<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, 1999
OR
Transition report pursuant to Section 13 or 15(d) of the Securities
- ------- Exchange Act of 1934
For the transition period from ____________ to ____________
COMMISSION FILE NO.
0-17183
---------------
MURRAY INCOME PROPERTIES II, LTD.
(Exact Name of Registrant as Specified in its Charter)
TEXAS 75-2085586
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
5550 LBJ FREEWAY, SUITE 675, DALLAS, TEXAS 75240
(Address of principal executive offices) (Zip Code)
(972) 991-9090
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
------ ------
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
<PAGE> 2
TABLE OF CONTENTS
PART I
<TABLE>
<CAPTION>
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 5
Item 6. Selected Financial Data 5
Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations 6
Item 7A. Quantitative and Qualitative Disclosures About Market Risk 10
Item 8. Financial Statements and Supplementary Data 11
Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure 22
PART III
Item 10. Directors and Executive Officers of the Partnership 23
Item 11. Executive Compensation 24
Item 12. Security Ownership of Certain Beneficial Owners
and Management 25
Item 13. Certain Relationships and Related Transactions 26
PART IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 27
Signatures 34
Index to Exhibits 35
</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, 1999, Tower Place was
86% 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, 1998, Tower Place was 98% 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, 1999
-------- ----------- -----------------
<S> <C> <C>
1 251,829 98%
2 40,946 100%
3 132,648 92%
</TABLE>
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Paddock Place Shopping Center. At December 31, 1999, Paddock Place was 96%
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, 1998, Paddock Place was 90% 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, 1999
-------- ----------- -----------------
<S> <C> <C>
1 108,000 89%
2 15,000 100%
3 178,491 98%
</TABLE>
Germantown Collection Shopping Center. At December 31, 1999, 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, 1998, 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, 1999
-------- ----------- -----------------
<S> <C> <C>
1 84,000 97%
2 37,760 97%
3 87,975 96%
</TABLE>
1202 Industrial Place. At December 31, 1999 and 1998, 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, 1999
-------- ----------- -----------------
<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
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a 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:
Location Description of Property
-------- -----------------------
Pineville (Charlotte), Tower Place Festival Shopping Center
North Carolina A 114,186 square foot shopping
center situated on 10.777 acres. At December
31, 1999, Tower Place was 86% leased at an
average annual lease rate of $14.62. Lease
rental rates range from $12.37 to $17.00 per
square foot.
The Partnership also owns the properties described below:
Nashville, Tennessee Paddock Place Shopping Center
A 68,629 square foot shopping center
situated on 4.66 acres. At December 31,
1999, Paddock Place was 96% leased at an
average annual lease rate of $14.46. Lease
rates range from $9.79 to $19.00 per square
foot.
Germantown (Memphis), Germantown Collection Shopping Center
Tennessee A 55,730 square foot shopping center
situated on 11.4 acres. At December 31,
1999, Germantown was 100% leased at an
average annual lease rate of $16.55. Lease
rates range from $14.00 to $20.00 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, 1999, 1202 Industrial Place
was 100% leased at an average annual lease
rate of $2.73. Lease rates range from $2.40
to $3.45 per square foot.
ITEM 3. LEGAL PROCEEDINGS.
There are no material legal proceedings to which the General Partners or
the Partnership is a party or to which any of the Partnership's properties are
subject.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
No matters were submitted to a vote of security holders during the fourth
quarter of the year covered by this report through the solicitation of proxies
or otherwise.
On March 10, 2000, a special meeting of the Limited Partners was held to
approve the sale of the Partnership's properties, in one or a series of sale
transactions (which may include one or more properties owned by Murray Income
Properties I, Ltd., an affiliate of the Partnership under joint management), the
subsequent dissolution and liquidation of the Partnership upon the sale of the
partnership's last property and an amendment to the partnership agreement to
permit the proposed asset sale, dissolution and liquidation on the terms set
forth in a proxy statement mailed to the limited partners on or about January
14, 2000. At the meeting, holders of 246,488 Interests (78%) out of a total of
314,687 Interests were represented by proxy. The vote was 235,973 Interests
(75%) for the proposal, 6,342 Interests (2%) against the proposal and 4,173
Interests (1%) abstaining.
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Because more than 50% of the outstanding Interests voted to approve the
proposal, the Partnership will begin marketing the properties for sale, and
after the sale of the last property and the winding up of all other business
affairs, the Partnership will be liquidated and dissolved.
4
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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, 1999, there were 2,146 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, 1995 through
December 31, 1999. 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, 1999, no funds were available for this
purpose.
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
Year Ended December 31,
-------------------------------------------------------------------
1999 1998 1997 1996 1995
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Income $ 3,237,453 $ 3,124,604 $ 2,927,389 $ 2,947,806 $ 2,794,261
Net Earnings 1,403,780 1,290,459 1,108,782 1,160,228 1,121,097
Basic earnings per
Limited Partnership
Interest* 4.32 3.97 3.40 3.56 3.44
Distributions per
Limited Partnership
Interest* 6.00 6.00 5.94 6.00 6.00
Total Assets at
Year End $18,270,529 $18,748,341 $19,396,894 $20,161,224 $20,934,041
</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, 1999, the Partnership had cash, cash equivalents and
certificates of deposit of $1,504,622, which included $1,474,665 invested in
certificates of deposit and other money market instruments. Such amounts
represent cash generated from operations and working capital reserves. The
increase in cash and cash equivalents from December 31, 1998 to December 31,
1999 is primarily due to an increase in the net cash flow generated from the
operations of the Partnership's properties.
Rental income from leases is accrued using the straight line method over
the related lease terms. At December 31, 1999 and December 31, 1998, there were
$326,341 and $232,338, 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 $67,152
(exclusive of bad debts and recoveries) from December 31, 1998 to December 31,
1999 is primarily due to increases in receivables related to the accruals
described above.
Other assets consist primarily of deferred leasing costs. The increase in
other assets of $152,457 (exclusive of amortization) is primarily due to an
increase in leasing commissions paid at Germantown and Paddock Place and
deferred costs related to a proxy solicitation mailed subsequent to year end.
During the year ended December 31, 1999, the Partnership made Cash
Distributions from Operations totaling $1,926,653. Subsequent to December 31,
1999 the Partnership made a Cash Distribution from Operations of $481,664, which
related to the three months ended December 31, 1999. 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. Average occupancies at Tower Place and Paddock Place
decreased for the year, while Germantown increased and 1202 Industrial Place
remained at 100% occupancy. Industry-wide and in the Partnership's markets, the
year was characterized by increased vacancy in large anchor spaces caused by
bankruptcies and consolidation among large retailers. In all three retail
markets, and specifically at Tower Place, anchor and large space users have
vacated their spaces due to increased competition within their industries. The
development of power centers, or centers with several anchors, in the early
1990's has left many markets with an abundance of vacant anchor stores. This
oversupply, coupled with the specific build-out needs and square footage
requirements of large users, makes these spaces difficult to re-lease. The
vacant space at Tower Place, which was occupied by General Cinema, has been
leased to Bally Total Fitness and it is anticipated that they will take
occupancy in late 2000 or early 2001. The theater will be demolished and a new
building will be constructed for Bally. Management continues to work diligently
to lease the space previously occupied by Famous Footwear at Tower Place.
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<PAGE> 9
Results of Operations
Rental income increased $133,709 (5%) for the year ended December 31, 1999
as compared to the year ended December 31, 1998. Rental income increased
$202,308 (8%) for the year ended December 31, 1998 as compared to the year ended
December 31, 1997. The following information details the rental income
generated, bad debt expense incurred, and average occupancy for the years ended
December 31, 1999, 1998 and 1997.
<TABLE>
<CAPTION>
For the years ended
December 31,
---------------------------------------
1999 1998 1997
---------- ---------- -----------
<S> <C> <C> <C>
Paddock Place Shopping Center
Rental income $1,183,885 $1,194,824 $ 1,166,486
Bad debt expense (recovery) 5,476 28,844 (7,200)
Average occupancy 91% 95% 94%
Germantown Collection Shopping Center
Rental income $1,130,922 $1,084,570 $ 1,008,103
Bad debt expense -0- -0- 686
Average occupancy 100% 94% 94%
1202 Industrial Place
Rental income $ 711,720 $ 613,424 $ 515,921
Bad debt expense -0- -0- -0-
Average occupancy 100% 100% 100%
</TABLE>
Rental income at Paddock Place Shopping Center in Nashville, Tennessee
decreased $10,939 (1%) for the year ended December 31, 1999 as compared to the
year ended December 31, 1998. Decreases in base rents due to lower average
occupancy were offset by increases in percentage rent received from J.
Alexander's Restaurant and tenant reimbursements for common area maintenance
costs and real estate taxes. Rental income at Paddock Place 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 averaged 91% occupancy for the year ended December 31, 1999,
a four percent decrease from the previous year. One tenant who occupied 4,154
square feet moved to another space in the shopping center which contains 5,230
square feet. The space containing 4,154 square feet has subsequently been leased
to a card and gift shop. Two tenants who occupy 5,354 square feet renewed their
leases for five years and one tenant who occupies 1,254 square feet renewed its
lease for three years. One tenant who occupied 1,330 square feet vacated its
space prior to the expiration of its lease. During the year, repairs were
completed to the parking lot, irrigation system, and downspouts. At December 31,
1999, Paddock Place was 96% leased.
Rental income at Germantown Collection in Germantown (Memphis), Tennessee
increased $46,352 (4%) for the year ended December 31, 1999 as compared to the
year ended December 31, 1998. Increases in base rents due to higher occupancies
and increases in tenant reimbursements for common area maintenance costs were
offset by decreases in tenant reimbursements for real estate taxes. Rental
income at Germantown Collection 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.
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Occupancy at Germantown averaged 100% for the year ended December 31, 1999,
a six percent increase over the previous year. One tenant who occupies 1,284
square feet renewed its lease for five years and a tenant who occupies 1,100
square feet renewed its lease for three years. A tenant who occupied 1,200
square feet assigned its lease to a new owner, who then executed a new three
year lease. One tenant who occupied 1,050 square feet vacated its space upon
expiration of its lease. This space was then leased to a new tenant who took
occupancy in September. During the year, parking lot repairs were completed and
portions of the shopping center were painted. At December 31, 1999, Germantown
was 100% occupied.
Rental income at 1202 Industrial Place in Grand Prairie (Dallas), Texas
increased $98,296 (16%) for the year ended December 31, 1999 as compared to the
year ended December 31, 1998, 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, real estate taxes and
insurance costs. Rental income at 1202 Industrial Place 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.
1202 Industrial Place remained 100% occupied for the year ended December
31, 1999, unchanged from the previous year. A tenant who occupied 54,000 square
feet subleased its space to a new tenant who will occupy the space until the
lease expires on November 30, 2000. Effective December 1, 2000, the tenant
occupying the remainder of the property will move into this space, and they will
then occupy 100% of the building. Parking lot repairs were completed in
September. As of December 31, 1999, 1202 Industrial Place was 100% leased.
"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 $16,465
(1%) for the year ended December 31, 1999 as compared to the year ended December
31, 1998, with increases in rental rates offset by decreases in tenant
reimbursements for common area maintenance costs and insurance costs. Rental
income at Tower Place 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. Tower Place's total operating expenses increased $23,988 (6%),
with higher repair and maintenance costs, landscaping costs and real estate
taxes offset by lower utility costs and security costs. The following
information details the rental income generated, bad debt expense incurred, and
average occupancy for the years ended December 31, 1999, 1998 and 1997:
<TABLE>
<CAPTION>
For the years ended
December 31,
--------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Tower Place Shopping Center
Rental income $1,803,589 $1,787,124 $1,772,710
Bad debt expense (recovery) 8,799 448 2,997
Average occupancy 95% 96% 98%
</TABLE>
The Partnership's share of income from the joint venture decreased $2,306
(2%) for the year ended December 31, 1999 as compared to the year ended December
31, 1998 for the reasons stated above. 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.
Tower Place averaged 95% occupancy for the year ended December 31, 1999, a
one percent decrease from the previous year. A new lease for 1,600 square feet
was signed and the tenant took occupancy in April. A lease for 2,310 square feet
was signed; however, the tenant never opened for
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<PAGE> 11
business. This space was subsequently leased to a restaurant who took occupancy
in the first quarter of 2000. Effective October 5, 1999, Famous Footwear, who
occupied 9,600 square feet, exercised a clause in its lease which allowed it to
terminate the lease and vacate its space. Management is pursuing a replacement
tenant for this space. During the year, five tenants who occupy a total of 9,250
square feet renewed their leases for three years. One tenant who occupies 4,200
square feet renewed its lease for five years. Three tenants who occupied 3,710
square feet vacated their spaces prior to the expiration of their leases. Two
tenants who occupied 2,170 square feet vacated their spaces upon expiration of
their leases. General Cinema, who vacated their eight-screen theater in 1998,
continued to pay rent according to the terms of its lease. Effective January 31,
2000, this lease was terminated and a new lease was signed with Bally Total
Fitness, who will operate a health and fitness club at the center. Bally will
occupy approximately 25,000 square feet and should take occupancy in late 2000
or early 2001. During the year, roof repairs were completed and some of the wood
trim along the fascia of the property was repaired and painted. At December 31,
1999, Tower Place was 86% 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 $11,876
(2%) for the year ended December 31, 1999 as compared to the year ended December
31, 1998. 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, landscaping costs and trash removal costs. Property
operating expenses at Paddock Place increased $13,056 (5%), with increases in
repair and maintenance costs and amortization of leasing costs being offset by
decreases in trash removal costs and security costs. Property operating expenses
at Germantown were flat, with increases in real estate taxes and amortization of
leasing costs being offset by decreases in utilities costs and repair and
maintenance costs. Property operating expenses at 1202 Industrial Place were
also flat, with increases in roof repair and maintenance costs being offset by
decreases in parking lot and general building repair and maintenance costs.
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.
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 increased $4,744 (2%) for the year ended December
31, 1999 as compared to the year ended December 31, 1998 primarily due to
increases in salaries and benefits, travel and entertainment expenses, and
seminars and education costs offset by decreases in legal fees, investor
services costs and telephone expenses.
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.
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<PAGE> 12
The effect of inflation on results of operations for the years ended
December 31, 1999, 1998, and 1997 was not significant.
Through March 27, 2000, Management of the Partnership is unaware of any
adverse effects of Year 2000 issues on its information technology system and
non-information technology system. While Management does not believe it will
experience any adverse effects, there can be no assurance that Year 2000 issues
will not arise and have an adverse effect on the Partnership's financial
position or results of 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.
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<PAGE> 13
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 12
Balance Sheets - December 31, 1999 and 1998 13
Statements of Earnings - Years ended December 31, 1999, 1998, and 1997 14
Statements of Changes in Partners' Equity -Years ended
December 31, 1999, 1998, and 1997 15
Statements of Cash Flows - Years ended December 31, 1999, 1998, and 1997 16
Notes to Financial Statements 17-21
</TABLE>
11
<PAGE> 14
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, 1999 and 1998, 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, 1999. 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, 1999 and 1998, and the results of its operations and its
cash flows for each of the years in the three-year period ended December 31,
1999, in conformity with generally accepted accounting principles.
KPMG LLP
Dallas, Texas
February 10, 2000, except as to note 7
which is as of March 10, 2000
12
<PAGE> 15
MURRAY INCOME PROPERTIES II, LTD.
(A LIMITED PARTNERSHIP)
BALANCE SHEETS
DECEMBER 31, 1999 AND 1998
<TABLE>
<CAPTION>
1999 1998
------------ ------------
<S> <C> <C>
ASSETS
Investment properties, at cost (note 3):
Land $ 5,789,291 $ 5,789,291
Buildings and improvements 17,841,734 17,813,151
------------ ------------
23,631,025 23,602,442
Less accumulated depreciation 9,152,398 8,431,219
------------ ------------
Net investment properties 14,478,627 15,171,223
Investment in joint venture,
at equity (note 4) 1,237,802 1,321,510
Cash and cash equivalents 908,676 745,995
Certificates of deposit 595,986 597,000
Accounts receivable, net of allowances of
$5,476 and $-0- in 1999 and 1998,
respectively (note 1) 515,346 453,670
Other assets, at cost, net of accumulated
amortization of $631,315 and $554,007 in
1999 and 1998, respectively 534,092 458,943
------------ ------------
$ 18,270,529 $ 18,748,341
============ ============
LIABILITIES AND PARTNERS' EQUITY
Accounts payable $ 19,004 $ 19,293
Accrued property taxes 317,344 297,194
Security deposits and other liabilities 76,156 72,906
Deferred income (note 3) 57,420 35,470
------------ ------------
Total liabilities 469,924 424,863
------------ ------------
Partners' equity:
General Partners:
Capital contributions 1,000 1,000
Cumulative net earnings 689,241 645,335
Cumulative cash distributions (684,246) (645,713)
------------ ------------
5,995 622
------------ ------------
Limited Partners (314,687 Interests):
Capital contributions, net of offering costs 27,029,395 27,029,395
Cumulative net earnings 14,503,014 13,143,140
Cumulative cash distributions (23,737,799) (21,849,679)
------------ ------------
17,794,610 18,322,856
------------ ------------
Total partners' equity 17,800,605 18,323,478
------------ ------------
$ 18,270,529 $ 18,748,341
============ ============
</TABLE>
See accompanying notes to financial statements.
13
<PAGE> 16
MURRAY INCOME PROPERTIES II, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF EARNINGS
<TABLE>
<CAPTION>
Years Ended
December 31,
-------------------------------------
1999 1998 1997
---------- ---------- -----------
<S> <C> <C> <C>
INCOME:
Rental (note 3) $3,026,527 $2,892,818 $ 2,690,510
Interest 72,934 91,488 101,485
Equity in earnings of joint
venture (note 4) 137,992 140,298 135,394
---------- ---------- -----------
3,237,453 3,124,604 2,927,389
---------- ---------- -----------
EXPENSES:
Depreciation 721,179 714,903 724,411
Property operating (note 5) 790,603 778,727 752,939
General and administrative 316,415 311,671 347,771
Bad debts (recoveries), net 5,476 28,844 (6,514)
---------- ---------- -----------
1,833,673 1,834,145 1,818,607
---------- ---------- -----------
Net earnings $1,403,780 $1,290,459 $ 1,108,782
========== ========== ===========
Basic earnings per limited partnership
interest $ 4.32 $ 3.97 $ 3.40
========== ========== ===========
</TABLE>
See accompanying notes to financial statements.
14
<PAGE> 17
MURRAY INCOME PROPERTIES II, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CHANGES IN PARTNERS' EQUITY
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
<TABLE>
<CAPTION>
General Limited
Partners Partners Total
------------ ------------ ------------
<S> <C> <C> <C>
YEAR ENDED DECEMBER 31, 1997:
Balance at December 31, 1996 $ (2,333) $ 19,759,806 $ 19,757,473
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
------------ ------------ ------------
YEAR ENDED DECEMBER 31, 1999:
Net earnings 43,906 1,359,874 1,403,780
Cash distributions ($6.00 per limited
partnership interest) (38,533) (1,888,120) (1,926,653)
------------ ------------ ------------
Balance at December 31, 1999 $ 5,995 $ 17,794,610 $ 17,800,605
============ ============ ============
</TABLE>
See accompanying notes to financial statements.
15
<PAGE> 18
MURRAY INCOME PROPERTIES II, LTD.
(A LIMITED PARTNERSHIP)
STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Years ended
December 31,
-----------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings $ 1,403,780 $ 1,290,459 $ 1,108,782
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Bad debts (recoveries), net 5,476 28,844 (6,514)
Depreciation 721,179 714,903 724,411
Equity in earnings of joint venture (137,992) (140,298) (135,394)
Amortization of other assets 77,308 73,530 66,877
Amortization of deferred income (6,498) (6,498) (6,498)
Change in assets and liabilities:
Accounts and notes receivable (67,152) (74,713) (22,371)
Other assets (152,457) (289,013) (74,868)
Accounts payable (289) 12,892 865
Accrued property taxes, security deposits
and other liabilities and deferred income 51,848 (18,752) 39,103
----------- ----------- -----------
Net cash provided by operating activities 1,895,203 1,591,354 1,694,393
----------- ----------- -----------
Cash flows from investing activities:
Additions to investment properties (28,583) (317,961) (31,585)
Purchases of certificates of deposit (993,972) (498,000) (996,000)
Proceeds from redemptions of certificates of deposit 994,986 797,000 995,000
Distributions from joint venture 221,700 210,000 212,700
----------- ----------- -----------
Net cash provided by investing activities 194,131 191,039 180,115
----------- ----------- -----------
Cash flows from financing activities - cash distributions (1,926,653) (1,926,654) (1,906,582)
----------- ----------- -----------
Net increase (decrease) in cash and cash equivalents 162,681 (144,261) (32,074)
Cash and cash equivalents at beginning of year 745,995 890,256 922,330
----------- ----------- -----------
Cash and cash equivalents at end of year $ 908,676 $ 745,995 $ 890,256
=========== =========== ===========
</TABLE>
See accompanying notes to financial statements.
16
<PAGE> 19
MURRAY INCOME PROPERTIES II, LTD.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999 AND 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, 1999 and 1998,
there were $326,341 and $232,338, 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. Basic earnings per limited
partnership interest is based on year-end partnership interests outstanding as
there has been no change in partnership interests in any period included in
these financial statements. There are no dilutive potential partnership
interests and, therefore, there is no difference in basic earnings per limited
partner interest and diluted earnings per limited partner interests.
Continued
17
<PAGE> 20
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, 1999 and 1998. 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.
Effective January 1, 1999, the Partnership implemented the provisions of
Statement of Position (SOP) 98-5, Reporting on the Costs of Start-Up Activities.
SOP 98-5 requires that the costs of start-up activities, including
organizational costs, be expensed as incurred. SOP 98-5 required the initial
application to be recorded as of the beginning of the fiscal year in which the
SOP is first adopted. Due to the nature of capitalized costs of the Partnership,
there was no effect of implementation of this new pronouncement on the financial
condition or results of operations of the Partnership.
2. PARTNERSHIP AGREEMENT
Pursuant to the terms of the Partnership Agreement, Cash Distributions from
Operations ("Operating Distributions") are allocated and paid 7% to the
Non-corporate General Partner, 3% to the Corporate General Partner and 90% to
the Limited Partners. An amount equal to 5% of Operating Distributions out of
the 7% allocated to the Non-corporate General Partner and the entire amount of
Operating Distributions allocated to the Corporate General Partner is
subordinated to the prior receipt by the Limited Partners of a non-cumulative 7%
annual return from either Operating Distributions or Cash Distributions from
Sales or Refinancings. Net profits or losses, excluding depreciation and gain or
loss from sales or refinancing, are allocated to the General Partners and
Limited Partners in the same proportions as the Operating Distributions for the
year. All depreciation is 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
18
<PAGE> 21
MURRAY INCOME PROPERTIES II, LTD.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
(d) Upon the sale of the last property owned by the Partnership, Cash
Distributions from Sales or Refinancings shall be allocated and paid
to the Partners in an amount equal to, and in proportion with, their
existing capital account balances. Such distributions shall be made
only after distribution of all Cash Distributions from Operations and
only after all allocations of Partnership income, gain, loss,
deduction and credit (including net gain from the sale or other
disposition of the properties) have been closed to the Partners'
respective capital accounts.
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.
The Partnership has 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, 1999
or 1998, which, individually, exceeded 5% of the Partnership's total assets.
Rental income from a major customer was approximately $356,000 during year
ended December 31, 1999 and approximately $282,000 and $257,000 for the years
1998 and 1997, 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, 1999 are as follows:
Year ending December 31:
<TABLE>
<S> <C>
2000 $ 2,332,447
2001 2,023,608
2002 1,649,434
2003 1,011,133
2004 691,908
Thereafter 5,732,923
-------------
$ 13,441,453
=============
</TABLE>
Rental income includes $572,487, $563,986, and $543,118 in 1999, 1998, and
1997, respectively, related to reimbursements from tenants for common area
maintenance costs, real estate taxes and insurance costs.
Continued
19
<PAGE> 22
MURRAY INCOME PROPERTIES II, LTD.
(A LIMITED PARTNERSHIP)
NOTES TO FINANCIAL STATEMENTS
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,
$12,997 and $19,495 at December 31, 1999 and 1998, respectively, is classified
as deferred income and recognized on a straight line basis over the remaining
term of this lease.
4. INVESTMENT IN JOINT VENTURE
The Partnership owns a 15% interest in Tower Place Joint Venture, a joint
venture that owns and operates Tower Place Festival Shopping Center located in
Pineville (Charlotte), North Carolina. The Partnership accounts for the joint
venture using the equity method. The remaining 85% interest in the joint venture
is owned by Murray Income Properties I, Ltd. ("MIP I"), an affiliated real
estate limited partnership. The Tower Place Joint Venture Agreement provides
that the Partnership will share profits, losses, and cash distributions
according to the Partnership's 15% ownership interest in the joint venture.
Summarized financial information for the joint venture is as follows:
<TABLE>
<CAPTION>
December 31,
-----------------------
1999 1998
---------- ----------
<S> <C> <C>
Total assets, principally investment property $8,453,953 $8,995,551
========== ==========
Total liabilities 201,940 185,484
Venturers' capital 8,252,013 8,810,067
---------- ----------
$8,453,953 $8,995,551
========== ==========
</TABLE>
<TABLE>
<CAPTION>
Years ended
December 31,
------------------------------------
1999 1998 1997
---------- ---------- ----------
<S> <C> <C> <C>
Income $1,826,369 $1,810,269 $1,797,162
Expenses 906,422 874,946 894,538
---------- ---------- ----------
Net earnings $ 919,947 $ 935,323 $ 902,624
========== ========== ==========
</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 $18,792 and
$17,832 during the years ended December 31, 1999 and 1998. 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. No such fees were earned during the year ended December 31,
1999.
Continued
20
<PAGE> 23
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,
-----------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Net earnings - financial statement basis $ 1,403,780 $ 1,290,459 $ 1,108,782
----------- ----------- -----------
Financial statement basis depreciation/amortization
over tax basis depreciation/amortization 115,172 94,799 111,112
Financial statement basis joint venture earnings
under tax basis joint venture earnings 16,370 4,798 6,560
Tax basis rental income over (under)
financial statement basis rental income (71,300) (41,302) 23,404
----------- ----------- -----------
Sub-total 60,242 58,295 141,076
----------- ----------- -----------
Net earnings - Federal income tax basis $ 1,464,022 $ 1,348,754 $ 1,249,858
=========== =========== ===========
</TABLE>
Reconciliation of financial statement partners' equity to Federal income
tax basis partners' equity is as follows:
<TABLE>
<CAPTION>
Years Ended
December 31,
---------------------------------------
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Total partners' equity - financial statement basis $17,800,605 $18,323,478 $18,959,673
Current year tax basis net earnings over
financial statement basis net earnings 60,242 58,295 141,076
Cumulative prior years tax basis net earnings
over financial statement basis net earnings 1,375,272 1,316,977 1,175,901
----------- ----------- -----------
Total partners' equity - Federal income tax basis $19,236,119 $19,698,750 $20,276,650
=========== =========== ===========
</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.
7. SUBSEQUENT EVENT
On March 10, 2000 in a special meeting of the Partnership, the Limited
Partners approved the sale of the Partnership's properties, in one or a series
of sale transactions (which may include one or more properties owned by MIP I),
the subsequent dissolution and liquidation of the Partnership upon the sale of
the Partnership's last property, and an amendment to the partnership agreement
to permit the proposed asset sale, dissolution and liquidation on the terms set
forth in a proxy statement mailed to the limited partners on or about January
14, 2000. As a result, the Partnership will begin marketing the properties for
sale, and after the sale of the last property and the winding up of all other
business affairs, the Partnership will be liquidated. Management of the
Partnership expects no loss to result from the sale of properties.
21
<PAGE> 24
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Not applicable.
22
<PAGE> 25
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, 71, 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, 49, 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, 44, 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
23
<PAGE> 26
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, 1999 $ 67,687 $ 2,874
President* 1998 66,621 2,848
1997 65,507 2,815
W. Brent Buck, 1999 50,405 1,773
Executive Vice President* 1998 49,611 1,733
1997 48,782 1,695
</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 1999 the Partnership's matching
contributions were $2,050 for Mr. Armstrong and $1,521 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
24
<PAGE> 27
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, 1999.
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, 1999.
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, 1999:
<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.
25
<PAGE> 28
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, 1999 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 $18,792 and $17,832
during the years ended December 31, 1999 and 1998. 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.
26
<PAGE> 29
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, 1999, 1998, and 1997.
(ii) Real Estate and Accumulated Depreciation (Schedule III) -
December 31, 1999
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:
2a Proxy Statement pursuant to Section 14(a) of the Securities
Exchange Act of 1934. Reference is made to the Partnership's
Schedule 14A, filed with the Securities and Exchange Commission
on January 13, 2000. (File No. 0-17183)
2b Definitive Soliciting Additional Materials to Proxy Statement
pursuant to Section 14(a) of the Securities Exchange Act of
1934. Reference is made to the Partnership's Schedule 14A, filed
with the Securities and Exchange Commission on February 9, 2000.
(File No. 0-17183)
2c Definitive Soliciting Additional Materials to Proxy Statement
pursuant to Section 14(a) of the Securities Exchange Act of
1934. Reference is made to the Partnership's Schedule 14A, filed
with the Securities and Exchange Commission on February 23,
2000. (File No. 0-17183)
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)
3d Amendment to Amended and Restated Certificate and Agreement of
Limited Partnership, dated March 22, 2000. Filed herewith.
27
<PAGE> 30
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 Termination of Lease Agreement with General Cinema Corporation
of North Carolina, dated February 11, 2000, terminating the
Lease Agreement dated July 23, 1985 at Tower Place Festival
Shopping Center. Filed herewith.
10d Lease Agreement with Bally Total Fitness Corporation to lease
certain premises as described within the Lease Agreement dated
February 14, 2000 at Tower Place Festival Shopping Center. Filed
herewith.
10e 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)
10f 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)
10g 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)
10h 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)
10i 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)
10j Data Processing System Use Agreement between Murray Income
Properties II, Ltd. and The Mavricc Management Systems, Inc.,
dated September 1, 1998. Reference is made to Exhibit 10h to the
1998 Annual Report on Form 10-K filed with the Securities and
Exchange Commission on March 26, 1999. (File No. 0-17183)
10k Management Agreement with CK Charlotte Overhead Limited
Partnership for management and operation services described in
the Management Agreement dated December 2, 1999 at Tower Place
Festival Shopping Center. Filed herewith.
28
<PAGE> 31
10l 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 December 15, 1999) at Germantown
Collection Shopping Center. Filed herewith.
10m 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 December 15,
1999 at Paddock Place Shopping Center. Filed herewith.
10n 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)
10o 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)
10p 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)
10q 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). Reference is made to Exhibit 10o to
the 1998 Annual Report on Form 10-K filed with the Securities
and Exchange Commission on March 26, 1999. (File No. 0-17183)
10r 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). Reference is made to Exhibit 10p
to the 1998 Annual Report on Form 10-K filed with the Securities
and Exchange Commission on March 26, 1999. (File No. 0-17183)
10s 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)
10t 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)
10u 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)
29
<PAGE> 32
10v 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, 1999, 1998, and 1997.
(ii) Real Estate and Accumulated Depreciation (Schedule III) -
December 31, 1999.
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.
30
<PAGE> 33
INDEPENDENT AUDITORS' REPORT
The Partners
Murray Income Properties II, Ltd.:
Under date of February 10, 2000, except as to note 7 which is as of March 10,
2000, we reported on the balance sheets of Murray Income Properties II, Ltd. (a
limited partnership) as of December 31, 1999 and 1998, 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, 1999, 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 10, 2000, except as to note 7
which is as of March 10, 2000
31
<PAGE> 34
Schedule II
MURRAY INCOME PROPERTIES II LTD.
(A LIMITED PARTNERSHIP)
VALUATION AND QUALIFYING ACCOUNTS
YEARS ENDED DECEMBER 31, 1999, 1998, AND 1997
<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, 1997 $ 9,485 (6,514) 1,524 1,447
=========== =========== =========== ===========
Year ended December 31, 1998 $ 1,447 28,844 30,291 -0-
=========== =========== =========== ===========
Year ended December 31, 1999 $ -0- 5,476 -0- 5,476
=========== =========== =========== ===========
</TABLE>
Deductions are primarily for writeoffs of accounts receivable deemed
uncollectible by management.
32
<PAGE> 35
Schedule III
MURRAY INCOME PROPERTIES II, LTD.
(a limited partnership)
Real Estate and Accumulated Depreciation
December 31, 1999
<TABLE>
<CAPTION>
Costs Capitalized Gross Amount
Initial Cost Subsequent at which carried at
to Partnership (A) to Acquisition Close of Period (D)
------------------------- ---------- ---------------------------------------
Buildings and Buildings and
Description Encumbrances Land Improvements Improvements Land Improvements Total
----------- ----------- ----------- ----------- ---------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C>
Shopping Center
Nashville, Tennessee $ 0 $3,153,285 $ 6,615,549 $ 664,184 $3,153,285 $ 7,279,733 $10,433,018
Shopping Center
Germantown (Memphis)
Tennessee $ 0 $1,751,518 $ 6,395,078 $1,158,565 $1,751,518 $ 7,553,643 $ 9,305,161
Office Warehouse
Grand Prairie
Texas $ 0 $ 884,488 $ 2,895,376 $ 112,982 $ 884,488 $ 3,008,358 $ 3,892,846
----------- ---------- ----------- ---------- ---------- ----------- -----------
$ 0 $5,789,291 $15,906,003 $1,935,731 $5,789,291 $17,841,734 $23,631,025
=========== ========== =========== ========== ========== =========== ===========
<CAPTION>
Life on which
Depreciation in
Fiscal Latest Statement
Accumulated Year of Year of Earnings
Description Depreciation Construction Acquired is Computed
----------- ----------- ----------- ----------- ----------------
<S> <C> <C> <C> <C>
Shopping Center
Nashville, Tennessee $3,877,097 1985/86 1986 3-25 YEARS
Shopping Center
Germantown (Memphis)
Tennessee $3,791,991 1987 1988 3-25 YEARS
Office Warehouse
Grand Prairie
Texas $1,483,310 1980 1988 3-25 YEARS
----------
$9,152,398
==========
</TABLE>
Notes:
(A) The initial cost to the Partnership represents the original purchase price
of the properties
(B) Reconciliation of real estate owned for 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Balance at beginning of period $23,602,442 $23,284,481 $23,252,896
Additions during period $ 28,583 $ 317,961 $ 31,585
Retirements during period $ 0 $ 0 $ 0
----------- ----------- -----------
Balance at close of period $23,631,025 $23,602,442 $23,284,481
=========== =========== ===========
</TABLE>
(C) Reconciliation of accumulated depreciation for 1999, 1998 and 1997:
<TABLE>
<CAPTION>
1999 1998 1997
----------- ----------- -----------
<S> <C> <C> <C>
Balance at beginning of period $ 8,431,219 $ 7,716,316 $ 6,991,905
Depreciation expense $ 721,179 $ 714,903 $ 724,411
Retirements during period $ 0 $ 0 $ 0
----------- ----------- -----------
Balance at close of period $ 9,152,398 $ 8,431,219 $ 7,716,316
=========== =========== ===========
</TABLE>
(D) The aggregate cost of real estate at December 31, 1999 for Federal income
tax purposes is $24,452,401.
33
<PAGE> 36
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 27, 2000 By: /s/ Jack E. Crozier
--------------------------------
Jack E. Crozier
a General Partner
By: Murray Realty Investors IX, Inc.
a General Partner
Dated: March 27, 2000 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 27, 2000 By: /s/ Brent Buck
--------------------------------
Brent Buck
Executive Vice President
Director
Dated: March 27, 2000 By: /s/ Mitchell Armstrong
--------------------------------
Mitchell Armstrong
Chief Executive Officer
Chief Financial Officer
Director
34
<PAGE> 37
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Document
<S> <C>
2a Proxy Statement pursuant to Section 14(a) of the Securities
Exchange Act of 1934. Reference is made to the Partnership's
Schedule 14A, filed with the Securities and Exchange Commission
on January 13, 2000. (File No. 0-17183)
2b Definitive Soliciting Additional Materials to Proxy Statement
pursuant to Section 14(a) of the Securities Exchange Act of
1934. Reference is made to the Partnership's Schedule 14A, filed
with the Securities and Exchange Commission on February 9, 2000.
(File No. 0-17183)
2c Definitive Soliciting Additional Materials to Proxy Statement
pursuant to Section 14(a) of the Securities Exchange Act of
1934. Reference is made to the Partnership's Schedule 14A, filed
with the Securities and Exchange Commission on February 23,
2000. (File No. 0-17183)
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)
3d Amendment to Amended and Restated Certificate and Agreement of
Limited Partnership, dated March 22, 2000. Filed herewith.
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 Termination of Lease Agreement with General Cinema Corporation
of North Carolina, dated February 11, 2000, terminating the
Lease Agreement dated July 23, 1985 at Tower Place Festival
Shopping Center. Filed herewith.
10d Lease Agreement with Bally Total Fitness Corporation to lease
certain premises as described within the Lease Agreement dated
February 14, 2000 at Tower Place Festival Shopping Center. Filed
herewith.
</TABLE>
35
<PAGE> 38
<TABLE>
<CAPTION>
Document
<S> <C>
10e 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)
10f 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)
10g 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)
10h 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)
10i 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)
10j Data Processing System Use Agreement between Murray Income
Properties II, Ltd. and The Mavricc Management Systems, Inc.,
dated September 1, 1998. Reference is made to Exhibit 10h to the
1998 Annual Report on Form 10-K filed with the Securities and
Exchange Commission on March 26, 1999. (File No. 0-17183)
10k Management Agreement with CK Charlotte Overhead Limited
Partnership for management and operation services described in
the Management Agreement dated December 2, 1999 at Tower Place
Festival Shopping Center. Filed herewith.
10l 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 December 15, 1999) at Germantown
Collection Shopping Center. Filed herewith.
10m 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 December 15,
1999 at Paddock Place Shopping Center. Filed herewith.
10n 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)
10o 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)
</TABLE>
36
<PAGE> 39
<TABLE>
<CAPTION>
Document
<S> <C>
10p 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)
10q 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). Reference is made to Exhibit 10o to
the 1998 Annual Report on Form 10-K filed with the Securities
and Exchange Commission on March 26, 1999. (File No. 0-17183)
10r 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). Reference is made to Exhibit 10p
to the 1998 Annual Report on Form 10-K filed with the Securities
and Exchange Commission on March 26, 1999. (File No. 0-17183)
10s 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)
10t 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)
10u 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)
10v 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.
</TABLE>
37
<PAGE> 40
<TABLE>
<CAPTION>
Document
<S> <C>
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>
38
<PAGE> 1
EXHIBIT 3d
CERTIFICATE OF AMENDMENT
TO THE AMENDED AND RESTATED
CERTIFICATE AND AGREEMENT OF LIMITED PARTNERSHIP
OF
MURRAY INCOME PROPERTIES II, LTD.
Pursuant to the provisions of Section 2.02 of the Texas Revised Limited
Partnership Act, as amended, the undersigned limited partnership desires to
amend its amended and restated certificate and agreement of limited partnership
and for that purpose submits the following certificate of amendment, which is
executed by a general partner.
I.
The name of the limited partnership is: Murray Income Properties II,
Ltd.
II.
The Amended and Restated Certificate of Limited Partnership is hereby
further amended by adding a new Article XXV and Section 25.1 which shall read in
its entirety as follows:
"ARTICLE XXV
25.1 Notwithstanding Sections 11.4 and 15.1 or any other
provision in this Agreement to the contrary, the General Partners shall
have full authority and power to consummate the sale of all of the
Partnership's assets and to subsequently dissolve the Partnership upon
completion of the asset sale in accordance with the terms approved by a
majority of the Limited Partners and as described in that certain Proxy
Statement on Schedule 14A filed by the Partnership with the U. S.
Securities and Exchange Commission on or about January 13, 2000."
IN WITNESS WHEREOF, the undersigned General Partner of the Partnership
has caused this Certificate of Amendment to the Amended and Restated Certificate
and Agreement of Limited Partnership to be executed to be effective upon filing.
MURRAY INCOME PROPERTIES II, LTD.
By: Murray Realty Investors IX, Inc.,
a general partner
By: /s/ Mitchell Armstrong
------------------------------
Mitchell Armstrong
President
<PAGE> 1
EXHIBIT 10c
TERMINATION OF LEASE
THIS TERMINATION OF LEASE (this "Agreement") is made this 11th day of
February, 2000 between TOWER PLACE JOINT VENTURE, a joint venture and successor
in interest to Crow-Charlotte Retail #2, Ltd. ("Landlord"), and GENERAL CINEMA
CORP. OF NORTH CAROLINA ("Tenant").
Background Statement
A. Crow-Charlotte Retail #2, Ltd., predecessor in interest to Landlord,
and Tenant entered into that certain Theatre Lease dated July 23, 1985 ("Lease")
covering certain premises located in Charlotte, North Carolina and described
more particularly therein (Premises"). Landlord has succeeded to the interest of
Crow-Charlotte Retail #2, Ltd. with respect to the Premises and the Lease.
B. Landlord and Tenant have agreed to terminate the Lease pursuant to
the provisions of this Agreement.
NOW, THEREFORE, in consideration of the foregoing and other good and
valuable consideration, the receipt and sufficiency is acknowledged, Landlord
and Tenant agree as follows:
1. PAYMENT. On or before the date five (5) business days after Landlord
shall have executed this Agreement ("Payment Date"), Tenant shall pay to
Landlord, in immediately available funds by wire transfer the sum of Two Million
Two Hundred Fifty Thousand and no/100 Dollars ($2,250,000) (the "Release
Payment"). The Release Payment shall be wired to the account of Landlord as
follows:
Account Name: Tower Place Joint Venture
Account Number: 08805059654
Bank Name: Texas Commerce Bank
ABA Number: 113000609
Contact: Mitchell Armstrong FAX (972) 991-9086
Tenant shall be entitled to a credit against the Release Payment for
all base rent, common area maintenance charges and insurance reimbursements paid
in accordance with the Lease with respect to the month of January, 2000.
2. TERMINATION OF LEASE: Landlord agrees that upon timely receipt of
the Release Payment on the Payment Date, the term of the Lease will be deemed to
have expired as of 11:59 p.m. on the Payment Date and Tenant shall have no
further obligation to Landlord with respect to the Lease or the Premises, other
than those obligations and liabilities which pursuant to the provisions of the
Lease or applicable law would survive the Lease's expiration. Tenant agrees that
on the Effective Date Tenant shall vacate the Premises and surrender exclusive
possession thereof to Landlord in full compliance with all provisions of the
Lease.
3. ADDITION PRO-RATA AMOUNTS. Tenant shall remain responsible for all
charges accruing under the Lease through the Effective Date including but not
limited to common area maintenance charges, common area maintenance
reconciliation amounts, base rent, and Tenant's pro-rata share of 1999 property
taxes, which pro-rata share of taxes equals the amount of Twenty Eight Thousand
Seven Hundred Nineteen and 54/100 Dollars ($28,719.54). No amounts paid by
Tenant to Landlord under this Section shall reduce the Release Payment except as
expressly provided in Section 1.
4. ACCESS TO PREMISES. Tenant agrees that notwithstanding the
provisions of the Lease to the contrary Landlord shall have access to the
Premises to show the property to prospective tenants.
5. REPRESENTATIONS AND WARRANTIES. Landlord and Tenant hereby represent
and warrant unto the other that (a) the execution, delivery and performance of
this Agreement has been duly authorized by each party, respectively; and (b)
Landlord and Tenant are the "Landlord" and "Tenant" respectively, under the
Lease, and that no assignment of each of their respective interest have been
made.
6. RELEASE. (a) Upon timely performance by Tenant of all of its
obligations under this Agreement and all obligations accruing under the Lease on
or before December 31, 1999, Landlord shall release and forever discharge Tenant
and its officers, directors, shareholders, partners, agents, employees,
predecessors, successors and assigns, including but not limited to Harcourt
General, Inc. (formerly known as General Cinema Corporation), from all claims,
contracts, liabilities, obligations or causes of action of any kind, whether
known or unknown, fixed or contingent, liquidated or unliquidated, whether
sounding in contract or tort, including but not limited to, all claims arising
out of or existing in connection with the occupancy of the Premises or the
execution of the Lease or any of the terms or provisions thereof, except for
Tenant's obligations pursuant to this Agreement, provided, however, that this
release shall not cover any rights of Landlord which by their nature would have
survived the expiration or early termination of the Lease, all of which are
specifically reserved by Landlord.
<PAGE> 2
(b) Tenant hereby releases and forever discharges Landlord and its
officers, directors, shareholders, partners, members, managers, agents,
employees, predecessors, successors and assigns from all claims, contracts,
liabilities, obligations or causes of action of any kind, whether known or
unknown, fixed or contingent, liquidated or unliquidated, whether sounding in
contract or tort, including but not limited to, all claims arising out of or
existing in connection with the occupancy of the Premises or the execution of
the Lease or any of the terms or provisions thereof, except for Landlord's
obligations pursuant to this Agreement.
7. CONFIDENTIALITY. Tenant shall not at any time or in any manner,
either directly or indirectly, disclose, divulge, communicate or otherwise
reveal or allow to be revealed to any third party the terms, substance or
content of this Agreement or the terms, substance or content of any
communications, whether written or oral, concerning the negotiation, execution
or implementation of this Agreement.
8. BROKERAGE COMMISSIONS. Landlord hereby indemnifies and holds Tenant
from all loss, claim, obligation, liability, damage, expense, actions and
demands of every kind or nature, including without limitation reasonable
attorneys' fees, relating to any brokerage commissions which may now or
hereafter be claimed with respect to the Lease or a replacement tenant leasing
the Premises.
9. GOVERNING LAW. This Agreement shall be enforced and interpreted
according to the laws of the State of North Carolina excluding any choice of law
rule which would direct the application of the law of any other state.
IN WITNESS WHEREOF, Landlord and Tenant have caused this Agreement to
be executed as of the day and year first above written.
TENANT:
Date of Signature by Tenant:
GENERAL CINEMA CORP. OF NORTH CAROLINA
January 13, 2000
By: /s/ Frank Stryjewski
-----------------------------------------
Its: President
LANDLORD:
Date of Signature by Landlord:
TOWER PLACE JOINT VENTURE, a joint venture
February 11, 2000
By: Murray Income Properties I, Ltd., a Texas
limited partnership, a Joint Venture
By: Murray Realty Investors VIII, Inc.
a Texas corporation, General Partner
By: /s/ Brent Buck
--------------------------------
Title: Executive VP
<PAGE> 1
EXHIBIT 10d
LEASE AGREEMENT
BALLY TOTAL FITNESS CORPORATION,
TENANT
WITH
TOWER PLACE JOINT VENTURE,
LANDLORD
Date:
FEBRUARY 14, 2000
Premises:
Tower Place Festival Shopping Center
Charlotte, North Carolina
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C> <C>
Article 1 Incorporation and Definitions.....................................................1
1.1 Incorporation.............................................................1
1.2 Definitions...............................................................1
Article 2 Lease and Term....................................................................1
2.1 Lease of the Premises.....................................................1
2.2 Permitted Use.............................................................2
2.3 Term......................................................................2
2.4 Option Terms..............................................................2
2.5 Rent Commencement Date....................................................3
Article 3 Rent..............................................................................4
3.1 Rent......................................................................4
3.2 Measurement of Premises and Memorandum....................................4
3.3 Payment of Rent...........................................................4
3.4 Late Payment..............................................................5
Article 4 Operating Expenses................................................................5
4.1 Operating Expenses........................................................5
4.2 Common Areas..............................................................8
4.3 Taxes.....................................................................8
4.4 Tenant's Proportionate Share..............................................9
4.5 Payment of Operating Expenses............................................10
4.6 Landlord's Books and Records.............................................11
4.7 Personal Property Tax....................................................11
Article 5 Title Insurance..................................................................12
5.1 Title Insurance Policy...................................................12
Article 6 Landlord's Agreements............................................................12
6.1 Landlord's Representations, Warranties and Covenants.....................12
6.2 Parking and Common Areas.................................................14
6.3 Exclusivity..............................................................15
Article 7 Use of the Premises and the Common Areas; Signage................................16
7.1 Quiet Enjoyment..........................................................16
7.2 Compliance with Laws.....................................................16
7.3 Covenant Against Waste...................................................17
7.4 Exterior Signs...........................................................17
7.5 Utilities................................................................17
7.6 Interruption of Utilities................................................18
7.7 Rules and Regulations....................................................18
Article 8 Repairs, Maintenance and Alterations.............................................18
8.1 Repairs, Maintenance and Operation.......................................18
8.2 Tenant's Property........................................................19
8.3 Fixtures and Alterations.................................................20
8.4 Performance of Alterations...............................................20
8.5 Mechanics' Liens and Claims Against Landlord.............................20
Article 9 Assignment and Sublease..........................................................21
9.1 Consent Required.........................................................21
9.2 No Consent Required......................................................21
9.3 Continued Liability......................................................22
9.4 Consent Procedure........................................................22
Article 10 Default by Tenant...............................................................23
10.1 Default In Payment of Rent...............................................23
10.2 Non-Monetary Defaults....................................................23
10.3 Financial Defaults.......................................................23
10.4 Remedies After Default...................................................23
10.5 Reletting After Default..................................................24
10.6 Rights Upon Holding Over.................................................25
10.7 Landlord's Right to Perform Tenant's Covenants...........................25
10.8 Remedies Cumulative; No Acceleration or Consequential Damages............25
</TABLE>
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<PAGE> 3
<TABLE>
<S> <C> <C>
Article 11 Insurance.......................................................................25
11.1 Waivers of Claims and Subrogation........................................25
11.2 Tenant's Insurance.......................................................25
11.3 Landlord as Additional Insured...........................................26
11.4 Landlord's Insurance.....................................................26
Article 12 Damage or Destruction...........................................................28
12.1 Notice...................................................................28
12.2 Restoration after Damage or Destruction..................................28
12.3 Total Destruction........................................................29
12.4 Rent Abatement...........................................................29
12.5 Payment for Restoration..................................................29
12.6 Restoration Near End of Term.............................................30
Article 13 Indemnity.......................................................................30
13.1 Tenant's Indemnity.......................................................30
13.2 Landlord's Indemnity.....................................................30
Article 14 Condemnation....................................................................31
14.1 Total Taking.............................................................31
14.2 Partial Taking...........................................................31
14.3 Parking Areas............................................................31
14.4 Distribution of Award....................................................31
Article 15 Environmental Matters...........................................................31
15.1 Representations..........................................................31
15.2 Covenants................................................................32
15.3 Breach...................................................................32
15.4 Environmental Indemnities................................................33
Article 16 Landlord's Work.................................................................33
16.1 Performance of Landlord's Work...........................................33
16.2 No Liens by Landlord.....................................................35
Article 17 Tenant's Work...................................................................35
17.1 Plans and Specifications.................................................35
17.2 Permits..................................................................36
17.3 Access to Premises.......................................................36
17.4 Performance of Tenant's Work.............................................36
Article 18 Landlord Contribution...........................................................37
18.1 Landlord Contribution....................................................37
18.2 Security.................................................................37
Article 19 Priority of Lease...............................................................38
19.1 Existing Encumbrances....................................................38
19.2 Future Encumbrances......................................................38
Article 20 Landlord's Default..............................................................39
20.1 Remedies for Landlord's Default..........................................39
Article 21 Miscellaneous...................................................................39
21.1 Notices..................................................................39
21.2 Modification of Lease....................................................40
21.3 Covenants Severable......................................................40
21.4 Payment or Performance Under Protest.....................................40
21.5 Tenant's Obligation to Open and Tenant's Right to Cease Operations.......40
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C> <C>
21.6 Construction.............................................................40
21.7 Attorneys' Fees..........................................................40
21.8 Time of the Essence......................................................41
21.9 Short Form Lease.........................................................41
21.10 Landlord's Access to Premises............................................41
21.11 Choice of Law............................................................41
21.12 Parties Bound............................................................41
21.13 Force Majeure............................................................41
21.14 Estoppel Certificate.....................................................42
21.15 Brokerage Commission.....................................................42
21.16 Pre-Sale Space and Grand Opening.........................................42
21.17 Merchants' Association...................................................43
21.18 No Partnership or Joint Venture..........................................43
21.19 Landlord Liability.......................................................43
</TABLE>
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<PAGE> 5
<TABLE>
<CAPTION>
SIGNATURES
<S> <C>
EXHIBIT A LEGAL DESCRIPTION OF THE SHOPPING CENTER
EXHIBIT B SITE PLAN
EXHIBIT C GUARANTY OF BALLY TOTAL FITNESS HOLDING CORPORATION
EXHIBIT D PERMITTED EXCEPTIONS
EXHIBIT E SIGN PLAN
EXHIBIT F LANDLORD'S WORK
EXHIBIT G SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
</TABLE>
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<PAGE> 6
INDEX TO DEFINITIONS
<TABLE>
<S> <C>
accrue ........................................... 9
ADA .............................................. 7
Additional Rent .................................. 4
Alterations ...................................... 20
Base Rent ........................................ 4
Building ......................................... 1
Capital Items .................................... 6
Certificates ..................................... 3
Commencement Date ................................ 2
Common Areas ..................................... 8
Default Interest Rate ............................ 5
Delivery Date .................................... 3
Delivery Notice .................................. 3
Environmental Laws ............................... 32
Exhibit A ........................................ 1
Exhibit B ........................................ 1
Exhibit C ........................................ 1
Exhibit D ........................................ 12
Exhibit E ........................................ 17
Exhibit F ........................................ 33
Exhibit G ........................................ 38
Expiration Date .................................. 2
Final Plans ...................................... 36
First Option Term ................................ 2
force majeure .................................... 41
Guarantor ........................................ 1
Hazardous Materials .............................. 32
HVAC ............................................. 2
Initial Term ..................................... 2
insurance proceeds ............................... 30
IRC .............................................. 8
Land ............................................. 1
Landlord ......................................... 1
Landlord Contribution ............................ 37
Landlord's Work .................................. 33
Lease Year ....................................... 2
Local Permitting Authorities ..................... 36
Major Title Document ............................. 38
Major Title Document Holder ...................... 38
mechanics' liens ................................. 20
Memorandum of Lease .............................. 41
Operating Expense Statement ...................... 10
Operating Expenses ............................... 5
Option Terms ..................................... 2
Outside Delivery Date ............................ 33
Parking Areas .................................... 8
Permits .......................................... 36
Permitted Exceptions ............................. 12
Permitted Use .................................... 2
Pre Sale Period .................................. 42
Pre Sale Space ................................... 42
Premises ......................................... 1
Punch List ....................................... 34
Rent ............................................. 4
Rent Commencement Date ........................... 3
repair ........................................... 20
Second Option Term ............................... 2
</TABLE>
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<PAGE> 7
<TABLE>
<S> <C>
Shopping Center .................................. 1
Site Plan ........................................ 1
SNDA ............................................. 38
Substantially Completed .......................... 3
Taking Date ...................................... 31
Tax Year ......................................... 9
Taxes ............................................ 8
Tenant ........................................... 1
Tenant's Proportionate Share ..................... 9
Tenant's Work .................................... 35
Term ............................................. 2
Third Option Term ................................ 2
Title Policy ..................................... 12
Work Period Expiration Date ...................... 3
</TABLE>
- vii -
<PAGE> 8
LEASE AGREEMENT
THIS LEASE AGREEMENT is made and entered into on February 14, 2000, by
and between TOWER PLACE JOINT VENTURE, a Texas joint venture ("LANDLORD"),
having its principal place of business at 5550 LBJ Freeway, Suite 675, Dallas,
Texas 75240 and BALLY TOTAL FITNESS CORPORATION, a Delaware corporation
("TENANT"), having a place of business located at 8700 West Bryn Mawr Avenue,
Chicago, Illinois 60631.
RECITALS:
WHEREAS, Landlord owns fee simple title to that certain real property
commonly known as the Tower Place Festival Shopping Center, located on NC
Highway 51 in Pineville, North Carolina and situated on the land more
particularly described on EXHIBIT A attached hereto (the "LAND"), together with
all improvements thereon and appurtenances thereto, whether now existing or
hereafter to be constructed or created (the "SHOPPING CENTER"), which
improvements include, without limitation, the building in which the Premises are
located (the "BUILDING").
WHEREAS, Landlord desires to lease to Tenant certain premises (the
"PREMISES"), consisting of that portion of the Building (to contain
approximately twenty-five thousand (25,000) square feet of space) indicated on
the site plan attached hereto as EXHIBIT B (the "SITE PLAN"), as well as to
grant to Tenant certain rights to use the Common Areas (including, without
limitation, the Parking Areas). Tenant desires to lease the Premises from
Landlord, and to use the Common Areas (including, without limitation, the
Parking Areas), pursuant to the terms and conditions set forth in this Lease.
WHEREAS, as a material inducement for Tenant to enter into this Lease
and perform its obligations hereunder, Landlord has agreed to perform Landlord's
Work and to provide Tenant with a Landlord Contribution in accordance with the
terms hereof.
WHEREAS, the performance of the obligations of Tenant under this Lease
is to be guaranteed by BALLY TOTAL FITNESS HOLDING CORPORATION, a Delaware
corporation ("GUARANTOR"), having a place of business located at 8700 West Bryn
Mawr Avenue, 2nd Floor, Chicago, Illinois 60631 pursuant to a Guaranty in the
form of EXHIBIT C attached hereto.
NOW, THEREFORE, in consideration of the covenants and conditions herein
contained and other good and valuable consideration, the receipt and legal
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
ARTICLE 1
INCORPORATION AND DEFINITIONS
1.1 INCORPORATION. The recitals set forth above, as well as the
exhibits attached to this Lease, are hereby incorporated into this Lease in
their entirety.
1.2 DEFINITIONS. Any term defined in this Lease shall have the meaning
ascribed to it herein, regardless of whether the usage of such term shall appear
in the text hereof before or after the definition of the same.
ARTICLE 2
LEASE AND TERM
2.1 LEASE OF THE PREMISES. Landlord hereby leases and demises the
Premises to Tenant, and Tenant hereby hires and takes the Premises from
Landlord, for Tenant's use, occupancy and benefit, as well as for the use,
occupancy and benefit of Tenant's customers, employees, agents, invitees,
subtenants, licensees and concessionaires, during the Term. Landlord hereby also
grants to Tenant, for Tenant's benefit, as well as for the benefit of Tenant's
customers, employees, agents, invitees, subtenants, licensees, concessionaires
and suppliers, a non-exclusive, irrevocable license, coterminous with the Term,
for the use of all of the Common Areas for their respective intended purposes
(including, without limitation, for purposes of ingress to and egress from the
Shopping
- 1 -
<PAGE> 9
Center and the Premises and, with respect to the Parking Areas, the
parking of motor vehicles), such use to be in common only with Landlord, the
other tenants of the Shopping Center and their respective customers, employees,
agents, invitees, subtenants, licensees, concessionaires and suppliers. Landlord
hereby further grants to Tenant an irrevocable license, coterminous with the
Term, for the installation, maintenance, repair, replacement, alteration, use
and/or operation of telecommunications equipment, utilities and heating,
ventilating and air conditioning ("HVAC") equipment on the roof of the Building,
subject to governmental requirements and to Landlord's approval as to their
location and manner of attachment thereto (such approval not to be unreasonably
withheld or delayed). Landlord acknowledges that its grants of the foregoing
irrevocable licenses are material inducements for Tenant to enter into this
Lease and perform its obligations hereunder.
2.2 PERMITTED USE. The Premises may be used and occupied for the
operation of a health and fitness center between the hours of 6:00 a.m. and
midnight (or such other hours as Tenant shall determine), seven (7) days a week
(or such lesser number of days as Tenant shall determine), and Landlord shall
permit Tenant to operate the Premises during all such hours and days, offering
such fitness programs, recreational facilities and other services as Tenant may
determine (which may include, but need not be limited to, a jogging track,
racquetball courts, gymnasiums, jacuzzi, whirlpools, swimming pool, saunas,
steam rooms, aerobics and/or floor exercise, free weights, exercise machinery
and equipment and physical therapy and rehabilitative services) and the
following uses as incidental thereto: massage, office space, child nursery
facilities, a restaurant and/or snack/juice bar, retail sales activities
(including, without limitation, the sale of vitamins and nutritional
supplements) and other usual amenities found in a modern health club facility
(collectively, the "PERMITTED USE"), it being understood and agreed that the
foregoing list is illustrative and not exhaustive, and that Tenant shall not be
obligated to offer each item on such list to its customers. Except for the
Permitted Use, the Premises may not be used for any other purpose without the
consent of Landlord, not to be unreasonably withheld or delayed.
2.3 TERM. The initial term of this Lease shall be for a period of
fifteen (15) years (the "INITIAL TERM"), unless sooner terminated in accordance
with the terms of this Lease. This Lease shall commence on the later to occur
(the "COMMENCEMENT DATE") of:
(a) the date hereof;
(b) the date upon which Tenant receives the Subordination,
Non-Disturbance and Attornment Agreement required pursuant to Article
19 below; and
(c) the date upon which Tenant receives confirmation that Landlord
has terminated the existing lease with General Cinema Corporation.
and shall expire, unless sooner terminated in accordance with the terms of this
Lease, at 11:59 PM on the date (the "EXPIRATION DATE") that is fifteen (15)
years after the Rent Commencement Date, plus, if applicable, a sufficient number
of additional days so that the Expiration Date shall occur on the last day of a
calendar month. The Initial Term, together with all exercised Option Terms, are
collectively called the "TERM". The first "LEASE YEAR" shall begin on the Rent
Commencement Date and end twelve (12) months thereafter, plus, if applicable, a
sufficient number of additional days so that the first Lease Year will end on
the last day of a calendar month. Subsequent Lease Years shall mean each
successive twelve (12) month period, or portion thereof, of the Term after the
first Lease Year.
2.4 OPTION TERMS. Tenant shall have the right to extend the Initial
Term for three (3) additional periods of five (5) years each (respectively, the
"FIRST OPTION TERM," "SECOND OPTION TERM," "THIRD OPTION TERM" and,
collectively, the "OPTION TERMS"). Provided that Tenant is not then in default
under the terms of this Lease (after the giving of notice of such default and
the expiration of the applicable cure period), Tenant may exercise such
extension right by delivering to Landlord written notice of Tenant's election to
extend the Initial Term or the then Option Term (as the case may be) no later
than six (6) months prior to the expiration of the Initial Term or the then
Option Term (as the case may be). If Tenant fails to exercise its extension
right for any Option Term, any subsequent extension rights shall lapse.
- 2 -
<PAGE> 10
2.5 RENT COMMENCEMENT DATE.
(a) The "RENT COMMENCEMENT DATE" shall be the earlier to occur of:
(i) the date upon which Tenant opens its doors for business to the
general public (meaning the commencement of continuous, daily operation
of a health club facility therein, and not merely the pre-selling of
memberships, the giving of demonstrations or tours in connection
therewith and/or the storage or calibration of equipment therein); and
(ii) the date (the "WORK PERIOD EXPIRATION DATE") that is one
hundred twenty (120) days after the later to occur of:
(x) the Commencement Date;
(y) the date (the "DELIVERY DATE") that is ten (10) days after
the date upon which Landlord shall substantially complete
Landlord's Work and give Tenant written notice thereof (the
"DELIVERY NOTICE"); and
(z) the date upon which Tenant obtains all Permits necessary
to complete Tenant's Work.
Landlord's Work shall be deemed to be "SUBSTANTIALLY COMPLETED" when the only
work remaining to be performed are minor items of decoration, mechanical
adjustment and the like, the non-completion of which shall not materially
interfere with the performance of Tenant's Work in and to the Premises.
(b) For purposes of determining when the Rent Commencement Date shall
occur, the Work Period Expiration Date shall be deemed to be postponed by one
day for each day, or fraction thereof, that the performance or completion of
Tenant's Work shall be hindered or delayed by reason of force majeure.
Further, if, by the date that would otherwise be the Work Period Expiration
Date, Tenant shall not have obtained final certificates of occupancy or
compliance for the Premises (jointly, the "CERTIFICATES") as a result, in whole
or in part, of Landlord's failure to complete any of Landlord's Work (including,
without limitation, the completion of any work set forth in any Punch List);
then, and in any such event, the Work Period Expiration Date shall be deemed to
be postponed until all of such work shall be performed or completed and/or any
such condition or circumstance shall be remedied or corrected, plus a reasonable
period of time thereafter for Tenant to receive all of the Certificates.
Additionally, Tenant shall have the right to demand that Landlord perform and
complete all of such work, and/or remedy and correct any such condition and/or
circumstance, at Landlord's sole cost and expense, whereupon Landlord shall
promptly commence the performance of the same and thereafter pursue the same
with diligence and continuity to completion. If Landlord shall fail to complete
the same within a reasonable time after having been notified of the necessity
thereof, Tenant shall have the right to perform and complete any or all of such
work, and/or to remedy and correct any or all of such conditions and/or
circumstances, for the account and at the expense of Landlord, in which event
Tenant shall have the right to set-off all reasonable costs and expenses
incurred against the Rent payments next due and owing hereunder.
- 3 -
<PAGE> 11
ARTICLE 3
RENT
3.1 RENT. Commencing on the Rent Commencement Date, and on the first
day of each month thereafter during the Term, Tenant shall pay a fixed base rent
("BASE RENT") for the Premises in the amount set forth below:
<TABLE>
<CAPTION>
ANNUAL RENT ANNUAL
LEASE YEAR PSF RENT MONTHLY RENT
- ----------------------------- ----------- -------- ------------
<S> <C> <C> <C>
1 - 5 $13.26 $331,500 $27,625.00
6 - 10 $14.26 $356,500 $29,708.33
11 - 15 $15.26 $381,500 $31,791.67
16 - 20 (First
Option Term) $15.26 $381,500 $31,791.67
21 - 25 (Second
Option Term) $16.26 $406,500 $33,875.00
26 - 30 (Third
Option Term) $17.26 $431,500 $35,958.33
</TABLE>
All other amounts that become due and payable to Landlord under this Lease shall
be deemed to constitute additional rent ("ADDITIONAL RENT"). For purposes of
this Lease, the Base Rent and the Additional Rent are sometimes collectively
called the "RENT". The Rent for any partial month or other partial period during
the Term shall be prorated based upon the actual number of days contained in
such period.
3.2 MEASUREMENT OF PREMISES AND MEMORANDUM. After the completion of
Landlord's Work and Tenant's Work, either party shall have the right to have the
Premises remeasured. If the parties cannot agree on such remeasurement, the
parties shall mutually agree upon an architect whose decision shall be binding.
If such measurement (from the outside face of any exterior walls of the Building
and from the center line of walls shared with other premises, with the Common
Areas and with other non-leaseable areas) is different from twenty-five thousand
(25,000) square feet (which is the square foot area upon which the Base Rent
figures set forth in Section 3.1 above, the Tenant's Proportionate Share figure
set forth in Section 4.4 below and the Landlord Contribution amount set forth in
Section 18.1 below were all based), then the Base Rent, Tenant's Proportionate
Share and the Landlord Contribution shall each be deemed to be adjusted to
conform to said measurement for all purposes of this Lease. Regardless of
whether such an adjustment is required to be made, Landlord and Tenant shall,
not later than thirty (30) days after the prior written request of either of
them, execute a Memorandum of Lease Commencement setting forth the following
items (each of which shall be calculated in accordance with the terms of this
Lease):
(a) the Rent Commencement Date;
(b) the actual square foot area of the Premises;
(c) the Base Rent payments for the Initial Term and the Option
Terms;
(d) Tenant's Proportionate Share as of such date; and
(e) the amount of the Landlord Contribution.
For purposes of this Lease, it is hereby understood and agreed that no mezzanine
area shall be included in the leaseable square footage of the Premises, and
there shall be no Rent payable for any such mezzanine area.
3.3 PAYMENT OF RENT. The Base Rent shall be paid to Landlord in equal
monthly installments, in advance, in lawful money of the United States of
America. Tenant shall pay each installment on account of Base Rent to Landlord
on or before the first day of the month for which
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the same is due, without demand, deduction, or set-off (except as otherwise set
forth herein), at such place as Landlord, from time to time, may designate in
writing to Tenant. In the absence of such designation, Base Rent shall be paid
at the place identified herein for notices to Landlord.
3.4 LATE PAYMENT. If Tenant shall fail to pay any Rent payment when the
same is due and payable, such unpaid amount shall bear interest from the due
date thereof (after notice and applicable grace periods) to the date of payment
at the rate of four percent (4%) over the "prime rate" per annum announced by
First Chicago/NBD Bank (or its successor) as of the date of default, twelve
percent (12%) per annum, or the maximum legal rate, whichever is lower ("DEFAULT
INTEREST RATE"). In addition, Tenant shall pay, as Additional Rent, a fee of
Three Hundred and No/100 Dollars ($300.00) for the processing of such late
payment if not received by Landlord within five (5) days after notice that the
same is due.
ARTICLE 4
OPERATING EXPENSES
4.1 OPERATING EXPENSES.
(a) "OPERATING EXPENSES" means all costs incurred and paid by Landlord
for each calendar year during the Term, from and after the calendar year in
which the Rent Commencement Date shall occur, for:
(i) maintaining, repairing, operating, lighting, cleaning,
painting, landscaping, securing and insuring the exterior Common Areas
(including, without limitation, all Parking Areas), but specifically
excluding any and all interior Common Areas; and
(ii) paying all Taxes that are levied, charged, or assessed against
the Shopping Center by any lawful taxing authority.
(b) Anything contained in Section 4.1(a) above or elsewhere in this
Lease to the contrary notwithstanding:
(i) wages, unemployment insurance payments, social security taxes
and other employee-related expenses of Landlord's employees shall be
included in Operating Expenses only for those employees who are below
the level of property manager and who perform services with respect to
the Shopping Center (the foregoing expenses with respect to any
employee who provides services with respect to the Shopping Center,
along with other facilities, shall be included only to the extent of
the portion of such expenses that is equitably allocable to the
Shopping Center based upon objective criteria reasonably established by
Landlord); and
(ii) there shall be excluded from Operating Expenses:
(A) depreciation of any improvement or other item whatsoever;
(B) interest on, amortization of and all other costs and
expenses (including without limitation, brokerage commissions,
points, commitment fees, title charges, recording charges, taxes
and the like) related to any mortgage or deed of trust encumbering
the Shopping Center or any portion thereof;
(C) the costs of all repairs, improvements and/or
replacements, as well as the purchase or leasing of any machinery,
equipment, vehicles, supplies, or the like, that, under generally
accepted accounting principles consistently applied, are required
to be capitalized on the books and records of Landlord
(collectively
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<PAGE> 13
"CAPITAL ITEMS"), except as specifically provided otherwise in
Section 4.1(c) below;
(D) costs of alterations, maintenance and repairs to premises
of other tenants (including, without limitation, any permit,
license and/or inspection fees) and/or the cost of relocating
tenants;
(E) costs incurred directly or indirectly in connection with
the acquisition of the Land, the construction of the Shopping
Center (including, without limitation, the Common Areas), the
remodeling or rehabilitation of the Shopping Center (including,
without limitation, all or any portion of the Common Areas), the
acquisition of any additional land and/or the construction or
installation of any additional buildings or other improvements at
the Shopping Center (including, without limitation, on any such
additional land);
(F) the direct and indirect costs and expenses of furnishing
any service or facility that is provided to, or available for the
use of, one or more tenants (whether or not for a specific charge
thereto), but not provided to Tenant;
(G) real estate brokerage and leasing commissions and expenses
such as advertising;
(H) repairs or other work occasioned by a casualty or
condemnation;
(I) legal expenses (including, without limitation, any costs
attributable, directly or indirectly, to entering into leases or
other agreements with, enforcing leases or other agreements
against, or otherwise related to disputes with any actual or
prospective tenant or other occupant of the Shopping Center);
(J) costs incurred for, or in connection with, the creation or
augmentation of any contingency fund, reserve fund, sinking fund,
or other fund or reserve for any purpose (including, without
limitation, any reserve fund for bad debts or rent loss);
(K) any cost or expense for which Landlord has been reimbursed
by any tenant or tenants, by insurance proceeds, by condemnation
awards and/or damages, or from any other source, except for any
cost or expense reimbursed to Landlord solely through the payment
by other tenants of the Shopping Center of their pro-rata
contributions toward Operating Expenses pursuant to provisions of
similar import to this Article 4;
(L) franchise, income and other such taxes;
(M) space planner or architect fees related to the
construction or remodeling of tenants' space within the Shopping
Center;
(N) costs incurred for the correction of any defects in the
design, workmanship and/or construction of the Shopping Center
(including, without limitation, the Common Areas), or any
subsequent improvement constructed or installation made with
respect to the same, the need for which is discovered within one
(1) year after the substantial completion of the same or covered
(whenever incurred) by any manufacturer's or installer's warranty;
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<PAGE> 14
(O) costs of repairs or other work necessitated by the
negligence or willful misconduct of Landlord, its agents,
contractors, or employees;
(P) costs of "clean up", remediation, or removal from the
Shopping Center of any hazardous substance or material;
(Q) costs of insurance maintained on any rentable space in the
Shopping Center, whether occupied or vacant;
(R) the cost of any increased insurance premiums resulting
from the nature or manner of the use of premises by any tenant or
occupant of the Shopping Center and/or any alterations or
improvements made thereby;
(S) any bad debt loss or rent loss;
(T) costs of rendering any portion of the Shopping Center
(including, without limitation, the Common Areas) in compliance
with any applicable law (including, without limitation, the
Americans with Disabilities Act ("ADA") and other similar laws), to
the extent that the same shall not be in compliance therewith as of
the Delivery Date;
(U) costs associated with achieving Year 2000 Compliance;
(V) any wages, fringe benefits and/or other compensation paid
by Landlord to any clerk, attendant, or other person in a
commercial concession (if any) operated by Landlord or any
affiliate of Landlord;
(W) any costs or expenses for sculpture, paintings, or other
works of art (including, without limitation, with respect to the
purchase, ownership, leasing, insuring, repair and/or maintenance
of such works of art);
(X) costs related to the formation of Landlord (if Landlord is
other than an individual), costs associated with any internal
matters of Landlord (including, without limitation, the preparation
of tax returns and financial statements and the gathering of data
relating thereto, the defense of any lawsuits, the participation in
any disputes and/or the selling, syndicating, financing, mortgaging
and/or hypothecating of any of Landlord's interest in the Shopping
Center) and any other costs associated with the operation of the
business of the entity that constitutes Landlord (including,
without limitation, Landlord's general overhead) as distinguished
from the costs and expenses of operating the Shopping Center; and
(Y) any other cost or expense that, under generally accepted
accounting principles, consistently applied, would not be
considered to be an "operating expense" of the Shopping Center.
All management, administrative and other like fees and costs included in
Operating Expenses shall be at market rates, regardless of whether payable to
Landlord or to a third party. In no event, however, may the aggregate amount of
such fees and costs included in Operating Expenses for any calendar year exceed
ten percent (10%) of the other Operating Expenses for such calendar year,
determined net of Taxes and insurance premiums.
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<PAGE> 15
(c) If, and to the extent that, any Capital Item either:
(i) must be made, purchased, or leased by Landlord in order to
comply with any legal requirement(s) applicable to Landlord and/or the
Shopping Center; or
(ii) is such that, at the time in question, Landlord reasonably
estimates that the making, purchase, or leasing of the same will result
in the avoidance of, or savings in, one or more other items of
Operating Expenses,
then the cost of such Capital Item shall be amortized on a straight line basis
over the useful life thereof in accordance with generally accepted accounting
principles consistently applied, the Internal Revenue Code of 1984, as amended
(the "IRC") and the regulations promulgated under the IRC. The Operating
Expenses for each year of such useful life shall include only that portion of
the cost of such Capital Item so amortized during such year, and, with respect
to Capital Items of the nature described in subsection (ii) above, only to the
extent of any actual avoidance of, or savings in, Operating Expenses as a result
of the making, purchase, or leasing of such Capital Item.
(d) Landlord shall use all reasonable efforts to control the amount of
Operating Expenses for each calendar year. Without intention to limit the
generality of the foregoing in any respect, Landlord shall not be permitted to
recover more than the actual out-of-pocket costs and expenses incurred by
Landlord for those items included in Operating Expenses and for which the
tenants at the Shopping Center share pro-rata, plus the administrative and/or
management fee referred to in subsection (b) above. To the extent that the cost
or expense incurred by Landlord for a product or service, otherwise properly
includable in Operating Expenses, shall be greater than the generally prevailing
cost or expense for such product or service in the area in which the Shopping
Center is located, only the amount of such generally prevailing cost or expense
shall be included in Operating Expenses for purposes of this Lease. There shall
be no duplications of any item(s) included in Operating Expenses.
4.2 COMMON AREAS.
The term "COMMON AREAS" means those portions of the Shopping Center now
or hereafter intended for the common use of all tenants thereof (including,
without limitation, all parking areas now existing, or hereafter constructed,
private streets and alleys, landscaping, curbs, loading areas, sidewalks,
lighting facilities and the like at the Shopping Center), EXCLUDING, HOWEVER,
space designed for rental or commercial purposes (or otherwise for the exclusive
use of any tenant), as the same may exist from time to time, as well as streets
and alleys maintained by a public authority. The term "PARKING AREAS" means
those portions of the Common Areas intended for use as parking areas, whether
now existing or hereafter made available for such use (including, without
limitation, those areas designated on the Site Plan as being parking areas).
Landlord reserves the right to change, from time to time, the dimensions and
location of the Common Areas, as well as the dimensions, identity and type of
any buildings in the Shopping Center, SUBJECT, HOWEVER, to the applicable
provisions of this Lease (including, without limitation, Section 6.2 hereof).
4.3 TAXES.
(a) The term "TAXES" means all real estate taxes, special or
extraordinary assessments, or other governmental levies that accrue, during any
calendar year, against the Land, the buildings and/or the equipment constituting
the Shopping Center, or any similar tax imposed in lieu of such real estate
taxes. Landlord's reasonable expenditures for attorneys' fees, appraisers' fees
and experts' fees incurred by Landlord in any calendar year in an attempt to
minimize Taxes shall be included in the definition of Taxes to be paid pursuant
to the terms of this Article 4 to the extent of any actual reduction in Taxes.
However, anything contained in this Section 4.3 or elsewhere in this Lease to
the contrary notwithstanding, there shall be excluded from Taxes:
(i) any increase in the amount of Taxes caused by a "change of
ownership" (as defined in the law under which reassessment or real
estate tax
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<PAGE> 16
increase results) or otherwise, resulting directly or indirectly from a
transfer of all or a portion of Landlord's interest in the Shopping
Center;
(ii) any increase in the amount of Taxes caused by the creation of
additional rentable area at the Shopping Center, or resulting from any
construction, improvements, alterations, or replacements made by
Landlord or by, or on behalf of, any other tenant except the
approximate 6,500 square feet of small tenant space which Landlord is
constructing adjacent to the Premises;
(iii) any franchise, income, corporate, profit, estate,
inheritance, succession, gift, transfer, mortgage, recording and other
such taxes, together with any other capital levies, that are, or may
be, imposed upon Landlord, the Shopping Center, or any revenue derived
therefrom;
(iv) any penalties and/or interest for the late payment of any
taxes, assessments, or levies; and
(v) any impact fees, hook-up fees and other similar charges which
shall be Landlord's responsibility.
In the event that any real estate taxes, special or extraordinary assessments
and/or other governmental levies shall be payable, or shall be subject to
conversion so that the same may be payable, in annual or other periodic
installments, Landlord shall elect to pay the same in such installments over the
longest period available, and there shall be included in Taxes hereunder, with
respect to each calendar year or other period in which such an installment shall
be payable, only the amount of such installment (together with any interest
charged by the taxing authority for the privilege of paying in installments).
(b) The term "TAX YEAR" means the fiscal year used by the taxing
authorities where the Shopping Center is located. Taxes for any calendar year
not coinciding with a Tax Year shall be prorated based upon the actual number of
days Tenant is in possession of the Premises and is obligated to pay Rent
pursuant to the terms of this Lease.
(c) The meaning of "ACCRUE" to define the amount of the Taxes to be
included in the Operating Expenses payable by Tenant pursuant to this Article 4
for a particular calendar year is illustrated by the following example. If:
(i) the Rent Commencement Date is October 1st;
(ii) the applicable Tax Year is the fiscal year commencing on July
1st,
then the amount of Taxes to be included in Operating Expenses for the calendar
year in which the Rent Commencement Date occurs will be 92/365ths of the Taxes
for the then current Tax Year.
4.4 TENANT'S PROPORTIONATE SHARE. "TENANT'S PROPORTIONATE SHARE" means
a fraction, the numerator of which shall be the leaseable square foot area of
the Premises and the denominator of which shall be the leaseable square foot
area of the Shopping Center, PROVIDED, HOWEVER, that:
(a) if the real estate tax lot or parcel on which the Building is
located does not include the entire Shopping Center, then, for purposes
of determining Tenant's contribution toward the payment of Taxes only,
"TENANT'S PROPORTIONATE SHARE" shall mean a fraction, the numerator of
which shall be the leaseable square foot area of the Premises and the
denominator of which shall be the leaseable square foot area of the
buildings located on the real estate tax lot or parcel on which the
Building is located; and
(b) if any tenant or tenants in the Shopping Center pay Taxes
directly to the taxing authority and/or provide insurance, operational
services and/or maintenance services to such tenant's or tenants'
premises (but not to any portion of
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<PAGE> 17
the Common Areas), then, in lieu of Tenant's payment of a share of such
Taxes and/or the cost of such services (as the case may be), the floor
area(s) of such tenant's or tenants' premises shall be deducted from
the denominator in the calculation of Tenant's Proportionate Share for
determining Tenant's pro rata contribution toward such Taxes and/or
costs (as the case may be).
As of the date of this Lease, Landlord represents that Tenant's Proportionate
Share is 24%.
4.5 PAYMENT OF OPERATING EXPENSES.
(a) Commencing on the first day of the calendar month occurring after
the Rent Commencement Date, Tenant shall pay to Landlord, in equal monthly
installments, Tenant's Proportionate Share of Landlord's reasonable estimate of
the Operating Expenses for the then calendar year, which estimate shall not
exceed one hundred and three percent (103%) of the previous calendar year's
Operating Expenses exclusive of the cost of security and snow removal. Each
installment becoming due to Landlord under this Section 4.5(a) shall be payable
as Additional Rent, in the same manner and at the same place as the
corresponding installment of Base Rent is payable under this Lease, without
demand, deduction, or set-off (except as otherwise set forth in this Lease).
Landlord estimates that Tenant's Proportionate Share of Operating Expenses shall
be $2.51 for the first Lease Year.
(b) Within sixty (60) days after the end of each calendar year during
the Term (including, without limitation, the calendar year in which the
Expiration Date occurs), Landlord shall furnish Tenant with a written statement,
certified by an officer of Landlord, setting forth:
(i) the actual amount of the Operating Expenses incurred by
Landlord for such calendar year;
(ii) a reasonably detailed breakdown of such Operating Expenses on
a budget line by budget line basis;
(iii) a statement as to the leaseable areas of the Shopping Center
upon which Tenant's Proportionate Share is based;
(iv) the amount of Tenant's Proportionate Share of such Operating
Expenses;
(v) the aggregate amount of the installments paid by Tenant
pursuant to Section 4.5(a) above during such calendar year;
(vi) the amount of any overpayment to be credited to Tenant or any
deficiency payable to Landlord; and
(vii) the amount of Landlord's reasonable estimate of the Operating
Expenses for the then current calendar year, which estimate shall be
made subject to the limitations set forth in Section 4.5(a) above and
which estimate may be provided prior to the end of each calendar year.
Each such statement (an "OPERATING EXPENSE STATEMENT") shall be accompanied by a
copy of the real estate tax bill(s) covering, in whole or in part, the calendar
year in question. Tenant shall remit the amount of any deficiency to Landlord
within thirty (30) days after receipt of the Operating Expense Statement.
Landlord shall apply any surplus to payments next falling due from Tenant under
this Article 4 or, with respect to the last year of the Term, shall refund such
surplus to Tenant simultaneously with the delivery of such Operating Expense
Statement.
(c) Pending Tenant's receipt of an Operating Expense Statement after
the beginning of a calendar year, Tenant shall continue to make the payments set
forth in Section 4.5(a) above, on an interim basis, in the same amount as during
the preceding calendar year. If, in such Operating Expense Statement (when
ultimately received), Landlord's reasonable estimate of the Operating
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<PAGE> 18
Expenses for the then current calendar year shall be greater than Landlord's
estimate upon which such interim payments had been based, then, commencing on
the first day of the month that shall be more than thirty (30) days after Tenant
shall have received such Operating Expense Statement, Tenant shall pay, in
addition to and concurrently with Tenant's other payment required by Section
4.5(a) above, Tenant's Proportionate Share of the excess divided by the number
of months remaining in the calendar year. If Landlord's reasonable estimate of
the Operating Costs for the then current calendar year shall be less than
Landlord's estimate upon which such interim payments had been based, then Tenant
shall be entitled to credit the amount of the resultant overpayment against the
subsequent payments required by this Section, in similar fashion as if there
were an underpayment.
(d) In the event that Landlord shall receive any refund, rebate,
reimbursement, or recovery with respect to any item previously included in
Operating Expenses as to which Tenant shall have been assessed Tenant's
Proportionate Share thereof (including, without limitation, any refund of Taxes
obtained by reason of a reduction in the assessed valuation of the Shopping
Center or in the tax rate in effect during any Tax Year), Landlord shall
promptly refund to Tenant an amount equal to Tenant's Proportionate Share of the
amount of such refund, rebate, reimbursement, or recovery, after first deducting
therefrom all reasonable costs and expenses incurred by Landlord in obtaining
the same (excluding attorneys' fees, appraisers' fees and experts' fees incurred
by Landlord in an attempt to minimize Taxes, to the extent that such costs and
expenses were included in Taxes pursuant to Section 4.3(a) above).
(e) Landlord's and Tenant's rights and obligations under this Section
4.5 shall survive the expiration of the Term.
4.6 LANDLORD'S BOOKS AND RECORDS. Landlord shall keep complete and
accurate books and records, showing all Operating Expenses in accordance with
generally accepted accounting practices consistently applied, which books and
records shall be maintained on a year-to-year basis and shall be kept for a
period of not less than three (3) years after the expiration of the calendar
year in question. Tenant shall have the right to dispute in writing any specific
item or items on any Operating Expense Statement(s) submitted by Landlord to
Tenant pursuant to Section 4.5(b) above. If Tenant shall dispute in writing any
such item or items, the parties shall exercise their reasonable good faith
efforts to settle such dispute within ninety (90) days following Tenant's
notice. Landlord shall reimburse to Tenant all or any part (as the case may be)
of such disputed amount determined to be due and owing to Tenant, together with
interest thereon at the Default Interest Rate. Upon Tenant's written request,
Landlord shall forward to Tenant photocopies of any requested receipts or other
back-up items relating to any specific item or items of Operating Expenses
disputed by Tenant. Tenant shall have the further right to audit, or to have
audited, the bookkeeping and calculation of Landlord's charges to Tenant on
account of Operating Expenses (at Tenant's election, either with respect to
specific item(s) or generally). Landlord shall cooperate, and shall cause its
agents, employees and contractors (including, without limitation, any managing
agent of the Shopping Center) to cooperate, in good faith and in all reasonable
respects with Tenant and (if applicable) Tenant's designated representative(s)
in connection with any such audit. In the event that Tenant's audit discloses
discrepancies, the appropriate adjustments shall be made. If such discrepancies
are in excess of three percent (3%) of the annual billing to Tenant for such
charges, Landlord shall also reimburse Tenant for its actual out-of-pocket costs
of such audit. Landlord's and Tenant's rights and obligations under this Section
4.6 shall survive the expiration of the Term.
4.7 PERSONAL PROPERTY TAX. Tenant shall pay in a timely manner personal
property taxes on any personal property owned or possessed by Tenant that is
located in the Premises.
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ARTICLE 5
TITLE INSURANCE
5.1 TITLE INSURANCE POLICY. It shall be a condition precedent to
Tenant's obligations under this Lease that Tenant receive, not later than
fifteen (15) days after the date of this Lease, a title insurance policy, a
marked-up title insurance binder, or other similar confirmation from Chicago
Title Insurance Company, evidencing that ALTA extended coverage leasehold title
insurance has been issued in Tenant's favor in an amount of at least $2,000,000,
insuring fee simple title to the Shopping Center in Landlord and Tenant's
leasehold interest in the Premises subject only to those exceptions described on
EXHIBIT D attached hereto (the "PERMITTED EXCEPTIONS"), together with either:
(a) an endorsement insuring that no other parties, except Landlord,
has rights in and to the Premises; or
(b) the deletion from the standard title exceptions of parties in
possession pursuant to unrecorded leases.
Each party shall execute and promptly return to the title company any documents
that are reasonably required by the title company in connection with the
issuance of such a policy, binder, or confirmation (as the case may be, the
"TITLE POLICY"). Tenant shall be responsible for the payment, in a timely
fashion, of all amounts necessary to obtain the Title Policy (including, without
limitation, the cost of title insurance premiums and any endorsements thereto
requested by Tenant). If Tenant has not received the Title Policy within fifteen
(15) days after the date of this Lease (other than solely by reason of Tenant's
failure or refusal to pay the foregoing costs and expenses), Tenant shall be
entitled, in its sole discretion, to either:
(i) terminate this Lease by giving written notice thereof to
Landlord at any time thereafter (but prior to Tenant's receipt of the
Title Policy), in which event:
(x) Tenant shall have no further obligations under this Lease;
and
(y) Landlord shall reimburse Tenant, within fifteen (15) days
after Tenant's written demand, for all costs and expenses
(including, without limitation, all reasonable architectural,
engineering and legal fees) incurred by Tenant in planning Tenant's
leasehold improvements, as well as in negotiating and documenting
this Lease; or
(ii) waive, or extend the time for completion of, such condition
precedent, but nevertheless shall be deemed to reserve the right to
avail itself of any and all other rights and remedies available to
Tenant under this Lease, at law, or in equity.
ARTICLE 6
LANDLORD'S AGREEMENTS
6.1 LANDLORD'S REPRESENTATIONS, WARRANTIES AND COVENANTS.
(a) Landlord represents and warrants to Tenant that the following are
true and correct as of the date of this Lease, and shall continue to be true and
correct as of the Delivery Date, as well as covenants with Tenant as follows:
(i) Landlord is a joint venture duly organized, validly existing
and in good standing under the laws of the State of Texas. Landlord has
the requisite power to own and lease the Shopping Center, including,
without limitation, the Common Areas (including, without limitation,
the Parking Areas) and the Premises, and to carry on its business as
and where presently conducted.
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<PAGE> 20
(ii) Landlord has the full right, power and lawful authority to
enter into this Lease, to lease the Premises to Tenant and to perform
all of Landlord's obligations hereunder. All proceedings required by,
or on the part of, Landlord and/or its principals to authorize Landlord
to execute, deliver and carry out this Lease have been duly and
properly taken. This Lease constitutes a legal, valid, binding and
enforceable obligation of Landlord.
(iii) The execution and delivery of this Lease by Landlord, and
Landlord's compliance with its terms and consummation of the
transactions contemplated hereby, will not violate, conflict with, or
result in a breach of any provisions of the joint venture agreement of
Landlord, or constitute a default, require third party consent that has
not been obtained by Landlord, or result in the creation of a lien or a
right of acceleration under, or otherwise result in a breach or
violation of, any contract, commitment, indenture, mortgage, easement,
restriction, covenant, note, bond, license, lease, deed of trust, or
other instrument or obligation, or any judgment, order, or decree of
any court, administrative agency, or other governmental authority, to
which Landlord or any of its principals is a party or by which the
Shopping Center (including, without limitation, the Premises) may
otherwise be bound. There are no reciprocal easement or other
agreements that could affect Tenant's rights under this Lease.
(iv) Landlord has insurable fee simple title to the Shopping Center
(including, without limitation, the Premises, the Common Areas and the
Parking Areas), free and clear of all liens, claims, encumbrances and
tenancies, except the Permitted Exceptions.
(v) All Taxes on the Shopping Center are current and paid, and
Landlord has received no written notice from any taxing authority, and
has no actual knowledge, of any special charges, impact fees, or
assessments levied, or proposed to be levied, against the Shopping
Center or any part thereof other than a stormwater assessment fee which
is billed monthly as part of utility charges.
(vi) The Shopping Center is currently in compliance with all
ordinances, rules, regulations and restrictions governing the present
uses of the Shopping Center. The Premises are zoned for general
business by the Town of Pineville, North Carolina, which allows the
Premises to be used for the Permitted Use. Landlord has no knowledge of
any fact, action, or proceeding, whether actual, pending, or
threatened, that could result in a modification or termination of such
zoning classification, ordinances, regulations, or restrictions.
Landlord has complied, and shall continue to comply, to the best of
Landlord's actual knowledge, with all applicable laws, ordinances,
regulations, statutes, rules and restrictions pertaining to and
affecting the Shopping Center (including, without limitation, the
Building and the Common Areas) as required by the governing bodies
having jurisdiction over the Shopping Center. Landlord has received no
notice, and has no actual knowledge, that the Shopping Center or the
Building violates any applicable zoning ordinance, fire regulation,
building code, health code, or other governmental ordinances, orders,
or restrictions. Landlord shall cause the Shopping Center (including,
without limitation, the Common Areas and the exterior of the Building),
as well as the operation and maintenance thereof, to comply with all
applicable zoning ordinances, fire regulations, building codes, health
codes, the ADA and all other applicable governmental ordinances,
orders, or restrictions. Further, Landlord shall, if Tenant's rights
under this Lease could be adversely affected, maintain and keep all
covenants, restrictions and other agreements of record affecting the
Shopping Center or any portion thereof free from any default.
(vii) Except as described in this Lease, there are no agreements
with any municipality, governmental unit, or subdivision relating to
the Shopping Center or the Building that could result in any increased
Operating Expense.
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(viii) There is no pending or, to the best of Landlord's knowledge,
threatened condemnation or similar proceeding affecting the Shopping
Center or any part thereof (including, without limitation, the Building
and/or any of the Common Areas), and Landlord is not aware of any facts
or circumstances that might result in such a suit or other proceedings.
(ix) The Premises have a floor load capacity of not less than 100
lbs. per square foot live load.
(b) In the event that:
(i) any of the representations and warranties contained in Section
6.1(a) or elsewhere in this Lease is not true and correct as of the
applicable date or dates with respect thereto; or
(ii) any of the covenants contained in Section 6.1(a) is breached,
then, and in either such event, Tenant may, in its sole discretion, after ten
(10) days' notice to Landlord and, in the event of a breach of covenant only and
then except in an emergency, after thirty (30) days for Landlord to cure (or
such longer cure period as may be reasonable under the circumstances, provided
that Landlord commences such cure within such thirty (30) day period and
diligently prosecutes the same to completion) pursue Tenant's remedies at law or
equity, including, without limitation, the right to injunctive relief,
cumulatively or alternatively, singularly or in combination.
6.2 PARKING AND COMMON AREAS.
(a) Landlord represents and warrants to Tenant that there are currently
approximately seven hundred (700) parking spaces in the Parking Areas, all of
which are non-designated or non-restricted as to use (other than as required
under the ADA or similar law) and all of which are and will be available for
parking by customers, employees and other invitees of all tenants of the
Shopping Center. Landlord further represents and warrants to Tenant that the
Parking Areas are subject only to the agreements (if any) contained in the
Permitted Exceptions.
(b) Notwithstanding anything to the contrary contained in Section 4.2
above or elsewhere in this Lease, Landlord covenants that:
(i) none of the parking lot configuration within the area
delineated on the Site Plan as the "Bally Primary Parking Area",
traffic patterns (both vehicular and pedestrian), rights to egress,
rights to ingress, curbs, driveways and walkways shall be reconfigured,
reconstructed, redirected, or altered without Tenant's prior written
consent (including, without limitation, changing the size of any
parking spaces);
(ii) the visibility of the Premises and Tenant's signage from the
surrounding streets shall not be impaired by any building or sign
located within the Shopping Center, or otherwise constructed within the
Shopping Center, that do not presently exist or that are not shown on
the Site Plan;
(iii) Landlord shall not grant any "exclusive parking" or
"designated parking" rights in or to any portion of the Parking Areas,
or otherwise restrict the use of any portion of the parking area by
Tenant's customers, employees, agents, invitees, subtenants, licensees,
concessionaires and suppliers, except as may be required under the ADA
or similar law and/or, if Landlord shall so elect, for the restriction
of parking by employees of the tenants, subtenants, licensees and
concessionaires of the Shopping Center (including, without limitation,
Tenant) to a designated area or areas on a non-discriminatory basis as
between each of such employees;
(iv) Landlord shall not grant any easements of any nature
whatsoever directly in front of the Premises (excluding, however,
underground utility and other
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similar easements that do not affect the use of the encumbered portions
of the Common Areas for their intended purposes and/or access to the
Premises), or designate any portion of the Parking Areas located
directly in front of the Premises for employee parking pursuant to
Subsection (iii) above or otherwise;
(v) Landlord shall not establish, charge, or collect any fee or
charge of any nature whatsoever for the use of the Parking Areas or any
portion thereof (other than through Operating Expenses payable by
Tenant pursuant to the provisions of Article 4 of this Lease and by
other tenants of the Shopping Center pursuant to any corresponding
provisions of their respective leases); and
(vi) Other than a freestanding one-story building along the Highway
51 frontage of the Shopping Center as delineated on the Site Plan as
"Future Building Area", there shall be no material change to the Site
Plan (including, without limitation, the construction and/or
installation of any additional stores, shops, buildings, outlots,
developments, or improvements (including, without limitation, signs and
kiosks) in the Shopping Center) without Tenant's prior written consent,
which consent shall not be unreasonably withheld provided that:
(x) the proposed change shall not result in a reduction in the
number of parking spaces in the Parking Areas below 700 or in a
material decrease in the parking ratio with respect to the Shopping
Center;
(y) in Tenant's reasonable judgment, the proposed change would
not materially adversely affect access to and egress from the
Premises and the Parking Areas, the visibility of the Premises
and/or Tenant's signage, or Tenant's business operations at the
Premises; and
(z) the proposed change is not to be made, in whole or in
part, to any portion of those areas identified on the Site Plan as
the "No Build" areas.
(c) Landlord acknowledges that the covenants contained in this Section
are among the material inducements to Tenant's entering into this Lease, and
that any breach thereof by Landlord would be a material breach of this Lease for
which monetary damages would not be adequate. In recognition thereof, in the
event of any such breach, Tenant shall be entitled (after written notice to
Landlord specifying the breach and if Landlord does not cure such breach within
thirty (30) days thereafter, or such longer cure period as may be reasonable
under the circumstances, provided that Landlord commences such cure within such
thirty (30) day period and diligently prosecutes the same to completion), to all
rights and remedies available to it at law or in equity (including, without
limitation, obtaining injunctive relief forever restraining such breach by
Landlord) and to recover from Landlord all of Tenant's costs, expenses and
reasonable attorneys' fees incurred in connection with enforcing this Section.
6.3 EXCLUSIVITY.
(a) During the entire Term (including, without limitation, during any
renewal terms or extension periods, whether or not specifically provided for in
this Lease), Tenant shall have the exclusive right to operate a health and
fitness center at the Shopping Center. Without limiting the generality of the
foregoing in any respect, Landlord shall not enter into any new lease for space
in the Shopping Center, modify any existing lease and/or give its consent for,
or permit, any other tenant in the Shopping Center to use its premises for a
martial arts studio, a weight-reducing salon, or a health and fitness center,
any of which offers services and/or activities such as those non-incidental
services and/or activities described in the Permitted Use. Landlord further
represents and warrants to Tenant that the only leases heretofore entered into
by Landlord for spaces in the Shopping Center, and that are in effect or pending
commencement as of the date hereof, contain specific permitted use provisions
that do not permit the premises demised thereunder to be used for
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any of the aforesaid uses. If, in derogation of its lease of space in the
Shopping Center (whether now existing or hereafter entered into), any tenant
uses all or any portion of its premises for a use described above, Landlord
shall, upon Tenant's written request and at Landlord's sole cost and expense,
diligently pursue in good faith any and all remedies available to Landlord
(including, without limitation, the commencement and prosecution to final
judgment of suitable legal or equitable proceedings) to cause the termination of
such use.
(b) In the event of a breach of the provisions of this Section 6.3 by
Landlord, or a breach of the representation and warranty made by Landlord
herein, Tenant may, in its sole discretion, if Landlord fails to cure such
default within five (5) days after notice from Tenant:
(i) terminate this Lease and receive from Landlord an amount equal
to the unamortized cost (as set forth in Tenant's books and records) of
Tenant's Work and any subsequent Alterations;
(ii) reduce the Rent payable under this Lease to One Dollar ($1.00)
per month; and/or
(iii) have all other rights and remedies available to it at law or
in equity (including, without limitation, the right of injunction).
ARTICLE 7
USE OF THE PREMISES AND THE COMMON AREAS; SIGNAGE
7.1 QUIET ENJOYMENT. Landlord covenants that Tenant, upon paying the
Rent and all other amounts herein provided, and upon performing all of its
obligations under the Lease, shall peacefully and quietly have, hold and enjoy
the Premises and the Common Areas, including the Parking Areas.
7.2 COMPLIANCE WITH LAWS.
(a) Tenant, at its expense, shall promptly comply with all applicable
laws and ordinances, as well as all applicable requirements of the various
governmental departments and subdivisions having jurisdiction over the operation
of Tenant's business at the Premises. Tenant may, at its expense (and, if
necessary, in the name of Landlord), contest, by appropriate proceedings
prosecuted diligently and in good faith, the validity, or applicability to the
Premises, of any mandate of the nature described above, and Landlord shall
cooperate with Tenant in such proceedings. Notwithstanding anything to the
contrary provided in this subsection (a) or elsewhere in this Lease, Tenant
shall not be obligated to comply with any such mandate during the pendency of
such contest, provided that such non-compliance shall neither place Landlord, or
any agent, servant, or employee thereof, in imminent jeopardy of prosecution for
a crime nor place the Shopping Center, or any part thereof (including, without
limitation, the Premises), in imminent jeopardy of being condemned or vacated.
(b) Landlord, at its expense, shall promptly comply with all applicable
laws and ordinances, as well as all requirements of Landlord's policies of
insurance at any time in force and all applicable requirements of the various
governmental departments and subdivisions having jurisdiction over the Shopping
Center and those parts of the Premises for which Landlord has responsibility
hereunder. Landlord may, at its expense, contest, by appropriate proceedings
prosecuted diligently and in good faith, the validity, or applicability to the
Shopping Center (including, without limitation, the Premises), of any mandate of
the nature described above, and Tenant shall cooperate with Landlord in such
proceedings. Notwithstanding anything to the contrary provided in this
subsection (b) or elsewhere in this Lease, Landlord shall not be obligated to
comply with any such mandate during the pendency of such contest, provided that
such non-compliance shall neither place Tenant, or any agent, servant, or
employee thereof, in imminent jeopardy of prosecution for a crime nor place the
Shopping Center, or any part thereof (including, without limitation, the
Premises), in imminent jeopardy of being condemned or vacated.
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7.3 COVENANT AGAINST WASTE. Tenant shall not commit any waste to the
Premises or permit any overloading of the floors of the Premises.
7.4 EXTERIOR SIGNS. Tenant shall have the right to attach its signs to
the exterior elevations of the Premises at any time from and after the date
hereof. In addition, from and after the date hereof, Tenant shall have the right
to install its signs at any other location on the Building or at the Shopping
Center (including any pylon or monument signs) as delineated on the Site Plan.
Attached hereto as EXHIBIT E is the Sign Plan for the Premises and for any pylon
or monument signs (indicating the design, dimension and location of Tenant's
signs), which is hereby approved by Landlord. If EXHIBIT E does not include all
possible signs that Tenant may install pursuant to applicable law, Tenant shall
have the right, subject to Landlord's prior written consent which shall not be
unreasonably withheld or delayed, to place additional written signs on the
Building and at such other locations as other tenants of the Shopping Center
display their respective signs (exclusive of buildings containing signage only
of tenants located therein), including, without limitation, on any monument
and/or pylon signs that currently exist or may hereafter be erected at the
Shopping Center, all of which shall have the maximum size permitted by
applicable code and, with respect to such other locations where other tenants
are permitted to display their signs, having a size and prominence at least
commensurate with the size of the Premises when compared to the size of the
premises occupied by such other tenants. Further, from and after the date
hereof, Landlord shall appropriately include the Premises on all maps,
directories and/or directional aids situated in the Common Areas (including,
without limitation, in the Parking Areas) on which the locations of two or more
other tenants' premises are noted, each of which listings of Tenant shall have a
size and prominence at least commensurate with the size of the Premises when
compared to the size of the premises occupied by such other listed tenants.
Landlord shall cooperate with Tenant in obtaining variances, if necessary, in
connection with Tenant's signage. All signs must be erected in conformity with
city ordinances and other governmental agency requirements. Tenant shall provide
panels for such sign and shall be responsible for the maintenance thereof.
Notwithstanding anything to the contrary contained herein, during the Term,
Landlord shall not alter the position, location, dimensions, visibility or
prominence (relative to other tenants) of Tenant's signage in the Shopping
Center.
7.5 UTILITIES. From and after the Rent Commencement Date, Tenant shall
pay directly to the service provider for all charges for gas, water,
electricity, light power, telephone, and all other utility services used or
supplied upon, or in connection with, the Premises, PROVIDED, HOWEVER, Landlord
shall be responsible for arranging, as well as for paying the cost of, the
connection and installation of all meters in connection therewith to the extent
not already available at the Premises. Provided that its receipt of utility
services therefrom is physically practicable, Tenant shall have the right to
negotiate and contract directly with utility service providers of its own
choosing for the purchase of utility services. Tenant shall promptly pay all
bills for said utilities. In the event that any utilities are furnished to the
Premises by Landlord, whether sub-metered or otherwise, then, and in that event:
(a) Tenant shall pay Landlord for such utilities, but the
applicable per unit cost charged to Tenant for each such utility
service (such as, for example, the cost per kilowatt hour of
electricity consumed in the Premises) shall not exceed the lesser of:
(i) the corresponding per unit cost actually paid by Landlord
to the public utility company during the period in question; and
(ii) the corresponding per unit cost that Tenant would have
paid to the public utility company if its services were being
furnished directly to Tenant;
(b) Landlord shall, in no event, be permitted to charge any profit,
overhead, administrative fee, management fee, surcharge, or the like on
any utility payments made by Tenant;
(c) provided that the same does not violate any rules or
regulations of the applicable utility companies, or violate any
applicable laws, ordinances, rules, or
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regulations of any governmental authority having jurisdiction, Tenant
shall have the right to install, at Tenant's sole cost and expense, a
separate checkmeter to verify the accuracy of Tenant's bills, whereupon
the readings from Tenant's checkmeter shall prevail unless Landlord
shall reasonably establish that such checkmeter has malfunctioned; and
(d) Tenant shall have the right to arrange for its own direct
service of any such utility or utilities, at Tenant's sole cost and
expense (including, without limitation, the installation of all wires,
chases, pipes, meters and the like in accordance with the applicable
provisions of this Lease), provided that the same is physically
practicable.
7.6 INTERRUPTION OF UTILITIES. In the event that any utilities serving
the Premises are discontinued or interrupted, and such discontinuance or
interruption was caused, in whole or in part, by the negligence or misconduct of
Landlord, its employees or agents, resulting in Tenant's inability to reasonably
operate its business at the Premises, Tenant's obligation to pay Rent shall
abate in proportion to the interruption of Tenant's ability to carry on its
business from the date of such interruption until such time as Tenant is again
able to reasonably operate its business at the Premises.
7.7 RULES AND REGULATIONS. Landlord shall have the right to promulgate,
from time to time and upon not less than thirty (30) days' prior written notice
to Tenant, reasonable rules and regulations governing the use of the Common
Areas. Tenant shall comply with such reasonable rules and regulations, provided
that the same:
(a) are enforced equally, and in a non-discriminatory manner,
against all tenants of the Shopping Center; and
(b) do not interfere with Tenant's rights under this Lease.
Landlord may further, from time to time and upon not less than thirty (30) days'
prior written notice to Tenant (other than in an emergency, in which case
Landlord shall give Tenant only such notice as is reasonably practicable under
the circumstances), close one or more portions of the Common Areas on a
temporary basis for purposes of making repairs thereto or, subject to the
provisions of Section 6.2 above, alterations thereof, provided, however, that:
(i) the extent and duration of each such closure shall be limited
to those reasonably necessary under the circumstances;
(ii) Landlord shall pursue such work as expeditiously as possible
to completion; and
(iii) access to the Premises and/or the Parking Areas shall not be
unreasonably impaired.
ARTICLE 8
REPAIRS, MAINTENANCE AND ALTERATIONS
8.1 REPAIRS, MAINTENANCE AND OPERATION.
(a) During the Term, Landlord shall keep and maintain in good condition
and repair the roof (keeping the same water tight at all times), foundation,
slab, load bearing walls, exterior walls and structural members of the Building,
as well as all utilities, electrical, water and sewer systems and facilities
located inside of the Premises and not servicing the Premises exclusively. In
addition, to the extent that the same are not maintained and repaired by the
respective utility companies, Landlord shall keep and maintain in good condition
and repair all utilities, electrical, water and sewer systems and facilities
located outside of the Premises and servicing the same (whether or not
exclusively). Further, Landlord shall keep and maintain in good condition and
repair, as well as in a clean and safe condition, the Common Areas (including,
without limitation, the Parking Areas), all in compliance with the ADA and all
other applicable legal requirements as required by the
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governing bodies having jurisdiction over the Shopping Center, and shall operate
and manage the Common Areas (including, without limitation, the Parking Areas)
in accordance with generally accepted principles of sound and prudent management
consistently applied to the operation and management of comparable shopping
centers. Without intention to limit the generality of the foregoing in any
respect, Landlord shall perform the following in and to the Common Areas:
(i) periodically patch and resurface all driveways, sidewalks,
streets and the Parking Areas so as to keep the same free of chuck
holes, fissures and cracks, as well as the restripe all Parking Areas
not less frequently than once every three (3) years;
(ii) keep the Common Areas properly cleaned and swept (which shall
be performed as often as necessary, but not less than once per week),
drained, free of snow, ice, standing water, rubbish and other
obstructions and in a sightly condition;
(iii) keep the Common Areas lighted during, and for appropriate
periods before and after, the business hours of the Shopping Center
(including, without limitation, the cost of electricity to operate any
lighting standards or fixtures located in the common areas and the cost
of relamping the same as necessary);
(iv) maintain signs, markers, painted lines and other means and
methods of pedestrian and vehicular traffic control;
(v) provide and maintain security and patrol services (including,
without limitation, the cost of appropriate measures adopted by
Landlord to prevent unauthorized parking in the Parking Areas) to the
extent deemed necessary in Landlord's reasonable discretion;
(vi) maintain any plantings and landscaped areas;
(vii) if required by any governmental authority having jurisdiction
thereof, operate and maintain traffic signals or lights, as the case
may be, that are presently installed or may be installed hereafter
servicing the Shopping Center; and
(viii) employ an adequate number of persons to perform, as well as
to supervise the performance of, all of the services to be provided by
Landlord to the Common Areas (including, without limitation, pay the
wages, salaries and fringe benefits of such employees).
All costs and expenses paid by Landlord to comply with the provisions of this
Section 8.1(a) shall be included as Operating Expenses.
(b) During the Term, Tenant shall keep and maintain in good condition
and repair, as well as in a clean, tenantable and safe condition, the Premises
(including, without limitation, the storefront, entrances, plate glass and, to
the extent located within the Premises and servicing the same exclusively,
utilities, electrical, water and sewer systems and facilities), other than those
items that are Landlord's responsibility to maintain and/or repair pursuant to
the terms of Section 8.1(a) hereof. Tenant shall not permit any garbage rubbish,
refuse or unreasonable quantities of dirt to accumulate in or about the
Premises. Removal of garbage and trash shall be made in the manner and in the
areas reasonably prescribed by Landlord.
(c) As used in this Lease, unless specifically set forth to the
contrary, whenever a party shall have the obligation to "REPAIR" any portion of
the Shopping Center, any improvement, system, facility, or the like, or any item
of personal property, such obligation shall be deemed to include the obligation
to replace such improvement, system, facility, or the like, or item of personal
property, as, if, when and to the extent replacement of the same shall be
appropriate.
8.2 TENANT'S PROPERTY. All fixtures, signs, equipment, or other
personal property, of whatever nature, placed, installed, or affixed in or upon
the Premises shall remain the property of
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Tenant and may be removed at any time, provided that Tenant repairs any damage
caused by such removal. Tenant shall be under no obligation to restore or remove
any of Tenant's leasehold improvements or any changes or Alterations made in
accordance with the terms of this Article 8, but shall leave the Premises in
broom-clean condition upon the expiration of the Term.
8.3 FIXTURES AND ALTERATIONS. During the Term, Tenant shall have the
right to attach fixtures or articles to any portion of the Premises and to make
any alterations, additions, improvements or changes or perform any other work in
and to the Premises ("ALTERATIONS"). In the event that:
(a) such Alterations constitute structural changes;
(b) such Alterations affect the exterior portion of the Premises;
or
(c) if the cost of such Alterations (in Tenant's reasonable
estimation) exceeds the sum of Seventy-Five Thousand and No/100
($75,000) Dollars (excluding the cost of any carpeting, wall coverings
and other decorative work performed in conjunction therewith),
such Alterations shall be subject to Landlord's prior consent, which consent
shall not be unreasonably withheld or delayed. In each case where Landlord's
consent is required pursuant to the terms hereof, Tenant shall give Landlord for
its approval, which approval shall not be unreasonably withheld or delayed,
written notice of its intention to perform such Alterations, together with the
plans and specifications covering such Alterations. If Landlord does not respond
to Tenant's request for approval of plans and specifications within thirty (30)
days of its receipt thereof (silence being deemed approval), then the plans and
specifications shall be deemed approved.
8.4 PERFORMANCE OF ALTERATIONS. Tenant shall complete all Alterations
promptly and in conformity with the standards set forth in this Article. During
the performance of any Alterations, Tenant shall carry "Builder's Risk"
insurance naming Landlord and Landlord's mortgagee (provided Tenant has received
a non-disturbance agreement in the form specified herein from such mortgagee) as
additional insureds, in commercially reasonable amounts. All Alterations
performed pursuant to this Article shall be done pursuant to validly issued
permits, if required, and in conformity with all applicable laws and ordinances.
Tenant shall give Landlord copies of all permits (including occupancy permits)
within ten (10) days after request therefor from Landlord. In the event
governmental approval is required for any Alterations, upon completion of such
Alterations, Tenant shall provide Landlord with copies of revised plans for the
Premises reflecting such Alterations. Landlord shall cooperate with, and assist,
Tenant in all reasonable respects in connection with obtaining any necessary
permits and approval from governmental authorities having jurisdiction with
respect to any Alteration that Tenant desires to perform in or to the Premises,
provided, however, that Landlord shall not be obligated to incur any expense
(other than Landlord's own administrative expense and overhead) in connection
with any such cooperation or assistance, and provided, further, that, with
respect to any such Alterations that shall require Landlord's consent pursuant
to the provisions of this Lease, Tenant shall have theretofore obtained
Landlord's prior written consent thereto.
8.5 MECHANICS' LIENS AND CLAIMS AGAINST LANDLORD. Subject to the
remaining part of this Section, Tenant shall not permit any mechanics' or
materialmen's liens ("MECHANICS' LIENS") to be recorded against the Premises by
reason of the Alterations. However, Tenant shall not be required to pay or
discharge any such mechanics' liens if, within thirty (30) days after notice of
the recording of same, Tenant commences and thereafter proceeds diligently, in
good faith, to contest said lien by appropriate proceedings. Before Tenant
commences such contest, it shall, upon request, provide Landlord with:
(a) a bond which will release the effect of the lien from the
Premises and the Shopping Center; or
(b) title insurance, insuring Landlord against any defect in
Landlord's title resulting from any such mechanics' liens.
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In the event Tenant fails within such thirty (30)-day period to either cause
such mechanics' liens to be removed or to contest same in accordance with the
terms of this Section 8.5, Landlord shall have the right to discharge the same
by paying the amount claimed to be due, and the amount so paid by Landlord shall
be due and payable by Tenant on the first day of the next following month as
Additional Rent.
ARTICLE 9
ASSIGNMENT AND SUBLEASE
9.1 CONSENT REQUIRED. Tenant shall not sublease or license any portion
of the Premises, or assign any of its rights contained in this Lease, without
Landlord's prior written consent, which consent shall not be unreasonably
withheld or delayed. Sale by Tenant of more than fifty percent (50%) of its
assets or common stock (but only if Tenant's common stock is not publicly traded
on any exchange regulated by the United States Securities and Exchange
Commission) shall be deemed to be an assignment for purposes of this Section.
Notwithstanding the foregoing, Tenant shall have the right to assign or sublease
to a health or fitness club that is reasonably acceptable to Landlord,
considering its credit standing, reputation and demonstrated operating ability,
which will continue to use the Premises in substantially the same fashion as
Tenant and for the same Permitted Use as is set forth herein and has operational
skills reasonably commensurate with those of Tenant.
9.2 NO CONSENT REQUIRED. Notwithstanding anything to the contrary
contained in this Lease, Landlord's consent shall not be required with respect
to any of the following transactions:
(a) Tenant may license, sublet, or contract with concessionaires to
operate certain ancillary parts of Tenant's business customarily
offered in a health club (including, without limitation, a restaurant
and/or snack/juice bar, retail sales, physical therapy or
rehabilitative services, etc.);
(b) Tenant may assign this Lease or sublet all or a portion of the
Premises:
(i) to any corporation with which Tenant is merged or
consolidated;
(ii) to any person, corporation, or other entity to which
substantially all of Tenant's assets or common stock are
transferred; or
(iii) to any person, corporation, or other entity that
controls, or is controlled by, or is under common control with
Tenant,
provided, however, that:
(x) with respect to any such assignment of this Lease,
such assignment shall provide, or the assignee shall enter
into a written separate agreement providing, that the assignee
assumes all of the obligations imposed upon Tenant under the
terms of this Lease; and
(y) with respect to any such subletting of all or a
portion of the Premises, such sublease shall provide, or the
sublessor and sublessee shall enter into a separate written
agreement providing, that such sublease is subject and
subordinate, in all respects, to this Lease and all of the
terms, covenants and conditions hereof; and
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(c) Tenant may mortgage, pledge, collaterally assign, hypothecate,
or otherwise grant a security interest in this Lease and/or the right,
title and interest of Tenant hereunder in the form of a blanket lien
covering at least five (5) health and fitness club locations (including
the Premises) operated by Tenant and/or any affiliate(s) thereof in
connection with any financing obtained by Tenant and/or such
affiliate(s).
Tenant shall also have the right to mortgage, pledge, collaterally assign,
hypothecate, or otherwise grant a security interest in any one or more items of
Tenant's furniture, trade fixtures, equipment, merchandise and other personal
property used, or otherwise located, in the Premises, as well as to lease (as
opposed to own) all or any portion of the same. In this regard, Landlord hereby
unconditionally waives:
(A) any and all liens and/or security interests (whether by statute
or by common law) that Landlord, or its successor or assigns, might
otherwise have, or might otherwise hereafter acquire, in or to any of
the personal property referred to above; and
(B) any and all rights of levy, distraint, or execution with
respect to any and all of such personal property, whether afforded to
Landlord pursuant to this Lease or otherwise at law or in equity.
If Tenant shall default under any loan secured in whole or in part by such
personal property, or under any lease of such personal property to Tenant,
Landlord shall permit the personal property lender or lessor to enter the
Premises, after reasonable advance notice to both Landlord and Tenant, for the
purpose of removing such personal property therefrom, regardless of whether a
default shall have been committed by Tenant and be outstanding under this Lease.
Landlord shall have the right to have its designated representative physically
present in the Premises during any actual removal of such personal property.
Landlord shall, from time to time upon Tenant's written request, promptly
execute and return any confirmations, certificates and other documents (except
an amendment to this Lease, unless Landlord agrees to do so in its sole
discretion) that such personal property lender or lessor reasonably requests in
connection with any such financing or leasing.
9.3 CONTINUED LIABILITY. No assignment or sublease shall relieve Tenant
of, or effectuate a release or assignment of, Tenant's liabilities under the
terms of this Lease, it being specifically understood and agreed that Tenant
shall, in all events, be and remain liable to Landlord throughout the entire
Term, except in the event where Tenant becomes merged or consolidated into a
different legal entity following an assignment of this Lease to the successor
entity pursuant to Section 9.2(b) above and, upon such merger or consolidation,
ceases to exist.
9.4 CONSENT PROCEDURE. If Landlord's consent to a proposed assignment
or sublease is required hereunder, Tenant shall give Landlord a copy of the
prospective assignment or sublease, together with a written request for
Landlord's consent (which shall state that Landlord's failure to respond within
twenty (20) business days shall be deemed consent) and all reasonably requested
information (including but not limited to, financial and operating statements,
previous operating experience and qualifications of the proposed assignee or
sublessee). Within twenty (20) business days after receiving such request,
accompanied by the required information and such other information as Landlord
reasonably requests, Landlord shall give Tenant a written notice either:
(a) approving the assignment or sublease; or
(b) withholding approval of the assignment or sublease with a
description of the reasons for such withholding of approval.
If Landlord fails to respond within the designated time, then the proposed
assignment or sublease shall conclusively be deemed approved. In the event
Tenant requests Landlord's consent as aforesaid, Tenant agrees to reimburse
Landlord for all expenses, including attorneys' fees incurred by Landlord in
connection therewith, which the parties agree shall be in an amount not to
exceed the sum of Seven Hundred Fifty and No/100 Dollars ($750.00).
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ARTICLE 10
DEFAULT BY TENANT
10.1 DEFAULT IN PAYMENT OF RENT. If Tenant fails to make payment of any
Rent when due, and such failure continues for ten (10) days after Tenant
receives written notice thereof from Landlord, then such failure to pay Rent
shall be a default under this Lease.
10.2 NON-MONETARY DEFAULTS. If Tenant fails to perform any covenant or
is otherwise in breach of any provision of this Lease (except for the defaults
set forth in Sections 10.1 and 10.3) for a period of thirty (30) days after
Tenant receives written notice thereof from Landlord specifying the nature of
such failure, then such failure shall be deemed a default under this Lease;
provided, however, that, if the nature of Tenant's default is such that more
than thirty (30) days are reasonably required for its cure, then Tenant shall
not be deemed to be in default if Tenant commences such cure within thirty (30)
days after Tenant's receipt of written notice of such default from Landlord and
thereafter diligently prosecutes such cure to completion.
10.3 FINANCIAL DEFAULTS. The following shall be a default under this
Lease:
(a) if a voluntary or involuntary petition in bankruptcy shall be
filed by or against Tenant that is not dismissed within ninety (90)
days after its filing;
(b) if Tenant shall enter into any formal arrangement with its
creditors as a class extending the time within which Tenant may pay any
of its obligations and attempting to modify Tenant's obligations under
this Lease;
(c) if Tenant shall effect any composition that materially alters
Tenant's obligations to pay Rent under this Lease;
(d) if Tenant shall make any assignment for the benefit of its
creditors;
(e) if all or any part of Tenant's interest in the Premises shall
be:
(i) levied upon under execution to satisfy all, or part of, a
judgment entered by a court of competent jurisdiction;
(ii) levied upon or distrained to pay all, or part of, any
governmental tax; or
(iii) the subject matter of a receivership proceeding or
trusteeship that is not removed or dismissed within ninety (90)
days after Tenant receives written notice of such event; or
(f) without limiting the terms and conditions of Section 9.2(c)
hereof, if Landlord shall receive any written assertion of the
existence of a default on the part of Tenant under any documents
evidencing, securing or otherwise relating to any indebtedness secured,
in whole or in part, by any interest of Tenant related to the Premises
or this Lease.
10.4 REMEDIES AFTER DEFAULT. In the event of a default under this Lease
as provided herein, and after Tenant's receipt of written notice of such default
and the expiration of the applicable cure period, Landlord shall have the option
to exercise the following remedies:
(a) prosecute and maintain an action or actions, as often as
Landlord deems advisable, for collection of Rent, other charges and
damages as the same accrue (including without limitation, court costs,
attorneys' fees and other costs incurred by Landlord in collection of
past due Rent without entering into possession of the Premises or
terminating this Lease);
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(b) reenter and take possession of the Premises, and remove Tenant,
Tenant's agents, any subtenants, licensees, concessionaires, or
invitees and any or all of their property from the Premises, which
reentry and removal may be effected by summary proceedings or any other
legal or equitable action or proceedings; and/or
(c) terminate this Lease by written notice to Tenant, upon which
termination:
(i) Tenant shall immediately surrender possession of the
Premises to Landlord; and
(ii) if Tenant fails or refuses to so surrender the Premises,
Landlord may take possession in accordance with Section 10.4 (b)
above.
If Landlord elects to reenter the Premises and relet the same without
termination, Landlord may at any time thereafter elect to terminate this Lease
for such previous breach. If Landlord terminates this Lease (whether without or
after a reentry), Tenant shall have no further interest in this Lease or in the
Premises. However, Tenant shall remain liable to Landlord for all damages that
Landlord may sustain by reason of Tenant's default, including, without
limitation:
(x) the cost of reletting the Premises (including, without
limitation, the portion of the cost of any tenant improvements and
brokerage commissions incurred by Landlord that is fairly allocable to
the remainder of the Term, but excluding any portion of the costs
thereof that relate to any period beyond such remainder); and
(y) an amount equal to the Rent that, but for termination of this
Lease, would have been payable by Tenant during the remainder of the
Term, less any proceeds from reletting the Premises, payable monthly as
such amounts become due.
The amount of the Rent payable for the remainder of the Term shall be calculated
on the basis of the Monthly Base Rent and Additional Rent payable by Tenant at
the time of default plus any future increases which are determinable at the time
of calculation.
10.5 RELETTING AFTER DEFAULT. Upon recovery of possession of the
Premises by reason of Tenant's default, Landlord shall exercise reasonable
efforts to mitigate Tenant's obligations hereunder and shall diligently attempt
to procure one or more substitute tenants for all or any portion of the
Premises, for the account of Tenant or otherwise, for such rental terms and
conditions (which may be for a term extending beyond the Term) and collect the
rents therefor, applying them in the following manner:
(a) first, to the payment of such reasonable expenses as Landlord
may have incurred in recovering possession of the Premises (including,
without limitation, reasonable attorneys' fees) and other expenses paid
by Landlord in connection with reletting the Premises (including,
without limitation, the portion of the cost of any tenant improvements
and brokerage commissions incurred by Landlord that is fairly allocable
to the remainder of the Term, but excluding any portion of the cost
thereof that relates to any period beyond such remainder); and
(b) then to the fulfillment of Tenant's obligation to pay Rent
hereunder.
Any such reletting may be for the remainder of the Term hereof as originally
granted or for a longer or shorter period. Notwithstanding the foregoing, Tenant
shall have the right to secure and present for Landlord's approval, which
approval shall not be unreasonably withheld or delayed, one or more substitute
tenants for the Premises. If such rentals received from such reletting during
any month shall be less than that to be paid during that month by Tenant
hereunder, then Tenant shall pay any such deficiency to Landlord. Such
deficiency shall be calculated and paid monthly. If such rentals received from
such reletting shall, on a cumulative basis, exceed the Rent and other
obligations of the Tenant owing herein, Landlord shall be entitled to retain the
excess rentals.
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10.6 RIGHTS UPON HOLDING OVER. Tenant shall surrender the Premises at
the end of the Term. In the event that Tenant shall for any reason remain in
possession after the expiration of the Term, such possession shall be as a
month-to-month tenant during which time Tenant's liability shall be the same
monthly rental plus ten percent (10%) of the Base Rent paid by Tenant during the
previous Lease Year.
10.7 LANDLORD'S RIGHT TO PERFORM TENANT'S COVENANTS. If Tenant shall,
at any time, be in default in the performance of any act on its part to be
performed hereunder (after Tenant's receipt of written notice of such default
and the expiration of the applicable cure period), Landlord may (but shall not
be obligated to), in lieu of invoking any other remedy for such default, perform
such act on the part of Tenant to be performed, in a good and workmanlike
manner, and pay any reasonable expenses incidental thereto. All sums so paid by
Landlord shall constitute Additional Rent payable thirty (30) days after demand
(with interest at the Default Interest Rate). Failure to make such payment when
due shall constitute a new default by Tenant, and Landlord thereupon shall have
the same rights and remedies as in the case of default by Tenant in the payment
of any installment of Base Rent.
10.8 REMEDIES CUMULATIVE; NO ACCELERATION OR CONSEQUENTIAL DAMAGES. The
above remedies are in addition to all other remedies available to Landlord at
law or in equity. However, notwithstanding anything hereinbefore provided, or
contained elsewhere in this Lease, in no event shall Landlord have the right to
receive consequential, speculative, punitive, or other similar measures of
damages against Tenant, nor shall Landlord be entitled to any remedy that
involves or entails acceleration of any Rent payable by Tenant in the future
pursuant to this Lease, and Landlord hereby irrevocably waives, for itself and
its successors and assigns, its right to seek or receive any such measure of
damages or remedy.
ARTICLE 11
INSURANCE
11.1 WAIVERS OF CLAIMS AND SUBROGATION. Landlord and Tenant each hereby
waive each and every claim for recovery from the other, as well as from any
person or entity claiming under or through the party making such waiver (whether
by subrogation or otherwise), for any and all loss of, or damage to, the
Shopping Center, the Building, the Premises and/or the contents of any of the
foregoing, but only to the extent that such loss or damage either:
(a) is recoverable under insurance policies carried by the waiving
party; or
(b) would have been recoverable under insurance policies carried by
the waiving party had such party maintained in force the insurance
policies and limits required to be maintained by such party under this
Lease.
Inasmuch as this mutual waiver will preclude the assignment of any such claim,
by subrogation or otherwise, to an insurance company or any other person or
entity, each party shall, if such party's insurance policies do not themselves
permit such waiver of subrogation, cause such insurance policies to be endorsed
to permit the same.
11.2 TENANT'S INSURANCE. During the Term, from and after the Delivery
Date, Tenant shall maintain insurance, issued by companies licensed and admitted
in the State in which the Shopping Center is located, as follows:
(a) commercial general liability insurance covering the Premises
for bodily injury, death and third party property damage (including,
without limitation, contractual liability, personal injury, products
liability and completed operations coverages), in an amount not less
than $2,000,000 per occurrence and not less than $3,000,000 in the
aggregate;
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(b) property insurance covering Tenant's leasehold improvements, as
well as all of Tenant's signs, trade fixtures, personal property and
equipment located in the Premises, which insurance shall:
(i) be written on a special form (all risks) of physical loss
or damage basis, for the full replacement cost of the covered items
without deduction for physical depreciation thereof; and
(ii) provide that any proceeds thereof shall be paid to
Tenant; and
(c) during the performance of any Alterations, builder's risk
insurance against loss or damage from such causes of loss as are
embraced by insurance policies of the type known, on the date of this
Lease, as "builder's risks" property insurance, which insurance shall:
(i) be written on a special form (all risks) of physical loss
or damage basis, for not less than the completed value, on a
non-reporting form, of the Alterations then being performed; and
(ii) provide that any proceeds thereof shall be paid to
Tenant.
Tenant shall have the right to maintain any or all of the insurance coverages
set forth in this Section 11.2 under one or more blanket insurance policies,
covering the Premises together with other premises owned and/or occupied by
Tenant and/or its affiliates, so long as such blanket policies comply, as to
coverages and amounts, with the requirements hereinbefore set forth. Tenant
shall further have the right to maintain the liability coverage referred to
above in the form of primary and umbrella or excess liability coverages, in such
segments as Tenant shall determine from time to time. Any or all of the
insurance coverages to be maintained by Tenant pursuant to this Lease may
provide for such deductibles as Tenant shall determine, provided that no such
policy shall have a deductible in excess of $250,000 (or such greater deductible
as is customarily carried, from time to time, by large commercial tenants in the
geographic area in which the Shopping Center is located).
11.3 LANDLORD AS ADDITIONAL INSURED. Landlord and Landlord's mortgagee
(provided that Tenant has received a non-disturbance agreement in the form
specified herein from such mortgagee or as may have been agreed by the Tenant)
shall be named as additional insured(s)/loss payee(s) as its (their) interest(s)
may appear with respect to all other insurance policy or policies maintained by
Tenant pursuant to Section 11.2 hereof with respect to the commercial general
liability insurance policy or policies maintained by Tenant pursuant to Section
11.2. Each such policy shall provide, to the extent obtainable, that
cancellation or material modification thereof shall require thirty (30) days'
prior written notice to Landlord (fifteen (15) days' notice for non-payment of
premiums). Certificate(s) of such policies shall be delivered to Landlord not
later than thirty (30) days after the Delivery Date. Each such policy shall be
renewed, and new certificate(s) deposited with Landlord, at least ten (10) days
prior to the expiration thereof.
11.4 LANDLORD'S INSURANCE. Landlord shall maintain insurance, issued by
companies licensed and admitted in the State in which the Shopping Center is
located, as follows:
(a) commercial general liability insurance covering the Common
Areas (together with such other portions of the Shopping Center as
Landlord may elect) for bodily injury, death and third party property
damage (including, without limitation, contractual liability, personal
injury, products liability and completed operations coverages), in an
amount not less than $2,000,000 per occurrence and not less than
$3,000,000 in the aggregate;
(b) property insurance covering the Shopping Center (including,
without limitation, the Common Areas, the Building and the Premises,
but excluding
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Tenant's leasehold improvements), as well as any personal property
contained therein and owned by Landlord, which insurance shall:
(i) be written on a special form (all risks) of physical loss
or damage basis (including, but not limited to, fire and extended
coverage, collapse of improvements, flood and earthquake coverage),
for the full replacement cost of the buildings located in the
Shopping Center (including, without limitation, the Building) and
Landlord's personal property, without deduction for physical
depreciation thereof, and shall contain an agreed amount
endorsement;
(ii) include an ordinance or law (including, but not limited
to, increased cost of construction and demolition) endorsement; and
(iii) provide that any proceeds thereof shall be paid to
Landlord;
(c) Flood insurance covering all of the buildings located in the
Shopping Center (including, without limitation, the Building) in an
amount equal to the lesser of:
(i) the full replacement cost of such buildings without
deduction for physical depreciation thereof; or
(ii) the maximum amount of insurance obtainable,
PROVIDED, HOWEVER, THAT, if the Shopping Center is located in a flood
zone (A or B), a federal flood insurance policy must be maintained in
full force and effect in an amount equal to the full replacement cost
such buildings without deduction for physical depreciation thereof or
$500,000 (whichever is less), in which event the insurance coverage
first described in this subsection (c) shall be maintained as excess
coverage above the federal flood insurance coverage;
(d) during any period of restoration following a casualty or
condemnation, or of construction of any additional improvements,
builder's risk insurance against loss or damage from such causes of
loss as are embraced by insurance policies of the type known, on the
date of this Lease, as "builder's risks" property insurance, which
insurance shall:
(i) be written on a special form (all risk) of physical loss
or damage basis (including, but not limited to, fire and extended
coverage, collapse of the improvements, flood and earthquake
coverage), for either:
(x) as to any improvements then being restored following a
casualty or condemnation, the full replacement cost of such
improvements; and
(y) as to any additional improvements then being
constructed, an amount not less than the completed value, on a
non-reporting form, of the additional improvements then being
constructed; and
(ii) provide that any proceeds thereof shall be paid to
Landlord; and
(e) rent insurance for up to twelve (12) months of interruption of
rents.
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The proceeds of Landlord's property and builder's risk insurance, in case of
loss or damage, shall be applied to repair or rebuild the Shopping Center
(including, without limitation, the Common Areas, the Building and the Premises,
excluding Tenant's leasehold improvements) in a manner and respect consistent
with the requirements of this Lease. Upon request from Tenant, Landlord shall
furnish Tenant with evidence of its insurance in the form of an ACORD 27
certificate (or its equivalent, if no longer available). All amounts paid by
Landlord for obtaining the insurance required herein shall be included in
Operating Expenses.
ARTICLE 12
DAMAGE OR DESTRUCTION
12.1 NOTICE. Tenant shall give prompt written notice to Landlord of any
damage caused to the Premises by fire or other casualty.
12.2 RESTORATION AFTER DAMAGE OR DESTRUCTION.
(a) In the event that the Premises, the Building, or the Common Areas
shall be damaged or destroyed by fire or other casualty and this Lease is not
terminated as hereinafter provided, Landlord shall promptly rebuild and repair
the Premises, the Building and the Common Areas in a first-class manner and with
first-class materials to the condition they were in immediately prior to such
casualty, at Landlord's sole cost and expense. If the Building or the Premises
(which, for purposes of this Article 12, shall not include Tenant's leasehold
improvements, signs, personal property, furniture, fixtures and equipment) shall
be destroyed or rendered untenantable to an extent in excess of fifty percent
(50%) of the floor area thereof, then Landlord may elect either to terminate
this Lease or to proceed to rebuild and repair the Building, the Premises and
the Common Areas. Landlord shall give notice to Tenant of such election within
thirty (30) days after the occurrence of such casualty and, if it elects to
rebuild and repair, shall thereafter commence to do so in accordance with the
terms hereof within thirty (30) days after such notice. Failure of Landlord to
notify Tenant of its election within such thirty (30)-day period shall
conclusively result in Landlord's election to rebuild and repair in accordance
with the terms hereof. Landlord shall not discriminate unreasonably against
Tenant in the exercise of its right to terminate this Lease in accordance with
the provisions hereof.
(b) In the event that Landlord fails to repair and restore the
Premises, the Building and the Common Areas as required in this Article 12,
Tenant shall be entitled to have the same, or such portion thereof as Tenant
elects, repaired and restored at Landlord's sole cost and expense, and, if
Landlord fails to immediately pay Tenant for such work upon demand by Tenant,
Tenant shall have the right to set-off against the Rent next due and owing the
amount expended by Tenant for such repair and restoration, all without further
notice to and cure period of Landlord. Notwithstanding anything to the contrary
contained in this Lease, in the event that Landlord does not commence the repair
or restoration of such damage within the required time, or in the event that
such repairs or restorations are not completed within one hundred eighty (180)
days after the date of the casualty, Tenant shall have the right to terminate
this Lease upon written notice to Landlord delivered to Landlord (i) not earlier
than two hundred ten (210) days after the casualty and (ii) not later than two
hundred seventy (270) days after the casualty.
(c) Notwithstanding anything in this Lease to the contrary, Landlord's
obligation to rebuild and repair the Premises shall, in any event, be limited to
(i) the amount of insurance proceeds actually received by Landlord for use in
rebuilding and repairing and (ii) restoring them to substantially the same
condition in which they existed prior to such casualty, exclusive of Tenant's
leasehold improvements, trade fixtures, signs and equipment installed by Tenant.
Provided that Landlord's restoration and repairs described in Section 12.2(a)
above have been completed and Tenant has received its insurance proceeds
covering the Premises, Tenant shall thereafter proceed with reasonable diligence
at its sole cost and expense and in any event within thirty (30) days of
substantial completion by Landlord of its repairs, to restore, repair and
replace its leasehold improvements, trade fixtures, signs and equipment
installed by Tenant to substantially the same condition in which they existed
prior to such damage or destruction and to use commercially reasonable efforts
to reopen within one hundred twenty (120) days after Landlord's restoration and
repairs. Tenant shall assign to Landlord, and shall cause any co-insured in
Tenant's stead, if
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applicable, to assign to Landlord, immediately upon receipt thereof, all
proceeds of Landlord's insurance policies that name Tenant and/or such other
co-insured as an additional insured, which proceeds shall be used for such
reconstruction.
12.3 TOTAL DESTRUCTION. If the Building or the Premises shall be
totally destroyed by fire or other casualty, or if the Building or the Premises
shall be so damaged by fire or other casualty that its repair or restoration
(including, without limitation, restoration of reasonable means of ingress and
egress) under applicable laws and regulations requires more than one hundred
eighty (180) days (as determined by a contractor mutually satisfactory to the
parties), Landlord and Tenant shall each have the option to terminate this Lease
by giving the other party written notice to such effect within sixty (60) days
after the date of the casualty, which termination shall be effective as of the
date of such notice. Failure of either party to notify the other of its election
within such sixty (60) day period shall conclusively result in Landlord's and
Tenant's election not to terminate this Lease.
12.4 RENT ABATEMENT. During any period of reconstruction or repair of
the Premises, Tenant shall continue the operation of its business within the
Premises to the extent practicable. In the event that the entire Premises are
totally destroyed, there shall be a complete abatement of Rent. If:
(a) the Building, the Common Areas or the Shopping Center shall be
damaged or destroyed by fire or other casualty thereby causing the
Premises to be inaccessible; or
(b) the Premises shall be partially damaged by fire or other
casualty,
then:
(i) if access to, or use of, the Premises as a health club as
it was prior to the casualty is not materially impaired, Rent shall
abate in the proportion that the unusable area of Premises, as
determined by Tenant and Landlord in their good faith discretion,
bears to the total area of the Premises; or
(ii) if access to, or use of, the Premises as a health club as
it was prior to the casualty is materially impaired, Rent shall
abate based upon the extent to which access to or use of the
Premises as a health club as it was prior to the casualty has been
impaired, as determined by Tenant and Landlord in their good faith
discretion.
In the event that any casualty occurs prior to Tenant's opening the Premises for
business, Rent shall abate until Tenant is reasonably able to open the Premises
for the purpose of doing business.
12.5 PAYMENT FOR RESTORATION.
(a) Subject to Section 12.2(c) and provided that this Lease has not
been terminated in accordance with the provisions of this Article, the proceeds
of all hazard insurance carried pursuant to Article 11 ("HAZARD INSURANCE
PROCEEDS") shall be used to pay for the repair and restoration work performed
pursuant to the terms hereof. Landlord and Tenant shall timely make all claims
with respect to obtaining the hazard insurance proceeds from the insurer.
(b) If the total cost of restoring the Premises, as provided in this
Article, is less than the amount of the hazard insurance proceeds applicable to
such restoration work, the balance of the hazard insurance proceeds shall be
paid to the party responsible for maintaining such insurance upon delivery of
final waivers of lien and such other documentation as may be reasonably
requested by the other party in order to confirm that such restoration work has
been completed in substantial accordance with the terms hereof.
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(c) If this Lease is terminated by either party pursuant to the terms
and provisions of this Article, all Rent shall be prorated to the date of such
damage or destruction and all hazard insurance proceeds shall be retained by the
party whose insurance policies yielded such proceeds.
12.6 RESTORATION NEAR END OF TERM. If the Premises are damaged or
destroyed to such an extent as to render them untenantable for a period in
excess of thirty (30) days within twenty-four (24) months of the expiration of
the Initial Term or of any Option Term hereof, then, at Tenant's or Landlord's
option and upon notice to the other given within thirty (30) days after the date
of the casualty, this Lease shall terminate as of the date of such damage or
destruction. However, if Tenant notifies Landlord that it elects to extend the
Term for the next Option Term, such termination shall be deemed to be null and
void, and the provisions of the remainder of this Article 12 shall apply.
ARTICLE 13
INDEMNITY
13.1 TENANT'S INDEMNITY. Subject to the waiver of subrogation contained
in Section 11.1 hereof, Tenant shall indemnify, hold harmless and defend
Landlord from and against any and all claims, proceedings, injuries, damages,
losses, costs and expenses (including, without limitation, reasonable attorneys'
fees and legal costs) suffered or incurred by Landlord (whether directly or by
reason of any claim, suit, or judgement brought by, or awarded in favor of, any
person or persons) for damages, losses, costs and/or expenses due to, but not
limited to, personal injury (including, but not limited to, death resulting at
any time therefrom) and/or property damage sustained by any person or persons
that arise out of, is occasioned by, or is in any way attributable to the use,
operation and/or management of the Premises by Tenant and/or others, as well as
the acts or omissions of Tenant, its agents, employees, or contractors while in
the Premises, except to the extent that the same is caused intentional
misconduct or gross negligence of Landlord or its employees, agents, or
contractors.
13.2 LANDLORD'S INDEMNITY. Subject to the waiver of subrogation
contained in Section 11.1 hereof, Landlord shall indemnify, hold harmless and
defend Tenant from and against any and all claims, proceedings, injuries,
damages, losses, costs and expenses (including, without limitation, reasonable
attorneys' fees and legal costs) suffered or incurred by Tenant (whether
directly or by reason of any claim, suit, or judgement brought by, or awarded in
favor of, any person or persons) for damages, losses, costs and/or expenses due
to, but not limited to, personal injury (including, but not limited to, death
resulting at any time therefrom) and/or property damage sustained by any person
or persons that arise out of, is occasioned by, or is in any way attributable to
the ownership, operation and/or management of the Shopping Center by Landlord
and/or others, as well as the acts or omissions of Landlord, its agents,
employees, or contractors, except to the extent that the same is caused by the
acts, omissions, or negligence of Tenant or its employees, agents, or
contractors while in the Premises.
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ARTICLE 14
CONDEMNATION
14.1 TOTAL TAKING. If more than thirty (30%) percent of the floor area
of the Premises (or a lesser amount, in the event that Tenant is unable to
reasonably operate its business in the remainder) shall be taken for any public
or quasi-public use under any law, ordinance, or regulation, by right of eminent
domain, or by private purchase in lieu thereof, this Lease shall terminate, and
the Rent shall be abated during the unexpired portion of this Lease effective on
the date physical possession is taken by the condemning authority (the "TAKING
DATE").
14.2 PARTIAL TAKING. If this Lease is not terminated in accordance with
Section 14.1 above, the Base Rent payable hereunder during the unexpired portion
of the Term shall be reduced according to the extent that the interference of
such taking has on the operation of Tenant's business at the Premises, effective
on the Taking Date. Following such partial taking, Landlord shall make all
repairs or alterations that are required to make the remaining portions of the
Premises an architectural whole. Tenant's Proportionate Share of Operating
Expenses shall be adjusted as of the date of the taking.
14.3 PARKING AREAS. If ten (10%) percent or less of the Parking Areas
shall be taken as aforesaid, this Lease shall not terminate, nor shall the Rent
payable hereunder be reduced, unless a portion of the Premises shall also be
taken (in which event the provisions of Section 14.1 or 14.2, as the case may
be, shall apply thereto without regard to the taking of a portion of the Parking
Areas). However, if the area of the Parking Areas remaining following such
taking, plus any additional parking area provided by Landlord in reasonable
proximity to the Shopping Center, shall be less than ninety (90%) percent of the
area of the Parking Areas as of either the Delivery Date or immediately prior to
the taking (whichever shall be the larger), then, whether or not a portion of
the Premises shall also be taken, Tenant may terminate this Lease by giving
written notice thereof to Landlord within sixty (60) days after the Taking Date.
14.4 DISTRIBUTION OF AWARD. All compensation awarded for any taking (or
the proceeds of private sale in lieu thereof) of the Premises or Parking Areas
shall be the property of Landlord, except, however, that:
(a) Tenant shall receive from such award an amount equal to its
share of the unamortized value of Tenant's leasehold improvements,
which shall be deemed to be amortized on a straight-line basis over the
period commencing on the Rent Commencement Date and expiring on the
last day of the Initial Term; and
(b) Landlord shall have no interest in any award made to Tenant for
Tenant's loss of business goodwill, moving and relocation expenses, or
for the loss of Tenant's fixtures and other tangible personal property.
ARTICLE 15
ENVIRONMENTAL MATTERS
15.1 REPRESENTATIONS. Landlord represents and warrants to Tenant as of
this date and to the best of Landlord's actual knowledge that :
(a) Landlord has received no notice, and has no knowledge, of any
respect in which the Shopping Center, or any part thereof, is in
violation of any federal, state or local environmental law (including,
without limitation, any laws dealing with Hazardous Materials).
(b) Landlord has never caused or permitted any Hazardous Materials
(except for normal cleaning supplies and construction materials used in
accordance with manufacturer's instructions) to be placed, held,
located or disposed on, under, or at the Shopping Center, the Premises,
or any part thereof;
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(c) Landlord has no notice or knowledge that the Premises or the
Shopping Center has ever been used, whether by Landlord or by any other
person or entity, as a dump site, or a storage site, whether permanent
or temporary, for any Hazardous Materials; and
(d) the Premises, the Shopping Center and any ground water existing
thereon are free from any underground storage tanks and any toxic
and/or hazardous substances as defined in Section 101(14) of the
Comprehensive Environmental Response, Compensation and Liability Act,
as amended, 42 U.S.C. Section 9601(14).
As used in this Article 15, the term "HAZARDOUS MATERIALS" shall mean any
hazardous, toxic, or dangerous substance or material, or any substance or
material defined as such in (or for purposes of) the Comprehensive Environmental
Response, Compensation and Liability Act, any so-called "super fund" or "super
lien" law, or any other federal, state, or local statute, law, ordinance, code,
regulation, order, or other requirement of any governmental authority
regulating, relating to, or imposing liability for, or standard of conduct
concerning, any hazardous, toxic, or dangerous waste, substance, or material, as
now or at any time hereafter in effect (collectively, "ENVIRONMENTAL LAWS").
Without limiting the generality of the foregoing, Hazardous Materials shall be
deemed to include asbestos (in any form or condition), petroleum, crude oil,
natural gas, natural gas liquids and/or polychlorinated biphenyls.
15.2 COVENANTS. Neither Landlord nor Tenant shall generate, transport,
treat, store, or dispose of, or in any manner arrange for the disposal or
treatment (within the meaning of Environmental Laws) of, any Hazardous Material
within the Shopping Center, excepting, however, the proper storage, use and
disposal, in the normal operation of the Shopping Center (with respect to
Landlord) or of the Premises (with respect to Tenant), of typical,
commercially-available chemicals and products (including, without limitation,
cleaning products and lubricating oils), so long as such storage, use and
disposal comply with all applicable Environmental Laws and any other applicable
provisions of this Lease.
15.3 BREACH. If Landlord shall breach any of the representations,
warranties, or covenants made by Landlord in this Article 15, Tenant shall have
the right, in its sole discretion, upon written notice and, in the event of a
breach of covenant only, after allowing Landlord thirty (30) days after the
giving of such notice of default within which to cure such breach of covenant
(or such longer cure period as may be reasonably necessary under the
circumstances, provided that such cure is commenced within the aforesaid thirty
(30) day period and is diligently prosecuted to completion), to:
(a) terminate this Lease, but only if a governmental agency or
political subdivision requires that Tenant cease operating its business
at the Premises for a period of thirty (30) consecutive days due to any
environmental matters or conditions that were not caused by the acts or
negligence of Tenant, its agents, or employees;
(b) continue this Lease, but if the Premises, or any portion
thereof, shall be rendered untenantable, or if access to the Premises
shall be materially impaired, as a direct or indirect result of any
environmental matter or condition at the Shopping Center (including,
without limitation, as a consequence of any remediation work), abate
the Rents payable under this Lease in the same manner, and to the same
degree, as provided in Section 12.4 of this Lease, as if such
impairment of use or access were instead caused by a fire or other
casualty; and/or
(c) pursue Tenant's other remedies under this Lease, at law, or in
equity, which Tenant may do cumulatively or alternatively, singularly
or in combination.
If Tenant shall breach the covenant made by Tenant in Section 15.2 above,
Landlord shall have the right to pursue Landlord's remedies under this Lease
(including, without limitation, the right to terminate this Lease pursuant to
Section 10.2 above), at law, or in equity, which Landlord may do cumulatively or
alternatively, singularly or in combination.
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15.4 ENVIRONMENTAL INDEMNITIES. Each party shall indemnify, defend
(with counsel selected or reasonably approved by the other party) and hold the
other party and its officers, employees and agents harmless from any claims,
judgments, damages, penalties, fines, costs, liabilities (including sums paid in
settlement of claims) or loss, including reasonable attorneys' fees, consultant
fees and expert fees (consultants and experts to be selected or reasonably
approved by the other party) that arise during or after the Term from, or in
connection with, the presence or suspected presence of Hazardous Materials in
the soil, ground water, or soil vapor, or in, on, or under the Premises or the
Shopping Center (including, without limitation, costs incurred in connection
with any investigation of site conditions or any cleanup, remedial, removal or
restoration work required by any federal, state or local governmental agency, or
political subdivision because of the presence, or suggested presence, of
Hazardous Materials therein or thereon), except to the extent that such
Hazardous Materials are present solely as a result of the acts or negligence of
such other party, its officers, employees, contractors, or agents. The foregoing
indemnities shall survive the expiration or earlier termination of this Lease.
ARTICLE 16
LANDLORD'S WORK
16.1 PERFORMANCE OF LANDLORD'S WORK.
(a) Attached hereto as EXHIBIT F is a description of the work that
Landlord shall perform, at its sole cost and expense, in order to prepare the
Shopping Center and the Premises for Tenant's use and occupancy ("LANDLORD'S
Work"). Landlord's Work shall be performed pursuant to validly issued permits
and, when completed, shall comply with all applicable laws, ordinances, rules,
orders and regulations of the governmental authorities having jurisdiction
thereover. Landlord shall submit plans for Landlord's Work to Tenant for
Tenant's approval within thirty (30) days of lease execution. Tenant shall have
a period of ten (10) business days within which to either approve such plans or
to make comments or changes thereon. If applicable, Landlord shall promptly
revise the plans and resubmit same to Tenant for approval. Landlord's Work shall
be substantially completed not later than 210 days after the Commencement Date
(the "OUTSIDE DELIVERY DATE"). If Landlord fails to perform and/or substantially
complete Landlord's Work as aforesaid, Tenant shall be entitled to:
(i) have the same done and paid for by Landlord, and if Landlord
fails to immediately pay Tenant for such work upon demand by Tenant,
Tenant shall have the right to set-off against Rent payments next due
and owing the amount expended by Tenant for such work plus fifteen
percent (15%) of the amount thereof, all without further notice or cure
period of Landlord;
(ii) terminate this Lease by giving written notice thereof to
Landlord at any time after the Outside Delivery Date and prior to the
Delivery Date, in which event:
(x) Tenant shall have no further obligations under this Lease;
and
(y) Landlord shall reimburse Tenant, within fifteen (15) days
after Tenant's written demand, for all costs and expenses
(including, without limitation, all reasonable architectural,
engineering and legal fees) incurred by Tenant in planning Tenant's
leasehold improvements, as well as in negotiating and documenting
this Lease; and/or
(iii) pursue Tenant's other remedies under this Lease, at law
and/or in equity, cumulatively or alternatively, singularly or in
combination.
(b) Within thirty (30) days after the Delivery Date, Tenant shall
prepare and submit to Landlord a list of those items of Landlord's Work
requiring correction and/or completion (the "PUNCH LIST"). In the event that
Landlord shall object to any item set forth on the Punch List,
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Landlord shall give Tenant written notice thereof within five (5) days after
Landlord's receipt of the Punch List, setting forth in reasonable detail the
item or items to which Landlord objects and the grounds for such objection. If
Landlord shall fail to so notify Tenant within such five (5) day period, then
Landlord shall be deemed to have accepted the Punch List and agreed to correct
and/or complete (as the case may be) all items set forth thereon in accordance
with the provisions of paragraph (c) below. Conversely, if Landlord shall so
notify Tenant within such five (5) day period, then:
(i) if Landlord shall fail to object to all of the items set forth
in the Punch List, then Landlord shall be deemed to have accepted those
items on the Punch List as to which Landlord shall not have objected
and agreed to correct and/or complete (as the case may be) such items
in accordance with the provisions of paragraph (c) below; and
(ii) with respect to those items set forth on the Punch List as to
which Landlord has so objected:
(x) Landlord and Tenant shall attempt in good faith to resolve
the dispute within ten (10) days thereafter, and, to the extent
that the parties shall agree as to any item(s) to which Landlord
has objected, they shall confirm such agreement in writing; and
(y) to the extent that the parties are unable to resolve their
dispute as to one or more items on the Punch List and join in such
a confirmatory writing within such ten (10) day period, Tenant
shall have the right, at any time thereafter prior to such a
resolution, to submit the dispute for determination by an
independent architect mutually selected by the parties, whose
written determination shall be conclusive and binding upon the
parties.
(c) Landlord shall correct and/or complete all items on the Punch List
with reasonable diligence but, in any event, within thirty (30) days after
Landlord's receipt of the same or, if Landlord shall object to one or more items
on the Punch List as and when provided in paragraph (b) above, as to those items
within thirty (30) days after Landlord's objection has been resolved as provided
in the said paragraph. If Landlord fails to correct and/or complete any of such
items within such thirty (30) day period, then Tenant shall be entitled to:
(i) have the same done and paid for by Landlord, and if Landlord
fails to immediately pay Tenant for such work upon demand by Tenant,
Tenant shall have the right to set-off against Rent payments next due
and owing the amount expended by Tenant for such work plus fifteen
percent (15%) of the amount thereof, all without further notice or cure
period of Landlord; and/or
(ii) pursue Tenant's remedies at law and in equity, cumulatively or
alternatively, singularly or in combination.
(d) Tenant's acceptance of possession of the Premises shall, in all
respects, be deemed to be subject to Landlord's continuing obligation to correct
and/or complete the items set forth on any Punch List theretofore or thereafter
delivered to Landlord as set forth in Paragraph (b) above, as well as to
correct, diligently and in good faith, any latent defect(s) in the Premises as
to which Tenant shall give Landlord written notice, from time to time, within
twelve (12) months after the Rent Commencement Date. In the event that Landlord
shall fail to so correct any such latent defect(s), Tenant shall have the same
remedies as set forth in paragraph (c) above for Landlord's failure to timely
correct any Punch List item.
(e) None of the costs incurred by Landlord in connection with the
performance of Landlord's Work (including, without limitation, in correcting
and/or completing any Punch List items(s) and/or in correcting any latent
defect(s) as hereinabove provided) shall be included in Operating Expenses.
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16.2 NO LIENS BY LANDLORD. During the Term hereof, Landlord shall not
create, or permit to be created or to remain, any mechanics' or materialmen's
liens, or any other encumbrances or charges, upon all or a portion of the
Premises or upon Tenant's leasehold estate. If any such lien, encumbrance, or
charge shall at any time be filed, Landlord shall forthwith cause the same to be
discharged of record, PROVIDED, HOWEVER, that Landlord shall not be required to
pay or discharge any such liens if, within thirty (30) days after the recording
of same, Landlord commences and thereafter proceeds diligently, in good faith,
to contest said lien by appropriate proceedings. Before Landlord commences such
contest, it shall, upon request, provide Tenant with:
(a) a bond that will release the effect of the lien from the
Premises or upon Tenant's leasehold estate; or
(b) title insurance, insuring Tenant against any defect in Tenant's
interest resulting from any such lien or encumbrance.
Landlord further agrees to indemnify Tenant for all reasonable costs, attorneys'
fees, or other charges incurred by Tenant as a result of any such lien or
encumbrance being filed against the Premises or upon Tenant's leasehold estate,
and against any costs or claims against Tenant arising out of any such liens or
encumbrances.
ARTICLE 17
TENANT'S WORK
17.1 PLANS AND SPECIFICATIONS. Other than Landlord's Work, all work in
and to the Premises that shall be necessary or desirable in order to prepare the
same for Tenant's use and occupancy ("TENANT'S WORK") shall be performed by
Tenant at its sole cost and expense (except to the extent that all or a portion
of the same is to be reimbursed to Tenant through the Landlord Contribution as
and when hereinafter provided). Within thirty (30) days after the latest to
occur of:
(a) the Commencement Date;
(b) the date upon which Landlord delivers to Tenant a complete set
of plans for the Building, showing the Premises as the same will be
constituted after the completion of Landlord's Work, in form and having
content sufficient to permit Tenant's architect to begin to prepare its
preliminary plans and specifications for Tenant's Work based thereon;
and
(c) the date upon which Tenant receives a signed, original copy of
the Asbestos Certificate,
Tenant shall prepare or cause to be prepared preliminary plans and
specifications for Tenant's Work and shall submit the same to Landlord for
approval, such approval not to be unreasonably withheld. Landlord shall have a
period of fifteen (15) days within which to either approve such plans and
specifications or to make comments or changes thereon. If Landlord does not
respond to Tenant's submission of plans and specifications within such fifteen
(15)-day period, Landlord shall be deemed to have approved the same. Within
sixty (60) days after Landlord's approval of Tenant's preliminary plans, Tenant
shall prepare and submit to Landlord for its approval (not to be unreasonably
withheld) final plans and specifications for Tenant's Work. If Landlord does not
respond to Tenant's submission of final plans and specifications within fifteen
(15) days after they have been provided to Landlord, Landlord shall be deemed to
have approved the same. In the event Landlord disapproves any submission of
Tenant pursuant to the terms hereof, Landlord shall simultaneously with such
disapproval give Tenant detailed reasons therefor and the parties shall
diligently attempt to resolve all outstanding matters as soon as possible,
PROVIDED, HOWEVER, that in the event the parties are unable to agree upon same
within one hundred twenty (120) days after the commencement of such dispute,
either party shall have the right, upon notice to the other, to terminate the
Lease, and neither party shall thereafter have any further obligation or
liability to the other. The final plans and specifications, when approved by
Landlord, are referred to in this Lease as the "FINAL PLANS."
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17.2 PERMITS. Promptly after Landlord has approved the Final Plans,
Tenant shall submit them to the City of Charlotte, North Carolina and any other
relevant governmental authority (collectively, the "LOCAL PERMITTING
Authorities") as part of its application for all building and other permits
necessary in connection with performing Tenant's Work (the "PERMITS") and shall
diligently prosecute such application. Upon Tenant's request, Landlord shall
cooperate with, and assist, Tenant in all reasonable respects in connection with
obtaining any of the Permits (including, without limitation, signing all
applications and other forms required by such authorities to be signed by
Landlord in connection with the same), PROVIDED, HOWEVER, that Landlord shall
not be obligated to incur any expense (other than Landlord's own administrative
expense and overhead) in connection with any such cooperation or assistance. If
the Local Permitting Authorities will not issue, or have not issued, the Permits
within one (1) year after the date of Tenant's submission thereto of the Final
Plans, Tenant shall have the right, upon notice to Landlord, to terminate this
Lease in which event neither party shall have any further obligation to the
other. For purposes of this Lease, issuance of the Permits shall also include
the Local Permitting Authorities' approval of Tenant's proposed signage for the
Premises and Shopping Center.
17.3 ACCESS TO PREMISES. Tenant, its agents and/or contractors shall
have the right (in Tenant's sole discretion) to enter the Premises and commence
to perform Tenant's Work in and to the same prior to the Delivery Date, at any
time after:
(a) Tenant shall have obtained all necessary Permits for the
performance of the items of work then to be performed; and
(b) Landlord's Work shall have reached such a level of completion
to permit Tenant (in its reasonable judgment) to efficiently commence
and perform Tenant's Work simultaneously with Landlord's completion of
Landlord's Work.
If, however, the commencement or performance of Tenant's Work prior to the
Delivery Date shall interfere with, or delay the completion of, Landlord's Work
to more than a de minimus extent, and Landlord shall give Tenant written notice
to such effect, then Tenant shall promptly cease the performance of Tenant's
Work (or of so much of the same as is necessary to alleviate such interference
or delay) until the earlier to occur of:
(i) the Delivery Date; and
(ii) the date upon which Landlord's Work has reached such a level
of completion that the performance of Tenant's Work (or such portion of
the same) shall not so interfere with, or delay, the completion of
Landlord's Work.
In all events, however, Landlord shall be deemed to have delivered possession of
the Premises to Tenant upon the giving of the Delivery Notice thereto, and
Tenant shall have the absolute right to enter the Premises and commence to
perform Tenant's Work in and to the same at any time thereafter (provided only
that Tenant shall have obtained all necessary Permits for the performance of the
items of work then to be performed), regardless of any interference that the
same may cause to, or any delay that may result thereby in the completion of,
any of Landlord's Work then remaining to be performed. Notwithstanding Tenant's
commencement, performance and/or completion of Tenant's Work in and to the
Premises and/or its installation of its fixtures and other equipment therein,
Tenant's obligation to pay Rent or other amounts pursuant to this Lease shall
not commence until the Rent Commencement Date.
17.4 PERFORMANCE OF TENANT'S WORK. Tenant shall commence to perform
Tenant's Work not later than sixty (60) days after the Delivery Date, SUBJECT,
HOWEVER, to Tenant's receipt of all requisite Permits for the same and to force
majeure. Tenant's Work shall be performed in accordance with all applicable
legal requirements, in a good and workmanlike manner, with reasonable diligence
(subject to force majeure) and otherwise in accordance with good construction
practices.
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ARTICLE 18
LANDLORD CONTRIBUTION
18.1 LANDLORD CONTRIBUTION. In connection with the performance of
Tenant's Work, Landlord has unconditionally agreed, as a condition of this Lease
and Tenant's obligations hereunder, to pay an amount equal to Two Hundred Fifty
Thousand Dollars ($250,000), based upon $10.00 per square foot of gross
leaseable area contained in the Premises, to be used for Tenant's Work (the
"LANDLORD CONTRIBUTION"). The Landlord Contribution shall be paid without
set-off by Landlord to Tenant in two (2) installments -- $125,000 upon 50%
completion of the Building and the balance upon Tenant's payment of the first
installment of Base Rent and the opening for business in the Premises.
18.2 SECURITY. Landlord shall provide Tenant with adequate security,
whether in the form of a "set aside letter", letter of credit, escrow account,
or other form, to assure Tenant that the Landlord Contribution will be available
to Tenant for Tenant's Work. In the event that Landlord shall fail to make
payment to Tenant for invoices properly submitted to Landlord pursuant to
Section 18.1 above within thirty (30) days of presentation of same to Landlord,
Tenant, in its sole discretion, may:
(a) continue to perform its obligations under this Lease, including
construction of Tenant's Work to completion, in which case Tenant shall
pay for all Tenant's Work and both:
(i) set-off against Rent payments that portion of the Landlord
Contribution that was remaining to be paid by Landlord, plus
interest on the outstanding amount thereof at the rate of eighteen
percent (18%) per annum, from the date when such portion of the
Landlord Contribution was due through and including the date it was
recovered by Tenant's set-off against the Rent payments then due
and coming due hereunder; and
(ii) receive an annual reduction of Base Rent for the entire
balance of the Initial Term in the amount of fourteen cents ($0.14)
for each dollar of the Landlord Contribution not funded;
(b) terminate this Lease, in which event:
(i) Tenant shall have no further obligations under this Lease;
and
(ii) Landlord shall reimburse Tenant, within fifteen (15) days
after Tenant's written demand, for all costs and expenses
(including, without limitation, all reasonable architectural,
engineering and legal fees) incurred by Tenant in planning Tenant's
leasehold improvements, as well as in negotiating and documenting
this Lease; and/or
(c) pursue Tenant's other remedies under this Lease, at law and/or
in equity, cumulatively or alternatively, singularly or in combination.
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ARTICLE 19
PRIORITY OF LEASE
19.1 EXISTING ENCUMBRANCES. It shall be a condition precedent to
Tenant's obligations under this Lease that Landlord receive, not later than
fifteen (15) days after the date of this Lease, a Subordination, Non-Disturbance
and Attornment Agreement ("SNDA") with respect to each mortgage, deed of trust,
other similar encumbrance and/or ground lease (as the case may be, a "MAJOR
TITLE DOCUMENT") encumbering the Shopping Center, or any portion thereof that
shall include the Premises, and existing of record at the time when the
Memorandum of Lease is placed of record, which SNDA shall be:
(a) in the form attached hereto as EXHIBIT G, or in such other form
as is reasonably acceptable to Tenant; and
(b) duly signed, in form for recording, by Landlord and the
mortgagee, trust deed beneficiary, other lien or, or ground lessor (as
the case may be) under such Major Title Document (as the case may be, a
"MAJOR TITLE DOCUMENT HOLDER").
If Tenant has not received all of the foregoing SNDA's within fifteen (15) days
after the date of this Lease, Tenant shall be entitled, in its sole discretion,
to either:
(i) terminate this Lease by giving written notice thereof to
Landlord at any time thereafter (but prior to Tenant's receipt of
all of the outstanding SNDA's), in which event:
(x) Tenant shall have no further obligations under this
Lease; and
(y) Landlord shall reimburse Tenant, within fifteen (15)
days after Tenant's written demand, for all costs and expenses
(including, without limitation, all reasonable architectural,
engineering and legal fees) incurred by Tenant in planning
Tenant's leasehold improvements, as well as in negotiating and
documenting this Lease; or
(ii) waive, or extend the time for completion of, such
condition precedent, but nevertheless shall be deemed to reserve
the right to avail itself of any and all other rights and remedies
available to Tenant under this Lease, at law, or in equity.
19.2 FUTURE ENCUMBRANCES. Subject to the further provisions of this
Section 19.2, this Lease and the leasehold estate of Tenant created hereby shall
be prior in lien, right, title and interest with respect to any lien,
encumbrance, or other interest (except statutory liens, to the extent required
by law) created or imposed, or caused or allowed to be created or imposed, by
Landlord from and after the date hereof upon or against the Shopping Center or
any portion thereof that shall include the Premises. Tenant shall, upon
Landlord's written request, enter into an SNDA in the form attached hereto as
EXHIBIT G, or in such other form as is reasonably acceptable to Tenant, with
Landlord and the Major Title Document Holder of any bona-fide Major Title
Document entered into from and after the date hereof in connection with the
construction or refinancing of the Shopping Center, pursuant to which SNDA,
among other things, Tenant shall subordinate the priority of this Lease and the
leasehold estate of Tenant created hereby to the lien, right, title and interest
of such Major Title Document Holder under such Major Title Document, PROVIDED,
HOWEVER, that Tenant shall be obligated to enter into such SNDA only if such
subordination would not adversely affect Tenant's priority rights with respect
to intervening liens, if any, that are recorded after the Memorandum of Lease
but prior to the recordation of the Major Title Document in question. Tenant
shall receive not less than one (1) original counterpart of each such SNDA, duly
signed, in form for recording, by Landlord and such Major Title Document Holder.
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ARTICLE 20
LANDLORD'S DEFAULT
20.1 REMEDIES FOR LANDLORD'S DEFAULT. In the event that:
(a) Landlord fails to perform any obligation required of it
pursuant to this Lease, and fails to commence curing such default
within thirty (30) days, or to complete such cure within sixty (60)
days (or such longer period of time as is reasonable under the
circumstances, provided that such cure has been timely commenced and is
diligently being prosecuted, or such shorter period of time as is
reasonable under the circumstances in the event of an emergency), after
Tenant's written notice to Landlord;
(b) Landlord fails to pay any amount required therefrom pursuant to
this Lease; or
(c) Tenant is given the right of set-off pursuant to the terms of
this Lease,
then Tenant shall have the right to pay such amount(s) or cause such work to be
performed and set-off such amounts or such costs against the next succeeding
Rent payments due by Tenant hereunder, plus interest on such amounts or costs at
the Default Interest Rate from the date upon which such amount or cost was paid
or due through and including the date upon which it was recovered by Tenant's
set-off against such Rent payments. Tenant's rights of set-off under this Lease
are not the sole and exclusive remedies of Tenant hereunder, Tenant being
entitled to pursue all of its remedies under this Lease, at law, or in equity,
cumulatively or alternatively, singularly or in combination.
ARTICLE 21
MISCELLANEOUS
21.1 NOTICES. Whenever either party wishes to give any notice, request,
or document to the other (whether required by this Lease or otherwise), such
notice, request, or document shall be sent by a nationally recognized overnight
courier delivery service properly addressed to the last address previously
specified in writing by the party to whom the written notice is given. If no
other address has been specified, all notices, requests, or documents directed
to Landlord shall be sent to it as follows:
Tower Place Joint Venture
5550 LBJ Freeway, Suite 675
Dallas, Texas 75240
With a copy to:
Childress Klein Properties
2800 One First Union Center
301 S. College Street
Charlotte, NC 28202-6021
Attn: Managing Partner - Retail
All notices, requested or documents directed to Tenant shall be sent to
it as follows:
Bally Total Fitness Corporation
8700 West Bryn Mawr Avenue
Second Floor
Chicago, IL 60631
Attn: Director of Property Management
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With a copy to:
Bally Total Fitness Corporation
8700 West Bryn Mawr Avenue
Second Floor
Chicago, IL 60631
Attn: General Counsel
Notices, requests and documents given in the manner prescribed shall constitute
sufficient notice of the contents thereof for all purposes and shall be deemed
to have been given when the same have been received by the addressee thereof,
when delivery thereof shall be refused by such addressee, or when the same is
returned to the giver thereof as undeliverable (as the case may be).
21.2 MODIFICATION OF LEASE. This Lease constitutes the entire agreement
of Landlord and Tenant and supersedes all oral and written agreements and
understandings made and entered into by the parties hereto prior to the date
hereof. None of the terms of the Lease shall be waived or modified to any
extent, except by a written instrument signed and delivered by both parties.
21.3 COVENANTS SEVERABLE. Whenever possible, each provision of this
Lease shall be interpreted in such a manner as to be effective and valid under
applicable state law. If any provision of this Lease be prohibited or
invalidated under applicable law, such provision(s) shall only be ineffective to
the extent of such prohibition of invalidity, without invalidating the remaining
provisions of this Lease.
21.4 PAYMENT OR PERFORMANCE UNDER PROTEST. If, at any time, a dispute
shall arise as to any amount to be paid, or any other act to be performed, by
either party under any provision hereof, the party against whom the obligation
to pay money or to perform another act is asserted shall have the right to make
payment or perform (as the case may be) "under protest." A payment or
performance "under protest" shall not be regarded as voluntary payment or
performance, and the payor or performer (as the case may be) may institute suit
for the recovery of the payment or the cost of performing such act (as the case
may be). If it shall be adjudged that there was no legal obligation on the part
of the payor to make such payment or any part thereof, or on the part of the
performer to perform such act or any part thereof (as the case may be), the
payor or performer shall be entitled to recover such payment or the cost of
performing such act (as the case may be), or so much thereof as it was not
legally required to pay or perform, together with its reasonable expenses of
suit (including, without limitation, reasonable attorneys' fees and costs).
21.5 TENANT'S OBLIGATION TO OPEN AND TENANT'S RIGHT TO CEASE
OPERATIONS. Tenant shall be required to open for business eighteen (18) months
after the later of (i) the Delivery Date and (ii) the date upon which Tenant
obtains all Permits necessary to complete Tenant's Work. Notwithstanding
anything contained in this Lease to the contrary, Tenant shall not have any
obligation to continuously operate a health and fitness club, or any other
business, in the Premises. Rather, Tenant shall have the right, in its sole and
absolute discretion, to cease its business operations in the Premises, to reopen
the Premises for business to the public, to remove any or all of its property
therefrom and/or to reinstall any or all of its property therein, each from time
to time throughout the Term. However, Tenant's election to cease business
operations in the Premises shall not affect Tenant's obligation to pay all Rents
as and when due hereunder, as well as to perform all of Tenant's other
obligations under this Lease.
21.6 CONSTRUCTION. Any word contained in the text of this Lease shall
be read as the singular or plural, or in the masculine, feminine, or neuter
gender, as may be applicable in the particular context. The captions of this
Lease are for convenience and reference only, and in no way limit or expand the
scope or intent of this Lease or any Section hereof.
21.7 ATTORNEYS' FEES. Should either party hereto institute any action
or proceeding at law or in equity to enforce or interpret any provision hereof
for damages or other relief by reason of an alleged breach of any provision
hereof, the prevailing party shall be entitled to receive from the losing party,
in addition to allowable court costs, such amount as the court may adjudge to be
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reasonable as attorneys' fees for the services rendered the prevailing party in
such action or proceeding, and such amount may be made a part of the judgment
against the losing party.
21.8 TIME OF THE ESSENCE. Time is of the essence of this Lease and all
of the terms, provisions, covenants and conditions hereof.
21.9 SHORT FORM LEASE. Contemporaneously with their execution and
delivery of this Lease, the parties have executed and delivered a memorandum or
so-called "short form" of this Lease in recordable form for the purposes of
recordation at Tenant's expense (as the case may be, the "MEMORANDUM OF LEASE").
In the event of any conflict between the terms and provisions of the Memorandum
of Lease and the terms and provisions of this Lease, the terms and provisions of
this Lease shall govern and control.
21.10 LANDLORD'S ACCESS TO PREMISES. Notwithstanding anything to the
contrary contained in this Lease, except for emergencies, Landlord shall only
enter the Premises after giving twenty-four (24) hours' advance notice to
Tenant, during reasonable business hours and in a manner so as not to interfere
with the operation of Tenant's business. To the greatest extent that
circumstances shall permit, any work required or permitted to be performed in
and to the Premises by Landlord pursuant to this Lease shall be performed other
than during Tenant's hours of operation of the Premises, if Tenant shall so
elect, and pursuant to plans and specifications approved in writing by Tenant
(which approval shall not be unreasonably withheld, delayed, or conditioned).
Any installations required or permitted to be made in the Premises by Landlord
pursuant to this Lease shall be located in concealed locations above Tenant's
hung ceilings (if any), below Tenant's finish flooring (if any) and/or in
existing columns. Any other repairs, alterations and/or additions required or
permitted to be performed in and to the Premises by Landlord pursuant to this
Lease shall be of a nature and design that shall cause the least practicable
interference with the operation of Tenant's business and shall, in no event,
affect ingress to, or egress from, the Premises in any respect. Any installation
and/or other work required or permitted to be performed in and to the Premises
by Landlord pursuant to this Lease shall be performed diligently and
continuously to completion, so as to complete the same at the earliest possible
time. To the extent that any such installation and/or other work shall damage
any of Tenant's trade fixtures, Tenant's equipment, Tenant's inventory, Tenant's
other movable personal property, any fixtures and/or any leasehold improvement
made to the Premises (including, without limitation, Tenant's Work and any
Alterations subsequent thereto), Landlord shall, promptly after the completion
of such installation and/or other work, repair any such damage and restore such
assets and/or improvements (as the case may be) to their former condition, all
at Landlord's sole cost and expense.
21.11 CHOICE OF LAW. This Lease shall be governed by, and construed in
accordance with, the laws of the State in which the Premises are located.
21.12 PARTIES BOUND. Except as expressly otherwise provided, all of the
terms, covenants and conditions hereof shall be binding upon, and inure to the
benefit of, the parties hereto and their respective heirs, personal
representatives, executors, successors in interest and assigns. Landlord may, at
any time, assign or transfer its interest as Landlord in and to this Lease, and
sell or transfer its interest in Shopping Center or any part thereof,. In the
event of any such conveyance and transfer, all of Landlord's obligations
hereunder shall thereafter be binding only upon each such transferee, PROVIDED,
HOWEVER, that in no event shall such sale or transfer relieve Landlord of its
obligation to complete Landlord's Work or fund the Landlord Contribution in
accordance with the terms of this Lease. In the event of such transfer, Tenant
shall attorn to the purchaser or successor to Landlord's interest in the Lease
and recognize such purchaser or successor as Landlord under this Lease and such
other party shall recognize Tenant as tenant under this Lease and shall be bound
by all of Landlord's obligations hereunder.
21.13 FORCE MAJEURE. For purposes of this Lease, "FORCE MAJEURE" shall
mean delays due to any acts of God, adverse weather conditions, strikes, labor
disputes, wars, riots, governmental regulation or restriction, material and
labor shortages, fire or other casualty, or other cause beyond the reasonable
control of the party affected. If force majeure occurs, the time for performance
or completion of any act required in this Lease (but not including Tenant's
obligation to pay Rent once
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the Rent Commencement Date has occurred, unless Rent is abated in accordance
with the terms of this Lease) shall be extended one (1) day for each day of
delay.
21.14 ESTOPPEL CERTIFICATE. Either party shall, within twenty (20)
business days after receiving a written request from the other party, make a
statement in writing certifying:
(a) that the Term has commenced, setting forth the date of such
commencement and termination;
(b) that this Lease is unmodified and in full force and effect (or,
if there have been modifications, that the Lease is in full force and
effect, as modified, and stating the modification(s));
(c) whether to its knowledge (without independent investigation)
there are then existing any offsets or defenses against the enforcement
of any of such party's covenants hereunder (and, if so, specifying
them);
(d) the dates to which Base Rent, Additional Rent and all other
amounts to be paid by Tenant hereunder have been paid in advance, if at
all;
(e) whether or not Tenant has acquired any interest in the
Premises, except for its interest under this Lease;
(f) whether, to its knowledge, there are any uncured defaults by
the other party, and, if defaults are claimed, stating the facts giving
rise thereto; and
(g) such other factual statements as may be reasonably requested.
Any such statement given by a party may be relied upon by the other party, by a
prospective purchaser or assignee (as the case may be) of the other party's
interest in the Shopping Center, by any mortgagee, assignee, or prospective
mortgagee, by any person merging with or consolidating into the other party, or
by any person acquiring any or all of the assets of the other party, through the
date of the estoppel certificate.
21.15 BROKERAGE COMMISSION. Landlord and Tenant each represent and
warrant to the other that it has had no dealings with any real estate broker or
agent in connection with the negotiation of this Lease, and that it knows of no
real estate broker or agent who is, or might be, entitled to a commission in
connection herewith, other than Divaris Real Estate, Inc. and Childress Klein
Properties. Landlord and Tenant each agree to indemnify and hold harmless the
other from and against any liability or claim, whether meritorious or not,
arising with respect to any broker who alleges it has dealt with such
indemnifying party in connection with this Lease, other than the broker(s) named
above.
21.16 PRE-SALE SPACE AND GRAND OPENING.
(a) During the period (the "PRE-SALE PERIOD") commencing on the date
hereof and continuing until the earlier of:
(i) the date Tenant opens the Premises for business; or
(ii) the date this Lease is terminated,
Tenant shall have the right to conduct pre-sales of health club memberships from
an in-line space at the Shopping Center approximately two thousand (2,000)
square feet in size, the exact location of such space (the "PRE-SALE SPACE") to
be mutually agreeable to Landlord and Tenant. Tenant may at its sole expense
finish, furnish and equip the Pre-Sale Space as it sees fit. The Pre-Sale Space
shall be occupied by Tenant rent-free, and Tenant's use of the same for pre-sale
purposes shall not constitute Tenant's opening for business or taking possession
of the Premises for any purpose hereunder. At any time, and from time to time,
during the Pre-Sale Period, Tenant shall have the
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right, in addition to Tenant's signage rights pursuant to Section 7.4 above and
to the fullest extent permitted by applicable codes, to place at Tenant's sole
expense one or more temporary signs upon the exterior of the Premises, as well
as upon any pylon sign to which Tenant shall have signage rights pursuant to
this Lease, announcing the coming of Tenant's health and fitness club to the
Shopping Center and/or the grand opening of the Premises. Each of such temporary
signs shall be subject to Landlord's prior written consent as to the design,
dimension and location thereof, not to be unreasonably withheld or delayed.
(b) Notwithstanding anything to the contrary set forth in this Lease,
for a period not to exceed sixty (60) days from the date of Tenant's so-called
"Grand Opening" of the Premises, Tenant shall have the right, subject to receipt
of any necessary local governmental approvals, to utilize banners, balloons,
streamers, flags and similar promotional devices on the exterior of the Premises
and/or in the Common Areas substantially adjacent to the Premises.
21.17 MERCHANTS' ASSOCIATION. Tenant shall not be required to become a
member of, participate in, contribute to, nor otherwise remain in good standing
in any Merchants' Association now existing or hereafter formed with respect to
the Shopping Center.
21.18 NO PARTNERSHIP OR JOINT VENTURE. It is the intention of the
parties hereto to create only the relationship of landlord and tenant between
them in this Lease, and no provision hereof, or act of either party hereunder,
shall ever be construed as creating the relationship between the parties of
principal and agent, partners, or joint venturers.
21.19 LANDLORD LIABILITY. Notwithstanding anything in this Lease to the
contrary, all obligations of Landlord hereunder will be construed as covenants,
not conditions, and all such obligations will be binding upon Landlord only
during the period of its ownership and possession of the Premises and not
thereafter. The term "Landlord" shall mean only the owner of the Premises with
respect to the time at which any claim is asserted in a written notice delivered
to the owner at such time, and in the event of the transfer by such owner of its
interest in the Premises, such owner shall thereupon be released and discharged
from all covenants and obligations of the Landlord thereafter accruing, but such
covenants and obligations shall be binding during the Term upon each new owner
for the duration of such owner's ownership. Notwithstanding any other provision
hereof, Landlord shall not have any personal liability hereunder. In the event
of any breach or default by Landlord in any term or provision of this Lease,
Tenant agrees to look solely to the equity or interest then owned by Landlord in
the land and improvements which constitute the Premises or the Shopping Center;
however, in no event, shall any deficiency judgment or any money judgment of any
kind be sought or obtained against any landlord which is now or hereafter a
party to this Lease.
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<PAGE> 51
IN WITNESS WHEREOF, the parties have duly executed this Lease as of the
day and year first above written.
TENANT:
BALLY TOTAL FITNESS CORPORATION,
a Delaware corporation
By: /s/Cary A. Gaan
----------------------------------------
CARY A. GAAN,
SENIOR VICE PRESIDENT
LANDLORD:
TOWER PLACE JOINT VENTURE,
a Texas joint venture
By: Murray Income Properties I, Ltd.,
a Texas Limited Partnership
Its: Joint Venturer
By: Murray Realty Investors
VIII, Inc., a
Texas corporation
Its: General Partner
By: /s/Brent Buck
------------------------------
Brent Buck
Executive Vice President
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EXHIBIT A
LEGAL DESCRIPTION OF THE SHOPPING CENTER
That certain tract or parcel of land situate in the town of Pineville,
Mecklenburg County, North Carolina, being more particularly described as
follows:
BEGINNING at a point in the northerly margin of the 100 foot wide right of way
of North Carolina Highway No. 51 (the Matthews-Pineville Road, said Beginning
Point being also located in the southeasterly line of the property conveyed to
Faye S. Dixon (widow) et al by deed dated February 15, 1983, recorded in Book
4626 at page 305 in the Mecklenburg Registry, and running thence from said
Beginning Point with the aforesaid Dixon property (now or formerly) in two calls
as follow: (1) N. 23-19-23 E. 250.0 feet to an iron; thence (2) N. 70-30-00 W.
150.34 feet to an old nail; thence with two lines of the property of Lorick
Enterprises, Inc. (now or formerly) as follow: (1) N. 23-19-23 E. 75.67 feet to
a nail; thence (2) N. 66-40-37 W. 89.14 feet to a nail; thence with two lines of
the property of Brevard S. Myers (now or formerly) as follow: (1) N. 26-46-23 E.
196.47 feet to an iron; thence (2) N. 61-16-23 E. 90.00 feet to an iron; thence
with a line of the property of Brevard S. Myers (now or formerly) and continuing
with the line of the property of Park Road Associates (now or formerly) N.
26-46-23 E. 103.50 feet to an iron; thence S. 71-19-59 E. 680.05 feet crossing
two irons to a point; thence a new line S. 18-40-01 W. 705.53 feet to a point
located in the aforesaid northerly margin of the 100 foot wide right of way of
N.C. Highway No. 51; thence with said northerly margin of said highway right of
way N. 70-30-00 W. 570.60 feet to the point or place of Beginning; containing
10.777 acres.
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EXHIBIT B
SITE PLAN
B-1
<PAGE> 54
EXHIBIT C
GUARANTY OF BALLY TOTAL FITNESS HOLDING CORPORATION
FOR VALUE RECEIVED, and in consideration for, and as an inducement to
Tower Place Joint Venture, as Landlord, to enter into a Lease dated as of
February 14, 2000 (the "LEASE"), for certain premises located within the
property commonly known as Tower Place Festival Shopping Center and located on
NC Highway 51 Pineville, North Carolina (the "DEVELOPMENT"), with Bally Total
Fitness Corporation, a Delaware corporation, as Tenant, the undersigned
guarantees the full performance and observance of all the covenants, conditions
and agreements contained in the Lease to be performed and observed by Tenant,
Tenant's successors and assigns, and expressly agrees that the validity of this
Guaranty and any obligations of the undersigned, as guarantor (the "GUARANTOR")
hereunder shall not be terminated, affected, or impaired by reason of the
granting by Landlord of any indulgences to Tenant or by reason of the assertion
by Landlord against Tenant of any of the rights or remedies reserved to Landlord
pursuant to the provisions of the Lease.
The undersigned further covenants and agrees that this Guaranty shall
remain and continue in full force and effect as to any renewal, modification, or
extension of said Lease, provided that notice thereof is duly delivered to the
Guarantor as provided in the Lease. The undersigned further agrees that its
liability under this Guaranty shall be primary, and that if any right or action
shall accrue to Landlord under the Lease, Landlord may, at Landlord's option,
proceed against the undersigned without having commenced an action against or
having obtained any judgment against Tenant. In any action under this Guaranty,
the prevailing party shall be entitled to recover, in addition to any damages,
its reasonable attorneys' fees and costs incurred in such proceeding. The
undersigned, further represents to Landlord, as an inducement for Landlord to
enter into the Lease, that the undersigned owns, directly or indirectly, all of
the outstanding capital stock of Tenant, that the execution and delivery of the
Guaranty is not in contravention of its Charter or By-laws or applicable state
laws, and has been duly authorized by its Board of Directors.
The failure of Landlord to insist in any one of more instances upon a
strict performance or observance of any of the terms, provisions, or covenants
of the Lease, or to exercise any right therein contained, shall not be construed
or deemed to be a waiver or relinquishment for the future of such term,
provision, covenant, or right, and that the same shall continue and remain in
full force and effect. Receipt by Landlord of Rent with knowledge of the breach
of any provision of the Lease shall not be deemed a waiver of such breach.
No subletting, assignment, or other transfer of the Lease, or any
interest therein, other than as specifically provided herein or in the Lease,
shall operate to extend or diminish the liability of the Guarantor under this
Guaranty. Whatever reference is made to the liability of Tenant within the
Lease, such reference shall be deemed likewise to refer to the Guarantor. It is
further agreed that all of the terms and provisions hereof shall inure to the
benefit of the successors and assigns of Landlord, and shall be binding upon the
successors and assigns of the undersigned.
This Guaranty is a guarantee of payment and performance and not merely
a guarantee of collection.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty to be
executed as of this 10th day of February, 2000 .
BALLY TOTAL FITNESS HOLDING
CORPORATION, a Delaware corporation
By: /s/Cary A. Gaan
-------------------------------------
CARY A. GAAN,
SENIOR VICE PRESIDENT
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<PAGE> 55
EXHIBIT D
PERMITTED EXCEPTIONS
1. Taxes, dues and assessments for the year 2000, and subsequent years,
not yet due and payable.
2. Covenants, conditions, restrictions and easements contained in
instrument filed for record in Book 4626, page 305 and Book 4731, page
524.
3. Easement to Duke Power Company recorded in Book 5114, page 807.
4. Thirty-five (35) foot easement for ingress and egress reserved to Park
Cedar Associates, Ltd. from Crow-Charlotte Retail #2, Ltd. recorded in
Book 4974, page 53 and amended in Book 5227, page 305.
5. Driveway Easement Agreement recorded in Book 4469, page 774; amended in
Book 4581, page 309 and Book 4620, page 536 and further amended by
Agreement recorded in Book 5227, page 283.
6. Utility easement granted under deed recorded in Book 4544, page 910.
7. Roadway Construction Cost and Maintenance Agreement recorded in Book
4973, page 728.
8. Development Agreement recorded in Book 4985, page 684.
9. Fifteen (15) foot sanitary sewer right of way recorded in Book 4787,
page 722.
10. Easement Agreement for Construction and Maintenance of a sign in favor
of Park Cedar Associates recorded in Book 5272, page 300.
11. Terms and provisions of the Lease by and between Tower Place Joint
Venture and E1 Cancun Tower Place as evidenced by a Memorandum of Lease
recorded in Book 6649, page 567.
12. Terms and provisions of the unrecorded Lease by and between Tower Place
Joint Venture and The Bagel Works, Inc. as assigned by The Bagel Works,
Inc. to The Neighborhood Bagel Corp. as evidenced by an Assignment of
Lease recorded in Book 7785, page 628.
13. Terms and provisions of the Lease by and between Tower Place Joint
Venture and Brown Group Retail, Inc. d/b/a Famous Footwear as evidenced
by a Memorandum of Lease recorded in Book 8044, page 959.
14. UCC Financing Statement No. 97-3811 with lease from Myra E. Cornwell in
favor of Sun Life Assurance Co. of Canada.
15. UCC Financing Statement No. 97-3812 and lease from Sosebee Enterprises
in favor of Tower Place Joint Venture.
16. UCC Financing Statement No. 97-9553 and lease from Moobasi, Inc. in
favor of Tower Place Joint Venture.
17. UCC Financing Statement No. 98-13576 and lease from James and Cathy S.
Burgess d/b/a Simply Weight Loss in favor of Tower Place Joint Venture.
18. UCC Financing Statement No. 99-8323 and lease from Judy Brown d/b/a
Simply Weight Loss in favor of Tower Place Joint Venture.
19. UCC Financing Statement No. 99-8326 and lease from Natures' Secret,
Inc. in favor of Tower Place Joint Venture.
D-1
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20. UCC Financing Statement No. 99-8978 and lease from Sewing Center of
North Carolina, Inc. in favor of Tower Place Joint Venture.
21. UCC Financing Statement No. 99-8980 and lease from Truyen C. Nguyen and
Trang Thi Nguyen d/b/a Vina Alterations in favor of Tower Place Joint
Venture.
22. UCC Financing Statement No. 99-8981 and lease from John W. Gluth, Jr.
d/b/a Pop Muzic in favor of Tower Place Joint Venture.
D-2
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EXHIBIT E
SIGN PLAN
E-1
<PAGE> 58
EXHIBIT F
LANDLORD'S WORK
The Landlord will provide, at its expense, the following building and site
improvements on its land, per plans and specifications as provided by Landlord
and approved by Tenant. All construction shall be in conformance with all local
and state building codes, and the Americans With Disabilities Act (ADA). All
permits required to construct the project will be obtained by Landlord at its
expense.
IMPROVEMENTS
1. Utilities (service to and stubbed into the Premises)
o 6" Sewer max or 4" if sufficient per local code.
o 3" Domestic Water (60 lbs. pressure) (2" or 21/2" might suffice if
pressure is adequate)
o 6" Fire Sprinkler Line.
o Natural Gas approximately 2,000 cubic feet per hour (exact requirements
to be determined).
o Electric Service (1600 amp at 120/208 volt) or (800 amp at 480 volt).
o Conduit for telephone.
o Hook-up fees, tap fees, impact fees.
2. Heating, Ventilating, Air Conditioning
o Cooling - one ton per 200 square feet (roof top units).
o Distribution duct per ASHRAE standards.
o Controls - computerized central control system.
o Fire Dampers, Registers and Diffusers.
o HVAC roof top units provided with curbs.
o Exhaust fans as required (by Tenant).
3. Building Roof
o Roof structure per building code requirements.
o Roofing - rubber membrane with 20 year warranty.
o Walk pads per roofing manufacturer's requirements.
o Drainage - 1/4" slope per foot to drains.
o Roof drains.
o Roof insulation per code.
4. Building Exterior
o Single story structure.
o Exit doors as required by occupancy load exit requirements.
o Split face masonry with cavity construction or metal studs with
stucco/dryvit.
o Front or entrance elevation - aluminum entrance and vestibule
fabricated with anodized aluminum system, glazed with 1" insulated
glass with a feature entrance form constructed with premium material.
o Other elevations - anodized aluminum glazing system with 1" insulated
glass in locations as required per Tenant design standards.
o Building insulation per code.
5. Building Interior
o 4" reinforced concrete slab on grade. Level concrete throughout with 2"
depression at locker, toilet, shower rooms.
o 16' clearance from top of slab to underside of roof structure.
o Demising walls constructed full height of block or metal studs and
sheet rock with sound insulation and fire rated, as required by code.
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6. Parking Lot
o Bituminous paving - base course 6" thick compacted depth, type A stone,
surface course minimum 3" thick total compacted depth (2" course hot
mix binder and 1" wearing course).
o Parking spaces - striped to meet dimensions of code requirements.
o Accessible parking spaces and accessible route per ADA requirements.
o Drainage - surface drainage to inlet structures per local code
requirements.
o Lighting - minimum of 1 foot candle or local code requirements,
whichever is greater.
o Landscaping - per local code requirements.
o Walkways and curbs as required.
7. Environmental
o Removal from the site, at Landlord's cost, all asbestos and/or
hazardous materials, if any, and obtaining a certificate indicating
that the property is free of all hazardous materials.
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EXHIBIT G
SUBORDINATION, NON-DISTURBANCE AND ATTORNMENT AGREEMENT
THIS AGREEMENT, made as of this _____ day of ________, 2000, by and
among BALLY TOTAL FITNESS CORPORATION, a Delaware corporation (herein called
"TENANT"), ___________________________, a (herein called "LENDER"), and TOWER
PLACE JOINT VENTURE, a Texas joint venture (herein called "LANDLORD").
STATEMENTS OF FACT
Tenant has entered into a certain lease dated as of ___________,
2000 (herein called the "LEASE") with Landlord covering premises
(herein called the "DEMISED PREMISES") located within a building
located on NC Highway 51 in Pineville, California (herein called the
"BUILDING"), which Building is located on the land more particularly
described on Exhibit A attached hereto and made a part hereof (herein
called the "LAND" and, together with the Building and any other
buildings and improvements on the Land, called the "MORTGAGED
PROPERTY") and constitutes a portion of the shopping center known as
Tower Place Festival Shopping Center.
Lender is the holder of a certain mortgage dated __________,
199___, made by Landlord in favor of Lender encumbering the Mortgaged
Property, which mortgage was recorded in the Office of
______________________ on ___________, 199___, in Reel ___ at page
_____ (herein called the "MORTGAGE").
As a condition of entering into the Lease, Tenant has required that
Lender and Landlord join with Tenant in the mutual execution and
delivery of this Agreement in proper form for recording.
NOW, THEREFORE, in consideration of the premises and mutual covenants
hereinafter contained, the parties hereto mutually covenant and agree as
follows:
1. The Lease, any extensions, renewals, replacements, or modifications
thereof and all of the right, title and interest of Tenant in and to the
Premises are, and shall continue to be, subject and subordinate to the Mortgage,
to all of the terms and conditions contained therein and to any renewals,
modifications, replacements, consolidations and extensions thereof. Lender
hereby consents to the Lease.
2. If Lender, or any designee or nominee thereof or successor thereto
(herein, as the case may be, called a "SUCCESSOR LANDLORD"), comes into
possession of, or acquires title to, the Premises as a result of the enforcement
or foreclosure of the Mortgage or the note secured thereby, by a deed or other
conveyance in lieu of foreclosure, or as a result of any other means, Tenant
shall not be disturbed in its possession of the Premises as a consequence
thereof or otherwise unless, at such time, Tenant shall be in default under the
terms of the Lease such that, were it not for such enforcement, foreclosure,
conveyance, or other means, Landlord would then be entitled to terminate the
Lease under its terms (including, without limitation, that the applicable notice
of default has been given and the applicable grace period has expired). Unless
Tenant shall be in uncured default as aforesaid, Tenant shall not be named in,
or joined as a party defendant or otherwise to, any suit, action, or proceeding
for the foreclosure of the Mortgage or otherwise to enforce any rights under the
Mortgage, or the note or other obligations secured thereby, nor in any other way
shall Tenant be deprived of its rights under the Lease.
3. If possession of, or title to, the Mortgaged Property shall be
transferred to, or otherwise become owned by, a Successor Landlord, such
Successor Landlord shall recognize and be bound to Tenant, and Tenant shall
attorn to and be bound to such Successor Landlord, under all of the terms,
covenants and conditions of the Lease for the balance of the term thereof
remaining, and for any extensions or renewals thereof that may be effected in
accordance with any option therefor in the Lease, with the same force and effect
as if such Successor Landlord were the landlord specifically named in the Lease.
Such recognition and attornment shall be self-operative, and shall become
effective without the execution of any further instruments on the part of any of
the parties
G-1
<PAGE> 61
hereto, immediately upon the Successor Landlord obtaining possession of, or
title to, the Mortgaged Property. However, upon the written request of either
the Successor Landlord or Tenant, made to the other within twenty (20) days
after the Successor Landlord obtains possession of, or title to, the Mortgaged
Property, the Successor Landlord and Tenant shall both execute an instrument in
confirmation of the foregoing provisions, reasonably satisfactory to both of
them, in which the parties shall acknowledge their respective recognition and
attornment, as well as set forth the terms and conditions of Tenant's continuing
tenancy.
4. If possession of, or title to, the Mortgaged Property shall be
transferred to, or otherwise become owned by, a Successor Landlord, Tenant
shall, from and after such event, have the same remedies against such Successor
Landlord for the breach of any provision contained in the Lease that Tenant
would have had under the Lease against the former landlord thereunder, PROVIDED,
HOWEVER, that such Successor Landlord shall not be:
(a) personally liable for any act or omission of any prior landlord
under the Lease, provided that such Successor Landlord shall not be
released from all of the continuing obligations of the landlord under
the Lease (including, but not limited to, providing those on-going
services, repairs and maintenance set forth in the Lease);
(b) bound by any base rent or additional rent that Tenant may have
paid for more than the current or next succeeding month to any prior
landlord (provided, however, that Lender shall be bound by any previous
estimated payments made by Tenant on account of "Operating Costs" as
such term is defined in the Lease);
(c) bound by any material amendment or modification of the Lease
hereafter made without Lender's consent; or
(d) obligated to perform any work in the Premises or any part
thereof, other than such work (including, without limitation,
"Landlord's Work", as such term is defined in the Lease) that is
required to be performed by the landlord under the Lease.
Notwithstanding the foregoing, however, Tenant's obligation to pay Rent (as
defined in the Lease) shall be and remain subject to Tenant's rights of set-off
and abatement, along with Tenant's other rights, as provided in the Lease.
5. All condemnation awards and/or insurance proceeds received with
respect to the Mortgaged Property shall be applied to the restoration thereof,
and paid in the manner set forth in the Lease, notwithstanding any contrary
provision contained in the Mortgage. Further, all fixtures and equipment,
whether owned by Tenant or leased by Tenant from any lessor/landlord (an
"EQUIPMENT LESSOR"), installed in or on the Mortgaged Property (regardless of
the manner or mode of attachment) shall be and remain the property of Tenant or
any such Equipment Lessor, and may be removed by Tenant or such Equipment Lessor
at any time. In no event (including, without limitation, a default under the
Lease or the Mortgage) shall Lender or any Successor Landlord have any lien on,
right in, or claim with respect to any such fixtures or equipment, whether or
not all or any part thereof shall be deemed fixtures, and Lender expressly
waives (for itself and for any Successor Landlord) all rights of levy,
distraint, or execution with respect to such fixtures and equipment.
6. Until Tenant has been notified that the Mortgage has been released
of record, Tenant shall, upon receipt by Tenant of written notice from Lender
directing Tenant to make payment of rents under the Lease to Lender, comply with
such direction, and shall not be required to determine whether Landlord is in
default under the Mortgage or related loan documents. Lender shall indemnify,
defend and hold harmless Tenant from and against any and all losses, costs,
expenses, claims, obligations and liabilities incurred or otherwise suffered by
Tenant resulting from Tenant's compliance with Lender's said direction to pay
rent. Landlord hereby releases Tenant from any obligation to pay to Landlord any
amounts paid to Lender based upon Tenant's compliance with such a direction to
pay rent from Lender.
G-2
<PAGE> 62
7. All notices, demands or other communications required or permitted
to be given pursuant to this Agreement shall be in writing, and shall be sent by
overnight courier service, addressed to the party at its following address, or
at such other place as such party or successor or assign may, from time to time,
designate in a notice to the other parties:
Notices To Landlord:
Tower Place Joint Venture
5550 LBJ Freeway, Suite 675
Dallas, Texas 75240
With a copy to:
Childress Klein Properties
2800 One First Union Center
301 S. College Street
Charlotte, NC 28202-6021
Attention: Managing Partner - Retail
Notices to Tenant:
Bally Total Fitness Corporation
8700 W. Bryn Mawr Avenue - 2nd Floor
Chicago, Illinois 60631
Attention: Director of Property Management
With a copy to:
Bally Total Fitness Corporation
8700 W. Bryn Mawr Avenue - 2nd Floor
Chicago, Illinois 60631
Attention: General Counsel
Notices shall be deemed delivered and received upon the date of receipt,
rejection, other refusal to accept, or inability to deliver because of changed
address for which no notice has been given.
8. Prior to a Successor Landlord's succeeding to Landlord's interest in
accordance with the terms hereof, in the event that Landlord shall default in
the performance or observance of any of the terms, conditions, or agreements in
the Lease, Tenant shall give written notice thereof to Lender, and Lender shall
have the right (but not the obligation) to cure such default within any
applicable cure period provided for in the Lease.
9. This Agreement shall bind, and inure to the benefit of, the parties
hereto, along with their respective successors and assigns.
10. This Agreement shall be the whole and only agreement between the
parties hereto with regard to the subject matter hereof (including, without
limitation, the subordination of the Lease and/or the leasehold interest of
Tenant thereunder to the lien or charge of the Mortgage), and shall completely
supersede and preempt any prior agreement(s) of the parties (including, but not
limited to, any provisions contained in the Lease that might be otherwise
applicable thereto) with respect to all or any portion of such subject matter.
This Agreement may not be modified or amended except by a writing signed by all
of the parties hereto and/or their respective successors or assigns.
11. The use of the neuter gender in this Agreement shall be deemed to
include any other gender, and words in the singular number shall be held to
include the plural, when the sense requires.
G-3
<PAGE> 63
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered as of the day and year first above written.
TENANT:
BALLY TOTAL FITNESS CORPORATION,
a Delaware corporation
By:
-------------------------------------
CARY A. GAAN,
SENIOR VICE PRESIDENT
LENDER:
----------------------------------------
a corporation
-------------------
By:
-------------------------------------
Name:
Title:
LANDLORD:
TOWER PLACE JOINT VENTURE,
a Texas joint venture
By: Murray Income Properties I, Ltd.,
a Texas Limited Partnership
Its: Joint Venturer
By: Murray Realty Investors
VIII, Inc., a
Texas corporation
Its: General Partner
By:
------------------------
Brent Buck
Executive Vice President
ADD ACKNOWLEDGMENTS
G-4
<PAGE> 64
EXHIBIT "A"
LEGAL DESCRIPTION
That certain tract or parcel of land situate in the town of Pineville,
Mecklenburg County, North Carolina, being more particularly described as
follows:
BEGINNING at a point in the northerly margin of the 100 foot wide right of way
of North Carolina Highway No. 51 (the Matthews-Pineville Road, said Beginning
Point being also located in the southeasterly line of the property conveyed to
Faye S. Dixon (widow) et al by deed dated February 15, 1983, recorded in Book
4626 at page 305 in the Mecklenburg Registry, and running thence from said
Beginning Point with the aforesaid Dixon property (now or formerly) in two calls
as follow: (1) N. 23-19-23 E. 250.0 feet to an iron; thence (2) N. 70-30-00 W.
150.34 feet to an old nail; thence with two lines of the property of Lorick
Enterprises, Inc. (now or formerly) as follow: (1) N. 23-19-23 E. 75.67 feet to
a nail; thence (2) N. 66-40-37 W. 89.14 feet to a nail; thence with two lines of
the property of Brevard S. Myers (now or formerly) as follow: (1) N. 26-46-23 E.
196.47 feet to an iron; thence (2) N. 61-16-23 E. 90.00 feet to an iron; thence
with a line of the property of Brevard S. Myers (now or formerly) and continuing
with the line of the property of Park Road Associates (now or formerly) N.
26-46-23 E. 103.50 feet to an iron; thence S. 71-19-59 E. 680.05 feet crossing
two irons to a point; thence a new line S. 18-40-01 W. 705.53 feet to a point
located in the aforesaid northerly margin of the 100 foot wide right of way of
N.C. Highway No. 51; thence with said northerly margin of said highway right of
way N. 70-30-00 W. 570.60 feet to the point or place of Beginning; containing
10.777 acres.
G-5
<PAGE> 1
EXHIBIT 10k
December 2, 1999
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, 2000. 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:
<TABLE>
<S> <C>
CK Charlotte Overhead Limited Partnership Tower Place Joint Venture
a North Carolina Limited Partnership By: Murray Income Properties I, LTD.
By: Childress Klein Retail-Charlotte a Texas Ltd. Partnership, Joint Venturer
#2, Inc., Its General Partner By: Murray Realty Investors VIII, Inc.
a Texas Corp., General Partner
BY: /s/ David Haggart By: /s/ Brent Buck
------------------------------ -----------------------------------------
David Haggart, Vice President Brent Buck, Executive Vice President
Attest/Witness: Witness:
/s/ Wendy Roy /s/ Joni Armstrong
- ----------------------------------- ------------------
Title: Secretary Name: Joni Armstrong
(Corporate Seal)
</TABLE>
<PAGE> 1
EXHIBIT 10L
STATE OF TENNESSEE
COUNTY OF SHELBY
MODIFICATION TO MANAGEMENT AGREEMENT
This Modification to management Agreement is made and entered into this
15th day of December, 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, 2000.
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/ Vince Dunavant
----------------------------------- --------------------------
Brent Buck Vince Dunavant
Title: Executive Vice President Title: Senior Vice-President
----------------------------------- --------------------------
<PAGE> 1
EXHIBIT 10M
EXTENSION OF PROPERTY MANAGEMENT AGREEMENT
The Extension of Property Management Agreement entered into this 15th day
of December, 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, was extended
with an expiration date of December 31, 1998, and was extended with an
expiration date of December 31, 1999. 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, 2000
2. All other terms and conditions of the Property Management Agreement
shall remain unchanged and in full force and effect.
IN WITNESS WHEREOF, the parties hereto have executed this document the day and
year first above written.
WITNESS BROOKSIDE PROPERTIES, INC.
/s/ Charles H. Warfield, Jr. /s/ W. Miles Warfield
- ------------------------------- -------------------------------------
Charles H. Warfield, Jr. W. Miles Warfield
MURRAY INCOME PROPERTIES II, LTD
a Texas Limited Partnership by
Murray Realty Investors IX, Inc. a
Texas Corporation, its General Partners
(Owners)
/s/ Brent Buck
- ------------------------------- -------------------------------------
By: Brent Buck, Executive Vice President
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MURRAY
INCOME PROPERTIES II, LTD. BALANCE SHEET AND STATEMENT OF EARNINGS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 1999.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 908,676
<SECURITIES> 595,986
<RECEIVABLES> 520,822
<ALLOWANCES> 5,476
<INVENTORY> 0
<CURRENT-ASSETS> 2,020,008
<PP&E> 23,631,025
<DEPRECIATION> 9,152,398
<TOTAL-ASSETS> 18,270,529
<CURRENT-LIABILITIES> 336,348
<BONDS> 0
0
0
<COMMON> 0
<OTHER-SE> 17,800,605
<TOTAL-LIABILITY-AND-EQUITY> 18,270,529
<SALES> 0
<TOTAL-REVENUES> 3,237,453
<CGS> 0
<TOTAL-COSTS> 1,511,782
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 5,476
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 1,403,780
<INCOME-TAX> 0
<INCOME-CONTINUING> 1,403,780
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 1,403,780
<EPS-BASIC> 4.32
<EPS-DILUTED> 4.32
</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> 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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