal Revenue Code of 1954, as amended. 13.10 Any assignment, sale, exchange or other transfer in contravention of any of the provisions of this Article XIII shall be void and ineffectual, and shall not bind or be recognized by the Partnership. ARTICLE XIV INDEMNIFICATION 14.1 No General Partner and no officer, director, partner or Affiliate of a General Partner shall be liable to the Partnership or any Limited Partner for any loss or damage suffered by the Partnership or any Limited Partner which arises out of any error in judgment or other action or inaction not constituting negligence (gross or ordinary), fraud or breach of fiduciary duty which was taken in good faith, in accordance with the exercise of reasonable business judgment and pursuant to a determination that such course of conduct was in the best interest of the Partnership. The Partnership or its receiver or trustee shall indemnify, save harmless and pay all judgments and claims against the General Partners (and each of them) or their officers, directors, partners and Affiliates from any liability, loss or damage incurred by them or by the Partnership by reason of any act performed or omitted to be A-22 EX-99.C 8 AMEND. NO. 9 TO AGREEMENT OF LIMITED PARTNERSHIP 1 for this purpose include only the price of goods and materials paid to independent third parties and direct costs incurred by the General Partners or their Affiliates in the transaction, including overhead directly attributable to the transaction but excluding general and administrative overhead. Further, all such transactions between the Partnership and a General Partner or an Affiliate of a General Partner must be pursuant to the terms of a written contract between the Partnership and such General Partner or Affiliate which precisely described the services to be rendered or the goods or materials to be provided and the compensation therefor. These provisions are inconsistent with the direct management by the Partnership of its business, operations and affairs and the proposed restructuring wherein the Partnership and Murray Income Properties, Ltd.-84 will employ their own executive and managerial personnel, secretaries, accountants and other staff, rent office space, pay their own utility bills, and in general run their own business, operations and affairs and share expenses. Murray Income Properties, Ltd.-84 is an Affiliate of the Partnership. Consequently, this amendment proposes to create an exception to the scope of Section 10.9 that would allow the Partnership, in conjunction with Murray Income Properties, Ltd.-84, to manage its own business and affairs and conduct its own operations through its own staff out of its own office and to share personnel, office and other general and administrative overhead expenses with Murray Income Properties, Ltd.-84. Further, the amendment allows the salaried personnel to be persons who are Affiliates of the General Partners so long as their compensation and benefits are comparable to the amounts that would be paid for their services if they were not Affiliates of a General Partner. The Amendment. A new paragraph is hereby added to the end of Section 10.9 that reads as follows: "Notwithstanding anything contained in this Section 10.9 or elsewhere in this Agreement, the Partnership may directly conduct, operate and manage its business and affairs. The Partnership may employ, either alone or in association with Murray Income Properties, Ltd.-84, managerial and executive personnel, secretaries, accountants and other support staff in the conduct of the business, operations and affairs of the Partnership. If any person employed by the Partnership is an Affiliate of a General Partner (or if an Affiliate of a General Partner is employed by Murray Income Properties, Ltd.-84 and the Partnership is to reimburse Murray Income Properties, Ltd.-84 for a portion of the compensation and benefits paid to such person), the compensation and benefits paid by the Partnership (or by Murray Income Properties, Ltd.-84 as appropriate) for the services of such person shall be comparable to the amount that would be paid to such person if such person was not an Affiliate of a General Partner. The Partnership may reimburse Murray Income Properties, Ltd.-84 for that proportion of any expenditure made by Murray Income Properties, Ltd.-84 which the General Partners deem to be the fair, just and equitable share that should be borne by the Partnership and, conversely, the Partnership may pay, and seek reimbursement from, Murray Income Properties, Ltd.-84 for that proportion of any expenditure made by the Partnership which the General Partners deem to be the fair, just and equitable share that should be borne by Murray Income Properties, Ltd.-84." Amendment No. 9 Explanation of Amendment. Section 10.17 requires MRI to allocate 25% of its share of Cash Distributions from Operations to a "Repurchase Fund" for the purchase of Interests upon the request of a Limited Partner. MRI is permitted to commingle the amount allocated to the "Repurchase Fund" with other assets of MRI. To the present time, however, MRI has not been paid any Cash Distributions from Operations since the allocation and payment of Cash Distributions to MRI is subordinated to the prior receipt by the Limited Partners of a noncumulative 7% annual return from either Cash Distributions from Operations or Cash Distributions from Sales or Refinancings, or both, on their Average Annual Unreturned Invested Capital. (vi) 2 Since the amendments herein will reduce the allocation of Cash Distributions from Operations to MRI from 8% to 3% and will reallocate 5% of such 8% to Crozier Partners (subordinate, of course, in each instance to the prior receipt by the Limited Partners of a noncumulative 7% annual return from either Cash Distributions from Operations or Cash Distributions from Sales or Refinancings, or both), this amendment will require both MRI and Crozier Partners, in the proportions of 3/8ths for MRI and 5/8ths for Crozier Partners, respectively, to allocate 25% of their respective shares of any such subordinated Cash Distributions from Operations to a "Repurchase Fund" to be established by each of them, respectively. The Amendment. The third and fourth sentences in Section 10.17 are hereby deleted and there is hereby substituted in lieu thereof the following three sentences: "MRI will allocate 25% of its share of Cash Distributions from Operations to a "Repurchase Fund" and Crozier Partners will allocate to a "Repurchase Fund" 25% of its 5% share of Cash Distributions from Operations that is subordinated to the prior receipt by the Limited Partners of a noncumulative 7% annual return from either Cash Distributions from Operations or Cash Distributions from Sales or Refinancings, or both, on their Average Annual Unreturned Invested Capital. MRI's share of Cash Distributions from Operations allocated to the Repurchase Fund will be commingled with other assets of MRI and Crozier Partners' share of Cash Distributions from Operations allocated to the Repurchase Fund will be commingled with other assets of Crozier Partners. Any repurchase of Interests pursuant to this Section 10.15 shall be in the proportions of 3/8ths by MRI and 5/8ths by Crozier Partners, respectively." Amendment No.10 Explanation of Amendment. Section 11.3 provides in respect of voting on any matter on which the Limited Partners are entitled to vote that each Limited Partner will be deemed to be "...the holder of only those Interests shown on Exhibit A, as amended by the last-filed certificate of limited partnership." The Texas Uniform Limited Partnership Act requires the filing of a certificate of limited partnership that lists the name and address of each limited partner of a limited partnership and the amount of the contribution of each limited partner to the partnership. The certificate of limited partnership filed in the office of the Secretary of State is authoritative as to the identity of limited partners. The Texas Uniform Limited Partnership also does not permit an owner of a limited partnership interest to be considered a "limited partner," with the voting and other rights appurtenant to that status, unless the owner is named in the certificate of limited partnership. The Texas Revised Limited Partnership Act that will be adopted by these amendments no longer requires that the identity of the limited partners be disclosed in the certificate of limited partnership filed in the office of the Secretary of State, which filing was often burdensome on limited partnerships and considered by some people to be an invasion of their financial privacy. Instead, the Texas Revised Limited Partnership Act requires the limited partnership to maintain records showing the name and mailing address of each partner and a written statement of the date on which each partner in a limited partnership became a partner. This amendment makes the records of the Partnership authoritative as to the identity of the holders of Interests entitled to vote on any particular matter that is submitted to a vote of the Limited Partners. The Amendment. The Last sentence of Section 11.3 is hereby amended to read as follows: "For purposes of determining the number of votes which he is entitled to cast, a Limited Partner shall be deemed to be the holder of only those Interests which are reflected as owned by him by the records of the Partnership." (vii) EX-99.D 9 MANAGEMENT COMPENSATION 1 MANAGEMENT COMPENSATION The following table sets forth the types and estimates of the amounts of all fees, compensation, income, distributions and other payments that the General Partners and their Affiliates will or may receive in connection with the operations of the Partnership. SUCH FEES, COMPENSATION, INCOME, DISTRIBUTIONS AND OTHER PAYMENTS WERE NOT DETERMINED BY ARM'S- LENGTH BARGAINING. See "Conflicts of Interest."
Entity Receiving Method of Determination Form of Compensation Compensation and Estimated Dollar Amount - -------------------- ---------------- --------------------------- Offering Stage Selling Commissions Murray Securities Up to $8 per Interest sold, Corporation(1) reduced for purchases by one investor of more than 1,000 Interests and for purchases by officers, directors, partners, employees or Affiliates of the General Partners or their Affiliates. Actual amount depends upon number of Interests sold but could be $2,400,000 if 300,000 Interests are sold or $4,000,000 if 500,000 Interests are sold.(2) Dealer Manager Fee Murray Securities Up to $2 per Interest sold, Corporation(1) reduced for purchases by officers, directors, partners, employees or Affiliates of the General Partners or their Affiliates. Actual amount depends upon number of Interests sold but could be $600,000 if 300,000 Interests are sold or $1,000,000 if 500,000 Interests are sold.(2) Reimbursement of MRI or its Affiliates Actual out-of-pocket Organizational Organizational and Offering Offering Expenses(3) Expenses, including accounting, legal, printing, registration fees, etc. Acquisition Stage Reimbursement of Murray Properties Actual costs incurred in Acquisition and Company or its acquiring and holding Holding Costs(4) Affiliates properties prior to their acquisition by the Partnership. Dollar amount is not determinable at this time.(5) Title Insurance Dallas Title Company A portion of the premium paid for Commissions(6) or Texas Title title insurance upon acquisition Company(7) of a property. The premium in Texas is fixed by the State. Dollar amount is not determinable at this time.(5)
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Entity Receiving Method of Determination Form of Compensation Compensation and Estimated Dollar Amount - -------------------- ---------------- --------------------------- Operational Stage Property Management Murray Management For its management services, Fees Corporation(8) an amount not to exceed the lesser of (i) in the case of apartment complexes, 5% of gross revenues, in the case of shopping centers, office buildings and office/showroom centers, 6% of gross revenues (or 3% if leasing performed by third parties) and in the case of shopping centers, office buildings and office/ showroom centers which are leased on a long-term (ten or more years) net (or similar) basis, 1% of gross revenues or (ii) the amount customarily charged in arm's-length transactions by others rendering comparable services in the locality where the property is located, considering the size and type of each such property. In addition, Murray Management Corporation will be reimbursed for the actual costs of on-site personnel engaged in the management, leasing and maintenance of the property of the Partnership. Dollar amount is not determinable at this time.(5) Reimbursement of MRI or its Affiliates Actual cost of goods and Partnership materials used for and by the Operational Partnership and obtained from Expenses(9) an entity not affiliated with a General Partner or an Affiliate of the General Partners and certain administrative services. Dollar amount is not determinable at this time.(5) Casualty Insurance Murray General A portion of the premiums paid Commissions Agency, Inc.(10) for casualty insurance. The cost of the insurance cannot exceed the lower quote for comparable terms and coverage from two independent brokers. Dollar amount is not determinable at this time.(5) Partnership Murray Savings The excess of Murray Savings Administrative Association(11) Association's rate of return Account and on the Partnership funds in Property Operating such accounts over the interest Accounts rate paid to the Partnership on such accounts. Dollar amount is not determinable at this time.(5)
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Entity Receiving Method of Determination Form of Compensation Compensation and Estimated Dollar Amount - -------------------- ---------------- --------------------------- Interest and Other A General Partner or An amount not in excess of the Financing Charges an Affiliate of the amounts that would be charged or Fees General Partners(12) by unrelated lending institutions on comparable loans for the same purpose and in the same locality but never in excess of 2% over the prime rate of MBank Dallas, N.A., Dallas, Texas. Dollar amount is not determinable at this time.(5) Distributive Share of Crozier Partners and Crozier Partners will receive Cash Distributions MRI(14) 2% of all Cash Distributions from Operations(13) from Operations. MRI will receive 8% of all Cash Distributions from Operations, subject to the Limited Partners having received a noncumulative annual cash return equal to 7% of their Average Annual Unreturned Invested Capital, calculated from the Initial Closing Date. Dollar amount is not determinable at this time.(5) Liquidation Stage Real Estate Crozier Partners or An amount not to exceed the Commissions its Affiliates; lesser of (i) 50% of the MRI or its competitive real estate Affiliates(14)(15) commission or (ii) 3% of the sales price of the property, provided that all real estate commissions or similar fees paid to all persons shall not exceed the lesser of the competitive real estate commission or 6% of the sales price of the property. Such commissions will be payable only after Limited Partners have been returned their Original Invested Capital from Cash Distributions from Sales or Refinancings, plus their Preferred Return from either Cash Distributions from Operations or Cash Distributions from Sales or Refinancings. Dollar amount is not determinable at this time.(5) Title Insurance Dallas Title Company A portion of the premiums paid Commissions or Texas Title for title insurance upon sale, Company(7) financing or refinancing of a property if such title insurance is provided by Dallas Title Company or Texas Title Company. The premium in Texas is fixed by the State. Dollar amount is not determinable at this time.(5)
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Entity Receiving Method of Determination Form of Compensation Compensation and Estimated Dollar Amount - -------------------- ---------------- --------------------------- Distributive Share Crozier Partners Crozier Partners will receive of Cash and MRI(14) 1% of all Cash Distributions Distributions from from Sales or Refinancings. Sales or The remaining 99% shall be Refinancings(13)(16) allocated (a) first, to the Limited Partners until they have been returned their Original Invested Capital from Cash Distributions from Sales or Refinancings, plus their Preferred Return from either Cash Distributions from Operations or Cash Distributions from Sales or Refinancings, (b) then, to MRI in an amount equal to any unpaid Cash Distributions from Operations subordinated to the Limited Partners' 7% noncumulative annual return and (c) thereafter, the remainder shall be allocated 85% to the Limited Partners and 15% to the General Partners. See "Income and Losses and Cash Distributions." Dollar amount is not determinable at this time.(5)
- -------------------- (1) The Dealer Manager may authorize certain other broker-dealers who are members of the National Association of Securities Dealers, Inc., to sell Interests on a "best efforts" basis. In the event of sales by such other broker-dealers, the Dealer Manager has advised the Partnership that the Dealer Manager will reallow to such other broker- dealers all or a portion of the selling commissions with respect to such sales. Such other broker-dealers, together with the Dealer Manager, may also be reimbursed up to an additional 1/2% of gross offering proceeds in connection with their due diligence activities. (2) See "The Offering" for a discussion of the rebate of selling commissions payable with respect to sales to one purchaser of more than 1,000 Interests and the rebate of selling commissions and the dealer manager fee with respect to sales to officers, directors, partners, employees or Affiliates of the General Partners or their Affiliates. (3) For nonleveraged programs such as the Partnership, the NASAA Guidelines require that, at a minimum, 82% of the Limited Partners' capital contributions be committed to investment in properties. Investment in properties, as defined under the NASAA Guidelines, is the amount of capital contributions actually paid or allocated to the purchase, development, construction or improvement of properties acquired by the Partnership (including the purchase of properties, working capital reserves not in excess of 5% of gross offering proceeds and other cash payments such as interest and taxes but excluding front- end fees, defined as fees and expenses paid by any party for any services rendered during the Partnership's organizational or acquisition phase including organization and offering expenses, acquisition fees, acquisition expenses and any other similar fees, however designated). The remaining capital contributions not invested in properties are available for the payment of Organizational and Offering Expenses, selling commissions, acquisition fees and acquisition expenses. Acquisition fees for this purpose shall be the total of all fees and commissions paid by any party in connection with the purchase or development of property by the Partnership, including real estate commissions, acquisition fees, selection fees, development fees, nonrecurring management fees, or any fees of a similar nature, 13 5 however designated, but excluding a development fee paid to a person not affiliated with the General Partners or their Affiliates in connection with actual development of property after acquisition by the Partnership. Acquisition expenses for this purpose include, but are not limited to, legal fees and expenses, travel and communication expenses, costs of appraisals, loan commitment and loan fees ("points"), nonrefundable option payments on properties not acquired, accounting fees and expenses, title insurance, and miscellaneous expenses related to selection and acquisition of properties, whether or not acquired. The Partnership will acquire its properties on an unleveraged basis. In addition, the Partnership will not pay any acquisition fees to the General Partners or their Affiliates and the total of acquisition fees to unaffiliated parties and acquisition expenses will not exceed 1% of the Limited Partners' capital contributions. Based on those assumptions and assuming the sale of 300,000 Interests with Organizational and Offering Expenses, selling commissions and the dealer manager fee equal to 13.0% of the Limited Partners' capital contributions, the amount that would be invested in properties would be equal to 86.0% of such contributions. The amount invested in Partnership properties will comply with the NASAA Guidelines limitations set forth above. (4) An Affiliate of the General Partners may purchase property in its own name and temporarily hold title thereto for the purpose of facilitating the acquisition of such property or any other purpose related to the business of the Partnership. In such event, such Affiliate may be reimbursed for its costs incurred in acquiring and holding such real property prior to the acquisition of such property by the Partnership. Such costs will consist of the price paid by such Affiliate for such property, plus the amount of any net cash flow deficit or minus the amount of any net cash flow surplus incurred by such Affiliate during its ownership and operation of such property. (5) Any prediction of such dollar amount would necessarily involve assumptions of future events that cannot be determined at this time. (6) To the extent a seller of property to the Partnership sets the sales price at a level sufficient to cover the premium for title insurance, the Partnership, if effect, will pay the premium in the purchase price of the property. (7) The Partnership has entered into nonexclusive contracts with Dallas Title Company and Texas Title Company, Affiliates of the General Partners, pursuant to which each has agreed that, upon the request of the Partnership, it will handle the closing of purchases, sales, financings or refinancings by the Partnership of properties situated in Texas and will cause to be issued title insurance policies on such properties. Either of such title insurance agencies may receive a portion of the commission on premiums paid for title insurance by the Partnership or by a seller of real property to the Partnership. In Texas, title insurance premiums and the policy forms are prescribed by the State. Each contract provides that if such title insurance agency does not derive, in any calendar year, at least 75% if its gross income from persons or entities not affiliated with a General Partner, that agency's contract will terminate upon the earlier of 60 days after the end of the calendar year or as soon as the Partnership can arrange for another person or entity to perform such services. Each contract also provides that it may be terminated by either party, without penalty, on 60 days' prior written notice and that such title insurance agency shall not render services or receive title insurance commissions in connection with the reinvestment of any proceeds from a sale or refinancing of Partnership properties. (8) The Partnership has entered into an agreement with Murray Management Corporation, an Affiliate of the General Partners, pursuant to which Murray Management Corporation will be responsible for the management of each property and the collection of its rental income, for which services it will receive a monthly Property Management Fee. This Property Management Fee is payable for professional supervisory management services undertaken in connection with the operation of the Partnership's properties. In the case of apartment complexes, such fee shall include all leasing and releasing fees and bonuses, and leasing-related services. In the case of shopping centers, office buildings and office/showroom centers, where Murray Management Corporation is not responsible for leasing, re-leasing and leasing- related services with respect to 14 6 the property, its fee shall not exceed 3% of gross revenues. Notwithstanding the foregoing, a separate competitive fee may be paid for the one-time initial lease-up of a newly constructed property if such service is not included in the purchase price of the property, provided that such fee shall not exceed the lesser of cost or 90% of the competitive price that would be charged by unaffiliated persons rendering similar services in the same or comparable geographic location. In the case of shopping centers, office buildings and office/ showroom centers which are leased on a long-term net (or similar) basis, a one-time initial leasing fee of 3% of gross revenues may be taken on each lease payable over the first five full years of the original term of the lease. Murray Management Corporation shall pay from the Property Management Fee, and not as an expense of the Partnership, the expenses of rendering supervisory property management services; provided, however, that the wages and expenses of on-site personnel engaged in the management, leasing and maintenance of the Partnership's properties and personnel, supplies, repairs, furniture and equipment costs and other costs directly attributable to the Partnership's property operations shall be deemed to be property operating expenses and as such shall be borne by the Partnership by reimbursement to Murray Management Corporation. Wages and other actual expenses of personnel may be allocated between properties of the Partnership and other properties managed by Murray Management Corporation if such properties are owned by (i) a public or private program sponsored by the General Partners or their Affiliates or any joint venture in which a General Partner or an Affiliate is a party or (ii) an unaffiliated third party. Murray Management Corporation has the right to subcontract to third parties a portion or all of the management services to be rendered by it with respect to any particular property, provided that (a) Murray Management Corporation shall at all times remain responsible for the management of such property, (b) the Partnership shall not be required to pay for duplicative services and (c) the aggregate cost to the Partnership will not exceed the amount which would be customarily charged in arm's-length transactions by others rendering similar services in the locality where the property is located, considering the size and type of each such property, if only one entity had provided all such services. The agreement between the Partnership and Murray Management Corporation may be terminated by either party, without penalty, on 60 days' prior written notice. (9) Except as set forth below, reimbursements to a General Partner or an Affiliate of a General Partner shall not be allowed. A General Partner or an Affiliate of a General Partner may be reimbursed for: (a) the actual cost of goods and materials used for or by the Partnership and obtained from an entity not affiliated with a General Partner or an Affiliate of a General Partner; and (b) the lesser of the cost or 90% of the competitive price charged by unaffiliated parties for (i) salaries and related salary expenses for services that could be performed directly for the Partnership by independent parties, including legal, accounting, transfer agent, data processing, duplicating and administration of investor accounts and (ii) Partnership reports and communications to investors. All such transactions shall be pursuant to the terms of a written contract between the Partnership and such General Partner or Affiliate which precisely describes the services to be rendered or the goods or materials to be provided and the compensation therefor. No reimbursement shall be permitted for services for which the General Partners or Affiliates receive a separate fee or for (i) salaries, related salary expenses, traveling expenses, and other administrative items which are incurred by any Controlling Person or which are not directly attributable to the rendering of reimbursable services to the Partnership and (ii) any indirect expenses incurred in performing services for the Partnership, such as rent or depreciation, utilities, capital equipment, and other administrative items. "Controlling Person" for this purpose shall mean any person, regardless of title, who performs executive or senior management functions for the General Partners or Affiliates similar to those of directors, executive management and senior management, or any person who either holds 5% or more equity interest in the General Partners or Affiliates or has the power to direct or cause the direction of the General Partners or Affiliates, whether through the ownership of voting securities, by contract, or otherwise, or, in the absence of a specific role or title, any person having the power to direct or cause the direction of the management level employees and policies of the General Partners or 15 7 Affiliates. It is not intended that every person who carries a title such as vice president, senior vice president, secretary or treasurer be included in the definition of Controlling Person. In no event shall any amount charged to the Partnership as a reimbursable expense by the General Partners exceed the lesser of the actual cost of such services or 90% of the amount which the Partnership would be required to pay to independent parties for comparable services. "Costs" for purposes of this paragraph shall include the price of goods and materials paid to independent third parties, and direct costs incurred by the General Partners or their Affiliates in the transactions including overhead directly attributable to the transaction but excluding general or administrative overhead. Notwithstanding the foregoing, reimbursements are also allowable for certain organizational and offering expenses and for the actual costs of on-site personnel engaged in the management, leasing and maintenance of the property of the Partnership as provided in note (8) above. (10) The Partnership has entered into a nonexclusive contract with Murray Insurance Agency, Inc., an Affiliate of the General Partners, pursuant to which, upon the request of the Partnership, such agency will endeavor to obtain fire, casualty, or similar insurance on the properties of the Partnership. Any commission on any casualty insurance brokered by it will not exceed the amount customarily received by it from the brokerage of comparable policies for unaffiliated persons. Before such agency brokers any fire, casualty or similar insurance on any property of the Partnership, quotes must have been received from two unaffiliated insurance brokers for coverage and terms comparable to that proposed to be provided by such agency. No insurance will be brokered by the Partnership through such agency unless the cost of such insurance will be no greater than the lower quote of the two unaffiliated insurance agencies. The contract with Murray Insurance Agency, Inc., provides that if such agency does not derive at least 75% of its gross income from business done with persons or entities not affiliated with a General Partner, that agency's contract will terminate upon the earlier of 60 days after the end of the calendar year or as soon as the Partnership can arrange for another person or entity to perform such services. The contract also provides that it may be terminated by either party, without penalty, on 60 days' prior written notice. Murray General Agency, Inc., an Affiliate of the General Partners, will receive commissions on insurance premiums paid through Murray Insurance Agency, Inc., by virtue of contractual arrangements between it and Murray Insurance Agency, Inc. (11) The General Partners may open and maintain an interest-bearing Partnership administrative account and property operating accounts at Murray Savings Association, a stock association organized under the Texas Savings and Loan Act. Murray Savings Association is a wholly- owned subsidiary of Murray Financial Corporation, an Affiliate of the General Partners. Such accounts are insured up to a maximum of $100,000 in the aggregate by the Federal Savings and Loan Insurance Corporation ("FSLIC"). The General Partners will not permit the balance of such accounts to exceed the maximum amount insured by the FSLIC. Murray Savings Association may receive indirect compensation to the extent that Murray Savings Association's rate of return on the Partnership funds in such accounts exceeds the interest rate paid to the Partnership on such accounts. The Partnership will receive an interest rate competitive with similar accounts at unrelated institutions and will not be charged any servicing fees on the accounts. (12) It is not contemplated that a General Partner or any Affiliate of a General Partner will make a loan to the Partnership, but the Partnership Agreement permits a General Partner or any Affiliate of a General Partner to make a loan to the Partnership if the interest and other financing charges or fees on any such loan are not in excess of the amounts which would be charged by unaffiliated lending institutions on comparable loans for the same purpose in the same locality but not in excess of 2% over the prime rate of MBank Dallas, N.A. Any financing charges or fees on any loan to the Partnership by a General Partner or an Affiliate of a General Partner will be only those incurred by such General Partner or Affiliate in connection with the making of such loan. Neither a General Partner nor an Affiliate of a General Partner will make a profit from the Partnership's payment of financing charges or fees. No property of the Partnership shall secure 16 8 any loan made to the Partnership by a General Partner or an Affiliate of a General Partner if, at the inception of the loan, any payment of principal or interest is to be made more than two years after the date of the loan. No loans, secured or unsecured, may be made to the Partnership by a General Partner or an Affiliate of a General Partner if at the inception of the loan any payment of principal or interest is to be made more than three years after the date of the loan. (13) For a discussion of Cash Distributions from Operations and Cash Distributions from Sales or Refinancings, see "Income and Losses and Cash Distributions." (14) Crozier Partners was formed as of December 19, 1985, under The Texas Uniform Limited Partnership Act with Jack E. Crozier as the general partner and Fulton Murray, individually, Fulton Murray in his capacity as Trustee of the Beverly Murray Wilson Trust and Fulton Murray and RepublicBank Dallas, N.A., in their capacities as Trustees of a trust created under the Will of Owen M. Murray, Deceased, as the limited partners. (15) Real estate commissions are payable to the General Partners or their Affiliates only if such General Partner or Affiliate provides a substantial amount of the services in the sales effort. All real estate commissions payable to the General Partners or their Affiliates for services in connection with sales of properties of the Partnership shall be cumulative but shall be paid only after the Limited Partners have been returned their Original Invested Capital from Cash Distributions from Sales or Refinancings, plus their Preferred Return. If an unaffiliated broker participates in the sale of a Partnership property, the subordination requirement will apply only to the commission, if any, earned by the General Partners or their Affiliates. The total of all real estate commissions payable to all parties in connection with the sale of a Partnership property shall not exceed the lesser of a competitive real estate commission wihch is reasonable, customary and competitive in light of the size, type and location of the property or 6% of the sales price of the property. Real estate commissions payable to the General Partners or their Affiliates will be allocated one-third to Crozier Partners or its Affiliates and two-thirds to MRI or its Affiliates. (16) Cash Distributions from Sales or Refinancings payable to the General Partners (other than the 1% of Cash Distributions from Sales or Refinancings payable to Crozier Partners) will be allocated one-third to Crozier Partners and two-thirds to MRI. CONFLICTS OF INTEREST The General Partners are subject to various conflicts of interest because of other activities and entities in which they have a direct or indirect financial interest. This Prospectus attempts to highlight those conflicts of interest but a potential investor should be aware that because of future activities or circumstances not now foreseen, the listing herein may not be complete. The General Partners, having the exclusive authority to manage the operations and affairs of the Partnership and to make all decisions regarding the business of the Partnership, will seek to resolve any matter involving a conflict of interest in a manner which, in their best judgment, is fair and reasonable to the Partnership. Murray Realty Investors IX, Inc., a General Partner, is a wholly-owned subsidiary of Murray Realty Investors, Inc., which is a wholly-owned subsidiary of Murray Properties Company. Murray Properties Company is a wholly-owned subsidiary of Murray Financial Corporation. The general partner of Crozier Partners IX, Ltd., a General Partner, is Jack E. Crozier, and the limited partners are Fulton Murray, individually, Fulton Murray in his capacity as Trustee of the Beverly Murray Wilson Trust and Fulton Murray and RepublicBank Dallas, N.A. in their capacities as Trustees of a trust created under the Will of Owen M. Murray, Deceased. Jack E. Crozier owns approximately 11% of the outstanding stock and is the President of Murray Financial Corporation and is an officer and director of substantially all Affiliates of Murray Financial Corporation. Fulton Murray, members of his family and trusts for their benefit own the remaining outstanding stock of Murray Financial Corporation. Mr. Murray is the Chairman of the Board and Chief Executive Officer and a director of Murray Financial Corporation and is an officer and director of substantially all Affiliates of Murray Financial Corporation. Murray Financial Corporation is engaged, directly or through subsidiaries, in various real estate 17
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