<PAGE> 1
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
---------------
FORM 10-Q
---------------
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996. . . . . . . . . . . . .
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.
0-14105
---------------
MURRAY INCOME PROPERTIES I, LTD.
(Exact Name of Registrant as Specified in its Charter)
TEXAS 75-1946214
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
5550 LBJ FREEWAY, SUITE 675, DALLAS, TEXAS 75240
(Address of principal executive offices) (Zip Code)
(214) 991-9090
(Registrant's Telephone Number, including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
--- ---
<PAGE> 2
MURRAY INCOME PROPERTIES I, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED JOINT VENTURE
CONSOLIDATED BALANCE SHEETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
June 30, December 31,
1996 1995
-------------- ---------------
(unaudited)
<S> <C> <C>
ASSETS
Investment properties, at cost:
Land $ 6,232,801 $ 6,232,801
Buildings and improvements 20,225,727 20,168,412
----------- -----------
26,458,528 26,401,213
Less accumulated depreciation 8,500,089 8,079,281
----------- -----------
Net investment properties 17,958,439 18,321,932
Cash and cash equivalents 1,334,120 1,325,197
Accounts and notes receivable,
net of allowance of $25,598 and
$21,758, in 1996 and 1995, respectively 685,133 689,231
Other assets, at cost, net of accumulated
amortization of $403,339 and $370,252
in 1996 and 1995, respectively 286,507 262,532
----------- -----------
$20,264,199 $20,598,892
=========== ===========
LIABILITIES AND PARTNERS' EQUITY
Accounts payable $ 64,113 $ 26,615
Accrued property taxes 126,225 192,903
Security deposits 190,711 208,589
----------- -----------
Total liabilities 381,049 428,107
----------- -----------
Minority interest in joint venture 1,505,040 1,535,208
----------- -----------
Partners' equity:
General Partners:
Capital contributions 1,000 1,000
Cumulative net earnings 185,955 176,703
Cumulative cash distributions ( 318,949) ( 304,547)
----------- -----------
( 131,994) ( 126,844)
----------- -----------
Limited Partners (28,227 Interests):
Capital contributions, net of offering costs 24,570,092 24,570,092
Cumulative net earnings 9,568,575 9,115,216
Cumulative cash distributions (15,628,563) (14,922,887)
----------- -----------
18,510,104 18,762,421
----------- -----------
Total partners' equity 18,378,110 18,635,577
----------- -----------
$20,264,199 $20,598,892
=========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE> 3
MURRAY INCOME PROPERTIES I, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED JOINT VENTURE
CONSOLIDATED STATEMENTS OF EARNINGS
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
--------------------------- ---------------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Income:
Rental $727,059 $692,708 $1,489,252 $1,391,696
Interest 17,941 18,784 35,880 36,384
-------- -------- ---------- ----------
745,000 711,492 1,525,132 1,428,080
-------- -------- ---------- ----------
Expenses:
Depreciation 210,087 214,159 420,808 424,435
Property operating 209,964 196,296 392,229 379,987
General and administrative 81,969 65,659 177,773 157,409
Bad debts, net 1,304 1,673 5,129 5,056
-------- -------- ---------- ----------
503,324 477,787 995,939 966,887
-------- -------- ---------- ----------
Earnings before minority interest 241,676 233,705 529,193 461,193
Minority interest in joint venture's
earnings 31,487 28,232 66,582 57,758
-------- -------- ---------- ----------
Net earnings $210,189 $205,473 $ 462,611 $ 403,435
======== ======== ========== ==========
Earnings per limited partnership interest $7.30 $7.13 $16.06 $14.00
===== ===== ====== ======
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE> 4
MURRAY INCOME PROPERTIES I, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED JOINT VENTURE
CONSOLIDATED STATEMENTS OF CHANGES IN PARTNERS' EQUITY
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
---------- ---------- -------------
<S> <C> <C> <C>
Six months ended June 30, 1995:
Balance at December 31, 1994 $(114,097) $19,387,015 $19,272,918
Net earnings 8,069 395,366 403,435
Cash distributions ( 14,402) (705,674) (720,076)
--------- ----------- -----------
Balance at June 30, 1995 $(120,430) $19,076,707 $18,956,277
========= =========== ===========
Six months ended June 30, 1996:
Balance at December 31, 1995 $(126,844) $18,762,421 $18,635,577
Net earnings 9,252 453,359 462,611
Cash distributions ( 14,402) (705,676) (720,078)
--------- ----------- -----------
Balance at June 30, 1996 $(131,944) $18,510,104 $18,378,110
========= =========== ===========
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE> 5
MURRAY INCOME PROPERTIES I, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED JOINT VENTURE
CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-------------------------------------
1996 1995
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net earnings $ 462,611 $ 403,435
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Bad debts, net 5,129 5,056
Depreciation 420,808 424,435
Amortization of other assets 33,087 32,431
Minority interest in joint venture's earnings 66,582 57,758
Change in assets and liabilities:
Accounts and notes receivable ( 1,031) ( 44,899)
Other assets ( 57,062) ( 40,779)
Accounts payable 37,498 657
Accrued property taxes and security deposits ( 84,556) ( 33,624)
---------- ----------
Net cash provided by operating activities 883,066 804,470
---------- ----------
Cash flows from investing activities -
Additions to investment properties ( 57,315) ( 28,426)
---------- ----------
Cash flows from financing activities:
Distributions to minority interest in joint venture ( 96,750) ( 87,000)
Cash distributions (720,078) (720,076)
---------- ----------
Net cash used in financing activities (816,828) (807,076)
---------- ----------
Net increase (decrease) in cash and cash equivalents 8,923 ( 31,032)
Cash and cash equivalents at beginning of period 1,325,197 1,255,015
---------- ----------
Cash and cash equivalents at end of period $1,334,120 $1,223,983
========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
5
<PAGE> 6
MURRAY INCOME PROPERTIES I, LTD.
(A LIMITED PARTNERSHIP)
AND CONSOLIDATED JOINT VENTURE
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
1. BASIS OF ACCOUNTING
The consolidated financial statements include the accounts of the
Partnership and Tower Place Joint Venture (85% owned by the Partnership). All
significant intercompany balances and transactions have been eliminated in
consolidation.
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 June 30, 1996 and December 31,
1995, $496,603 and $488,013, 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.
Effective January 1, 1995, the Partnership implemented Statement of
Financial Accounting Standards No. 121, "Accounting for the Impairment of
Long-Lived Assets and Long-Lived Assets to Be Disposed Of," (SFAS 121) which
establishes the method of accounting for rental property when circumstances
indicate that the carrying amount of an asset may not be recoverable. The
Partnership periodically reevaluates the propriety of the carrying amounts of
investment properties to determine whether current events and circumstances
warrant an adjustment to such carrying amounts. Such evaluations are performed
utilizing annual appraisals performed by independent appraisers as well as
internally developed estimates of expected undiscounted future cash flows. In
the event the carrying value of an individual property exceeds expected future
undiscounted cash flows, the property is written down to the most recently
appraised value. Since inception of the Partnership, none of the Partnership's
properties have required write downs.
No provision for income taxes has been made as the liabilities for such
taxes are those of the individual Partners rather than the Partnership. The
Partnership files its tax return on the accrual basis used for Federal income
tax purposes.
Earnings per limited partnership interest are based upon the limited
partnership interests outstanding at period-end and the net earnings allocated
to the Limited Partners in accordance with the Partnership Agreement.
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.
6
<PAGE> 7
- --------------------------------------------------------------------------------
The following information relates to estimated fair values of the
Partnership's financial instruments as of June 30, 1996 and December 31, 1995.
For cash and cash equivalents, 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. 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 Cash Distributions from Operations or Cash
Distributions from Sales or Refinancings, or both.
(b) 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 (i) first
to the Corporate General Partner in an amount equal to any unpaid Cash
Distributions from Operations subordinated to the Limited Partners' 7%
non-cumulative annual return and (ii) thereafter, 80% to the Limited
Partners and 20% to the General Partners.
Cash Distributions from Sales or Refinancings (other than the 1% of Cash
Distributions from Sales or Refinancings payable to the Non-corporate
General Partner) payable to the General Partners shall be allocated 62
1/2% to the Non-corporate General Partner and 37 1/2% to the Corporate
General Partner.
3. INVESTMENT PROPERTIES
The Partnership owns and operates Mountain View Plaza, a shopping center
located in Scottsdale, Arizona, and Castle Oaks Village, a shopping center
located in Castle Hills (San Antonio), Texas. In addition, the Partnership
owns an 85% interest in Tower Place Joint Venture, a joint venture which owns
Tower Place Festival Shopping Center located in Pineville (Charlotte), North
Carolina. The remaining 15% interest in the joint venture is owned by Murray
Income Properties II, Ltd. ("MIP II"), 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 85% ownership interest in the joint venture.
4. OTHER
Information furnished in this interim report reflects all adjustments
consisting of normal recurring adjustments, which, in the opinion of
management, are necessary to reflect a fair presentation of the results for the
periods presented.
The financial information included in this interim report as of June 30,
1996 and for the three and six months ended June 30, 1996 and 1995 has been
prepared by management without audit by independent public accountants who do
not express an opinion thereon. The Partnership's annual report contains
audited consolidated financial statements. The notes to the consolidated
financial
7
<PAGE> 8
statements in the Partnership's 1995 annual report are an integral part of the
consolidated financial statements presented herein.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
LIQUIDITY AND CAPITAL RESOURCES
As of June 30, 1996, the Partnership had cash and cash equivalents of
$1,334,120. Such amounts represent cash generated from operations and working
capital reserves.
Rental income from leases with escalating rental rates is accrued using the
straight line method over the related lease terms. At June 30, 1996 and
December 31, 1995, $496,603 and $488,013, respectively, of accounts receivable
related to such accruals. Accounts receivable also consist of tenant
receivables, receivables for rent collected (but not yet remitted by the
property management companies managing the properties), and interest receivable
on short-term investments. The increase in accounts receivable of $1,031
(exclusive of bad debts and recoveries) from December 31, 1995 to June 30, 1996
is primarily due to an increase in tenant receivables at Mountain View Plaza
Shopping Center and Tower Place Festival Shopping Center, and receivables
related to the accruals described above at Tower Place Festival Shopping
Center, Mountain View Plaza Shopping Center and Castle Oaks Shopping Center.
As of June 30, 1996 and December 31, 1995, the Partnership had allowances of
$25,598 and $21,758, respectively, for uncollectible accounts receivable.
The decrease of $66,678 in accrued property taxes from December 31, 1995 to
June 30, 1996 is primarily due to the payment of 1995 property taxes for the
Partnership's properties.
During the three months ended June 30, 1996, the Partnership made Cash
Distributions from Operations totaling $360,040, (which was reduced by $19,547
related to 1995 North Carolina state income taxes paid on behalf of the
partners in connection with the operation of Tower Place Joint Venture) related
to the three month period ended March 31, 1996. Subsequent to June 30, 1996,
the Partnership made Cash Distributions from Operations of $360,038 relating to
the three months ended June 30, 1996. The distributed funds 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.
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 ultimately
through the sale of the Partnership's properties.
8
<PAGE> 9
RESULTS OF OPERATIONS
Rental income increased $97,556 for the six months ended June 30, 1996 as
compared to the same period in 1995. The following information details the
rental income generated, bad debt expense incurred, and average occupancy for
the periods shown for each of the Partnership's properties.
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------------- -------------------------
1996 1995 1996 1995
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Mountain View Plaza Shopping Center
Rental income $226,575 $228,580 $462,442 $437,992
Bad debt expense $ -0- $ -0- $ -0- $ 926
Average occupancy 94% 98% 95% 98%
Castle Oaks Village Shopping Center
Rental income $ 76,300 $ 64,634 $154,843 $140,630
Bad debt expense $ 1,901 $ 3,187 $ 5,820 $ 6,267
Average occupancy 70% 64% 71% 71%
Tower Place Festival Shopping Center
Rental income $424,184 $399,494 $871,967 $813,074
Bad debt expense (recovery) $ ( 597) $ (1,514) $ ( 691) $ (2,137)
Average occupancy 98% 96% 96% 96%
</TABLE>
Rental income at Mountain View Plaza in Scottsdale, Arizona increased
$24,450 for the six months ended June 30, 1996 as compared to the same period
in 1995 with lower rent due to lower occupancy being offset by increased tenant
reimbursements for common area maintenance costs, real estate taxes and
insurance costs.
Occupancy at Mountain View averaged 94% during the quarter ended June 30,
1996, a one percent decrease from the previous quarter. One tenant who
occupies 928 square feet renewed its lease for three years. In May,
preventative roof maintenance was completed on two of the shopping center's
buildings.
Rental income at Castle Oaks Village in Castle Hills (San Antonio), Texas
increased $14,213 for the six months ended June 30, 1996 as compared to the
same period in 1995 primarily due to an increase in rental rates and higher
tenant reimbursements for common area maintenance costs and insurance costs.
Occupancy at Castle Oaks averaged 70% during the quarter ended June 30,
1996, a two percent decrease from the previous quarter. In May one tenant who
occupied 1,230 square feet vacated its space upon expiration of its lease and a
tenant who occupied 860 square feet vacated its space prior to the expiration
of its lease. Two tenants who occupy 2,732 square feet renewed their leases
for three years. One new tenant who signed a lease for 1,800 square feet in
the first quarter took occupancy of its space. Two new leases totalling 1,755
square feet were signed and these tenants will take occupancy during the third
quarter. Effective July 1, the General Partners hired a new firm to assume the
property management and leasing of Castle Oaks Village. This company has
extensive experience in the management and leasing of retail property in San
Antonio. As of June 30, Castle Oaks Village was 75% occupied and 80% leased.
9
<PAGE> 10
Rental income at Tower Place in Pineville (Charlotte), North Carolina
increased $58,893 for the six months ended June 30, 1996 as compared to the
same period in 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.
Occupancy at Tower Place averaged 98% during the quarter ended June 30,
1996, a three percent increase over the previous quarter. In April two tenants
who signed leases for 3,720 square feet took occupancy of their spaces. Also,
minor parking lot repairs were completed at the property in May.
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.
Property operating expenses consist primarily of real estate taxes,
property management fees, insurance costs, utility costs, repair and
maintenance costs, leasing and promotion costs, and amortization of deferred
leasing costs. The increase in property operating expenses of $12,242 for the
six months ended June 30, 1996 as compared to the same period in 1995 is
primarily due to higher landscaping costs at each of the properties, higher
legal fees at Castle Oaks and higher real estate taxes at Mountain View Plaza.
Mountain View Plaza's total operating expenses increased because of increases
in landscaping costs and real estate taxes. Castle Oaks' total operating
expenses increased primarily because of increases in insurance costs and legal
costs. Tower Place's total operating expenses were flat with increases in
landscaping costs offset by decreases in utilities and repair and maintenance
costs.
General and administrative expenses incurred are related to legal and
accounting expenses, rent, investor services costs, salaries and benefits and
various other costs required for the administration of the Partnership,
including reimbursements of shared direct operating costs to Murray Income
Properties II, Ltd. General and administrative expenses increased $20,364 for
the six months ended June 30, 1996 as compared to the same period in 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 caused the Partnership's
compliance costs to increase. Also, legal costs increased because of due
diligence performed and negotiations with a limited partner who wanted to
acquire the Partnership's investor list in order to solicit the partners to
purchase their interests.
10
<PAGE> 11
PART II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
3a Agreement of Limited Partnership of Murray Income Properties
Ltd. 84. Reference is made to Exhibit A of the Prospectus
dated May 31, 1984 contained in Amendment No. 2 to
Partnership's Form S-11 Registration Statement. (File No.
2-90016)
3b Amended and Restated Certificate and Agreement of Limited
Partnership dated as of May 23, 1984. 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, 1990.
(File No. 0-14105)
3c Amended and Restated Certificate and Agreement of Limited
Partnership dated as of June 25, 1984. 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, 1990.
(File No. 0-14105)
3d Amended and Restated Certificate and Agreement of Limited
Partnership dated as of November 27, 1984. Reference is made
to Exhibit 3d to the 1989 Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 31, 1990.
(File No. 0-14105)
3e Amended and Restated Certificate and Agreement of Limited
Partnership dated as of April 1, 1985. Reference is made to
Exhibit 3e to the 1989 Annual Report on Form 10-K filed with
the Securities and Exchange Commission on March 31, 1990.
(File No. 0-14105)
3f Amended and Restated Certificate and Agreement of Limited
Partnership dated as of November 15, 1989. Reference is made
to Exhibit 3f to the 1989 Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 31, 1990.
(File No. 0-14105)
3g Amended and Restated Certificate and Agreement of Limited
Partnership dated as of January 10, 1990. Reference is made
to Exhibit 3g to the 1989 Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 31, 1990.
(File No. 0-14105)
10a Management Agreement with Cavender & Hill Properties, Inc. for
management and operation services described in the Management
Agreement dated June 30, 1996 at Castle Oaks Shopping Center.
Filed herewith.
27 Financial Data Schedule. Filed herewith.
99a Glossary, as contained in the Prospectus dated May 31, 1984
filed as part of Amendment No. 2 to Registrant's Form S-11
Registration Statement. (File No. 2-90016) Filed herewith.
99b Article XIII of the Agreement of Limited Partnership as
contained in the Prospectus dated May 31, 1984 filed as part
of the Amendment No. 2 to Registrant's Form S-11 Registration
Statement. (File No. 2- 90016) Filed herewith.
11
<PAGE> 12
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 (Pages
10 through 17) dated May 31, 1984 filed as part of Amendment
No. 2 to Registrant's Form S-11 Registration Statement. (File
No. 2-90016) Filed herewith.
(b) Reports on Form 8-K filed during the quarter ended June 30, 1996:
None
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
MURRAY INCOME PROPERTIES I, LTD.
By: Murray Realty Investors VIII, Inc.
A General Partner
Date: August 9, 1996 By: /s/ Mitchell Armstrong
-------------------------------
Mitchell Armstrong
President
Chief Financial Officer
13
<PAGE> 14
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Document Sequentially
Number Description Numbered Page
- ------ ----------- -------------
<S> <C> <C>
3a Agreement of Limited Partnership of Murray Income Properties
Ltd. 84. Reference is made to Exhibit A of the Prospectus
dated May 31, 1984 contained in Amendment No. 2 to
Partnership's Form S-11 Registration Statement. (File No.
2-90016)
3b Amended and Restated Certificate and Agreement of Limited
Partnership dated as of May 23, 1984. 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, 1990.
(File No. 0-14105)
3c Amended and Restated Certificate and Agreement of Limited
Partnership dated as of June 25, 1984. 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, 1990.
(File No. 0-14105)
3d Amended and Restated Certificate and Agreement of Limited
Partnership dated as of November 27, 1984. Reference is made
to Exhibit 3d to the 1989 Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 31, 1990.
(File No. 0-14105)
3e Amended and Restated Certificate and Agreement of Limited
Partnership dated as of April 1, 1985. Reference is made to
Exhibit 3e to the 1989 Annual Report on Form 10-K filed with
the Securities and Exchange Commission on March 31, 1990.
(File No. 0-14105)
3f Amended and Restated Certificate and Agreement of Limited
Partnership dated as of November 15, 1989. Reference is made
to Exhibit 3f to the 1989 Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 31, 1990.
(File No. 0-14105)
3g Amended and Restated Certificate and Agreement of Limited
Partnership dated as of January 10, 1990. Reference is made
to Exhibit 3g to the 1989 Annual Report on Form 10-K filed
with the Securities and Exchange Commission on March 31, 1990.
(File No. 0-14105)
10a Management Agreement with Cavender & Hill Properties, Inc. for
management and operation services described in the Management
Agreement dated June 30, 1996 at Castle Oaks Shopping Center.
Filed herewith.
27 Financial Data Schedule. Filed herewith.
</TABLE>
14
<PAGE> 15
<TABLE>
<S> <C> <C>
99a Glossary, as contained in the Prospectus dated May 31, 1984
filed as part of Amendment No. 2 to Registrant's Form S-11
Registration Statement. (File No. 2-90016) Filed herewith.
99b Article XIII of the Agreement of Limited Partnership as
contained in the Prospectus dated May 31, 1984 filed as part
of the Amendment No. 2 to Registrant's Form S-11 Registration
Statement. (File No. 2- 90016) 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 (Pages
10 through 17) dated May 31, 1984 filed as part of Amendment
No. 2 to Registrant's Form S-11 Registration Statement. (File
No. 2-90016) Filed herewith.
</TABLE>
15
<PAGE> 1
EXHIBIT 10a
MANAGEMENT AGREEMENT
THIS AGREEMENT, is entered into by and between MURRAY INCOME
PROPERTIES I, LTD. (herein referred to as "Owner") and CAVENDER & HILL
PROPERTIES, INC., (herein referred to as "Manager".)
WITNESSETH:
In consideration of the covenants herein contained, the parties hereto
agree as follows:
ARTICLE I
APPOINTMENT AND AUTHORITY OF MANAGER
1.1 APPOINTMENT: Owner hereby appoints Manager as the managing and
leasing agent for the real property more fully described in Exhibit
"A" attached hereto, together with the buildings, fixtures and other
improvements now or hereafter to be situated thereon (collectively the
"Premises"). Owner hereby authorizes Manager to exercise such powers
with respect to the Premises as may be necessary for the performance
of Manager's obligations under the terms of this Agreement and Manager
accepts such appointment under the terms and conditions hereinafter
set forth (for a term as provided in Article VIII). Manager shall
have no right or authority, expressed or implied, to commit or
otherwise obligate Owner in any manner whatsoever except to the extent
specifically provided herein.
1.2 COMMENCEMENT DATE: Manager's duties and responsibilities under this
Agreement shall commence on July 1, 1996 and shall continue until
termination as provided under Article VIII.
ARTICLE II
MANAGER'S AGREEMENTS
2.1 GENERAL RESPONSIBILITY: Manager, on behalf of Owner, shall implement,
or cause to be implemented, the decisions of Owner with respect to the
Premises and shall conduct the ordinary and usual business affairs of
Owner as provided in this Agreement. Manager agrees to use its best
efforts in the management, operation, and leasing of the Premises and
to comply with such instructions and policies as may be reasonably
requested by Owner.
2.2 INDEPENDENT CONTRACTOR: Manager covenants and agrees to perform the
services covered under this Agreement and Owner authorizes Manager to
perform such services on behalf of Owner. The Manager in performance
of its duties under this Agreement is an Independent Contractor and it
is expressly understood and agreed that payments hereunder shall be
payments by Owner to Manager as an Independent Contractor and not as
an employee, partner or joint venturer of Owner.
<PAGE> 2
ARTICLE III
SERVICES OF MANAGER
3.1 FOR OWNER'S ACCOUNT: The services of Manager in performing its duties
and providing services pursuant to this Agreement shall be for the
account of Owner. Owner agrees to be responsible for all costs,
expenses, and disbursements incurred by Manager under the terms of
this Agreement in providing management, operational, and leasing
services hereunder, such as, but not limited to: contracts for
cleaning and janitorial services, landscaping, maintenance services,
supplies and equipment, , telephone, postage, overnight delivery
(except for delivery of monthly management reports), office supplies
and equipment, salaries, wages and related costs of those engaged
exclusively (except as to leasing agents and brokers) in the
management, operations, and leasing of the premises. The Manager will
not incur any expenses or make any expenditure except as expressly
permitted in this Agreement.
3.2 STANDARDS: Manager shall manage, operate, and maintain the Premises
at an acceptable level of management and operation which shall include
maintaining the building in a clean, safe, operable, attractive
condition comparable to other buildings located in the San Antonio
area unless otherwise directed by Owner. The Manager shall also act
in a fiduciary capacity with respect to the proper protection of and
accounting for the Owner's assets in respect to the Premises of which
Manager is in possession or which are subject to the control and
management of Manager pursuant to the terms of this Agreement.
3.3 FINANCIAL REPORTS AND RECORDS: Manager shall maintain adequate and
separate books and records for the Premises. Manager shall ensure
such control over accounting and financial transactions as is
reasonably required to protect Owner's assets from theft or fraudulent
activity.
(a) Manager shall account for the Premises in accordance
with accrual basis accounting principles applied in
a consistent manner.
(b) Manager shall provide a chart of accounts, in
accordance with industry standard, for all income and
expense categories required to account for the
operation of the Premises.
(c) Manager shall provide Owner with the following
reports:
i) General Ledger;
ii) Project Cash Flow with account
detail;
iii) Project Summary Report with tenant
detail;
iv) Aged Receivables Report with tenant
detail including past due rent and
lease related charges;
v) Bank Reconciliation which will
contain a copy of the bank statement
and the book statement as support
for the
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balances;
vi) Invoice copies paid on Owner's
behalf by Manager that were reported
as activity on the Project Cash
Flow;
vii) Budget Variance Explanation Report;
viii) Balance Sheet; and
ix) Copies of all checks.
All reports will be prepared with a cut off date as
of the 25th day of the previous month. Each report
will be prepared on a monthly basis containing
year-to-date information, and will be rendered to
Owner on or before the 10th day of each month.
(d) Owner or its representatives may conduct examinations
upon 24 hour notice, during business hours, of the
books and records maintained for Owner by Manager and
such books and records shall be deemed owned by
Owner. Owner also may perform any and all additional
audit tests relating to Manager's activities;
provided such audit tests are related to those
activities performed by Manager for Owner. Any and
all such audits shall be at the sole expense of Owner
unless (i) an audit is performed during the existence
of an incurred default by Manager under the terms of
this Agreement, or (ii) any audit performed by Owner
discloses an error of five percent (5%) or greater of
audited total revenues or total expenses, in which
event the cost of the audit shall be borne by
Manager.
3.4 BUDGETS: Manager shall for each calendar year prepare and submit to
Owner a proposed Operating Budget and a proposed Capital Budget for
the 1) management, operation, and leasing of the Premises and 2) the
replacement, repair and maintenance of equipment or improvements of a
capital nature on or about the Premises. The budget will contain
estimated monthly cash flows showing estimated income, operating
expenses (including management fees), capital expenditures and other
non-recurring items. Also to be included with the budget will be a
list and explanation of assumptions used in arriving at projected
leasing activity and rates, expenses and capital expenditures. Each
proposed budget for the succeeding calendar year shall be presented to
the Owner no later than September 30th of the preceding year or as to
the initial budgets, no later than sixty (60) days after the
commencement date of this Agreement.
(a) If the proposed Operating and Capital Budgets are
acceptable to Owner, Owner shall so notify Manager
within sixty (60) days after Owner's receipt of the
proposed budget. The proposed Operating Budget when
approved shall then become the Approved Operating
Budget for purposes of this Agreement.
(b) The Approved Operating Budget shall constitute an
authorization for Manager to expend necessary monies
to manage, operate and lease the Premises. Any such
authorization to expend money shall be limited to
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monies specifically set forth with the approved
budget.
(c) The Capital Budget, when approved, shall constitute
an authorization for Manager to expend necessary
monies to implement the items called for in this
budget for the Premises. Any such authorization to
expend money shall be limited to monies specifically
set forth in the approved budget.
(d) Notification and approval of major capital
expenditures will be required before work is begun.
Bids showing the dollar amount will be required, as
well as a proposed work schedule. Periodic reports
on work progress, either verbal or written, will be
provided as requested.
3.5 BANK ACCOUNT: Manager shall establish a separate bank account for the
Premises (the "Operating Account"). Said bank account shall be styled
to include the name of the project that the Operating Account was
established for.
(a) Manager shall deposit all revenues and reimbursements
from tenants into the Operating Account.
(b) Manager shall pay all invoices on a monthly basis,
from the operating account.
(c) Owner shall authorize Manager to pay invoices from
the Operating Account.
(d) Owner shall be an authorized signatory on the
Operating Account.
(e) On or before the 10th of each month, Manager shall
disburse from the Operating Account any remaining
cash balance in excess of One Thousand Dollars
($1,000). The disbursement shall be made via wire
transfer to Owner's designated bank account
accompanied by faxed verification to the Owner of the
wire transfer.
(f) Owner shall fund the Operating Account, to the extent
that it becomes overdrawn through payments made by
Manager on Owner's behalf, on or before the tenth
working day following the Manager's request for
funding. The primary purpose of this subsection is to
provide a policy for payment of property taxes and
capital improvements if requested by Owner.
3.6 EMPLOYEES: Manager shall have in its employ at all times sufficient
number of capable employees to properly, safely, and economically
manage, operate and maintain the Premises. All matters pertaining to
the employment, supervision, compensation, promotion, and discharge of
such employees are the responsibility of Manager.
(a) Manager shall fully comply with all applicable laws
and regulations
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having to do with worker's compensation, social
security, unemployment insurance, hours of labor,
wages, working conditions under Manager's control and
other employer-employee related subjects. Manager
represents that it is and will continue to be an
Equal Opportunity Employer.
(b) Employees of Manager:
(i) Manager, as an independent contractor, has
the authority to control and direct the
management, operation, and leasing of the
Premises. The payments provided under this
Agreement for the performance by Manager
hereunder shall be payments by Owner to
Manager as an independent contractor and not
as an employee.
(ii) All persons employed at the expense of the
Owner in connection with the management,
operation, and leasing of the Premises shall
be employees of the Manager or such
consultants, independent contractor or
contractors as may be retained by Manager.
(c) Executive Personnel: Notwithstanding anything in the
foregoing to the contrary, it is agreed that from the
compensation to be paid Manager pursuant to the terms
of this Agreement, Manager shall be required to bear
the costs of all salaries of Manager's home office
executive and management personnel.
(d) No general, administrative or overhead costs of
Manager's Home Office shall be passed through to
Owner except as specifically stated herein.
(e) If Manager hires on site personnel, leasing agent(s)
and property manager(s) shall be selected requiring
the approval of said personnel by Owner as well as
the Manager.
3.7 COLLECTION OF RENTS AND OTHER INCOME: Manager shall use diligent
efforts to collect all rents and other charges which may become due
from others for services provided in connection with the use of the
Premises. Manager shall identify and collect any income due Owner for
miscellaneous services provided to tenants or to the general public
including, but not limited to, income from parking, tenant storage and
vending machines.
(a) Termination of Lease: Manager cannot and may not
terminate any lease, lock out a tenant, institute
suit for rent or for the possession of the Premises
without the prior approval of Owner. Expenses
actually incurred by Manager in bringing such
approved suit or any other appropriate action will be
borne by the Owner. Manager shall not write off any
income items without the prior approval of Owner.
Receipts for Owner are to be distributed to Owner by
Federal Reserve Bank wire transfer or check to a
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bank designated by owner.
3.8 MAINTENANCE, REPAIRS, ALTERATIONS: Manager shall initiate and
supervise all ordinary and extraordinary repairs, decorations, and
alterations on or about the premises, including (i) repairs or
alterations which Owner is required to make pursuant to the terms of
tenant leases and (ii) the administration of a preventative
maintenance program for all mechanical, electrical and plumbing
systems and equipment.
(a) Operations and Maintenance: Manager shall undertake
and supervise all operational activities of the
Premises such as, but not limited to: janitorial and
cleaning work, window washing, metal and marble
maintenance; patrols of the premises; landscaping;
elevator and escalator maintenance; operation of the
central plant and other HVAC and electrical
equipment; a preventative maintenance program; and
any other maintenance and repair activity to ensure
operation of a quality office building for Owner and
the tenants.
(b) Emergency Repair and Approved Repair Cost: With
respect to any expense not itemized in the Approved
Operating budget, no single expenditure for any
repair shall exceed two thousand five hundred dollars
($2,500) without the prior written approval of Owner,
with the exception of emergencies relating to life
support systems, building safety or other emergencies
threatening damage to persons or to the Premises.
Manager may make such emergency repairs as is
necessary, at the Owners expense, and shall notify
Owner within twenty-four (24) hours after the
occurrence of an event of an emergency nature, the
nature of the remedy implemented by Manager, and the
cost of implementing such remedy. Actual and
reasonable expenses for materials and labor for such
purposes will be paid for from the Operating Account
or by Owner.
3.9 CAPITAL EXPENDITURES: The Approved Capital Budget constitutes the
authorization for Manager to proceed with obtaining bids for capital
improvements covered by the Approved Capital Budget. Any capital
expenditures in excess of five thousand dollars ($5,000) shall require
at least two (2) bids and any capital expenditure in excess of ten
thousand dollars ($10,000) shall require at least three (3) bids.
With respect to the purchase and installation of major items of new or
replacement equipment and/or materials, when the cost exceeds three
thousand dollars ($3,000) for any one item not included in the
Approved Capital Budget, the Manager shall recommend to the Owner the
purchase of such when Manager believes such to be necessary or
desirable and shall obtain Owner's approval prior to purchase. Owner
may pay for capital expenses from its own resources or may authorize
payment by Manager out of the Operating Account. Manager shall
identify any related parties contracted for work on Owner's property.
3.10 SERVICE CONTRACTS: Manager shall arrange on behalf of Owner for the
cleaning, maintenance and services needed by the Property, but shall
not enter into any contract or
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obligation in connection with the management, operation, and
maintenance of the Premises that is not included in the Approved
Operating Budget without the prior written authorization of Owner. As
a condition to obtaining authorization, Manager shall supply Owner
with a copy of the proposed contract and shall state to Owner the
relationship, if any, between Manager and the party proposed to supply
such goods and/or services. If the bid is from a related party, it
must be accompanied by two (2) independent bids for the same work.
Each such service contract entered into by Manager shall not extend
for more than one year, and shall include a provision of cancellation
thereof upon not more than thirty (30) days written notice and without
payment of any cancellation fee, unless otherwise approved in writing
by Owner, and shall require that all contractors provide evidence of
sufficient insurance. All service contracts are entered into by
Manager for the account and in the name of Owner and the funds
necessary to pay for the services so obtained shall be paid from the
Operating Account with funds advanced by Owner.
As part of the annual review of service contracts, two (2) bids must
be procured from vendors for each type of service needed.
3.11 COMPLIANCE WITH LAWS: Manager shall not in the performance of its
services hereunder violate any federal, state, municipal or other
governmental law, ordinance, rule or regulation, and Manager shall use
reasonable efforts to cause all such acts and things to be done, at
the Owner's expense, to comply with any and all such law, ordinance,
rule or regulation affecting the Premises. Manager shall immediately
notify (within a 24 hours period) Owner of any known violation of any
federal, state or municipal or other governmental law, ordinance, rule
or regulation due to the structure or condition of the Premises or the
use made thereof by any tenant, occupant, or employee. If the expense
of remedying any such violation is less than Five Thousand Dollars
($5,000.00), Manager may, (but shall have no obligation to) remedy
such violation and the expenses thereof shall be paid from the
Operating Account. If the expense of remedying such violation exceeds
such amount, Manager shall not take any action with respect to such
violation except to notify Owner and await Owner's written
instructions. Manager shall not in performance of its services
hereunder knowingly violate, and shall comply in all material respects
with the terms of, any ground lease, space lease, mortgage, deed of
trust or other security instrument binding on or affecting any of the
Premises, provided that true and complete copies of such documents
have been delivered to Manager or Owner has otherwise disclosed such
terms to Manager, in writing. In the event of a conflict between the
terms of any such documents and the terms of this Agreement, Manager
shall not take any action except to notify Owner and await Owner's
written instructions. Manager shall not be required to make any
payment or incur any liability in order to comply with any such terms
or conditions of any such instruments.
3.12 NOTIFICATION OF LITIGATION: If Manager shall be apprised of any
claim, demand, suit or other legal proceeding made or instituted
against Owner on account of any matter connected with the Premises,
Manager shall give Owner all information in its possession
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in respect thereof, and shall assist and cooperate with Owner in all
reasonable respects in the defense of any such suit or other legal
proceeding.
3.13 LEASING: Manager shall list and offer for Owner's account, for
rental, all space in the Premises that is available for lease and use
diligence to obtain desirable tenants. Manager is authorized, at
Owner's expense, (which expense shall be itemized in the approved
Operating Budget) to advertise the Premises, to prepare and secure
marketing plans, descriptive material and other forms of advertising,
and to list the Premises with brokers who shall be paid by Owner for
space leased in accordance with commission schedule set forth in
Exhibit "C" attached hereto. All commissions shall be paid in
accordance with Exhibit "C" or pursuant to the applicable agreement
previously approved by Owner. Owner shall be entitled to approve any
brokerage agreement that contemplates commissions which are not in
conformity with Exhibit "C". Manager may employ, at the expense of
Owner (such expense shall be itemized in the approved Operating
Budget) a space planner on a contract basis to prepare layouts and to
provide working drawings to the on-site manager for assistance in
construction of leased space.
(a) Inquiries: All inquiries concerning leases,
renewals, expansions, extensions or continuations of
tenancy, for space in the Premises or any part
thereof, shall be referred to the Manager. Manager
will also keep Owner advised of all space in the
building available for subleasing.
(b) Negotiations: All negotiations connected with the
foregoing shall be conducted by or under the
direction of the Manager subject to the terms of this
Agreement.
(c) Consent of Owner: Without the prior written consent
of Owner, no lease will be entered into for space in
the Premises which does not comply with the leasing
parameters agreed to by Owner and Manager.
Furthermore Owner shall have the right of involvement
in any inquiries, negotiations or other matters
concerning the leasing of space. Upon execution by
lessee of any new lease, lease modification, lease
renewal, etc., Manager will execute lease on Owner's
behalf after receipt of Owner's approval.
(d) Parameters: The leasing parameters, attached hereto
as Exhibit "D", shall be deemed approved by Owner but
may, from time to time, be changed and/or amended by
agreement between Owner and Manager. Leases shall be
drawn by Manager on the lease form reasonably
consistent with the form attached as Exhibit "E".
(i) Annual marketing plans are to be prepared by
January 1st of each year, discussing
marketing and leasing strategies for the
coming year.
(ii) Quarterly updates are to be provided either
in a written format or verbal format at the
Owner's request.
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(iii) Owner will be provided, if requested, a
summary of lease negotiations before a lease
document is presented to the prospective
tenant.
ARTICLE IV
INSURANCE
4.1 MANAGER'S INSURANCE: Manager shall secure and maintain with one or
more insurance companies, reasonably satisfactory to Owner, worker's
compensation and employer's liability insurance covering all employees
of Manager in accordance with State law. Manager shall provide
non-owned or hired automobile liability insurance with bodily injury
limits of not less that One Million Dollars ($1,000,000) per person
and Two Million Dollars ($2,000,000) per accident and property damage
limits of not less than Two Hundred Fifty Thousand Dollars ($250,000)
per event. Owner will be named an additional insured on Manager's
policy. Manager shall furnish satisfactory evidence of the foregoing
insurance to Owner.
4.2 OWNER'S INSURANCE: Owner, at its own expense, will maintain and keep
in force, fire and extended coverage insuring against physical damage
to any of the Premises in amounts at least sufficient to prevent Owner
from becoming a co-insurer under such policies. Owner, at its own
expense, shall obtain and keep in force comprehensive general
liability insurance insuring against loss, damage or injury to
property or persons which might arise out of the occupancy,
management, operation, or maintenance of the Premises with bodily
injury of no less than One Million Dollars ($1,000,000) per person and
property damage not less than Five Hundred Thousand Dollars ($500,000)
per occurrence. Manager will be named an additional insured on all
liability policies. Owner and Manager agree that in the event the
Premises sustain a loss by reason of fire or other casualty which is
covered by fire and extended coverage insurance or other physical
damage insurance and such fire or casualty is caused in whole or in
part by the acts or omissions of Manager, its agents, servants, or
employees then Owner agrees to look solely to its insurance proceeds
and Owner shall have no right of recovery against Manager or its
agents, servants or employees, and no third party shall have any right
of recovery against Manager, its agents, servants, or employees by way
of subrogation provision between Manager and Owner shall be disclosed
to Owner's insurer. This provision shall apply with respect to any
policies presently maintained or that may hereafter be acquired by
Owner. Within thirty days following contract commencement, Owner will
provide a certificate to Manager showing all requirements set forth in
this section.
4.3 HOLD HARMLESS: Owner agrees (1) to indemnify, hold and save Manager
free and harmless from any claim for damages or injuries to persons or
property resulting from: (a) Manager carrying out the provisions of
this Agreement or acting under the direction of Owner, (b) Owner's
failure or refusal to comply with or abide by any rule, order,
determination, ordinance or law of any federal, state or municipal
authority, (c) Owner's failure or refusal to comply with or abide by
or perform its obligations set forth in this
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Agreement, (d) any latent building defects or other defect or
dangerous condition which a visual inspection would fail to disclose
or any unsafe or dangerous condition or characteristic of the Premises
resulting from the design or initial construction of the Premises
(including, but not limited to security systems, door locks, location
of trash receptacles, ingress and egress routes and recreational
structures), (e) any defects, conditions or situations with respect
to the Premises which Manager has disclosed to Owner and requested
Owner's permission to correct or rectify, (f) the willful misconduct
or criminal activity of any third person or agency, except as to
Manager and its employees, with respect to the Premises or any tenant
thereof or (g) the negligent or intentional acts of Owner or Owner's
representatives, officers, employees and agents; and (2) to defend
promptly and diligently, at Owner's sole expense, any claim, action or
proceeding brought against Manager and/or Manager and Owner, jointly
or severally, arising out of or connected with any of the foregoing,
and to hold harmless and fully indemnify Manager from any judgment,
loss or settlement on account thereof. The indemnity herein set forth
is for the sole and exclusive benefit of Manager and is not assignable
to, nor shall inure to the benefit of, by subrogation or otherwise,
any third party, including but not limited to any party providing
insurance coverage to either Owner or Manager.
Nothing in this paragraph shall relieve the Manager from the negligent
or willful acts of Manager, its agents, servants, and/or employees.
4.4 CONTRACTOR'S INSURANCE: Manager shall require all contractors and
subcontractors performing work on, in, or about the Premises, to carry
workmen's compensation and employer's liability insurance in
accordance with the laws of the State. Contracts shall also provide
comprehensive general (including contractual liability coverage) and
now-owned or hired automobile liability insurance, of not less than
Five Hundred-Thousand Dollars ($500,000) per person and One Million
Dollars ($1,000,000) per accident, and property damage limits of not
less that Fifty Thousand Dollars ($50,000).
ARTICLE V
TAXES
5.1 REAL PROPERTY, AD VALOREM OR OTHER TAXES: If requested by the Owner,
Manager shall pay on Owner's behalf any and all real property, ad
valorem or other taxes and assessments, but not State or Federal
Income Taxes levied against any or all of the Premises. The cost
thereof shall be borne by Owner and paid by Manager from the Operating
Account. Manager shall not make any payments on account of mortgage,
deed of trusts, or other security instruments, if any, affecting the
Premises. At Owner's request and expense, Manager will retain an
independent property tax consultant to negotiate the property value to
obtain the most favorable assessments.
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ARTICLE VI
RESPONSIBILITIES OF OWNER
6.1 In order for Manager to set-up and establish operations, Owner shall
provide to Manager such information, documents and certificates
regarding the Premises as Manager shall reasonably request, including,
but not limited to, the following to the extent available:
(a) A current and complete rent roll.
(b) An Operating Budget and Capital Budget for the past
and current calendar year.
(c) Income Cash Flow Report and Variances from Budget for
prior and current calendar year.
(d) A current list of all employees, title,
salaries/wages.
(e) A current list of brokers actively engaged in leasing
the Premises.
(f) Copies of lease documents for all leases currently in
force.
(g) All leases currently in dispute or litigation.
(h) All files on any litigation and/or disputes regarding
any and all matters, including, but not limited to:
parts, equipment, furnishings, real property,
easements, taxes, third party contracts,
employer-employee relations, and the like.
(i) Legal descriptions of the Premises and any
improvements.
(j) Site plans and specs.
(k) An inventory of Owner's personal property on
Premises, all tools, equipment, and supplies.
(l) List of vendors.
(m) All pertinent books and records relating to the
management, operation and leasing of the Premises.
(n) Third party contracts in force.
(o) Mortgagees name and addresses; lien holders, and the
like.
6.2 The above and any and all books and records are and shall remain the
property of Owner but shall be made available to Manager for its use
and knowledge in assuming the duties and responsibilities of Manager
under this Agreement.
ARTICLE VII
MANAGER'S COMPENSATION
7.1 MANAGEMENT FEE: See Exhibit "B".
7.2 GROSS REVENUES:
(a) For the purposes of computing the Management Fee,
Gross Revenues shall mean the total monthly
collections received from the Premises, including all
rents paid by tenants, including escalations;
operating expense pass throughs; income from the
operation of concessions; parking revenues;
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payments for lease cancellations less lease
acquisition costs; security deposits applied to the
payment of rent after tenant defaults or, applied to
the lease for any rent and any other income derived
from the utilization or operation of the Premises.
(b) Gross Revenues shall exclude all other sources of
revenue including but not limited to:
(i) Reductions in the security deposits
returned to tenants due to damage
resulting from tenant misuse of or
damage to the Premises.
(ii) Receipt arising out of the sale of
assets, settlement of fire losses or
liability claims, condemnation
proceeds or items of a similar
nature.
(iii) Rebates, discounts or other credits
received by the Manager incident to
purchases, contractors or other
arrangements entered into pursuant
to this Agreement for the account of
Owner, which items shall accrue
solely to the benefit of the Owner.
(iv) Rents that have been abated (free
rent).
(v) Interest Income.
(vi) Credits to tenants for escrows of
operating expenses in excess of
actuals.
7.3 COMPENSATION OF MANAGER FOR LEASING: Compensation for the negotiation
and consummation of a lease or renewal in the project is scheduled in
Exhibit "C".
7.4 COMPENSATION OF MANAGER FOR CONSTRUCTION SERVICES: Manager shall
receive a construction supervision fee in accordance with the schedule
below. Such fee shall be due and payable on completion of the
construction activities. Manager shall not receive a fee for
supervision or construction management to cosmetic changes (painting,
wall papering, painting, etc.) of tenant space.
Construction Cost Fee
----------------- ---
$0 - $7,500 0%
$7,501 - $25,000 5%
$25,001 + 3%
7.5 The cost of the property manager shall not be a direct cost of the
property.
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ARTICLE VIII
TERM AND TERMINATION
8.1 TERM: This Agreement shall commence July 1, 1996 (the "Commencement
Date") and shall continue for a period of twelve (12) months and
thereafter on a month-to-month basis, but may be terminated with or
without cause by Owner or Manager upon no less than thirty (30) days
advance written notice from the party so terminating.
8.2 TERMINATION ON SALE: Anytime that Owner shall sell, transfer, or
convey title to all or substantially all of the Premises to a
bona-fide, non-related party, either party may terminate this
Agreement immediately upon written notice to the other party.
8.3 TERMINATION BY DEFAULT: Notwithstanding anything to the contrary set
forth herein, in the event Owner or Manager shall default, with
respect to any material covenant, term or provision of this Agreement,
and the same shall not be cured or corrected within thirty (30) days
following the receipt of the written notice from the non-defaulting
party specifying the nature of such default, then the party not in
default may terminate this Agreement upon ten (10) days written notice
to the defaulting party. No notice shall be required and no fee shall
be payable as set forth in Section 8.2 in the event Owner elects to
cancel for "Cause."
8.4 TERMINATION FOR CAUSE: For purposes of this Agreement "Cause" shall
mean the occurrence of any of the following:
(a) Any default, by Owner or Manager, which is not cured
or corrected in accordance of the provisions of
Section 8.3 above.
(b) Termination By Bankruptcy: If a petition for
bankruptcy, reorganization or rearrangement is filed
under state or federal insolvency statutes by or
against Manager or Owner, or either party shall make
an assignment for the benefit of creditors or take
advantage of any insolvency act, then the party not
seeking credit or relief may terminate this Agreement
upon ten (10) days written notice to the other party.
(c) Fraud: In the event Manager should commit fraud
against Owner or be convicted of an illegal act.
(d) Ownership Change: In the event that more than fifty
percent (50%) of the beneficial ownership of Manager
is transferred to persons or entities who are not
Cavender & Hill Properties, Inc. or Cavender & Hill
properties, Inc. affiliated employees or partners.
8.5 MANAGER'S OBLIGATIONS AFTER TERMINATION: Upon the termination of this
Agreement Manager shall:
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(a) Deliver Records. Deliver to Owner, or such other
person or persons designated by Owner, copies of all
books and records of the Premises and all funds in
the possession of Manager belonging to Owner or
received by Manager pursuant to the terms of this
Agreement.
(b) Assignment. Assign, transfer or convey to such
person or persons as may be designated by Owner all
service contracts and personal property relating to
or used in the operation and maintenance of the
Premises, except any personal property which was paid
for and is owned by Manager.
(c) Termination of Obligations: Rights to Compensation.
Upon any termination pursuant to this Article VIII,
the respective obligations of the parties hereto
shall cease as of the date specified in the notice of
termination provided Manager shall be entitled to
receive any and all compensation which may be due
Manager hereunder at the time of such termination or
expiration.
(i) Such compensation shall include any fees set
forth in Article VII above (whether
Management Fees or otherwise) prorated to the
date of termination, together with leasing
commissions on signed leases due Manager for
leasing activities through the date of
termination.
8.6 FINAL ACCOUNTING:
(a) Manager shall, within twenty (20) days of the date of
expiration or termination of this Agreement, deliver
to Owner the following:
(i) An accounting reflecting the balance
of income and expenses of the
Premises to the date of termination
or expiration of the Agreement.
(ii) Any balance of monies of Owner then
held by Manager.
(iii) All executed leases, receipts for
deposits, insurance policies, unpaid
bills, correspondence and other
documents, books and records, which
are the property of Owner in the
possession of Manager.
(b) Manager shall warrant that the reports given to Owner
are accurate.
(c) Owner shall have sixty (60) days from the date
Manager delivers the foregoing to Owner within which
to deliver to Manager a written statement approving
or disapproving, as the case may be, the foregoing
as:
i) a correct accounting of the time and
expenses of the
14
<PAGE> 15
Premises;
ii) the correct balance of monies of
Owner then held by Manager; and
iii) receipt of all executed leases,
receipts of deposits, insurance
policies, unpaid bills,
correspondence, other documents,
books and records which are the
property of Owner.
In the event of a disapproval, Owner shall set forth
in reasonable detail why such approval cannot be
given, including any inaccuracy in said account.
Upon receipt of said written approval, or upon the
expiration of said sixty (60) day period in the event
such approval is not given, Manager shall be deemed
to have fully performed all of its obligations under
this Agreement and shall be fully released by Owner
from any and all liability and obligation to Owner
under this Agreement and the performance thereof by
Manager and Owner shall thereupon be fully released
from all liability and obligations to Manager under
this Agreement.
ARTICLE IX
NOTICES AND ASSIGNMENTS
9.1 NOTICES: All notices, demands, consents, and reports provided for in
this Agreement shall be in writing and shall be given to Owner or
Manager at that address set forth below or at such other address as
they individually may specify thereafter in writing:
OWNER: Murray Income Properties I, Ltd.
299 South 9th Street
Suite 203
Oxford, Mississippi 38655
Attn: Brent Buck
with copy to: Murray Income Properties I, Ltd.
5550 LBJ Freeway
Suite 675, Lock Box 6
Dallas, Texas 75240
Attn: Mitchell L. Armstrong
MANAGER: Cavender & Hill Properties, Inc.
900 Isom Road
Suite 306
San Antonio, Texas 78216
Attn: Alex H. Yount
Any such notice or other communication shall be deemed received
immediately upon
15
<PAGE> 16
delivery in person or three (3) days after being deposited in the
United States mail, registered or certified mail, return receipt
requested, postage prepaid, addressed to the foregoing address. Such
notices, demands, consents, and reports may also be delivered by any
other method or means permitted by law and providing proof of
delivery.
9.2 ASSIGNMENTS: This Agreement and all rights hereunder shall not be
assignable by Manager. Subject to the foregoing limitations on
assignment, this Agreement shall be binding upon and shall inure to
the benefit of the parties hereto and their respective successors and
assigns. Whenever in this Agreement, a reference is made to any of the
parties hereto, such reference shall be deemed to include a reference
to the successors and assigns of such parties.
ARTICLE X
MISCELLANEOUS
10.1 CONSENT AND APPROVALS: Owner's consent or approval may be given only
by representatives of Owner from time to time designated in writing by
a duly authorized representative of Owner.
10.2 PRONOUNS: The pronouns used in this Agreement that referred to
Manager shall be understood and construed to apply whether the Manager
be an individual, co-partnership, corporation or an individual or
individuals doing business under a firm or trade name.
10.3 AMENDMENTS: Except as otherwise herein provided, any and all
amendments, additions or deletions to this Agreement shall be null and
void unless made by the parties in writing.
10.4 HEADINGS: All headings herein are inserted only for convenience and
ease of reference and are not to be considered in the construction or
interpretation of any provision of this Agreement.
10.5 REPRESENTATIONS: Manager represents and warrants that it is qualified
to manage the Premises and perform all obligations assumed by Manager
hereunder. Owner has clear title to the property or necessary
authority to enter into this management and leasing agreement.
10.6 COMPLETE AGREEMENT: This Agreement supersedes and takes the place of
any and all previous management agreements for the Premises entered
into between the parties hereto.
10.7 GOVERNING LAW: This Agreement shall be governed by and construed in
accordance with the laws of the State of Texas.
16
<PAGE> 17
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
June 30th, 1996
OWNER: MANAGER:
MURRAY INCOME CAVENDER & HILL
PROPERTIES I, LTD. PROPERTIES, INC.
By: Murray Realty Investors VIII, Inc.
Its: General Partner
By: /s/ BRENT BUCK By: /s/ J. MARK CAVENDER
------------------------------- -------------------------------
Brent Buck J. Mark Cavender
Title: Executive Vice President Title: President
17
<PAGE> 18
EXHIBIT A
DESCRIPTION OF REAL PROPERTY
That certain tract of land situated in the County of Bexar, State of Texas and
more particularly described as follows:
Lot 1, Castle Hills City Block 219, Castle Hills, Bexar County, Texas.
Tax Parcel Number: 05778-000-0150
18
<PAGE> 19
EXHIBIT B
MANAGEMENT FEES
The Owner shall pay Manager a monthly management fee in an amount equal to Four
percent (4%) of the monthly Gross Revenues (defined under Section 7.2 of the
agreement) for the preceding month with a minimum fee of $750 per month.
19
<PAGE> 20
EXHIBIT C
LEASING COMMISSIONS
A. LEASES
Commissions shall be payable in accordance with the following payment
schedule and rates:
1. Payment Schedule of Commissions:
(a) New Leases and Expansions:
i. One-half (1/2) upon execution of a lease or
expansion agreement by Owner and the tenant
(if required) and, Owner's receipt of any
security deposit required by the lease and
the first month's rent under the lease.
ii. One-half (1/2) upon the actual occupancy and
acceptance by such tenant of the leased
premises or expansion space.
(b) Renewals or Extensions. The total commission payable
for a renewal or extension of a lease shall be due
upon execution of the renewal or extension agreement
by Owner and the tenant and, Owner's receipt of any
additional security deposit required by the renewal
or extension agreement.
2. Rates:
(a) Except as provided in paragraph B.2 below, all leases
and expansions not involving third-party brokers,
four percent (4%) of the total base rent less the
exclusions described below.
(b) Except as provided in paragraph B.2 below, all leases
and expansions involving third-party brokers, two
percent (2%) of the total base rent less the
exclusions described below to Broker and four percent
(4%) of the total base rent, less the exclusions
described below to the third party broker.
B. TERMS AND CONDITIONS:
The above payment schedule and rates are subject to the following
terms and conditions:
1. Term of More than 10 Years:
If a lease term (including any and all renewal periods) is in
excess of ten (10) years, then no commission shall be paid for
that period following the tenth (10th)
20
<PAGE> 21
anniversary of the lease commencement date.
2. Renewal or Extension of Lease:
If a lease for which a commission is payable hereunder is
renewed or extended then Owner shall pay a leasing commission,
with respect to the term of the extension, equal to one half
of the commission that would otherwise be payable hereunder,
and no other sums shall be owed with respect to such lease.
No commissions shall be payable hereunder with respect to
renewals or extensions of leases after the expiration or
termination of the Term of this Agreement except as provided
for in Paragraph 3.2.
3. Exclusions from Commissionable Base Rent:
The following shall be excluded from commissionable base rent
under any lease:
(a) Escalations in excess of the original base rent for
each year, as stated in the lease, including, without
limitation, escalations resulting from increases in
ad valorem/real estate taxes, in operating expense
pass-throughs and/or in the Consumer Price Index or
similar index resulting in a corresponding increase
to the base rental (if applicable).
(b) Rentals credited to any tenant by reason of lease
takeover or lease pick-ups and/or Owner take-back or
subleasing.
(c) Additional rentals for special tenant services above
and over Owner's customary tenant services.
(d) Cancellation or penalty payments for termination
rights.
(e) Late payment charges.
(f) Payments for parking.
(g) Percentage rental in the case of retail leases.
(h) Cash credits, payments, deferments or abatements of
rent, tenant improvement costs and allowances or
other concession items.
(i) Security deposits (including any amounts necessary to
restore any security deposit after application of
same).
(j) Rent for services or facilities available to tenant
at locations other than the demised premises covered
by the lease.
4. Cancellations: No leasing commission shall be deemed earned
or payable on the cancelable portion of a lease term. A
commission shall be payable only on the
21
<PAGE> 22
noncancellable portion of the lease term, and such term shall
apply for the purposes of calculating the commission earned
and payable.
In the event the lease is not canceled, then an additional
leasing commission shall be due for the remaining lease term
calculated as if such remaining term were a renewal period
(subject, however, to the terms and provisions of paragraphs
B1 and B2 above).
5. No additional Payments: The compensation to Broker provided
herein includes all costs, taxes, fees and charges, and no
additional payments shall be made by Owner to Broker in
connection therewith.
22
<PAGE> 23
EXHIBIT D
LEASING PARAMETERS
To Be Determined
23
<PAGE> 24
EXHIBIT E
SAMPLE LEASE DOCUMENT
To be attached.
24
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MURRAY
INCOME PROPERTIES I, LTD. AND CONSOLIDATED JOINT VENTURE BALANCE SHEET AND
STATEMENT OF EARNINGS AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FORM 10-Q FOR THE PERIOD ENDED JUNE 30, 1996.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> APR-01-1996
<PERIOD-END> JUN-30-1996
<CASH> 1,334,120
<SECURITIES> 0
<RECEIVABLES> 710,731
<ALLOWANCES> 25,598
<INVENTORY> 0
<CURRENT-ASSETS> 2,019,253
<PP&E> 26,458,528
<DEPRECIATION> 8,500,089
<TOTAL-ASSETS> 20,264,199
<CURRENT-LIABILITIES> 190,338
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 18,378,110
<TOTAL-LIABILITY-AND-EQUITY> 20,264,199
<SALES> 0
<TOTAL-REVENUES> 745,000
<CGS> 0
<TOTAL-COSTS> 420,051
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 1,304
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 210,189
<INCOME-TAX> 0
<INCOME-CONTINUING> 210,189
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 210,189
<EPS-PRIMARY> 7.30
<EPS-DILUTED> 7.30
</TABLE>
<PAGE> 1
In the event that the General Partners decide to honor a request, they
will notify the requesting Limited Partner in writing of such fact and will
forward to such Limited Partner the documents necessary to effect such
repurchase within 60 days following the receipt of the request by the General
Partners. The purchase price will be equal to 90% of the estimated fair value
of the Interests to be repurchased, as determined by the General Partners by
using such methods of valuation as they deem appropriate. The General Partners
may consider, among other criteria, the current market value of the
Partnership's properties and other assets, less all outstanding Partnership
debts and obligations. The General Partners will, as soon as possible following
return of such documents from the Limited Partner, repurchase the Interests of
the Limited Partner, provided that (i) sufficient amounts are then available in
the Repurchase Fund to repurchase all of such Interests and (ii) such documents
are returned by the end of the fiscal quarter in which the Limited Partner's
request was received by the General Partners ("current quarter"). In the event
that items (i) or (ii) 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 Limited Partners will be deemed to have priority over
subsequent requests for repurchases.
Special Power of Attorney
Under the Partnership Agreement and Subscription Agreement, each
Limited Partner irrevocably appoints the General Partners his attorney-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)
the date of disposition of all assets of the Partnership, (b) 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, (c) that date on which Limited Partners holding a majority
of Interests vote in favor of dissolution and termination, or (d) January 31,
2020.
Upon the election by the Limited Partners to continue the business of
the Partnership after an event specified in (b) above, the Partnership shall be
required to purchase the General Partner's general partnership interest
pursuant to Section 12.3 and Section 12.4 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.
65
<PAGE> 2
"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 (but not below zero) to Limited
Partners, 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 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 one year after the Registration Statement first became effective.
"Corporate General Partner": Murray Realty Investors VIII, Inc.
"Escrow Agent": Mercantile National Bank at Dallas, Dallas, Texas, or
its successor.
"General Partners": Murray Realty Investors VIII, Inc. and Crozier
Partners VIII, 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 3,000 Interests have been accepted by the General Partners.
"Interest": The limited partnership interest in the Partnership
acquired by the payment of 81,000 to the Partnership.
"Limited Partners": All persons who are admitted to the Partnership as
limited partners.
"Minimum Deadline": This date that is 120 days after the date of this
Prospectus, unless extended by the General Partners by up to an additional 90
days.
"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.
"Non-corporate General Partner": Crozier Partners VIII, Ltd.
"Organizational and Offering Expenses": Expenses incurred in connection
with the organization of the Partnership and the offering of the Interests
(excluding selling commissions), including legal fees, accounting fees, escrow
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 $1,000 per Interest.
"Partner": Any General Partner or Limited Partner.
"Partnership": The partnership created under the Agreement of Limited
Partnership attached as Exhibit A.
66
<PAGE> 3
"Preferred Return": The cumulative preferred return to each
Limited Partner equal to 12% per annum on his Average Annual Unreturned
Invested Capital from either Cash Distributions from Operations or Cash
Distributions from Sales or Refinancings, or both. 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 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 on the date the Registration Statement is declared effective by the
Securities and Exchange Commission.
"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 the Corporate General Partner's share
of Cash Distributions from Operations to be used to repurchase Limited Partner
Interests under certain circumstances.
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 a maximum of 30,000 Interests
priced at $1,000 per Interest. 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 is two Interests. The minimum subscription
for other investors is five 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 its 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 1/2% of the gross
proceeds on all sales made directly by it or by other dealers in accordance
with the following schedule:
<TABLE>
<CAPTION>
Amount of Investment
- ---------------------------------- Commission
From To Rate
- ---------- ---------- ----------
<S> <C> <C>
$ 2,000 $ 25,000.................... 8 1/2%
26,000 100,000.................... 7 1/2%
101,000 250,000.................... 6 1/2%
251,000 500,000.................... 5 1/2%
501,000 1,000,000.................... 4 1/2%
over $1,000,000...................................... 2 1/2%
</TABLE>
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. 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 8.5% 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.
67
<PAGE> 1
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 retirement, resignation, removal, adjudication of
bankruptcy, insolvency, dissolution, insanity or death. 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
retirement, resignation, removal, adjudication of bankruptcy, insolvency,
dissolution, insanity or death, 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.
12.4 Within 90 days after the retirement, resignation, removal,
adjudication of bankruptcy, insolvency, dissolution, insanity or death of a
General Partner (except that a General Partner shall not voluntarily withdraw
from the Partnership 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.
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.
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 five Interests unless to an Individual Retirement
Account and then not less than two 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.
A-17
<PAGE> 2
(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 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
substitute 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 two Interests if such assignee is an Individual Retirement
Account and at least five Interests if such assignee is not an
Individual Retirement Account and, if the assignor shall retain any
Interests, such retention shall consist of at least two Interests if
such assignor is an Individual Retirement Account and at least five
Interests if such assignor is not an Individual Retirement Account;
(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,
acknowledgment and delivery to the General 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 $50 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 in the Partnership 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.
A-18
<PAGE> 3
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 interest
in the Partnership 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, Affiliate
or assign 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, Affiliates and assigns from any liability, loss or damage
incurred by them or by the Partnership by reason of any act performed or
omitted to be performed by them in connection with the activities of the
Partnership or in dealing with third parties on behalf of the Partnership,
including costs and attorneys' fees (which attorneys' fees may be paid as
incurred) and any amounts expended in the settlement of any claims of
liability, loss or damage, provided that such action 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 and did not constitute fraud, negligence (gross or ordinary) or
breach of fiduciary duty by such General Partner or such officer, director,
partner, Affiliate or assign and provided further that any such indemnification
shall be recoverable only from the assets of the Partnership and not from the
assets of the holders of Interests. Notwithstanding the foregoing, no
Affiliate will be indemnified or excused from liability under this Agreement in
connection with Partnership activities to the extent such Affiliate is
rendering contract services for which it receives a competitive fee. All
judgments against the Partnership and a General Partner, wherein a General
Partner is entitled to indemnification, must first be satisfied from
Partnership assets before a General Partner shall be responsible for such
obligations. The Partnership shall not pay for any insurance covering liability
of a General Partner or of officers, directors, partners, Affiliates and
assigns of a General Partner for actions or omissions for which indemnification
is not permitted hereunder; provided, however, that nothing contained herein
shall preclude the Partnership from purchasing and paying for such types of
insurance, including extended coverage liability and casualty and workmen's
compensation, as would be customary for any person owning comparable property
and engaged in a similar business or from naming a General Partner and any
Affiliate as additional
A-19
<PAGE> 1
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 II, Ltd.
AMENDMENT NO. 9
Explanation of Amendment. Section 10.15 requires the Corporate General
Partner 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. The Corporate General Partner is permitted to commingle the amount
allocated to the "Repurchase Fund" with other assets of the Corporate General
Partner. To the present time, however, the Corporate General Partner has not
been paid any Cash Distributions from Operations since the allocation and
payment of Cash Distributions to the Corporate General Partner is subordinated
to the prior receipt by the Limited Partners of a non-cumulative 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.
Since the amendments herein will reduce the allocation of Cash
Distributions from Operations to the Corporate General Partner from 8% to 3% and
will reallocate 5% of such 8% to the Non-Corporate General Partner (subordinate,
of course, in each instance to the prior receipt by the Limited Partners of a
non-cumulative 7% annual return from either Cash Distributions from Operations
or Cash Distributions from Sales or Refinancings, or both), this amendment will
require both the Corporate General Partner and the Non-Corporate General
Partner, in the proportions of 3/8ths for the Corporate General Partner and
5/8ths for the Non-Corporate General Partner, 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 last two sentences in the first paragraph of Section
10.15 are hereby deleted and there is hereby substituted in lieu thereof the
following three sentences:
"The Corporate General Partner will allocate 25% of its share of Cash
Distributions from Operations to a "Repurchase Fund" and the
Non-Corporate General Partner 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
non-cumulative 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. The Corporate General
Partner's share of Cash Distributions from Operations allocated to the
Repurchase Fund will be commingled with other assets of the Corporate
General Partner and the Non-corporate General Partner's share of Cash
Distributions from Operations allocated to the Repurchase Fund will be
commingled with other assets of the Non-corporate General Partner. Any
repurchase of Interests pursuant to this Section 10.15 shall be in the
proportions of 3/8ths by the Corporate General Partner and 5/8ths by the
Non-corporate General Partner, 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
(vi)
<PAGE> 1
commissions on such Interests. No selling commissions were paid on the
five Interest purchased by the Initial Limited Partner.
(4) For a discussion of the limitations imposed by the NASAA Guidelines
with respect to the percentage of capital contributions available for
the payment of acquisition expenses, see footnote (3) to "Management
Compensation."
(5) Assumes an initial working capital reserve of 2% of gross offering
proceeds. See "Investment Objectives and Policies - Working Capital
Reserve."
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 ARMS-LENGTH BARGAINING.
See "Conflicts of Interest."
<TABLE>
<CAPTION>
Entity Receiving Method of Determination
Form of Compensation Compensation and Estimated Dollar Amount
- -------------------- ---------------- ---------------------------
<S> <C> <C>
Offering Stage
Selling Commissions Murray Securities Corpora- Up to $85 per Interest sold,
tion, an Affiliate of the reduced for purchases by one
General Partners(1) investor of more than 25
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
$2,549,575 if 30,000 Interests
are sold.(2)
Reimbursement of Murray Realty Investors Actual out-of-pocket Organiza-
Organizational and VIII, Inc. or its Affiliates tional and Offering
Offering Expenses(3) Expenses, including
accounting, legal, printing,
registration fees, etc.
Acquisition Stage
Purchase of Murray Properties Actual costs of properties
Properties at Cost(4) Company, an Affiliate acquired by Affiliates.
of the General Partners, Dollar amount is not
or its Affiliates determinable at this time.(5)
Title Insurance Dallas Title Company or A portion of the premium
Commissions(6) Texas Title Company, paid for title insurance upon
Affiliates of the General acquisition of a property.
Partners(7) The premium in Texas is
fixed by the State. Dollar
amount is not determin-
able at this time.(5)
</TABLE>
10
<PAGE> 2
<TABLE>
<CAPTION>
Entity Receiving Method of Determination
Form of Compensation Compensation and Estimated Dollar Amount
- -------------------- ---------------- ---------------------------
<S> <C> <C>
Operational Stage
Property Management Fees Murray Management Corp- An amount equal to (a) for
ration, an Affiliate of its management services,
the General Partners(8) the lesser of (i) 6% of gross
revenues or (ii) the amount
customarily charged in
arms length transactions
by others rendering com-
parable services in the
locality where the property
is located, considering the
size and type of each such
property plus (b) reim-
bursement for the actual costs
of on-site personnel engaged
in the management, leasing
and maintenance of the
property of the Partnership
and certain other costs.
Dollar amount is not deter-
minable at this time.(5)
Reimbursement of Part- Murray Realty Investors Actual cost of goods and
nership Operational VIII, Inc. or its materials used for and by the
Expenses(9) Affiliates Partnership and obtained
from an entity not affiliated
with a General Partner or an
Affiliate of the General
Partners and certain ad-
ministrative services. Dollar
amount is not determinable
at this time.(5)
Casualty Insurance Murray General Agency, A portion of the premiums
Commissions Inc., an Affiliate of paid for casualty insur-
the General Partners(10) ance. The cost of the
insurance cannot exceed
the lower quote for com-
parable terms and coverage
from two independent
brokers. Dollar amount is
not determinable at this
time.(5)
Partnership Administrative Murray Savings Associa- The excess of Murray Savings
and Property Operating tion, an Affiliate of Association's rate of
Account the General Partners(11) return on the Partnership
funds in such account over
the interest rate paid to
the Partnership on such
account. Dollar amount is
not determinable at this
time.(5)
</TABLE>
11
<PAGE> 3
<TABLE>
<CAPTION>
Entity Receiving Method of Determination
Form of Compensation Compensation and Estimated Dollar Amount
- ------------------------ ------------------------ --------------------------------
<S> <C> <C>
Interest and Other A General Partner or an An amount not in excess of
Financing Charges or Affiliate of the General the amounts that would be
Fees Partners(12) charged 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 Mercantile
National Bank at Dallas.
Dollar amount is not
determinable at this time.(5)
Distributive Share of Crozier Partners VIII, The Non-corporate General
Cash Distributions Ltd. and Murray Realty Partner will receive 2% of
from Operations(13) Investors VIII, Inc.(14) all Cash Distributions from
Operations. The Corporate
General Partner 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 Closing
Date. Dollar amount is not
determinable at this time.(5)
Liquidation Stage
Real Estate Commissions Crozier Partners VIII, Ltd. An amount equal to 50% of the
or its Affiliates; Murray competitive real estate
Realty Investors VIII, Inc. commission, such commission
or its Affiliates(14)(15) not to exceed 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, or both. Dollar
amount is not determinable
at this time.(5)
</TABLE>
12
<PAGE> 4
<TABLE>
<CAPTION>
Entity Receiving Method of Determination
Form of Compensation Compensation and Estimated Dollar Amount
- --------------------------- ------------------------- -------------------------------
<S> <C> <C>
Title Insurance Commissions Dallas Title Company or Texas A portion of the premiums paid
Title Company, Affiliates of for title insurance upon sale,
the General Partners(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)
Distributive Share of Cash Crozier Partners VIII, Ltd. The Non-corporate General
Distributions from Sales or and Murray Realty Partner will receive 1% of
Refinancings(13)(16) Investors VIII, Inc.(14) all Cash Distributions from
Sales or Refinancings. The
remaining 99% shall be
allocated (a) first to the
Limited Partners until they
have been returned their
Original Invested Capital
from Cash Distributions from
Operations or Cash
Distributions from Sales or
Refinancings, or both (b)
then to the Corporate General
Partner 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
80% to the Limited Partners
and 20% to the General
Partners. See "Income and
Losses and Cash
Distributions." Dollar amount
is not determinable at this
time.(5)
</TABLE>
- ------------
(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 sale by such other
broker-dealers, the Dealer Manager has advised the Partnership that the
Dealer Manager will pay to such other broker-dealers all or a portion of
its commission from such sales.
(2) See "The Offering" for a discussion of the reduction in selling
commissions payable with respect to sales to one purchaser or more than
25 Interests or with respect to sales to officers, directors, partners,
employees or Affiliates of the General Partners or their Affiliates.
13
<PAGE> 5
(3) The NASAA Guidelines require that, at a minimum, an amount equal to the
greater of (i) 67% of the Limited Partners' capital contributions or
(ii) 80% of such capital contributions reduced by .1625% for each 1% of
indebtedness encumbering the Partnership's properties 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 working capital
reserves not in excess of 5% of gross offering proceeds). 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, non-recurring management fees, or any
fees of a similar nature, 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. It is anticipated that the
Partnership will not pay any acquisition fees to the General Partners or
their Affiliates and the total of acquisition fees to all parties and
acquisition expenses will not exceed 1% of the Limited Partners' capital
contributions. Based on these assumptions and assuming the sale of
30,000 Interests with Organizational and Offering Expenses and selling
commissions equal to 11.5% of the Limited Partners' capital
contributions, the amount that would be invested in properties would be
equal to 87.5% 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 assume loans in connection therewith) and temporarily hold
title thereto for the purpose of facilitating the acquisition of such
property or the borrowing of money or obtaining of financing for the
Partnership, or any other purpose related to the business of the
Partnership, provided that such property is purchased by the Partnership
for a price no greater than the cost of such property to the Affiliate,
and provided there is no difference in interest rates of the loans
secured by the property at the time acquired by the Affiliate and the
time acquired by the Partnership, nor any other benefit arising out of
such transaction to the Affiliate apart from compensation otherwise
permitted herein. In such event, such Affiliate may be reimbursed for
its expenses incurred in holding such real property prior to the
acquisition of such property by the Partnership. On March 15, 1984,
Murray Properties Company acquired Mountain View Plaza, a shopping
center in Scottsdale, Arizona for a purchase price of $6,392,916. If
sufficient funds are received by the Partnership pursuant to this
offering, the Partnership will acquire the Property from Murray
Properties Company and Murray Properties Company will be reimbursed as
provided herein. See "The 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, in 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
14
<PAGE> 6
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% of 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. Such fee
shall include all leasing and re-leasing fees and bonuses, and
leasing-related services, except that a separate 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 the cost of such services or 90% of the
competitive price that would be charged by non-affiliated persons rendering
similar services in the same or comparable geographic location. 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 supplies, repairs, furniture, 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 duplicate services and (c) the aggregate cost to the Partnership
will not exceed the amount which would be customarily charged in arms-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 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
15
<PAGE> 7
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. 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 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 officers, 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 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 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. "Costs of Services" for purposes of this paragraph
shall mean the pro rata cost of personnel, including an allocation of
overhead directly attributable to such personnel, based on the amount of
time such personnel spent on such services, or other method of allocation
acceptable to the Partnership's independent certified public accountant.
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 and 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 to 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 and property operating account 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. Murray Savings
Association will pay the Partnership the highest interest rate permitted by
law on such
16
<PAGE> 8
accounts. Such accounts are insured up to a maximum of $100,000 by the
Federal Savings and Loan Insurance Corporation ("FSLIC"). It is not
anticipated that the balance of such accounts will exceed $100,000 on an
ongoing basis except to the extent monthly property operating expenses
have not been charged against collected rental income for any such
month. Murray Savings Association may receive indirect compensation to
the extent that Murray Savings Association's rate of return on the
Partnership funds in such account exceeds the interest rate paid to the
Partnership on such accounts. The Partnership will not be charged any
servicing fees on this account.
(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 any 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 is 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 Mercantile National Bank at Dallas.
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 a 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
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.
(13) For a discussion of Cash Distributions from Operations and Cash
Distributions from Sales or Refinancing, see "Income and Losses and Cash
Distributions."
(14) Crozier Partners VIII, Ltd. was formed as of January 10, 1984 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) All real estate commissions payable to the General Partners or their
Affiliates for real estate brokerage 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 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 two-thirds to the Non-corporate General Partner or its
Affiliates and one-third to the Corporate General Partner 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 the Non-corporate General Partner) will be
divided two-thirds to the Non-corporate General Partner and one-third to
the Corporate General Partner.
17
