<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-----------------
FORM 10-K
(Mark One)
X Annual Report pursuant to Section 13 or 15(d) of the Securities
- ---------- Exchange Act of 1934
For the Fiscal Year Ended DECEMBER 31, 1998
OR
- ---------- Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the transition period from ______________ to _______________
COMMISSION FILE NO.
0-17183
---------------
MURRAY INCOME PROPERTIES II, LTD.
(Exact Name of Registrant as Specified in its Charter)
TEXAS 75-1946214
(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)
(972) 991-9090
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ ]
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TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I
Page
<S> <C> <C>
Item 1. Business 1
Item 2. Properties 3
Item 3. Legal Proceedings 3
Item 4. Submission of Matters to a Vote of Security Holders 3
PART II
Item 5. Market for the Partnership's Limited Partnership
Interests and Related Security Holder Matters 4
Item 6. Selected Financial Data 4
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 5
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 9
Item 8. Financial Statements and Supplementary Data 10
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 21
PART III
Item 10. Directors and Executive Officers of the Partnership 22
Item 11. Executive Compensation 23
Item 12. Security Ownership of Certain Beneficial Owners
and Management 24
Item 13. Certain Relationships and Related Transactions 25
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 26
Signatures 33
Index to Exhibits 34
</TABLE>
<PAGE> 3
PART I
ITEM 1. BUSINESS.
General. Murray Income Properties II, Ltd. (the "Partnership") was formed
December 23, 1985 under the Texas Uniform Limited Partnership Act to acquire
recently constructed income-producing shopping centers located in growth
markets. As of November, 1989, the Partnership became governed by the Texas
Revised Limited Partnership Act. The General Partners of the Partnership are
Murray Realty Investors IX, Inc., a Texas corporation, and Crozier Partners IX,
Ltd., a Texas limited partnership.
In September 1986, the Partnership acquired a 15% interest in Tower Place
Joint Venture, which owns Tower Place Festival Shopping Center ("Tower Place").
The remaining 85% interest in the joint venture is owned by Murray Income
Properties I, Ltd., a publicly-registered real estate limited partnership, the
general partners of which are affiliates of the General Partners. The
Partnership also acquired Paddock Place Shopping Center ("Paddock Place") on
December 17, 1986, Germantown Collection Shopping Center ("Germantown") on
February 9, 1988, and 1202 Industrial Place (an office/warehouse facility) on
February 26, 1988. All acquisitions were paid for in cash. For a more detailed
description of the joint venture interest and the properties acquired by the
Partnership, see "Item 2. Properties".
The Partnership is in competition for tenants for its properties with
other real estate limited partnerships as well as with individuals,
corporations, real estate investment trusts, pension funds and other entities
engaged in the ownership and operation of retail real estate. When evaluating a
particular location to lease, a tenant may consider many factors, including,
but not limited to, space availability, rental rates, lease terms, access,
parking, quality of construction and quality of management. While the General
Partners believe that the Partnership's properties are generally competitive
with other properties with regard to these factors, there can be no assurance
that, in the view of a prospective tenant, other retail properties will not be
more attractive.
Tower Place Festival Shopping Center. At December 31, 1998, Tower Place
was 98% leased. One tenant, General Cinema, leases 27.8% of the total rentable
space of the property and another, J&K Cafeterias, leases 10.6% of the total
rentable space. The General Cinema lease expires on September 30, 2006, with
the tenant having the option to extend the term of the lease for two successive
terms of five years each. The J&K Cafeterias lease expires on April 30, 2004,
and the tenant has the option to renew for two periods of five years each. At
December 31, 1997, Tower Place was 100% leased.
Tower Place is subject to competition from similar types of properties in
the vicinity in which it is located. The following information on competitive
properties in the vicinity of Mountain View has been obtained from sources
believed reliable by the Partnership. The accuracy of this information was not
independently verified by the Partnership.
<TABLE>
<CAPTION>
Rentable Percent Leased at
Property Square Feet December 31, 1998
-------- ----------- -----------------
<S> <C> <C>
1 65,000 100%
2 132,648 95%
3 248,700 99%
</TABLE>
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Paddock Place Shopping Center. At December 31, 1998, Paddock Place was 90%
leased. One tenant, Rafferty's, leases 11.6% of the total rentable space of the
property. J. Alexander's, a full service restaurant, is occupying the space
under a sub-lease. The Rafferty's lease expires on December 31, 2001 and the
tenant has an option to extend the term of the lease for two successive periods
of five years each. At December 31, 1997, Paddock Place was 100% leased.
Paddock Place is subject to competition from similar types of properties
in the vicinity in which it is located. The following information on such
competitors has been obtained from sources believed reliable by the
Partnership. The accuracy of this information was not independently verified by
the Partnership.
<TABLE>
<CAPTION>
Rentable Percent Leased at
Property Square Feet December 31, 1998
-------- ----------- -----------------
<S> <C> <C>
1 108,000 95%
2 15,753 100%
3 178,491 98%
</TABLE>
Germantown Collection Shopping Center. At December 31, 1998, Germantown
was 100% leased. One tenant, Chili's, leases 10% of the total rentable space.
The Chili's lease expires on December 31, 2004, and the tenant has the option
to extend the term of the lease for three consecutive terms of five years each.
At December 31, 1997, Germantown was 100% leased.
Germantown is subject to competition from similar types of properties in
the vicinity in which it is located. The following information on such
competitors has been obtained from sources believed reliable by the
Partnership. The accuracy of this information was not independently verified by
the Partnership.
<TABLE>
<CAPTION>
Rentable Percent Leased at
Property Square Feet December 31, 1998
-------- ----------- -----------------
<S> <C> <C>
1 88,500 100%
2 84,000 96%
3 38,000 100%
</TABLE>
1202 Industrial Place. At December 31, 1998 and 1997, 1202 was 100%
leased. Pierce Family Partnership leases 69% of the total rentable space of the
property and Care Management Enterprises, Inc. leases 31% of the total rentable
space. The Pierce lease expires on October 31, 2014 and the tenant has an
option to renew the lease for one additional term of five years. The Care
Management Enterprises, Inc. lease expires on November 30, 2000.
1202 Industrial Place is subject to competition from similar types of
properties in the vicinity in which it is located. The following information on
such competitors has been obtained from sources believed reliable by the
Partnership. The accuracy of this information was not independently verified by
the Partnership.
<TABLE>
<CAPTION>
Rentable Percent Leased at
Property Square Feet December 31, 1998
-------- ----------- -----------------
<S> <C> <C>
1 100,000 100%
2 80,000 100%
3 100,000 100%
</TABLE>
The Partnership is reimbursed for 47% of the costs of four employees by
Murray Income Properties I, Ltd., an affiliate of the Partnership.
For a definition of the terms used herein and elsewhere in this Form 10-K,
see "Glossary" incorporated by reference herein as contained in the Prospectus
dated February 20, 1986 filed as a
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part of Amendment No. 1 to Registrant's Form S-11 Registration Statement (File
No. 33-2394) attached hereto as Exhibit 99a.
ITEM 2. PROPERTIES.
The Partnership owns a 15% interest in Tower Place Joint Venture which
owns the property described below:
<TABLE>
<CAPTION>
Location Description of Property
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<S> <C>
Pineville (Charlotte), Tower Place Festival Shopping Center
North Carolina A 114,562 square foot shopping center
situated on 10.777 acres. At
December 31, 1998, Tower Place was 98%
leased at an average annual lease rate of
$13.89. Lease rental rates range from $8.00
to $16.50 per square foot.
</TABLE>
The Partnership also owns the properties described below:
<TABLE>
<S> <C>
Nashville, Tennessee Paddock Place Shopping Center
A 68,629 square foot shopping center
situated on 4.66 acres. At December 31,
1998, Paddock Place was 90% leased at an
average annual lease rate of $14.45. Lease
rates range from $9.50 to $18.75 per square
foot.
Germantown (Memphis), Germantown Collection Shopping Center
Tennessee A 55,730 square foot shopping center
situated on 11.4 acres. At December 31,
1998, Germantown was 100% leased at an
average annual lease rate of $16.10. Lease
rates range from $13.50 to $19.79 per
square foot.
Grand Prairie, Texas, 1202 Industrial Place
An office/warehouse facility containing
172,800 square feet situated on 8.6 acres.
At December 31, 1998, 1202 Industrial Place
was 100% leased at an average annual lease
rate of $2.58. Lease rates range from $2.25
to $3.30 per square foot.
</TABLE>
ITEM 3. LEGAL PROCEEDINGS.
There are no material legal proceedings to which the General Partners or
the Partnership is a party or to which any of the Partnership's properties are
subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the fourth
quarter of the year covered by this report through the solicitation of proxies
or otherwise.
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PART II
ITEM 5. MARKET FOR THE PARTNERSHIP'S LIMITED PARTNERSHIP INTERESTS AND RELATED
SECURITY HOLDER MATTERS.
A public market for Interests does not exist and is not likely to develop.
Consequently, a Limited Partner may not be able to liquidate its investment in
the event of emergency or for any other reason, and Interests may not be
readily accepted as collateral for a loan. Further, the transfer of Interests
is subject to certain limitations. For a description of such limitations, see
Article XIII of the Agreement of Limited Partnership as contained in the
Prospectus dated February 20, 1986 filed as a part of Amendment No. 1 to
Registrant's Form S-11 Registration Statement (File No. 33-2394) attached
hereto as Exhibit 99b.
At December 31, 1998, there were 2,166 record holders, owning an aggregate
of 314,687 interests.
The Partnership made its initial Cash Distribution from Operations
following the quarter ended November 30, 1986, the first complete quarter
subsequent to the acceptance of subscriptions for the minimum number of
Interests offered, and has continued to make distributions after each
subsequent quarter. See "Item 6. Selected Financial Data" for the cash
distributions per Limited Partnership Interest during the years ended December
31, 1994 through December 31, 1998. The Partnership intends to continue making
Cash Distributions from Operations on a quarterly basis.
The Partnership Agreement provides that under certain circumstances, the
General Partners may, in their sole discretion and upon the request of a
Limited Partner, repurchase the Interests held by such Limited Partner. Murray
Realty Investors IX, Inc. is obligated to set aside 25% of its share of Cash
Distributions from Operations and Crozier Partners IX, Ltd. is obligated to set
aside 25% of its 5% share of Cash Distributions from Operations that is
subordinated to the prior receipt by the Limited Partners of a non-cumulative
7% annual return from Cash Distributions from Operations for this purpose. Any
such repurchase shall be subject to the availability of funds set aside and the
other terms and conditions set forth in the Partnership Agreement. For
information on such terms and conditions, see Section 10.17 of the Agreement of
Limited Partnership as contained in Amendment No. 9 to the Agreement of Limited
Partnership contained in the Proxy Statement dated October 11, 1989 attached
hereto as Exhibit 99c. As of December 31, 1998, no funds were available for
this purpose.
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------------------------------
1998 1997 1996 1995 1994
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Income $ 3,124,604 $ 2,927,389 $ 2,947,806 $ 2,794,261 $ 2,743,911
Net Earnings 1,290,459 1,108,782 1,160,228 1,121,097 1,064,413
Basic earnings per
Limited Partnership
Interest* 3.97 3.40 3.56 3.44 3.26
Distributions per
Limited Partnership
Interest* 6.00 5.94 6.00 6.00 5.63
Total Assets at
Year End $18,748,341 $19,396,894 $20,161,224 $20,934,041 $21,767,471
</TABLE>
* Based on Limited Partnership Interests outstanding at year-end and net
earnings or distributions allocated to the Limited Partners.
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The above selected financial data should be read in conjunction with the
financial statements and related notes appearing in Item 8 of this report.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Liquidity and Capital Resources
As of December 31, 1998, the Partnership had cash, cash equivalents and
certificates of deposit of $1,342,995, which included $1,312,805 invested in
certificates of deposit and other money market instruments. Such amounts
represent cash generated from operations and working capital reserves. The
decrease in cash and cash equivalents from December 31, 1997 to December 31,
1998 is primarily due to the purchase of a new roof at Paddock Place and
increases in tenant finish and leasing costs at each of the Partnership's
properties.
Rental income from leases is accrued using the straight line method over
the related lease terms. At December 31, 1998 and December 31, 1997, there were
$232,338 and $185,338, respectively, of accounts receivable related to such
accruals. Accounts receivable also consist of tenant receivables, receivables
for rents collected (but not yet remitted to the Partnership by the property
management companies managing the properties), and interest receivable on
short-term investments. The increase in accounts receivable of $74,713
(exclusive of bad debts and recoveries) from December 31, 1997 to December 31,
1998 is primarily due to increases in tenant receivables at Germantown and
Paddock Place and increases in receivables related to the accruals described
above at each of the Partnership's properties.
Other assets consist primarily of deferred leasing costs. The increase in
other assets of $289,013 is primarily due to an increase (exclusive of
amortization) in leasing commissions paid at each of the Partnership's
properties.
During the year ended December 31, 1998, the Partnership made Cash
Distributions from Operations totaling $1,926,654. Subsequent to December 31,
1998 the Partnership made a Cash Distribution from Operations of $481,664,
which related to the three months ended December 31, 1998. The funds
distributed were derived from the net cash flow generated from operations of
the Partnership's properties and from interest earned, net of administrative
expenses, on funds invested in short-term money market instruments and
certificates of deposit.
Future liquidity is currently expected to result from cash generated from
the operations of the Partnership's properties (which could be affected
negatively in the event of weakened occupancies and/or rental rates), interest
earned on funds invested in short-term money market instruments and
certificates of deposit, and ultimately through the sale of the Partnership's
properties.
Overall market conditions remained stable in the cities in which the
Partnership owns property. This is evidenced by the fact that two of the
properties maintained the same average occupancy in 1998 as 1997, and two of
the properties experienced slight decreases in occupancy as compared to the
previous year. Real estate activity typically parallels employment, job growth,
and housing starts, and a strong national economy has spurred the construction
of new retail development in these markets. However, in Memphis and Nashville,
most of this new development has been in areas that are not in close proximity
to Germantown and Paddock Place. This is due to restrictive zoning and the lack
of available land in these sub-markets. The sub-market in which Tower Place is
located has seen significant retail development; however, most of this
development has been power centers and a regional mall, and therefore, does not
typically compete for the same type retailer as Tower Place. Unfortunately,
Tower Place did lose a major tenant when General Cinema closed its eight-screen
movie theater in August, 1998. This tenant has continued to pay rent according
to the terms of its lease. To date, Tower Place has not seen its occupancy or
overall performance severely impacted by the loss of the theater. However, an
unoccupied anchor space could result in less foot traffic in the
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shopping center, thereby impacting the sales of smaller tenants and,
consequently, their ability to pay rent. It could also impact the ability to
attract new retailers when space does become available for lease. Management is
working diligently to lease this space so that the property's long-term
performance is not adversely affected. The Dallas-Fort Worth industrial market
remains healthy, although there are some signs of overbuilding. According to
published reports, approximately 7 million square feet of industrial space was
absorbed through the first half of 1998. This is less than the 8.4 million
square feet of new space that came on the market during the first six months of
the year. Around 11.5 million square feet of additional industrial space was
under construction at the end of June 1998.
Results of Operations
Rental income increased $202,308 (8%) for the year ended December 31, 1998
as compared to the year ended December 31, 1997. Rental income decreased
$25,682 (1%) for the year ended December 31, 1997 as compared to the year ended
December 31, 1996. The following information details the rental income
generated, bad debt expense incurred, and average occupancy for the years ended
December 31, 1998, December 31, 1997 and December 31, 1996.
<TABLE>
<CAPTION>
FOR THE YEARS ENDED
DECEMBER 31,
--------------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Paddock Place Shopping Center
Rental income $ 1,194,824 $ 1,166,486 $ 1,180,740
Bad debt expense (recovery) 28,844 (7,200) (4,549)
Average occupancy 95% 94% 97%
Germantown Collection Shopping Center
Rental income $ 1,084,570 $ 1,008,103 $ 1,052,117
Bad debt expense -0- 686 -0-
Average occupancy 94% 94% 99%
1202 Industrial Place
Rental income $ 613,424 $ 515,921 $ 483,335
Bad debt expense -0- -0- -0-
Average occupancy 100% 100% 100%
</TABLE>
Rental income at Paddock Place Shopping Center in Nashville, Tennessee
increased $28,338 (2%) for the year ended December 31, 1998 as compared to the
year ended December 31, 1997 with increases in base rent being offset by a
decrease in percentage rent received from J. Alexander's Restaurant. Paddock
Place had an increase in base rents due to higher rental rates and also had
increases in percentage rent received from J. Alexander's Restaurant and tenant
reimbursements for common area maintenance costs for the year ended December
31, 1997. However, the 1996 same period income included a one time $40,000 fee
as consideration for the termination of the Waldenbooks lease. The increase in
rent income components described above in the amount of $25,746 less the one
time fee of $40,000 received in 1996 resulted in a net decrease of $14,254 (1%)
for the period ended December 31, 1997 as compared to the same period in 1996.
Paddock Place averaged 95% occupancy for the year ended December 31, 1998,
a one percent increase over the previous year. A tenant who occupied 3,706
square feet reduced the size of its space to 1,870 square feet. The remaining
1,836 square feet was leased by an adjacent tenant who now leases a total of
7,060 square feet. A restaurant which occupied 2,160 square feet vacated its
space prior to expiration of its lease. This tenant continued to pay rent and
subsequently assigned its lease to another restaurant. During this transition,
there was no loss of income to the Partnership. A tenant who occupied 1,354
square feet vacated its space prior to the expiration of its lease. This space
was then leased to an existing tenant who now leases a total of 4,154 square
feet.
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One tenant who leases 2,332 square feet renewed its lease for five years and
two tenants who lease a total of 4,486 square feet renewed their leases for
three years. A tenant who leased 6,669 square feet vacated its space upon
expiration of its lease. During the year, a new roof was installed on the
entire shopping center. As of December 31, 1998, Paddock Place was 90%
occupied.
Rental income at Germantown Collection in Germantown (Memphis), Tennessee
increased $76,467 (8%) for the year ended December 31, 1998 as compared to the
year ended December 31, 1997 due to higher rental rates and an increase in
tenant reimbursements for real estate taxes, offset by decreases in tenant
reimbursements for common area maintenance costs. Rental income at Germantown
Collection decreased $44,014 (4%) for the year ended December 31, 1997 as
compared to the year ended December 31, 1996 due to a decrease in occupancy and
a decrease in percentage rent received from Chili's Restaurant, offset by an
increase in tenant reimbursements for common area maintenance costs.
Occupancy at Germantown averaged 94% for the year ended December 31, 1998,
unchanged from the previous year. Three new leases totaling 8,191 square feet
were executed and all of these tenants took occupancy during the year. A tenant
who leased 1,052 square feet moved to a larger space containing 2,668 square
feet. The 1,052 square foot space was subsequently leased to an existing tenant
who now leases a total of 2,552 square feet. Two tenants totaling 6,775 square
feet renewed their leases for five years. Two tenants totaling 2,777 square
feet assigned their leases to new tenants with no loss of income to the
Partnership. As of December 31, 1998, Germantown was 100% occupied.
Rental income at 1202 Industrial Place in Grand Prairie (Dallas), Texas
increased $97,503 (19%) for the year ended December 31, 1998 as compared to the
year ended December 31, 1997 primarily due to higher rental rates on a lease
extension with Pierce Leahy, the warehouse's primary tenant, and an increase in
tenant reimbursements for common area maintenance costs and real estate taxes.
Rental income at 1202 Industrial Place increased $32,586 (7%) for the year
ended December 31, 1997 as compared to the year ended December 31, 1996
primarily due to higher rental rates and an increase in tenant reimbursements
for common area maintenance costs and real estate taxes.
1202 Industrial Place averaged 100% occupancy for the year ended December
31, 1998, unchanged from the previous year. In August, Care Management Inc., a
tenant who leases 54,000 square feet, ceased operations at the building. Their
lease expires November 30, 2000. Care Management has continued to pay rent
according to the terms of its lease, and subsequent to moving out, has
subleased the space on a short-term basis until July 31, 1999. Pierce Leahy
Corporation, who leases 118,800 square feet, signed a lease to take the 54,000
square foot space effective December 1, 2000. This lease will give Pierce Leahy
100% occupancy of the building. The new lease, as well as their existing lease
which was extended, will expire on October 31, 2014. As of December 31, 1998,
1202 Industrial Place was 100% occupied.
"Equity in earnings of joint venture" represents the Partnership's 15%
interest in the earnings of Tower Place Joint Venture. Rental income at Tower
Place Festival Shopping Center in Pineville (Charlotte), N.C. increased $14,414
(1%) for the year ended December 31, 1998 as compared to the year ended
December 31, 1997, with increases in rental rates offset by decreases in tenant
reimbursements for common area maintenance costs, reimbursements for common
advertising costs and a decrease in percentage rent received. Rental income at
Tower Place increased $36,633 (2%) for the year ended December 31, 1997 as
compared to the year ended December 31, 1996 primarily due to an increase in
occupancy, an increase in rental rates and an increase in tenant reimbursements
for common area maintenance costs, offset by a decrease in percentage rent
received. Tower Place's total operating expenses decreased with higher repair
and maintenance costs offset by lower leasing and promotion costs. During 1998,
the tenants at Tower Place stopped paying into a marketing fund for common
advertising costs. This resulted in lower income from reimbursements for
advertising costs and a corresponding decrease in advertising expenses. The
following information details the
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rental income generated, bad debt expense incurred, and average occupancy for
the years ended December 31, 1998, 1997, and 1996:
<TABLE>
<CAPTION>
For the years ended
December 31,
--------------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Tower Place Shopping Center
Rental income $ 1,787,124 $ 1,772,710 $ 1,736,077
Bad debt expense (recovery) 448 2,997 (4,305)
Average occupancy 96% 98% 97%
</TABLE>
The Partnership's share of income from the joint venture increased $4,904
(4%) for the year ended December 31, 1998 as compared to the year ended
December 31, 1997 for the reasons stated above. The Partnership's share of
income from the joint venture increased $3,334 (3%) for the year ended December
31, 1997 as compared to the year ended December 31, 1996 for the reasons stated
above.
Tower Place averaged 96% occupancy for the year ended December 31, 1998, a
two percent decrease from the previous year. A new lease for 1,604 square feet
was executed in January and the tenant took occupancy in February. One tenant
who occupied 1,050 square feet vacated its space prior to the expiration of its
lease. This space was subsequently leased to an existing tenant who now leases
a total of 3,750 square feet. Two other tenants who occupied a total of 3,570
square feet vacated their spaces prior to lease expiration. Both of these
spaces have been leased to new tenants who will take occupancy during the first
quarter of 1999. Two tenants who occupied a total of 2,650 square feet vacated
their spaces upon the expiration of their leases. One of these spaces,
containing 1,050 square feet, was leased to a new tenant who took occupancy in
September. One tenant who occupies 3,500 square feet renewed its lease for five
years and two tenants who occupy a total of 5,322 square feet renewed their
leases for three years. A tenant who occupies 1,400 square feet renewed its
lease for two years and a tenant who occupies 1,120 square feet renewed its
lease for one year. General Cinema, whose eight-screen theater occupies 31,837
square feet, ceased operations in August. They have continued to pay rent
according to the terms of their lease, which expires September 30, 2006.
Management is aggressively seeking a replacement tenant for this space. As of
December 31, 1998, Tower Place was 98% leased.
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 utility costs, repair and
maintenance costs, leasing and promotion costs, real estate taxes, insurance
and property management fees. Total property operating expenses increased
$25,788 (3%) for the year ended December 31, 1998 as compared to the year ended
December 31, 1997. The increase is due to higher repair and maintenance costs,
property management fees, real estate taxes and amortization of leasing costs,
offset by lower utility costs and leasing and promotion expenses. Property
operating expenses at Germantown increased $5,933 (2%), with increases in
repair and maintenance costs and property management fees offset by decreases
in leasing and promotion costs and real estate taxes. Property operating
expenses at Paddock Place decreased slightly ($1,098), with increases in real
estate taxes and amortization of leasing costs being more than offset by
decreases in repair and maintenance costs and utility costs. Property operating
expenses at 1202 Industrial Place increased $20,953 (11%) due to increases in
real estate taxes, property management fees and amortization of leasing costs.
Property operating expenses increased $16,362 (2%) for the year ended
December 31, 1997 as compared to the year ended December 31, 1996. The increase
is due to higher real estate taxes and leasing and promotion costs. Property
operating expenses at Germantown decreased $5,949 (2%), with decreases in
parking lot repairs and maintenance and landscaping costs being offset by
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increases in leasing and promotion costs and utility costs. Property operating
expenses at Paddock Place increased $4,322 (2%), with increases in real estate
taxes and parking lot repair and maintenance costs being offset by decreases in
utilities and snow removal costs. Property operating expenses at 1202
Industrial Place increased $17,989 (11%) primarily due to increases in parking
lot repair and maintenance costs and real estate taxes offset by decreases in
insurance costs and general building repair and maintenance costs.
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. General
and administrative expenses decreased $36,100 (10%) for the year ended December
31, 1998 as compared to the year ended December 31, 1997 primarily due to
decreases in accounting and legal costs, investor services costs and telephone
expenses, offset by increases in salaries and benefits.
General and administrative expenses increased $26,364 (8%) for the year
ended December 31, 1997 as compared to the year ended December 31, 1996
primarily due to increases in telephone, salaries and benefits, seminars and
education costs, travel costs and legal and accounting fees.
Bad debt expense was $28,844 for the year ended December 31, 1998. This
expense occurred primarily because one tenant at Paddock Place declared
bankruptcy and vacated the premises during the year.
The effect of inflation on results of operations for the years ended
December 31, 1998, 1997, and 1996 was not significant.
The Partnership recognizes that the arrival of the Year 2000 poses a
unique challenge to the ability of an entity's information technology system
and non-information technology systems to recognize the date change from
December 31, 1999 to January 1, 2000. The Partnership is continuing to assess
and has made certain changes to provide for continued functionality of its
systems. An assessment of the readiness of the Partnership's external entities,
such as vendors, customers, payment systems and others is still ongoing. Due to
the nature and extent of the Partnership's operations that are affected by Year
2000 issues, the Partnership does not believe that Year 2000 issues will have a
material adverse effect on the business operation or the financial performance
of the Partnership. There can be no assurance, however, that Year 2000 issues
will not adversely affect the Partnership or its business. The Partnership
believes that the cost to make appropriate changes of its internal and external
systems will not be significant and that such costs will be funded completely
through operations.
Words or phrases when used in the Form 10-K or other filings with the
Securities and Exchange Commission, such as "does not believe" and "believes"
or similar expressions, are intended to identify "forward-looking statements"
within the meaning of the Private Securities Litigation Reform Act of 1995.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISKS.
The Partnership's financial instruments consist of cash and cash
equivalents, accounts receivable, accounts payable, accrued property taxes
payable, and security deposits. The carrying amount of these instruments
approximate fair value due to the short-term nature of these instruments.
Therefore, the Partnership believes it is relatively unaffected by interest
rate changes or other market risks.
9
<PAGE> 12
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following financial statements are filed as part of this report:
<TABLE>
<CAPTION>
Page
Number
------
<S> <C>
Independent Auditors' Report 11
Balance Sheets -- December 31, 1998 and 1997 12
Statements of Earnings -- Years ended December 31, 1998, 1997, and 1996 13
Statements of Changes in Partners' Equity -- Years ended
December 31, 1998, 1997, and 1996 14
Statements of Cash Flows -- Years ended December 31, 1998, 1997, and 1996 15
Notes to Financial Statements 16-20
</TABLE>
10
<PAGE> 13
INDEPENDENT AUDITORS' REPORT
The Partners
Murray Income Properties II, Ltd.:
We have audited the accompanying balance sheets of Murray Income Properties II,
Ltd. (a limited partnership) as of December 31, 1998 and 1997, and the related
statements of earnings, changes in partners' equity and cash flows for each of
the years in the three-year period ended December 31, 1998. These financial
statements are the responsibility of the Partnership's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Murray Income Properties II,
Ltd. as of December 31, 1998 and 1997, and the results of their operations and
their cash flows for each of the years in the three-year period ended December
31, 1998, in conformity with generally accepted accounting principles.
KPMG LLP
Dallas, Texas
February 26, 1999
11
<PAGE> 14
MURRAY INCOME PROPERTIES II, LTD.
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
DECEMBER 31, 1998 AND 1997
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
ASSETS
Investment properties, at cost (note 3):
Land $ 5,789,291 $ 5,789,291
Buildings and improvements 17,813,151 17,495,190
------------ ------------
23,602,442 23,284,481
Less accumulated depreciation 8,431,219 7,716,316
------------ ------------
Net investment properties 15,171,223 15,568,165
Investment in joint venture,
at equity (note 4) 1,321,510 1,391,212
Cash and cash equivalents 745,995 890,256
Certificates of deposit 597,000 896,000
Accounts receivable, net of allowances of
$-0- and $1,447 in 1998 and 1997,
respectively (note 1) 453,670 407,801
Other assets, at cost, net of accumulated
amortization of $554,007 and $480,477 in
1998 and 1997, respectively 458,943 243,460
------------ ------------
$ 18,748,341 $ 19,396,894
============ ============
LIABILITIES AND PARTNERS' EQUITY
Accounts payable $ 19,293 $ 6,401
Accrued property taxes 297,194 291,570
Security deposits and other liabilities 72,906 108,423
Deferred income (note 3) 35,470 30,827
------------ ------------
Total liabilities 424,863 437,221
------------ ------------
Partners' equity:
General Partners:
Capital contributions 1,000 1,000
Cumulative net earnings 645,335 603,815
Cumulative cash distributions (645,713) (607,180)
------------ ------------
622 (2,365)
------------ ------------
Limited Partners (314,687 Interests):
Capital contributions, net of offering costs 27,029,395 27,029,395
Cumulative net earnings 13,143,140 11,894,201
Cumulative cash distributions (21,849,679) (19,961,558)
------------ ------------
18,322,856 18,962,038
------------ ------------
Total partners' equity 18,323,478 18,959,673
------------ ------------
$ 18,748,341 $ 19,396,894
============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
12
<PAGE> 15
MURRAY INCOME PROPERTIES II, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Years Ended
December 31,
--------------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
INCOME:
Rental (note 3) $ 2,892,818 $ 2,690,510 $ 2,716,192
Interest 91,488 101,485 99,554
Equity in earnings of joint
venture (note 4) 140,298 135,394 132,060
------------ ------------ ------------
3,124,604 2,927,389 2,947,806
------------ ------------ ------------
EXPENSES:
Depreciation 714,903 724,411 734,143
Property operating (note 5) 778,727 752,939 736,577
General and administrative 311,671 347,771 321,407
Bad debts (recoveries), net 28,844 (6,514) (4,549)
------------ ------------ ------------
1,834,145 1,818,607 1,787,578
------------ ------------ ------------
Net earnings $ 1,290,459 $ 1,108,782 $ 1,160,228
============ ============ ============
Basic earnings per limited partnership
interest $ 3.97 $ 3.40 $ 3.56
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
13
<PAGE> 16
MURRAY INCOME PROPERTIES II, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
------------ ------------ ------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1996:
Balance at December 31, 1995 $ (3,134) $ 20,527,015 $ 20,523,881
Net earnings 39,334 1,120,894 1,160,228
Cash distributions ($6.00 per limited
partnership interest) (38,533) (1,888,103) (1,926,636)
------------ ------------ ------------
Balance at December 31, 1996 $ (2,333) $ 19,759,806 $ 19,757,473
------------ ------------ ------------
YEAR ENDED DECEMBER 31, 1997:
Net earnings 38,100 1,070,682 1,108,782
Cash distributions ($5.94 per limited
partnership interest) (38,132) (1,868,450) (1,906,582)
------------ ------------ ------------
Balance at December 31, 1997 $ (2,365) $ 18,962,038 $ 18,959,673
------------ ------------ ------------
YEAR ENDED DECEMBER 31, 1998:
Net earnings 41,520 1,248,939 1,290,459
Cash distributions ($6.00 per limited
partnership interest) (38,533) (1,888,121) (1,926,654)
------------ ------------ ------------
Balance at December 31, 1998 $ 622 $ 18,322,856 $ 18,323,478
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
14
<PAGE> 17
MURRAY INCOME PROPERTIES II, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended
December 31,
--------------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,290,459 $ 1,108,782 $ 1,160,228
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Bad debts (recoveries), net 28,844 (6,514) (4,549)
Depreciation 714,903 724,411 734,143
Equity in earnings of joint venture (140,298) (135,394) (132,060)
Amortization of other assets 73,530 66,877 66,893
Amortization of deferred income (6,498) (6,498) (6,498)
Change in assets and liabilities:
Accounts and notes receivable (74,713) (22,371) 64,790
Other assets (289,013) (74,868) (83,571)
Accounts payable 12,892 865 (3,272)
Accrued property taxes, security deposits
and other liabilities and deferred income (18,752) 39,103 3,361
------------ ------------ ------------
Net cash provided by operating activities 1,591,354 1,694,393 1,799,465
------------ ------------ ------------
Cash flows from investing activities:
Additions to investment properties (317,961) (31,585) (70,895)
Purchases of certificates of deposit (498,000) (996,000) (895,000)
Proceeds from redemptions of certificates of deposit 797,000 995,000 895,000
Distributions from joint venture 210,000 212,700 198,750
------------ ------------ ------------
Net cash provided by investing activities 191,039 180,115 127,855
------------ ------------ ------------
Cash flows from financing activities - cash distributions (1,926,654) (1,906,582) (1,926,636)
------------ ------------ ------------
Net increase (decrease) in cash and cash equivalents (144,261) (32,074) 684
Cash and cash equivalents at beginning of year 890,256 922,330 921,646
------------ ------------ ------------
Cash and cash equivalents at end of year $ 745,995 $ 890,256 $ 922,330
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
15
<PAGE> 18
MURRAY INCOME PROPERTIES II, LTD.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
THREE YEARS ENDED DECEMBER 31, 1998
1. ORGANIZATION AND BASIS OF ACCOUNTING
The Partnership was formed December 23, 1985 by filing a Certificate and
Agreement of Limited Partnership with the Secretary of State of the State of
Texas. The Partnership Agreement authorized the issuance of up to 500,000
limited partnership interests at a price of $100 each, of which 314,687 limited
partnership interests were issued. Proceeds from the sale of limited
partnership interests, net of related selling commissions, dealer-manager fees
and other offering costs, are recorded as contributed capital.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses during the reporting
period. Actual results could differ from those estimates.
Rental income is recognized as earned under the leases. Accordingly, the
Partnership accrues rental income for the full period of occupancy using the
straight line method over the related terms. At December 31, 1998 and 1997,
there were $232,338 and $185,338, respectively, of accounts receivable related
to such accruals.
Other assets consist primarily of deferred leasing costs which are
amortized using the straight line method over the lives of the related leases.
Depreciation is provided over the estimated useful lives of the respective
assets using the straight line method. The estimated useful lives of the
buildings and improvements range from three to twenty-five years.
The Partnership periodically reevaluates the propriety of the carrying
amounts of investment properties to determine whether current events and
circumstances warrant an adjustment to such carrying amounts. Such evaluations
are performed utilizing annual appraisals performed by independent appraisers
as well as internally developed estimates of expected undiscounted future cash
flows. In the event the carrying value of an individual property exceeds
expected future undiscounted cash flows, the property is written down to the
most recently appraised value. Since inception of the Partnership, none of the
Partnership's properties have required write downs.
No provision for income taxes has been made as the liabilities for such
taxes are those of the individual Partners rather than the Partnership. The
Partnership files its tax return on the accrual basis used for Federal income
tax purposes.
Basic earnings and cash distributions per limited partnership interest are
based upon the limited partnership interests outstanding at year-end and the
net earnings and cash distributions allocated to the Limited Partners in
accordance with the Partnership Agreement, as amended.
Continued
16
<PAGE> 19
MURRAY INCOME PROPERTIES II LTD.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
Certificates of deposit are held at commercial banks and are stated at
cost, which approximates market. For purposes of reporting cash flows, the
Partnership considers all certificates of deposit and highly liquid debt
instruments with original maturities of three months or less to be cash
equivalents.
The following information relates to estimated fair values of the
Partnership's financial instruments as of December 31, 1998 and 1997. For cash
and cash equivalents, certificates of deposit, accounts receivable, accounts
payable, accrued property taxes payable, and security deposits, the carrying
amounts approximate fair value because of the short maturity of these
instruments.
2. PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement, net profits or losses
of the Partnership and cash distributions are generally allocated 98% to the
Limited Partners and 2% to the General Partners, except that all depreciation
shall be allocated to those Limited Partners subject to Federal income taxes.
Cash Distributions from the sale or refinancing of a property are allocated as
follows:
(a) First, all Cash Distributions from Sales or Refinancings shall be
allocated 99% to the Limited Partners and 1% to the Non-corporate
General Partner until the Limited Partners have been returned their
Original Invested Capital from Cash Distributions from Sales or
Refinancings, plus their Preferred Return from Cash Distributions from
Operations or Cash Distributions from Sales or Refinancings.
(b) Next, all Cash Distributions from Sales or Refinancings shall be
allocated 99% to the General Partners and 1% to the Non-corporate
General Partner in an amount equal to any unpaid Cash Distributions
from Operations subordinated to the Limited Partners' 7% non-cumulative
annual return. Such 99% shall be allocated 62 1/2% to the Non-corporate
General Partner and 37 1/2% to the Corporate General Partner
(c) Next, all Cash Distributions from Sales or Refinancings shall be
allocated 1% to the Non-corporate General Partner and 99% to the
Limited Partners and the General Partners. Such 99% will be allocated
85% to the Limited Partners and 15% to the General Partners. Such 15%
shall be allocated 62 1/2% to the Non-corporate General Partner and
37 1/2% to the Corporate General Partner.
Continued
17
<PAGE> 20
MURRAY INCOME PROPERTIES II, LTD.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
3. INVESTMENT PROPERTIES
The Partnership owns and operates Paddock Place Shopping Center in
Nashville, Tennessee, Germantown Collection Shopping Center located in
Germantown (Memphis), Tennessee and 1202 Industrial Place (an office/warehouse
facility) located in Grand Prairie, Texas.
During 1998, the Partnership adopted Statement of Financial Accounting
Standards No. 131, "Disclosures about Segments of an Enterprise and related
information", which established standards for the way that public business
enterprises report information about operating segments in audited financial
statements, as well as related disclosures about products and services,
geographic areas, and major customers. The Partnership defines each of its
shopping centers and its warehouse as operating segments; however, management
has determined that all of its properties have similar economic characteristics
and also meet the other criteria which permit the properties to be aggregated
into one reportable segment. Management of the Partnership makes decisions
about resource allocation and performance assessment based on the same
financial information presented throughout these financial statements.
The Partnership had no outstanding receivable balances at December 31, 1998
or 1997, which, individually, exceeded 5% of the Partnership's total assets.
Rental income from a major customer was approximately $282,000 during year
ended December 31, 1998 and approximately $257,000 for each of the years 1997
and 1996, respectively.
Operating leases with tenants range in terms from thirty-three months to
fifteen years. Fixed minimum future rentals under existing leases at December
31, 1998 are as follows:
<TABLE>
<CAPTION>
Year ending December 31:
<S> <C>
1999 $ 2,195,595
2000 2,042,875
2001 1,715,074
2002 1,353,635
2003 839,705
Thereafter 6,285,554
------------
$ 14,432,438
============
</TABLE>
Rental income includes $563,986, $543,118, and $507,503 in 1998, 1997, and
1996, respectively, related to reimbursements from tenants for common area
maintenance costs, real estate taxes and insurance costs.
During 1990, the Partnership reached a settlement with a tenant which
provided for the receipt of $245,000 in settlement of all past due rent and a
modification of future rental obligations. In connection with this settlement,
$19,495 and $25,993 at December 31, 1998 and 1997, respectively, is classified
as deferred income and recognized on a straight line basis over the remaining
term of this lease.
Continued
18
<PAGE> 21
MURRAY INCOME PROPERTIES II, LTD.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
4. INVESTMENT IN JOINT VENTURE
The Partnership owns a 15% interest in Tower Place Joint Venture, a joint
venture that owns and operates Tower Place Festival Shopping Center located in
Pineville (Charlotte), North Carolina. The Partnership accounts for the joint
venture using the equity method. The remaining 85% interest in the joint
venture is owned by Murray Income Properties I, Ltd. ("MIP I"), an affiliated
real estate limited partnership. The Tower Place Joint Venture Agreement
provides that the Partnership will share profits, losses, and cash
distributions according to the Partnership's 15% ownership interest in the
joint venture.
Summarized financial information for the joint venture is as follows:
<TABLE>
<CAPTION>
December 31,
----------------------------
1998 1997
------------ ------------
<S> <C> <C>
Total assets, principally investment property $ 8,995,551 $ 9,473,766
============ ============
Total liabilities 185,484 199,023
Venturers' capital 8,810,067 9,274,743
------------ ------------
$ 8,995,551 $ 9,473,766
============ ============
</TABLE>
<TABLE>
<CAPTION>
Years ended
December 31,
--------------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Income $ 1,810,269 $ 1,797,162 $ 1,761,565
Expenses 874,946 894,538 881,164
------------ ------------ ------------
Net earnings $ 935,323 $ 902,624 $ 880,401
============ ============ ============
</TABLE>
5. TRANSACTIONS WITH AFFILIATES
Murray Realty Investors IX, Inc. ("MRI IX"), the Corporate General Partner,
entered into a property management agreement with the Partnership for the
management of 1202 Industrial Place, effective January 1, 1996. Pursuant to
this agreement, MRI IX earned property management fees in the amount of $17,832
and $15,495 during the years ended December 31, 1998 and 1997. MRI IX entered
into a property marketing agreement with the Partnership for the leasing of
1202 Industrial Place, effective August 4, 1998. Pursuant to this agreement,
MRI IX earned leasing commissions in the amount of $197,865 during the year
ended December 31, 1998.
Continued
19
<PAGE> 22
MURRAY INCOME PROPERTIES II, LTD.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
6. RECONCILIATION OF FINANCIAL STATEMENT NET EARNINGS AND PARTNERS' EQUITY TO
FEDERAL INCOME TAX BASIS NET EARNINGS AND PARTNERS' EQUITY
Reconciliation of financial statement net earnings to Federal income tax
basis net earnings is as follows:
<TABLE>
<CAPTION>
Years Ended
December 31,
-------------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Net earnings - financial statement basis $ 1,290,459 $ 1,108,782 $ 1,160,228
------------ ------------ ------------
Financial statement basis depreciation/amortization
over tax basis depreciation/amortization 94,799 111,112 123,618
Financial statement basis joint venture earnings
under tax basis joint venture earnings 4,798 6,560 2,906
Tax basis rental income over (under)
financial statement basis rental income (41,302) 23,404 23,274
------------ ------------ ------------
Sub-total 58,295 141,076 149,798
------------ ------------ ------------
Net earnings - Federal income tax basis $ 1,348,754 $ 1,249,858 $ 1,310,026
============ ============ ============
</TABLE>
Reconciliation of financial statement partners' equity to Federal income
tax basis partners' equity is as follows:
<TABLE>
<CAPTION>
Years Ended
December 31,
-------------------------------------------
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Total partners' equity - financial statement basis $ 18,323,478 $ 18,959,673 $ 19,757,473
Current year tax basis net earnings over
financial statement basis net earnings 58,295 141,076 149,798
Cumulative prior years tax basis net earnings
over financial statement basis net earnings 1,316,977 1,175,901 1,026,103
------------ ------------ ------------
Total partners' equity - Federal income tax basis $ 19,698,750 $ 20,276,650 $ 20,933,374
============ ============ ============
</TABLE>
Because many types of transactions are susceptible to varying
interpretations under Federal and state income tax laws and regulations, the
amounts reported above may be subject to change at a later date upon final
determination by the taxing authorities.
20
<PAGE> 23
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
21
<PAGE> 24
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE PARTNERSHIP.
Murray Realty Investors IX, Inc., a Texas corporation, and Crozier Partners
IX, Ltd., a Texas limited partnership, are the General Partners of the
Partnership. The Limited Partners voting a majority of the interests may,
without the consent of the General Partners, remove a General Partner and elect
a successor General Partner.
The Partnership Agreement provides that the Partnership will have an
Investment Committee consisting initially of three members, appointed by Murray
Realty Investors IX, Inc. (the "Corporate General Partner"). A person appointed
to the Investment Committee may be removed by the Corporate General Partner,
but the Corporate General Partner must name a replacement. The acquisition,
sale, financing or refinancing of a Partnership property must be approved by a
majority of the members of the Investment Committee. The members of the
Investment Committee currently are Messrs. Jack E. Crozier, Mitchell L.
Armstrong and W. Brent Buck. Murray Realty Investors IX, Inc. is owned 60% by
Mr. Armstrong and 40% by Mr. Buck. The following is a brief description of Jack
E. Crozier, a general partner of Crozier Partners IX, Ltd. a General Partner,
and the directors and executive officers of the Corporate General Partner:
Crozier Partners IX, Ltd., General Partner
Jack E. Crozier, 70, General Partner. From 1954 through July 1990, Mr.
Crozier was affiliated with Murray Financial Corporation and various of its
affiliates. From 1977 through 1988, he was President of Murray Financial
Corporation, and from 1982 until June 1989, he also served as President of
Murray Savings Association, a principal affiliate of Murray Financial
Corporation. He served as President or Director of various other subsidiaries
of Murray Financial Corporation which were engaged in real estate finance,
development and management. He also served as the general partner in a number
of publicly registered limited partnerships, and a number of non-registered
limited partnerships, all of which had real estate as their principal assets.
He is a consultant to several companies.
Murray Realty Investors IX, Inc., Corporate General Partner
The directors and executive officers of Murray Realty Investors IX, Inc.
are:
Mitchell L. Armstrong, 48, President and Director. Mr. Armstrong became
President of Murray Realty Investors IX, Inc. on November 15, 1989. From
September 1984 to that date, he was Senior Vice President Product Development
of Murray Realty Investors, Inc. and Murray Property Investors, and Vice
President - Tax for Murray Properties Company. From November 1988 to November
15, 1989, he also served as Secretary to these companies. From August 1983 to
September 1984, he was Executive Vice President of Dover Realty Investors. From
September 1980 to August 1983, he was with Murray Properties Company, in charge
of tax planning and reporting. From July 1972 to August 1980, he was with the
international accounting firm of Deloitte Haskins and Sells (now Deloitte &
Touche). Mr. Armstrong is a Certified Public Accountant and a Certified
Financial Planner and holds a Bachelor of Business Administration degree with
high honors in Accounting from Texas Tech University. He is a member of the
American Institute of Certified Public Accountants and a member of the
Institute of Certified Financial Planners.
W. Brent Buck, 43, Executive Vice President and Director. Mr. Buck became
Executive Vice President of Murray Realty Investors VIII, Inc., on November 15,
1989. From September 1981 to November 15, 1989, Mr. Buck served in various
capacities for Murray Properties Company and certain subsidiaries. His primary
responsibilities included property acquisitions and asset management. He was
responsible for initially identifying and negotiating the purchase of all
22
<PAGE> 25
properties in the Partnership, except for Mountain View Plaza Shopping Center.
Since their acquisition to the present time, he has continued to oversee the
management of all properties of the Partnership. Mr. Buck holds a Master of
Business Administration degree in Finance and a Bachelor of Public
Administration degree in Urban Administration from the University of
Mississippi. He also holds a Texas real estate salesman license and a
Mississippi broker's license.
ITEM 11. EXECUTIVE COMPENSATION.
Pursuant to an amendment to the Partnership Agreement effective November
15, 1989, Murray Income Properties II, Ltd. is reimbursed by Murray Income
Properties I, Ltd. for forty-seven percent (47%) of executive compensation
incurred in the management of the two partnerships. Murray Income Properties I,
Ltd. is a real estate limited partnership, the general partners of which are
affiliates of the General Partners. The following table presents Murray Income
Properties II, Ltd.'s share of executive compensation.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
--------------------------------------
All Other
Name and Principal Position Year Salary Compensation (1)
- --------------------------- ---- -------- ----------------
<S> <C> <C> <C>
Mitchell L. Armstrong, 1998 $ 66,621 $ 2,848
President* 1997 65,507 2,815
1996 63,414 499
W. Brent Buck, 1998 49,611 1,733
Executive Vice President* 1997 48,782 1,695
1996 47,224 221
</TABLE>
* Offices held in Murray Realty Investors IX, Inc., the Corporate General
Partner.
(1) The Partnership provides the named executive officers with certain group
life, health, medical and other non-cash benefits generally available to
all salaried employees. The amounts shown in this column include the
following:
(a) Matching contributions by the Partnership under its SIMPLE-IRA plan
which equaled 3% of each employee's covered compensation (salary and
term insurance value). During 1998 the Partnership's matching
contributions were $2,024 for Mr. Armstrong and $1,499 for Mr. Buck.
(b) Full premium cost of term insurance that will benefit the executive.
The Partnership and Murray Income Properties I, Ltd. entered into severance
agreements with Mr. Armstrong and Mr. Buck effective September 16, 1996.
Pursuant to these agreements, upon the occurrence of specified events, the
Partnership will be obligated for fifty-three (53%) of any benefits paid
pursuant to the agreements to either Mr. Armstrong or Mr. Buck. The agreement
with Mr. Armstrong provides for a benefit amount equal to the value of the
aggregate of one month of his highest monthly salary paid at any time during
the twelve months prior to his termination multiplied by fifteen (15), plus the
current monthly cost of such health, disability and life benefits (including
spousal or similar coverage and coverage for children) which he was receiving
or entitled to receive immediately prior to termination multiplied by eighteen
(18). The agreement with Mr. Buck provides for a benefit amount equal to the
value of the aggregate of one month of his highest monthly salary paid at any
time during the twelve months prior to his termination multiplied by twelve
(12), plus the current monthly cost of such health, disability and life
benefits (including
23
<PAGE> 26
spousal or similar coverage and coverage for children) which he was receiving
or entitled to receive immediately prior to termination multiplied by fourteen
(14).
The Partnership has not paid and does not propose to pay any bonuses or
deferred compensation, compensation pursuant to retirement or other plans, or
other compensation to the officers, directors or partners of the General
Partners other than described in the above table or the above paragraph. In
addition, there are no restricted stock awards, options or stock appreciation
rights, or any other long term incentive payouts.
During the operational and liquidation stages of this Partnership, the
General Partners and their affiliates receive various fees and distributions.
For information on these types of remuneration, reference is made to the
section entitled "Management Compensation" as contained in the Prospectus dated
February 20, 1986 filed as a part of Amendment No. 1 to Registrant's Form S-11
Registration Statement (File No. 33-2394) attached hereto as Exhibit 99d. See
"Item 13. Certain Relationships and Related Transactions" for information on
the fees and other compensation or reimbursements paid to the General Partners
or their Affiliates during the year ended December 31, 1998.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
No person (including any "group" as that term is used in Section 13 (d)(3)
of the Securities Exchange Act of 1934) is known to the Partnership to be the
beneficial owner of more than five percent of the outstanding voting Interests
as of December 31, 1998.
The following table presents certain information regarding the number of
Interests owned, directly or indirectly, by (i) a general partner of a General
Partner and executive officers and directors of a General Partner and (ii) a
general partner of a General Partner and executive officers and directors of a
General Partner as a group as of December 31, 1998:
<TABLE>
<CAPTION>
Amount and Nature
Of Beneficial Percent
Title of Class Beneficial Owner Beneficial Ownership of Class
- ------------------------------ ----------------------- -------------------- --------
<S> <C> <C> <C>
Limited Partnership Interests, Mitchell L. Armstrong 377 (1) .12%
$100 per Interest W. Brent Buck 251 (2) .08%
Jack E. Crozier 736 (3) .23%
Limited Partnership Interest, All General Partners
$100 per Interest as a group 1,057 .34%
</TABLE>
(1) The total of 377 Interests listed above includes 126 Interests owned
beneficially and of record by First Trust Corporation, Trustee for the
benefit of Mitchell L. Armstrong IRA; 195 Interests owned by Murray Realty
Investors IX, Inc., a corporation in which Mr. Armstrong is an officer,
director, and substantial owner; and 56 Interests owned by Crozier
Partners IX, Ltd., a partnership in which Mr. Armstrong is a limited
partner.
(2) The total of 251 Interests listed above includes 195 Interests owned by
Murray Realty Investors IX, Inc., a corporation in which Mr. Buck is an
officer, director and substantial owner; and 56 Interests owned by Crozier
Partners IX, Ltd., a partnership in which Mr. Buck is a limited partner.
(3) The total of 736 Interests listed above included 272 Interests owned by
Crozier Partners IX, Ltd., a partnership in which Mr. Crozier is a general
partner and 464 Interests owned by Mrs. Irma Crozier as her separate
property.
24
<PAGE> 27
No arrangements are known to the Partnership which may result in a change
of control of the Partnership.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
During the year ended December 31, 1998 the Partnership was reimbursed by
Murray Income Properties I, Ltd. ("MIP I") for forty-seven percent (47%) of the
costs associated with the management of the Partnership and MIP I. MIP I is a
publicly-registered real estate limited partnership, the general partners of
which are affiliates of the General Partners. The reimbursement has been
accounted for as a reduction of general and administrative expenses. Murray
Realty Investors IX, Inc. ("MRI IX"), the Corporate General Partner, entered
into a property management agreement with the Partnership for the management of
1202 Industrial Place, effective January 1, 1996. Pursuant to this agreement,
MRI IX earned property management fees in the amount of $17,832 and $15,495
during the years ended December 31, 1998 and 1997. MRI IX entered into a
property marketing agreement with the Partnership for the leasing of 1202
Industrial Place, effective August 4, 1998. Pursuant to this agreement, MRI IX
earned leasing commissions in the amount of $197,865 during the year ended
December 31, 1998.
25
<PAGE> 28
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) 1. Financial Statements - See Index to Financial Statements in Item 8
of this Form 10-K
2. Financial Statement Schedules with Independent Auditors' Report
Thereon:
(i) Valuation and Qualifying Accounts (Schedule II) - Years ended
December 31, 1998, 1997, and 1996.
(ii) Real Estate and Accumulated Depreciation (Schedule III) -
December 31, 1998
All other schedules have been omitted because they are not required or
the required information is shown in the financial statements or notes
thereto.
(b) Reports on Form 8-K filed during the last quarter of the year:
None
(c) Exhibits:
3a Agreement of Limited Partnership of Murray Income Properties II,
Ltd.. Reference is made to Exhibit A of the Prospectus dated
February 20, 1986 contained in Amendment No. 1 to Partnership's
Form S-11 Registration Statements filed with the Securities and
Exchange Commission on February 13, 1986. (File No. 33-2294).
3b Amended and Restated Certificate and Agreement of Limited
Partnership dated as of November 15, 1989. Reference is made to
Exhibit 3b to the 1989 Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 31, 1989.
(File No. 0-17183)
3c Amended and Restated Certificate and Agreement of Limited
Partnership dated as of January 10, 1990. Reference is made to
Exhibit 3c to the 1989 Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 31, 1989.
(File No. 0-17183)
10a Form of Joint Venture Agreement between the Partnership and Murray
Income Properties II, Ltd. Reference is made to Exhibit 10h to
Post-Effective Amendment No. l to Partnership's Form S-11
Registration Statements, filed with the Securities and Exchange
Commission on July 29, 1989. (File No. 33-2394)
10b Lease Agreement with General Cinema to lease certain premises as
described within the Lease Agreement dated July 23, 1985 at Tower
Place Festival Shopping Center. Reference is made to Exhibit 10q to
the 1989 Annual Report on Form 10-K filed with the Securities and
Exchange Commission on March 31, 1989. (File No. 0-17183)
10c Lease Agreement with Rafferty's Inc. to lease certain premises as
described within the Lease Agreement dated August 12, 1985 at
Paddock Place Shopping Center. Reference is made to Exhibit 10r to
the 1989 Annual Report on Form 10-K filed with the Securities and
Exchange Commission on March 31, 1989. (File No. 0-17183)
10d Lease Agreement with Chili's Inc. to lease certain premises as
described within the Lease Agreement dated May 19, 1988 at
Germantown Collection Shopping Center.
26
<PAGE> 29
Reference is made to Exhibit 10t to the 1989 Annual Report on Form
10-K filed with the Securities and Exchange Commission on March 31,
1989. (File No. 0-17183)
10e Settlement and Release Agreement with Rafferty's Inc. and Mid-South
Management Group, Inc., dated December 1, 1990. Reference is made
to Exhibit 10u to the 1990 Annual Report on Form 10-K filed with
the Securities and Exchange Commission on March 31, 1991.
(File No. 0-17183)
10f Management Agreement with Murray Realty Investors IX, Inc. for
management and operation services described in the Management
Agreement dated January 1, 1996 at 1202 Industrial Place. Reference
is made to Exhibit 10a to the Form 10-Q for the Quarter ended
March 31, 1996 filed with the Securities and Exchange Commission on
May 13, 1996. (File No. 0-17183)
10g Marketing Agreement with Murray Realty Investors IX, Inc. for
leasing services described in the Marketing Agreement dated
August 4, 1998 at 1202 Industrial Place. Reference is made to
Exhibit 10a to the Form 10-Q for the Quarter ended September 30,
1998 filed with the Securities and Exchange Commission on
November 6, 1998. (File No. 0-17183)
10h Data Processing System Use Agreement between Murray Income
Properties II, Ltd. and The Mavricc Management Systems, Inc., dated
September 1, 1998. Filed herewith.
10i Management Agreement with CK Charlotte Overhead Limited Partnership
for management and operation services described in the Management
Agreement dated November 9, 1998 at Tower Place Festival Shopping
Center. Filed herewith.
10j Management Agreement with Trammell Crow SE, Inc. for management and
operation services described in the Management Agreement dated
August 8, 1990 (as extended pursuant to the Modification to
Management Agreement dated February 28, 1998) at Germantown
Collection Shopping Center. Filed herewith.
10k Management Agreement with Brookside Commercial Services for
management and operation services described in the Management
Agreement dated March 1, 1991 (as extended pursuant to the
Extension of Property Management Agreement dated February 18, 1997
at Paddock Place Shopping Center. Filed herewith.
10l Lease Agreement with Calidad Foods, Inc. to lease certain premises
as described within the Lease Agreement dated October 19, 1992, at
1202 Industrial Place (an office/warehouse facility). Reference is
made to Exhibit 10v to the Form 10-Q for the Quarter ended
September 30, 1992 filed with the Securities and Exchange
Commission on November 13, 1992. (File No. 0-17183)
10m Lease Agreement with Pierce Family Partnership to lease certain
premises as described within the Lease Agreement dated October 23,
1992, at 1202 Industrial Place (an office/warehouse facility).
Reference is made to Exhibit 10x to the Form 10-Q for the Quarter
ended September 30, 1992 filed with the Securities and Exchange
Commission on November 13, 1992. (File No. 0-17183)
10n Amendment to Lease Agreement with Calidad Foods, Inc. dated
December 28, 1992 at 1202 Industrial Place (an office/warehouse
facility). Reference is made to Exhibit 10n to the 1992 Annual
Report on Form 10-K filed with the Securities and Exchange
Commission on March 19, 1993. (File No. 0-17183)
27
<PAGE> 30
10o Amendment to Lease Agreement with Pierce Leahy Corp., a
Pennsylvania corporation, as successor in interest to Pierce Family
Partnership Ltd., a Pennsylvania limited partnership, dated
October 8, 1998, at 1202 Industrial Place (an office/warehouse
facility). Filed herewith.
10p Lease Agreement with Pierce Leahy Corp., a Pennsylvania
corporation, to lease certain premises as described within the
Lease Agreement dated October 8, 1998, at 1202 Industrial Place
(an office/warehouse facility). Filed herewith.
10q Lease Agreement with Brown Group Retail, Inc. to lease certain
premises as described within the Lease Agreement dated November 9,
1993 at Tower Place Festival Shopping Center. Reference is made to
Exhibit 10p to the 1993 Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 21, 1994.
(File No. 0-17183)
10r Lease Agreement with Care Management Enterprises, Inc. to lease
certain premises as described within the Lease Agreement dated
November 16, 1995 at 1202 Industrial Place (an office/warehouse
facility). Reference is made to Exhibit 10p to the 1995 Annual
Report on Form 10-K filed with the Securities and Exchange
Commission on March 22, 1996. (File No. 0-14105)
10s Severance Agreements by and among Murray Income Properties I, Ltd.
and Murray Income Properties II, Ltd. and Mitchell L. Armstrong
dated September 16, 1996. Reference is made to Exhibit 10a to the
1996 3rd Quarter Report on Form 10-Q filed with the Securities and
Exchange Commission on November 8, 1996. (File No. 0-14105)
10t Severance Agreements by and among Murray Income Properties I, Ltd.
and Murray Income Properties II, Ltd. and W. Brent Buck dated
September 16, 1996. Reference is made to Exhibit 10b to the 1996
3rd Quarter Report on Form 10-Q filed with the Securities and
Exchange Commission on November 8, 1996. (File No. 0-14105)
27 Financial Data Schedule. Filed herewith.
99a Glossary, as contained in the Prospectus dated February 20, 1986
filed as part of Amendment No. 2 to Registrant's Form S-11
Registration Statement (File No. 33-2394). Filed herewith.
99b Article XIII of the Agreement of Limited Partnership as contained
in the Prospectus dated February 20, 1986 filed as part of
Amendment No. 2 to Registrant's Form S-11 Registration Statement
(File No. 33-2394). Filed herewith.
99c Amendment No. 9 to the Agreement of Limited Partnership contained
in the Proxy Statement dated October 11, 1989. Filed herewith.
99d Management Compensation as contained in the Prospectus dated
February 20, 1986 filed as part of Amendment No. 2 to Registrant's
Form S-11 Registration Statement (File No. 33-2394). Filed
herewith.
(d) Financial Statement Schedules with Independent Auditors' Report Thereon:
(i) Valuation and Qualifying Accounts (Schedule II) - Years ended
December 31, 1998, 1997, and 1996.
(ii) Real Estate and Accumulated Depreciation (Schedule III) -
December 31, 1998.
28
<PAGE> 31
All other schedules have been omitted because they are not required or
the required information is shown in the consolidated financial
statements or notes thereto.
29
<PAGE> 32
INDEPENDENT AUDITORS' REPORT
The Partners
Murray Income Properties II, Ltd.:
Under date of February 26, 1999, we reported on the balance sheets of Murray
Income Properties II, Ltd. (a limited partnership) as of December 31, 1998 and
1997, and the related statements of earnings, changes in partners' equity, and
cash flows for each of the years in the three-year period ended December 31,
1998, as contained in Item 8 of this annual report on Form 10-K. In connection
with our audits of the aforementioned financial statements, we also audited the
related financial statement schedules as listed in Item 14(a)2 of this annual
report on Form 10-K. These financial statement schedules are the responsibility
of the Partnership`s management. Our responsibility is to express an opinion on
these financial statement schedules based on our audits.
In our opinion, such financial statement schedules, when considered in relation
to the basic financial statements taken as a whole, present fairly, in all
material respects, the information set forth therein.
KPMG LLP
Dallas, Texas
February 26, 1999
30
<PAGE> 33
Schedule II
MURRAY INCOME PROPERTIES II LTD.
(A LIMITED PARTNERSHIP)
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1998, 1997, AND 1996
<TABLE>
<CAPTION>
Balance at Charged to Balance at
beginning costs and end of
Description of period expenses Deductions period
----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Allowance for doubtful accounts:
Year ended December 31, 1996 $ 14,034 (4,549) -0- 9,485
========== ========== ========== ==========
Year ended December 31, 1997 $ 9,485 (6,514) 1,524 1,447
========== ========== ========== ==========
Year ended December 31, 1998 $ 1,447 28,844 30,291 -0-
========== ========== ========== ==========
</TABLE>
Deductions are primarily for writeoffs of accounts and notes receivables
deemed uncollectible by management.
31
<PAGE> 34
Schedule III
MURRAY INCOME PROPERTIES II, LTD.
(a limited partnership)
Real Estate and Accumulated Depreciation
December 31, 1998
<TABLE>
<CAPTION>
Costs Capitalized
Initial Cost Subsequent
to Partnership (A) to Acquisition
-------------------------- --------------
Buildings and
Description Encumbrances Land Improvements Improvements
----------- ------------ ---- ------------- ------------
<S> <C> <C> <C> <C>
Shopping Center
Nashville, Tennessee $ 0 $ 3,153,285 $ 6,615,549 $ 646,184
Shopping Center
Germantown (Memphis)
Tennessee $ 0 $ 1,751,518 $ 6,395,078 $ 1,147,982
Office Warehouse
Grand Prairie
Texas $ 0 $ 884,488 $ 2,895,376 $ 112,982
----------- ----------- ----------- -----------
$ 0 $ 5,789,291 $15,906,603 $ 1,907,148
=========== =========== =========== ===========
<CAPTION>
Gross Amount
at which carried at Life on which
Close of Period (D) Depreciation in
--------------------------------------- Fiscal Latest Statement
Buildings and Accumulated Year of Year of Earnings
Description Land Improvements Total Depreciation Construction Acquired is Computed
----------- ---- ------------- ----- ------------ ------------ ----------- ----------------
Shopping Center
Nashville, Tennessee $ 3,153,285 $ 7,261,733 $10,415,018 $ 3,579,653 1985/86 1986 3-25 YEARS
Shopping Center
Germantown (Memphis)
Tennessee $ 1,751,518 $ 7,543,060 $ 9,294,578 $ 3,485,370 1987 1988 3-25 YEARS
Office Warehouse
Grand Prairie
Texas $ 884,488 $ 3,008,358 $ 3,892,846 $ 1,366,196 1980 1988 3-25 YEARS
----------- ----------- ----------- -----------
$ 5,789,291 $17,813,151 $23,602,442 $ 8,431,219
=========== =========== =========== ===========
</TABLE>
Notes:
(A) The initial cost to the Partnership represents the original purchase
price of the properties.
(B) Reconciliation of real estate owned for 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of period $ 23,284,481 $ 23,252,896 $ 23,182,001
Additions during period $ 317,961 $ 31,585 $ 70,895
Retirements during period $ 0 $ 0 $ 0
------------ ------------ ------------
Balance at close of period $ 23,602,442 $ 23,284,481 $ 23,252,896
============ ============ ============
</TABLE>
(C) Reconciliation of accumulated depreciation for 1998, 1997 and 1996:
<TABLE>
<CAPTION>
1998 1997 1996
------------ ------------ ------------
<S> <C> <C> <C>
Balance at beginning of period $ 7,716,316 $ 6,991,905 $ 6,257,762
Depreciation expense $ 714,903 $ 724,411 $ 734,143
Retirements during period $ 0 $ 0 $ 0
------------ ------------ ------------
Balance at close of period $ 8,431,219 $ 7,716,316 $ 6,991,905
============ ============ ============
</TABLE>
(D) The aggregate cost of real estate at December 31, 1998 for Federal income
tax purposes is $24,423,818
32
<PAGE> 35
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
MURRAY INCOME PROPERTIES II, LTD.
By: Crozier Partners IX, Ltd.
a General Partner
Dated: March 26, 1999 By: /s/ Jack E. Crozier
----------------------------------
Jack E. Crozier
a General Partner
By: Murray Realty Investors IX, Inc.
a General Partner
Dated: March 26, 1999 By: /s/ Mitchell Armstrong
----------------------------------
Mitchell Armstrong
President
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Murray Realty Investors IX, Inc.
a General Partner
Dated: March 26, 1999 By: /s/ Brent Buck
----------------------------------
Brent Buck
Executive Vice President
Director
Dated: March 26, 1999 By: /s/ Mitchell Armstrong
----------------------------------
Mitchell Armstrong
Chief Executive Officer
Chief Financial Officer
Director
33
<PAGE> 36
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Document
Exhibit
Number Description
- ------- -----------
<S> <C>
3a Agreement of Limited Partnership of Murray Income Properties II,
Ltd.. Reference is made to Exhibit A of the Prospectus dated
February 20, 1986 contained in Amendment No. 1 to Partnership's
Form S-11 Registration Statements filed with the Securities and
Exchange Commission on February 13, 1986. (File No. 33-2294).
3b Amended and Restated Certificate and Agreement of Limited
Partnership dated as of November 15, 1989. Reference is made to
Exhibit 3b to the 1989 Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 31, 1989. (File No.
0-17183)
3c Amended and Restated Certificate and Agreement of Limited
Partnership dated as of January 10, 1990. Reference is made to
Exhibit 3c to the 1989 Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 31, 1989. (File No.
0-17183)
10a Form of Joint Venture Agreement between the Partnership and Murray
Income Properties II, Ltd. Reference is made to Exhibit 10h to
Post-Effective Amendment No. l to Partnership's Form S-11
Registration Statements, filed with the Securities and Exchange
Commission on July 29, 1989. (File No. 33-2394)
10b Lease Agreement with General Cinema to lease certain premises as
described within the Lease Agreement dated July 23, 1985 at Tower
Place Festival Shopping Center. Reference is made to Exhibit 10q to
the 1989 Annual Report on Form 10-K filed with the Securities and
Exchange Commission on March 31, 1989. (File No. 0-17183)
10c Lease Agreement with Rafferty's Inc. to lease certain premises as
described within the Lease Agreement dated August 12, 1985 at
Paddock Place Shopping Center. Reference is made to Exhibit 10r to
the 1989 Annual Report on Form 10-K filed with the Securities and
Exchange Commission on March 31, 1989. (File No. 0-17183)
10d Lease Agreement with Chili's Inc. to lease certain premises as
described within the Lease Agreement dated May 19, 1988 at
Germantown Collection Shopping Center. Reference is made to Exhibit
10t to the 1989 Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 31 1989. (File No.
0-17183)
10e Settlement and Release Agreement with Rafferty's Inc. and Mid-South
Management Group, Inc., dated December 1, 1990. Reference is made
to Exhibit 10u to the 1990 Annual Report on Form 10-K filed with
the Securities and Exchange Commission on March 31, 1991. (File No.
0-17183)
10f Management Agreement with Murray Realty Investors IX, Inc. for
management and operation services described in the Management
Agreement dated January 1, 1996 at 1202 Industrial Place. Reference
is made to Exhibit 10a to the Form 10-Q for the Quarter ended March
31, 1996 filed with the Securities and Exchange Commission on May
13, 1996. (File No. 0-17183)
10g Marketing Agreement with Murray Realty Investors IX, Inc. for
leasing services described in the Marketing Agreement dated August
4, 1998 at 1202 Industrial Place. Reference is made to Exhibit 10a
to the Form 10-Q for the Quarter ended September 30, 1998 filed
with the Securities and Exchange Commission on November 6, 1998.
(File No. 0-17183)
</TABLE>
34
<PAGE> 37
<TABLE>
<S> <C>
10h Data Processing System Use Agreement between Murray Income
Properties II, Ltd. and The Mavricc Management Systems, Inc., dated
September 1, 1998. Filed herewith.
10i Management Agreement with CK Charlotte Overhead Limited Partnership
for management and operation services described in the Management
Agreement dated November 9, 1998 at Tower Place Festival Shopping
Center. Filed herewith.
10j Management Agreement with Trammell Crow SE, Inc. for management and
operation services described in the Management Agreement dated
August 8, 1990 (as extended pursuant to the Extension of
Modification to Management Agreement dated February 28, 1998) at
Germantown Collection Shopping Center. Filed herewith.
10k Management Agreement with Brookside Commercial Services for
management and operation services described in the Management
Agreement dated March 1, 1991 (as extended pursuant to the
Extension of Property Management Agreement dated February 18, 1997
at Paddock Place Shopping Center. Filed herewith.
10l Lease Agreement with Calidad Foods, Inc. to lease certain premises
as described within the Lease Agreement dated October 19, 1992, at
1202 Industrial Place (an office/warehouse facility). Reference is
made to Exhibit 10v to the Form 10-Q for the Quarter ended
September 30, 1992 filed with the Securities and Exchange
Commission on November 13, 1992. (File No. 0-17183)
10m Lease Agreement with Pierce Family Partnership to lease certain
premises as described within the Lease Agreement dated October 23,
1992, at 1202 Industrial Place (an office/warehouse facility).
Reference is made to Exhibit 10x to the Form 10-Q for the Quarter
ended September 30, 1992 filed with the Securities and Exchange
Commission on November 13, 1992. (File No. 0-17183)
10n Amendment to Lease Agreement with Calidad Foods, Inc. dated
December 28, 1992 at 1202 Industrial Place (an office/warehouse
facility). Reference is made to Exhibit 10n to the 1992 Annual
Report on Form 10-K filed with the Securities and Exchange
Commission on March 19, 1993. (File No. 0-17183)
10o Amendment to Lease Agreement with Pierce Leahy Corp., a
Pennsylvania corporation, as successor in interest to Pierce Family
Partnership Ltd., a Pennsylvania limited partnership, dated October
8, 1998, at 1202 Industrial Place (an office/warehouse facility).
Filed herewith.
10p Lease Agreement with Pierce Leahy Corp., a Pennsylvania
corporation, to lease certain premises as described within the
Lease Agreement dated October 8, 1998, at 1202 Industrial Place (an
office/warehouse facility). Filed herewith.
10q Lease Agreement with Brown Group Retail, Inc. to lease certain
premises as described within the Lease Agreement dated November 9,
1993 at Tower Place Festival Shopping Center. Reference is made to
Exhibit 10p to the 1993 Annual Report on Form 10-K filed with the
Securities and Exchange Commission on March 21, 1994. (File No.
0-17183)
10r Lease Agreement with Care Management Enterprises, Inc. to lease
certain premises as described within the Lease Agreement dated
November 16, 1995 at 1202 Industrial Place (an office/warehouse
facility). Reference is made to Exhibit 10p to the 1995 Annual
Report on Form 10-K filed with the Securities and Exchange
Commission on March 22, 1996. (File No. 0-14105)
</TABLE>
35
<PAGE> 38
<TABLE>
<S> <C>
10s Severance Agreements by and among Murray Income Properties I, Ltd.
and Murray Income Properties II, Ltd. and Mitchell L. Armstrong
dated September 16, 1996. Reference is made to Exhibit 10a to the
1996 3rd Quarter Report on Form 10-Q filed with the Securities and
Exchange Commission on November 8, 1996. (File No. 0-14105)
10t Severance Agreements by and among Murray Income Properties I, Ltd.
and Murray Income Properties II, Ltd. and W. Brent Buck dated
September 16, 1996. Reference is made to Exhibit 10b to the 1996
3rd Quarter Report on Form 10-Q filed with the Securities and
Exchange Commission on November 8, 1996. (File No. 0-14105)
27 Financial Data Schedule. Filed herewith.
99a Glossary, as contained in the Prospectus dated February 20, 1986
filed as part of Amendment No. 2 to Registrant's Form S-11
Registration Statement (File No. 33-2394). Filed herewith.
99b Article XIII of the Agreement of Limited Partnership as contained
in the Prospectus dated February 20, 1986 filed as part of
Amendment No. 2 to Registrant's Form S-11 Registration Statement
(File No. 33-2394). Filed herewith.
99c Amendment No. 9 to the Agreement of Limited Partnership contained
in the Proxy Statement dated October 11, 1989. Filed herewith.
99d Management Compensation as contained in the Prospectus dated
February 20, 1986 filed as part of Amendment No. 2 to Registrant's
Form S-11 Registration Statement (File No. 33-2394). Filed
herewith.
</TABLE>
36
<PAGE> 1
EXHIBIT 10h
SECOND AMENDMENT TO MURRAY INCOME PROPERTY LP SERVICES, INC./
MAVRICC MANAGEMENT SYSTEMS, INC.
DATA PROCESSING SYSTEM USE AGREEMENT
This Second Amendment is made and entered into this 1st day of September, 1998,
by MURRAY INCOME PROPERTIES I, LTD. AND MURRAY INCOME PROPERTIES II, LTD.
("MURRAY") and MAVRICC MANAGEMENT SYSTEMS, INC. ("MMS").
The parties hereto desire to amend the Data Processing System Use Agreement
(the "Agreement") entered into by them with an effective date of September 1,
1993.
In consideration of the mutual covenants and consideration furnished to each
other hereunder, the sufficiency of which is acknowledged, the parties agree as
follows:
1. TERM. The Agreement shall remain in effect through August 31, 2001.
2. PRICING. Exhibit A to the Agreement is amended as follows:
Commencing on September 1, 1998, the monthly charge for
services rendered to active Funds shall be equal to $.96 per
account. Postage up to $.33 per piece for four quarterly
distribution mailings and postage up to $.55 per piece for
the K-1 mailing are included in the monthly charge.
The annual charge for Funds that cease to operate as going
concerns shall be equal to $1.00 per account so long as
MURRAY desires to have the accounts available on-line; such
Funds charges shall be invoiced semi-annually rather than
monthly as for active Funds.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day and
year first above written.
WITNESSED: MAVRICC MANAGEMENT SYSTEMS, INC.
/s/ LAURA ALLAN By: /s/ Kyle C. Kerbawy
--------------------------------------------------
Kyle C. Kerbawy, Chief Executive Officer
MURRAY INCOME PROPERTIES I, LTD.
By Murray Realty Investors VIII, Inc, General Partner
/s/ LINDA S. FLYNN By: /s/ Mitchell Armstrong
--------------------------------------------------
Mitchell Armstrong, President
MURRAY INCOME PROPERTIES II, LTD.
By Murray Realty Investors IX, Inc., General Partner
/s/ LINDA S. FLYNN By: /s/ Mitchell Armstrong
--------------------------------------------------
Mitchell Armstrong, President
<PAGE> 1
EXHIBIT 10i
November 19, 1998
Mr. Brent Buck
Murray Income Properties
299 South 9th Street
Suite 203
Oxford, MS 38655
RE: Tower Place Festival
Management Contract Renewal
Dear Brent:
Our current management agreement, dated December 12, 1994 and renewed each year
in letter agreements between Murray Income Properties and CK Retail Charlotte
Overhead Limited Partnership is in the process of expiring. It is our desire to
renew this management contract upon the same terms and conditions as the
previous management, dated December 12, 1994, with the exception that the term
shall now expire on December 31, 1999. I have attached as Exhibit "A", a copy
of the December 12, 1994 management agreement and would like you to indicate
your approval of the renewal and the new expiration date by signing this
renewal agreement in the appropriate space below.
It has been a pleasure to be the property manager/leasing agent at Tower Place
Festival and we look forward to continuing our relationship as your management
agent in the future.
RENEWAL AGREEMENT ACCEPTED:
CK Charlotte Overhead Limited Partnership Tower Place Joint Venture
a North Carolina Limited Partnership By: Murray Income Properties I, LTD.
By: Childress Klein Retail-Charlotte A Texas Ltd. Partnership, Joint
#2, Inc., Its General Partner Venturer
By: Murray Realty Investors VIII,
Inc.
A Texas Corp., General Partner
BY: /s/ David Haggart By: /s/ Brent Buck
------------------------------- --------------------------------
David Haggart, Vice President Brent Buck, Executive Vice
President
Attest/Witness: Witness:
/s/ Wendy Roy /s/ Jan Pugh
- ----------------------------------- --------------------------------
Title: Secretary Name: Jan Pugh
(Corporate Seal)
<PAGE> 1
EXHIBIT 10j
STATE OF TENNESSEE
COUNTY OF SHELBY
MODIFICATION TO MANAGEMENT AGREEMENT
This Modification to management Agreement is made and entered into this
15th day of February, 1999, by and between Murray Income Properties, II, LTD, a
Texas Limited Partnership ("Owner") and TC Tennessee, Inc., a Delaware
Corporation ("Operator").
WITNESSETH:
Whereas, Owner and Operator entered into that certain Management
Agreement for the managing and operating of certain improved real property,
("Project") commonly known as Germantown Collection, dated August 8, 1990 and
extended December 30, 1993.
Whereas, the Owner and Operator desire to modify and amend the Management
Agreement;
Now, therefore, for and in consideration of the Modification to
Management Agreement, the sum of One and 00/100 Dollars ($1.00) in hand paid by
Owner to Operator, the mutual agreements herein contained and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto do agree as follows:
1. Owner and Operator acknowledge and agree the management Agreement
shall be extended to expire on December 31, 1999.
2. All other terms and conditions of the Management Agreement not
specifically amended by this Modification to Management Agreement,
are hereby deemed to remain in full force and effect.
IN WITNESS WHEREOF, the parties have executed the foregoing Modification
as of the day and year written above.
Owner: Operator:
Murray Income Properties, II, LTD TC Tennessee, Inc., a Delaware
corporation
BY: Murray Realty Investors, IX, Inc.
BY: /s/ Brent Buck BY: /s/ Curt Grantham
------------------------------ ----------------------------
Brent Buck Curt Grantham
Title: Executive Vice President Title: President
<PAGE> 1
EXHIBIT 10k
EXTENSION OF PROPERTY MANAGEMENT AGREEMENT
The Extension of Property Management entered into this 15th day of February,
1999 by and between Murray Income Properties II, Ltd., a Texas limited
partnership (hereinafter called the "Owner") and Brookside Properties, Inc.,
(hereinafter called the "Agent").
RECITALS:
1. Owner and Agent are parties to that certain Property Management
Agreement dated March 1, 1991 covering the Paddock Place Shopping
Center, located at the Southwest corner of White Bridge Road and
Brookwood Terrace, Nashville, Tennessee.
2. The term of the aforesaid Property Management Agreement expired on
February 28, 1994, was extended with an expiration date of February
28, 1995, was extended with an expiration date of February 29,
1996, was extended with an expiration date of February 28, 1997,
was extended with an expiration date of February 28, 1998, and was
extended with an expiration date of December 31, 1998. The parties
thereto are mutually desirous of extending the term of the Property
Management Agreement.
NOW, THEREFORE, it is hereby agreed as follows:
1. The expiration date of the Property Management Agreement shall be
midnight, December 31, 1999.
2. All other terms and conditions of the Property Management Agreement
shall remain unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this document the day and
year first above written.
WITNESS BROOKSIDE PROPERTIES, INC.
/s/ Lori Green /s/ W. Miles Warfield
- ------------------------------- -------------------------------------------
Lori Green W. Miles Warfield
MURRAY INCOME PROPERTIES II, LTD
A Texas Limited Partnership by
Murray Realty Investors IX, Inc. a
Texas Corporation, its General Partners
(Owners)
/s/ Mitchell Armstrong /s/ Brent Buck
- ------------------------------- -------------------------------------------
Mitchell Armstrong By: Brent Buck, Executive Vice President
<PAGE> 1
EXHIBIT 10o
FIRST AMENDMENT TO LEASE AGREEMENT
THIS FIRST AMENDMENT TO LEASE AGREEMENT (this "Amendment") is made and
entered effective as of the 8th day of October, 1998, by and between MURRAY
INCOME PROPERTIES II, LTD., a Texas limited partnership ("Landlord") and PIERCE
LEAHY CORP., a Pennsylvania corporation, as successor-in-interest to Pierce
Family Partnership Ltd., a Pennsylvania limited partnership, ("Tenant").
RECITALS:
Landlord and Pierce Family Partnership Ltd. entered into that certain
Lease Agreement dated effective as of October 23, 1992 (the "Lease") providing
for the lease of approximately 118,800 square feet of Floor Area in the
Building situated in Grand Prairie, Tarrant County, Texas. Tenant is the
successor-in-interest to all of the right, title and interest, and the
obligations, of Pierce Family Partnership Ltd. under the Lease.
Landlord and Tenant have agreed to extend the Term of the Lease and to
amend the Lease in certain other respects. Landlord and Tenant enter into this
Amendment for the purpose of providing for such amendments.
AGREEMENTS:
NOW, THEREFORE, in consideration of the premises and for other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Basic Lease Provisions. (a) The definition of "Term" set forth in
Article I of the Lease is hereby amended in its entirety to read as follows:
"Term shall mean two hundred sixty-four (264) months, commencing on the
Commencement Date and ending on October 31, 2014, as the same may be
extended pursuant to Section 2.04."
(b) The definition of "Base Rental" set forth in Article I of the Lease
is hereby amended to add the following calculation of Base Rental for the
period from and after November 1, 2002 through the end of the Term:
<TABLE>
<CAPTION>
Base
Rental/Square Monthly Base
"Period Foot Rental
------- ---- ------
<S> <C> <C>
November 1, 2002-October 31, 2004 $3.00 $29,700.00
November 1, 2004-October 31, 2007 $3.10 $30,690.00
November 1, 2007-October 31, 2009 $3.25 $32,175.00
November 1, 2009-October 31, 2014 $3.50 $34,650.00"
</TABLE>
<PAGE> 2
(c) The following term shall be added to the Basic Lease Provisions set
forth in Article I of the Lease:
"Other Lease shall mean that certain Lease Agreement dated as of October
8 1998, between Landlord and Pierce Leahy Corp. (an affiliate of Tenant)
as Tenant providing for the lease of 54,000 square feet of Floor Area in
the Building."
2. Broker. With respect to extension of the Term from November 1, 2002 to
October 31, 2014, Murray Realty Investors IX, Inc. shall be the "Broker" in
place of Rosemark Commercial Real Estate Services.
3. Renewal Options. Section 2.04 of the Lease is hereby amended to
provide that the renewal options provided for therein shall be exercisable in
accordance with Section 2.04 at the expiration of the Term of the Lease, as
extended hereby, as opposed to being exercisable at the expiration of the
"initial ten-year Term," as presently provided in Section 2.04. Section 2.04 is
further amended to delete the following language: "provided, however, at no
time during the Renewal Term shall Base Rental be less than $2.65 per square
foot of Floor Area in the Leased Premises."
4. Security Deposit. Thirty (30) days after the execution and delivery of
this Amendment, Landlord shall release to Tenant the Security Deposit in the
amount of $25,740. Section 7.03(d) is hereby deleted in its entirety from the
Lease.
5. Expansion Space. Section 2.06 of the Lease is hereby deleted in its
entirety.
6. Default by Tenant. Section 7.02 of the Lease is hereby amended to add
the following language:
"(k) The occurrence of a default by the tenant under the Other Lease,
following any period for notice and opportunity to cure provided
therein."
7. Defined Terms. Terms defined in the Lease shall have the same meaning
when used in this Amendment.
8. Ratification. Except as expressly provided in this Amendment, the
Lease shall continue in full force and effect in accordance with its terms.
9. Counterparts. This Amendment may be executed in identical
counterparts, which when taken together shall constitute one and the same
instrument.
2
<PAGE> 3
IN WITNESS WHEREOF, the parties have executed and delivered this
Amendment as of the date first written above.
LANDLORD:
MURRAY INCOME PROPERTIES II, LTD., a
Texas limited partnership
By: Murray Realty Investors IX, Inc., a
Texas corporation
General Partner
By: /s/ Brent Buck
---------------------------------
Name: Brent Buck
Title: Executive Vice President
TENANT:
PIERCE LEAHY CORP., a
Pennsylvania corporation
By: /s/ Joseph P. Linaugh
-------------------------------------
Name: Joseph P. Linaugh
Title: Vice President
3
<PAGE> 1
EXHIBIT 10p
LEASE AGREEMENT
THIS LEASE AGREEMENT (this "Lease") is made and entered into as of the
8th day of October, 1998, by and between MURRAY INCOME PROPERTIES II, LTD., a
Texas limited partnership, ("Landlord"), whose address is 5550 LBJ Freeway,
Suite 675, LB #6, Dallas, Texas 75240, and PIERCE LEAHY CORP., a Pennsylvania
corporation ("Tenant"), whose address is 631 Park Avenue, King of Prussia,
Pennsylvania 19406. Subject to all of the terms, provisions, covenants and
conditions of this Lease, and in consideration of the mutual covenants,
obligations and agreements contained in this Lease, and other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged,
Landlord and Tenant agree as follows:
ARTICLE I. BASIC LEASE PROVISIONS.
Base Rental shall mean for each month during the Term (hereinafter defined) the
amount per square foot of Floor Area in the Leased Premises set forth below:
<TABLE>
<CAPTION>
Period Base Rental/Square Foot Monthly Base Rental
------ ----------------------- -------------------
<S> <C> <C>
December 1, 2000 - October 31, 2004 $3.00 $13,500.00
November 1, 2004 - October 31, 2007 $3.10 $13,950.00
November 1, 2007 - October 31, 2009 $3.25 $14,625.00
November 1, 2009 - October 31, 2014 $3.50 $15,750.00
</TABLE>
Broker shall mean Murray Realty Investors IX, Inc.
Building shall mean the approximately 172,800 square foot structure situated
upon the Site (hereinafter defined), located in the City of Grand Prairie,
County of Tarrant, State of Texas, as the same currently exists or as it may
from time to time hereafter be expanded or modified. For the purposes of
determining Tenant's Share, the floor area of the Building shall be the amount
set forth in the preceding sentence.
Commencement Date shall mean December 1, 2000.
Common Area shall mean all areas of the Site designated by Landlord from time
to time for the common use of all tenants, including, among other facilities,
parking areas, sidewalks, landscaping, curbs, loading areas, private streets
and alleys, lighting facilities, hallways, restrooms and other areas and
improvements provided by Landlord for the common use of all tenants, all of
which shall be subject to the provisions of Section 4.02 of this Lease.
Floor Area shall mean the total number of square feet of floor space in the
Leased Premises (hereinafter defined) available for the exclusive use of an
occupant, whether or not actually occupied, including basement, subterranean,
balcony and mezzanine, measured from exterior facade of exterior walls and
center line of demising walls. The Floor Area of the Leased Premises has been
calculated on the basis of the foregoing definition, and is stipulated for all
purposes to be the number of square feet set forth in Section 2.01 of the
Lease, whether the same should be more or less as a result of minor variations
resulting from completion of the Leased Premises for occupancy so long as such
work is in accordance with this Lease.
Other Lease shall mean that certain Lease Agreement dated as of October 23,
1992 between Landlord and Tenant, as the successor-in-interest to Pierce Family
Partnership Ltd. providing for the lease by Landlord to Tenant of 118,800
square feet of Floor Area in the Building.
Project shall mean the Building, together with the Site, the Common Area and
all other improvements situated therein or directly benefitting the Building,
and all future additional facilities or improvements directly benefitting the
Building that may be constructed.
Site shall mean that certain tract of land situated in Tarrant County, Texas
and more particularly described on Exhibit A attached hereto and hereby made a
part hereof.
Term shall mean one hundred sixty-seven (167) months, commencing on the
Commencement Date and ending on October 31, 2014, as the same may be extended
pursuant to Section 2.04.
<PAGE> 2
ARTICLE II. Section II.1. Leased Premises. Landlord does hereby lease, demise
and let to Tenant and Tenant does hereby lease and take from Landlord those
certain premises containing approximately 54,000 square feet of Floor Area in
the Building together with the non-exclusive use of all rights, privileges,
easements, appurtenances and immunities belonging to or in any way pertaining
to said premises (collectively, the "Leased Premises"). The Leased Premises are
outlined on Exhibit B attached hereto and hereby made a part hereof. Tenant
accepts the Leased Premises and the Project in their "AS IS" "WHERE IS"
condition, and Landlord shall have no obligation to furnish, equip or improve
the Leased Premises or the Project. By occupying the Leased Premises, Tenant
shall be deemed to have accepted the Leased Premises and the Project and to
have acknowledged that the Leased Premises and the Project comply fully with
Landlord's covenants and obligations.
Section II.2. Term. The Term of this Lease shall begin on the Commencement Date
and shall continue in full force and effect for the Term of this Lease unless
extended or sooner terminated in accordance with the provisions of this Lease.
Section II.3. Use. Tenant shall use and be permitted to use the Leased Premises
solely for the following purposes: general office and warehouse for the storage
and management of business records and for no other purpose. Any other use may
be done only with Landlord's prior written consent, not to be unreasonably
withheld, conditioned or delayed. Tenant, at its sole expense, will comply, and
will cause Tenant's Agents (hereinafter defined) to comply, with any and all
applicable laws, rules and regulations in any way applicable to Tenant,
Tenant's Property (hereinafter defined), the Leased Premises or the Project
(collectively, "Legal Requirements" and individually, "Legal Requirement").
Tenant will not (a) use, occupy or permit the use or occupancy of the Leased
Premises or the Project for any purpose or in any manner which is not permitted
hereunder or which is or may be, directly or indirectly, violative of any Legal
Requirement, or dangerous to life or property, or a public or private nuisance,
or disruptive or obstructive of any tenant or neighbor of the Leased Premises
or the Project; provided, however, Tenant shall be entitled to contest in good
faith the alleged violation by Tenant of any Legal Requirement so long as
Tenant's contest does not adversely affect the Building or Landlord and any
enforcement proceedings against the Building or Landlord have been stayed, (b)
keep, or permit to be kept, any substance in or conduct, or permit to be
conducted, any operation from the Leased Premises or the Project which might
emit offensive or hazardous odors or conditions onto or into the Leased
Premises, the Project or the property located outside the Project, (c) cause,
commit or permit to remain any waste or damage to the Leased Premises or the
Project, or any conditions which adversely impair in Landlord's sole reasonable
judgment the value or marketability of the Leased Premises or the Project, (d)
install or permit to remain any improvements to the Leased Premises or the
Project (other than improvements which have first been approved by Landlord)
which are visible from the outside of the Leased Premises or the Project, or
adversely affect the mechanical, plumbing or electrical systems of the Building
or affect the structural integrity thereof in any way, (e) place any dumpsters
or other garbage or trash disposal equipment in the Leased Premises or the
Project except those approved by Landlord, or (f) commit, or permit to be
committed, any action or circumstance in, upon or about the Leased Premises or
the Project which, directly or indirectly, would or might justify any insurance
carrier in canceling or increasing the premium on any insurance policy covering
the Leased Premises, the Project or the contents thereof, and if any increase
so results, Tenant shall pay such increase upon Landlord's demand. Tenant shall
comply with, and Tenant shall cause Tenant's Agents to comply with, the current
Rules and Regulations of the Building (a copy of which are attached hereto as
Exhibit C) as the same may be amended by Landlord from time to time. Landlord
will endeavor in good faith to apply the Rules and Regulations uniformly and
consistently among all tenants of the Building.
Section II.4. Renewal Option. Provided no default shall remain uncured beyond
any applicable grace or cure period at the time the option is exercised, and
provided Tenant shall not have assigned this Lease or sublet the Leased
Premises, Tenant shall have the right, at the expiration of the initial Term to
extend the Term as to the entire Leased Premises for a period of five (5) years
("Renewal Term"). If the option is exercised during a grace or cure period, the
exercise shall be of no force or effect if the default is not cured by the
expiration of the applicable grace or cure period. Such right to renew shall be
exercised by written notice to Landlord at least 180 days prior to the end of
the initial Term. During the Renewal Term, the Lease shall continue upon the
same terms and conditions as provided herein except for an adjustment in Base
Rental as hereinafter provided. During the Renewal Term, Base Rental shall be
ninety-five percent (95%) of Market Rent (hereinafter defined). "Market Rent"
shall mean the prevailing fair market rental rate for comparable lease space in
the area of the Project at the time in question. The Market Rent shall be
determined by agreement of the parties; provided, however, if the parties are
unable to agree on Market Rent by ninety (90) days prior to commencement of the
Renewal Term, within the next fifteen (15) days, each of Landlord and Tenant
shall select an independent qualified appraiser and such appraisers shall
select a third. The three
2
<PAGE> 3
appraisers so selected shall determine the Market Rent for the Leased Premises
and shall submit a written report of their determination to both Landlord and
Tenant within thirty (30) days after selection. Prior to the commencement of
the Renewal Term, Landlord and Tenant shall execute and deliver an agreement
evidencing the renewal and establishing the adjusted Base Rental. Tenant's
failure to timely exercise its option to extend for the Renewal Term in the
manner provided in this Section shall constitute Tenant's waiver of all rights
to extend the Term.
Section II.5. Left Blank Intentionally.
Section II.6. Left Blank Intentionally.
ARTICLE III. Section III.1. Rent. (a) Tenant agrees to pay the Base Rental to
Landlord for each month during the Term of the Lease as herein provided. Base
Rental for the first (1st) month of the Term of the Lease shall be due and
payable on the Commencement Date, and Base Rental for each and every month
thereafter during the Term of the Lease shall be due and payable in advance on
the first (1st) day of each month. If the Commencement Date is a day other than
the first (1st) day of a calendar month or in the event this Lease terminates
on other than the last day of a calendar month, then Base Rental for such month
or months shall be prorated and the rental installment or installments so
prorated shall be paid in advance. Tenant shall pay any and all sums, other
than Base Rental, which Tenant is or becomes obligated to pay to Landlord under
this Lease (herein called "Additional Rental") within thirty (30) days after
receipt of Landlord's invoice or statement for same which statement shall be
accompanied by receipted bills and other detail sufficient to allow
verification of amounts reflected on the statement, or, if this Lease provides
another time for payment of certain items of Additional Rental, then at such
other time.
(b) Tenant shall pay to Landlord Tenant's Share (hereinafter defined) of
Expenses (hereinafter defined) as follows as an item of Additional Rental.
(i) "Tenant's Share" shall mean that portion of an Expense determined
by multiplying the cost of the item by a fraction, the numerator of which is
the total Floor Area of the Leased Premises and the denominator of which is the
total floor area of the Building. Landlord and Tenant acknowledge that the size
of the Project, and the floor area therein, may change from time to time, and
Tenant's Share may vary accordingly.
(ii) "Expenses" shall mean the total in any given calendar year of all
expenses, costs and disbursements (but not specific costs billed to specific
tenants) of every kind and nature which Landlord shall pay or become obligated
to pay because of, or in connection with, ownership, maintenance (other than
maintenance of the roof, exterior walls and foundation to the extent Landlord
is obligated to maintain such items pursuant to Section 4.01(a)) and operation
of the Project, including without limitation, the following: (A) costs of all
insurance relating to the Project maintained by Landlord; (B) all real estate
taxes, assessments (whether they be general, specific or special), sewer rents,
rates and charges, transit taxes, taxes based upon the receipt of rent and any
other federal, state or local governmental charge, general, special, ordinary
or extraordinary (but not including income or franchise taxes or estate;
inheritance, succession or transfer taxes, or any other taxes imposed upon or
measured by Landlord's income or profits, unless a rent tax or receipts tax
regarding the Leased Premises or the Project is imposed, in which case Tenant
shall pay such tax determined as if only the Leased Premises were being taxed
exclusive of Landlord's other property), which may now or hereafter be levied
or assessed against or relating to the Project; (C) costs of repairs and
general maintenance of all Common Areas; and (D) cost of all supplies and
materials used in such repair and maintenance. All accounting for Expenses
shall be on the accrual basis except for taxes which, notwithstanding any other
provision herein to the contrary, shall be computed on the basis of taxes
actually paid during the calendar year in question and in accordance with
generally accepted accounting principles.
(iii) Calculation of Tenant's Share of Expenses. Tenant's Share of
Expenses shall be determined and paid in the following manner:
(A) (1) For the calendar year of Landlord in which the Commencement
Date occurs (the "First Year"), whether the portion of the Term following the
Commencement Date includes the full calendar year or a portion thereof,
Tenant's Share of Expenses shall be determined by applying Tenant's Share to an
amount equal to the Expenses of the Project, as projected by Landlord for the
full calendar year.
(2) For each calendar year during the Term (whether full calendar
year or portion thereof falls within the Term) following the First Year (a "New
Year"), Landlord shall provide Tenant a comparison
3
<PAGE> 4
between the Expenses for the year preceding the New Year and the projected
Expenses for each New Year. Landlord shall make reasonable efforts to provide
such projection prior to, and Tenant shall commence to pay on or effective, the
first day of each New Year Tenant's Share of Expenses -- which shall be
determined by applying Tenant's Share to an amount equal to Expenses of the
Project, as projected by Landlord for the full calendar year.
(3) Tenant shall pay one-twelfth (1/12th) of Tenant's Share of
Expenses, as determined by the provisions in (iii)(A)(1) and (2) above, as
applicable, for each month of the Term following the Commencement Date.
However, if this Lease commences or terminates at any time other than on the
first day of a calendar month, Tenant's Share of Expenses for said commencement
or termination month shall be prorated accordingly.
(B) Landlord shall, within the period of one hundred fifty (150) days
(or as soon thereafter as possible) after the close of the First Year and each
New Year, provide Tenant a statement for such year showing the projected
Expenses, actual Expenses, and the difference between them (the "Difference").
If actual Expenses are greater than those projected for such year, Tenant shall
pay as Additional Rental Tenant's Share of the Difference upon Landlord's
demand. If such year's projected Expenses are greater than the actual Expenses
for such year, Landlord shall credit Tenant's Share of the Difference against
the Base Rental next falling due. If this Lease commences or terminates at any
time other than the first day of the year, then Tenant's Share of the
Difference for such commencement or termination year shall be prorated
accordingly.
Section III.2. Payment; Past Due Rate. Base Rental and Additional Rental shall
constitute and are sometimes hereinafter collectively referred to as "Rent".
Tenant shall pay all Rent and other sums of money as shall become due from and
payable by Tenant to Landlord hereunder in lawful money of the United States of
America at the times and in the manner provided in this Lease, without demand,
deduction, abatement, setoff, counterclaim or prior notice. In the event that
Tenant fails to pay any installment of Rent or any other sums due under this
Lease by the due date thereof or within any grace period provided for herein,
the total amount then due shall bear interest at the lesser of twelve percent
(12%) or the maximum nonusurious rate of interest then permitted by the
applicable laws of the State of Texas or the United States of America,
whichever shall permit the higher nonusurious rate, such interest being in
addition to and cumulative of any other rights and remedies which Landlord may
have with regard to the failure of Tenant to make any such payments under this
Lease.
Section III.3. Left Blank Intentionally.
ARTICLE IV. Section IV.1. Maintenance. (a) Landlord's Maintenance. Landlord
shall maintain at its sole cost and expense the roof, structural soundness of
the exterior walls and foundation of the Leased Premises in operable repair and
condition, reasonable wear and tear and damage by any casualty pursuant to
Section 6.03 of this Lease excepted. Tenant shall immediately give Landlord
written notice of defects or repairs of items required to be maintained by
Landlord under this Article IV, after which Landlord shall, with reasonable
promptness, commence and complete the necessary repairs. If Landlord has not
completed the repairs within thirty (30) days after notice from Tenant, or if
the nature of the repair is such that it cannot reasonably be completed in
thirty (30) days, unless Landlord has within such thirty-day period commenced
the repair and is diligently pursuing the same to completion, Tenant may, at
its option, undertake the repairs itself. In that event, Landlord shall
reimburse Tenant for the reasonable cost of such repairs within thirty (30)
days after receipt of a statement therefor accompanied by receipted bills and
other detail sufficient to allow verification of amounts reflected on the
statement. If Landlord fails to make such payment within the thirty-day period,
the amount due Tenant shall bear interest at twelve percent (12%) per annum.
Notwithstanding the foregoing, if in Tenant's reasonable judgment, a bona fide
emergency exists, if Landlord has not made the necessary repairs within 72
hours after written notice from Tenant, Tenant may, at its option, undertake
such repairs and recover the reasonable cost thereof as hereinabove provided.
Landlord shall not be liable to Tenant for any damage to Tenant's Property in
the Leased Premises or Project; provided, however, if by reason of Landlord's
failure to repair and maintain the Leased Premises as provided in this Section
4.01(a), there is a material interference with the ordinary conduct of Tenant's
business, Tenant shall be entitled to a fair and equitable diminution of the
Base Rental payable hereunder, based on the extent and nature of the
interference and the portion of the Leased Premises so affected. The period of
the diminution shall continue until the interference has been substantially
removed. Unless otherwise expressly provided in this Lease, Landlord shall not
be required to maintain, or make any repairs to, the Leased Premises. Subject
to the provisions of Section 3.01(b) hereof, Landlord shall also maintain all
landscaping, exterior lighting, concrete and paving including driveway and
parking area surfaces (subject, however, to the limitations of Section 4.01(b)
of this Lease), pedestrian walks and other Common Area.
4
<PAGE> 5
(b) Tenant's Maintenance. Tenant shall, at its sole expense, keep all
other parts of the Leased Premises in good condition, order and repair, clean,
sanitary and safe, including, without limitation, the following items: all
glass, including windows of glass or plate glass, window mullions and gaskets,
doors and attached hardware, office entries, special store fronts, interior
walls, interior ceilings, cabinets, millwork, paneling and other finish work,
floors and floor coverings, plumbing fixtures and sanitary sewers between
Tenant's plumbing fixtures and the main Project sanitary sewers, electrical
facilities and electrical fixtures, and all other equipment, fixtures and Trade
Fixtures (hereinafter defined), and shall paint the interior of the Leased
Premises when necessary in order to maintain at all times a clean and sightly
appearance. Tenant shall also maintain on a regular basis the heating,
ventilating and cooling equipment serving the Leased Premises, and repair the
same as necessary. Tenant shall repair and replace, subject to Landlord's
direction and supervision, any damage to the Leased Premises or the Project
caused by Tenant or any of Tenant's Agents. If Tenant refuses or neglects to
make repairs and/or maintain the Leased Premises, or any part thereof, in a
manner reasonably satisfactory to Landlord, Landlord shall have the right (but
not the obligation), upon giving Tenant ten days' prior written notice of its
election to do so, to make such repairs or replacements or perform such
maintenance on behalf of and for the account of Tenant. Such cost shall be
payable to Landlord by Tenant on demand as Additional Rental. The obligation to
repair shall include the obligation to replace when necessary. All contractors,
workmen, artisans and other persons which or who Tenant proposes to retain to
perform work in the Leased Premises pursuant to this Section 4.01 shall be
approved by Landlord prior to the commencement of any such work. Tenant is also
obligated to perform, at Tenant's own cost and expense and risk, all other
maintenance and repairs necessary or appropriate to cause the Leased Premises
to be suitable for Tenant's intended commercial purpose.
(c) Occupancy of Leased Premises. Tenant shall throughout the Term of
this Lease, at its own expense, maintain the Leased Premises and all
improvements thereon and shall deliver up the Leased Premises in a clean and
sanitary condition at the expiration or termination of this Lease or the
termination of Tenant's right to occupy the Leased Premises, in good repair and
condition, reasonable wear and tear excepted, subject to the provisions of
Article VI. Upon the expiration or termination of this Lease or the termination
of Tenant's right to occupy the Leased Premises, Tenant shall surrender all
keys for the Leased Premises to Landlord at the place then fixed for the
payment of Rent and Landlord shall have the right to reenter and resume
possession of the Leased Premises. No act done by Landlord or any of Landlord's
Agents (hereinafter defined) during the Term of the Lease shall be deemed an
acceptance of a surrender of the Leased Premises, and no agreement to accept a
surrender of the Leased Premises shall be valid unless the same be made in
writing and executed by Landlord. Tenant shall notify Landlord at least fifteen
(15) days prior to vacating the Leased Premises and shall arrange to meet with
Landlord for a joint inspection of the Leased Premises. If Tenant fails to give
such notice or to arrange for such inspection, then Landlord's inspection of
the Leased Premises shall be deemed correct for the purpose of determining
Tenant's responsibility for repair of the Leased Premises.
Section IV.2. Common Area. The Common Area shall be subject to Landlord's sole
management and control and shall be operated and maintained in such manner as
Landlord, in its discretion, shall determine. Landlord reserves the right to
change from time to time the dimensions and location of the Common Area as well
as the location, dimensions, identity and type of any building and to construct
additional buildings or additional stories on existing buildings or other
improvements in the Project, and to eliminate buildings. Tenant and Tenant's
Agents shall have the nonexclusive right and license to use the Common Area as
constituted from time to time, such use to be in common with Landlord, other
tenants of the Project and other persons permitted by Landlord to use the
Common Area. Landlord may from time to time designate specific areas within the
Project or in reasonable proximity thereto in which automobiles owned by Tenant
and Tenant's Agents shall be parked. Tenant and Tenant's Agents shall not,
without the prior written consent of Landlord, solicit business or display
merchandise within the Common Area, or distribute handbills therein, or take
any action which would interfere with the rights of other persons to use the
Common Area. Landlord may temporarily close any part of the Common Area as may
be necessary to prevent the public from obtaining prescriptive rights or to
make repairs or alterations.
Section IV.3. Light, Air and View. Neither the diminution nor the shutting off
of any light, air or view nor any other effect on the Leased Premises by any
structure or condition now or hereafter existing on property adjacent to the
Leased Premises or the Project shall affect this Lease, abate Rent or otherwise
impose any liability on Landlord.
Section IV.4. Entry. Tenant shall permit Landlord and Landlord's Agents
(hereinafter defined) to enter into and upon the Leased Premises at all
reasonable times for the purposes of inspecting the same or showing the
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same to prospective purchasers, or for the purpose of maintaining or making
repairs and the Rent shall in no way abate while such inspections, repairs,
alterations, improvements or additions are being made, by reason of loss or
interruption of business of Tenant; provided, however, that Landlord shall make
reasonable efforts not to interfere with the normal business operations of
Tenant. During the period that is six (6) months prior to the end of the Term
hereof (unless Tenant has exercised its option to renew) and at any time Tenant
is in default, Landlord or Landlord's Agents may enter the Leased Premises
during reasonable times for the purpose of showing the Leased Premises.
Landlord acknowledges that the business conducted by Tenant and to be conducted
by Tenant on the Leased Premises consists of retention, maintenance and storage
of records of third parties, which requires that their access be restricted so
as to maintain the confidentiality thereof. In exercising its right to enter
into and upon the Leased Premises, Landlord shall observe such procedures and
safeguards as Tenant may reasonably impose to protect the confidentiality of
the business records stored in the Leased Premises, provided, in the case of an
emergency, Landlord may take such action as may be reasonably necessary to
protect the Leased Premises. In the event of a default by Tenant under and
pursuant to this Lease, Tenant, or the third parties whose records are stored
and maintained by Tenant on the Premises, shall have thirty (30) days from the
retaking of possession by Landlord in which to remove such records from the
Premises without interference from Landlord. In no event shall any Landlord
type lien, security interest or encumbrance attach in any manner to any of such
third party records.
Section IV.5. Waste and Environmental Compliance. Tenant covenants and agrees
to comply strictly and in all respects and to cause Tenant's Agents to comply
strictly and in all respects with the requirements of any applicable law,
statute, ordinance, permit, decree, guideline, rule, regulation or order
pertaining to health or the environment (hereinafter sometimes collectively
called "Applicable Environmental Laws"), including, without limitation, the
Comprehensive Environmental Response, Compensation, and Liability Act of 1980,
the Resource Conservation and Recovery Act, the Hazardous Materials
Transportation Act, the Texas Water Code, the Texas Solid Waste Disposal Act
and regulations promulgated under any of the preceding statutes, as each of the
foregoing may be amended from time to time. Tenant shall not cause or permit
any Hazardous Materials (hereinafter defined) to be brought to or generated,
treated, stored, used, installed or disposed in, on, under or about the Leased
Premises or the Project. Tenant represents, warrants, covenants and agrees that
Tenant and Tenant's Agents are not and will not become involved in operations
at the Leased Premises, the Project which could lead to the imposition on
Landlord or any of Landlord's Related Parties (hereinafter defined) of
liability under any of the Applicable Environmental Laws. As additional
consideration for Landlord's entering into this Lease, Tenant does hereby for
itself and its heirs, legal representatives, successors and assigns, agree to
and hereby does expressly (a) assume and accept any and all liability and risks
involved or related to the presence on the Project of any and all Hazardous
Materials introduced by Tenant, (b) indemnify, defend and hold harmless
Landlord and Landlord's Related Parties against and from any and all actions,
causes of action, claims, demands, liabilities, losses, damages and expenses of
whatsoever kind, including, but not limited to, attorneys' fees, that any or
all of Landlord or any of Landlord's Related Parties may at any time sustain or
incur by reason of any and all claims asserted against any of them to the
extent that such claims arise out of or are based upon the breach of any of the
agreements of Tenant under this Section 4.05 or based upon any Hazardous
Materials being brought or allowed to be brought to or from the Project by
Tenant or any of Tenant's Agents. The covenants and agreements of Tenant under
this Section 4.05 shall survive the expiration or termination of this Lease. As
used in this Lease, the term "Hazardous Materials" means any flammables,
explosives, radioactive materials, asbestos-containing materials, solid wastes
that pose imminent and substantial endangerment to health or the environment,
formaldehyde, radon gas, lead, petroleum products or wastes, polychlorinated
biphenyls and other hazardous waste, toxic substances or other potentially
health affecting substances, including without limitation substances defined as
"hazardous substances," "hazardous materials," "toxic substances," "hazardous
waste," "extremely hazardous substance," "regulated substance," "contaminant"
or "Class I" or "Class II" waste in the Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, the Hazardous Materials Transportation
Act, the Resources Conservation and Recovery Act, the Texas Water Code, the
Texas Solid Waste Disposal Act, and regulations promulgated under any of the
preceding statutes, as each of the foregoing may be amended from time to time.
ARTICLE V. Section V.1. Utilities. (a) Services. Landlord agrees to cause to be
provided the necessary mains, conduits and other facilities necessary to supply
water, electricity, gas, telephone, and sewer service (sometimes collectively
referred to in this Section 5.01 as the "services") to the Leased Premises to
the extent and in such manner as is deemed by Landlord to be adequate for the
use and occupancy of the Building.
(b) Payment of Impositions. Tenant shall pay all charges for gas,
electricity and water used in its operations in the Leased Premises, and all
connection charges and sewer charges attributable thereto. Tenant shall pay
suppliers directly for those utilities which are separately metered by the
supplier thereof. Tenant
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shall pay Landlord for utilities which are not paid directly to the supplier
thereof and charges for such utilities shall be calculated by Landlord in
accordance with Section 3.01(b) hereof.
(c) Personal Property Taxes. Tenant shall pay all ad valorem and other
taxes, assessments or charges levied upon or applicable to any of Tenant's
Property and all fees or charges imposed on the business conducted by Tenant on
the Leased Premises before such items become delinquent. If Landlord shall be
required to pay a higher tax with respect to the Leased Premises as a result of
Tenant's leasehold improvements, then Tenant shall pay to Landlord, upon
demand, the amount of the increase in such tax.
(d) No Liability. No interruption, cessation or malfunction of any
services from any cause of any kind which is beyond the reasonable control of
Landlord, shall constitute an eviction or disturbance of Tenant's use and
possession of the Leased Premises or a breach by Landlord of any of its
obligations under this Lease or render Landlord liable for any damages to
either person or property (including, without limitation, consequential or
special damages) or entitle Tenant to be relieved from any of its obligations
under this Lease (including the obligation to pay Rent) or grant Tenant any
right of setoff, counterclaim, abatement or recoupment. In the event of any
such interruption of any such services, Landlord shall use reasonable diligence
to restore such service.
Section V.2. Liens. Tenant shall not permit any mechanic's lien or any other
liens, claims or charges to be placed on the Leased Premises, on the Project,
on the improvements thereon, on Landlord's interest therein, or upon Tenant's
leasehold interest therein, during the Term of this Lease, and in the event of
the filing of any such lien, encumbrance, claim or charge, Tenant shall
promptly have same removed. Tenant covenants and agrees that it will pay or
cause to be paid all sums legally due and payable by it on account of labor
performed or materials furnished in connection with any work performed on the
Leased Premises and that it will save and hold Landlord harmless from and
defend Landlord against any and all loss, cost or expense based on or arising
out of any such asserted claims, liens or charges. Tenant agrees to give
Landlord immediate written notice of the placing of any lien, charge, claim or
encumbrance against the Leased Premises.
Section V.3. Indemnification. As additional consideration for Landlord entering
into this Lease, Tenant does hereby for itself and its heirs, legal
representatives, successors and assigns, agree to and hereby does expressly
indemnify, defend and hold harmless Landlord, and Landlord's manager of the
Project and Landlord's and such manager's agents, principals, employees, heirs,
legal representatives, successors, assigns, affiliates, officers, directors,
shareholders, partners, venturers, trustees and representatives (collectively,
"Landlord's Related Parties"), against and from any and all claims, actions,
causes of action, demands, losses, assessments, suits, damages, liability,
costs and expenses of whatever kind (including without limitation attorneys'
fees), that Landlord or any of Landlord's Related Parties may at any time
sustain or incur by reason of any and all claims asserted against any of them
to the extent that such claims arise out of or are based upon (a) any breach of
any of the agreements of Tenant under this Lease, (b) any occurrence in, upon
or about the Leased Premises or the Project caused by the sole, contributory,
partial, joint, comparative or concurrent negligence of Tenant or Tenant's
respective employees, agents, officers, directors, shareholders, partners,
trustees, representatives, customers, guests, invitees, licensees, subtenants,
concessionaires, contractors, servants, vendors, materialmen, suppliers, heirs,
legal representatives, successors, assigns or any other person entering the
Project under express or implied invitation of Tenant, claiming by, through or
under Tenant or who may occupy or use the Leased Premises (collectively,
"Tenant's Agents"), (c) the conduct of management of any work done by Tenant or
any of Tenant's Agents in, upon or about the Leased Premises or the Project,
(d) any occurrence in, upon or about the Leased Premises or the Project
occasioned wholly or in part by any act, omission or neglect claimed to have
been caused by Tenant or any of Tenant's Agents, or (e) any occurrence
occasioned by the violation of any law, statute, permit, order, decree,
guideline, rule, regulation or ordinance (including without limitation any
Legal Requirements) by Tenant or any of Tenant's Agents. In any case in which
Tenant has agreed to indemnify Landlord, Landlord's Related Parties or any
other person, such indemnity shall be deemed to include an obligation on the
part of Tenant to appear on behalf of the indemnified party in any and all
proceedings involving a claim or cause of action covered by such indemnity and
to defend the indemnified party against such claim or cause of action, all at
Tenant's cost; provided, however, at the option of any party indemnified
hereunder, such party shall have the right to appear on its own behalf, employ
its own legal counsel and defend any claim or cause of action indemnified in
this Section 5.03, all at Tenant's cost. The provisions of this Section 5.03
shall survive the termination or expiration of this Lease.
Section V.4. Alterations. Tenant shall not make any alterations, improvements,
modifications or additions to the Leased Premises or the Project without prior
written consent of Landlord. Any and all furnishing, equipping and improving of
or other alteration and addition to the Leased Premises shall be: (a) made at
Tenant's sole cost, risk and expense; (b) performed in a prompt, good and
workmanlike manner with labor
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and materials of such quality as Landlord may reasonably require; (c)
constructed in accordance with all plans and specifications approved in writing
by Landlord prior to the commencement of any such work; (d) prosecuted
diligently and continuously to completion so as to minimize interference with
the normal business operations of other tenants in the Building; and (e)
performed by contractors approved in writing by Landlord. Any and all
alterations, improvements and additions (other than Trade Fixtures) to the
Leased Premises shall at once become the property of Landlord. Tenant shall
have no (and hereby waives all) rights to payment or compensation for any such
item.
Section V.5. Trade Fixtures. "Trade Fixtures" shall mean any and all items of
property placed by Tenant in the Leased Premises and used by Tenant in, upon or
about the Leased Premises for the carrying on of its business and which may or
may not be annexed to the realty by the Tenant, but in any event can be removed
without material injury to the Leased Premises, including but not limited to
signs, furniture, equipment, shelves, steel storage racking, telecommunication
equipment, computer systems, bins and machinery; provided, however, that the
term Trade Fixtures shall not include any permanent leasehold improvements,
including but not limited to any floor, wall or ceiling coverings, any interior
walls or partitions, any lighting fixtures, track lights or any property which
is a part of or associated with any electrical, plumbing or mechanical system,
notwithstanding that the same may have been installed in, upon or about the
Leased Premises. Notwithstanding anything in this Article V to the contrary,
Tenant, at its own cost and expense, may erect such Trade Fixtures on the
Leased Premises as it desires provided that (a) such Trade Fixtures do not
alter the basic character of the Leased Premises, (b) such Trade Fixtures do
not overload or damage the Leased Premises, (c) such items may be removed
without injury to the Leased Premises, and (d) the construction, erection or
installation thereof complies with all Legal Requirements and with Landlord's
specifications and requirements. Tenant shall have the right to remove at the
termination or expiration of this Lease such Trade Fixtures owned by Tenant and
so installed (other than replacements for any such items originally installed
by Landlord), provided Tenant is not in default under this Lease and such
removal is made within five (5) days after the termination or expiration of
this Lease; provided, however, Tenant shall repair any damage caused by such
removal and restore the Leased Premises to its original condition, reasonable
wear and tear excepted, subject to the provisions of Article VI.
Section V.6. Removal. Any alterations, improvements, modifications, additions
or fixtures made, installed or attached by either Landlord or Tenant to, in or
on the Leased Premises (other than as provided in Section 5.05 hereof) shall
become the property of Landlord and shall, at Landlord's election, be (a)
surrendered with the Leased Premises at the termination or expiration of this
Lease without any payment or reimbursement therefor, or (b) promptly removed by
Tenant at Tenant's expense, and Tenant shall repair any damage caused by such
removal and restore the Leased Premises to its original condition, reasonable
wear and tear excepted.
ARTICLE VI. Section VI.1. Condemnation. (a) Total Taking. In the event of a
taking or damage related to the exercise of the power of eminent domain, by any
authority, corporation or entity empowered to condemn property (including
without limitation a voluntary conveyance by Landlord in lieu of such taking or
condemnation) (individually, a "Taking") of (i) the entire Leased Premises,
(ii) so much of the Leased Premises as to prevent or substantially impair its
use by Tenant during the Term of this Lease or (iii) portions of the Building
or Project required for reasonable access to, or reasonable use of, the Leased
Premises (individually, a "Total Taking"), the rights of Tenant under this
Lease shall cease and terminate as of the date upon which title to the property
taken passes to and vests in the condemnor or the effective date of any order
for possession if issued prior to the date title vests in the condemnor ("Date
of Taking").
(b) Partial Taking. In the event of a Taking of only a part of this
Leased Premises or of a part of the Project which does not constitute a Total
Taking during the Term of the Lease (individually, a "Partial Taking"), the
rights of Tenant under this Lease and the leasehold estate of Tenant in and to
the portion of the property taken shall cease and terminate as of the Date of
Taking, and an adjustment to the Rent shall be made based upon the reduced
value of the Leased Premises.
(c) Termination by Landlord. In the event of a Taking of a portion of the
Building or Project (other than the Leased Premises), and in Landlord's
reasonable opinion, the Building or Project should be restored in a manner that
materially alters the Leased Premises, Landlord may terminate this Lease by
giving notice to Tenant within sixty (60) days following the date title vests
in the condemnor. This Lease shall terminate on the date specified in the
termination notice, which date shall be at least thirty (30) days but not more
than ninety (90) days after the date such notice is given.
(d) Rent Adjustment. If this Lease is terminated pursuant to this Section
6.01, Landlord shall refund to Tenant any prepaid unaccrued Rent and any other
sums due and owing to Tenant (less any sums then due
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and owing Landlord by Tenant), and Tenant shall pay to Landlord any remaining
sums due and owing Landlord under this Lease, each prorated as of the Date of
Taking where applicable.
(e) Repair. If this Lease is not terminated as provided for in this
Section 6.01, then Landlord at its expense shall promptly repair and restore
the Project, Building and/or the Leased Premises to approximately the same
condition that existed at the time Tenant entered into possession of the Leased
Premises, wear and tear excepted (and Landlord shall have no obligation to
repair or restore Tenant's improvements to the Leased Premises or Tenant's
Property), except for the part taken, to render the Building or Project a
complete architectural unit, but only to the extent of the condemnation award
received by Landlord for the damage.
(f) Awards and Damages. Landlord reserves all rights to damages paid
because of any Partial or Total Taking of the Leased Premises or the Project.
Tenant assigns to Landlord any right Tenant may have to the damages or award.
Further, Tenant shall not make claims against Landlord or the condemning
authority for damages. Notwithstanding, Tenant may claim and recover from the
condemning authority a separate award for Tenant's moving expenses, business
dislocation damages, Tenant's Property and any other award that would not
reduce the award payable to Landlord.
Section VI.2. Force Majeure. Neither Landlord nor Tenant shall be required to
perform any term of this Lease (other than the obligations of Tenant to pay
Rent as provided herein) so long as such performance is delayed or prevented by
"Force Majeure", which shall mean acts of God, strikes, injunctions, lockouts,
material or labor restrictions by any governmental authority, civil riots,
floods, fire, theft, public enemy, insurrection, war, court order, requisition
or order of governmental body or authority, and any other cause not reasonably
within the control of Landlord or Tenant and which by the exercise of due
diligence Landlord or Tenant is unable, wholly or in part, to prevent or
overcome. Neither Landlord nor any mortgagee shall be liable or responsible to
Tenant for any loss or damage to any property or person occasioned by any Force
Majeure, or for any damage or inconvenience which may arise through repair or
alteration of any part of the Project as a result of any Force Majeure.
Section VI.3. Fire or Other Casualty. (a) Damage. If any portion of the Leased
Premises shall be destroyed or damaged by fire or any other casualty, Tenant
shall immediately give notice thereof to Landlord. If any portion of the Leased
Premises or Project shall be destroyed or damaged by fire or any other casualty
then, at the option of Landlord, (i) Landlord may restore and repair the
portion of the Leased Premises or Project damaged and, if the Leased Premises
are rendered untenantable in whole or in part by reason of such casualty as
determined by Landlord, Tenant shall be entitled to a fair diminution of the
Rent (subject to the limitations in Section 6.03(c) below) hereunder until such
time as the Leased Premises (exclusive of any of Tenant's Property or Tenant's
improvements) are made tenantable by repair or restoration as determined by an
architect's certificate or issuance of a certificate of occupancy or (ii)
Landlord may terminate this Lease whereupon all Rent accrued up to the time of
such termination and any other sums due and owing shall be paid by Tenant to
Landlord (less any sums then due and owing Tenant by Landlord) and any
remaining sums due and owing by Landlord to Tenant shall be paid to Tenant. In
no event shall Landlord have any obligation to repair or restore any such
destruction or damage.
(b) Repair. Landlord shall give Tenant written notice of its decisions,
estimates or elections under this Section 6.03 within forty-five (45) days
after any such damage or destruction; should Landlord fail to timely give such
written notice, Tenant may, by written notice to Landlord terminate this Lease.
If Landlord has elected to repair and restore the Leased Premises or other
portion of the Project, this Lease shall continue in full force and effect, and
the repairs will be made within a reasonable time thereafter (not to exceed one
hundred eighty (180) days following the casualty) subject to the provisions of
Section 6.02 of this Lease; provided, however, if at the time repair and
restoration has commenced, Landlord has delivered to Tenant an independent
architect's certificate to the effect that repair and restoration will require
longer than 180 days, then the period for repair and restoration shall be the
period so certified by the architect up to but not exceeding 270 days following
the casualty. Should the repairs not be completed within that period, both
Landlord and Tenant shall each have the option of terminating this Lease by
written letter of termination. If this Lease is terminated pursuant to Section
6.03 (a) or (b), Tenant shall be entitled to a fair and equitable diminution of
Base Rental from the date of casualty to the date of termination based on the
extent and nature of the damage, and Landlord shall refund to Tenant any
prepaid Rent (unaccrued as of the date of damage or destruction) and any other
sums due and owing by Landlord to Tenant (less any sums then due and owing
Landlord by Tenant) and any remaining sums due and owing by Tenant to Landlord
shall be paid to Landlord. If Landlord has elected to repair and reconstruct
the Leased Premises or other portion of the Project to the extent stated above,
the Term will be extended for a time equal to the period of such repair and
reconstruction. If Landlord elects to rebuild the Leased Premises or other
portion of the Project, Landlord shall (i) only
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be obligated to restore or rebuild the Leased Premises or other portion of the
Project to approximately the same condition as existed at the time Tenant
entered into possession of the Leased Premises, wear and tear excepted and (ii)
not be required to rebuild, repair or replace any part of Tenant's Property or
Tenant's improvements. Notwithstanding anything contained in this Lease to the
contrary, if Landlord shall elect to repair and restore the Leased Premises or
other portion of the Project pursuant to this Section 6.03, in no event shall
Landlord be required to expend under this Article VI any amount in excess of
the proceeds actually received from the insurance carried by Landlord pursuant
to Section 6.04 of this Lease. Landlord shall not be liable for any
inconvenience or annoyance to Tenant or injury to the business of Tenant
resulting in any way from such damage or destruction or the disregard of the
repair thereof.
(c) Negligence of Tenant. Notwithstanding the provisions of Sections
6.03(a) and 6.03(b) of this Lease, if the Leased Premises, the Project or any
portion thereof, are damaged by fire or other casualty resulting from the fault
or negligence of Tenant or any of Tenant's Agents, the Rent under this Lease
will not be diminished during the repair of that damage (except to the extent
covered by insurance proceeds of any rent interruption insurance maintained by
the Landlord) and Tenant will be liable to Landlord for the cost and expense of
the repair and restoration of the Leased Premises, the Project or any part
thereof, caused thereby to the extent that cost and expense is not covered by
insurance proceeds (including without limitation the amount of any insurance
deductible).
Section VI.4. Insurance. (a) Landlord shall maintain, or cause to be
maintained, at all times during Term of this Lease standard fire and extended
coverage insurance on the Project (excluding leasehold improvements by Tenant
and Tenant's Property) in amounts representing at least eighty percent (80%) of
the replacement value of the Building and improvements (excluding leasehold
improvements by Tenant). Said insurance shall be maintained with an insurance
company authorized to do business in Texas, in amounts desired by Landlord with
the same to be included in the expenses of the Project.
(b) Tenant shall, at its sole cost and expense, procure and maintain
during the Term of this Lease comprehensive general liability insurance
(including personal injury liability, premises/operation, property damage,
independent contractors and broad form contractual in support of the
indemnifications of Landlord by Tenant under this Lease) in amounts of not less
than a combined single limit of $1,000,000, business interruption insurance,
contractual liability insurance, property insurance with respect to Tenant's
Property, leasehold improvements, alterations and additions written on an "all
risk" basis for full replacement cost, worker's compensation and employer's
liability insurance and comprehensive catastrophe liability insurance, all
maintained with companies, on forms and in such amounts as Landlord may, from
time to time, reasonably require and endorsed to include Landlord as an
additional insured, with the premiums being fully paid on or before the due
dates. In the event that Tenant fails to take out or maintain any policy
required by this Section 6.04 to be maintained by Tenant, such failure shall be
a defense to any claim asserted by Tenant against Landlord by reason of any
loss sustained by Tenant that would have been covered by such policy,
notwithstanding that such loss may have been proximately caused solely or
partially by the negligence or willful misconduct of Landlord or any of
Landlord's Related Parties. If Tenant does not procure insurance as required,
Landlord may, upon advance written notice to Tenant, cause this insurance to be
issued and Tenant shall pay to Landlord the premium for such insurance within
ten (10) days of Landlord's demand, plus interest at the past due rate provided
for in Section 3.02 of this Lease until repaid by Tenant. All policies of
insurance required to be maintained by Tenant shall specifically provide that
Landlord shall be given at least ten (10) days' prior written notice of any
cancellation or nonrenewal of any such policy. A duplicate original or a
certificate evidencing the existence of each such policy shall be deposited
with Landlord by Tenant on or before the Commencement Date, and a duplicate
original or certificate of each subsequent policy shall be deposited with
Landlord at least ten (10) days prior to the expiration of the preceding such
policy. All insurance policies obtained by Tenant shall be written as primary
policies (primary over any insurance carried by Landlord), not contributing
with and not in excess of coverage which Landlord may carry, if any.
Section VI.5. Waiver of Subrogation Rights. Each party hereto waives all rights
of recovery, claims, actions or causes of actions arising in any manner in its
(the "Injured Party's") favor and against the other party for loss or damage to
the Injured Party's property located within or constituting a part or all of
the Project, to the extent the loss or damage is covered by: (i) the Injured
Party's insurance; or (ii) the insurance the Injured Party is required to carry
under this Lease, whichever is greater, regardless of the cause or origin,
including the sole, contributory, partial, joint, comparative or concurrent
negligence of the other party. This waiver also applies to each party's
directors, officers, employees, shareholders, partners, representatives and
agents. All insurance carried by either Landlord or Tenant covering the losses
and damages described in this Section 6.05 shall provide for a waiver of rights
of subrogation by the Injured Party's insurance carrier against the other
party, to the maximum extent that the same is permitted under the laws and
regulations governing the
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writing of insurance within the State of Texas. Both parties hereto are
obligated to obtain such a waiver and provide evidence to the other party of
such waiver. The waiver set forth in this Section 6.05 shall be in addition to,
and not in substitution for, any other waivers, indemnities or exclusions of
liability set forth in this Lease.
ARTICLE VII. Section VII.1. Waiver of Landlord's Lien. Landlord hereby waives
any and all right which Landlord may have by virtue of this Lease, Tenant's
occupancy of the Leased Premises, or under and pursuant to or by virtue of the
application of any law, to assert a lien or security interest as against any
goods, wares, equipment, fixtures, furniture, files, improvements or other
personal property of Tenant presently or which may hereinafter be situated and
located in the Leased Premises, and Landlord further agrees to execute and
deliver an instrument providing for the waiver of such rights to the extent
requested by a financial institution involved in making a credit
accommodation(s) to Tenant.
Section VII.2. Default by Tenant. The occurrence of any one or more of the
following events shall constitute a default by Tenant under this Lease:
(a) Tenant shall fail to perform, observe or comply with any of the
terms, provisions, agreements, covenants or conditions of this Lease or any
guaranty now or hereafter executed relating to this Lease (other than the
failure specified in Section 7.02(b) hereof), such failure continuing for
twenty (20) days after written notice from Landlord to Tenant of such failure
or if the nature of the default is such that it cannot reasonably be cured or
remedied within twenty (20) days, then so long as Tenant has commenced the cure
or remedy, the cure period shall be extended for such reasonable period, up to
but not exceeding an additional twenty-five (25) days, as may be necessary to
complete the cure or remedy; provided, however, that Landlord shall not be
required to provide such notice (x) with respect to any default which is by its
nature incurable, or (y) with respect to any nonmonetary default (or
substantially similar nonmonetary default), be obligated to provide such
written notice more than two (2) times during the Term, the third such default
not requiring such notice by Landlord;
(b) Tenant shall fail to pay to Landlord any Rent or any other monetary
charge due from Tenant hereunder as and when due and payable and such failure
shall continue for a period of ten (10) days after the due date;
(c) A Transfer (hereinafter defined) shall occur of all or a part of (i)
this Lease or (ii) the Leased Premises, without the prior written approval of
Landlord;
(d) The interest of Tenant under this Lease shall be levied on under
execution or other legal process and the same has not been stayed or removed
within thirty (30) days;
(e) Any petition in bankruptcy or other insolvency proceedings shall be
filed by or against Tenant, or any petition shall be filed or other action
taken to declare Tenant a bankrupt or to delay, reduce or modify Tenant's debts
or obligations or to reorganize or modify Tenant's capital structure or
indebtedness or to appoint a trustee, receiver or liquidator of Tenant or of
any property of Tenant, or any proceeding or other action shall be commenced or
taken by any governmental authority for the dissolution or liquidation of
Tenant and in the case of any involuntary proceeding commenced against Tenant,
the same has not been dismissed within sixty (60) days;
(f) Tenant shall become insolvent, or Tenant shall make an assignment for
the benefit of creditors, or Tenant shall make a transfer in fraud of
creditors, or a receiver or trustee shall be appointed for Tenant or any of its
properties;
(g) Tenant shall desert, abandon or vacate the Leased Premises or any
substantial portion thereof unless Tenant shall continue to timely pay all Rent
due hereunder and provide Landlord with adequate security for the payment of
future Rent through the remainder of the Term; provided, however,
notwithstanding continued payment and providing for security, upon any such
desertion, abandonment or vacation of the Leased Premises, Tenant's rights
under Sections 2.04, 2.05 and 2.06 shall forthwith terminate and be of no
further force or effect;
(h) Tenant shall fail to operate its business in the Leased Premises for
more than fifteen (15) days for any reason other than destruction or
condemnation of the Leased Premises;
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(i) Tenant shall do or permit to be done anything which creates a lien
upon the Leased Premises or the Project unless the same shall be removed or
bonded around with thirty (30) days; or
(j) The death or legal incapacity of Tenant, if Tenant is an individual
person, or the termination, dissolution or liquidation of Tenant, if Tenant is
a corporation, partnership or other entity.
(k) The occurrence of a default by the tenant under the Other Lease,
following any period for notice and opportunity to cure provided therein.
The term "Tenant" as used in this Section 7.02 shall be deemed to include any
guarantor of, or any other person or entity primarily or secondarily liable
for, any of the Tenant's obligations under this Lease.
Section VII.3. Landlord's Remedies. Upon the occurrence of any default by
Tenant under this Lease, Landlord may, at its sole option, have the option to
pursue any one or more of the following remedies without any notice or demand
whatsoever, other than any notice expressly provided in this Lease (and without
limiting the generality of the foregoing, except as otherwise provided herein,
Tenant hereby specifically waives notice and demand for payment of Rent or
other obligations due hereunder and waives any and all other notice or demand
requirements imposed by applicable law):
(a) Terminate this Lease, and Landlord may forthwith repossess the Leased
Premises and be entitled to recover as damages a sum of money equal to the
total of (i) the cost of recovering the Leased Premises, (ii) the cost of
removing and storing Tenant's or any other occupant's property, (iii) the
unpaid Rent and any other sums accrued hereunder at the date of termination
(including interest at the past due rate provided in Section 3.02 of this Lease
if in arrears), (iv) a sum equal to the amount, if any, by which the present
value of the total Rent and other benefits which would have accrued to Landlord
under this Lease for the remainder of the Term, if the terms of this Lease had
been fully complied with by Tenant, exceeds the total fair market value of the
Leased Premises for the balance of the Term (it being the agreement of the
parties hereto that Landlord shall receive the benefit of its bargain), (v) the
cost of restoring the Leased Premises to the condition necessary to rent the
Leased Premises at the prevailing market rental rate, normal wear and tear
excepted, (vi) any increase in insurance premiums caused by the vacancy of the
Leased Premises, (vii) the amount of any unamortized improvements to the Leased
Premises paid for by Landlord, (viii) the amount of any unamortized brokerage
commission paid by Landlord in connection with the leasing of the Leased
Premises (ix) the cost of any brokerage fees or commissions payable by Landlord
in connection with any reletting or attempted reletting; and (x) any other sum
of money or damages owed by Tenant to Landlord. The fair market value of the
Leased Premises shall be the prevailing market rental rate for similar space of
similar size in a similar building in the city where the Leased Premises is
located for a lease term equal to the remaining Term.
(b) Terminate Tenant's right of occupancy of the Leased Premises and
reenter and repossess the Leased Premises by entry, forcible entry or detainer
suit or otherwise, without demand or notice of any kind to Tenant and without
terminating this Lease, without acceptance of surrender of possession of the
Leased Premises, and without becoming liable for damages or guilty of trespass,
in which event Landlord may, but shall be under no obligation to relet the
Leased Premises or any part thereof for the account of Tenant (nor shall
Landlord be under any obligation to relet the Leased Premises before Landlord
relets or leases any other portion of the Project or any other property under
the ownership or control of Landlord) for a period equal to or lesser or
greater than the remainder of the Term of the Lease on whatever terms and
conditions Landlord, at Landlord's sole discretion, deems advisable. Tenant
shall be liable for and shall pay to Landlord all Rent payable by Tenant under
this Lease (plus interest at the past due rate provided in Section 3.02 of this
Lease if in arrears) plus an amount equal to (i) the cost of recovering
possession of the Leased Premises, (ii) the cost of removing and storing any of
Tenant's or any other occupant's property left on the Leased Premises or the
Project after reentry, (iii) the cost of decorations, repairs, changes,
alterations and additions to the Leased Premises and the Project, (iv) the cost
of any attempted reletting or reletting and the collection of the rent accruing
from such reletting, (v) the cost of any brokerage fees or commissions payable
by Landlord in connection with any reletting or attempted reletting, (vi) any
other costs incurred by Landlord in connection with any such reletting or
attempted reletting, (vii) the cost of any increase in insurance premiums
caused by the termination of possession of the Leased Premises, (viii) the
amount of any unamortized improvements to the Leased Premises paid for by
Landlord, (ix) the amount of any unamortized brokerage commission paid by
Landlord in connection with the leasing of the Leased Premises and (x) any
other sum of money or damages owed by Tenant to Landlord, all reduced by any
sums received by Landlord through any reletting of the Leased Premises;
provided, however, that in no event shall Tenant be entitled to any excess of
any sums obtained by reletting over and above Rent provided in this Lease to be
paid by Tenant to Landlord.
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For the purpose of such reletting Landlord is authorized to decorate or to make
any repairs, changes, alterations or additions in or to the Leased Premises
that may be necessary. Landlord may file suit to recover any sums falling due
under the terms of this Section 7.03(b) from time to time, and no delivery to
or recovery by Landlord of any portion due Landlord hereunder shall be any
defense in any action to recover any amount not theretofore reduced to judgment
in favor of Landlord. No reletting shall be construed as an election on the
part of Landlord to terminate this Lease unless a written notice of such
intention is given to Tenant by Landlord. Notwithstanding any such reletting
without termination, Landlord may at any time thereafter elect to terminate
this Lease for such previous default and/or exercise its rights under Section
7.03(a) of this Lease.
(c) Enter upon the Leased Premises and do whatever Tenant is obligated to
do under the terms on this Lease; and Tenant agrees to reimburse Landlord on
demand for any expenses which Landlord may incur in effecting compliance with
Tenant's obligations under this Lease plus fifteen percent (15%) of such cost
to cover overhead plus interest at the past due rate provided in this Lease,
and Tenant further agrees that Landlord shall not be liable for any damages
resulting to Tenant from such action. No action taken by Landlord under this
Section 7.03(c) shall relieve Tenant from any of its obligations under this
Lease or from any consequences or liabilities arising from the failure to
perform such obligations.
(d) Disconnect, discontinue, interrupt or cause the interruption of any
utility or service currently being furnished to Tenant including without
limitation gas, water, electricity, air conditioning and heating.
(e) Change all door locks and other security devices of Tenant at the
Leased Premises and/or the Project, and Tenant hereby expressly agrees that
Landlord shall not be required to affix any notice of any kind to the Leased
Premises or provide the new key to the Tenant at any hour, including Tenant's
regular business hours, until such time as Tenant has cured any and all
defaults hereunder and reimbursed Landlord for all sums due Landlord hereunder.
Landlord, on terms and conditions satisfactory to Landlord in its sole
discretion, may upon request from Tenant's employees, enter the Leased Premises
for the purpose of retrieving therefrom personal property of such employees,
provided, Landlord shall have no obligation to do so.
(f) Exercise any of the following remedies: suit on the contract, suit
for anticipatory breach and injunctive relief of all varieties.
(g) Exercise any or all other remedies available to Landlord in this
Lease, at law or in equity.
Section VII.4. No Duty to Relet or Mitigate. Notwithstanding anything contained
herein to the contrary, to the full extent permitted under applicable law,
Tenant hereby releases Landlord from any and all duty to relet the Leased
Premises or otherwise mitigate damages. Landlord shall not be liable, nor shall
Tenant's obligations hereunder be diminished, because of Landlord's failure to
relet the Leased Premises or collect rent due with respect to such reletting.
In no event shall Tenant be entitled to any excess rents received by Landlord.
In the event, and only in the event, that (despite such waiver) Texas law
requires Landlord to attempt to mitigate damages, Landlord shall use reasonable
efforts to relet the Leased Premises on such terms and conditions as Landlord
in its good faith judgment may determine; provided, however, that Landlord
shall not be obligated to relet the Leased Premises before leasing any other
unoccupied portions of the Project and any other property under the ownership
or control of Landlord.
Section VII.5. Reentry. If Tenant fails to allow Landlord to reenter and
repossess the Leased Premises, Landlord shall have full and free license to
enter into and upon the Leased Premises with or without process of law for the
purpose of repossessing the Leased Premises, expelling or removing Tenant and
any others who may be occupying or within the Leased Premises, removing any and
all property therefrom and changing all door locks of the Leased Premises.
Landlord may take these actions without being deemed in any manner guilty of
trespass, eviction or forcible entry or detainer, without accepting surrender
of possession of the Leased Premises by Tenant, and without incurring any
liability for any damage resulting therefrom including without limitation any
liability arising under Sections 93.002 and 93.003 of the Texas Property Code,
as amended or superseded from time to time, and without relinquishing
Landlord's right to Rent or any other right given to Landlord hereunder or by
operation of law or in equity.
Section VII.6. Waiver of Certain Rights. Tenant hereby expressly waives any and
all rights Tenant may have under Sections 93.002 and 93.003 of the Texas
Property Code (as amended or superseded from time to time) including without
limitation its right to (a) either recover possession of the Leased Premises or
terminate this Lease, and (b) recover from Landlord an amount equal to the sum
of its actual damages, one month's rent, and reasonable attorneys' fees, less
any delinquent rents or other sums for which Tenant is liable. Tenant
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hereby waives any and all liens (whether statutory, contractual or
constitutional) it may have or acquire as a result of a breach by Landlord
under this Lease. Tenant also waives and releases any statutory lien and offset
rights it may have against Landlord, including without limitation the rights
conferred upon Tenant pursuant to Section 91.004 of the Texas Property Code, as
amended or superseded from time to time, or other applicable law.
Section VII.7. NonWaiver. Failure on the part of Landlord to complain of any
action or nonaction on the part of Tenant, no matter how long the same may
continue, shall not be deemed to be a waiver by Landlord of any of its rights
under this Lease. Further, it is covenanted and agreed that no waiver at any
time of any of the provisions hereof by Landlord shall be construed as a waiver
of any of the other provisions hereof and that a waiver at any time of any of
the provisions hereof shall not be construed as a waiver at any subsequent time
of the same provisions. The consent or approval by Landlord to or of any action
by Tenant requiring Landlord's consent or approval shall not be deemed to waive
or render unnecessary Landlord's consent or approval to or of any subsequent
similar act.
Section VII.8. Holding Over. In the event Tenant remains in possession of the
Leased Premises after the expiration or termination of this Lease without the
execution of a new lease, then Tenant, at Landlord's option, shall be deemed to
be occupying the Leased Premises as a tenant at will at a base rental equal to
150% of the greater of (a) the prevailing market base rental rate of the Leased
Premises or (b) the Base Rental, and shall otherwise remain subject to all the
conditions and provisions of this Lease insofar as the same are applicable to a
tenancy at will, including without limitation the payment of all other Rent. No
holding over by Tenant after the expiration or termination of this Lease shall
be construed to extend the Term or in any other manner be construed as
permission by Landlord to hold over. Tenant shall indemnify Landlord (y)
against all claims for damages by any other tenant to whom Landlord may have
leased any part of the Leased Premises effective upon the termination or
expiration of this Lease, and (z) for all other losses, costs and expenses,
including reasonable attorneys' fees, incurred by reason of such holding over.
Section VII.9. Attorneys' Fees and Other Expenses. In the event either party
hereto defaults in the faithful performance or observance of any of the terms
of this Lease, the party in default shall be liable for and shall pay to the
nondefaulting party all expenses incurred by such nondefaulting party in
enforcing any of its remedies for any such default, and if the non-defaulting
party places the enforcement of all or any part of this Lease in the hands of
an attorney, the party in default agrees to pay the nondefaulting party's
reasonable attorneys' fees in such connection.
Section 7.10 Abandonment of Personal Property. Any personal property left in
the Leased Premises or any personal property of Tenant left about the Project
at the expiration or termination of this Lease, the termination of Tenant's
right to occupy the Leased Premises or the abandonment, desertion or vacating
of the Leased Premises by Tenant, shall be deemed abandoned by Tenant and may,
at the option of Landlord, be immediately removed from the Leased Premises or
such other space by Landlord and stored by Landlord at the full risk, cost and
expense of Tenant. Landlord shall in no event be responsible for the value,
preservation or safekeeping thereof. In the event Tenant does not reclaim any
such personal property and pay all costs for any storage and moving thereof
within thirty (30) days after the expiration or termination of this Lease, the
termination of Tenant's right to occupy the Leased Premises or the abandonment,
desertion or vacating of the Leased Premises by Tenant, Landlord may dispose of
such personal property in any way that it deems proper. If Landlord shall sell
any such personal property, it shall be entitled to retain from the proceeds
the amount of any Rent or other expenses due Landlord, together with the cost
of storage and moving and the expense of the sale. Notwithstanding anything
contained herein to the contrary, in addition to the rights provided herein
with respect to any such property, Landlord shall have the option of exercising
any of its other rights or remedies provided in the Lease or exercising any
rights or remedies available to Landlord in the Texas Property Code, as amended
from time to time, or otherwise at law or in equity.
ARTICLE VIII. Section VIII.1. Transfers. Tenant shall not, by operation of law
or otherwise, (a) assign, transfer, mortgage or otherwise encumber all or any
part of this Lease or the Leased Premises, (b) grant any concession or license
within the Leased Premises, (c) grant or transfer any management privileges or
rights with respect to the Leased Premises, (d) sublet all or any part of the
Leased Premises or any right or privilege appurtenant to the Leased Premises
except to Pierce Leahy Corp., (e) permit any other party to occupy or use all
or any part of the Leased Premises or (f) advertise for any of the foregoing
(collectively, a "Transfer"), without the prior written consent of Landlord. If
Tenant is other than an individual person, any conveyance, assignment or
transfer of more than a twenty-five percent (25%) interest in Tenant or any
lesser percentage which, in the opinion of Landlord, results in a change in the
effective control of Tenant, in a single transaction or a series of
transactions, shall be deemed to constitute a Transfer; provided, however, so
long as no default
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remains uncured beyond any applicable grace or cure period, transfer of an
interest in Tenant to one or more partners of Tenant or shareholders of Pierce
Leahy Corp. or members of the immediate family of any of them or a trust
created for the benefit of any such person or any entity controlled by any such
person may be effected without Landlord's consent. If Tenant requests
Landlord's consent to any Transfer, then Tenant shall provide Landlord with
documentation reasonably requested by Landlord regarding the proposed Transfer.
Tenant shall reimburse Landlord for its reasonable attorneys' fees and other
expenses incurred in connection with considering any request for its consent to
a Transfer. Landlord's consent to a Transfer shall not release Tenant from
performing its obligations under this Lease but rather Tenant's transferee
shall assume all of Tenant's obligations under this Lease in a writing
satisfactory to Landlord and Tenant, and its transferee shall be jointly and
severally liable therefor. Landlord's consent to any Transfer shall not waive
Landlord's rights as to any subsequent Transfer. While the Leased Premises or
any part thereof are subject to a Transfer, Landlord may collect directly from
such transferee all rents or other sums relating to the Leased Premises
becoming due to Tenant or Landlord and apply such rents and other sums against
the Rent and any other sums payable hereunder (in the event any such sums
received from such transferee exceed the Rent, Landlord shall have the right to
retain such excess); provided, so long as Tenant is not in default hereunder,
Landlord shall not be entitled to collect any Rent directly from Pierce Leahy
Corp. as Subtenant. Tenant authorizes its transferees to make payments of rent
and any other sums due and payable, directly to Landlord upon receipt of notice
from Landlord to do so. Any attempted Transfer by Tenant in violation of the
terms and covenants of this Article VIII shall be void and shall constitute a
default by Tenant under this Lease. The rights of Tenant under Sections 2.04,
2.05 and 2.06 shall in no event inure to the benefit of a sublessee (other than
Pierce Leahy Corp.) or assignee of Tenant unless specifically agreed and
consented to in writing by Landlord in connection with any such sublease or
assignment. Any proposed Transfer by Pierce Leahy Corp. shall be subject to the
provisions of this Section 8.01.
Section VIII.2. Assignment by Landlord. Landlord shall have the right at any
time to sell, transfer or assign, in whole or in part, by operation of law or
otherwise, its interests in any part of this Lease or the Project, without the
prior consent of Tenant, and such sale, transfer or assignment shall be binding
upon Tenant. Tenant shall attorn to such purchaser, transferee or assignee,
upon such party's request, and Landlord shall be released from all liability
and obligations under this Lease.
Section VIII.3. Limitation of Landlord's Liability. Any provisions of this
Lease to the contrary notwithstanding, Tenant hereby agrees that no personal,
partnership or corporate liability of any kind or character whatsoever now
attaches or at any time hereafter under any condition shall attach to Landlord
or any of Landlord's Related Parties or any mortgagee for payment of any
amounts payable under this Lease or for the performance of any obligation under
this Lease. The exclusive remedies of Tenant for the failure of Landlord to
perform any of its obligations under this Lease shall be to proceed against the
interest of Landlord in and to the Project. The provision contained in the
foregoing sentence is not intended to, and shall not, limit any right that
Tenant might otherwise have to obtain injunctive relief against Landlord or
Landlord's successors in interest or any suit or action in connection with
enforcement or collection of amounts which may become owing or payable under or
on account of insurance maintained by Landlord.
ARTICLE IX. MISCELLANEOUS. Section IX.1. Subordination. This Lease shall be
subject and subordinated at all times to all ground leases and all liens of all
mortgages and deeds of trust in any amount or amounts whatsoever now or
hereafter placed on the Project or Landlord's interest or estate therein or on
or against such ground or underlying leases and to all modifications thereof.
Tenant shall execute and deliver upon demand any instruments, releases or other
documents reasonably requested by any lessor or mortgagee for the purpose of
subjecting and subordinating this Lease to such ground leases, mortgages or
deeds of trust. As of the date, hereof, neither the Project nor any part of the
Leased Premises is encumbered by the lien of any mortgage or deed of trust.
Should the Project subsequently become so encumbered, Landlord will exercise
reasonable efforts to obtain from the holder of the mortgage or deed of trust,
a nondisturbance agreement in form and substance reasonably satisfactory to
Tenant. Tenant shall attorn to any party succeeding to Landlord's interest in
the Leased Premises, whether by purchase, foreclosure, deed in lieu of
foreclosure, power of sale, termination of lease or otherwise, only upon such
party's request and at such party's sole discretion but not otherwise, and
shall execute such agreements confirming such attornment as such party may
reasonably request. Tenant shall not seek to enforce any remedy it may have for
any default on the part of Landlord without first giving written notice by
certified mail, return receipt requested, specifying the default in reasonable
detail, to any mortgagee or lessor under a lien instrument or lease covering
the Leased Premises whose address has been given to Tenant, and affording such
mortgagee or lessor a reasonable opportunity to perform Landlord's obligations
hereunder. Notwithstanding the generality of the foregoing, any mortgagee or
ground lessor may at any time subordinate any such deeds of trust,
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mortgages, other security instruments or ground leases to this Lease on such
terms and conditions as such mortgagee or ground lessor may deem appropriate.
Section IX.2. Estoppel Certificate or Three-Party Agreement. Tenant and
Landlord agree within ten (10) days following request by the other to execute,
acknowledge and deliver to the requesting party and any other persons specified
by such party, a certificate certifying to matters relating to the Leased
Premises and the Lease as such party may reasonably request; provided that
neither Landlord nor Tenant shall have any obligation to provide such a
certificate unless the same has been requested by the other to fulfill an
obligation to or satisfy a condition imposed by a third party.
Section IX.3. Notices. Any notice or other communication required or
contemplated by this Lease must be in writing, and may, unless otherwise in
this Lease expressly provided, be given by depositing the same in the United
States Postal Service, post-paid and certified and addressed to the party to be
notified, with return receipt requested, or by prepaid telegram or express
overnight mail service, when appropriate, addressed to the party to be
notified. Notice deposited in the mail in the manner hereinabove described
shall be effective from and after three (3) days (exclusive of Saturdays,
Sundays and postal holidays) after such deposit. Notice given in any other
manner shall be effective only if and when delivered to the party to be
notified or at such party's address for purposes of notice as set forth herein.
For purposes of notice the addresses of the parties shall, until changed as
herein provided, be as provided on the first page of this Lease. However, the
parties hereto shall have the right from time to time to change their
respective addresses by giving at least fifteen (15) days' written notice to
the other party in the manner set forth in this Section 9.03.
Section IX.4. Successors; Gender; Time. Subject to the provisions of this
Lease, and except as otherwise provided in this Lease, all covenants and
obligations as contained within this Lease shall bind and extend and inure to
the benefit of the parties hereto and their heirs, legal representatives,
successors and assigns. The pronouns of any gender shall include the other
genders, and either the singular or the plural shall include the other. Time is
of the essence with respect to this Lease.
Section IX.5. Rights and Remedies Cumulative. The rights and remedies of
Landlord under this Lease shall be nonexclusive and each right or remedy shall
be in addition to and cumulative of all other rights and remedies available to
Landlord under this Lease or at law or in equity. Pursuit of any right or
remedy shall not preclude pursuit of any other rights or remedies provided in
this Lease or at law or in equity, nor shall pursuit of any right or remedy
constitute a forfeiture or waiver of any Rent due to Landlord or of any damages
accruing to Landlord by reason of the violation of any of the terms of this
Lease.
Section IX.6. Landlord's Representations and Warranties. Landlord hereby
represents and warrants as follows:
(a) Landlord has good and indefeasible title to the Project. Landlord has
full partnership right, power and authority to enter into and execute and
deliver and perform its duties and obligations under this Lease, which when so
executed and delivered, shall be binding upon Landlord and enforceable by
Tenant in accordance with its terms, except as may be limited by bankruptcy,
insolvency or similar laws affecting the enforcement of creditors' rights
generally.
(b) No written notice from any governmental body or person has been
served upon Landlord claiming any violation of any restrictive covenant, law,
ordinance, code or regulation or requiring construction, alterations or
installation on or in connection with the Leased Premises which has not been
complied with or asserting or establishing any liability or claim against
Landlord or any predecessor in interest.
(c) There are no pending, or to Landlord's actual knowledge, contemplated
or proposed eminent domain proceedings with respect to the Building or any
rights of Landlord therein.
(d) Landlord has and at the Commencement Date will have good and valid
rights of ingress and egress to and from the Building from dedicated public
street systems, and the Building is and at the Commencement Date will be
connected to, is adequately served by, and has legal use of the public sewer
lines, electric, water and other public utilities and there are no septic tanks
located on any thereof.
(e) There are no pending assessments for public improvements against the
Premises.
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(f) To the best of Landlord's actual knowledge, during the period of
Landlord' ownership of the Project, (i) the Leased Premises have not been used
to generate, manufacture, refine, transport, treat, sort, handle, dispose,
transfer, produce, process or in any manner deal with hazardous materials (as
defined by any federal, state or local environmental law, ordinance, rule or
regulation) and (ii) no hazardous materials have been installed or stored on
the Leased Premises, in either case in violation of any applicable
environmental law. Neither the Landlord, nor, to the best of Landlord's actual
knowledge, any tenant, subtenant or occupant of the Leased Premises during the
period of Landlord's ownership of the Project has received any written notice
or advise from any governmental agency or any tenant, subtenant or occupant
with regard to hazardous materials on, from or affecting the Leased Premises.
For the purposes of the foregoing representation, hazardous materials shall not
include substances in quantities and concentrations which are customarily used
in the ordinary course of Landlord's or any other tenant's business so long as
such substances are and have been used and disposed of in accordance with all
applicable environmental laws.
Section IX.7. Legal Interpretation. This Lease and the rights and obligations
of the parties hereto shall be interpreted, construed and enforced in
accordance with the laws of the State of Texas and the United States. The
determination that one or more provisions of this Lease is invalid, void,
illegal or unenforceable shall not affect or invalidate any other provision of
this Lease, and this Lease shall be construed as if such invalid, illegal or
unenforceable provision had never been contained in this Lease, and, so far as
is reasonable and possible, effect shall be given to the intent manifested by
the portion held invalid or inoperative. All obligations of either party
hereunder not fully performed after the expiration or termination of the Term
of this Lease shall survive the expiration or termination of the Term of this
Lease and shall be fully enforceable in accordance with those provisions
pertaining thereto. Article and section titles and captions appearing in this
Lease are for convenient reference only and shall not be used to interpret or
limit the meaning of any provision of this Lease. No custom or practice which
may evolve between the parties in the administration of the terms of this Lease
shall waive or diminish the right of Landlord to insist upon the performance by
Tenant in strict accordance with the terms of this Lease. Tenant agrees that
this Lease supersedes and cancels any and all previous statements,
negotiations, arrangements, brochures, agreements and understandings, if any,
between Landlord and Tenant with respect to the subject matter of this Lease or
the Leased Premises and that this Lease, including written extrinsic documents
referred to herein, is the entire agreement of the parties, and that there are
no representations, understandings, stipulations, agreements, warranties or
promises (express or implied, oral or written) between Landlord and Tenant with
respect to the subject matter of the Lease or the Leased Premises. It is
likewise agreed that this Lease may not be altered, amended or extended except
by an instrument in writing signed by both Landlord and Tenant. The terms and
provisions of this Lease shall not be construed against or in favor of a party
hereto merely because such party is "Landlord" or "Tenant" hereunder or because
such party or its counsel is the draftsman of this Lease. All references to
days in this Lease and any Exhibits or Addendums hereto mean calendar days, not
working or business days, unless otherwise stated.
Section IX.8. Tenant's Authority. Tenant warrants and represents unto Landlord
that Tenant has full right, power and authority to execute, deliver and perform
this Lease and that the person executing this Lease on behalf of Tenant was
authorized to do so.
Section IX.9. Leases and Tenants. Landlord reserves the absolute right to
effect such other tenancies in the Building as Landlord, in the exercise of its
sole business judgment, shall determine to best promote the interest of the
Building. Notwithstanding anything in this Lease to the contrary, Tenant does
not rely on the fact, and Landlord does not represent, that any specific tenant
or number of tenants shall during the Term occupy any space or any particular
space in the Building, and Landlord does not represent or warrant that any
particular space will be used for any particular purpose during the Term.
Section 9.10. Joint and Several Liability. If there is more than one Tenant,
then the obligations hereunder imposed upon Tenant shall be joint and several.
If there is a guarantor of Tenant's obligations hereunder, then the obligations
hereunder imposed upon Tenant shall be the joint and several obligations of
Tenant and such guarantor, and Landlord need not first proceed against Tenant
before proceeding against such guarantor nor shall any such guarantor be
released from its guaranty for any reason whatsoever.
Section 9.11. Independent Covenants. The obligation of Tenant to pay Rent and
other monetary obligations provided to be paid by Tenant under this Lease and
the obligation of Tenant to perform Tenant's other covenants and duties under
this Lease constitute independent, unconditional obligations of Tenant to be
performed at all times provided for under this Lease, save and except only when
an abatement thereof or reduction therein is expressly provided for in this
Lease and not otherwise. Notwithstanding any of the other terms or provisions
of this Lease and notwithstanding any other circumstances whatsoever, it is the
intent
17
<PAGE> 18
and agreement of Landlord and Tenant that so long as Tenant has not been
wrongfully evicted from the Leased Premises, the doctrine of independent
covenants shall apply in all matters relating to this Lease including, without
limitation, the obligation of Landlord to perform Landlord's covenants under
this Lease, as well as the obligation of Tenant to pay Rent and all other
monetary obligations of Tenant and perform Tenant's other covenants, duties and
obligations under this Lease.
Section 9.12. Recording. This Lease (and any Exhibits or Addendums hereto) or
memoranda hereof shall not be recorded without the prior written consent of
Landlord.
Section 9.13. Broker's Fee. Landlord and Tenant represent and warrant to each
other that no real estate commissions, finders' fees, or brokers' fees have
been or will be incurred in connection with this Lease other than a commission
payable by Landlord to Broker in an amount provided by separate agreement
between Landlord and Broker. Landlord and Tenant shall indemnify, defend and
hold each other harmless from any claim, liability, obligation, cost or expense
(including attorneys' fees and expenses) for fees or commissions relating to
this Lease asserted against either party by any broker or other person (other
than the Broker) claiming by, through or under the indemnifying party or whose
claim is based on the indemnifying party's acts.
Section 9.14. Attorney's Fees. Wheresoever Tenant is required to pay counsel
fees of Landlord, such fees shall be reasonable in amount.
Section 9.15. Non-Competition. Landlord will not, at any time that the Lease is
in force, and for five (5) years following termination thereof for whatever
reason, directly or indirectly, in any capacity or for the benefit of any
person, including Landlord, communicate with or solicit any person who is or
during the Term of the Lease becomes a customer, supplier, employee,
salesperson, agent or representative of either the Tenant or Pierce Leahy Corp.
in an effort to obtain such person as a customer, supplier, employee,
salesperson, agent or representative of any business in competition with either
the Tenant or Pierce Leahy Corp.; provided, however, notwithstanding the
foregoing, in no event shall Landlord be precluded from leasing space to any
person at any time in any place or soliciting any such person to become a
tenant so long as the relationship between Landlord and such person is solely
that of landlord and tenant. Landlord acknowledges and agrees that the scope
and duration of the restrictions contained in this Section 9.15 are reasonable
and necessary to protect the rights of Tenant and Pierce Leahy Corp. sought to
be protected. Landlord further acknowledges and agrees that any breach by it of
the restrictions contained in this Section 9.15 will result in irreparable
injury to the Tenant and Pierce Leahy Corp., which is not compensable by
monetary damages and that, in such event, either the Tenant or Pierce Leahy
Corp. will be entitled (in addition to any other remedies available at law or
in equity and without resorting to arbitration) to the issuance of injunctive
relief, whether preliminary or permanent by a court of competent jurisdiction
enjoining Landlord, or any other person involved therein from continuing such
breach, without posting bond or other security in addition to any other
remedies they may have. Notwithstanding the foregoing, in the event that the
restrictions contained in this Section 9.15 are determined by any court of
competent jurisdiction to be unenforceable by reason of its extending over too
great a period of time or being too extensive in any other respect, it will be
interpreted to extend only over the maximum period of time for which it may be
enforceable, and to the maximum extent in all other respects as to which it may
be enforceable, all as is determined by such court in such action.
EXCEPT AS OTHERWISE PROVIDED IN THIS LEASE, LANDLORD AND TENANT EXPRESSLY
ACKNOWLEDGE AND AGREE, AS A MOVING AND MATERIAL PART OF THE CONSIDERATION FOR
LANDLORD'S ENTERING INTO THIS LEASE WITH TENANT, THAT LANDLORD HAS MADE NO
WARRANTIES TO TENANT AS TO THE USE OR CONDITION OF THE LEASED PREMISES OR THE
PROJECT, EITHER EXPRESS OR IMPLIED, AND LANDLORD AND TENANT EXPRESSLY DISCLAIM
ANY IMPLIED WARRANTY THAT THE LEASED PREMISES OR THE PROJECT ARE SUITABLE FOR
TENANT'S INTENDED COMMERCIAL PURPOSE OR ANY OTHER WARRANTY (EXPRESS OF IMPLIED)
REGARDING THE LEASED PREMISES OR THE PROJECT AND ALSO EXPRESSLY ACKNOWLEDGE AND
AGREE THAT TENANT'S OBLIGATION TO PAY RENT HEREUNDER IS NOT DEPENDENT UPON THE
CONDITION OF THE LEASED PREMISES OR THE PROJECT OR THE PERFORMANCE BY LANDLORD
OF ITS OBLIGATIONS HEREUNDER, AND THAT TENANT WILL CONTINUE TO PAY THE RENT
PROVIDED FOR HEREIN WITHOUT ABATEMENT, SETOFF OR DEDUCTION, NOTWITHSTANDING ANY
BREACH BY LANDLORD OF ITS DUTIES OR OBLIGATIONS HEREUNDER, EXPRESS OR IMPLIED.
TENANT EXPRESSLY WAIVES (TO THE EXTENT NOT PROHIBITED BY APPLICABLE LAW) ANY
CLAIMS UNDER FEDERAL, STATE OR OTHER LAW THAT TENANT MIGHT
18
<PAGE> 19
OTHERWISE HAVE AGAINST LANDLORD RELATING TO THE USE, CHARACTERISTICS OR
CONDITION OF THE LEASED PREMISES OR THE PROJECT. LANDLORD AND TENANT EXPRESSLY
AGREE THAT THERE ARE NO, AND SHALL NOT BE ANY, IMPLIED WARRANTIES OF
MERCHANTABILITY, HABITABILITY, FITNESS FOR A PARTICULAR PURPOSE OR ANY OTHER
KIND ARISING OUT OF THIS LEASE AND THAT ALL EXPRESS OR IMPLIED WARRANTIES IN
CONNECTION HEREWITH ARE EXPRESSLY DISCLAIMED AND WAIVED.
IN TESTIMONY WHEREOF, the parties hereto have executed this Lease as of
the day and year first above written.
LANDLORD:
MURRAY INCOME PROPERTIES II, LTD., a Texas
limited partnership
By: Murray Realty Investors IX, Inc., a Texas
corporation
General Partner
By: /s/ Brent Buck
------------------------------------------
Name: Brent Buck
Title: Executive Vice President
TENANT:
PIERCE LEAHY CORP., a
Pennsylvania corporation
By: /s/ Jospeh P. Linaugh
-----------------------------------------------
Name: Joseph P. Linaugh
Title: Vice President
EXHIBITS:
Exhibit A - Legal Description of Site
Exhibit B - Floor Plans of Leased Premises
Exhibit C - Building Rules and Regulations
19
<PAGE> 20
BUILDING RULES AND REGULATIONS
1. No additional locks shall be placed on the doors of the Leased
Premises by Tenant, nor shall any existing locks be changed unless Landlord is
immediately furnished with two keys to such locks. Landlord will without charge
furnish Tenant with two keys for each lock existing upon the entrance doors
when Tenant assumes possession with the understanding that at the termination
of the Lease these keys shall be returned.
2. Any alterations, additions or improvements to the Leased Premises or
other work performed therein shall be done only by contractors approved by
Landlord, such approval not to be unreasonably withheld. Tenant may from time
to time submit to Landlord for its approval a list of contractors, and
thereafter, Tenant, without any further approval from Landlord, may use any of
the contractors on the approved list. As a condition to approval, Landlord may
require any contractor to provide evidence that it has in full force and effect
insurance providing coverages, including without limitation, workmen's
compensation, general liability and motor vehicle liability insurance, and in
amounts determined by Landlord, in the exercise of its reasonable discretion,
to be adequate given the nature of work to be performed. Tenant will be
responsible for determining that any such contractor's insurance is in full
force and effect at the commencement of and during any work performed in the
Leased Premises. This provision shall apply to all work performed in the
Building including installations of telephones, telegraph equipment, electrical
devices and attachments, and installations of any nature affecting floors,
walls, woodwork, trim, windows, ceilings, equipment or any other physical
portion of building. AT&T, Southwestern Bell and GTE are approved contractors
and will not be required to provide evidence of insurance.
3. Third parties providing services in connection with movement in or out
of the Building of furniture, equipment and other bulky items or materials
shall be subject to approval by Landlord as provided in Section 2 above, such
approval not to be unreasonably withheld. Landlord shall have the right to
impose reasonable rules regarding the time, method and routing of movement and
limitations imposed by safety or other concerns which may prohibit any article,
equipment or any other item from being brought into the Building. Tenant is to
assume all risk as to damage to articles moved and injury to persons or public
engaged or not engaged in such movement, including equipment, property, and
personnel of Landlord if damaged or injured as a result of acts in connection
with carrying out this service for Tenant from time of entering property to
completion of work; and Landlord shall not be liable for acts of any person
engaged in, or any damage or loss to any of said property or persons resulting
from any act in connection with such service performed for Tenant.
4. No signs will be allowed in any form on windows inside or out, and no
signs except in uniform location and uniform style approved by Landlord will be
permitted in or about the Building.
5. No portion of Tenant's area or any other part of Building shall at
anytime be used or occupied as sleeping or lodging quarters.
6. No birds or animals shall be brought into or kept in or about the
Building.
7. Agents or employees of Landlord shall not receive or carry messages
for or to any Tenant or other person, nor contract with or render free or paid
services to any Tenant or Tenant's agents, employees, or invitees.
8. Landlord will not permit entrance to the Leased Premises by use of
pass keys controlled by Landlord, to any person at any time without written
permission by Tenant except agents, employees, contractors or service personnel
engaged by Landlord to perform services pursuant to the Lease.
9. None of the sidewalks, driveways, entries, passages, doors, elevators,
elevator doors, hallways or stairways shall be blocked or obstructed, or any
rubbish, litter, trash, or material of any nature placed, emptied or thrown
into these areas, or such areas be used at any time except for access or egress
by Tenant, Tenant's agents, employees or invitees.
EXHIBIT C
to
Lease Agreement
Page 1 of 2
<PAGE> 21
10. Landlord will not be responsible for lost or stolen personal
property, money or jewelry from Tenant's Leased Premises or public or common
areas regardless of whether such loss occurs when the area is locked against
entry or not.
11. These Rules and Regulations are in addition to, and shall not be
construed to in anyway modify or amend, in whole or in part, the terms,
covenants, agreements and conditions of any lease of premises in the Building.
12. Landlord reserves the right to make such other and reasonable Rules
and Regulations as in its judgment may from time to time be needed for the
safety, care and cleanliness of the Building, and for the preservation of good
order therein.
EXHIBIT C
to
Lease Agreement
Page 2 of 2
<TABLE> <S> <C>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 745,995
<SECURITIES> 597,000
<RECEIVABLES> 453,670
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,796,665
<PP&E> 23,602,442
<DEPRECIATION> 8,431,219
<TOTAL-ASSETS> 18,748,341
<CURRENT-LIABILITIES> 316,487
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 18,323,478
<TOTAL-LIABILITY-AND-EQUITY> 18,748,341
<SALES> 0
<TOTAL-REVENUES> 3,124,604
<CGS> 0
<TOTAL-COSTS> 1,493,630
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 28,844
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,290,459
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,290,459
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,290,459
<EPS-PRIMARY> 3.97
<EPS-DILUTED> 3.97
</TABLE>
<PAGE> 1
EXHIBIT 99.A
above are not met, the General Partners may repurchase a portion of such
Interests or defer the repurchase of all such Interests. If the General
Partners determine to defer all or a portion of the repurchase of certain
Interests, the affected Limited Partners will be deemed to have priority over
subsequent requests for repurchases. Investors should be aware that the General
Partners have no obligation to repurchase Interests. If Interests are
repurchased, the General Partner then owning such Interests shall in all
respects be treated as a Limited Partner with respect to those Interests
repurchased.
Special Power of Attorney
Under the Partnership Agreement and Subscription Agreement each Limited
Partner irrevocably appoints the General Partners his attorneys-in-fact to
make, execute, sign, acknowledge, swear to, deliver, record and file any
document or instrument which may be considered necessary or desirable by the
General Partners executing the same to carry out fully the provisions of the
Partnership Agreement.
Dissolution and Liquidation
Article XV of the Partnership Agreement provides that the Partnership
shall be dissolved and its business wound up upon the earliest to occur of (a)
180 days from the date of this Prospectus, unless subscriptions for 30,000
Interests are accepted by such date, (b) the date of disposition of all assets
of the Partnership, (c) the date of the removal, resignation, adjudication of
bankruptcy, insolvency or dissolution of a General Partner, unless the Limited
Partners elect to continue the business of the Partnership, (d) that date on
which Limited Partners holding a majority of Interests vote in favor of
dissolution and termination, or (e) January 31, 2025.
Upon the election by the Limited Partners to continue the business of
the Partnership after an event specified in (c) above, the Partnership shall be
required to purchase the General Partners' general partnership interest
pursuant to Section 12.2 and Section 12.3 of the Partnership Agreement.
Upon the completion of the liquidation of the Partnership, the General
Partners have the authority to execute and record a certificate of cancellation
of the Partnership, as well as any and all other documents required to
effectuate the dissolution and termination of the Partnership.
GLOSSARY
As used in this Prospectus, the following definitions of terms are
applicable:
"Affiliate": (i) any person directly or indirectly controlling,
controlled by, or under common control with, another person, (ii) a person
owning or controlling 10% or more of the outstanding voting securities or
beneficial interests of such other person, (iii) any officer, director,
partner, general trustee, or any other person acting in a substantially
similar capacity of such person, and (iv) if such other person is an
officer, director, partner, trustee or holder of 10% or more of the voting
securities or beneficial interests of such person, any other entity for
which such person acts in any capacity.
"Average Annual Unreturned Invested Capital": The total of all the
Limited Partners' Original Invested Capital reduced by the total of all Cash
Distributions from Sales or Refinancings (excluding Cash Distributions from
Sales or Refinancings applied to the Limited Partners' Preferred Return) to
Limited Partners (but not below zero), as reflected on the partnership's
books and records, weighted on a daily average basis for the period.
"Cash Distributions from Operations": Distributions of cash receipts
from Gross Revenues after (i) operating expenses (without deduction for
depreciation), (ii) amounts set aside for reasonable reserves, and (iii)
payments on the Partnership's other current obligations.
"Cash Distributions from Sales or Refinancings": Distributions of cash
receipts from Net Proceeds from Sales or Refinancings realized by the
Partnership from sales or refinancings of the
68
<PAGE> 2
Partnership's properties after (i) amounts set aside for reasonable
reserves, and (ii) payments on the Partnership's other current obligations.
"Closing Date": Such date as designated by the General Partners as the
date when the last Interest has been sold by the Partnership, but in no
event later than 18 months after the Registration Statement first became
effective.
"Crozier Partners": Crozier Partners IX, Ltd.
"Escrow Agent": MBank Dallas, N.A., Dallas, Texas, or its successor.
"General Partners": Murray Realty Investors IX, Inc. and Crozier
Partners IX, Ltd.
"Gross Revenues": All Partnership revenues from whatever source derived,
exclusive of revenues from the sale or refinancing of Partnership
properties.
"Initial Closing Date": The date on which subscriptions for the minimum
of 30,000 Interests have been accepted by the General Partners.
"Initial Limited Partner": Richard H. Shaw.
"Interest": The limited partnership interest in the Partnership acquired
by the payment of $100 to the Partnership.
"Limited Partners": All subscribers for Interests who are admitted to
the Partnership as limited partners and listed on Schedule A to the
Partnership Agreement.
"Minimum Deadline": The date that is 180 days after the date of this
Prospectus.
"MRI": Murray Realty Investors IX, Inc.
"NASAA Guidelines": The guidelines for real estate programs as adopted
by the North American Securities Administrators Association as they exist on
the date the Partnership's Registration Statement is declared effective by
the Securities and Exchange Commission.
"Net Proceeds from Sales or Refinancings": The net cash realized by the
Partnership from sales, refinancings or other dispositions of Partnership
properties after the payment of all debts and expenses related to the
transactions.
"Organizational and Offering Expenses": Expenses incurred in connection
with the organization of the Partnership and the offering of the Interests
(excluding selling commissions and the dealer manager fee), including legal
fees, accounting fees, printing costs, filing and qualification fees,
reimbursement of expenses (excluding salaries and related salary expenses
incurred during the organization of the Partnership) incurred by the General
Partners or their Affiliates and other disbursements in connection with the
sale and distribution of Interests.
"Original Invested Capital": An amount equal to $100 per Interest.
"Partner": Any General Partner, Limited Partner or, until the Initial
Closing Date, the Initial Limited Partner.
"Partnership": The partnership created under the Amended and Restated
Certificate and Agreement of Limited Partnership attached as Exhibit A.
"Partnership Agreement": The Amended and Restated Certificate and
Agreement of Limited Partnership attached as Exhibit A.
"Preferred Return": The cumulative preferred return to each Limited
Partner equal to 10% per annum on his Average Annual Unreturned Invested
Capital from either Cash Distributions from Operations or Cash Distributions
from Sales or Refinancings. Such cumulative preferred return shall be
calculated from the beginning of the first full fiscal quarter after such
Limited Partner purchased such Interest. A Limited Partner shall be deemed
to have purchased an Interest as of
69
<PAGE> 3
the date on which the purchase of such Interest is reflected on the
certificate of limited partnership filed with the Secretary of State of
Texas.
"Property Management Fee": The fee payable for property management
services.
"Prospectus": The prospectus contained in the Registration Statement, as
amended or supplemented.
"Registration Statement": The Partnership's Registration Statement on
Form S-11 filed with the Securities and Exchange Commission and as amended
from time to time.
"Repurchase Fund": 25% of MRI's share of Cash Distributions from
Operations to be used to repurchase Limited Partner Interests under certain
circumstances.
"Subordinated Amount": MRI's unpaid Cash Distributions from Operations
subordinated to the Limited Partners' 7% noncumulative annual return.
THE OFFERING
Subject to the conditions set forth in this Prospectus and in
accordance with the terms and conditions of the Partnership Agreement, the
Partnership offers through the Dealer Manager 300,000 Interests at $100 per
Interest, subject to the right of the Dealer Manager to increase the offering
by up to an additional 200,000 Interests. Except for investors in certain
states that have imposed higher purchase requirements as set forth in the
Subscription Agreement, a form of which is included as Exhibit B, the minimum
subscription for an Individual Retirement Account or a Keogh Plan is 20
Interests. The minimum subscription for other investors is 50 Interests.
The Interests are being offered on a "best efforts" basis through
Murray Securities Corporation (the "Dealer Manager"), an Affiliate of the
General Partners. As compensation for their services in soliciting and
obtaining subscribers for the purchase of the Interests, the Partnership has
agreed to pay the Dealer Manager a commission of up to a maximum of 8% of the
gross proceeds on all sales made directly by it or by other dealers in
accordance with the following schedule:
<TABLE>
<CAPTION>
Amount of Investment
-------------------- Commission
From To Rate
---------- -------- ----------
<S> <C> <C>
$ 2,000 $ 99,999 8%
100,000 249,999 7%
250,000 499,999 6%
500,000 749,999 5%
750,000 999,999 4%
1,000,000 and over 2%
</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. To be eligible for combination, subscriptions must be
identical for all of the following: registration, type of ownership and tax
identification or social security number. Any request to combine subscriptions
will be subject to verification by the General Partners that all of such
subscriptions were made by a single investor. In such an event, the commission
payable with respect to the initial purchase of Interests will be computed
using the commission schedule set forth above. The commission payable with
respect to any subsequent purchase of Interests will equal the commission that
would have been payable in accordance with the commission schedule set forth
above if all purchases had been made simultaneously, less the commissions that
previously have been paid with respect to all prior purchases of Interests by
such an investor. The difference between 8% of the gross proceeds from the sale
of Interests and the amount payable to the Dealer Manager with respect to such
sale will be reimbursed to the Limited Partner as soon as possible after his
admission to the Partnership or, at the option of such Limited Partner, as
evidenced on his executed subscription agreement in the form of Exhibit B
hereto, will be applied to
70
<PAGE> 1
EXHIBIT 99.B
"Terminated General Partner") shall be purchased by the Partnership for a
purchase price determined according to the provisions of Section 12.3 hereof.
The last to remain of MRI and Crozier Partners, and the successors thereof,
shall not resign or withdraw from the Partnership without the concurrence of a
majority in interest of the Limited Partners. If such retirement or resignation
is voluntary, the purchase price shall be paid in the form of a non-interest
bearing unsecured promissory note with principal payable, if at all, from
distributions which the Terminated General Partner otherwise would have
received had the Terminated General Partner not resigned or retired. If such
termination is involuntary, the Partnership shall have the option to pay the
purchase price of such interest to the Terminated General Partner either in
cash or by a promissory note of the Partnership, payable to such Terminated
General Partner in a face amount equal to said purchase price and containing
provisions as would be usual and customary in a commercial promissory note,
including provisions for interest, at a rate equal to the prime rate of
interest from time to time charged by MBank Dallas, N.A. to its best commercial
customers (but in no event to exceed the maximum rate permitted by law to be
paid to the Terminated General Partners by the Partnership), such interest to
be payable at the time of each installment of principal, which shall be payable
as the Terminated General Partner and the Partnership may agree, or if they
cannot so agree, then annually over a period of five years from the date of the
Terminated General Partner's removal, adjudication of bankruptcy, insolvency or
dissolution. No prepayment penalty shall be charged to the Partnership for the
early payment of its note.
12.3 The fair market value of the Terminated General Partner's
interest to be purchased by the Partnership according to the provisions of
Section 12.2 above shall be determined by agreement between the Terminated
General Partner and the Partnership. If the Terminated General Partner and the
Partnership cannot agree upon the fair market value of such Partnership
interest within 90 days after the date of the Terminated General Partner's
resignation, removal, adjudication of bankruptcy, insolvency or dissolution,
then the Terminated General Partner and the Partnership shall each select an
independent appraiser within the next thirty days. If such appraisers fail to
agree on the fair market value of the Terminated General Partner's interest
within the next 90 days, then the two appraisers shall jointly appoint a third
appraiser whose determination shall be final and binding. The Terminated
General Partner and the Partnership shall each compensate their respective
appraisers, and the compensation of the third appraiser, if necessary, shall be
borne equally by each party. If the Partnership or the Terminated General
Partner fails to appoint an independent appraiser within the thirty day period
provided for in this paragraph, then the fair market value of the Terminated
General Partner's interest will be determined in accordance with the then
current rules of the American Arbitration Association, and the expense of such
arbitration shall be borne equally by the Terminated General Partner and the
Partnership.
12.4 Within 90 days after the resignation, removal, adjudication of
bankruptcy, insolvency or dissolution of a General Partner (except that a
General Partner shall not voluntarily withdraw from the Partnership without
complying with the terms of Section 12.2 and without at least 90 days' prior
written notice to the other General Partner and the Limited Partners of
intention to withdraw, and in such event, within the period from the date of
the notice of intention to withdraw to the date of withdrawal specified in the
notice of intention), Limited Partners holding a majority of the Interests may
elect to continue the business of the Partnership and, if they desire to do so,
may elect a successor General Partner or continue the business of the
Partnership with the remaining General Partner.
ARTICLE XIII
TRANSFER OF A PARTNERSHIP INTEREST
13.1 The General Partners may, pursuant to this Article XIII, admit as
a substituted Limited Partner any successor in interest to a Limited Partner
who is either deceased or under legal disability or who is an assignee of a
Limited Partner.
<PAGE> 2
13.2 Subject to the provisions of this Article XIII, compliance with the
suitability standards imposed by the Partnership, applicable "blue sky" laws
and the applicable rules of any other governmental authority, a Limited Partner
shall have the right to assign the whole or any portion of his Interests (but
not less than 50 Interests unless to an Individual Retirement Account or Keogh
Plan and then not less than 20 Interests) by a written assignment, the terms of
which are not in contravention of any of the provisions of this Agreement.
Any assignment in contravention of any of the provisions of this Article XIII
shall be of no force and effect and shall not be binding upon or recognized by
the Partnership.
(a) Except as provided in (b) below, an assignee of a Limited
Partner's Interest who is not admitted as a substituted Limited
Partner shall have no right to require any information or account of
the Partnership's transactions or to inspect the Partnership's books;
he shall only be entitled to receive distributions from the Partnership
and the share of income, gain, loss, deduction and credit attributable
to the Interests acquired by reason of such assignment from the first
day of the month following the month in which the written instrument
of assignment, executed by the assignor and in form and substance
reasonably satisfactory to the General Partners, and other documents
reasonably deemed necessary or appropriate by the General Partners
(as, for example, evidence that the assignee meets investor suitability
standards) shall have been received by the Partnership.
(b) Anything herein to the contrary notwithstanding, both the
Partnership and the General Partners shall be entitled to (i) treat
the assignor of such Interests as the absolute owner thereof in all
respects, and shall incur no liability for allocations of income, gain,
loss, deduction or credit or for distributions or for transmittal of
reports and notices required to be given to holders of Interests,
until the last day of the month in which the Partnership shall have
received the written assignment executed by the assignor in form and
substance reasonably satisfactory to the General Partners and other
documents reasonably deemed necessary or appropriate by the General
Partners (including evidence of the assignee's compliance with
standards imposed by applicable "blue sky" laws) or (ii) treat the
assignee as a substituted Limited Partner in the place of his assignor,
should the General Partners deem, in their absolute discretion, that
such treatment is in the best interests of the Partnership for any of
its purposes or for any of the purposes of this Agreement.
13.3 No assignee shall have the right to become a substituted Limited
Partner in place of his assignor unless all of the following conditions are
satisfied:
(a) The written consent of the General Partners to such
substitution shall be obtained, the granting of which shall not be
unreasonably withheld;
(b) A duly executed written instrument of assignment setting forth
the intention of the assignor that the assignee shall become a
substituted Limited Partner in his place shall have been filed with
the Partnership;
(c) The Interests being acquired by the assignee shall consist of
at least 20 Interests if such assignee is an Individual Retirement
Account or Keogh Plan and at least 50 Interests if such assignee is not
an Individual Retirement Account or Keogh Plan and, if the assignor
shall retain any Interests, such retention shall consist of at least
20 Interests if such assignor is an Individual Retirement Account or
Keogh Plan and at least 50 Interests if such assignor is not an
Individual Retirement Account or Keogh Plan;
(d) The assignor and assignee shall execute and acknowledge such
other instruments as the General Partners reasonably deem necessary
or desirable to effect such assignment and admission, including,
but not limited to, evidence of the assignee's compliance with
standards imposed by any applicable "blue sky" laws, the written
acceptance and adoption by the assignee of the provisions of this
Agreement and his execution, acknowledgement and delivery to the
General
A-21
<PAGE> 3
Partners of a special power of attorney, the form and content of which
are more fully described in Article XXI hereof; and
(e) The Partnership shall have received from the assignor or
assignee a transfer fee to cover all reasonable expenses of the
transfer, not to exceed $500 per transaction, but such transfer fee
may be waived by the General Partners, in their discretion.
13.4 Any person admitted to the Partnership as a substituted Limited
Partner shall be subject to all of the provisions of this Agreement as if an
original party to it.
13.5 The General Partners shall amend the certificate of limited
partnership at least once each quarter to add assignees as substituted Limited
Partners.
13.6 Upon the death or legal disability of an individual who is a
Limited Partner, his personal representative shall have all of the rights of
a Limited Partner for the purpose of settling or managing his estate, and such
power as the decedent or incompetent possessed to constitute a successor as an
assignee of his Interests and to join with such assignee in making application
to substitute such assignee as a Limited Partner. However, such personal
representative shall not have the right to become a substituted Limited
Partner in the place of his predecessor in interest unless the conditions of
this Article XIII (other than the requirement that the assignor execute and
acknowledge instruments) are first satisfied.
13.7 Upon the adjudication of bankruptcy or insolvency, dissolution
or other cessation of existence as a legal entity of a Limited Partner which
is not an individual, the authorized representative of such entity shall have
all of the rights of a Limited Partner for the purpose of effecting the orderly
winding up and disposition of the business of such entity and such power as
such entity possessed to constitute a successor as an assignee of its
Interests and to join with such assignee in making application to substitute
such assignee as a Limited Partner. However, such representative shall not
have the right to become a substituted Limited Partner in the place of his
predecessor in interest unless the conditions of this Article XIII (other
than the requirement that the assignor execute and acknowledge instruments) are
first satisfied.
13.8 A General Partner may not assign his or its interest as a General
Partner to anyone other than the Partnership as provided in Article XII of
this Agreement.
13.9 No assignment of any Interests may be made if the Interests
sought to be assigned, when added to the total of all other Interests assigned
within the period of 12 consecutive months prior to the proposed date of
assignment, would, in the opinion of counsel for the Partnership, result in
the termination of the Partnership under Section 708 of the Internal Revenue
Code of 1954, as amended.
13.10 Any assignment, sale, exchange or other transfer in contravention
of any of the provisions of this Article XIII shall be void and ineffectual,
and shall not bind or be recognized by the Partnership.
ARTICLE XIV
INDEMNIFICATION
14.1 No General Partner and no officer, director, partner or Affiliate
of a General Partner shall be liable to the Partnership or any Limited Partner
for any loss or damage suffered by the Partnership or any Limited Partner which
arises out of any error in judgment or other action or inaction not
constituting negligence (gross or ordinary), fraud or breach of fiduciary duty
which was taken in good faith, in accordance with the exercise of reasonable
business judgment and pursuant to a determination that such course of conduct
was in the best interest of the Partnership. The Partnership or its receiver
or trustee shall indemnify, save harmless and pay all judgments and claims
against the General Partners (and each of them) or their officers, directors,
partners and Affiliates from any liability, loss or damage incurred by them
or by the Partnership by reason of any act performed or omitted to be
A-22
<PAGE> 1
EXHIBIT 99.C
for this purpose include only the price of goods and materials paid to
independent third parties and direct costs incurred by the General Partners or
their Affiliates in the transaction, including overhead directly attributable
to the transaction but excluding general and administrative overhead. Further,
all such transactions between the Partnership and a General Partner or an
Affiliate of a General Partner must be pursuant to the terms of a written
contract between the Partnership and such General Partner or Affiliate which
precisely described the services to be rendered or the goods or materials
to be provided and the compensation therefor.
These provisions are inconsistent with the direct management by the
Partnership of its business, operations and affairs and the proposed
restructuring wherein the Partnership and Murray Income Properties, Ltd.-84
will employ their own executive and managerial personnel, secretaries,
accountants and other staff, rent office space, pay their own utility bills,
and in general run their own business, operations and affairs and share
expenses. Murray Income Properties, Ltd.-84 is an Affiliate of the Partnership.
Consequently, this amendment proposes to create an exception to the scope of
Section 10.9 that would allow the Partnership, in conjunction with Murray
Income Properties, Ltd.-84, to manage its own business and affairs and
conduct its own operations through its own staff out of its own office and
to share personnel, office and other general and administrative overhead
expenses with Murray Income Properties, Ltd.-84. Further, the amendment
allows the salaried personnel to be persons who are Affiliates of the
General Partners so long as their compensation and benefits are comparable
to the amounts that would be paid for their services if they were not
Affiliates of a General Partner.
The Amendment. A new paragraph is hereby added to the end of
Section 10.9 that reads as follows:
"Notwithstanding anything contained in this Section 10.9 or
elsewhere in this Agreement, the Partnership may directly conduct,
operate and manage its business and affairs. The Partnership may
employ, either alone or in association with Murray Income Properties,
Ltd.-84, managerial and executive personnel, secretaries, accountants
and other support staff in the conduct of the business, operations
and affairs of the Partnership. If any person employed by the
Partnership is an Affiliate of a General Partner (or if an Affiliate
of a General Partner is employed by Murray Income Properties, Ltd.-84
and the Partnership is to reimburse Murray Income Properties, Ltd.-84
for a portion of the compensation and benefits paid to such person),
the compensation and benefits paid by the Partnership (or by Murray
Income Properties, Ltd.-84 as appropriate) for the services of such
person shall be comparable to the amount that would be paid to such
person if such person was not an Affiliate of a General Partner.
The Partnership may reimburse Murray Income Properties, Ltd.-84 for
that proportion of any expenditure made by Murray Income Properties,
Ltd.-84 which the General Partners deem to be the fair, just and
equitable share that should be borne by the Partnership and,
conversely, the Partnership may pay, and seek reimbursement from,
Murray Income Properties, Ltd.-84 for that proportion of any
expenditure made by the Partnership which the General Partners
deem to be the fair, just and equitable share that should be borne
by Murray Income Properties, Ltd.-84."
Amendment No. 9
Explanation of Amendment. Section 10.17 requires MRI to allocate
25% of its share of Cash Distributions from Operations to a "Repurchase
Fund" for the purchase of Interests upon the request of a Limited Partner.
MRI is permitted to commingle the amount allocated to the "Repurchase Fund"
with other assets of MRI. To the present time, however, MRI has not been
paid any Cash Distributions from Operations since the allocation and payment
of Cash Distributions to MRI is subordinated to the prior receipt by the
Limited Partners of a noncumulative 7% annual return from either Cash
Distributions from Operations or Cash Distributions from Sales or
Refinancings, or both, on their Average Annual Unreturned Invested Capital.
(vi)
<PAGE> 2
Since the amendments herein will reduce the allocation of Cash
Distributions from Operations to MRI from 8% to 3% and will reallocate 5% of
such 8% to Crozier Partners (subordinate, of course, in each instance to the
prior receipt by the Limited Partners of a noncumulative 7% annual return
from either Cash Distributions from Operations or Cash Distributions from
Sales or Refinancings, or both), this amendment will require both MRI and
Crozier Partners, in the proportions of 3/8ths for MRI and 5/8ths for Crozier
Partners, respectively, to allocate 25% of their respective shares of any
such subordinated Cash Distributions from Operations to a "Repurchase Fund"
to be established by each of them, respectively.
The Amendment. The third and fourth sentences in Section 10.17 are
hereby deleted and there is hereby substituted in lieu thereof the following
three sentences:
"MRI will allocate 25% of its share of Cash Distributions from
Operations to a "Repurchase Fund" and Crozier Partners will allocate
to a "Repurchase Fund" 25% of its 5% share of Cash Distributions
from Operations that is subordinated to the prior receipt by the
Limited Partners of a noncumulative 7% annual return from either
Cash Distributions from Operations or Cash Distributions from Sales or
Refinancings, or both, on their Average Annual Unreturned Invested
Capital. MRI's share of Cash Distributions from Operations allocated
to the Repurchase Fund will be commingled with other assets of MRI and
Crozier Partners' share of Cash Distributions from Operations
allocated to the Repurchase Fund will be commingled with other
assets of Crozier Partners. Any repurchase of Interests pursuant to
this Section 10.15 shall be in the proportions of 3/8ths by MRI
and 5/8ths by Crozier Partners, respectively."
Amendment No.10
Explanation of Amendment. Section 11.3 provides in respect of voting on
any matter on which the Limited Partners are entitled to vote that each Limited
Partner will be deemed to be "...the holder of only those Interests shown on
Exhibit A, as amended by the last-filed certificate of limited partnership." The
Texas Uniform Limited Partnership Act requires the filing of a certificate of
limited partnership that lists the name and address of each limited partner of a
limited partnership and the amount of the contribution of each limited partner
to the partnership. The certificate of limited partnership filed in the office
of the Secretary of State is authoritative as to the identity of limited
partners. The Texas Uniform Limited Partnership also does not permit an owner of
a limited partnership interest to be considered a "limited partner," with the
voting and other rights appurtenant to that status, unless the owner is named in
the certificate of limited partnership. The Texas Revised Limited Partnership
Act that will be adopted by these amendments no longer requires that the
identity of the limited partners be disclosed in the certificate of limited
partnership filed in the office of the Secretary of State, which filing was
often burdensome on limited partnerships and considered by some people to be an
invasion of their financial privacy. Instead, the Texas Revised Limited
Partnership Act requires the limited partnership to maintain records showing the
name and mailing address of each partner and a written statement of the date on
which each partner in a limited partnership became a partner. This amendment
makes the records of the Partnership authoritative as to the identity of the
holders of Interests entitled to vote on any particular matter that is submitted
to a vote of the Limited Partners.
The Amendment. The Last sentence of Section 11.3 is hereby amended
to read as follows:
"For purposes of determining the number of votes which he is entitled
to cast, a Limited Partner shall be deemed to be the holder of only
those Interests which are reflected as owned by him by the records
of the Partnership."
(vii)
<PAGE> 1
EXHIBIT 99.D
MANAGEMENT COMPENSATION
The following table sets forth the types and estimates of the
amounts of all fees, compensation, income, distributions and other payments
that the General Partners and their Affiliates will or may receive in
connection with the operations of the Partnership. SUCH FEES, COMPENSATION,
INCOME, DISTRIBUTIONS AND OTHER PAYMENTS WERE NOT DETERMINED BY ARM'S-
LENGTH BARGAINING. See "Conflicts of Interest."
<TABLE>
<CAPTION>
Entity Receiving Method of Determination
Form of Compensation Compensation and Estimated Dollar Amount
- -------------------- ---------------- ---------------------------
Offering Stage
<S> <C> <C>
Selling Commissions Murray Securities Up to $8 per Interest sold,
Corporation(1) reduced for purchases by one
investor of more than 1,000
Interests and for purchases
by officers, directors,
partners, employees or
Affiliates of the General
Partners or their Affiliates.
Actual amount depends upon
number of Interests sold but
could be $2,400,000 if 300,000
Interests are sold or
$4,000,000 if 500,000 Interests
are sold.(2)
Dealer Manager Fee Murray Securities Up to $2 per Interest sold,
Corporation(1) reduced for purchases by
officers, directors, partners,
employees or Affiliates of the
General Partners or their
Affiliates. Actual amount
depends upon number of
Interests sold but could be
$600,000 if 300,000 Interests
are sold or $1,000,000 if
500,000 Interests are sold.(2)
Reimbursement of MRI or its Affiliates Actual out-of-pocket
Organizational Organizational and Offering
Offering Expenses(3) Expenses, including accounting,
legal, printing, registration
fees, etc.
<CAPTION>
Acquisition Stage
<S> <C> <C>
Reimbursement of Murray Properties Actual costs incurred in
Acquisition and Company or its acquiring and holding
Holding Costs(4) Affiliates properties prior to their
acquisition by the Partnership.
Dollar amount is not
determinable at this time.(5)
Title Insurance Dallas Title Company A portion of the premium paid for
Commissions(6) or Texas Title title insurance upon acquisition
Company(7) of a property. The premium in
Texas is fixed by the State.
Dollar amount is not determinable
at this time.(5)
</TABLE>
10
<PAGE> 2
<TABLE>
<CAPTION>
Entity Receiving Method of Determination
Form of Compensation Compensation and Estimated Dollar Amount
- -------------------- ---------------- ---------------------------
Operational Stage
<S> <C> <C>
Property Management Murray Management For its management services,
Fees Corporation(8) an amount not to exceed the
lesser of (i) in the case of
apartment complexes, 5% of
gross revenues, in the case
of shopping centers, office
buildings and office/showroom
centers, 6% of gross revenues
(or 3% if leasing performed
by third parties) and in the
case of shopping centers,
office buildings and office/
showroom centers which are
leased on a long-term (ten or
more years) net (or similar)
basis, 1% of gross revenues
or (ii) the amount customarily
charged in arm's-length
transactions by others
rendering comparable services
in the locality where the
property is located, considering
the size and type of each such
property. In addition, Murray
Management Corporation will be
reimbursed for the actual
costs of on-site personnel
engaged in the management,
leasing and maintenance of the
property of the Partnership.
Dollar amount is not
determinable at this time.(5)
Reimbursement of MRI or its Affiliates Actual cost of goods and
Partnership materials used for and by the
Operational Partnership and obtained from
Expenses(9) an entity not affiliated with
a General Partner or an
Affiliate of the General
Partners and certain
administrative services. Dollar
amount is not determinable
at this time.(5)
Casualty Insurance Murray General A portion of the premiums paid
Commissions Agency, Inc.(10) for casualty insurance. The
cost of the insurance cannot
exceed the lower quote for
comparable terms and
coverage from two independent
brokers. Dollar amount is not
determinable at this time.(5)
Partnership Murray Savings The excess of Murray Savings
Administrative Association(11) Association's rate of return
Account and on the Partnership funds in
Property Operating such accounts over the interest
Accounts rate paid to the Partnership
on such accounts. Dollar
amount is not determinable at
this time.(5)
</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 amount not in excess of the
Financing Charges an Affiliate of the amounts that would be charged
or Fees General Partners(12) by unrelated lending
institutions on comparable
loans for the same purpose and
in the same locality but never
in excess of 2% over the prime
rate of MBank Dallas, N.A.,
Dallas, Texas. Dollar amount is
not determinable at this
time.(5)
Distributive Share of Crozier Partners and Crozier Partners will receive
Cash Distributions MRI(14) 2% of all Cash Distributions
from Operations(13) from Operations. MRI will
receive 8% of all Cash
Distributions from Operations,
subject to the Limited Partners
having received a noncumulative
annual cash return equal to
7% of their Average Annual
Unreturned Invested Capital,
calculated from the Initial
Closing Date. Dollar amount
is not determinable at this
time.(5)
<CAPTION>
Liquidation Stage
<S> <C> <C>
Real Estate Crozier Partners or An amount not to exceed the
Commissions its Affiliates; lesser of (i) 50% of the
MRI or its competitive real estate
Affiliates(14)(15) commission or (ii) 3% of the
sales price of the property,
provided that all real estate
commissions or similar fees
paid to all persons shall not
exceed the lesser of the
competitive real estate
commission or 6% of the sales
price of the property. Such
commissions will be payable
only after Limited Partners
have been returned their
Original Invested Capital from
Cash Distributions from Sales
or Refinancings, plus their
Preferred Return from either
Cash Distributions from
Operations or Cash Distributions
from Sales or Refinancings.
Dollar amount is not
determinable at this time.(5)
Title Insurance Dallas Title Company A portion of the premiums paid
Commissions or Texas Title for title insurance upon sale,
Company(7) financing or refinancing of a
property if such title
insurance is provided by Dallas
Title Company or Texas Title
Company. The premium in Texas
is fixed by the State. Dollar
amount is not determinable
at this time.(5)
</TABLE>
12
<PAGE> 4
<TABLE>
<CAPTION>
Entity Receiving Method of Determination
Form of Compensation Compensation and Estimated Dollar Amount
- -------------------- ---------------- ---------------------------
<S> <C> <C>
Distributive Share Crozier Partners Crozier Partners will receive
of Cash and MRI(14) 1% of all Cash Distributions
Distributions from from Sales or Refinancings.
Sales or The remaining 99% shall be
Refinancings(13)(16) allocated (a) first, to the
Limited Partners until they
have been returned their
Original Invested Capital
from Cash Distributions from
Sales or Refinancings, plus
their Preferred Return from
either Cash Distributions
from Operations or Cash
Distributions from Sales or
Refinancings, (b) then, to
MRI in an amount equal to any
unpaid Cash Distributions
from Operations subordinated
to the Limited Partners' 7%
noncumulative annual return
and (c) thereafter, the
remainder shall be allocated
85% to the Limited Partners
and 15% to the General Partners.
See "Income and Losses and
Cash Distributions." Dollar
amount is not determinable
at this time.(5)
</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 sales by
such other broker-dealers, the Dealer Manager has advised the
Partnership that the Dealer Manager will reallow to such other broker-
dealers all or a portion of the selling commissions with respect to
such sales. Such other broker-dealers, together with the Dealer
Manager, may also be reimbursed up to an additional 1/2% of gross
offering proceeds in connection with their due diligence activities.
(2) See "The Offering" for a discussion of the rebate of selling commissions
payable with respect to sales to one purchaser of more than 1,000
Interests and the rebate of selling commissions and the dealer manager
fee with respect to sales to officers, directors, partners, employees
or Affiliates of the General Partners or their Affiliates.
(3) For nonleveraged programs such as the Partnership, the NASAA
Guidelines require that, at a minimum, 82% of the Limited Partners'
capital contributions be committed to investment in properties.
Investment in properties, as defined under the NASAA Guidelines,
is the amount of capital contributions actually paid or allocated to
the purchase, development, construction or improvement of properties
acquired by the Partnership (including the purchase of properties,
working capital reserves not in excess of 5% of gross offering proceeds
and other cash payments such as interest and taxes but excluding front-
end fees, defined as fees and expenses paid by any party for any
services rendered during the Partnership's organizational or
acquisition phase including organization and offering expenses,
acquisition fees, acquisition expenses and any other similar fees,
however designated). The remaining capital contributions not invested
in properties are available for the payment of Organizational and
Offering Expenses, selling commissions, acquisition fees and
acquisition expenses. Acquisition fees for this purpose shall be the
total of all fees and commissions paid by any party in connection
with the purchase or development of property by the Partnership,
including real estate commissions, acquisition fees, selection fees,
development fees, nonrecurring management fees, or any fees of a
similar nature,
13
<PAGE> 5
however designated, but excluding a development fee paid to a person not
affiliated with the General Partners or their Affiliates in connection
with actual development of property after acquisition by the
Partnership. Acquisition expenses for this purpose include, but are not
limited to, legal fees and expenses, travel and communication expenses,
costs of appraisals, loan commitment and loan fees ("points"),
nonrefundable option payments on properties not acquired, accounting
fees and expenses, title insurance, and miscellaneous expenses related
to selection and acquisition of properties, whether or not acquired. The
Partnership will acquire its properties on an unleveraged basis. In
addition, the Partnership will not pay any acquisition fees to the
General Partners or their Affiliates and the total of acquisition fees
to unaffiliated parties and acquisition expenses will not exceed 1% of
the Limited Partners' capital contributions. Based on those assumptions
and assuming the sale of 300,000 Interests with Organizational and
Offering Expenses, selling commissions and the dealer manager fee equal
to 13.0% of the Limited Partners' capital contributions, the amount that
would be invested in properties would be equal to 86.0% of such
contributions. The amount invested in Partnership properties will comply
with the NASAA Guidelines limitations set forth above.
(4) An Affiliate of the General Partners may purchase property in its own
name and temporarily hold title thereto for the purpose of facilitating
the acquisition of such property or any other purpose related to the
business of the Partnership. In such event, such Affiliate may be
reimbursed for its costs incurred in acquiring and holding such real
property prior to the acquisition of such property by the Partnership.
Such costs will consist of the price paid by such Affiliate for
such property, plus the amount of any net cash flow deficit or minus the
amount of any net cash flow surplus incurred by such Affiliate during
its ownership and operation of such property.
(5) Any prediction of such dollar amount would necessarily involve
assumptions of future events that cannot be determined at this time.
(6) To the extent a seller of property to the Partnership sets the sales
price at a level sufficient to cover the premium for title insurance,
the Partnership, if effect, will pay the premium in the purchase price
of the property.
(7) The Partnership has entered into nonexclusive contracts with Dallas
Title Company and Texas Title Company, Affiliates of the General
Partners, pursuant to which each has agreed that, upon the request of
the Partnership, it will handle the closing of purchases, sales,
financings or refinancings by the Partnership of properties situated in
Texas and will cause to be issued title insurance policies on such
properties. Either of such title insurance agencies may receive a
portion of the commission on premiums paid for title insurance by the
Partnership or by a seller of real property to the Partnership. In
Texas, title insurance premiums and the policy forms are prescribed by
the State. Each contract provides that if such title insurance agency
does not derive, in any calendar year, at least 75% if its gross income
from persons or entities not affiliated with a General Partner, that
agency's contract will terminate upon the earlier of 60 days after the
end of the calendar year or as soon as the Partnership can arrange for
another person or entity to perform such services. Each contract also
provides that it may be terminated by either party, without penalty, on
60 days' prior written notice and that such title insurance agency shall
not render services or receive title insurance commissions in connection
with the reinvestment of any proceeds from a sale or refinancing of
Partnership properties.
(8) The Partnership has entered into an agreement with Murray Management
Corporation, an Affiliate of the General Partners, pursuant to which
Murray Management Corporation will be responsible for the management
of each property and the collection of its rental income, for which
services it will receive a monthly Property Management Fee. This
Property Management Fee is payable for professional supervisory
management services undertaken in connection with the operation of
the Partnership's properties. In the case of apartment complexes,
such fee shall include all leasing and releasing fees and bonuses,
and leasing-related services. In the case of shopping centers, office
buildings and office/showroom centers, where Murray Management
Corporation is not responsible for leasing, re-leasing and leasing-
related services with respect to
14
<PAGE> 6
the property, its fee shall not exceed 3% of gross revenues.
Notwithstanding the foregoing, a separate competitive fee may be paid
for the one-time initial lease-up of a newly constructed property if
such service is not included in the purchase price of the property,
provided that such fee shall not exceed the lesser of cost or 90%
of the competitive price that would be charged by unaffiliated persons
rendering similar services in the same or comparable geographic
location. In the case of shopping centers, office buildings and office/
showroom centers which are leased on a long-term net (or similar)
basis, a one-time initial leasing fee of 3% of gross revenues may be
taken on each lease payable over the first five full years of the
original term of the lease. Murray Management Corporation shall pay
from the Property Management Fee, and not as an expense of the
Partnership, the expenses of rendering supervisory property management
services; provided, however, that the wages and expenses of on-site
personnel engaged in the management, leasing and maintenance of the
Partnership's properties and personnel, supplies, repairs, furniture
and equipment costs and other costs directly attributable to the
Partnership's property operations shall be deemed to be property
operating expenses and as such shall be borne by the Partnership by
reimbursement to Murray Management Corporation. Wages and other actual
expenses of personnel may be allocated between properties of the
Partnership and other properties managed by Murray Management
Corporation if such properties are owned by (i) a public or private
program sponsored by the General Partners or their Affiliates or any
joint venture in which a General Partner or an Affiliate is a party
or (ii) an unaffiliated third party. Murray Management Corporation
has the right to subcontract to third parties a portion or all of the
management services to be rendered by it with respect to any particular
property, provided that (a) Murray Management Corporation shall at all
times remain responsible for the management of such property, (b)
the Partnership shall not be required to pay for duplicative services
and (c) the aggregate cost to the Partnership will not exceed the
amount which would be customarily charged in arm's-length transactions
by others rendering similar services in the locality where the
property is located, considering the size and type of each such
property, if only one entity had provided all such services. The
agreement between the Partnership and Murray Management Corporation
may be terminated by either party, without penalty, on 60 days' prior
written notice.
(9) Except as set forth below, reimbursements to a General Partner or an
Affiliate of a General Partner shall not be allowed. A General Partner
or an Affiliate of a General Partner may be reimbursed for: (a) the
actual cost of goods and materials used for or by the Partnership and
obtained from an entity not affiliated with a General Partner or an
Affiliate of a General Partner; and (b) the lesser of the cost or
90% of the competitive price charged by unaffiliated parties for (i)
salaries and related salary expenses for services that could be
performed directly for the Partnership by independent parties, including
legal, accounting, transfer agent, data processing, duplicating
and administration of investor accounts and (ii) Partnership reports
and communications to investors. All such transactions shall be
pursuant to the terms of a written contract between the Partnership
and such General Partner or Affiliate which precisely describes the
services to be rendered or the goods or materials to be provided and
the compensation therefor. No reimbursement shall be permitted for
services for which the General Partners or Affiliates receive a
separate fee or for (i) salaries, related salary expenses, traveling
expenses, and other administrative items which are incurred by any
Controlling Person or which are not directly attributable to the
rendering of reimbursable services to the Partnership and (ii) any
indirect expenses incurred in performing services for the Partnership,
such as rent or depreciation, utilities, capital equipment, and other
administrative items. "Controlling Person" for this purpose shall
mean any person, regardless of title, who performs executive or senior
management functions for the General Partners or Affiliates similar
to those of directors, executive management and senior management, or
any person who either holds 5% or more equity interest in the General
Partners or Affiliates or has the power to direct or cause the
direction of the General Partners or Affiliates, whether through the
ownership of voting securities, by contract, or otherwise, or, in the
absence of a specific role or title, any person having the power to
direct or cause the direction of the management level employees and
policies of the General Partners or
15
<PAGE> 7
Affiliates. It is not intended that every person who carries a title
such as vice president, senior vice president, secretary or treasurer
be included in the definition of Controlling Person. In no event shall
any amount charged to the Partnership as a reimbursable expense by the
General Partners exceed the lesser of the actual cost of such services
or 90% of the amount which the Partnership would be required to pay to
independent parties for comparable services. "Costs" for purposes of
this paragraph shall include the price of goods and materials paid
to independent third parties, and direct costs incurred by the General
Partners or their Affiliates in the transactions including overhead
directly attributable to the transaction but excluding general or
administrative overhead. Notwithstanding the foregoing, reimbursements
are also allowable for certain organizational and offering expenses
and for the actual costs of on-site personnel engaged in the
management, leasing and maintenance of the property of the Partnership
as provided in note (8) above.
(10) The Partnership has entered into a nonexclusive contract with Murray
Insurance Agency, Inc., an Affiliate of the General Partners, pursuant
to which, upon the request of the Partnership, such agency will endeavor
to obtain fire, casualty, or similar insurance on the properties of
the Partnership. Any commission on any casualty insurance brokered by
it will not exceed the amount customarily received by it from the
brokerage of comparable policies for unaffiliated persons. Before such
agency brokers any fire, casualty or similar insurance on any property
of the Partnership, quotes must have been received from two unaffiliated
insurance brokers for coverage and terms comparable to that proposed
to be provided by such agency. No insurance will be brokered by the
Partnership through such agency unless the cost of such insurance will
be no greater than the lower quote of the two unaffiliated insurance
agencies. The contract with Murray Insurance Agency, Inc., provides
that if such agency does not derive at least 75% of its gross income
from business done with persons or entities not affiliated with a
General Partner, that agency's contract will terminate upon the earlier
of 60 days after the end of the calendar year or as soon as the
Partnership can arrange for another person or entity to perform such
services. The contract also provides that it may be terminated by
either party, without penalty, on 60 days' prior written notice.
Murray General Agency, Inc., an Affiliate of the General Partners,
will receive commissions on insurance premiums paid through Murray
Insurance Agency, Inc., by virtue of contractual arrangements between
it and Murray Insurance Agency, Inc.
(11) The General Partners may open and maintain an interest-bearing
Partnership administrative account and property operating accounts at
Murray Savings Association, a stock association organized under the
Texas Savings and Loan Act. Murray Savings Association is a wholly-
owned subsidiary of Murray Financial Corporation, an Affiliate of the
General Partners. Such accounts are insured up to a maximum of
$100,000 in the aggregate by the Federal Savings and Loan Insurance
Corporation ("FSLIC"). The General Partners will not permit the balance
of such accounts to exceed the maximum amount insured by the FSLIC.
Murray Savings Association may receive indirect compensation to the
extent that Murray Savings Association's rate of return on the
Partnership funds in such accounts exceeds the interest rate paid to the
Partnership on such accounts. The Partnership will receive an interest
rate competitive with similar accounts at unrelated institutions and
will not be charged any servicing fees on the accounts.
(12) It is not contemplated that a General Partner or any Affiliate of a
General Partner will make a loan to the Partnership, but the Partnership
Agreement permits a General Partner or any Affiliate of a General
Partner to make a loan to the Partnership if the interest and other
financing charges or fees on any such loan are not in excess of the
amounts which would be charged by unaffiliated lending institutions
on comparable loans for the same purpose in the same locality but not
in excess of 2% over the prime rate of MBank Dallas, N.A. Any
financing charges or fees on any loan to the Partnership by a General
Partner or an Affiliate of a General Partner will be only those
incurred by such General Partner or Affiliate in connection with the
making of such loan. Neither a General Partner nor an Affiliate of
a General Partner will make a profit from the Partnership's payment
of financing charges or fees. No property of the Partnership shall
secure
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any loan made to the Partnership by a General Partner or an Affiliate
of a General Partner if, at the inception of the loan, any payment of
principal or interest is to be made more than two years after the
date of the loan. No loans, secured or unsecured, may be made to the
Partnership by a General Partner or an Affiliate of a General Partner
if at the inception of the loan any payment of principal or interest
is to be made more than three years after the date of the loan.
(13) For a discussion of Cash Distributions from Operations and Cash
Distributions from Sales or Refinancings, see "Income and Losses and
Cash Distributions."
(14) Crozier Partners was formed as of December 19, 1985, under The Texas
Uniform Limited Partnership Act with Jack E. Crozier as the general
partner and Fulton Murray, individually, Fulton Murray in his capacity
as Trustee of the Beverly Murray Wilson Trust and Fulton Murray and
RepublicBank Dallas, N.A., in their capacities as Trustees of a trust
created under the Will of Owen M. Murray, Deceased, as the limited
partners.
(15) Real estate commissions are payable to the General Partners or their
Affiliates only if such General Partner or Affiliate provides a
substantial amount of the services in the sales effort. All real estate
commissions payable to the General Partners or their Affiliates for
services in connection with sales of properties of the Partnership shall
be cumulative but shall be paid only after the Limited Partners have
been returned their Original Invested Capital from Cash Distributions
from Sales or Refinancings, plus their Preferred Return. If an
unaffiliated broker participates in the sale of a Partnership property,
the subordination requirement will apply only to the commission, if any,
earned by the General Partners or their Affiliates. The total of all
real estate commissions payable to all parties in connection with the
sale of a Partnership property shall not exceed the lesser of a
competitive real estate commission which is reasonable, customary and
competitive in light of the size, type and location of the property or
6% of the sales price of the property. Real estate commissions payable
to the General Partners or their Affiliates will be allocated one-third
to Crozier Partners or its Affiliates and two-thirds to MRI or its
Affiliates.
(16) Cash Distributions from Sales or Refinancings payable to the General
Partners (other than the 1% of Cash Distributions from Sales or
Refinancings payable to Crozier Partners) will be allocated one-third
to Crozier Partners and two-thirds to MRI.
CONFLICTS OF INTEREST
The General Partners are subject to various conflicts of interest
because of other activities and entities in which they have a direct or
indirect financial interest. This Prospectus attempts to highlight those
conflicts of interest but a potential investor should be aware that because of
future activities or circumstances not now foreseen, the listing herein may not
be complete. The General Partners, having the exclusive authority to manage the
operations and affairs of the Partnership and to make all decisions regarding
the business of the Partnership, will seek to resolve any matter involving a
conflict of interest in a manner which, in their best judgment, is fair and
reasonable to the Partnership.
Murray Realty Investors IX, Inc., a General Partner, is a wholly-owned
subsidiary of Murray Realty Investors, Inc., which is a wholly-owned subsidiary
of Murray Properties Company. Murray Properties Company is a wholly-owned
subsidiary of Murray Financial Corporation. The general partner of Crozier
Partners IX, Ltd., a General Partner, is Jack E. Crozier, and the limited
partners are Fulton Murray, individually, Fulton Murray in his capacity as
Trustee of the Beverly Murray Wilson Trust and Fulton Murray and RepublicBank
Dallas, N.A. in their capacities as Trustees of a trust created under the Will
of Owen M. Murray, Deceased. Jack E. Crozier owns approximately 11% of the
outstanding stock and is the President of Murray Financial Corporation and is
an officer and director of substantially all Affiliates of Murray Financial
Corporation. Fulton Murray, members of his family and trusts for their
benefit own the remaining outstanding stock of Murray Financial Corporation.
Mr. Murray is the Chairman of the Board and Chief Executive Officer and a
director of Murray Financial Corporation and is an officer and director of
substantially all Affiliates of Murray Financial Corporation. Murray Financial
Corporation is engaged, directly or through subsidiaries, in various real
estate
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