-----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, TvTEsXOpQV/2LcT0wcRfiORlJ7JmXUCNrv7YSWO5hKg5lDB37Jr9IVxwgN+bsDOR upEsZC0+QAa3MP2iQ6J1/A== 0000950134-98-002326.txt : 19980325 0000950134-98-002326.hdr.sgml : 19980325 ACCESSION NUMBER: 0000950134-98-002326 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980324 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: SEC FILE NUMBER: 000-17183 FILM NUMBER: 98571698 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, 1997 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 (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, 1997 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) (972) 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 4 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 24 Item 13. Certain Relationships and Related Transactions 25 PART IV Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 26 Signatures 32 Index to Exhibits 33
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, 1997, Tower Place was 100% 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, 1996, Tower Place was 100% 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, 1997 - -------- ----------- ----------------- 1 248,700 96% 2 40,800 97% 3 65,800 96%
1 4 Paddock Place Shopping Center. At December 31, 1997, Paddock Place was 100% 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, 1996, 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, 1997 - -------- ----------- ----------------- 1 178,491 96% 2 108,000 95% 3 15,753 100%
Germantown Collection Shopping Center. At December 31, 1997, Germantown was 100% 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 expired on December 31, 1997. At December 31, 1996, Germantown was 95% 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, 1997 - -------- ----------- ----------------- 1 88,500 100% 2 84,000 90% 3 38,000 100%
1202 Industrial Place. At December 31, 1997 and December 31, 1996, 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 Care Management Enterprises, Inc. lease expires on November 30, 2000. Pierce Family Partnership leases 69% of the total rentable space of the property and Care Management Enterprises, 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, 1997 - -------- ----------- ----------------- 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. 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 2 5 of Amendment No. 1 to Registrant's Form S-11 Registration Statement (File No. 33-2394) attached hereto as Exhibit 99a. 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, 1997, Tower Place was 100% leased at an average annual lease rate of $13.69. Lease rates range from $8.00 to $16.50 per square foot.
The Partnership also owns the properties described below: Nashville, Tennessee Paddock Place Shopping Center A 68,629 square foot shopping center situated on 4.66 acres. At December 31, 1997, Paddock Place was 100% leased at an average annual lease rate of $13.65. Lease rates range from $9.50 to $18.50 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, 1997, Germantown was 100% leased at an average annual lease rate of $15.48. Lease rates range from $13.00 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, 1997, 1202 Industrial Place was 100% leased at an average annual lease rate of $2.53. Lease rates range from $2.25 to $3.15 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 99b. As of December 31, 1997, there were 2,242 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, 1993 through December 31, 1997. 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, 1997, no funds were available for this purpose. ITEM 6. SELECTED FINANCIAL DATA.
Year Ended December 31, -------------------------------------------------------------------------- 1997 1996 1995 1994 1993 ----------- ---------- ----------- ---------- ---------- Income $ 2,927,389 $2,947,806 $ 2,794,261 $2,743,911 $2,638,865 Net Earnings 1,108,782 1,160,228 1,121,097 1,064,413 861,425 Earnings per Limited Partnership Interest * 3.40 3.56 3.44 3.26 2.63 Distributions per Limited Partnership Interest * 5.94 6.00 6.00 5.63 5.00 Total Assets at Year End $19,396,894 $20,161,224 $20,934,041 $21,767,471 $22,519,206
* 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. 4 7 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Liquidity and Capital Resources As of December 31, 1997, the Partnership had cash, cash equivalents and certificates of deposit of $1,786,256, which included $1,761,748 invested in certificates of deposit and other money market instruments. Such amounts represent cash generated from operations and working capital reserves. The decrease in cash and cash equivalents from December 31, 1996 to December 31, 1997 is primarily due to a decrease 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, 1997 and December 31, 1996, there were $185,338 and $211,854, 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. The increase in accounts receivable of $22,371 (exclusive of bad debts and recoveries) from December 31, 1996 to December 31, 1997 is primarily due to increases in tenant receivables for rent collected (but not yet remitted by the property management companies) at each of the properties. Other assets consist primarily of deferred leasing costs. The increase in other assets of $74,868 is primarily due to an increase (exclusive of amortization) in leasing commissions. During the year ended December 31, 1997, the Partnership made Cash Distributions from Operations totaling $1,906,582. Subsequent to December 31, 1997, the Partnership made a Cash Distribution from Operations of $481,664, which related to the three months ended December 31, 1997. 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. 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. Although two of the Partnership's three shopping centers experienced a decline in average occupancy during 1997 compared to 1996, overall market conditions have remained healthy in the cities in which the Partnership owns retail properties. The average annual rental rate achieved in 1997 increased at all three shopping centers compared to the previous year. There has been almost no new retail development in the submarkets in which Germantown and Paddock Place are located. This is due primarily to restricted zoning and a lack of available land in these areas. As in many markets across the country, there has been a proliferation of grocery anchored shopping centers in Memphis and Nashville. To date this new development is in areas which are not in close proximity to the Partnership's properties. As older shopping centers are refurbished or other types of properties are converted to retail use, the Partnership's shopping centers could potentially face new competition in the future. Charlotte has also remained a healthy retail market, with occupancy rates stable in the face of supermarket driven development. This development is expected to continue with the construction of a 65 mile loop around the city, spurring residential development in the suburbs which in turn provides the impetus for the development of new shopping centers. This new development could eventually have a negative impact on rental rates and occupancy at Tower Place. All three of these cities have seen a slowdown in the construction of power centers with several large anchors, which is primarily due to the financial weakness among some big box discount retailers. The Dallas-Fort Worth industrial market has remained healthy through 1997, although it has added space faster than it has been absorbed. Published reports projected that approximately 22 million square feet would be added to the Dallas-Fort Worth industrial market in 1997 compared to 13 million in 1996. This is in a total market of approximately 400 million 5 8 square feet. This new development could eventually have a negative impact on occupancy and rental rates. Results of Operations Rental income decreased $25,682 (1%) for the year ended December 31, 1997 as compared to the year ended December 31, 1996. Rental income increased $136,010 (5%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995. The following information details the rental income generated, bad debt expense incurred, and average occupancy for the years ended December 31, 1997, 1996, and 1995. For the years ended December 31, -------------------------------------------------------- 1997 1996 1995 ---------- ----------- ----------- Paddock Place Shopping Center Rental income $1,166,486 $1,180,740 $1,059,154 Bad debt expense (recovery) $ (7,200) $ (4,549) $ (5,845) Average occupancy 94% 97% 95% Germantown Collection Shopping Center Rental income $1,008,103 $1,052,117 $1,044,327 Bad debt expense $ 686 $ -0- $ -0- Average occupancy 94% 99% 100% 1202 Industrial Place Rental income $515,921 $ 483,335 $ 476,701 Bad debt expense $ -0- $ -0- $ -0- Average occupancy 100% 100% 100%
Paddock Place Shopping Center in Nashville, Tennessee had an increase in base rents due to higher rental rates and also had increases in percentage rent received from J. Alexander's Restaurant and tenant reimbursements for common area maintenance costs for the year ended December 31, 1997. However, the 1996 same period income included a one time $40,000 fee as consideration for the termination of the Waldenbooks lease. The increase in rent income components described above in the amount of $25,746 less the one time fee of $40,000 received in 1996 resulted in a net decrease of $14,254 (1%) for the period ended December 31, 1997 as compared to the same period in 1996. Rental income at Paddock Place increased $121,586 (11%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995, primarily due to an increase in rental rates, an increase in percentage rent received from J. Alexander's Restaurant and the receipt of a $40,000 fee as consideration for the termination of the Waldenbooks' lease. Paddock Place averaged 94% occupancy for the year ended December 31, 1997, a three percent decrease from the previous year. Three new leases totalling 8,011 square feet were signed during the year. Two of these tenants, totalling 3,946 square feet, took occupancy in 1997 and one tenant took occupancy of 4,065 square feet in 1998. Three tenants who occupy 7,070 square feet renewed their leases for five years. One tenant who occupies 1,304 square feet renewed its lease for thee years. One tenant who occupied 3,708 square feet reduced the size of its space to 1,870 square feet. The remaining 1,838 square feet was leased by an existing tenant who occupied 5,222 square feet. This new lease, totalling 7,060 square feet, was also extended an additional two years and will now expire on August 31, 2001. As of December 31, 1997, Paddock Place was 94% occupied. Rental income at Germantown Collection in Germantown (Memphis), Tennessee decreased $44,014 (4%) for the year ended December 31, 1997 due to a decrease in occupancy and a decrease in percentage rent received from Chili's Restaurant, offset by an increase in tenant reimbursements for common area maintenance costs. Rental income at Germantown increased $7,790 (1%) for the year 6 9 ended December 31, 1996 as compared to the year ended December 31, 1995 due to an increase in rental rates and an increase in tenant reimbursements for common area maintenance costs. Occupancy at Germantown averaged 94% for the year ended December 31, 1997, a five percent decrease from the previous year. The primary reason for the decline in average occupancy was that a tenant who occupied 2,691 square feet vacated its space during the fourth quarter of 1996 and the space remained vacant throughout 1997. This space was leased in December and the tenant took occupancy in February, 1998. One new lease for 642 square feet was signed and the tenant took occupancy in February, 1997. One tenant who occupied 8,678 square feet vacated its space when its lease expired on December 31, 1997. A new tenant who signed a lease in January, 1997 for 3,208 square feet also leased 1,510 square feet of the 8,678 that was vacated at year-end. This tenant will take occupancy of the additional 1,510 square feet during the first quarter of 1998. Two tenants who occupy 5,580 square feet renewed their leases for three years and five tenants who occupy 11,413 square feet renewed their leases for five years. As of December 31, 1997, Germantown was 94% occupied. Rental income at 1202 Industrial Place in Grand Prairie (Dallas), Texas increased $32,586 (7%) for the year ended December 31, 1997 as compared to the year ended December 31, 1996 primarily due to higher rental rates and an increase in tenant reimbursements for common area maintenance costs and real estate taxes. Rental income at 1202 Industrial Place increased $6,634 (1%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995 primarily due to an increase in tenant reimbursements for insurance costs. Occupancy at 1202 Industrial Place averaged 100% for the year ended December 31, 1997, unchanged from the previous year. As of December 31, 1997, 1202 Industrial Place was 100% occupied. "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 Festival Shopping Center in Pineville (Charlotte), N.C. increased $36,633 (2%) for the year ended December 31, 1997 as compared to the year ended December 31, 1996 primarily due to an increase in occupancy, an increase in rental rates and an increase in tenant reimbursements for common area maintenance costs, offset by a decrease in percentage rent received. Tower Places's total operating expenses increased, with increases in parking lot maintenance costs, leasing and promotion costs and property management fees being offset by decreases in utilities and landscaping costs. Rental income at Tower Place increased $118,175 (7%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995 primarily due to an increase in rental rates along with an increase in percentage rent received from J&K Cafeterias and an increase in tenant reimbursements for common area maintenance costs, offset by lower tenant reimbursements for real estate taxes and insurance costs. Tower Place's total operating expenses increased, with increases in repair and maintenance costs, property management fees, and landscaping costs offset by decreases in leasing and promotion costs, insurance and real estate taxes. The following information details the rental income generated, bad debt expense incurred, and average occupancy for the years ended December 31, 1997, 1996, and 1995:
For the years ended December 31, --------------------------------------------------- 1997 1996 1995 ---------- ---------- ---------- Tower Place Festival Shopping Center Rental income $1,772,710 $1,736,077 $1,617,902 Bad debt expense (recovery) $ 2,997 $ (4,305) $ (5,521) Average occupancy 98% 97% 96%
The Partnership's share of income from the joint venture increased $3,334 (3%) for the year ended December 31, 1997 as compared to the year ended December 31, 1996 for the reasons stated above. The Partnership's share of income from the joint venture increased $16,840 (15%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995 for the reasons stated above. 7 10 Tower Place averaged 98% occupancy for the year ended December 31, 1997, a one percent increase over the previous year. Two tenants who occupied 3,360 square feet vacated their space upon expiration of their leases. Both of these spaces were subsequently leased to new tenants who took occupancy during 1997. Four tenants totalling 5,864 square feet vacated their spaces prior to the expiration of their leases. One of these tenants, who had occupied 1,600 square feet, continued to pay rent under the lease. This space was subsequently subleased to a new tenant and this lease expires on April 30, 1998. The other three spaces which were vacated have all been re-leased with two of the new tenants taking occupancy in 1997 and one during the first quarter of 1998. Two tenants who occupy 3,000 square feet renewed their leases for five years and three tenants who occupy 5,180 square feet renewed their leases for three years. As of December 31, 1997, Tower Place 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 $16,362 (2%) for the year ended December 31, 1997 as compared to the year ended December 31, 1996. The increase is due to higher real estate taxes and leasing and promotion costs. Property operating expenses at Germantown decreased $5,949 (2%) with decreases in parking lot repairs and maintenance and landscaping costs being offset by increases in leasing and promotion costs and utility costs. Property operating expenses at Paddock Place increased $4,322 (2%) with increases in real estate taxes and parking lot repair and maintenance costs being offset by decreases in utilities and snow removal costs. Property operating expenses at 1202 Industrial Place increased $17,989 (11%) primarily due to increases in parking lot repair and maintenance costs and real estate taxes offset by decreases in insurance costs and general building repair and maintenance costs. Total property operating expenses increased $75,745 (11%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995. The increase is due to higher repair and maintenance costs, utilities costs, snow removal costs, landscaping costs, property management fees, insurance costs, and real estate taxes. Property operating expenses at Germantown increased $19,409 (7%) primarily because of increases in parking lot repair and maintenance costs, landscaping costs and utilities. Property operating expenses at Paddock Place increased $20,827 (8%) primarily because of increases in utilities, snow removal costs and property management fees. Property operating expenses at 1202 Industrial Place increased $35,509 (27%) primarily because of increases in utilities, parking lot repair and maintenance costs, insurance and real estate taxes. 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 increased $26,364 (8%) for the year ended December 31, 1997 as compared to the year ended December 31, 1996 primarily due to increases in telephone, salaries and benefits, seminars and education costs, travel costs and legal and accounting fees. General and administrative expenses increased $45,622 (17%) for the year ended December 31, 1996 as compared to the year ended December 31, 1995. The Partnership became subject to electronic filing requirements with the Securities and Exchange Commission during the year ended December 31, 1995. Costs associated with filing the 1995 Form 10-K and quarterly Form 10-Q's for 1996 caused the Partnership's compliance costs to increase. Also, legal costs increased because of due diligence performed on and negotiations held with limited partners who wanted to acquire the Partnership's investor list in order to solicit the partners to purchase their interests. The Partnership also incurred additional printing and postage costs to respond to all limited partners regarding these solicitations. The effect of inflation on the results of operations for the years ended December 31, 1997, 1996 and 1995 was not significant. 8 11 Over the past several years the real estate markets have gotten stronger and the properties' performance has improved. This improvement has resulted in an increase in the number of potential buyers as well as the number of parties interested in purchasing limited partnership units on the secondary market. Some of these groups have solicited the Partnership's limited partners directly with offers to buy their units. Barring any unforseen circumstances, the General Partners believe that the markets will continue to improve. Also, management will continue to pursue a strategy of carefully selecting tenants, achieving the highest rents possible, and maintaining the properties in first class condition. This strategy should result in the properties being well positioned when the decision to sell is made. Management is constantly analyzing market conditions, comparable sales, and economic trends in order to evaluate their impact on the value of the Partnership's properties, and intends to sell the portfolio at the time when such a sale will maximize the properties' values and otherwise be in the best interest of the Limited Partners. 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, 1997 and 1996 12 Statements of Earnings - Years ended December 31, 1997, 1996, and 1995 13 Statements of Changes in Partners' Equity - Years ended 14 December 31, 1997, 1996, and 1995 Statements of Cash Flows - Years ended December 31, 1997, 1996, and 1995 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, 1997 and 1996, 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, 1997. 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, 1997 and 1996, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 1996, in conformity with generally accepted accounting principles. KPMG Peat Marwick LLP Dallas, Texas February 27, 1998 11 14 MURRAY INCOME PROPERTIES II, LTD. (A LIMITED PARTNERSHIP) BALANCE SHEETS DECEMBER 31, 1997 AND 1996
1997 1996 ----------- ----------- ASSETS Investment properties, at cost (note 3): Land $ 5,789,291 $ 5,789,291 Buildings and improvements 17,495,190 17,463,605 ----------- ----------- 23,284,481 23,252,896 Less accumulated depreciation 7,716,316 6,991,905 ----------- ----------- Net investment properties 15,568,165 16,260,991 Investment in joint venture, at equity (note 4) 1,391,212 1,468,518 Cash and cash equivalents 890,256 922,330 Certificates of deposit 896,000 895,000 Accounts and notes receivable, net of allowance of $1,447 and $9,485 in 1997 and 1996, respectively (note 1) 407,801 378,916 Other assets, at cost, net of accumulated amortization of $480,477 and $413,600 in 1997 and 1996, respectively 243,460 235,469 ----------- ----------- $19,396,894 $20,161,224 =========== =========== LIABILITIES AND PARTNERS' EQUITY Accounts payable $ 6,401 $ 5,536 Accrued property taxes 291,570 271,692 Security deposits and other liabilities 108,423 90,843 Deferred income (note 3) 30,827 35,680 ----------- ----------- Total liabilities 437,221 403,751 ----------- ----------- Partners' equity: General Partners: Capital contributions 1,000 1,000 Cumulative net earnings 603,815 565,715 Cumulative cash distributions (607,180) (569,048) ----------- ----------- (2,365) (2,333) ----------- ----------- Limited Partners (314,687 Interests): Capital contributions, net of offering costs 27,029,395 27,029,395 Cumulative net earnings 11,894,201 10,823,519 Cumulative cash distributions (19,961,558) (18,093,108) ----------- ----------- 18,962,038 19,759,806 ----------- ----------- Total partners' equity 18,959,673 19,757,473 ----------- ----------- $19,396,894 $20,161,224 =========== ===========
See accompanying notes to financial statements. 12 15 MURRAY INCOME PROPERTIES II, LTD. (A LIMITED PARTNERSHIP) STATEMENTS OF EARNINGS
Years Ended December 31 ------------------------------------------------ 1997 1996 1995 ---------- --------- ---------- Income: Rental (notes 3 and 7) $2,690,510 $2,716,192 $2,580,182 Interest 101,485 99,554 98,859 Equity in earnings of joint venture (note 4) 135,394 132,060 115,220 ---------- ---------- ---------- 2,927,389 2,947,806 2,794,261 ---------- ---------- ---------- Expenses: Depreciation 724,411 734,143 742,392 Property operating (note 5) 752,939 736,577 660,832 General and administrative 347,771 321,407 275,785 Bad debts (recoveries), net (6,514) (4,549) (5,845) ---------- ---------- ---------- 1,818,607 1,787,578 1,673,164 ---------- ---------- ---------- Net earnings $1,108,782 $1,160,228 $1,121,097 ========== ========== ========== Earnings per limited partnership interest $3.40 $ 3.56 $ 3.44 ========== ========== ==========
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, 1997, 1996, AND 1995
General Limited Partners Partners Total ---------- ----------- ----------- Year ended December 31, 1995: Balance at December 31, 1994 $ (3,341) $21,332,763 $21,329,422 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 ---------- ----------- ----------- Year ended December 31, 1996: Net earnings 39,334 1,120,894 1,160,228 Cash distributions ($6.00 per limited partnership interest) (38,533) (1,888,103) (1,926,636) ---------- ----------- ----------- Balance at December 31, 1996 $ (2,333) $19,759,806 $19,757,473 ---------- ----------- ----------- Year ended December 31, 1997: Net earnings 38,100 1,070,682 1,108,782 Cash distributions ($5.94 per limited partnership interest) (38,132) (1,868,450) (1,906,582) ---------- ----------- ----------- Balance at December 31, 1997 $ 2,365) $18,962,038 $18,959,673 =========== =========== ===========
See accompanying notes to financial statements. 14 17 MURRAY INCOME PROPERTIES II, LTD. (A LIMITED PARTNERSHIP) STATEMENTS OF CASH FLOWS
Years ended December 31 --------------------------------------------- 1997 1996 1995 ---------- ---------- ------------- Cash flows from operating activities: Net earnings $1,108,782 $1,160,228 $1,121,097 Adjustments to reconcile net earnings to net cash provided by operating activities: Bad debts (recoveries), net (6,514) (4,549) (5,845) Depreciation 724,411 734,143 742,392 Equity in earnings of joint venture (135,394) (132,060) (115,220) Amortization of other assets 66,877 66,893 65,553 Amortization of deferred income (6,498) (6,498) (6,498) Change in assets and liabilities: Accounts and notes receivable (22,371) 64,790 (628) Other assets (74,868) (83,571) (23,263) Accounts payable 865 (3,272) (2,197) Accrued property taxes, security deposits and other liabilities and deferred income 39,103 3,361 (19,194) ---------- ---------- ---------- Net cash provided by operating activities 1,694,393 1,799,465 1,756,197 ---------- ---------- ---------- Cash flows from investing activities: Additions to investment properties (31,585) (70,895) (3,107) Purchases of certificates of deposit (996,000) (895,000) (796,000) Proceeds from redemptions of certificates of deposit 995,000 895,000 789,000 Distributions from joint venture 212,700 198,750 182,550 ---------- ---------- ---------- Net cash provided by investing activities 180,115 127,855 172,443 ---------- ---------- ---------- Cash flows from financing activities - cash distributions (1,906,582) (1,926,636) (1,926,638) ---------- ---------- ---------- Net increase (decrease) in cash and cash equivalents (32,074) 684 2,002 Cash and cash equivalents at beginning of year 922,330 921,646 919,644 ---------- ---------- ---------- Cash and cash equivalents at end of year $ 890,256 $ 922,330 $ 921,646 ========== ========== ==========
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, 1997 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, 1997 and 1996, there were $185,338 and $211,854, 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. 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. 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. 16 19 MURRAY INCOME PROPERTIES II, LTD. (A LIMITED PARTNERSHIP) NOTES TO FINANCIAL STATEMENTS 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, 1997 and 1996. 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 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, 1997 are as follows: Years ending December 31: 1998 $ 1,942,211 1999 1,746,400 2000 1,518,759 2001 1,052,230 2002 772,287 Thereafter 260,866 ----------- $ 7,292,753 ===========
Rental income includes $543,118, $507,503, and $475,490 in 1997, 1996, and 1995, 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, $25,993 and $32,491 at December 31, 1997 and 1996, 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 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, --------------------------------- 1997 1996 ------------ ------------ Total assets, principally investment property $ 9,473,766 $ 10,021,353 ============ ============ Total liabilities 199,023 231,235 Venturers' capital 9,274,743 9,790,118 ------------ ------------ $ 9,473,766 $ 10,021,353 ============ ============
Years ended December 31 ---------------------------------------------------- 1997 1996 1995 ------------ ------------ ----------- Income $ 1,797,162 $ 1,761,565 $ 1,643,520 Expenses 894,538 881,164 875,385 ----------- ----------- ----------- Net earnings $ 902,624 $ 880,401 $ 768,135 =========== =========== ===========
5. TRANSACTIONS WITH AFFILIATES Murray Realty Investors IX, Inc. ("MRI IX"), the Corporate General Partner, entered into a property management agreement with the Partnership for the management of 1202 Industrial Place, effective January 1, 1996. Pursuant to this agreement, MRI IX earned property management fees in the amount of $15,495 and $14,411 during the years ended December 31, 1997 and 1996. 19 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 ------------------------------------------ 1997 1996 1995 ---------- ---------- ---------- Net earnings - financial statement basis $1,108,782 $1,160,228 $1,121,097 ---------- ---------- ---------- Financial statement basis depreciation/amortization over tax basis depreciation/amortization 111,112 123,618 112,371 Financial statement basis joint venture earnings under tax basis joint venture earnings 6,560 2,906 7,527 Tax basis rental income over (under) financial statement basis rental income 23,404 23,274 ( 27,067) ---------- ---------- ---------- Sub-total 141,076 149,798 92,831 ---------- ---------- ---------- Net earnings - Federal income tax basis $1,249,858 $1,310,026 $1,213,928 ========== ========== ==========
Reconciliation of financial statement partners' equity to Federal income tax basis partners' equity is as follows:
December 31 ------------------------------------------- 1997 1996 1995 ----------- ----------- ----------- Total partners' equity - financial statement basis $18,959,673 $19,757,473 $20,523,881 Current year tax basis net earnings over financial statement basis net earnings 141,076 149,798 92,831 Cumulative prior years tax basis net earnings over financial statement basis net earnings 1,175,901 1,026,103 933,272 ----------- ----------- ----------- Total partners' equity - Federal income tax basis $20,276,650 $20,933,374 $21,549,984 =========== =========== ===========
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, 1997 or 1996, 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 1997, 1996, and 1995, 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, 69, 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, 47, 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, 42, 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 certain subsidiaries. His primary responsibilities included property acquisitions and asset management. He was 22 25 responsible for initially identifying and negotiating the purchase of all properties in the Partnership. Since their acquisition 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 a Mississippi broker's license. 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(1) --------------------------- ---- ------ ------------ Mitchell L Armstrong, 1997 $65,507 $2,815 President* 1996 63,414 499 1995 61,868 329 W. Brent Buck, 1997 $48,782 $1,695 Executive Vice President* 1996 47,224 221 1995 46,072 176
* Offices held in Murray Realty Investors IX, Inc., the Corporate General Partner. (1)The Partnership provides the named executive officers with certain group life, health, medical and other non-cash benefits generally available to all salaried employees. The amounts shown in this column include the following: a) Contributions by the Partnership under its SEP-IRA plan which equaled 3% of each employee's covered compensation (salary and term insurance value). Prior to 1997, contributions were made only on behalf of the Partnership's non-management employees. Commencing in 1997, contributions were made on behalf of every employee of the Partnership, including $1,991 for Mr. Armstrong and $1,474 for Mr. Buck. b) Full premium cost of term insurance that will benefit the executive. The Partnership and Murray Income Properties I, Ltd. entered into severance agreements with Mr. Armstrong and Mr. Buck effective September 16, 1996. Pursuant to these agreements, upon the occurrence of specified events, the Partnership will be obligated for fifty three (53%) of any benefits paid pursuant to the agreements to either Mr. Armstrong or Mr. Buck. The agreement with Mr. Armstrong provides for a benefit amount equal to the value of the aggregate of one month of his highest monthly salary paid at any time during the twelve months prior to his termination multiplied by fifteen (15), plus the current monthly cost of such health, disability and life benefits (including spousal or similar coverage and coverage for children) which he was receiving or entitled to receive immediately prior to termination multiplied by eighteen (18). The agreement with Mr. Buck provides for a benefit amount equal to the value of the aggregate of one month of his highest monthly salary paid at any time during the twelve months prior to his termination multiplied by twelve (12), plus the current monthly cost of such health, 23 26 disability and life benefits (including spousal or similar coverage and coverage for children) which he was receiving or entitled to receive immediately prior to termination multiplied by fourteen (14). 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 or the above paragraph. 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, 1997. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. 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, 1997. 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, 1997:
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. 24 27 (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, 1997 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. Murray Realty Investors IX, Inc. ("MRI IX"), the Corporate General Partner, entered into a property management agreement with the Partnership for the management of 1202 Industrial Place, effective January 1, 1996. Pursuant to this agreement, MRI IX earned property management fees in the amount of $15,495 and $14,411 during the years ended December 31, 1997 and 1996. 25 28 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, 1997, 1996, and 1995. (ii) Real Estate and Accumulated Depreciation (Schedule III) - December 31, 1997. 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) 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. 26 29 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 Murray Realty Investors IX, Inc. for management and operation services described in the Management Agreement dated January 1, 1996 at 1202 Industrial Place. Reference is made to Exhibit 10a to the Form 10-Q for the Quarter ended March 31, 1996 filed with the Securities and Exchange Commission on May 13, 1996. (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, 1996. Reference is made to Exhibit 10g to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 21, 1997. (File No. 0- 17183) 10h Management Agreement with CK Charlotte Overhead Limited Partnership for management and operation services described in the Management Agreement dated November 14, 1997 at Tower Place Festival Shopping Center. Filed herewith. 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 February 28, 1998) 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 18, 1997 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) 10n 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) 27 30 10o 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). Reference is made to Exhibit 10p to the 1995 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 22, 1996. (File No. 0-14105) 10p Severance Agreement by and among Murray Income Properties I, Ltd. and Murray Income Properties II, Ltd. and Mitchell L. Armstrong dated September 16, 1996. Reference is made to Exhibit 10a to the 1996 3rd Quarter Report on Form 10-Q filed with the Securities and Exchange Commission on November 8, 1996. (File No. 0-14105) 10q Severance Agreement by and among Murray Income Properties I, Ltd. and Murray Income Properties II, Ltd. and W. Brent Buck dated September 16, 1996. Reference is made to Exhibit 10a to the 1996 3rd Quarter Report on Form 10-Q filed with the Securities and Exchange Commission on November 8, 1996. (File No. 0-14105) 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, 1997, 1996, and 1995. (ii) Real Estate and Accumulated Depreciation (Schedule III) - December 31, 1997. All other schedules have been omitted because they are not required or the required information is shown in the financial statements or notes thereto. 28 31 INDEPENDENT AUDITORS' REPORT The Partners Murray Income Properties II, Ltd.: Under date of February 27, 1998, we reported on the balance sheets of Murray Income Properties II, Ltd. (a limited partnership) as of December 31, 1997 and 1996, 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, 1997, 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, 1998 29 32 Schedule II MURRAY INCOME PROPERTIES II, LTD. (A LIMITED PARTNERSHIP) VALUATION AND QUALIFYING ACCOUNTS YEARS ENDED DECEMBER 31, 1997, 1996, AND 1995
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, 1995 $ 19,879 (5,845) -0- 14,034 ========= ======= ======= ======= Year ended December 31, 1996 $ 14,034 (4,549) -0- 9,485 ========= ======= ======= ======= Year ended December 31, 1997 $ 9,485 (6,514) 1,524 1,447 ========= ======= ======= =======
Deductions are primarily for writeoffs of accounts receivable deemed uncollectible by management. 30 33 Schedule III MURRAY INCOME PROPERTIES II, LTD. (a limited partnership) Real Estate and Accumulated Depreciation December 31, 1997
GROSS AMOUNT COSTS AT WHICH CAPITALIZED CARRIED AT INITIAL COST SUBSEQUENT TO CLOSE OF TO PARTNERSHIP (A) ACQUISITION PERIOD (D) ----------------------------- ------------- ----------- ------------- ----------- BUILDINGS AND BUILDINGS AND DESCRIPTION ENCUMBRANCES LAND IMPROVEMENTS IMPROVEMENTS LAND IMPROVEMENTS TOTAL - ----------------------- ------------ ----------- ------------- ------------- ----------- ------------- ----------- Shopping Center Nashville, Tennessee $ 0 $ 3,153,285 $ 6,615,549 $ 420,991 $ 3,153,285 $ 7,036,540 $10,189,825 Shopping Center Germantown (Memphis) Tennessee $ 0 $ 1,751,518 $ 6,395,078 $ 1,055,214 $ 1,751,518 $ 7,450,292 $ 9,201,810 Office/Warehouse Grand Prairie, Texas $ 0 $ 884,488 $ 2,895,376 $ 112,982 $ 884,488 $ 3,008,358 $ 3,892,846 ------------ ----------- ----------- ----------- ----------- ----------- ----------- $ 0 $ 5,789,291 $15,906,003 $ 1,589,187 $ 5,789,291 $17,495,190 $23,284,481 =========== =========== =========== =========== =========== =========== =========== LIFE ON WHICH DEPRECIATION IN LATEST STATEMENT ACCUMULATED YEAR OF YEAR OF EARNINGS DESCRIPTION DEPRECIATION CONSTRUCTION ACQUIRED IS COMPUTED - ---------------------- ------------ ------------ -------- ---------------- Shopping Center Nashville, Tennessee $3,286,310 1985/86 1986 3-25 YEARS Shopping Center Germantown (Memphis) Tennessee $3,180,926 1987 1988 3-25 YEARS Office/Warehouse Grand Prairie, Texas $1,249,080 1980 1988 3-25 YEARS ---------- $7,716.316 ==========
NOTES: (A) The initial cost to the Partnership represents the original purchase price of the properties. (B) Reconciliation of real estate owned for 1997, 1996 and 1995:
1997 1996 1995 ----------- ----------- ----------- Balance at beginning of period $23,252,896 $23,182,001 $23,178,894 Additions during period $ 31,585 $ 70,895 $ 3,107 Retirements during period $ 0 $ 0 $ 0 ----------- ----------- ----------- Balance at close of period $23,284,481 $23,252,896 $23,182,001 =========== =========== ===========
(C) Reconciliation of accumulated depreciation for 1997, 1996 and 1995:
1997 1996 1995 ----------- ----------- ----------- Balance at beginning of period $ 6,991,905 $ 6,257,762 $ 5,515,370 Depreciation expense $ 724,411 $ 734,143 $ 742,392 Retirements during period $ 0 $ 0 $ 0 ----------- ----------- ----------- Balance at close of period $ 7,716,316 $ 6,991,905 $ 6,257,762 =========== =========== ===========
(D) The aggregate cost of real estate at December 31, 1997 for Federal income tax purposes is $24,105,857. Real Estate and Accumulated Depreciation 31 34 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 its behalf by the undersigned, thereunto duly authorized. MURRAY INCOME PROPERTIES II, LTD. By: Crozier Partners IX, Ltd. A General Partner Dated: March 26, 1998 By: /s/ Jack E. Crozier --------------------------------- Jack E. Crozier A General Partner By: Murray Realty Investors IX, Inc. a General Partner Dated: March 26, 1998 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 26, 1998 By: /s/ Brent Buck --------------------------------- Brent Buck Executive Vice President Director Dated: March 26, 1998 By: /s/ Mitchell Armstrong --------------------------------- Mitchell Armstrong Chief Executive Officer Chief Financial Officer Director 32 35 INDEX TO EXHIBITS
Exhibit Number Description - -------- ----------- 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) 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 Murray Realty Investors IX, Inc. for management and operation services described in the Management Agreement dated January 1, 1996 at 1202 Industrial Place. Reference is made to Exhibit 10a to the Form 10-Q for the Quarter ended March 31, 1996 filed with the Securities and Exchange Commission on May 13, 1996. (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, 1996. Reference is made
33 36 to Exhibit 10g to the Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 21, 1997. (File No. 0-17183) 10h Management Agreement with CK Charlotte Overhead Limited Partnership for management and operation services described in the Management Agreement dated November 14, 1997 at Tower Place Festival Shopping Center. Filed herewith. 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 February 28, 1998) 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 18, 1997) 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) 10n 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) 10o 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). Reference is made to Exhibit 10p to the 1995 Annual Report on Form 10-K filed with the Securities and Exchange Commission on March 22, 1996. (File No. 0-14105) 10p Severance Agreement by and among Murray Income Properties I, Ltd. and Murray Income Properties II, Ltd. and Mitchell L. Armstrong dated September 16, 1996. Reference is made to Exhibit 10a to the 1996 3rd Quarter Report on Form 10-Q filed with the Securities and Exchange Commission on November 8, 1996. (File No. 0-14105) 10q Severance Agreement by and among Murray Income Properties I, Ltd. and Murray Income Properties II, Ltd. and W. Brent Buck dated September 16, 1996. Reference
34 37 is made to Exhibit 10a to the 1996 3rd Quarter Report on Form 10-Q filed with the Securities and Exchange Commission on November 8, 1996. (File No. 0-14105) 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.
35
EX-10.H 2 MANAGEMENT AGREEMENT WITH CK CHARLOTTE OVERHEAD LP 1 EXHIBIT 10h November 14, 1997 Mr. Brent Buck Murray Income Properties 299 South 9th Street Suite 203 Oxford, MS 38655 RE: Tower Place Festival Management Contract Renewal Dear Brent: Our current management agreement, dated December 12, 1994 and renewed December 1, 1995 and November 21, 1996 in letter agreements between Murray Income Properties and CK Retail Charlotte Overhead Limited Partnership is in the process of expiring. It is our desire to renew this management contract upon the same terms and conditions as the previous management, dated December 12, 1994, with the exception that the term shall now expire on December 31, 1998. I have attached as Exhibit "A", a copy of the December 12, 1994 management agreement and would like you to indicate your approval of the renewal and the new expiration date by signing this renewal agreement in the appropriate space below. It has been a pleasure to be the property manager/leasing agent at Tower Place Festival and we look forward to continuing our relationship as your management agent in the future. RENEWAL AGREEMENT ACCEPTED: CK Charlotte Overhead Limited Partnership Tower Place Joint Venture a North Carolina Limited Partnership By: Murray Income Properties I, LTD. By: Childress Klein Retail-Charlotte A Texas Ltd. Partnership, Joint Venturer #2, Inc., Its General Partner By: Murray Realty Investors VIII, Inc. A Texas Corp., General Partner BY: /s/ DAVID S. MILLER By: /s/ BRENT BUCK ------------------------------------ ------------------------------------------- David S. Miller, President Brent Buck, Executive Vice President Attest/Witness: Witness: - ---------------------------------------- -------------------------------------- Title: Name:
(Corporate Seal)
EX-10.I 3 MANAGEMENT AGREEMENT WITH TRAMMELL CROW SE INC 1 EXHIBIT 10i STATE OF TENNESSEE COUNTY OF SHELBY MODIFICATION TO MANAGEMENT AGREEMENT This Modification to Management Agreement is made and entered into this 25th day of February, 1998, by and between Murray Income Properties, II, LTD, a Texas limited Partnership ("Owner") and Trammell Crow SE, Inc., a Delaware corporation ("Operator"). WITNESSETH: 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. 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, 1998 and expire on December 31. 1998. 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. 3. "Permitted Assignment. Notwithstanding any other provision of this Management Agreement, Operator shall be permitted to assign all of its right, title and interest in and to this Management Agreement to any other entity that is directly or indirectly wholly-owned by Trammell Crow Company, a Delaware corporation ("TCC"). Such permitted assignment shall include any assignment that may be deemed to occur by operation of law in connection with any merger or consolidation of TCC entity with and/or into any other entity directly or indirectly wholly-owned by TCC (an "Intragroup Merger"). Any such Intragroup Merger"). Any such Intragroup Merger shall not be deemed a breach of, cause a default under or trigger any right of termination under, any other provision of this Agreement." 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: Brent Buck By: Phil Fawcett Title: Executive Vice President Title: Sr. Vice President EX-10.J 4 MANAGEMENT AGREEMENT WITH BROOKSIDE COMMERCIAL 1 EXHIBIT 10j EXTENSION OF PROPERTY MANAGEMENT AGREEMENT The Extension of Property Management Agreement entered into this 18th day of February, 1998 by and between Murray Income Properties II, Ltd., a Texas limited partnership (hereinafter called the "Owner") and Brookside Properties, Inc., (hereinafter called the "Agent"). RECITALS: 1. Owner 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, was extended with an expiration date of February 28, 1995, was extended with an expiration date of February 29, 1996, was extended with an expiration date of February 28, 1997, and was extended with an expiration date of February 28, 1998. 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, December 31, 1998. 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 PROPERTIES, INC. /s/ CHARLES H. WARFIELD, JR. /s/ W. MILES WARFIELD - ------------------------------ ---------------------------------------- Charles H. Warfield, Jr. W. Miles Warfield 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 By: Brent Buck, Executive Vice President 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, 1997 YEAR DEC-31-1997 JAN-01-1997 DEC-31-1997 890,256 896,000 409,248 1,447 0 2,194,057 23,284,481 7,716,316 19,396,894 297,971 0 0 0 0 18,959,673 19,396,894 0 2,927,389 0 1,477,350 0 (6,514) 0 1,108,782 0 1,108,782 0 0 0 1,108,782 3.40 3.40
EX-99.A 6 GLOSSARY 1 EXHIBIT 99.A 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 ARTICLE XIII TO AGREEMENT OF LIMITED PARTNERSHIP 1 EXHIBIT 99.B "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 AMENDMENT NO.9 TO AGREEMENT OF LIMITED PARTNERSHIP 1 EXHIBIT 99.C 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 EXHIBIT 99.D 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 which 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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