<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
FOR QUARTER ENDED JUNE 30, 1998
COMMISSION FILE NO 1-13038
CRESCENT REAL ESTATE EQUITIES COMPANY
----------------------------------------------------------------
(Exact name of registrant as specified in its charter)
TEXAS 52-1862813
- --------------------------------------------- ----------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer
or organization) Identification Number)
777 Main Street, Suite 2100, Fort Worth, Texas 76102
- --------------------------------------------------------------------------------
(Address of principal executive offices)(Zip code)
Registrant's telephone number, including area code (817) 321-2100
Number of shares outstanding of each of the registrant's classes of preferred
and common shares, as of August 12, 1998.
Preferred Shares, par value $.01 per share:
Series A: 8,000,000
Series B: 6,948,734
Common Shares, par value $.01 per share: 120,884,756
- --------------------------------------------------------------------------------
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 twelve (12) months (or for such shorter period that the registrant
was required to file such report) and (2) has been subject to such filing
requirements for the past ninety (90) days.
YES X NO
---------- ------------
<PAGE> 2
CRESCENT REAL ESTATE EQUITIES COMPANY
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PART I: FINANCIAL INFORMATION PAGE
<S> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of June 30, 1998 (Unaudited) and December 31,
1997 (Audited)..................................................................... 3
Consolidated Statements of Operations for the three and six months ended June
30, 1998 and 1997 (Unaudited)...................................................... 4
Consolidated Statements of Cash Flows for the six months ended June 30, 1998
and 1997 (Unaudited)............................................................... 5
Notes to Financial Statements...................................................... 6
Item 2. Management's Discussion and Analysis of Financial
Condition and Historical Results of Operations..................................... 15
Item 3. Quantitative and Qualitative Disclosures about Market Risk......................... 28
PART II: OTHER INFORMATION
Item 1. Legal Proceedings................................................................... 29
Item 2. Changes in Securities............................................................... 29
Item 3. Defaults Upon Senior Securities..................................................... 29
Item 4. Submission of Matters to a Vote of Security Holders................................. 29
Item 5. Other Information................................................................... 30
Item 6. Exhibits and Reports on Form 8-K.................................................... 30
</TABLE>
2
<PAGE> 3
CRESCENT REAL ESTATE EQUITIES COMPANY
CONSOLIDATED BALANCE SHEETS
(dollars in thousands)
(Note 1)
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
1998 1997
----------- -----------
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS:
Investments in Real Estate:
Land $ 392,482 $ 353,374
Land held for development or sale 103,135 94,954
Building and improvements 3,521,973 2,923,097
Furniture, fixtures and equipment 58,208 51,705
Less - accumulated depreciation (329,192) (278,194)
----------- -----------
Net investment in real estate 3,746,606 3,144,936
Cash and cash equivalents 121,673 66,622
Restricted cash and cash equivalents 28,368 41,528
Accounts receivable, net 20,881 30,179
Deferred rent receivable 55,648 39,588
Investments in real estate mortgages and equity of
unconsolidated companies 664,765 601,770
Notes receivable, net 142,052 156,676
Other assets, net 131,491 98,681
----------- -----------
Total assets $ 4,911,484 $ 4,179,980
=========== ===========
LIABILITIES:
Borrowings under credit facility $ 610,000 $ 350,000
Notes payable 1,394,596 1,360,124
Accounts payable, accrued expenses and other liabilities 94,750 127,258
----------- -----------
Total liabilities 2,099,346 1,837,382
----------- -----------
COMMITMENTS AND CONTINGENCIES (Note 11):
MINORITY INTERESTS:
Operating partnership, 6,576,851 and 6,397,072 units,
respectively 131,873 117,103
Investment joint ventures 27,390 28,178
----------- -----------
Total minority interests 159,263 145,281
----------- -----------
SHAREHOLDERS' EQUITY:
Preferred shares, $.01 par value, authorized 100,000,000 shares:
6 3/4% Series A Convertible Cumulative Preferred Shares,
8,000,000 shares issued and outstanding at June 30, 1998 200,000 --
Series B Convertible Preferred Shares, 6,948,734 shares issued
and outstanding at June 30, 1998 225,000 --
Common shares, $.01 par value, authorized 250,000,000 shares,
120,877,294 and 117,977,907 shares issued and outstanding
at June 30, 1998 and December 31, 1997, respectively 1,208 1,179
Additional paid-in capital 2,293,481 2,253,928
Deferred compensation on restricted shares (190) (283)
Retained deficit (66,624) (57,507)
----------- -----------
Total shareholders' equity 2,652,875 2,197,317
----------- -----------
Total liabilities and shareholders' equity $ 4,911,484 $ 4,179,980
=========== ===========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
3
<PAGE> 4
CRESCENT REAL ESTATE EQUITIES COMPANY
CONSOLIDATED STATEMENTS OF OPERATIONS
(dollars in thousands,
except per share data)
(Note 1)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE SIX MONTHS
ENDED JUNE 30, ENDED JUNE 30,
------------------------------ ------------------------------
(UNAUDITED) (UNAUDITED)
1998 1997 1998 1997
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
REVENUES:
Office and retail properties $ 137,472 $ 84,904 $ 263,900 $ 155,319
Hotel properties 12,678 8,436 25,552 17,421
Behavioral healthcare properties 13,824 2,142 27,647 2,142
Interest and other income 5,130 3,647 13,154 5,178
------------- ------------- ------------- -------------
Total revenues 169,104 99,129 330,253 180,060
------------- ------------- ------------- -------------
EXPENSES:
Real estate taxes 17,309 9,697 33,406 17,622
Repairs and maintenance 9,102 5,792 17,802 10,943
Other rental property operating 29,774 19,080 59,665 36,600
Corporate general and administrative 3,554 2,638 6,701 7,483
Interest expense 37,844 16,868 72,127 31,612
Amortization of deferred financing costs 1,110 571 2,250 1,220
Depreciation and amortization 28,250 16,339 54,832 30,291
------------- ------------- ------------- -------------
Total expenses 126,943 70,985 246,783 135,771
------------- ------------- ------------- -------------
Operating income 42,161 28,144 83,470 44,289
OTHER INCOME:
Equity in net income of unconsolidated
companies 6,117 1,042 11,962 5,142
------------- ------------- ------------- -------------
INCOME BEFORE MINORITY INTERESTS 48,278 29,186 95,432 49,431
Minority interests (4,834) (4,092) (9,580) (7,586)
------------- ------------- ------------- -------------
NET INCOME 43,444 25,094 85,852 41,845
PREFERRED STOCK DIVIDENDS (3,375) -- (4,950) --
------------- ------------- ------------- -------------
NET INCOME APPLICABLE TO COMMON
SHAREHOLDERS $ 40,069 $ 25,094 $ 80,902 $ 41,845
============= ============= ============= =============
PER COMMON SHARE DATA:
Net Income - Basic $ 0.33 $ 0.28 $ 0.68 $ 0.52
============= ============= ============= =============
Net Income - Diluted $ 0.32 $ 0.27 $ 0.65 $ 0.50
============= ============= ============= =============
WEIGHTED AVERAGE SHARES
OUTSTANDING - BASIC 119,754,049 89,591,456 119,071,111 80,996,072
============= ============= ============= =============
WEIGHTED AVERAGE SHARES
OUTSTANDING - DILUTED 124,348,469 93,020,712 123,712,059 84,488,830
============= ============= ============= =============
</TABLE>
The accompanying notes are an integral
part of these financial statements.
4
<PAGE> 5
CRESCENT REAL ESTATE EQUITIES COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(NOTE 1 AND 3)
<TABLE>
<CAPTION>
FOR THE SIX MONTHS
ENDED JUNE 30,
--------------------------
(UNAUDITED)
1998 1997
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 85,852 $ 41,845
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 57,082 31,511
Minority interests 9,580 7,586
Non-cash compensation 135 131
Equity in earnings net of distributions
received from unconsolidated companies 441 (390)
Decrease (increase) in accounts receivable 9,298 (1,995)
Increase in deferred rent receivable (16,060) (7,049)
Increase in other assets (25,741) (23,439)
Decrease in restricted cash and cash equivalents 13,185 9,549
(Decrease) increase in accounts payable, accrued
expenses and other liabilities (32,508) 13,744
----------- -----------
Net cash provided by operating activities 101,264 71,493
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of investment properties (582,036) (876,903)
Development of investment properties (11,498) --
Capital expenditures - rental properties (24,930) (8,169)
Tenant improvement and leasing costs - rental properties (34,316) (18,519)
Increase in restricted cash and cash equivalents (25) (1,096)
Investment in unconsolidated companies (51,986) (19,598)
Escrow deposits - acquisition of investment properties (2,160) (5,665)
Decrease (increase) in notes receivable 14,624 (94,102)
----------- -----------
Net cash used in investing activities (692,327) (1,024,052)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt financing costs (2,293) (2,948)
Borrowings under credit facility 532,150 430,700
Payments under credit facility (272,150) (131,000)
Debt proceeds 205,034 315,174
Debt payments (170,562) (150,186)
Capital distributions - joint venture partner (1,596) (1,698)
Proceeds from common shares offerings 43,959 593,522
Proceeds from exercise of stock options 184 475
Net proceeds from preferred shares offerings 416,000 --
Distribution of Crescent Operating, Inc. shares to
unitholders of Operating Partnership and
shareholders of Crescent Equities -- (11,907)
Preferred dividends (4,950) --
Dividends and unitholder distributions (99,662) (59,576)
----------- -----------
Net cash provided by financing activities 646,114 982,556
----------- -----------
INCREASE IN CASH AND CASH EQUIVALENTS 55,051 29,997
CASH AND CASH EQUIVALENTS,
Beginning of period 66,622 25,592
----------- -----------
CASH AND CASH EQUIVALENTS,
End of period $ 121,673 $ 55,589
=========== ===========
</TABLE>
The accompanying notes are an integral
part of these financial statements.
5
<PAGE> 6
CRESCENT REAL ESTATE EQUITIES COMPANY
NOTES TO FINANCIAL STATEMENTS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
1. ORGANIZATION AND BASIS OF PRESENTATION:
ORGANIZATION
Crescent Real Estate Equities Company ("Crescent Equities") operates as
a real estate investment trust for federal income tax purposes (a "REIT") and
together with its subsidiaries, is a fully integrated real estate company. The
direct and indirect subsidiaries of Crescent Equities include Crescent Real
Estate Equities Limited Partnership (the "Operating Partnership"); Crescent Real
Estate Equities, Ltd. (the "General Partner"), which is the sole general partner
of the Operating Partnership; seven single purpose limited partnerships (formed
for the purpose of obtaining securitized debt) in which the Operating
Partnership owns substantially all of the economic interests directly or
indirectly, with the remaining interests owned indirectly by Crescent Equities
through seven separate corporations, each of which is a wholly owned subsidiary
of the General Partner and a general partner of one of the seven limited
partnerships. The term "Company" includes, unless the context otherwise
requires, Crescent Equities, the Operating Partnership, the General Partner and
the other direct and indirect subsidiaries of Crescent Equities.
As of June 30, 1998, the Company directly or indirectly owned a
portfolio of real estate assets (the "Properties") located primarily in 17
metropolitan submarkets in Texas. The Properties include 89 office properties
(the "Office Properties") with an aggregate of approximately 31.8 million net
rentable square feet (including pending investments, see Note 9, the Office
Properties would include an additional 10 properties with an aggregate of 2.6
million net rentable square feet), 89 behavioral healthcare properties (the
"Behavioral Healthcare Properties"), seven full-service hotels with a total of
2,276 rooms and two destination health and fitness resorts that can accommodate
up to 452 guests daily (the "Hotel Properties"), real estate mortgages and
non-voting common stock representing interests ranging from 40% to 95% in five
unconsolidated residential development corporations (the "Residential
Development Corporations"), which in turn, through joint venture or partnership
arrangements, own interests in 13 residential development properties (the
"Residential Development Properties"), and seven retail properties (the "Retail
Properties") with an aggregate of approximately .8 million net rentable square
feet. In addition, the Company owns an indirect 38% interest in each of two
corporations (collectively referred to as the "Refrigerated Storage
Corporations"), that, as of June 30, 1998, owned or operated 89 refrigerated
storage properties with an aggregate of approximately 419 million cubic feet
(the "Refrigerated Storage Properties"). On July 1, 1998, one of the
Refrigerated Storage Corporations acquired an additional five refrigerated
storage properties with an aggregate of approximately 61 million cubic feet. The
Company also has a 42.5% partnership interest in a partnership whose primary
holdings consist of a 364-room executive conference center and general partner
interests ranging from one to 50%, in additional office, retail, multi-family
and industrial properties.
Crescent Equities owns its assets and carries on its operations and
other activities through the Operating Partnership and it's other subsidiaries.
The following table sets forth, by subsidiary, the Properties owned by
such subsidiary as of June 30, 1998:
<TABLE>
<S> <C>
Operating Partnership: 62 Office Properties, six Hotel Properties and five Retail Properties
Crescent Real Estate The Aberdeen, The Avallon, Caltex House, The Citadel, Continental Plaza, The Crescent Atrium,
Funding I, L.P.: The Crescent Office Towers, Regency Plaza One, and Waterside Commons
("Funding I")
</TABLE>
6
<PAGE> 7
<TABLE>
<S> <C>
Crescent Real Estate Albuquerque Plaza, Barton Oaks Plaza One, Briargate Office and Research Center, Hyatt Regency
Funding II, L.P.: Albuquerque, Hyatt Regency Beaver Creek, Las Colinas Plaza, Liberty Plaza I & II, MacArthur
("Funding II") Center I & II, Ptarmigan Place, Stanford Corporate Centre, Two Renaissance Square, and 12404
Park Central
Crescent Real Estate Greenway Plaza Portfolio(1)
Funding III, IV, and V, L.P.:
("Funding III, IV and V")
Crescent Real Estate Canyon Ranch-Lenox
Funding VI, L.P.:
("Funding VI")
Crescent Real Estate Behavioral Healthcare Properties
Funding VII, L.P.:
("Funding VII")
</TABLE>
- -------------------------------
(1) Funding III owns the Greenway Plaza Portfolio, except for the central heated
and chilled water plant building and Coastal Tower Office property, both
located within Greenway Plaza, which are owned by Funding IV and Funding V,
respectively.
BASIS OF PRESENTATION
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim financial
information and with the instructions to Form 10-Q and Article 10 of Regulation
S-X. Accordingly, they do not include all of the information and footnotes
required by generally accepted accounting principles for complete financial
statements. In management's opinion, all adjustments (consisting of normal
recurring adjustments) considered necessary for a fair presentation of the
unaudited interim financial statements have been included. Operating results for
interim periods reflected are not necessarily indicative of the results that may
be expected for a full fiscal year. These financial statements should be read in
conjunction with the financial statements and notes thereto included in the
Company's Form 10-K for the year ended December 31, 1997.
Certain reclassifications have been made to previously reported amounts
to conform with current presentation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
In March 1998, the Emerging Issues Task Force ("EITF") of the Financial
Accounting Standards Board ("FASB") issued EITF 97-11, "Accounting for Internal
Costs Relating to Real Estate Property Acquisitions", which provides that
internal costs of identifying and acquiring operating property should be
expensed as incurred. This pronouncement is effective March 19, 1998, and has no
material impact on the Company's financial statements.
In May 1998, the EITF issued EITF 98-9, "Accounting for Contingent Rent
in Interim Financial Periods", which provides that the lessor should defer
recognition of contingent rental income in interim periods until the specified
target that triggers the contingent rental income is achieved. This
pronouncement is effective May 22, 1998, and has no material impact on the
Company's financial statements.
In June 1998, the FASB issued Statement of Financial Accounting
Standard ("SFAS") No. 133, "Accounting for Derivative Instruments and Hedging
Activities", which provides that all derivative instruments should be recognized
as either assets or liabilities depending on the rights or obligations under the
contract and that all derivative instruments be measured at fair value. This
pronouncement is effective for all fiscal quarters of fiscal years beginning
after June 15, 1999 and has no material impact on the Company's financial
statements.
7
<PAGE> 8
3. SUPPLEMENTAL DISCLOSURES TO STATEMENTS OF CASH FLOWS:
<TABLE>
<CAPTION>
Six months ended
June 30,
1998 1997
-------- --------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid $ 70,834 $ 30,648
SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING
AND FINANCING ACTIVITIES:
Two-for-one common share dividend $ -- $ 362
Conversion of operating partnership units to common
shares with resulting reduction in minority interest and
increases in common shares and additional paid-in
capital $ 4,384 $ 225
Issuance of operating partnership units in settlement
of obligation $ 8,522 $ --
Issuance of operating partnership units in conjunction
with investments $ 11,450 $ --
</TABLE>
4. INVESTMENTS IN REAL ESTATE MORTGAGES AND EQUITY OF UNCONSOLIDATED
COMPANIES:
The Company reports its share of income and losses based on its
ownership interest in the respective equity investments. The following
summarized information for all unconsolidated companies has been presented on an
aggregated basis and classified under the captions "Residential Development
Corporations" and "Refrigerated Storage Corporations," as applicable, as of June
30, 1998.
<TABLE>
<CAPTION>
BALANCE SHEET AT JUNE 30, 1998: RESIDENTIAL REFRIGERATED STORAGE
DEVELOPMENT CORPORATIONS AND
CORPORATIONS OTHER
-------------- --------------
<S> <C> <C>
Real estate, net ............................ $ 601,466 $ 1,746,196
Cash ........................................ 30,960 40,674
Other assets ................................ 119,937 391,786
-------------- --------------
Total Assets ............................ $ 752,363 $ 2,178,656
============== ==============
Notes payable ............................... $ 292,414 $ 895,829
Notes payable to the Company ................ 192,985 --
Other liabilities ........................... 75,877 475,982
Equity ...................................... 191,087 806,845
-------------- --------------
Total Liabilities and Equity ........... $ 752,363 $ 2,178,656
============== ==============
Company's investment in real estate
mortgages and equity of uncon-
solidated companies ....................... $ 297,687 $ 367,078
============== ==============
</TABLE>
8
<PAGE> 9
<TABLE>
<CAPTION>
SUMMARY STATEMENTS OF OPERATIONS: FOR THE SIX MONTHS ENDED
JUNE 30, 1998
---------------------------
REFRIGERATED
RESIDENTIAL STORAGE
DEVELOPMENT CORPORATIONS
CORPORATIONS AND OTHER
------------ ------------
<S> <C> <C>
Total revenues .............................. $ 158,708 $ 276,226
Total expenses .............................. 137,485 275,782
------------ ------------
Net income .................................. $ 21,223 $ 444
============ ============
Company's equity in net income of
unconsolidated companies ................. $ 11,825 $ 137
============ ============
</TABLE>
On June 1, 1998, one of the Refrigerated Storage Corporations acquired
nine refrigerated storage properties from Freezer Services, Inc. for
approximately $134,000. On July 1, 1998, one of the Refrigerated Storage
Corporations acquired five refrigerated storage properties from Carmar Group for
approximately $158,000. These properties contain approximately 90 million cubic
feet of refrigerated storage space.
In April 1998, the Refrigerated Storage Corporations refinanced
$607,000 of secured and unsecured debt with a weighted average rate of
approximately 12%, with a $550,000 non-recourse, ten-year loan secured by 58
Refrigerated Storage Properties with an interest rate of 6.89%.
5. NOTES PAYABLE AND BORROWINGS UNDER CREDIT FACILITY:
<TABLE>
<CAPTION>
Following is a summary of the Company's debt financing: June 30, 1998
-------------
SECURED DEBT
<S> <C>
LaSalle Note I bears interest at 7.83% with an initial seven-year interest-only
term (through August 2002), followed by principal amortization based on a
25-year amortization schedule through maturity in August 2027(1), secured by
the Funding I properties........................................................... $ 239,000
LaSalle Note II bears interest at 7.79% with an initial seven-year
interest-only term (through March 2003), followed by principal amortization
based on a 25-year amortization schedule through maturity in March 2028(2),
secured by the Funding II properties............................................... 161,000
LaSalle Note III due July 1999, bears interest at 30-day LIBOR plus a weighted
average rate of 2.135% (at June 30, 1998 the rate was 7.79% subject to a rate
cap of 10%) with a five-year interest-only term, secured by the Funding III,
IV and V properties.............................................................. 115,000
Chase Manhattan Note due September 2001, bears interest at 30-day LIBOR plus 175
basis points (at June 30, 1998 the rate was 7.41%), and requires payments of
interest only during its term, secured by the Fountain Place Office
Property........................................................................... 97,123
CIGNA Note due December 2002, bears interest at 7.47% with a seven-year
interest-only term, secured by the MCI Tower Office Property and Denver
Marriott City Center Hotel Property................................................ 63,500
</TABLE>
9
<PAGE> 10
<TABLE>
<CAPTION>
June 30, 1998
-------------
<S> <C>
Metropolitan Life Note II due December 2002, bears interest at 6.93% with monthly
principal and interest payments based on a 25-year amortization schedule, secured
by the Energy Centre Office Property................................................ 44,716
Metropolitan Life Note III due December 1999, bears interest at 7.74% and
requires monthly payments of interest only based on a 25-year amortization
schedule, secured by the Datran Center Office Property.............................. 40,000
Northwestern Note due January 2003, bears interest at 7.65% with a seven-year
interest-only term, secured by the 301 Congress Avenue Office Property.............. 26,000
Metropolitan Life Note I due September 2001, bears interest at 8.88% with monthly
principal and interest payments based on a 20-year amortization schedule, secured
by five of The Woodlands Office Properties.......................................... 11,948
Nomura Funding VI Note bears interest at 10.07% with monthly principal and
interest payments based on a 25-year amortization schedule through July 2020(3),
secured by the Funding VI property.................................................. 8,649
Metropolitan Life Note IV due December 1999, bears interest at 7.11% with monthly
principal and interest payments based on a 25-year amortization schedule, secured
by the Datran Center Office Property................................................ 6,890
Rigney Note due November 2012, bears interest at 8.50% with quarterly principal
and interest payments based on a 15-year amortization schedule, secured by a
parcel of land...................................................................... 770
UNSECURED DEBT
Line of Credit with BankBoston, N.A. ("BankBoston") ("Credit Facility") (see
description of Credit Facility below)............................................... 610,000
Short-term BankBoston Note due July 1998, bears interest at Eurodollar rate plus
120 basis points (at June 30, 1998, the rate was 6.83%)(4).......................... 80,000
Short-term BankBoston Note II due August 1998, bears interest at Eurodollar rate
plus 120 basis points (at June 30, 1998, the rate was 6.83%)........................ 100,000
2007 Notes bear interest at a fixed rate of 7.13% with a ten-year interest-only
term, due September 2007(5)...................................................... 250,000
2002 Notes bear interest at a fixed rate of 6.63% with a five-year
interest-only term, due September 2002(5)....................................... 150,000
-----------------
Total Notes Payable $ 2,004,596
=================
</TABLE>
10
<PAGE> 11
- ----------------------------------------------
(1) In August 2007, the interest rate increases, and the Company is
required to remit, in addition to the monthly debt service payment,
excess property cash flow, as defined, to be applied first against
principal until the note is paid in full and thereafter, against
accrued excess interest, as defined. It is the Company's intention to
repay the note in full at such time (August 2007) by making a final
payment of approximately $220,000.
(2) In March 2006, the interest rate increases, and the Company is required
to remit, in addition to the monthly debt service payment, excess
property cash flow, as defined, to be applied first against principal
until the note is paid in full and thereafter, against accrued excess
interest, as defined. It is the Company's intention to repay the note
in full at such time (March 2006) by making a final payment of
approximately $154,000.
(3) Beginning in July 1998, the Company has the option to defease the note
by purchasing Treasury obligations to pay the note without penalty. In
July 2010, the interest rate due under the note will change to a
10-year Treasury yield plus 500 basis points or, if the Company so
elects, it may repay the note without penalty.
(4) Repaid on July 1, 1998 with a borrowing under the Credit Facility.
(5) The interest rates on the Notes were subject to temporary increase by
50 basis points in the event that a registered offer to exchange the
Notes for notes of the Operating Partnership with terms identical in
all material respects to the Notes was not consummated or a shelf
registration statement with respect to the resale of the Notes was not
declared effective by the Securities and Exchange Commission (the
"SEC") on or before March 21, 1998. The interest rates on the Notes
were temporarily increased by 50 basis points, since the exchange offer
was not completed by March 21, 1998. The interest rates on the Notes
returned to the original rates in July 1998, when the registered offer
to exchange the Notes became effective. As of July 2, 1998, all of the
Notes had been exchanged. The interest rates on the Notes are also
subject to adjustment in the event that the Notes are assigned a rating
that is not an investment grade rating, do not continue to be assigned
a rating or are not assigned a rating by certain rating agencies. In
September 1997, the Notes received a Baa3 rating (investment grade)
from Moody's Investors Service, Inc. ("Moody's") On July 28, 1998, the
Notes received a BB+ rating (one notch below investment grade) from
Standard & Poor's ("S&P"). Since the Notes are split rated, the
interest rates on the Notes increased 37.5 basis points on July 28,
1998. Should the Notes become investment grade rated from both Moody's
and S&P by September 22, 1998, the 37.5 basis point increase would be
eliminated.
CREDIT FACILITY
On June 30, 1998, the Credit Facility was increased to $850,000
(currently limited to $750,000 of borrowing capacity, subject to increase based
upon certain events), to enhance the Company's financial flexibility in making
new real estate investments. The interest rate on advances under the Credit
Facility is the Eurodollar rate plus 120 basis points. The Credit Facility is
unsecured and expires in June 2000. The Credit Facility requires the Company to
maintain compliance with a number of customary financial and other covenants on
an ongoing basis, including leverage ratios based on book value and debt service
coverage ratios, limitations on additional secured and total indebtedness and
distributions, and a minimum net worth requirement. As of June 30, 1998, the
Company was in compliance with all covenants. As of June 30, 1998, the interest
rate was 6.83% and $140,000 was available under the Credit Facility.
6. MINORITY INTERESTS:
Minority interests represent (i) the limited partnership interests
owned by unitholders in the Operating Partnership ("units") and (ii) joint
venture interests held by outside interests. Each unit may be exchanged for
either two common shares or, at the election of the Company, cash equal to the
fair market value of two common shares at the time of the exchange. When a
unitholder exchanges a unit, the Company's percentage ownership in the Operating
Partnership is increased. During the six months ended June 30, 1998, there were
112,073 units exchanged for 224,146 common shares.
11
<PAGE> 12
7. SHAREHOLDERS' EQUITY:
COMMON SHARES OFFERING
On April 23, 1998, the Company completed an offering of 1,365,138
common shares at $32.27 per share (the "Unit Investment Trust Offering") to
Merrill Lynch & Co. Net proceeds to the Company from the Unit Investment Trust
Offering were approximately $43,959. The net proceeds were used to reduce
borrowings outstanding under the Credit Facility.
PREFERRED SHARES OFFERINGS
On February 19, 1998, the Company completed an offering (the "February
1998 Preferred Offering") of 8,000,000 shares of 6 3/4% Series A convertible
cumulative preferred shares (the "Series A Preferred Shares") with a liquidation
preference of $25 per share. Series A Preferred Shares are convertible at any
time, in whole or in part, at the option of the holders thereof into common
shares of the Company at a conversion price of $40.86 per common share
(equivalent to a conversion rate of .6119 common share per Series A Preferred
Share), subject to adjustment in certain circumstances. Net proceeds to the
Company from the February 1998 Preferred Offering after underwriting discounts
of $8,000 and other offering costs of $750 were approximately $191,250. The net
proceeds from the February 1998 Preferred Offering were used to repay borrowings
under the Credit Facility. Dividends on the Series A Preferred Shares are
cumulative from the date of original issue and are payable quarterly in arrears
commencing on May 15, 1998.
On June 29, 1998, the Company completed an offering (the "June 1998
Preferred Offering") of 6,948,734 shares of Series B convertible preferred
shares with a liquidation preference of $32.38 per share (the "Series B
Preferred Shares") in an aggregate principal amount of approximately $225,000.
The Series B Preferred Shares have equal priority with the Series A Preferred
Shares. Holders of the Series B Preferred Shares will not be entitled to regular
quarterly cash dividends, but will be entitled to receive certain extraordinary
cash dividends, and stock and other non-cash dividends, excluding dividends of
common shares of the Company, that may be made from time to time to the common
shareholders. On June 30, 2001, the Series B Preferred Shares will convert
automatically into common shares of the Company at a conversion rate which is
calculated based on a comparison of the investment return produced by the common
shares of the Company and the investment return of a portfolio of equity REITs
as computed by the National Association of Real Estate Investment Trusts
("NAREIT Return"). The Series B Preferred Shares will also be convertible, at
the option of the holder thereof, at any time from and after June 30, 2000 or
upon the occurrence of certain events. Net proceeds to the Company from the June
1998 Preferred Offering after offering costs of $250 were approximately
$224,750. The net proceeds from the June 1998 Preferred Offering were used to
repay approximately $170,000 of the amounts outstanding under the Company's
short-term BankBoston Note, and to make an indirect investment of approximately
$54,750 in five additional refrigerated storage properties. The Company will
estimate quarterly non-cash dividends, for the purpose of calculating net income
applicable to common shareholders, based on the NAREIT Return. This non-cash
dividend will be recorded as an adjustment to retained earnings and additional
paid-in capital.
DISTRIBUTIONS
On February 3, 1998, the Company paid a cash dividend and unitholder
distribution of $49,697 or $.38 per share and equivalent unit, to shareholders
and equivalent unitholders of record on January 20, 1998. The dividend
represented an annualized dividend of $1.52 per share and equivalent unit.
On May 5, 1998, the Company paid a cash dividend and unitholder
distribution of $49,965 or $.38 per share and equivalent unit, to shareholders
and equivalent unitholders of record on April 20, 1998. The dividend represented
an annualized dividend of $1.52 per share and equivalent unit.
On May 15, 1998, the Company paid a cash dividend on the Company's
Series A Convertible Preferred Shares of $3,264 or $.408 per share. The initial
quarterly dividend was prorated from the share issue date (February 19, 1998) to
May 15, 1998. The dividend represented an annualized dividend of $1.69 per
share.
12
<PAGE> 13
8. INVESTMENTS:
During the six months ended June 30, 1998, the Company acquired the
following Properties from unrelated third parties. The Properties are owned in
fee simple or pursuant to a lessee's interest under a ground lease. The Company
funded these acquisitions through borrowings under the Credit Facility and
borrowings under the BankBoston Note.
<TABLE>
<CAPTION>
Office
Property
Net
Rentable
Company's Hotel Area
Property Name Acq. Date City, State Ownership % Acq. Price Rooms Apartments (In Sq. Ft.)
------------- --------- ----------- ----------- ---------- ----- ---------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
Austin
Centre/Omni 1/23/98 Austin, TX 100 $ 96,400 314 61 344,000
Austin Hotel
Post Oak 2/13/98 Houston, TX 100 $ 155,250 N/A N/A 1,278,000
Central
Washington 2/25/98 Washington, 100 $ 161,000 N/A N/A 536,000
Harbour D.C.
Datran Center 5/1/98 Miami, FL 100 $ 70,550 N/A N/A 472,000
BP Plaza 6/30/98 Houston, TX 100 $ 83,000 N/A N/A 561,000
</TABLE>
9. PENDING INVESTMENTS:
During the month of June, the Company entered into agreements and
related amendments to acquire fee simple title to the office
properties/complexes of Woodfield Corporate Center, Two Town Center and 6701
Tower (collectively referred to as the "Prudential Portfolio") from unrelated
third parties that include the Prudential Insurance Company of America, for an
aggregate purchase price of approximately $464,600. Completion of the
investments are scheduled to occur in the third quarter of 1998, subject to
various closing conditions.
<TABLE>
<CAPTION>
Office
Property
Net
Company's Rentable
Intended Area
Property Name City, State Ownership % (In Sq. Ft.)
------------- ----------- ----------- ------------
<S> <C> <C> <C>
Woodfield Corporate Center Chicago, IL 100 1,628,000
Two Town Center Costa Mesa, CA 100 732,000
6701 Tower Los Angeles, CA 100 321,000
</TABLE>
13
<PAGE> 14
10. PRO FORMA FINANCIAL INFORMATION
The pro forma financial information for the six months ended June 30,
1998 assumes the completion, in each case as of January 1, 1998, of (i) the
February 1998 Preferred Offering; (ii) the Unit Investment Trust Offering,
(iii) the June 1998 Preferred Offering; (iv) the 1998 completed investments
(see Note 8), pending investments (see Note 9), subsequent events (see Note 12),
and related financing and share and unit issuances. Pro Forma information
assumes as of January 1, 1998, all offering proceeds were used for repayment of
indebtedness incurred for investments.
<TABLE>
<CAPTION>
For the six months ended
June 30, 1998
--------------------------
<S> <C>
Total revenues $367,686
Operating income $ 74,468
Income before minority interests $ 89,937
Net income applicable to
Common Shareholders $ 74,263
Per common share data:
Net income - Basic $ 0.60
Net income - Diluted $ 0.55
</TABLE>
The pro forma operating results combine the Company's consolidated
historical statement of operations for the six months ended June 30, 1998 with
the following adjustments:
(i) Adjustment to rental income and operating expenses for the
1998 acquired and pending office properties
(ii) Adjustment to depreciation based on acquisition price
associated with the 1998 acquired and pending office and hotel
properties
(iii) Adjustment to rental income for the 1998 acquired hotel
property to reflect the lease payment (base rent and
percentage rent) from the hotel lessee to the Company as
calculated by applying the rent provisions (as defined in the
lease agreement) to the historical revenues of the hotel
property
(iv) Adjustment to equity in net income of unconsolidated companies
for the Refrigerated Storage Corporations 1998 acquired
Refrigerated Storage Properties
(v) Adjustment to equity in net income of unconsolidated companies
for the pending investment in Tower Realty Trust (see Note 12)
(vi) Adjustment to increase interest expense as a result of
interest costs for long and short-term financing for
investments
(vii) Adjustment to reflect minority partners' weighted average
interest in the net income of the Operating Partnership less
joint venture minority interests assuming completion of share
and unit issuances as of January 1, 1998
(viii) Adjustment to reflect prorated preferred dividends in
connection with the February 1998 Preferred Offering
These pro forma amounts are not necessarily indicative of what the
actual financial position or results of operations of the Company would have
been assuming the above investments had been consummated as of the beginning of
the period, nor do they purport to represent the future financial position or
results of operations of the Company.
14
<PAGE> 15
11. COMMITMENTS AND CONTINGENCIES:
The Company is a party to an Agreement and Plan of Merger, dated
January 16, 1998, as amended (the "Merger Agreement"), between the Company and
Station Casinos, Inc. ("Station"). Pursuant to the Merger Agreement, Station
would merge with and into the Company (the "Merger"). On July 27, 1998, Station
canceled its joint annual and special meeting of its common and preferred
stockholders scheduled for August 4, 1998, at which the common and preferred
stockholders were to vote on the Merger. Station and the Company have since
become involved in litigation relating to the Merger Agreement. Each of Station
and the Company are seeking damages from the other and declaratory relief. In
addition, the action by Station seeks, among other matters, an order of specific
performance requiring the Company to purchase $115,000 of a class of Station's
redeemable preferred stock.
The Company believes that Station's claims are without merit
and intends to contest the claims vigorously. As with any litigation, however,
it is not possible to predict the resolution of the pending actions. The
Company believes, however, that the pending action will not have a material
adverse effect on the Company's financial condition or results of operations.
12. SUBSEQUENT EVENTS:
On August 4, 1998, the Company paid a cash dividend and unitholder
distribution of $50,908 or $.38 per share and equivalent unit, to shareholders
and equivalent unitholders of record on July 15, 1998. The dividend represented
an annualized dividend of $1.52 per share and equivalent unit.
On July 9, 1998, the Company announced that, together with Reckson
Associates Realty Corporation, ("Reckson"), it had entered into an agreement to
acquire Tower Realty Trust ("Tower") for approximately $733 million of cash and
common shares of the Company and Reckson, and assumption of debt. The Company's
estimated funding requirement consisting of cash and common shares is
anticipated to be $168,400. The acquiring entity ("Metropolitan Partners"),
which will be newly formed, will be owned equally by the Company and Reckson.
Tower owns 2.3 million square feet of office building space in New York City,
New York and 2.0 million square feet in Phoenix, Arizona and Orlando, Florida.
The Company will account for its investment in Metropolitan Partners under the
equity method.
On July 21, 1998, the Company declared a cash dividend on the Company's
Series A Convertible Preferred Shares of $.422 per share. The dividend is
payable August 14, 1998, to shareholders of record on July 31, 1998.
On August 7, 1998, the Company notified Station that it was exercising
its termination rights under the Merger Agreement based on Station's alleged
material breaches of the Merger Agreement. Under the Merger Agreement, the
Company has the right to terminate the Merger Agreement if a material breach by
the other party is not cured within 10 business days after notice. As described
in Note 11, Station and the Company are currently involved in litigation
relating to the Merger Agreement. As a result of these developments, the Company
has stated that it no longer considers the Merger to be probable and intends to
cancel its previously announced common share rights offerings and increase in
quarterly dividend to $.63 per common share, which were dependent on the
consummation of the Merger. The Company's board of trust managers will conduct
its regular annual evaluation of the Company's dividend policy in September
1998. In addition, the Company has stated that it does not intend to proceed
with the formation of a new partnership that would have owned the real estate
assets acquired from Station and invested in casinos, gaming properties, and
other real estate properties.
On August 11, 1998, affiliates of Union Bank, AG and the Company
exercised the right provided under the forward share purchase agreement dated
August 12, 1997 to extend the term of the agreement for one year. In connection
with the exercise of the right to extend the forward share purchase agreement,
the Company paid a fee of approximately $3.0 million to one of the Union Bank
affiliates. Under the forward share purchase agreement, the Company has agreed
to purchase 4,700,000 common shares from such Union Bank affiliate by August
12, 1999.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
HISTORICAL RESULTS OF OPERATIONS
This information should be read in conjunction with the accompanying
consolidated financial statements and notes thereto. These financial statements
include all adjustments which are, in the opinion of management, necessary to
reflect a fair statement of the results for the interim periods presented, and
all such adjustments are of a normal and recurring nature. The information
herein should be read in conjunction with the more detailed information
contained in the Company's Form 10-K for the year ended December 31, 1997.
Capitalized terms used but not otherwise defined therein, shall have the
meanings ascribed to those terms in the footnotes to the financial statements.
15
<PAGE> 16
This Form 10-Q contains forward-looking statements within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Although the Company believes that
the expectations reflected in such forward-looking statements are based upon
reasonable assumptions, the Company's actual results could differ materially
from those set forth in the forward-looking statements. Certain factors that
might cause such a difference are set forth in the Company's Current Report on
Form 8-K/A dated April 17, 1998 and filed August 13, 1998 and include the
following: changes in real estate conditions (including rental rates and
competing properties) or in industries in which the Company's principal tenants
compete; changes in general economic conditions; the ability to identify
acquisitions and investment opportunities meeting the Company's investment
strategy; timely leasing of unoccupied square footage; timely releasing of
occupied square footage upon expiration; the Company's ability to generate
revenues sufficient to meet debt service payments and other operating expenses;
the Company's inability to control the management and operation of its
residential development properties, its tenants and the businesses associated
with its investment in refrigerated storage properties; financing risks, such as
the availability of funds sufficient to service existing debt, changes in
interest rates associated with its variable rate debt, the availability of
equity and debt financing terms acceptable to the Company, the possibility that
the Company's outstanding debt (which requires so-called "balloon" payments of
principal) may be refinanced at higher interest rates or otherwise on terms less
favorable to the Company and the fact that interest rates under the Credit
Facility and certain of the Company's other financing arrangements may increase;
the existence of complex regulations relating to the Company's status as a real
estate investment trust and the adverse consequences of the failure to qualify
as such; risks related to certain ongoing litigation with Station relating to
termination of a proposed merger agreement and other risks detailed from time to
time in the Company's filings with the SEC. Given these uncertainties, readers
are cautioned not to place undue reliance on such statements. The Company
undertakes no obligation to update these forward-looking statements to reflect
any future events or circumstances.
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 1998 AND 1997
Total revenues increased approximately $70.0 million, or 70.6%, to
$169.1 million for the three months ended June 30, 1998, as compared to $99.1
million for the three months ended June 30, 1997. An increase in Office and
Retail Property revenues of $52.6 million is primarily attributable to: (i) the
acquisition of nine Office Properties in 1998, which resulted in $13.1 million
of incremental revenues; (ii) the acquisition of 26 Office Properties and one
Retail Property in 1997 which resulted in $31.6 million of incremental revenues;
and (iii) an increase in Office and Retail Property revenues of $7.9 million
from the properties owned as of January 1, 1997, which is primarily due to
rental rate and occupancy increases at these Properties. The increase in Hotel
Property revenues of $4.2 million is primarily attributable to $3.4 million from
three full-service Hotel Properties acquired subsequent to January 1, 1997. The
increase in Behavioral Healthcare Property revenues of $11.7 million is
attributable to the acquisition of the Properties in June 1997. The increase in
interest and other income of $1.5 million for the three months ended June 30,
1998, is primarily attributable to the $104.7 million increase in notes
receivable as a result of the May 1997 acquisition of certain notes included in
the Carter-Crowley portfolio, and the loans to Crescent Operating, Inc. ("COI").
16
<PAGE> 17
Total expenses increased $55.9 million, or 78.7%, to $126.9 million for
the three months ended June 30, 1998, as compared to $71.0 million for the three
months ended June 30, 1997. An increase in rental property operating expenses of
$21.6 million is primarily attributable to: (i) the acquisition of nine Office
Properties in 1998, which resulted in $4.8 million of incremental expenses, (ii)
the acquisition of 26 Office Properties and one Retail Property in 1997 which
resulted in $14.5 million of incremental expenses; and (iii) an increase in
expenses of $2.3 million from the Office and Retail Properties owned as of
January 1, 1997, which is primarily due to occupancy increases at these
Properties. Depreciation and amortization increased $11.9 million primarily due
to the acquisitions of Office, Retail, Hotel and Behavioral Healthcare
Properties. An increase in interest expense of $21.0 million is primarily
attributable to: (i) $7.5 million of interest payable under the Notes due 2002
and Notes due 2007, which were issued in a private offering in September 1997;
(ii) $1.8 million of interest payable under the Chase Manhattan Note, which was
assumed in connection with the acquisition of Fountain Place in November 1997;
(iii) $1.7 million of interest payable on the BankBoston Note II which the
Company entered into in August 1997; (iv) $.8 million of interest payable under
the Metropolitan Life Note I, which was assumed in connection with the
acquisition of Energy Center in December 1997; and (v) $9.1 million of
incremental interest payable due to draws under the Credit Facility and
short-term borrowings with BankBoston (average balance outstanding for second
quarter 1998 and 1997 was $759.2 million and $211.1 million, respectively), all
of which financing arrangements were used to fund investments and working
capital.
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 1998 AND 1997
Total revenues increased approximately $150.2 million, or 83.4%, to
$330.3 million for the six months ended June 30, 1998, as compared to $180.1
million for the six months ended June 30, 1997. An increase in Office and Retail
Property revenues of $108.6 million is primarily attributable to: (i) the
acquisition of nine Office Properties in 1998 which resulted in $18.8 million of
incremental revenues; (ii) the acquisition of 26 Office Properties and one
Retail Property in 1997, which resulted in $74.7 million of incremental
revenues; and (iii) an increase in Office and Retail Property revenues of $15.1
million from Properties owned as of January 1, 1997, which is primarily due to
rental rate and occupancy increases at these Properties. The increase in Hotel
Property revenues of $8.1 million is primarily attributable to the acquisition
of three full-service Hotel Properties subsequent to January 1, 1997, which
resulted in $6.7 million of incremental revenues. The increase in Behavioral
Healthcare Property revenues of $25.5 is attributable to the acquisition of the
Properties in June 1997. The increase in interest and other income of $8.0
million for the six months ended June 30, 1998, is primarily attributable to the
sale of marketable securities and the $104.7 million increase in notes
receivable as a result of the May 1997 acquisition of certain notes included in
the Carter-Crowley portfolio, and the loans to COI.
Total expenses increased $111.0 million, or 81.7%, to $246.8 million
for the six months ended June 30, 1998, as compared to $135.8 million for the
six months ended June 30, 1997. An increase in rental property operating
expenses of $45.7 million is primarily attributable to: (i) the acquisition of
nine Office Properties in 1998 which resulted in $6.7 million of incremental
expenses; (ii) the acquisition of 26 Office Properties and one Retail Property
in 1997, which resulted in $35.6 million of incremental expenses; and (iii) an
increase in Office and Retail Property expenses of $3.4 million from Properties
owned as of January 1, 1997, which is primarily due to occupancy increases at
these Properties. Depreciation and amortization increased $24.5 million
primarily due to the acquisitions of Office, Retail, Hotel and the Behavioral
Healthcare Properties. An increase in interest expense of $40.5 million is
primarily attributable to: (i) $14.6 million of interest payable under the Notes
due 2002 and Notes due 2007, which were issued in a private offering in
September 1997 ; (ii) $3.6 million of interest payable under the Chase Manhattan
Note, which was assumed in connection with the acquisition of Fountain Place in
November 1997; (iii) $3.4 million of interest payable on the BankBoston Note II,
which the Company entered into in August 1997; (iv) $1.5 million of interest
payable under the Metropolitan Life Note I, which was assumed in connection with
the acquisition of Energy Center in December 1997; and (v) $17.4 million of
incremental interest payable due to draws under the Credit Facility and
short-term borrowings with BankBoston (average balance outstanding for six
months ended June 30, 1998 and 1997 was $680.7 million and $200.4 million,
respectively), all of which financing arrangements were used to fund investments
and working capital.
17
<PAGE> 18
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $121.7 million and $66.6 million at
June 30, 1998 and December 31, 1997, respectively. The increase is attributable
to $646.1 million and $101.3 million of cash provided by financing and operating
activities, respectively, offset by $692.3 million used in investing activities.
The Company's inflow of cash provided by financing activities is primarily
attributable to net borrowings under the Credit Facility ($260.0 million), net
borrowings under the BankBoston Note ($34.5 million), net proceeds from the
February and June 1998 Preferred Offerings ($416.0 million) and net proceeds
from the Unit Investment Trust Offering ($44.0 million). The inflow from cash
provided by financing activities was partially offset by distributions paid to
shareholders and unitholders ($99.7 million). The inflow from operating
activities is primarily attributable to property operations, but is partially
offset by the decrease in accounts payable due to the payment of real estate
taxes and increased investment in marketable securities. The Company utilized
$692.3 million of cash flow primarily in the following investing activities: (i)
the acquisition of nine Office Properties and one Hotel Property ($582.0
million); (ii) recurring and non-recurring tenant improvement and leasing costs
for the Office and Retail Properties ($34.3 million); (iii) capital expenditures
for rental properties ($24.9 million) primarily attributable to non-recoverable
building improvements for the Office and Retail properties, and replacement of
furniture, fixtures and equipment for the Hotel Properties; (iv) development of
investment properties ($11.5 million); and (v) increased investment in
unconsolidated companies ($52.0 million) which is primarily attributable to the
additional investment in the Refrigerated Storage Corporations which included
the acquisition of nine additional Refrigerated Storage Properties ($66.6
million) offset by distributions from the Residential Development Corporations.
The outflow of cash used in investing activities was partially offset by a
decrease in notes receivable ($14.6 million) which is primarily due to the
repayment of a mortgage note secured by an office property.
On February 19, 1998, the Company completed an offering (the "February
1998 Preferred Offering") of 8,000,000 shares of 6 3/4% Series A convertible
cumulative preferred shares (the "Series A Preferred Shares") with a liquidation
preference of $25.00 per share. Series A Preferred Shares are convertible at any
time, in whole or in part, at the option of the holders thereof into common
shares of the Company at a conversion price of $40.86 per common share
(equivalent to a conversion rate of .6119 common shares per Series A Preferred
Share), subject to adjustment in certain circumstances. Net proceeds to the
Company from the February 1998 Preferred Offering after underwriting discounts
of $8.0 million and other offering costs of approximately $.8 million were
approximately $191.3 million. The net proceeds from the February 1998 Preferred
Offering were used to repay borrowings under the Credit Facility. Dividends on
the Series A Preferred Shares are cumulative from the date of original issue and
are payable quarterly in arrears commencing on May 15, 1998. The dividend
represents an annualized dividend of $1.69 per share, or $.42 per share
quarterly.
On April 23, 1998, the Company completed an offering of 1,365,138
common shares at $32.27 per share to Merrill Lynch & Co. Net proceeds to the
Company from the Unit Investment Trust Offering were approximately $44.0
million. The net proceeds were used to reduce borrowings outstanding under the
Credit Facility.
On June 29, 1998, the Company completed the June 1998 Preferred
Offering of 6,948,734 Series B Preferred Shares with a liquidation preference of
$32.38 per share in an aggregate principal amount of approximately $225 million.
The Series B Preferred Shares have equal priority with the Series A Preferred
Shares. Holders of the Series B Preferred Shares will not be entitled to regular
quarterly cash dividends, but will be entitled to receive certain extraordinary
cash dividends, and stock and other non-cash dividends, excluding dividends of
common shares of the Company, that may be made from time to time to the common
shareholders. On June 30, 2001, the Series B Preferred Shares will convert
automatically into the Company's common shares at a conversion rate which is
calculated based on a comparison of the investment return produced by the
common shares of the Company and the NAREIT Return. The Series B Preferred
Shares will also be convertible, at the option of the holder thereof, at any
time from and after June 30, 2000 or upon the occurrence of certain events. Net
proceeds to the Company from the June 1998 Preferred Offering after offering
costs of $.2 million were approximately $224.8 million. The net proceeds from
the June 1998 Preferred Offering were used to repay approximately $170.0 million
of the amounts outstanding under the Company's short-term
18
<PAGE> 19
BankBoston Note, and to make an indirect investment of approximately $54.8
million in five additional refrigerated storage properties. The Company will
estimate quarterly non-cash dividends, for the purpose of calculating net income
applicable to common shareholders, based on the NAREIT Return. This non-cash
dividend will be recorded as an adjustment to retained earnings and additional
paid-in capital.
On February 20, 1998 and June 25, 1998, the Company issued an
additional 525,000 common shares and 759,254 common shares, respectively, to
Merrill Lynch International as a result of the decline in market price of the
common shares from the date of issuance on December 12, 1997 through,
respectively, February 12, 1998 and June 12, 1998. The issuance of these shares
did not have a material impact on the Company's net income per common share or
net book value per common share.
On August 11, 1998, affiliates of Union Bank, AG and the Company
exercised the right provided under the forward share purchase agreement dated
August 12, 1997 to extend the term of the agreement for one year. In connection
with the exercise of the right to extend the forward share purchase agreement,
the Company paid a fee of approximately $3.0 million to one of the Union Bank
affiliates. Under the forward share purchase agreement, the Company has agreed
to purchase 4,700,000 common shares from such Union Bank affiliate by August 12,
1999.
The Company is a party to the Merger Agreement, between the Company and
Station. Pursuant to the Merger Agreement, Station would merge with and into the
Company . On July 27, 1998, Station canceled its joint annual and special
meeting of its common and preferred stockholders scheduled for August 4, 1998,
at which the common and preferred stockholders were to vote on the Merger. On
August 7, 1998, the Company notified Station that it was exercising its
termination rights under the Merger Agreement based on Station's alleged
material breaches of the Merger Agreement. Under the Merger Agreement, the
Company has the right to terminate the Merger Agreement if a material breach by
the other party is not cured within 10 business days after notice. Station and
the Company are currently involved in litigation relating to the Merger
Agreement. Each of Station and the Company are seeking damages from the other
and declaratory relief. In addition, the action by Station seeks, among other
matters, an order of specific performance requiring the Company to purchase $115
million of a class of Station's redeemable preferred stock.
The Company has stated that it believes that Station's claims are
without merit and intends to contest the claims vigorously. As with any
litigation, however, it is not possible to predict the resolution of the pending
actions. The Company believes, however, that the pending action will not have a
material adverse effect on the Company's financial condition or results of
operations.
As a result of the developments relating to Station, the Company has
stated that it no longer considers the Merger to be probable and intends to
cancel its previously announced common share rights offerings, and increase in
quarterly dividend to $.63 per common share, which were dependent on the
consummation of the Merger. The Company's board of trust managers will conduct
its regular annual evaluation of the Company's dividend policy in September
1998. In addition, the Company has stated that it does not intend to proceed
with the formation of a new partnership that would have owned the real estate
assets acquired from Station and invested in casinos, gaming properties and
other real estate properties.
As of August 12, 1998, with the exception of the pending investment
in the Prudential Portfolio for approximately $464.6 million and the Tower
transaction for approximately $168.4 million, the Company had no commitments for
material capital expenditures.
The Company expects to meet its short-term liquidity requirements
primarily through cash flow provided by operating activities, which the Company
believes will be adequate to fund normal recurring operating expenses, debt
service requirements, recurring capital expenditures and distributions to
shareholders and unitholders. To the extent the Company's cash flow from
operating activities is not sufficient to finance non-recurring capital
expenditures, such as tenant improvement and leasing costs related to previously
unoccupied space, or investment property acquisition and development costs, the
Company expects to finance such activities with available cash reserves and
other debt and equity financing alternatives which are available to the Company.
These alternatives include but are not limited to unit and common share
issuances, obtaining new debt instruments secured by investment property
acquisitions and developments, additional proceeds from the refinancing of
existing secured debt and additional unsecured short-term borrowings. The
Company will analyze the various alternatives as needed, in order to maintain
the most appropriate capital structure to execute upon its strategy.
The Company expects to meet its long-term liquidity requirements,
consisting primarily of maturities under the Company's fixed and variable rate
debt through long-term secured and unsecured borrowings and the issuance of
additional debt securities or additional equity securities of the Company.
The Company intends to maintain its qualification as a REIT under the
Internal Revenue Code of 1986, as amended (the "Code"). As a REIT, the Company
generally will not be subject to corporate federal income taxes as long as it
satisfies certain technical requirements of the Code, including the requirement
to distribute 95% of its taxable income to its shareholders.
19
<PAGE> 20
The significant terms of the Company's primary debt financing
arrangements are shown below (dollars in thousands):
<TABLE>
<CAPTION>
INTEREST BALANCE
RATE OUTSTANDING
MAXIMUM AT EXPIRATION AT
DESCRIPTION BORROWINGS 6/30/98 DATE 6/30/98
- ---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Secured Fixed Rate Debt:
LaSalle Note I $ 239,000 7.83% August 2027(1) $ 239,000
LaSalle Note II 161,000 7.79 March 2028(2) 161,000
CIGNA Note 63,500 7.47 December 2002 63,500
Metropolitan Life Note I 11,948 8.88 September 2001 11,948
Metropolitan Life Note II 44,716 6.93 December 2002 44,716
Metropolitan Life Note III 40,000 7.74 December 1999 40,000
Metropolitan Life Note IV 6,890 7.11 December 1999 6,890
Northwestern Life Note 26,000 7.65 January 2003 26,000
Nomura Funding VI Note 8,649 10.07 July 2020(3) 8,649
Rigney Promissory Note 770 8.50 November 2012 770
------------- ------- ----------
Subtotal/Weighted Average $ 602,473 7.75% $ 602,473
============= ======= ==========
Secured Capped Variable Rate Debt:
LaSalle Note III $ 115,000 7.79% July 1999 $ 115,000
============= ======= ==========
Secured Variable Rate Debt:
Chase Manhattan Note $ 97,123 7.41% September 2001 $ 97,123
============= ======= ==========
Unsecured Fixed Rate Debt:
Notes due 2007(4) $ 250,000 7.13% September 2007 $ 250,000
Notes due 2002(4) 150,000 6.63 September 2002 150,000
------------- ------- ----------
Subtotal/Weighted Average $ 400,000 6.94% $ 400,000
============= ======= ==========
Unsecured Variable Rate Debt:
Line of Credit $ 750,000 6.83% June 2000 $ 610,000
BankBoston Note 80,000 6.83 July 1998(5) 80,000
BankBoston Note II 100,000 6.83 August 1998 100,000
------------- ------- ----------
Subtotal/Weighted Average $ 930,000 6.83% $ 790,000
============= ======= ==========
TOTAL/WEIGHTED AVERAGE $ 2,144,596 7.21% $2,004,596
============= ======= ==========
</TABLE>
(1) In August 2007, the interest rate increases, and the Company is
required to remit, in addition to the monthly debt service payment,
excess property cash flow, as defined, to be applied first against
principal until the note is paid in full and thereafter, against
accrued excess interest, as defined. It is the Company's intention to
repay the note in full at such time (August 2007) by making a final
payment of approximately $220 million.
(2) In March 2006, the interest rate increases, and the Company is required
to remit, in addition to the monthly debt service payment, excess
property cash flow, as defined, to be applied first against principal
until the note is paid in full and thereafter, against accrued excess
interest, as defined. It is the Company's intention to repay the note
in full at such time (March 2006) by making a final payment of
approximately $154 million.
(3) Beginning in July 1998, the Company has the option to defease the note
by purchasing Treasury obligations to pay the note without penalty. In
July 2010, the interest rate due under the note will change to a
10-year Treasury yield plus 500 basis points or, if the Company so
elects, it may repay the note without penalty.
(4) The interest rates on the Notes were subject to temporary increase by
50 basis points in the event that a registered offer to exchange the
Notes for notes of the Operating Partnership with terms identical in
all material respects to the Notes was not consummated or a shelf
registration statement with respect to the resale of the Notes was not
declared effective by the Securities and Exchange Commission (the
"SEC") on or before March 21, 1998. The interest rates on the Notes
were temporarily increased by 50 basis points, since the exchange offer
was not completed by March 21, 1998. The interest rates on the Notes
returned to the original rates in July 1998, when the registered offer
to exchange the Notes became effective. As of July 2, 1998, all of the
Notes had been exchanged. The interest rates on the Notes are also
subject to adjustment in the event that the Notes are assigned a rating
that is not an investment grade rating, do not continue to be assigned
a rating or are not assigned a rating by certain rating agencies. In
September 1997, the Notes received a Baa3 rating (investment grade)
from Moody's. On July 28, 1998, the Notes received a BB+ rating (one
notch below investment grade) from S & P. Since the Notes are split
rated, the interest rates on the Notes increased 37.5 basis points on
July 28, 1998. Should the Notes become investment grade rated from both
Moody's and S&P by September 22, 1998, the 37.5 basis point increase
would be eliminated.
(5) Repaid on July 1, 1998 with a borrowing under the Credit Facility.
20
<PAGE> 21
Based on the Company's total market capitalization of $6.9 billion and
$6.5 billion at June 30 and August 11, 1998, respectively (at a share price of
$33.625 and $29.750 which were the closing prices of the common shares on the
New York Stock Exchange on June 30 and August 11, 1998, respectively, and
including the full conversion of all units of minority interest in the Operating
Partnership plus total indebtedness), the Company's debt represented 29% and 32%
of its total market capitalization at June 30 and August 11, 1998, respectively.
It is the Company's current policy to pursue a strategy of conservative use of
leverage, generally with a ratio of debt to total market capitalization of the
Company targeted at approximately 40 percent, although this policy is subject to
reevaluation and modification and could be increased above 40 percent.
FUNDS FROM OPERATIONS
Funds from Operations ("FFO"), based on the definition adopted by the
Board of Governors of the NAREIT and as used herein, means net income (loss)
(determined in accordance with generally accepted accounting principles or
"GAAP"), excluding gains (or losses) from debt restructuring and sales of
property, plus depreciation and amortization of real estate assets, and after
adjustments for unconsolidated partnerships and joint ventures. FFO was
developed by NAREIT as a relative measure of performance and liquidity of an
equity REIT in order to recognize that income-producing real estate historically
has not depreciated on the basis determined under GAAP. The Company considers
FFO an appropriate measure of performance of an equity REIT. However, FFO (i)
does not represent cash generated from operating activities determined in
accordance with GAAP (which, unlike FFO, generally reflects all cash effects of
transactions and other events that enter into the determination of net income),
(ii) is not necessarily indicative of cash flow available to fund cash needs and
(iii) should not be considered as an alternative to net income determined in
accordance with GAAP as an indication of the Company's operating performance, or
to cash flow from operating activities determined in accordance with GAAP as a
measure of either liquidity or the Company's ability to make distributions. The
Company has historically distributed an amount less than FFO, primarily due to
reserves required for capital expenditures, including leasing costs. The
aggregate distributions paid to shareholders and unitholders for the six months
ended June 30, 1998 and 1997 were $99.7 and $59.6 million, respectively. An
increase in FFO does not necessarily result in an increase in aggregate
distributions because the Company's board of trustees is not required to
increase distributions on a quarterly basis unless necessary in order to enable
the Company to maintain REIT status. Because the Company must distribute 95% of
its real estate investment trust taxable income (as defined in the Code),
however, a significant increase in FFO will generally require an increase in
distributions to shareholders and unitholders although not necessarily on a
proportionate basis. Accordingly, the Company believes that in order to
facilitate a clear understanding of the consolidated historical operating
results of the Company, FFO should be considered in conjunction with the
Company's net income (loss) and cash flows as reported in the consolidated
financial statements and notes thereto. However, the Company's measure of FFO
may not be comparable to similarly titled measures of other REIT's because these
REIT's may not apply the definition of FFO in the same manner as the Company.
21
<PAGE> 22
STATEMENTS OF FUNDS FROM OPERATIONS
(dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Income before minority interests $ 48,278 $ 29,186 $ 95,432 $ 49,431
Adjustments:
Depreciation and amortization of real
estate assets 27,664 15,724 53,715 29,220
Adjustment for investments in real estate
mortgages and equity of
unconsolidated companies 15,184 407 27,498 673
Minority interest in joint ventures (406) (386) (806) (802)
Preferred stock dividends (3,375) -- (4,950) --
--------- --------- --------- ---------
Funds from operations $ 87,345 $ 44,931 $ 170,889 $ 78,522
========= ========= ========= =========
Investment Segments:
Office and retail properties $ 82,894 $ 50,036 $ 156,940 $ 89,446
Hotel properties 12,486 8,183 25,110 16,997
Behavioral healthcare properties 13,824 2,142 27,647 2,142
Refrigerated storage properties 5,576 -- 11,538 --
Residential development properties 13,712 1,449 23,266 2,673
Corporate general & administrative (3,554) (2,638) (6,701) (7,483)
Interest expense (37,844) (16,868) (72,127) (31,612)
Preferred dividend (3,375) -- (4,950) --
Other(1) 3,626 2,627 10,166 6,359
--------- --------- --------- ---------
Funds from operations $ 87,345 $ 44,931 $ 170,889 $ 78,522
========= ========= ========= =========
</TABLE>
(1) Includes interest and other income less depreciation and amortization of
non-real assets and amortization of deferred financing costs.
22
<PAGE> 23
RECONCILIATION OF FUNDS FROM OPERATIONS TO NET CASH PROVIDED
BY OPERATING ACTIVITIES
(dollars in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
----------------------
1998 1997
--------- ---------
<S> <C> <C>
Funds From Operations $ 170,889 $ 78,522
Adjustments:
Depreciation and amortization of non-real estate assets 739 743
Amortization of deferred financing costs 2,250 1,220
Minority interest in joint ventures profit and depreciation
and amortization of real estate assets 1,184 1,130
Adjustment for investments in real estate mortgages and equity
of unconsolidated companies (27,498) (673)
Change in deferred rent receivable (16,060) (7,049)
Change in current assets and liabilities (35,766) (2,141)
Equity in earnings in excess of distributions received from
unconsolidated companies 441 (390)
Preferred dividends 4,950 --
Non-cash compensation 135 131
--------- ---------
Net Cash Provided by Operating Activities $ 101,264 $ 71,493
========= =========
</TABLE>
23
<PAGE> 24
OFFICE PROPERTIES
The following table sets forth certain information about the Office
Properties as of June 30, 1998, assuming completion of the pending investment
(see Note 9 - financial statements).
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NET FULL-SERVICE
RENTABLE RENTAL RATE
NO. OF YEAR AREA PERCENT PER LEASED
STATE, CITY, PROPERTY PROPERTIES SUBMARKET COMPLETED (SQ. FT.) LEASED SQ. FT.(1)
--------------------- ---------- -------- --------- --------- ------- ----------
<S> <C> <C> <C> <C> <C> <C>
TEXAS
DALLAS
Bank One Center(2).......... 1 CBD 1987 1,530,957 73% $ 21.71
The Crescent Office Towers.. 1 Uptown/Turtle Creek 1985 1,210,949 99 28.75
Fountain Place.............. 1 CBD 1986 1,200,266 96 18.22
Trammell Crow Center(3)..... 1 CBD 1984 1,128,331 91 24.98
Stemmons Place.............. 1 Stemmons Freeway 1983 634,381 91 14.14
Spectrum Center(4).......... 1 Far North Dallas 1983 598,250 77(5) 20.75
Waterside Commons........... 1 Las Colinas 1986 458,739 100 16.76
Caltex House................ 1 Las Colinas 1982 445,993 96 25.47
Reverchon Plaza............. 1 Uptown/Turtle Creek 1985 374,165 94 17.55
The Aberdeen................ 1 Far North Dallas 1986 320,629 100 18.19
MacArthur Center I & II..... 1 Las Colinas 1982/1986 294,069 96 18.81
Stanford Corporate Centre... 1 Far North Dallas 1985 265,507 100 16.42
The Amberton................ 1 Central Expressway 1982 255,052 81(5) 11.24
Concourse Office Park....... 1 LBJ Freeway 1972-1986 244,879 92 13.07
12404 Park Central.......... 1 LBJ Freeway 1987 239,103 46(5) 19.73
Palisades Central II........ 1 Richardson/Plano 1985 237,731 95 16.63
3333 Lee Parkway............ 1 Uptown/Turtle Creek 1983 233,769 98 19.39
Liberty Plaza I & II........ 1 Far North Dallas 1981/1986 218,813 100 13.45
The Addison................. 1 Far North Dallas 1981 215,016 100 17.64
The Meridian................ 1 LBJ Freeway 1984 213,915 92 15.48
Palisades Central I......... 1 Richardson/Plano 1980 180,503 88(5) 14.31
Walnut Green................ 1 Central Expressway 1986 158,669 96 14.03
Greenway II................. 1 Richardson/Plano 1985 154,329 99 19.45
Addison Tower............... 1 Far North Dallas 1987 145,886 98 13.43
Greenway I & IA............. 2 Richardson/Plano 1983 146,704 100 21.95
5050 Quorum................. 1 Far North Dallas 1981 133,594 95 15.01
Cedar Springs Plaza......... 1 Uptown/Turtle Creek 1982 110,923 90 17.04
Valley Centre............... 1 Las Colinas 1985 74,861 99 15.73
One Preston Park............ 1 Far North Dallas 1980 40,525 86 15.63
---- ---------- ------- ------------
Subtotal/Weighted Average. 31 11,466,508 90% $ 19.96
--- ---------- ------- ------------
FORT WORTH
Continental Plaza........... 1 CBD 1982 954,895 48%(5) $ 15.76
---- ---------- ------- ------------
HOUSTON
Greenway Plaza Office
Portfolio.................. 10 Richmond-Buffalo 1969-1982 4,286,277 89% $ 15.40
Speedway
Houston Center............... 3 CBD 1974-1983 2,764,418 94(5) 15.18
Post Oak Central............. 3 West Loop/Galleria 1974-1981 1,277,516 95 15.42
The Woodlands Office
Properties(6) ............. 12 The Woodlands 1980-1996 810,630 96(5) 15.34
BP Plaza..................... 1 Katy Freeway 1992 561,065 100 17.94
Three Westlake Park(7)....... 1 Katy Freeway 1983 414,251 99 13.45
U.S. Home Building........... 1 West Loop/Galleria 1982 399,777 85 14.87
---- ---------- ------- ------------
Subtotal/Weighted Average. 31 10,513,934 92% $ 15.38
--- ---------- ------- ------------
AUSTIN
Frost Bank Plaza............ 1 CBD 1984 433,024 75%(5) $ 18.31
301 Congress Avenue(8)...... 1 CBD 1986 418,338 98 22.98
Bank One Tower.............. 1 CBD 1974 389,503 96 16.94
Austin Centre............... 1 CBD 1986 343,665 92 19.90
The Avallon................. 1 Northwest 1993/1997 232,301(9) 79(5) 18.95
Barton Oaks Plaza One....... 1 Southwest 1986 99,792 100 19.91
---- ---------- ------- ------------
Subtotal/Weighted Average 6 1,916,623 89% $ 19.58
---- ---------- ------- ------------
</TABLE>
24
<PAGE> 25
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NET FULL-SERVICE
RENTABLE RENTAL RATE
NO. OF YEAR AREA PERCENT PER LEASED
STATE, CITY, PROPERTY PROPERTIES SUBMARKET COMPLETED (SQ. FT.) LEASED SQ. FT.(1)
--------------------- ---------- --------- --------- --------- ------ ------------
<S> <C> <C> <C> <C> <C> <C>
COLORADO
DENVER
MCI Tower................... 1 CBD 1982 550,807 98% $ 17.96
Ptarmigan Place............. 1 Cherry Creek 1984 418,630 93 16.29
Regency Plaza One........... 1 DTC 1985 309,862 90(5) 21.17
AT&T Building............... 1 CBD 1982 184,581 83 15.07
The Citadel................. 1 Cherry Creek 1987 130,652 100 19.75
55 Madison.................. 1 Cherry Creek 1982 137,176 84(5) 17.11
44 Cook..................... 1 Cherry Creek 1984 124,174 96 17.75
--- ---------- ------- ------------
Subtotal/Weighted Average 7 1,855,882 93% $ 17.92
--- ---------- ------- ------------
COLORADO SPRINGS
Briargate Office and
Research Center.......... 1 Colorado Springs 1988 252,857 100 $ 15.51
--- ---------- ------- ------------
ILLINOIS
CHICAGO
Woodfield Corporate
Center(10)................ 6 Schaumburg 1978-1986 1,627,769 94 $ 23.74
--- ---------- ------- ------------
LOUISIANA
NEW ORLEANS
Energy Centre............... 1 CBD 1984 761,500 78% $ 14.85
1615 Poydras................ 1 CBD 1984 508,741 80 15.10
--- ---------- ------- ------------
Subtotal/Weighted Average 2 1,270,241 79% $ 14.95
--- ---------- ------- ------------
FLORIDA
MIAMI
Miami Center................ 1 CBD 1983 782,686 80% $ 23.52
Datran Center............... 2 South Dade/Kendall 1986/1988 472,236 92 20.29
--- ---------- ------- ------------
Subtotal/Weighted Average 3 1,254,922 84% $ 22.18
--- ---------- ------- ------------
ARIZONA
PHOENIX
Two Renaissance Square...... 1 Downtown/CBD 1990 476,373 91%(5) $ 23.30
6225 North 24th Street...... 1 Camelback Corridor 1981 86,451 67(5) 21.66
--- ---------- ------- ------------
Subtotal/Weighted Average 2 562,824 88% $ 23.10
--- ---------- ------- ------------
WASHINGTON, D.C.
WASHINGTON, D.C.
Washington Harbour........ 2 Georgetown 1986 536,206 94% $ 36.47
--- --------- ------- ------------
NEBRASKA
OMAHA
Central Park Plaza.......... 1 CBD 1982 409,850 100% $ 15.23
--- ---------- ------- ------------
NEW MEXICO
ALBUQUERQUE
Albuquerque Plaza........... 1 CBD 1990 366,236 96% $ 18.45
--- ---------- ------- ------------
CALIFORNIA
SAN FRANCISCO
160 Spear Street............ 1 South of Market/CBD 1984 276,420 99% $ 24.93
--- ---------- ------- ------------
SAN DIEGO
Chancellor Park (11)........ 1 UTC 1988 195,733 87% $ 20.35
--- ---------- ------- ------------
COSTA MESA
Two Town Center(10)......... 3 South Coast Metro 1979-1983 731,969 77% $ 22.61
--- ---------- ------- ------------
LOS ANGELES
6701 Tower(10).............. 1 Culver City-West LA 1987 320,982 81% $ 23.38
--- ---------- ------- ------------
TOTAL/WEIGHTED AVERAGE.... 99 34,513,851 89%(5) $ 18.75
== ========== ======= ============
</TABLE>
25
<PAGE> 26
(1) Calculated based on base rent payable as of June 30, 1998, without
giving effect to free rent or scheduled rent increases that would be
taken into account under generally accepted accounting principles and
including adjustments for expenses payable by or reimbursable from
tenants.
(2) The Company has a 50% general partner interest in the partnership that
owns Bank One Center.
(3) The Company owns the principal economic interest in Trammell Crow
Center through its ownership of fee simple title to the Property
(subject to a ground lease and a leasehold estate regarding the
building) and two mortgage notes encumbering the leasehold interests
in the land and building.
(4) The Company owns the principal economic interest in Spectrum Center
through an interest in Spectrum Mortgage Associates L.P., which owns
both a mortgage note secured by Spectrum Center and the ground
lessor's interest in the land underlying the office building.
(5) Leases have been executed at certain Office Properties but had not
commenced as of June 30, 1998. If such leases had commenced as of June
30, 1998, the percent leased for Office Properties would have been
92%. The total percent leased for such Properties would have been as
follows: Spectrum Center - 88%; The Amberton - 85%; 12404 Park Central
- 100%; Palisades Central I - 99%; Continental Plaza - 100%; Houston
Center - 97%; The Woodlands Office Properties - 99%; Frost Bank
Plaza - 92%; The Avallon - 100%; Regency Plaza One - 97%;
55 Madison - 89%; Two Renaissance Square - 96%; and 6225 North 24th
Street - 83%.
(6) The Company has a 75% limited partner interest and an indirect
approximately 10% general partner interest in the partnership that
owns the 12 Office Properties that comprise The Woodlands Office
Properties.
(7) The Company owns the principal economic interest in Three Westlake
Park through its ownership of a mortgage note secured by Three
Westlake Park.
(8) The Company has a 1% general partner and a 49% limited partner
interest in the partnership that owns 301 Congress Avenue.
(9) In August 1997, construction was completed on a 106,342 square foot
office property. The entire building is leased to BMC Software, Inc.,
which is expected to occupy in stages over the next 13 months.
(10) Pending investment as of June 30, 1998.
(11) The Company owns Chancellor Park through its ownership of a mortgage
note secured by the building and through its direct and indirect
interests in the partnership which owns the building.
AGGREGATE LEASE EXPIRATIONS OF OFFICE PROPERTIES
The following table sets forth a schedule of the lease expirations for
leases in place as of June 30, 1998, assuming completion of the pending
investment (see Note 9 - financial statements), for the Company's Office
Properties for each of the 10 years beginning with the remainder of 1998,
assuming that none of the tenants exercises renewal options and excluding an
aggregate of 6,360,666 square feet of unleased space.
<TABLE>
<CAPTION>
ANNUAL
PERCENTAGE PERCENTAGE OF FULL-
OF LEASED TOTAL ANNUAL SERVICE
NET RENTABLE NET RENTABLE ANNUAL FULL- FULL-SERVICE RENT PER
NUMBER OF AREA AREA SERVICE RENT NET
TENANTS WITH REPRESENTED REPRESENTED RENT UNDER REPRESENTED RENTABLE
EXPIRING BY EXPIRING LEASES BY EXPIRING EXPIRING BY EXPIRING AREA
YEAR OF LEASE EXPIRATION LEASES (SQUARE FEET)(1) LEASES LEASES(2) LEASES EXPIRING(2)
- ----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
1998.................. 382 1,496,733 5.3% $25,710,906 4.6% $17.18
1999.................. 432 3,542,650 12.6 62,702,859 11.3 17.70
2000 ................. 401 3,401,333 12.1 64,247,299 11.6 18.89
2001.................. 370 3,798,275 13.5 67,612,166 12.2 17.80
2002.................. 299 3,518,162 12.5 71,042,105 12.8 20.19
2003.................. 181 2,161,069 7.7 39,886,788 7.2 18.46
2004 ................. 94 2,825,922 10.0 55,890,884 10.0 19.78
2005.................. 60 2,100,930 7.5 44,203,041 7.9 21.04
2006.................. 26 583,247 2.1 11,994,078 2.2 20.56
2007.................. 29 1,156,506 4.1 25,345,686 4.6 21.92
2008 and thereafter... 48 3,568,358 12.6 87,569,838 15.6 24.54
</TABLE>
(1) Includes a pending investment (see Note 9 - financial statements).
(2) Calculated based on base rent payable as of the expiration date of the
lease for net rentable square feet expiring, without giving effect to free
rent or scheduled rent increases that would be taken into account under
generally accepted accounting principles and including adjustments for
expenses payable by or reimbursable from tenants based on current levels.
26
<PAGE> 27
HOTEL PROPERTIES
The following table sets forth certain information about the Hotel
Properties for the six months ended June 30, 1998 and 1997. The information for
the Hotel Properties is based on available rooms, except for Canyon Ranch-Tucson
and Canyon Ranch-Lenox, which are destination health and fitness resorts that
measure performance based on available guest nights.
<TABLE>
<CAPTION>
For the six months ended June 30,
---------------------------------
Revenue
Average Average Per
Occupancy Daily Available
Year Rate Rate Room
Completed/ ---- ---- ----
Hotel Property(1) Location Renovated Rooms 1998 1997 1998 1997 1998 1997
- -------------- -------- --------- ----- ---- ---- ---- ---- ---- ----
Full-Service/Luxury Hotels:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Denver Marriott City Center Denver, CO 1982/1994 613 78% 80% $ 125 $ 116 $ 97 $ 92
Four Seasons Hotel-Houston Houston, TX 1982 399 66 69 179 158 119 110
Hyatt Regency Albuquerque Albuquerque,NM 1990 395 68 74 103 99 70 74
Omni Austin Hotel Austin, TX 1986 314 80 80 117 106 94 85
Hyatt Regency Beaver Creek Avon, CO 1989 295 68 69 279 270 190 186
Sonoma Mission Inn & Spa Sonoma, CA 1927/1987/1997 198(2) 80 89 211 160 168 161
Ventana Country Inn Big Sur, CA 1975/1982/1988 62 40(7) 82 327 309 132(7) 252
----- ---- ---- ------ ----- ----- ------
TOTAL/WEIGHTED AVERAGE 2,276 72% 76% $ 159 $ 148 $ 115 $ 113
===== ==== ==== ====== ===== ===== ======
Destination Health & Fitness Guest Nights
------------
Resorts:
Canyon-Ranch - Tucson Tucson, AZ 1980 250(3)
Canyon Ranch - Lenox Lenox, MA 1989 202(3)
-----
TOTAL/WEIGHTED AVERAGE 452 89%(4) 83%(4) $504(5) $476(5) $436(6) $ 382(6)
===== ==== ==== ==== ==== ==== ======
</TABLE>
(1) Because of the Company's status as a REIT for federal income tax purposes,
it does not operate the Hotel Properties and has leased the Hotel
Properties to subsidiaries of Crescent Operating, Inc. pursuant to
long-term leases.
(2) In July 1997, 30 additional rooms were completed.
(3) Represents available guest nights, which is the maximum number of guests
that the resort can accommodate per night.
(4) Represents the number of paying and complimentary guests for the period,
divided by the maximum number of available guest nights for the period.
(5) Represents the average daily "all-inclusive" guest package charges for the
period, divided by the average daily number of paying guests for the
period.
(6) Represents the total "all-inclusive" guest package charges for the period,
divided by the maximum number of available guest nights for the period.
(7) Temporarily closed from February 1, 1998 through May 1, 1998 due to
flooding in the region affecting the roadway passage to the hotel.
RESIDENTIAL DEVELOPMENT PROPERTIES
The Company owns economic interests in five Residential Development
Corporations through the Residential Development Property Mortgages relating to
and the non-voting common stock in these Residential Development Corporations.
The Residential Development Corporations in turn, through joint ventures or
partnership arrangements, own interests in the 13 Residential Development
Properties. The Residential Development Corporations are responsible for the
continued development and the day-to-day operations of the Residential
Development Properties.
27
<PAGE> 28
RESIDENTIAL DEVELOPMENT PROPERTIES TABLE
The following table sets forth certain information as of June 30, 1998,
relating to the Residential Development Properties.
<TABLE>
<CAPTION>
Total Total Average Range of
Residential Residential Total Lots/Units Lots/Units Closed Proposed
Residential Development Development Lots/ Developed Closed Sale Price Sale Prices
Development Properties Type of Corporation's Units Since Since Per Lot/ Per Lot/Unit
Corporation(1) (RDP) RDP(2) Location Ownership % Planned Inception Inception Unit($) ($)(3)
- --------------- ------------ ------- -------- ------------ ------- --------- --------- -------- --------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Mira Vista Mira Vista SF Fort Worth, TX 100.00% 710 581 541 95,000 50,000 - 265,000
Development The Highlands SF Breckenridge, CO 12.25% 750 249 215 140,000 55,000 - 250,000
Corp. ------ ------ ------
Total Mira Vista Development Corp. 1,460 830 756
------ ------ ------
Houston Area Falcon Point SF Houston, TX 100.0% 1,205 556 294 31,000 22,000 - 60,000
Development Spring Lakes SF Houston, TX 100.0% 536 93 8 32,200 21,000 - 45,000
Corp. ------ ------ ------
Total Houston Area Development Corp. 1,741 649 302
------ ------ ------
Crescent The Reserve at
Development Frisco SF Frisco, CO 60.0% 134 134 90 95,000 60,000 - 165,000
Management Villa Montane
Corp. Townhomes TH Avon, CO 30.0% 27(4) - - N/A 515,000 - 1,700,000
Villa Montane
Club TS Avon, CO 30.0% 746(4) - - N/A 18,000 - 150,000
Villas at Beaver
Creek TH Avon, CO 30.0% 10(4) - - N/A 1,625,000 - 3,245,000
Deer Trail SFH Avon, CO 60.0% 16(4) - - N/A 2,560,000 - 3,325,000
Buckhorn
Townhomes TH Avon, CO 60.0% 24(4) - - N/A 945,000 - 1,850,000
Bear Paw Lodge CO Avon, CO 60.0% 43(4) - - N/A 1,495,000 - 1,895,000
------ ------ ------
Total Crescent Development Management Corp. 1,000 134 90
------ ------ ------
The Woodlands The Woodlands SF The Woodlands, TX 42.5% 38,313 18,949 18,087 40,000 13,000 - 250,000
Land Company
Inc.
------ ------ ------
Desert Mountain Desert Mountain SF Scottsdale, AZ 93.0% 2,543 1,877 1,689 300,000(5) 150,000 - 2,500,000(5)
Development ------ ------ ------
Corp.
Total 45,057 22,439 20,924
====== ====== ======
</TABLE>
- -------------------------------
(1) The Company has an approximately 94%, 94%, 90%, 95% and 95% ownership
interest in Mira Vista Development Corp., Houston Area Development Corp.,
Crescent Development Management Corp., The Woodlands Land Company, Inc.,
and Desert Mountain Development Corp., respectively, through ownership of
non-voting common stock in each of these Residential Development
Corporations.
(2) SF (Single-Family Lots); CO (Condominium); TH (Townhome); TS (Timeshare);
and SFH (Single-Family Homes).
(3) Based on existing inventory of developed lots and lots to be developed.
(4) As of June 30, 1998, 15 units were under contract at Villa Montane
Townhomes representing $14.5 million in sales proceeds, 638 contracts were
pre-sold at Villa Montane Club representing $38.7 million in sales
proceeds, eight units were under contract at Villas at Beaver Creek
representing $17.9 million in sales proceeds, seven units were under
contract at Deer Trail representing $20.2 million in sales, 14 units were
under contract at Buckhorn Townhomes representing $18.4 million in sales,
and five units were under contract at Bear Paw Lodge representing $8.9
million in sales.
(5) Excludes golf membership which is approximately $125,000.
YEAR 2000 COMPLIANCE
The Company has reviewed its in-house computer software programs and
operating systems, which consist primarily of the accounting and property
management systems, to assess the impact of the Year 2000 on these systems.
These programs and systems are Year 2000 compliant.
Based on current information, the Company believes that it will be able
to achieve Year 2000 compliance for its property-specific computer systems, such
as energy management and security access systems, through a combination of the
modification and replacement of systems within its Office Property portfolio.
The Company anticipates that the costs associated with achieving Year 2000
compliance will not have a material impact on the Company's financial results.
The implementation will take place over the next 12 months with the assistance
of full-time employees and independent contractors.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURE ABOUT MARKET RISK
This item is inapplicable to the Company because its market
capitalization was less than $2.5 billion on January 28, 1997, therefore the
Company is not required to respond to this item until its Form 10-K for the
year ended December 31, 1998.
28
<PAGE> 29
PART II
OTHER INFORMATION
Item 1. Legal Proceedings
The Company is a party to an Agreement and Plan of Merger, dated January
16, 1998, as amended (the "Merger Agreement"), between the Company and Station
Casinos, Inc. ("Station"). On July 27, 1998, Station canceled the joint annual
and special meeting of its common and preferred stockholders scheduled for
August 4, 1998, at which the common and preferred stockholders were to vote on
the Merger.
On July 30, 1998, Station filed a complaint in Clark County District Court,
State of Nevada seeking declaratory relief in connection with the Merger
Agreement. The complaint alleges that the Company consented to Station's
cancellation of its meeting of stockholders. The action seeks a declaratory
judgment that (i) Station has complied in all material respects with its
obligations under the Merger Agreement, (ii) Station is not obligated to
reschedule immediately a meeting of its common and preferred stockholders,
(iii) the Company has no right to terminate the Merger Agreement, and (iv) the
Company is obligated to purchase up to $115 million in redeemable preferred
stock of Station in accordance with certain provisions of the Merger Agreement.
On August 7, 1998, the Company filed a complaint in the United States
District Court, Northern District of Texas seeking damages and declaratory
relief as a result of Station's alleged breaches of the Merger Agreement. The
complaint alleges that Station breached the Merger Agreement by unilaterally
canceling its scheduled stockholders meeting and refusing to reschedule and
conduct the meeting and that Station's representations and warranties were not
true and correct in all material respects. The action seeks (i) compensatory
damages, including expenses, (ii) a declaratory judgment that Station's alleged
breaches under the Merger Agreement excuse the Company from any further
obligations under the Merger Agreement, and (iii) a declaratory judgment that
the Company is not required to purchase shares of Station's redeemable
preferred stock due to Station's material breaches of the Merger
Agreement.
On August 11, 1998, Station amended its complaint to expand the matters as
to which declaratory relief was sought and to add claims for damages and for
specific performance relating to the purchase of Station's redeemable preferred
stock. The amended complaint alleges that the Company breached its obligations
under the Merger Agreement by failing to use all reasonable efforts to
consummate the Merger and by refusing to provide Station with access to
additional information concerning the Company. The amended complaint also
alleges that the Company had no right to terminate the Merger Agreement or to
refuse to purchase 115,000 shares of Station's redeemable preferred stock for
an aggregate purchase price of $115,000,000. As amended, the action by Station
seeks, in addition to the prior requests for declaratory relief, (i) an order of
specific performance requiring the Company to purchase $115,000,000 of the
redeemable preferred stock, (ii) damages consisting of compensatory damages
(which Station states it believes to be in excess of $400,000,000), costs
associated with Station's obtaining capital needed to replace the $115,000,000
that was to have been paid by the Company to purchase the redeemable preferred
stock, and expenses incurred by Station in connection with the proposed Merger,
and (iii) a declaratory judgment that the Company was in breach of its
representations, warranties, and covenants at the time that the Company
exercised its termination rights under the Merger Agreement and that the
Company's breach and exercise of termination rights excuses Station from any
further performance obligation under the Merger Agreement.
The Company has stated that it believes that Station's claims are without
merit and intends to contest the claims vigorously. As with any litigation,
however, it is not possible to predict the resolution of the pending actions.
The Company has stated it believes however, that the pending action against the
Company will not have a material adverse effect on the Company's financial
condition or results of operations.
Item 2. Changes in Securities
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
(a) The annual meeting of stockholders of the Company was held on June
8, 1998.
(b) Proxies for the meeting were solicited pursuant to Section 14(a) of
the Securities and Exchange Act of 1934, as amended, and the
regulations promulgated thereunder. There was no solicitation in
opposition to management's solicitations. All of management's
nominees for director were elected.
29
<PAGE> 30
(c) Two proposals were submitted to a vote of shareholders as follows:
(1) The shareholders approved the election of the following
persons as directors of the Company:
<TABLE>
<CAPTION>
Name For Withheld
---- --- --------
<S> <C> <C>
Gerald W. Haddock 102,068,235 188,293
Morton H. Meyerson 102,058,090 198,438
</TABLE>
(2) The shareholders approved, with 102,074,826 affirmative votes,
69,414 negative votes, 112,288 abstentions, and no broker
non-votes, the proposal to approve the appointment of Arthur
Andersen LLP as the independent auditors of the Company for
the fiscal year ending December 31, 1998.
Item 5. Other information
Shareholders who intend to submit proposals for consideration
at the Company's 1999 annual meeting of shareholders must submit such proposals
to the Company no later than December 31, 1998, in order to be considered for
inclusion in the proxy statement and form of proxy to be distributed by the
Board of Trust Managers in connection with that meeting. Shareholder proposals
should be submitted to David M. Dean, Senior Vice President, Law, and Secretary,
777 Main Street, Suite 2100, Fort Worth, Texas 76102.
The form of proxy solicited by the Board of Trust Managers in
connection with the Company's 1999 annual meeting of shareholders will confer
discretionary authority to vote on any matter, if the Company did not have
notice of the matter on or before March 15, 1999. Such notice should be
submitted to David M. Dean, Senior Vice President, Law, and Secretary, 777 Main
Street, Suite 2100, Fort Worth, Texas 76102.
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are filed as part of this report.
<TABLE>
<CAPTION>
Exhibits Description
<S> <C>
2.01 -- Agreement and Plan of Merger, dated as of January 16,
1998, as amended, by and between the Registrant and
Station Casinos, Inc. (the "Merger Agreement") (filed as
Exhibit 2.01 to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1997 (the
"1997 10-K") and incorporated herein by reference)
2.02 -- First Amendment to the Merger Agreement, dated as of
February 17, 1998 (filed as Exhibit 2.02 to the Registrant's
Registration Statement on Form S-4 (File No. 333-57945)
(the "1998 S-4") and incorporated herein by reference)
2.03 -- Second Amendment to the Merger Agreement, dated as of
June 15, 1998 (filed as Exhibit 2.03 to the 1998 S-4 and
incorporated herein by reference)
2.04 -- Third Amendment to the Merger Agreement, dated as of June
26, 1998 (filed as Exhibit 2.04 to the 1998 S-4 and
incorporated herein by reference)
3.01 -- Restated Declaration of Trust of the Registrant (filed as
Exhibit 4.01 to the Registrant's Registration Statement
on Form S-3 (File No. 333-21905) (the "1997 S-3") and
incorporated herein by reference)
3.02 -- Amended and Restated Bylaws of the Registrant, as amended
(filed as Exhibit 4.02 to the Registrant's Registration
Statement on Form S-3) (File No. 333-56809) and incorporated
herein by reference)
4.01 -- Form of Common Share Certificate (filed as Exhibit 4.03
to the 1997 S-3 and incorporated herein by reference)
4.02 -- Statement of Designation of 6 3/4% Series A Convertible
Cumulative Preferred Shares of the Registrant (filed as
Exhibit 4.07 to the 1997 10-K and incorporated herein by
reference)
4.03 -- Form of Certificate of 6 3/4% Series A Convertible
Cumulative Preferred Shares of the Registrant (filed as
Exhibit 4 to the Registrant's Registration Statement on
Form 8-A/A filed on February 18, 1998 and incorporated
herein by reference)
4.04 -- Statement of Designation of Series B Convertible Preferred
Shares of the Registrant (filed as Exhibit 4.01 to the
Registrant's Current Report on Form 8-K dated June 29, 1998
and filed June 30, 1998 and incorporated herein by reference)
4.05 -- Form of Certificate of Series B Convertible Preferred Shares
(filed herewith)
4.06 -- Indenture, dated as of September 22, 1997, between
Crescent Real Estate Equities Limited Partnership and
State Street Bank and Trust Company, of Missouri, N.A.
(filed as Exhibit 4.01 to the Registration Statement on
Form S-4 (File No. 333-42293) of Crescent Real Estate
Equities Limited Partnership (the "1997 S-4") and
incorporated herein by reference)
4.07 -- 6 5/8% Note due 2002 of Crescent Real Estate Equities
Limited Partnership (filed herewith)
4.08 -- 7 1/8% Note due 2007 of Crescent Real Estate Equities
Limited Partnership (filed herewith)
4.09 -- Purchase Agreement, dated as of August 11, 1997, among
the Registrant, UBS Securities (Portfolio), LLC, and
Union Bank of Switzerland, London Branch (filed as
Exhibit 4.01 to the Registrant's Current Report on Form
8-K dated August 11, 1997 and filed August 13, 1997 and
incorporated herein by reference)
4.10 -- Purchase Agreement, effective as of December 12, 1997,
among the Registrant, Crescent Real Estate Equities
Limited Partnership, Merrill Lynch International and
Merrill Lynch, Pierce, Fenner & Smith Incorporated (filed
as Exhibit 1.01 to the Registrant's Current Report on
Form 8-K/A dated December 12, 1997 and filed December 19,
1997 and incorporated herein by reference)
4.11 -- Swap Agreement, effective as of December 12, 1997,
between the Registrant and Merrill Lynch International
(filed as Exhibit 1.02 to the Registrant's Current Report
on Form 8-K dated December 12, 1997 and filed December
18, 1997 and incorporated herein by reference)
10.01 -- Second Amended and Restated Agreement of Limited
Partnership of Crescent Real Estate Equities Limited
Partnership dated as of November 1, 1997, as amended
through June 30, 1998 (filed herewith)
10.02 -- Noncompetition Agreement (Rainwater) (filed as Exhibit
10.02 to the 1997 10-K and incorporated herein by
reference)
10.03 -- Noncompetition Agreement (Goff) (filed as Exhibit 10.03
to the 1997 10-K and incorporated herein by reference)
10.04 -- Noncompetition Agreement (Haddock) (filed as Exhibit
10.04 to the 1997 10-K and incorporated herein by
reference)
10.05 -- Employment Agreement (Goff) (the "Goff Employment
Agreement") (filed as Exhibit 10.05 to the 1997 10-K and
incorporated herein by reference)
10.06 -- Amendment No. 5 to the Goff Employment Agreement, dated
March 10, 1998 (filed as Exhibit 10.29 to the 1997 S-4
and incorporated herein by reference)
10.07 -- Employment Agreement (Haddock) (the "Haddock Employment
Agreement") (filed as Exhibit 10.06 to the 1997 10-K and
incorporated herein by reference)
10.08 -- Amendment No. 4 to the Haddock Employment Agreement,
dated March 10, 1998 (filed as Exhibit 10.30 to the 1997
S-4 and incorporated herein by reference)
10.09 -- Form of Officers' and Trust Managers' Indemnification
Agreement as entered into between the Registrant and each
of its executive officers and trust managers (filed as
Exhibit 10.07 to the 1997 S-4 and incorporated herein by
reference)
10.10 -- Crescent Real Estate Equities Company 1994 Stock Incentive
Plan (filed as Exhibit 10.07 to the Registrant's Registration
Statement on Form S-11 (File No. 33-75188) and incorporated
herein by reference)
10.11 -- Crescent Real Estate Equities, Ltd. First Amended and
Restated 401(k) Plan (filed as Exhibit 10.10 to the 1997
10-K and incorporated herein by reference)
10.12 -- Second Amended and Restated 1995 Crescent Real Estate
Equities Company Stock Incentive Plan (filed as Exhibit
10.13 to the 1997 S-4 and incorporated herein by
reference)
10.13 -- 1995 Crescent Real Estate Equities Limited Partnership
Unit Incentive Plan (filed as Exhibit 99.01 to the
Registrant's Registration Statement on Form S-8 (File No.
333-3452) and incorporated herein by reference)
10.14 -- 1996 Crescent Real Estate Equities Limited Partnership
Unit Incentive Plan (filed as Exhibit 10.01 to the
Registrant's Current Report on Form 8-K dated and filed
September 27, 1996 and incorporated herein by reference)
10.15 -- Master Lease Agreement, dated June 16, 1997, as amended,
between Crescent Real Estate Funding VII, L.P. and
Charter Behavioral Health Systems, LLC and its
subsidiaries, relating to the Magellan Facilities (filed
as Exhibit 10.27 to the 1997 10-K and incorporated herein
by reference)
10.16 -- Fifth Amended and Restated Revolving Credit Agreement,
dated June 30, 1998 among Crescent Real Estate
Equities Limited Partnership, BankBoston,
N.A. and the other banks named therein (filed herewith)
10.17 -- Intercompany Agreement, dated June 3, 1997, between
Crescent Real Estate Equities Limited Partnership
and Crescent Operating, Inc. (filed as Exhibit 10.2 to
the Registration Statement on Form S-1 (File No.
333-25223) of Crescent Operating, Inc. and incorporated
herein by reference)
27.01 -- Financial Data Schedule (filed herewith)
</TABLE>
(b) Reports on Form 8-K.
Form 8-K dated April 17, 1988 and filed April 28, 1998,
describing under Item 5 - Other Events, certain factors that
may be relevant to the Company's forward looking statements.
Form 8-K dated April 23, 1998 and filed April 27, 1998, for
the purpose of filing under Item 7 - Financial Statements, Pro
Forma Financial Information and Exhibits, certain exhibits in
connection with the Company's offering of 1,365,138 common
shares to Merrill Lynch & Co. for deposit with a unit
investment trust.
Form 8-K/A filed April 27, 1988, to the Form 8-K dated January
16, 1998 and filed January 27, 1988, for the purpose of
updating, under Item 5 - Other Events, certain information
related to the Company's pending merger with Station Casinos,
Inc. and filing under Item 7 - Financial Statements and Pro
Forma Financial Information and Exhibits, the Pro Forma
Consolidated Balance Sheet of the Company as of December 31,
1997 (unaudited) and notes thereto, and the Pro Forma
Consolidated Statements of Operations of the Company for the
years ended December 31, 1997 and 1996 (unaudited) and notes
thereto.
Form 8-K/A filed June 10, 1988, to the Form 8-K dated January
16, 1988 and filed January 27, 1988, for the purpose of
updating, under Item 5 - Other Events, certain information
related to the Company's pending merger with Station Casinos,
Inc. and filing under Item 7 - Financial Statements and Pro
Forma Financial Information and Exhibits, the Pro Forma
Consolidated Balance Sheet of the Company as of March 31, 1998
(unaudited) and notes thereto, and the Pro Forma Consolidated
Statements of Operations of the Company for the three months
ended March 31, 1998 and the year ended December 31, 1997
(unaudited) and notes thereto.
Form 8-K dated June 15, 1998 and filed June 16, 1998,
describing under Item 5 - Other Events, the Company's proposed
rights offering to be made following the completion of the
merger with Station Casinos, Inc.
Form 8-K dated January 6, 1998 and filed June 19, 1998, for
the purpose of filing under Item 7 - Financial Statements, Pro
Forma Financial Information and Exhibits, certain exhibits in
connection with the Company's offering of 30,933 common shares
to Senterra Real Estate Group, L.L.C.
Form 8-K/A dated April 17, 1988 and filed June 22, 1998,
restating under Item 5 - Other Events, certain factors that
may be relevant to the Company's forward looking statements.
30
<PAGE> 31
Form 8-K dated October 15, 1997 and filed June 24, 1998, for
the purpose of (i) announcing, under Item 5 - Other Events,
the Company's acquisitions of U.S. Home Building, Austin
Centre and Datran Center, and (ii) filing, under Item 7 -
Financial Statements, Pro Forma Financial Information and
Exhibits, the Report of Independent Public Accountants, with
respect to U.S. Home Building, Austin Centre and Datran
Center, the Statements of Excess of Revenues Over Specific
Operating Expenses and notes thereto, with respect to U.S.
Home Building, Austin Centre and Datran Center, the Pro Forma
Consolidated Balance Sheet of the Company as of March 31, 1998
and the notes thereto, and Pro Forma Consolidated Statements
of Operations of the Company for the three months ended
March 31, 1998 and the year ended December 31, 1997 and notes
thereto.
Form 8-K dated and filed June 25, 1998, for the purpose of
filing under Item 7 - Financial Statements, Pro Forma
Financial Information and Exhibits, certain exhibits in
connection with the Company's issuance of 759,254 common
shares to Merrill Lynch International.
Form 8-K dated June 29, 1998 and filed June 30, 1998, for the
purpose of filing under Item 7 - Financial Statements, Pro
Forma Financial Information and Exhibits, certain exhibits in
connection with the Company's offering of 6,948,734 Series B
Convertible Preferred Shares.
31
<PAGE> 32
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CRESCENT REAL ESTATE EQUITIES COMPANY
/s/ Gerald W. Haddock
------------------------------------------
Date: August 14, 1998 Gerald W. Haddock, President and Chief
------------------ Executive Officer
/s/ Dallas E. Lucas
----------------------------------------------
Date: August 14, 1998 Dallas E. Lucas, Senior Vice President, Chief
------------------ Financial Officer and Chief Accounting Officer
32
<PAGE> 33
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. EXHIBIT PAGE
------- ------- ------------
<C> <S> <C>
2.01 -- Agreement and Plan of Merger, dated as of January 16,
1998, as amended, by and between the Registrant and
Station Casinos, Inc. (the "Merger Agreement") (filed as
Exhibit 2.01 to the Registrant's Annual Report on Form
10-K for the fiscal year ended December 31, 1997 (the
"1997 10-K") and incorporated herein by reference)
2.02 -- First Amendment to the Merger Agreement, dated as of
February 17, 1998 (filed as Exhibit 2.02 to the Registrant's
Registration Statement on Form S-4 (File No. 333-57945)
(the "1998 S-4") and incorporated herein by reference)
2.03 -- Second Amendment to the Merger Agreement, dated as of
June 15, 1998 (filed as Exhibit 2.03 to the 1998 S-4 and
incorporated herein by reference)
2.04 -- Third Amendment to the Merger Agreement, dated as of June
26, 1998 (filed as Exhibit 2.04 to the 1998 S-4 and
incorporated herein by reference)
3.01 -- Restated Declaration of Trust of the Registrant (filed as
Exhibit 4.01 to the Registrant's Registration Statement
on Form S-3 (File No. 333-21905) (the "1997 S-3") and
incorporated herein by reference)
3.02 -- Amended and Restated Bylaws of the Registrant, as amended
(filed as Exhibit 4.02 to the Registrant's Registration
Statement on Form S-3) (File No. 333-56809) and incorporated
herein by reference)
4.01 -- Form of Common Share Certificate (filed as Exhibit 4.03
to the 1997 S-3 and incorporated herein by reference)
4.02 -- Statement of Designation of 6 3/4% Series A Convertible
Cumulative Preferred Shares of the Registrant (filed as
Exhibit 4.07 to the 1997 10-K and incorporated herein by
reference)
4.03 -- Form of Certificate of 6 3/4% Series A Convertible
Cumulative Preferred Shares of the Registrant (filed as
Exhibit 4 to the Registrant's Registration Statement on
Form 8-A/A filed on February 18, 1998 and incorporated
herein by reference)
4.04 -- Statement of Designation of Series B Convertible Preferred
Shares of the Registrant (filed as Exhibit 4.01 to the
Registrant's Current Report on Form 8-K dated June 29, 1998
and filed June 30, 1998 and incorporated herein by reference)
4.05 -- Form of Certificate of Series B Convertible Preferred Shares
(filed herewith)
</TABLE>
<PAGE> 34
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. EXHIBIT PAGE
------- ------- ------------
<C> <S> <C>
4.06 -- Indenture, dated as of September 22, 1997, between
Crescent Real Estate Equities Limited Partnership and
State Street Bank and Trust Company, of Missouri, N.A.
(filed as Exhibit 4.01 to the Registration Statement on
Form S-4 (File No. 333-42293) of Crescent Real Estate
Equities Limited Partnership (the "1997 S-4") and
incorporated herein by reference)
4.07 -- 6 5/8% Note due 2002 of Crescent Real Estate Equities
Limited Partnership (filed herewith)
4.08 -- 7 1/8% Note due 2007 of Crescent Real Estate Equities
Limited Partnership (filed herewith)
4.09 -- Purchase Agreement, dated as of August 11, 1997, among
the Registrant, UBS Securities (Portfolio), LLC, and
Union Bank of Switzerland, London Branch (filed as
Exhibit 4.01 to the Registrant's Current Report on Form
8-K dated August 11, 1997 and filed August 13, 1997 and
incorporated herein by reference)
4.10 -- Purchase Agreement, effective as of December 12, 1997,
among the Registrant, Crescent Real Estate Equities
Limited Partnership, Merrill Lynch International and
Merrill Lynch, Pierce, Fenner & Smith Incorporated (filed
as Exhibit 1.01 to the Registrant's Current Report on
Form 8-K/A dated December 12, 1997 and filed December 19,
1997 and incorporated herein by reference)
4.11 -- Swap Agreement, effective as of December 12, 1997,
between the Registrant and Merrill Lynch International
(filed as Exhibit 1.02 to the Registrant's Current Report
on Form 8-K dated December 12, 1997 and filed December
18, 1997 and incorporated herein by reference)
10.01 -- Second Amended and Restated Agreement of Limited
Partnership of Crescent Real Estate Equities Limited
Partnership dated as of November 1, 1997, as amended
through June 30, 1998 (filed herewith)
10.02 -- Noncompetition Agreement (Rainwater) (filed as Exhibit
10.02 to the 1997 10-K and incorporated herein by
reference)
10.03 -- Noncompetition Agreement (Goff) (filed as Exhibit 10.03
to the 1997 10-K and incorporated herein by reference)
</TABLE>
<PAGE> 35
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. EXHIBIT PAGE
------- ------- ------------
<C> <S> <C>
10.04 -- Noncompetition Agreement (Haddock) (filed as Exhibit
10.04 to the 1997 10-K and incorporated herein by
reference)
10.05 -- Employment Agreement (Goff) (the "Goff Employment
Agreement") (filed as Exhibit 10.05 to the 1997 10-K and
incorporated herein by reference)
10.06 -- Amendment No. 5 to the Goff Employment Agreement, dated
March 10, 1998 (filed as Exhibit 10.29 to the 1997 S-4
and incorporated herein by reference)
10.07 -- Employment Agreement (Haddock) (the "Haddock Employment
Agreement") (filed as Exhibit 10.06 to the 1997 10-K and
incorporated herein by reference)
10.08 -- Amendment No. 4 to the Haddock Employment Agreement,
dated March 10, 1998 (filed as Exhibit 10.30 to the 1997
S-4 and incorporated herein by reference)
10.09 -- Form of Officers' and Trust Managers' Indemnification
Agreement as entered into between the Registrant and each
of its executive officers and trust managers (filed as
Exhibit 10.07 to the 1997 S-4 and incorporated herein by
reference)
10.10 -- Crescent Real Estate Equities Company 1994 Stock Incentive
Plan (filed as Exhibit 10.07 to the Registrant's Registration
Statement on Form S-11 (File No. 33-75188) and incorporated
herein by reference)
10.11 -- Crescent Real Estate Equities, Ltd. First Amended and
Restated 401(k) Plan (filed as Exhibit 10.10 to the 1997
10-K and incorporated herein by reference)
10.12 -- Second Amended and Restated 1995 Crescent Real Estate
Equities Company Stock Incentive Plan (filed as Exhibit
10.13 to the 1997 S-4 and incorporated herein by
reference)
10.13 -- 1995 Crescent Real Estate Equities Limited Partnership
Unit Incentive Plan (filed as Exhibit 99.01 to the
Registrant's Registration Statement on Form S-8 (File No.
333-3452) and incorporated herein by reference)
10.14 -- 1996 Crescent Real Estate Equities Limited Partnership
Unit Incentive Plan (filed as Exhibit 10.01 to the
Registrant's Current Report on Form 8-K dated and filed
September 27, 1996 and incorporated herein by reference)
10.15 -- Master Lease Agreement, dated June 16, 1997, as amended,
between Crescent Real Estate Funding VII, L.P. and
Charter Behavioral Health Systems, LLC and its
subsidiaries, relating to the Magellan Facilities (filed
as Exhibit 10.27 to the 1997 10-K and incorporated herein
by reference)
10.16 -- Fifth Amended and Restated Revolving Credit Agreement,
dated June 30, 1998 among Crescent Real Estate Equities
Limited Partnership, BankBoston, N.A. and the other
banks named therein (filed herewith)
10.17 -- Intercompany Agreement, dated June 3, 1997, between
Crescent Real Estate Equities Limited Partnership and Crescent
Operating, Inc. (filed as Exhibit 10.2 to the Registration
Statement on Form S-1 (File No. 333-25223) of Crescent
Operating, Inc. and incorporated herein by reference)
</TABLE>
<PAGE> 36
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. EXHIBIT PAGE
------- ------- ------------
<C> <S> <C>
27.01 -- Financial Data Schedule (filed herewith)
</TABLE>
<PAGE> 1
EXHIBIT 4.05
[FRONT]
NUMBER SHARES
FORMED UNDER THE LAWS OF THIS CERTIFICATE IS TRANSFERABLE
THE STATE OF TEXAS ON THE BOOKS OF THE COMPANY
CUSIP
SEE REVERSE FOR CERTAIN DEFINITIONS
CRESCENT
REAL ESTATE EQUITIES COMPANY
A TEXAS REAL ESTATE INVESTMENT TRUST
SERIES B CONVERTIBLE
PREFERRED SHARES OF
BENEFICIAL INTEREST
PAR VALUE $.01
- --------------------------------------------------------------------------------
THIS CERTIFIES THAT
IS THE OWNER OF
- --------------------------------------------------------------------------------
FULLY PAID AND NONASSESSABLE SERIES B CONVERTIBLE PREFERRED SHARES OF
BENEFICIAL INTEREST OF
Crescent Real Estate Equities Company (the "Company"), transferable to the
Company by the holder hereof in person, or by duly authorized attorney upon
surrender of this Certificate properly endorsed.
Witness the seal of the Company and the signatures of its
duly authorized representatives.
Dated:
[SIG] [SIG]
Secretary President
THERE ARE RESTRICTIONS ON THE TRANSFER OF THE SHARES EVIDENCED BY THIS
CERTIFICATE AS MORE FULLY SET FORTH ON THE REVERSE SIDE HEREOF.
<PAGE> 2
[REVERSE]
[CRESCENT REAL ESTATE EQUITIES COMPANY LOGO]
A FULL STATEMENT OF ALL OF THE DESIGNATIONS, PREFERENCES, LIMITATIONS, AND
RELATIVE RIGHTS OF THE SHARES OF EACH CLASS OR SERIES OF THE COMPANY'S SHARES
OF BENEFICIAL INTEREST, TO THE EXTENT THEY HAVE BEEN FIXED AND DETERMINED, AND
THE AUTHORITY OF THE TRUST MANAGERS TO FIX AND DETERMINE THE DESIGNATIONS,
PREFERENCES, LIMITATIONS, AND RELATIVE RIGHTS OF SUBSEQUENT SERIES IS SET FORTH
IN THE COMPANY'S DECLARATION OF TRUST AND THE STATEMENT OF DESIGNATION ON FILE
WITH THE COUNTY CLERK OF TARRANT COUNTY, TEXAS. THE COMPANY, ON WRITTEN REQUEST
TO THE SECRETARY OF THE COMPANY AT ITS PRINCIPAL PLACE OF BUSINESS OR
REGISTERED OFFICE, WILL FURNISH A COPY THEREOF TO THE RECORD HOLDER OF THIS
CERTIFICATE WITHOUT CHARGE.
THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO RESTRICTIONS ON
TRANSFER AND OWNERSHIP FOR THE PURPOSE OF THE MAINTENANCE OF THE COMPANY'S
STATUS AS A REAL ESTATE INVESTMENT TRUST (A "REIT") UNDER SECTIONS 856 THROUGH
860 OF THE INTERNAL REVENUE CODE OF 1986, AS AMENDED (THE "CODE"). EXCEPT AS
OTHERWISE PROVIDED PURSUANT TO THE RESTATED DECLARATION OF TRUST, NO PERSON MAY
(i) BENEFICIALLY OR CONSTRUCTIVELY OWN COMMON SHARES OF BENEFICIAL INTEREST OF
THE COMPANY IN EXCESS OF 8.0 PERCENT (OR SUCH GREATER PERCENT AS MAY BE
DETERMINED BY THE BOARD OF TRUST MANAGERS OF THE COMPANY) OF THE OUTSTANDING
COMMON SHARES OF BENEFICIAL INTEREST (EXCEPT, TO THE EXTENT APPLICABLE, IN SUCH
CIRCUMSTANCES AS THE EXISTING HOLDER LIMIT SHALL APPLY); (ii) BENEFICIALLY OR
CONSTRUCTIVELY OWN PREFERRED SHARES OF BENEFICIAL INTEREST OF THE COMPANY OF ANY
SERIES IN EXCESS OF 9.9 PERCENT OF THE OUTSTANDING PREFERRED SHARES OF
BENEFICIAL INTEREST OF SUCH SERIES; OR (iii) BENEFICIALLY OR CONSTRUCTIVELY OWN
COMMON SHARES OF BENEFICIAL INTEREST OR PREFERRED SHARES OF BENEFICIAL INTEREST
(OF ANY CLASS OR SERIES) WHICH WOULD RESULT IN THE COMPANY BEING "CLOSELY HELD"
UNDER SECTION 856(b) OF THE CODE OR WHICH OTHERWISE COULD CAUSE THE COMPANY TO
FAIL TO QUALIFY AS A REIT. ANY PERSON WHO HAS BENEFICIAL OR CONSTRUCTIVE
OWNERSHIP OR WHO ACQUIRES OR ATTEMPTS TO ACQUIRE BENEFICIAL OR CONSTRUCTIVE
OWNERSHIP OF COMMON SHARES OF BENEFICIAL INTEREST AND/OR PREFERRED SHARES OF
BENEFICIAL INTEREST IN EXCESS OF THE ABOVE LIMITATIONS AND ANY PERSON WHO
BENEFICIALLY OR CONSTRUCTIVELY OWNS EXCESS SHARES OF BENEFICIAL INTEREST AS A
TRANSFEREE OF COMMON OR PREFERRED SHARES OF BENEFICIAL INTEREST RESULTING IN AN
EXCHANGE FOR EXCESS SHARES OF BENEFICIAL INTEREST (AS DESCRIBED BELOW)
IMMEDIATELY MUST NOTIFY THE COMPANY IN WRITING OR IN THE EVENT OF A PROPOSED OR
ATTEMPTED TRANSFER OR ACQUISITION OR PURPORTED CHANGE IN BENEFICIAL OR
CONSTRUCTIVE OWNERSHIP, MUST GIVE WRITTEN NOTICE TO THE COMPANY AT LEAST FIFTEEN
(15) DAYS PRIOR TO THE PROPOSED OR ATTEMPTED TRANSFER, TRANSACTION OR OTHER
EVENT. ANY TRANSFER OR ACQUISITION OF COMMON SHARES OF BENEFICIAL INTEREST
AND/OR PREFERRED SHARES OF BENEFICIAL INTEREST OR OTHER EVENT WHICH RESULTS IN
VIOLATION OF THE OWNERSHIP OR TRANSFER LIMITATIONS SET FORTH IN THE COMPANY'S
RESTATED DECLARATION OF TRUST SHALL BE VOID AB INITIO AND
<PAGE> 3
THE PURPORTED BENEFICIAL AND RECORD TRANSFEREE SHALL NOT HAVE OR ACQUIRE ANY
RIGHTS IN SUCH COMMON SHARES OF BENEFICIAL INTEREST AND/OR PREFERRED SHARES OF
BENEFICIAL INTEREST. IF THE TRANSFER AND OWNERSHIP LIMITATIONS REFERRED TO
HEREIN ARE VIOLATED, THE COMMON OR PREFERRED SHARES OF BENEFICIAL INTEREST
REPRESENTED HEREBY AUTOMATICALLY WILL BE EXCHANGED FOR EXCESS SHARES OF
BENEFICIAL INTEREST TO THE EXTENT OF VIOLATION OF SUCH LIMITATIONS, AND SUCH
EXCESS SHARES OF BENEFICIAL INTEREST WILL BE HELD IN TRUST BY THE COMPANY, ALL
AS PROVIDED BY THE RESTATED DECLARATION OF TRUST OF THE COMPANY. ALL DEFINED
TERMS USED IN THIS LEGEND HAVE THE MEANINGS IDENTIFIED IN THE COMPANY'S RESTATED
DECLARATION OF TRUST, AS THE SAME MAY BE AMENDED FROM TIME TO TIME, AND THE
STATEMENT OF DESIGNATION, COPIES OF WHICH, INCLUDING THE RESTRICTIONS ON
TRANSFER, WILL BE SENT WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS.
The following abbreviations, when used in the inscription on the face
of this certificate, shall be construed as though they were written out in full
according to applicable laws or regulations:
TEN COM - as tenants in common
TEN ENT - as tenants by the entireties
JT TEN - as joint tenants with right of
survivorship and not as tenants in
common
UNIF GIFT MIN ACT - _____ Custodian ________
(Cust) (Minor)
under Uniform Gifts to Minors
Act ___________
(State)
Additional abbreviations may also be used though not in the above list.
For value received, ___________________ hereby sell, assign and transfer
unto
PLEASE INSERT SOCIAL SECURITY NUMBER OR THE
IDENTIFYING NUMBER OF ASSIGNEE
- --------------------------------------------------------------------------------
- -----------------------------------------------------------------------Attorney
to transfer the said shares on the books of the within-named Company with full
power of substitution in the premises.
Dated, X
---------------------------- ----------------------------------
NOTICE: (SIGNATURE)
THE SIGNATURE(S) TO THIS
ASSIGNMENT MUST CORRESPOND
WITH THE NAME(S) AS WRITTEN X
UPON THE FACE OF THE ----------------------------------
CERTIFICATE IN EVERY (SIGNATURE)
PARTICULAR WITHOUT ALTERATION
OR ENLARGEMENT OR ANY CHANGE
WHATEVER.
<PAGE> 4
- --------------------------------------------------------------------------------
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN "ELIGIBLE GUARANTOR
INSTITUTION" AS DEFINED IN RULE 17Ad-15 UNDER THE SECURITIES EXCHANGE ACT OF
1934, AS AMENDED.
- --------------------------------------------------------------------------------
SIGNATURE(S) GUARANTEED BY:
- --------------------------------------------------------------------------------
<PAGE> 1
EXHIBIT 4.07
CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
6-5/8% NOTES DUE 2002
NO. 001 PRINCIPAL AMOUNT
CUSIP NO. 22575P AE 3 $150,000,000
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC AND ANY PAYMENT IS MADE TO
CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC, ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
UNLESS AND UNTIL THIS CERTIFICATE IS EXCHANGED IN WHOLE OR IN PART FOR
NOTES IN CERTIFICATED FORM, THIS CERTIFICATE MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY DTC TO A NOMINEE THEREOF OR BY A NOMINEE THEREOF TO DTC OR ANOTHER
NOMINEE OF DTC OR BY DTC OR ANY SUCH NOMINEE TO A SUCCESSOR OF DTC OR A NOMINEE
OF SUCH SUCCESSOR.
Crescent Real Estate Equities Limited Partnership, a Delaware limited
partnership (the "Issuer," which term includes any successor under the
Indenture hereinafter referred to), for value received, hereby promises to pay
to Cede & Co. or registered assigns, the principal sum of One Hundred Fifty
Million Dollars on September 15, 2002 (the "Maturity Date"), and to pay
interest thereon semiannually in arrears on September 15 and March 15 of each
year (each, an "Interest Payment Date"), commencing on September 15, 1998 (but
computed for the initial Interest Period (as defined below) as if interest had
accrued on the full principal amount hereof beginning on March 15, 1998), and
on the Maturity Date, at a rate of 6-5/8% per annum (together with any
Additional Ratings Interest that the Issuer may be required to pay, as
described on the reverse hereof), until payment of said principal sum has been
made or duly provided for.
The interest so payable and punctually paid or duly provided for on an
Interest Payment Date and on the Maturity Date will be paid to the Holder in
whose name this Note (or one or more predecessor Notes) is registered at the
close of business on the "Regular Record Date" for such payment, which will be
the date 15 calendar days (regardless of whether such day is a Business Day (as
defined below)) next preceding such payment date or the Maturity Date, as the
case may be. Any interest not so punctually paid or duly provided for shall
forthwith cease to be payable to the Holder on such Regular Record Date, and
shall be paid to the Holder in whose name this Note (or one or more predecessor
Notes) is registered at the close of business on a subsequent record date for
the payment of such defaulted interest (which shall not be less than five
Business Days prior to the date of the payment of such defaulted interest)
established by notice given by mail by or on behalf of the Issuer to the
Holders of the Notes not less than 15 days
<PAGE> 2
preceding such subsequent record date. Interest on this Note will be computed
on the basis of a 360-day year of twelve 30-day months.
The principal of this Note payable on the Maturity Date will be paid
against presentation and surrender of this Note at the office or agency of the
Issuer maintained for that purpose in Boston, Massachusetts with a drop
facility maintained in New York, New York. The Issuer hereby initially
designates the Corporate Trust Office of the Trustee in Boston, Massachusetts
as the office to be maintained by it where Notes may be presented for payment,
registration of transfer, or exchange and where notices or demands to or upon
the Issuer in respect of the Notes or the Indenture referred to on the reverse
hereof may be served.
Interest payable on this Note on any Interest Payment Date and on the
Maturity Date, as the case may be, will be the amount of interest accrued
during the applicable Interest Period (as defined below).
"Business Day" means any day, other than a Saturday or a Sunday on which
banking institutions in New York, New York, Boston, Massachusetts or St. Louis,
Missouri are not required or authorized by law or executive order to close. An
"Interest Period" is each period from and including the immediately preceding
Interest Payment Date (or from and including March 15, 1998, in the case of the
initial Interest Period) to but excluding the applicable Interest Payment Date
or the Maturity Date, as the case may be. If any Interest Payment Date other
than the Maturity Date would otherwise be a day that is not a Business Day,
such Interest Payment Date will be postponed to the succeeding Business Day. If
the Maturity Date falls on a day that is not a Business Day, principal and
interest payable on the Maturity Date will be paid on the succeeding Business
Day with the same force and effect as if it were paid on the date such payment
was due, and no interest will accrue on the amount so payable for the period
from and after the Maturity Date.
Payments of principal and interest in respect of this Note will be made
by U.S. dollar check or by wire transfer (such a wire transfer to be made only
to a Holder of an aggregate principal amount of Securities in excess of
$5,000,000, and only if such Holder shall have furnished wire instructions in
writing to the Trustee no later than 15 days prior to the relevant payment date
and acknowledged that a wire transfer fee shall be payable) of immediately
available funds in such coin or currency of the United States of America as at
the time of payment is legal tender for the payment of public and private
debts.
The Holder of this Security is entitled to the benefits of and is subject
to the obligations contained in a Registration Rights Agreement (subject to the
provisions thereof), dated as of September 22, 1997, between the Issuer and the
Initial Purchasers (the "Registration Rights Agreement").
Reference is made to the further provisions of this Note set forth on the
reverse hereof. Such further provisions shall for all purposes have the same
effect as though fully set forth at this place. Capitalized terms used herein,
including on the reverse hereof, and not defined herein or on the reverse
hereof shall have the respective meanings given to such terms in the Indenture.
This Note shall not be entitled to the benefits of the Indenture referred
to on the reverse hereof or be valid or become obligatory for any purpose until
the certificate of authentication hereon shall have been signed by the Trustee
under such Indenture.
2
<PAGE> 3
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed
manually or by facsimile by its duly authorized officers.
Dated: July 2, 1998 CRESCENT REAL ESTATE EQUITIES
LIMITED PARTNERSHIP, as Issuer
By: CRESCENT REAL ESTATE EQUITIES,
LTD., not individually but as General
Partner
By: /s/ Gerald W. Haddock
------------------------------
Gerald W. Haddock
Its: President and Chief Executive Officer
and By: /s/ Dallas E. Lucas
------------------------------
Dallas E. Lucas
Its: Chief Financial Officer
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein referred to in
the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY OF MISSOURI, N.A.
By: /s/ Robert Clasquin
------------------------------
3
<PAGE> 4
[REVERSE OF NOTE]
CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
6-5/8% NOTES DUE 2002
This security is one of a duly authorized issue of debentures, notes,
bonds, or other evidences of indebtedness of the Issuer (hereinafter called the
"Securities") of the series hereinafter specified, all issued or to be issued
under and pursuant to an Indenture dated as of September 22, 1997 (herein
called the "Indenture"), duly executed and delivered by the Issuer to State
Street Bank and Trust Company of Missouri, N.A., as Trustee (herein called the
"Trustee," which term includes any successor trustee under the Indenture with
respect to the series of Securities of which this Note is a part), to which
Indenture and all Indentures supplemental thereto reference is hereby made for
a description of the rights, limitations of rights, obligations, duties, and
immunities thereunder of the Trustee, the Issuer, and the Holders of the
Securities, and of the terms upon which the Securities are, and are to be,
authenticated and delivered. The Securities may be issued in one or more
series, which different series may be issued in various aggregate principal
amounts, may mature at different times, may bear interest (if any) at different
rates, may be subject to different redemption provisions (if any), and may
otherwise vary as provided in the Indenture. This Security is one of a series
designated as the 6-5/8% Notes due 2002 of the Issuer (the "Notes"), limited in
aggregate principal amount to $150,000,000.
In case an Event of Default with respect to the 6-5/8% Notes due 2002
shall have occurred and be continuing, the principal hereof and Make-Whole
Amount (if any) may be declared, and upon such declaration shall become, due
and payable, in the manner, with the effect, and subject to the conditions
provided in the Indenture.
The Issuer may redeem the Securities, at any time in whole or from time
to time in part, at the election of the Issuer, at a redemption price equal to
the sum of (i) the principal amount of the Securities being redeemed plus
accrued interest thereon to the Redemption Date and (ii) the Make-Whole Amount,
if any, with respect to such Securities (the "Redemption Price"). Notice of any
optional redemption of any Securities will be given to Holders at their
addresses, as shown in the security register for the Notes, not more than 60
nor less than 30 days prior to the date fixed for redemption. The notice of
redemption will specify, among other items, the Redemption Price and the
principal amount of the Securities held by such Holder to be redeemed. If less
than all the Notes are to be redeemed at the option of the Issuer, the Issuer
will notify the Trustee at least 45 days prior to giving notice of redemption
to the Holders (or such shorter period as is satisfactory to the Trustee) of
the aggregate principal amount of Notes to be redeemed and their redemption
date. The Trustee shall select, in such manner as it shall deem fair and
appropriate, Notes to be redeemed in whole or in part.
Subject to certain limitations in the Indenture, at any time when the
Issuer is not subject to Section 13 or 15(d) of the United States Securities
Exchange Act of 1934, as amended, upon the request of a Holder of a Restricted
Security (as defined in the Registration Rights Agreement) the Issuer will
promptly furnish or cause to be furnished Rule 144A Information (as defined in
the Registration Rights Agreement) to such Holder of Restricted Securities, or
to a prospective purchaser of any security designated by any such Holder to the
extent required to permit compliance by such Holder with Rule 144A under the
Securities Act in connection with the resale of any such security.
The Issuer has agreed to obtain a rating of the 6-5/8% Notes due 2002
issued by the Issuer on September 22, 1997 (the "Original Notes") and/or the
Notes from Standard & Poor's Rating Services, a division of The McGraw-Hill
Companies, and Moody's Investors Service, Inc. (each, a "Rating Agency,"
4
<PAGE> 5
and together, the "Rating Agencies"). If, within the period from September 22,
1997 to September 22, 1998, (i) either Rating Agency at any time (a) assigns a
rating to a series of the Original Notes or the Notes, as applicable, that is
not in one of such Rating Agency's generic rating categories which signifies
investment grade (an "Investment Grade Rating"), or (b) withdraws any rating
for a series of Original Notes or the Notes, as applicable, and does not
promptly assign a new rating, or (ii) either Rating Agency fails to assign any
rating for a series of the Original Notes or the Notes, as applicable, to a
series of the Original Notes or the Notes, as applicable, then the interest
rate for such series shall increase by 37.5 basis points (the "Rating
Adjustment" and the interest to be paid as a result of a Rating Adjustment, the
"Additional Ratings Interest") on the date on which such series is rated with
other than an Investment Grade Rating, the date a rating for any series is
withdrawn, or September 22, 1998 if no rating is assigned, as the case may be.
In the case of clause (i) above, from and after such date, if any, September
22, 1998, if such series becomes rated by such Rating Agency with an Investment
Grade Rating, then the Rating Adjustment shall be eliminated, until such time
as it would otherwise again be applicable. The interest rate for each series of
Original Notes or Notes, as applicable, shall be fixed on September 22, 1998
for the remainder of the term of such series. Notwithstanding anything to the
contrary contained herein, if at any time within the period from September 22,
1997 to September 22, 1998, both Rating Agencies shall have rated any series of
Original Notes or Notes with an Investment Grade Rating, the Rating Adjustment
shall be eliminated for the remainder of the term of such series of Original
Notes or Notes.
Whenever in this Security there is a reference, in any context, to the
payment of the principal of, Make-Whole Amount, if any, or interest on, or in
respect of, any Security, such mention shall be deemed to include mention of
the payment of Additional Ratings Interest payable as described above to the
extent that, in such context, Additional Ratings Interest is, was or would be
payable in respect of such Security and express mention of the payment of
Additional Ratings Interest (if applicable) in any provisions of this Security
shall not be construed as excluding Additional Ratings Interest in those
provisions of this Security where such express mention is not made.
The Indenture contains provisions permitting the Issuer and the Trustee,
with the consent of the Holders of not less than a majority of the aggregate
principal amount of the Securities at the time Outstanding of all series to be
affected (voting as one class), evidenced as provided in the Indenture, to
execute supplemental Indentures adding any provisions to or changing in any
manner or eliminating any of the provisions of the Indenture or of any
supplemental Indenture or modifying in any manner the rights of the Holders of
the Securities of each series; provided, however, that no such supplemental
Indenture shall, without the consent of the Holder of each Security so
affected, (i) change the final maturity of any Security, or reduce the
principal amount thereof or any premium thereon, or reduce the rate or extend
the time of payment of any interest thereon, or impair or affect the rights of
any Holder to institute suit for the payment on any Security, or (ii) reduce
the aforesaid percentage of Securities, the Holders of which are required to
consent to any such supplemental Indenture, or (iii) reduce the percentage of
Securities, the Holders of which are required to consent to any waiver of
compliance with certain provisions of the Indenture or any waiver of certain
defaults thereunder. It is also provided in the Indenture that, with respect to
certain defaults or Events of Default regarding the Securities of any series,
the Holders of a majority in aggregate principal amount outstanding of the
Securities of such series (or, in the case of certain defaults or Events of
Default, all series of Securities) may on behalf of the Holders of all the
Securities of such series (or all of the Securities, as the case may be) waive
any such past default or Event of Default and its consequences, prior to any
declaration accelerating the maturity of such Securities, or, subject to
certain conditions, may rescind a declaration of acceleration and its
consequences with respect to such Securities. The preceding sentence shall not,
however, apply to a default in the payment of the principal of or premium, if
any, or interest on any of the Securities. Any such consent or waiver by the
Holder of this Security (unless revoked as provided in the Indenture) shall be
conclusive and binding upon such Holder and upon all future Holders
5
<PAGE> 6
and owners of this Security and any securities that may be issued in exchange
or substitution herefor, irrespective of whether or not any notation thereof is
made upon this Security or such other securities.
As provided in and subject to the provisions of the Indenture, the Holder
of this Security shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless (a) such Holder shall have previously given
the Trustee written notice of a continuing Event of Default, (b) the Holders of
not less than 25% in aggregate principal amount of the Securities Outstanding
shall have made written request to the Trustee to institute proceedings in
respect of such Event of Default as Trustee and offered the Trustee reasonable
indemnity and the Trustee shall not have received from the Holders of a
majority in aggregate principal amount of the Securities Outstanding a
direction inconsistent with such request, and (c) the Trustee shall have failed
to institute any such proceeding, for 60 days after receipt of such notice,
request and offer of indemnity. The foregoing shall not apply to any suit
instituted by the Holder of this Security for the enforcement of any payment of
principal hereof, Make-Whole Amount, if any, or interest hereon (including any
Additional Ratings Interest) on or after the respective due dates expressed
herein.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and any Make-Whole Amount
and interest (including Additional Ratings Interest, as described herein) on
this Security in the manner, at the respective times, at the rate and in the
coin or currency herein prescribed.
This Security is issuable only in registered form without coupons in
denominations of $1,000 and integral multiples thereof. Securities may be
exchanged for a like aggregate principal amount of Securities of this series of
other authorized denominations at the office or agency of the Issuer in Boston,
Massachusetts, in the manner and subject to the limitations provided in the
Indenture, but without the payment of any service charge except for any tax or
other governmental charge imposed in connection therewith.
This Security is not subject to a sinking fund requirement.
Upon due presentment for registration of transfer of Securities at the
office or agency of the Issuer in Boston, Massachusetts, a new Security or
Securities of the same series of authorized denominations in an equal aggregate
principal amount will be issued to the transferee in exchange therefor, subject
to the limitations provided in the Indenture, without charge except for any tax
or other governmental charge imposed in connection therewith.
No recourse under or upon any obligation, covenant or agreement contained
in the Indenture, in any Security or coupon appertaining thereto, or because of
any indebtedness evidenced hereby or thereby (including, without limitation,
any obligation or indebtedness relating to the principal of, or premium or
Make-Whole Amount, if any, interest or any other amounts due, or claimed to be
due, on this Security), or for any claim based thereon or otherwise in respect
thereof, shall be had (i) against the General Partner or any other partner, or
any Person which owns an interest, directly or indirectly, in any partner, in
the Issuer, or (ii) against any promoter, as such, or against any past, present
or future shareholder, officer, trustee or partner, as such, of the Issuer or
the General Partner or of any successor, either directly or through the Issuer
or the General Partner or any successor, under any rule of law, statute or
constitutional provision or by the enforcement of any assessment or by any
legal or equitable proceeding or otherwise, all such liability being expressly
waived and released by the acceptance hereof and as part of the consideration
for the issue hereof.
6
<PAGE> 7
Prior to due presentation of a Security for registration of transfer, the
Issuer, the Trustee, and any authorized agent of the Issuer or the Trustee may
deem and treat the Person in whose name this Security is registered as the
absolute owner of this Security (whether or not this Security shall be overdue
and notwithstanding any notation of ownership or other writing hereon), for the
purpose of receiving payment of, or on account of, the principal hereof and
Make-Whole Amount, if any, and subject to the provisions herein and on the face
hereof; interest hereon, and for all other purposes, and neither the Issuer nor
the Trustee nor any authorized agent of the Issuer or the Trustee shall be
affected by any notice to the contrary.
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY THE LAW OF THE STATE
OF NEW YORK, UNITED STATES OF AMERICA WITHOUT REGARD TO THE PRINCIPLES OF
CONFLICTS OF LAWS.
7
<PAGE> 8
ASSIGNMENT FORM AND CERTIFICATE OF TRANSFER
To assign this Security fill in the form below:
(I) or (we) assign and transfer this Security to
- -------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number, if any)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
Your signature:
----------------------------------------------------------
(Sign exactly as your name appears on
the other side of this Security)
Date:
-----------
Signature Guarantee:*
----------
- --------------
* Signature must be guaranteed by a commercial bank, trust company or
member firm or a major stock exchange
8
<PAGE> 1
EXHIBIT 4.08
CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
7-1/8% NOTES DUE 2007
NO. 001 PRINCIPAL AMOUNT
CUSIP NO. 22575P AF 0 $250,000,000
UNLESS THIS CERTIFICATE IS PRESENTED BY AN AUTHORIZED REPRESENTATIVE OF
THE DEPOSITORY TRUST COMPANY, A NEW YORK CORPORATION ("DTC"), TO THE ISSUER OR
ITS AGENT FOR REGISTRATION OF TRANSFER, EXCHANGE OR PAYMENT AND ANY CERTIFICATE
ISSUED IS REGISTERED IN THE NAME OF CEDE & CO. OR IN SUCH OTHER NAME AS IS
REQUESTED BY AN AUTHORIZED REPRESENTATIVE OF DTC AND ANY PAYMENT IS MADE TO
CEDE & CO., OR TO SUCH OTHER ENTITY AS IS REQUESTED BY AN AUTHORIZED
REPRESENTATIVE OF DTC, ANY TRANSFER, PLEDGE, OR OTHER USE HEREOF FOR VALUE OR
OTHERWISE BY OR TO ANY PERSON IS WRONGFUL INASMUCH AS THE REGISTERED OWNER
HEREOF, CEDE & CO., HAS AN INTEREST HEREIN.
UNLESS AND UNTIL THIS CERTIFICATE IS EXCHANGED IN WHOLE OR IN PART FOR
NOTES IN CERTIFICATED FORM, THIS CERTIFICATE MAY NOT BE TRANSFERRED EXCEPT AS A
WHOLE BY DTC TO A NOMINEE THEREOF OR BY A NOMINEE THEREOF TO DTC OR ANOTHER
NOMINEE OF DTC OR BY DTC OR ANY SUCH NOMINEE TO A SUCCESSOR OF DTC OR A NOMINEE
OF SUCH SUCCESSOR.
Crescent Real Estate Equities Limited Partnership, a Delaware limited
partnership (the "Issuer," which term includes any successor under the
Indenture hereinafter referred to), for value received, hereby promises to pay
to Cede & Co. or registered assigns, the principal sum of Two Hundred Fifty
Million Dollars on September 15, 2007 (the "Maturity Date"), and to pay
interest thereon semiannually in arrears on September 15 and March 15 of each
year (each, an "Interest Payment Date"), commencing on September 15, 1998 (but
computed for the initial Interest Period (as defined below) as if interest had
accrued on the full principal amount hereof beginning on March 15, 1998), and
on the Maturity Date, at a rate of 7-1/8% per annum (together with any
Additional Ratings Interest that the Issuer may be required to pay, as
described on the reverse hereof), until payment of said principal sum has been
made or duly provided for.
The interest so payable and punctually paid or duly provided for on an
Interest Payment Date and on the Maturity Date will be paid to the Holder in
whose name this Note (or one or more predecessor Notes) is registered at the
close of business on the "Regular Record Date" for such payment, which will be
the date 15 calendar days (regardless of whether such day is a Business Day (as
defined below)) next preceding such payment date or the Maturity Date, as the
case may be. Any interest not so punctually paid or duly provided for shall
forthwith cease to be payable to the Holder on such Regular Record Date, and
shall be paid to the Holder in whose name this Note (or one or more predecessor
Notes) is registered at the close of business on a subsequent record date for
the payment of such defaulted interest (which shall not be less than five
Business Days prior to the date of the payment of such defaulted interest)
established by notice given by mail by or on behalf of the Issuer to the
Holders of the Notes not less than 15 days
<PAGE> 2
preceding such subsequent record date. Interest on this Note will be computed
on the basis of a 360-day year of twelve 30-day months.
The principal of this Note payable on the Maturity Date will be paid
against presentation and surrender of this Note at the office or agency of the
Issuer maintained for that purpose in Boston, Massachusetts with a drop
facility maintained in New York, New York. The Issuer hereby initially
designates the Corporate Trust Office of the Trustee in Boston, Massachusetts
as the office to be maintained by it where Notes may be presented for payment,
registration of transfer, or exchange and where notices or demands to or upon
the Issuer in respect of the Notes or the Indenture referred to on the reverse
hereof may be served.
Interest payable on this Note on any Interest Payment Date and on the
Maturity Date, as the case may be, will be the amount of interest accrued
during the applicable Interest Period (as defined below).
"Business Day" means any day, other than a Saturday or a Sunday on which
banking institutions in New York, New York, Boston, Massachusetts or St. Louis,
Missouri are not required or authorized by law or executive order to close. An
"Interest Period" is each period from and including the immediately preceding
Interest Payment Date (or from and including March 15, 1998, in the case of the
initial Interest Period) to but excluding the applicable Interest Payment Date
or the Maturity Date, as the case may be. If any Interest Payment Date other
than the Maturity Date would otherwise be a day that is not a Business Day,
such Interest Payment Date will be postponed to the succeeding Business Day. If
the Maturity Date falls on a day that is not a Business Day, principal and
interest payable on the Maturity Date will be paid on the succeeding Business
Day with the same force and effect as if it were paid on the date such payment
was due, and no interest will accrue on the amount so payable for the period
from and after the Maturity Date.
Payments of principal and interest in respect of this Note will be made
by U.S. dollar check or by wire transfer (such a wire transfer to be made only
to a Holder of an aggregate principal amount of Securities in excess of
$5,000,000, and only if such Holder shall have furnished wire instructions in
writing to the Trustee no later than 15 days prior to the relevant payment date
and acknowledged that a wire transfer fee shall be payable) of immediately
available funds in such coin or currency of the United States of America as at
the time of payment is legal tender for the payment of public and private
debts.
The Holder of this Security is entitled to the benefits of and is subject
to the obligations contained in a Registration Rights Agreement (subject to the
provisions thereof), dated as of September 22, 1997, between the Issuer and the
Initial Purchasers (the "Registration Rights Agreement").
Reference is made to the further provisions of this Note set forth on the
reverse hereof. Such further provisions shall for all purposes have the same
effect as though fully set forth at this place. Capitalized terms used herein,
including on the reverse hereof, and not defined herein or on the reverse
hereof shall have the respective meanings given to such terms in the Indenture.
This Note shall not be entitled to the benefits of the Indenture referred
to on the reverse hereof or be valid or become obligatory for any purpose until
the certificate of authentication hereon shall have been signed by the Trustee
under such Indenture.
2
<PAGE> 3
IN WITNESS WHEREOF, the Issuer has caused this instrument to be signed
manually or by facsimile by its duly authorized officers.
Dated: July 2, 1998 CRESCENT REAL ESTATE EQUITIES
LIMITED PARTNERSHIP, as Issuer
By: CRESCENT REAL ESTATE EQUITIES,
LTD., not individually but as General
Partner
By: /s/ Gerald W. Haddock
-----------------------------
Gerald W. Haddock
Its: President and Chief Executive Officer
By: /s/ Dallas E. Lucas
-----------------------------
Dallas E. Lucas
Its: Chief Financial Officer
TRUSTEE'S CERTIFICATE OF AUTHENTICATION
This is one of the Securities of the series designated herein referred to in
the within-mentioned Indenture.
STATE STREET BANK AND TRUST
COMPANY OF MISSOURI, N.A.
By: /s/ Robert Clasquin
-----------------------------
3
<PAGE> 4
[REVERSE OF NOTE]
CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
7-1/8% NOTES DUE 2007
This security is one of a duly authorized issue of debentures, notes,
bonds, or other evidences of indebtedness of the Issuer (hereinafter called the
"Securities") of the series hereinafter specified, all issued or to be issued
under and pursuant to an Indenture dated as of September 22, 1997 (herein
called the "Indenture"), duly executed and delivered by the Issuer to State
Street Bank and Trust Company of Missouri, N.A., as Trustee (herein called the
"Trustee," which term includes any successor trustee under the Indenture with
respect to the series of Securities of which this Note is a part), to which
Indenture and all Indentures supplemental thereto reference is hereby made for
a description of the rights, limitations of rights, obligations, duties, and
immunities thereunder of the Trustee, the Issuer, and the Holders of the
Securities, and of the terms upon which the Securities are, and are to be,
authenticated and delivered. The Securities may be issued in one or more
series, which different series may be issued in various aggregate principal
amounts, may mature at different times, may bear interest (if any) at different
rates, may be subject to different redemption provisions (if any), and may
otherwise vary as provided in the Indenture. This Security is one of a series
designated as the 7-1/8% Notes due 2007 of the Issuer (the "Notes"), limited in
aggregate principal amount to $250,000,000.
In case an Event of Default with respect to the 7-1/8% Notes due 2007
shall have occurred and be continuing, the principal hereof and Make-Whole
Amount (if any) may be declared, and upon such declaration shall become, due
and payable, in the manner, with the effect, and subject to the conditions
provided in the Indenture.
The Issuer may redeem the Securities, at any time in whole or from time
to time in part, at the election of the Issuer, at a redemption price equal to
the sum of (i) the principal amount of the Securities being redeemed plus
accrued interest thereon to the Redemption Date and (ii) the Make-Whole Amount,
if any, with respect to such Securities (the "Redemption Price"). Notice of any
optional redemption of any Securities will be given to Holders at their
addresses, as shown in the security register for the Notes, not more than 60
nor less than 30 days prior to the date fixed for redemption. The notice of
redemption will specify, among other items, the Redemption Price and the
principal amount of the Securities held by such Holder to be redeemed. If less
than all the Notes are to be redeemed at the option of the Issuer, the Issuer
will notify the Trustee at least 45 days prior to giving notice of redemption
to the Holders (or such shorter period as is satisfactory to the Trustee) of
the aggregate principal amount of Notes to be redeemed and their redemption
date. The Trustee shall select, in such manner as it shall deem fair and
appropriate, Notes to be redeemed in whole or in part.
Subject to certain limitations in the Indenture, at any time when the
Issuer is not subject to Section 13 or 15(d) of the United States Securities
Exchange Act of 1934, as amended, upon the request of a Holder of a Restricted
Security (as defined in the Registration Rights Agreement) the Issuer will
promptly furnish or cause to be furnished Rule 144A Information (as defined in
the Registration Rights Agreement) to such Holder of Restricted Securities, or
to a prospective purchaser of any security designated by any such Holder to the
extent required to permit compliance by such Holder with Rule 144A under the
Securities Act in connection with the resale of any such security.
The Issuer has agreed to obtain a rating of the 7-1/8% notes due 2007
issued by the Issuer on September 22, 1997 (the "Original Notes") and/or the
Notes from Standard & Poor's Rating Services, a division of The McGraw-Hill
Companies, and Moody's Investors Service, Inc. (each, a "Rating Agency,"
4
<PAGE> 5
and together, the "Rating Agencies"). If, within the period from September 22,
1997 to September 22, 1998, (i) either Rating Agency at any time (a) assigns a
rating to a series of the Original Notes or the Notes, as applicable, that is
not in one of such Rating Agency's generic rating categories which signifies
investment grade (an "Investment Grade Rating"), or (b) withdraws any rating
for a series of Original Notes or the Notes, as applicable, and does not
promptly assign a new rating, or (ii) either Rating Agency fails to assign any
rating for a series of the Original Notes or the Notes, as applicable, to a
series of the Original Notes or the Notes, as applicable, then the interest
rate for such series shall increase by 37.5 basis points (the "Rating
Adjustment" and the interest to be paid as a result of a Rating Adjustment, the
"Additional Ratings Interest") on the date on which such series is rated with
other than an Investment Grade Rating, the date a rating for any series is
withdrawn, or September 22, 1998 if no rating is assigned, as the case may be.
In the case of clause (i) above, from and after such date, if any, until
September 22, 1998, if such series becomes rated by such Rating Agency with an
Investment Grade Rating, then the Rating Adjustment shall be eliminated, until
such time as it would otherwise again be applicable. The interest rate for each
series of Original Notes or Notes, as applicable, shall be fixed on September
22, 1998 for the remainder of the term of such series. Notwithstanding anything
to the contrary contained herein, if at any time within the period from
September 22, 1997 to September 22, 1998, both Rating Agencies shall have rated
any series of Original Notes or Notes with an Investment Grade Rating, the
Rating Adjustment shall be eliminated for the remainder of the term of such
series of Original Notes or Notes.
Whenever in this Security there is a reference, in any context, to the
payment of the principal of, Make-Whole Amount, if any, or interest on, or in
respect of, any Security, such mention shall be deemed to include mention of
the payment of Additional Ratings Interest payable as described above to the
extent that, in such context, Additional Ratings Interest is, was or would be
payable in respect of such Security and express mention of the payment of
Additional Ratings Interest (if applicable) in any provisions of this Security
shall not be construed as excluding Additional Ratings Interest in those
provisions of this Security where such express mention is not made.
The Indenture contains provisions permitting the Issuer and the Trustee,
with the consent of the Holders of not less than a majority of the aggregate
principal amount of the Securities at the time Outstanding of all series to be
affected (voting as one class), evidenced as provided in the Indenture, to
execute supplemental Indentures adding any provisions to or changing in any
manner or eliminating any of the provisions of the Indenture or of any
supplemental Indenture or modifying in any manner the rights of the Holders of
the Securities of each series; provided, however, that no such supplemental
Indenture shall, without the consent of the Holder of each Security so
affected, (i) change the final maturity of any Security, or reduce the
principal amount thereof or any premium thereon, or reduce the rate or extend
the time of payment of any interest thereon, or impair or affect the rights of
any Holder to institute suit for the payment on any Security, or (ii) reduce
the aforesaid percentage of Securities, the Holders of which are required to
consent to any such supplemental Indenture, or (iii) reduce the percentage of
Securities, the Holders of which are required to consent to any waiver of
compliance with certain provisions of the Indenture or any waiver of certain
defaults thereunder. It is also provided in the Indenture that, with respect to
certain defaults or Events of Default regarding the Securities of any series,
the Holders of a majority in aggregate principal amount outstanding of the
Securities of such series (or, in the case of certain defaults or Events of
Default, all series of Securities) may on behalf of the Holders of all the
Securities of such series (or all of the Securities, as the case may be) waive
any such past default or Event of Default and its consequences, prior to any
declaration accelerating the maturity of such Securities, or, subject to
certain conditions, may rescind a declaration of acceleration and its
consequences with respect to such Securities. The preceding sentence shall not,
however, apply to a default in the payment of the principal of or premium, if
any, or interest on any of the Securities. Any such consent or waiver by the
Holder of this Security (unless revoked as provided in the Indenture) shall be
conclusive and binding upon such Holder and upon all future Holders
5
<PAGE> 6
and owners of this Security and any securities that may be issued in exchange
or substitution herefor, irrespective of whether or not any notation thereof is
made upon this Security or such other securities.
As provided in and subject to the provisions of the Indenture, the Holder
of this Security shall not have the right to institute any proceeding with
respect to the Indenture or for the appointment of a receiver or trustee or for
any other remedy thereunder, unless (a) such Holder shall have previously given
the Trustee written notice of a continuing Event of Default, (b) the Holders of
not less than 25% in aggregate principal amount of the Securities Outstanding
shall have made written request to the Trustee to institute proceedings in
respect of such Event of Default as Trustee and offered the Trustee reasonable
indemnity and the Trustee shall not have received from the Holders of a
majority in aggregate principal amount of the Securities Outstanding a
direction inconsistent with such request, and (c) the Trustee shall have failed
to institute any such proceeding, for 60 days after receipt of such notice,
request and offer of indemnity. The foregoing shall not apply to any suit
instituted by the Holder of this Security for the enforcement of any payment of
principal hereof, Make-Whole Amount, if any, or interest hereon (including any
Additional Ratings Interest) on or after the respective due dates expressed
herein.
No reference herein to the Indenture and no provision of this Security or
of the Indenture shall alter or impair the obligation of the Issuer, which is
absolute and unconditional, to pay the principal of and any Make-Whole Amount
and interest (including Additional Ratings Interest, as described herein) on
this Security in the manner, at the respective times, at the rate and in the
coin or currency herein prescribed.
This Security is issuable only in registered form without coupons in
denominations of $1,000 and integral multiples thereof. Securities may be
exchanged for a like aggregate principal amount of Securities of this series of
other authorized denominations at the office or agency of the Issuer in Boston,
Massachusetts, in the manner and subject to the limitations provided in the
Indenture, but without the payment of any service charge except for any tax or
other governmental charge imposed in connection therewith.
This Security is not subject to a sinking fund requirement.
Upon due presentment for registration of transfer of Securities at the
office or agency of the Issuer in Boston, Massachusetts, a new Security or
Securities of the same series of authorized denominations in an equal aggregate
principal amount will be issued to the transferee in exchange therefor, subject
to the limitations provided in the Indenture, without charge except for any tax
or other governmental charge imposed in connection therewith.
No recourse under or upon any obligation, covenant or agreement contained
in the Indenture, in any Security or coupon appertaining thereto, or because of
any indebtedness evidenced hereby or thereby (including, without limitation,
any obligation or indebtedness relating to the principal of, or premium or
Make-Whole Amount, if any, interest or any other amounts due, or claimed to be
due, on this Security), or for any claim based thereon or otherwise in respect
thereof, shall be had (i) against the General Partner or any other partner, or
any Person which owns an interest, directly or indirectly, in any partner, in
the Issuer, or (ii) against any promoter, as such, or against any past, present
or future shareholder, officer, trustee or partner, as such, of the Issuer or
the General Partner or of any successor, either directly or through the Issuer
or the General Partner or any successor, under any rule of law, statute or
constitutional provision or by the enforcement of any assessment or by any
legal or equitable proceeding or otherwise, all such liability being expressly
waived and released by the acceptance hereof and as part of the consideration
for the issue hereof.
6
<PAGE> 7
Prior to due presentation of a Security for registration of transfer, the
Issuer, the Trustee, and any authorized agent of the Issuer or the Trustee may
deem and treat the Person in whose name this Security is registered as the
absolute owner of this Security (whether or not this Security shall be overdue
and notwithstanding any notation of ownership or other writing hereon), for the
purpose of receiving payment of, or on account of, the principal hereof and
Make-Whole Amount, if any, and subject to the provisions herein and on the face
hereof; interest hereon, and for all other purposes, and neither the Issuer nor
the Trustee nor any authorized agent of the Issuer or the Trustee shall be
affected by any notice to the contrary.
THE INDENTURE AND THIS SECURITY SHALL BE GOVERNED BY THE LAW OF THE STATE
OF NEW YORK, UNITED STATES OF AMERICA WITHOUT REGARD TO THE PRINCIPLES OF
CONFLICTS OF LAWS.
7
<PAGE> 8
ASSIGNMENT FORM AND CERTIFICATE OF TRANSFER
To assign this Security fill in the form below:
(I) or (we) assign and transfer this Security to
- -------------------------------------------------------------------------------
(Insert assignee's social security or tax identification number, if any)
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
(Print or type assignee's name, address and zip code)
Your signature:
----------------------------------------------------------
(Sign exactly as your name appears on
the other side of this Security)
Date:
-----------
Signature Guarantee:*
--------
- --------------
* Signature must be guaranteed by a commercial bank, trust company or
member firm or a major stock exchange
8
<PAGE> 1
EXHIBIT 10.01
------------------------------------
SECOND AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP
OF
CRESCENT REAL ESTATE EQUITIES LIMITED
PARTNERSHIP
------------------------------------
Dated as of November 1, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINED TERMS .................................................................. 2
ARTICLE II ORGANIZATIONAL MATTERS ........................................................ 17
Section 2.1 Continuation of Partnership ............................................. 17
Section 2.2 Name .................................................................... 17
Section 2.3 Principal Office and Registered Agent ................................... 17
Section 2.4 Power of Attorney ....................................................... 17
Section 2.5 Term .................................................................... 19
ARTICLE III PURPOSE ...................................................................... 19
Section 3.1 Purpose and Business .................................................... 19
Section 3.2 Powers .................................................................. 19
ARTICLE IV CAPITAL CONTRIBUTIONS ......................................................... 20
Section 4.1 Capital Contributions of the Partners ................................... 20
Section 4.2 Additional Funding ...................................................... 21
Section 4.3 Issuance of Additional Partnership Interests ............................ 23
Section 4.4 No Preemptive Rights .................................................... 25
Section 4.5 No Interest on Capital .................................................. 26
Section 4.6 Stock Incentive Plans ................................................... 26
Section 4.7 Other Equity Compensation Plans ......................................... 27
ARTICLE V DISTRIBUTIONS .................................................................. 28
Section 5.1 Initial Partnership Distributions ....................................... 28
Section 5.2 Requirement and Characterization of Distributions ....................... 28
Section 5.3 Amounts Withheld ........................................................ 28
Section 5.4 Distributions in Kind ................................................... 29
Section 5.5 Distributions Upon Liquidation .......................................... 29
ARTICLE VI ALLOCATIONS ................................................................... 29
Section 6.1 Allocations For Capital Account Purposes ................................ 29
Section 6.2 Allocation of Nonrecourse Debt .......................................... 30
ARTICLE VII MANAGEMENT AND OPERATIONS OF BUSINESS ........................................ 30
Section 7.1 Management .............................................................. 30
Section 7.2 Certificate of Limited Partnership ...................................... 34
Section 7.3 Restrictions on General Partner's Authority ............................. 34
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C>
Section 7.4 Reimbursement of the Crescent Group ..................................... 35
Section 7.5 Outside Activities of the Crescent Group ................................ 35
Section 7.6 Contracts with Affiliates ............................................... 36
Section 7.7 Indemnification ......................................................... 36
Section 7.8 Liability of the General Partner ........................................ 39
Section 7.9 Other Matters Concerning the General Partner ............................ 39
Section 7.10 Title to Partnership Assets ............................................ 40
Section 7.11 Reliance by Third Parties .............................................. 40
Section 7.12 Limited Partner Representatives ........................................ 41
ARTICLE VIII RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS .................................. 41
Section 8.1 Limitation of Liability ................................................. 41
Section 8.2 Management of Business .................................................. 41
Section 8.3 Outside Activities of Limited Partners .................................. 42
Section 8.4 Return of Capital ....................................................... 42
Section 8.5 Rights of Limited Partners Relating to the Partnership .................. 42
Section 8.6 Exchange Rights ......................................................... 43
Section 8.7 Covenants Relating to the Exchange Rights ............................... 44
Section 8.8 Other Matters Relating to the Exchange Rights ........................... 45
ARTICLE IX BOOKS, RECORDS, ACCOUNTING AND REPORTS ........................................ 45
Section 9.1 Records and Accounting .................................................. 45
Section 9.2 Fiscal Year ............................................................. 46
Section 9.3 Reports ................................................................. 46
ARTICLE X TAX MATTERS .................................................................... 46
Section 10.1 Preparation of Tax Returns ............................................. 46
Section 10.2 Tax Elections .......................................................... 46
Section 10.3 Tax Matters Partner .................................................... 47
Section 10.4 Organizational Expenses ................................................ 48
Section 10.5 Withholding ............................................................ 48
ARTICLE XI TRANSFERS AND WITHDRAWALS ..................................................... 49
Section 11.1 Transfer ............................................................... 49
Section 11.2 Transfer of Partnership Interests of the General Partner ............... 49
Section 11.3 Transfer of Partnership Interests of Limited Partners Other Than
Crescent Equities ................................................................. 50
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<S> <C>
Section 11.4 Substituted Limited Partners ........................................... 51
Section 11.5 Assignees .............................................................. 52
Section 11.6 General Provisions ..................................................... 52
Section 11.7 Acquisition of Partnership Interest by Partnership ..................... 53
ARTICLE XII ADMISSION OF PARTNERS ........................................................ 53
Section 12.1 Admission of Substituted General Partner ............................... 53
Section 12.2 Admission of Additional or Employee Limited Partners ................... 54
Section 12.3 Amendment of Agreement and Certificate of Limited Partnership .......... 55
ARTICLE XIII DISSOLUTION AND LIQUIDATION ................................................. 55
Section 13.1 Dissolution ............................................................ 55
Section 13.2 Winding Up ............................................................. 56
Section 13.3 Compliance with Timing Requirements of Regulations ..................... 57
Section 13.4 Deemed Distribution and Recontribution ................................. 58
Section 13.5 Rights of Limited Partners ............................................. 58
Section 13.6 Documentation of Liquidation ........................................... 58
Section 13.7 Reasonable Time for Winding-Up ......................................... 58
Section 13.8 Liability of the Liquidator ............................................ 59
Section 13.9 Waiver of Partition .................................................... 59
ARTICLE XIV AMENDMENT OF AGREEMENT ....................................................... 59
Section 14.1 Amendments ............................................................. 59
ARTICLE XV PARTNER REPRESENTATIONS AND WARRANTIES ........................................ 60
Section 15.1 Representations and Warranties ......................................... 60
ARTICLE XVI ARBITRATION OF DISPUTES ...................................................... 62
Section 16.1 Arbitration ............................................................ 62
Section 16.2 Procedures ............................................................. 62
Section 16.3 Binding Character ...................................................... 63
Section 16.4 Exclusivity ............................................................ 63
Section 16.5 No Alteration of Agreement ............................................. 63
ARTICLE XVII GENERAL PROVISIONS .......................................................... 63
Section 17.1 Addresses and Notice ................................................... 63
Section 17.2 Titles and Captions .................................................... 64
Section 17.3 Pronouns and Plurals ................................................... 64
Section 17.4 Further Action ......................................................... 64
</TABLE>
(iii)
<PAGE> 5
<TABLE>
<S> <C>
Section 17.5 Binding Effect ......................................................... 64
Section 17.6 Creditors .............................................................. 64
Section 17.7 Waiver ................................................................. 64
Section 17.8 No Agency .............................................................. 65
Section 17.9 Entire Understanding ................................................... 65
Section 17.10 Counterparts .......................................................... 65
Section 17.11 Applicable Law ........................................................ 65
Section 17.12 Invalidity of Provisions .............................................. 65
Section 17.13 Guaranty by Crescent Equities ......................................... 65
Section 17.14 Restriction on Sale of Sonoma Property ................................ 66
</TABLE>
Exhibit A -- Partners, Partnership Units and Partnership Interests
Exhibit B -- Capital Account Maintenance
Exhibit C -- Special Tax Allocation Rules
Exhibit D -- Notice of Exchange
Exhibit E -- Listing of Approved Substituted Limited Partners
(iv)
<PAGE> 6
SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
THIS SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP,
dated as of November 1, 1997, is entered into by and among Crescent Real
Estate Equities, Ltd., a Delaware corporation, as general partner (the "General
Partner"), and those parties who are Limited Partners as listed on Exhibit A
hereto or who are admitted from time to time as Limited Partners as herein
provided.
W I T N E S S E T H:
WHEREAS, Crescent Real Estate Equities Limited Partnership, a Delaware
limited partnership (the "Partnership"), was formed pursuant to that certain
Certificate of Limited Partnership dated February 9, 1994 and filed on February
9, 1994 in the office of the Secretary of State of Delaware, and that certain
Agreement of Limited Partnership dated as of February 9, 1994 (the "Initial
Agreement");
WHEREAS, the Initial Agreement was amended and restated in its entirety
by that certain First Amended and Restated Agreement of Limited Partnership of
Crescent Real Estate Equities Limited Partnership, dated as of May 5, 1994, as
amended by the First Amendment to the First Amended and Restated Agreement of
Limited Partnership of Crescent Real Estate Equities Limited Partnership, dated
as of May 16, 1994, the Second Amendment to the First Amended and Restated
Agreement of Limited Partnership of Crescent Real Estate Equities Limited
Partnership, dated as of April 11, 1995, the Third Amendment to the First
Amended and Restated Agreement of Limited Partnership of Crescent Real Estate
Equities Limited Partnership, dated as of April 11, 1995, the Fourth Amendment
to the First Amended and Restated Agreement of Limited Partnership of Crescent
Real Estate Equities Limited Partnership, dated as of May 3, 1995, the Fifth
Amendment to the First Amended and Restated Agreement of Limited Partnership of
Crescent Real Estate Equities Limited Partnership, dated as of May 31, 1995, the
Sixth Amendment to the First Amended and Restated Agreement of Limited
Partnership of Crescent Real Estate Equities Limited Partnership, dated as of
June 1, 1995, the Seventh Amendment to the First Amended and Restated Agreement
of Limited Partnership of Crescent Real Estate Equities Limited Partnership,
dated as of August 23, 1995, the Eighth Amendment to the First Amended and
Restated Agreement of Limited Partnership of Crescent Real Estate Equities
Limited Partnership, dated as of December 31, 1995, the Restatement of Ninth
Amendment to the First Amended and Restated Agreement of Limited Partnership of
Crescent Real Estate Equities Limited Partnership, dated as of February 16,
1996, the Supplemental Amendment to the Restatement of Ninth Amendment to the
First Amended and Restated Agreement of Limited Partnership of Crescent Real
Estate Equities Limited Partnership, dated as of June 30, 1996, the Tenth
Amendment to the First Amended and Restated Agreement of Limited Partnership of
Crescent Real Estate Equities Limited Partnership, dated as of July 26, 1996,
the Eleventh Amendment to the First Amended and Restated
<PAGE> 7
Agreement of Limited Partnership of Crescent Real Estate Equities Limited
Partnership, dated as of November 4, 1996, the Twelfth Amendment to the First
Amended and Restated Agreement of Limited Partnership, dated as of December 31,
1996, the Thirteenth Amendment to the First Amended and Restated Agreement of
Limited Partnership, dated as of April 29, 1997 and the Fourteenth Amendment to
the First Amended and Restated Agreement of Limited Partnership, dated as of
April 30, 1997 (hereinafter referred to collectively as the "First Amended
Agreement");
WHEREAS, the General Partner desires to amend and restate in its
entirety the First Amended Agreement pursuant to its authority under Sections
2.4 and 14.1.B of the First Amended Agreement and the powers of attorney granted
to the General Partner by the Limited Partners in order to (i) combine all of
the provisions of the First Amended Agreement into one document, and (ii) make
changes to provisions of the First Amended Agreement in accordance with Section
14.1.B(3) of the First Amended Agreement;
WHEREAS, the General Partner desires to correct the Capital
Contribution amounts set forth in Paragraph 1 of the Thirteenth Amendment to
the First Amended and Restated Agreement of Limited Partnership, dated as of
April 29, 1997, to the following amounts: (i) $134,100 as of February 11, 1997,
in connection with the exercise of David M. Dean's options to purchase 2,400
REIT Shares; (ii) $420,000 as of February 21, 1997, in connection with the
exercise of Dallas E. Lucas' option to purchase 7,500 REIT Shares;
(iii) $58,625 as of March 5, 1997, in connection with the exercise of James E.
Wassel's option to purchase 1,000 REIT Shares; (iv) $59,000 as of March 6,
1997, in connection with the exercise of Jeffrey L. Fitzgerald's option to
purchase 1,000 REIT Shares; (v) $15,375 as of March 11, 1997, in connection
with the exercise of Charlene J. McNeil's option to purchase 250 REIT Shares;
(vi) $24,250 as of March 14, 1997, in connection with the exercise of John P.
Pittman's option to purchase 400 REIT Shares; and (vii) $72,750 as of March 14,
1997, in connection with the exercise of Alan C. Powers' option to purchase
1,200 REIT Shares;
WHEREAS, the General Partner desires to correct the description of the
March 15, 1997 assignment by FW-Irving Partners, Ltd. set forth in the Recitals
to the Fourteenth Amendment to the First Amended Agreement, dated as of April
30, 1997, to read as follows: FW-Irving Partners, Ltd. assigned legal title to
its entire 1.176019% Limited Partnership Interest (including 635,668
Partnership Units) to its partners as follows: (i) a .001177% Limited
Partnership Interest, including 636 Partnership Units, to Rainwater, Inc.,
(ii) a .704906% Limited Partnership Interest, including 381,020 Partnership
Units, to John C. Goff, and (iii) a .469936% Limited Partnership Interest,
including 254,012 Partnership Units, to Gerald W. Haddock;
WHEREAS, on May 4, 1997, Joseph W. Autem exercised his Exchange Right
with respect to 1,805 Partnership Units;
WHEREAS, the individuals set forth in the following table exercised
options to purchase REIT Shares for the respective number of shares, on the
respective date, pursuant to the respective stock option plan and for which
Crescent Equities shall receive credit for the respective Capital Contribution
to the Partnership indicated opposite each such individual's name;
<TABLE>
<CAPTION>
Number of REIT Capital
Individual Exercise Date Shares Purchased Plan Contribution
- ---------- ------------- ---------------- ---- ------------
<S> <C> <C> <C> <C>
Charlene J. McNeil 5/12/97 300 1994 Plan $7,837.50
Charlene J. McNeil 5/12/97 800 1995 Plan $20,900.00
Paul E. Rowsey, III 6/10/97 30,000 1994 Plan $795,000.00
6/10/97 2,800 First Amended and $74,200.00
Restated 1995 Plan
Jennifer L. Miller 6/16/97 400 1995 Plan $11,500.00
John M. Walker, Jr. 6/16/97 6,000 1995 Plan $172,500.00
Suzanne Stevens 7/11/97 800 1995 Plan $25,350.00
Carlton Jordan 7/17/97 200 1995 Plan $6,600.00
Kurtis D. Adams 7/17/97 200 1995 Plan $6,600.00
Michael A. Howell 7/17/97 200 1995 Plan $6,600.00
Henry L. Cosby 7/17/97 200 1995 Plan $6,600.00
John R. Leathers 7/17/97 200 1995 Plan $6,600.00
Ramon Cortez 7/17/97 200 1995 Plan $6,600.00
Becky Rainwater 7/17/97 200 1995 Plan $6,600.00
J. Mike Williams 7/17/97 200 1995 Plan $6,600.00
</TABLE>
-2-
<PAGE> 8
<TABLE>
<CAPTION>
Number of REIT Capital
Individual Exercise Date Shares Purchased Plan Contribution
- ---------- ------------- ---------------- ---- ------------
<S> <C> <C> <C> <C>
Elizabeth M. Frankowski 7/17/97 200 1995 Plan $6,600.00
Daniel Thompson 7/18/97 200 1995 Plan $6,537.50
Mark Stanfield 7/22/97 1,200 1995 Plan $39,150.00
Angela Petrucci 7/22/97 200 1995 Plan $6,525.00
Michael Musack 7/22/97 200 1995 Plan $6,525.00
Sidney Schneider 7/22/97 200 1995 Plan $6,525.00
Rodney Leach 7/22/97 200 1995 Plan $6,525.00
Vicki Rowell 7/22/97 200 1995 Plan $6,525.00
Debbie Hall 7/24/97 200 1995 Plan $6,600.00
Christopher Crisman 7/24/97 200 1995 Plan $6,600.00
Debra Garrison 7/24/97 100 First Amended and $3,300.00
Restated 1995 Plan
Teresa Shiller 7/31/97 200 First Amended and $6,250.00
Restated 1995 Plan
Nelda Casbon 7/31/97 200 First Amended and $6,250.00
Restated 1995 Plan
William Garcia 8/4/97 200 First Amended and $6,137.50
Restated 1995 Plan
Raymond Cuellar 8/6/97 200 First Amended and $6,575.00
Restated 1995 Plan
Jerry Crenshaw 8/14/97 1,600 1994 Plan $53,000.00
Jerry Crenshaw 8/14/97 1,800 1995 Plan $59,625.00
Priscilla Nunez 8/18/97 200 First Amended and $6,475.00
Restated 1995 Plan
David Hagar 8/18/97 192 First Amended and $6,216.00
Restated 1995 Plan
Richard Flusche 8/18/97 200 First Amended and $6,475.00
Restated 1995 Plan
Charles Lucabaugh 8/18/97 200 First Amended and $6,475.00
Restated 1995 Plan
James Dockal II 8/18/97 800 1995 Plan $25,900.00
James Dockal II 8/18/97 440 First Amended and $14,245.00
Restated 1995 Plan
</TABLE>
-3-
<PAGE> 9
<TABLE>
<CAPTION>
Number of REIT Capital
Individual Exercise Date Shares Purchased Plan Contribution
- ---------- ------------- ---------------- ---- ------------
<S> <C> <C> <C> <C>
Willie E. Hollie, Jr. 9/4/97 200 First Amended and $6,225.00
Restated 1995 Plan
Amelia K. Davis 9/4/97 200 First Amended and $6,225.00
Restated 1995 Plan
Anthony Tillman 9/5/97 200 First Amended and $6,250.00
Restated 1995 Plan
Cheryl Dillon 9/10/97 200 First Amended and $6,800.00
Restated 1995 Plan
L. Blair Tillery 9/10/97 160 First Amended and $5,440.00
Restated 1995 Plan
Eric Painter 9/10/97 200 First Amended and $6,800.00
Restated 1995 Plan
Elizabeth Hays 9/11/97 200 First Amended and $7,200.00
Restated 1995 Plan
Jeff Fitzgerald 9/12/97 6,000 1995 Plan $216,750.00
David M. Dean 9/15/97 400 1994 Plan $14,500.00
Joseph D. Ambrose, III 9/16/97 2,000 1994 Plan $70,375.00
Joseph D. Ambrose, III 9/16/97 8,000 1995 Plan $281,500.00
Philip Webster 9/18/97 200 First Amended and $7,087.50
Restated 1995 Plan
Brad Russell 9/18/97 200 First Amended and $7,087.50
Restated 1995 Plan
Johnny Jarrin 10/9/97 200 First Amended and $7,800.00
Restated 1995 Plan
Alan Connelly 10/9/97 200 First Amended and $7,800.00
Restated 1995 Plan
Sharon Simmons 10/22/97 500 1995 Plan $18,781.25
Jim Petrie 10/22/97 200 First Amended and $7,512.50
Restated 1995 Plan
</TABLE>
WHEREAS, on May 14, 1997, Crescent Equities issued 500,000 REIT Shares
in a public stock offering at a cash price of $25.875 per share, which cash
proceeds were contributed to the Partnership by Crescent Equities pursuant to
Section 4.2 of the First Amended Agreement;
-4-
<PAGE> 10
WHEREAS, on June 30, 1997, (i) the Partnership issued 1,046 Partnership
Units valued at $66,421 to Texas Greenbrier Associates, Inc. ("Greenbrier")
pursuant to a Consultant Unit Agreement dated August 15, 1995 between Greenbrier
and the Partnership; and (ii) Greenbrier immediately exercised its Exchange
Right with respect to such 1,046 Partnership Units;
WHEREAS, on July 8, 1997, Crescent Equities issued 217 REIT Shares to
each of Morton H. Meyerson, William F. Quinn and Paul E. Rowsey, III in payment
of trust managers' fees and, in connection therewith, Crescent Equities shall
receive credit for an aggregate Capital Contribution to the Partnership
of $20,018.25;
Whereas, On July 25, 1997, Crescent Equities issued 351,185 REIT Shares
in a public offering at a cash price of $28.475 per share, which cash proceeds
were contributed to the Partnership by Crescent Equities pursuant to Section 4.2
of the First Amended Agreement;
WHEREAS, on August 12, 1997, Crescent Equities issued 4,700,000 REIT
Shares to UBS Securities (Portfolio) LLC at a price of $31.5625 per share,
pursuant to that certain Purchase Agreement, dated as of August 11, 1997, by and
among Crescent Equities, UBS Securities (Portfolio) LLC and Union Bank of
Switzerland, London Branch, acting through its agent UBS Securities LLC, which
cash proceeds were contributed to the Partnership by Crescent Equities pursuant
to Section 4.2 of the First Amended Agreement;
WHEREAS, effective August 29, 1997, Crescent Equities granted (i) 33
REIT Shares to Tommy Ellis; (ii) 33 REIT Shares to Alan Friedman; (iii) 34 REIT
Shares to Shannon Gilbert; (iv) 34 REIT Shares to Jana Irwin; (v) 33 REIT Shares
to John Walker; and (vi) 33 REIT Shares to John Zogg, in accordance with
resolutions of the Board of Trust Managers of Crescent Equities, dated as of
August 29, 1997 and, in connection therewith, Crescent Equities shall receive
credit for an aggregate Capital Contribution to the Partnership of $6,325.00;
WHEREAS, on August 31, 1997, Crescent Equities rescinded 177,604
Partnership Units held by Canyon Ranch, Inc. pursuant to Article II of that
certain Contribution Agreement dated July 26, 1996 between the Partnership and
Canyon Ranch, Inc.
WHEREAS, on September 8, 1997, Gerald W. Haddock exercised his Exchange
Right with respect to 8,900 Partnership Units;
WHEREAS, on September 22, 1997, Crescent Equities issued 307,831 REIT
Shares in a public offering at a cash price of $32.485 per share, which cash
proceeds were contributed to the Partnership by Crescent Equities pursuant to
Section 4.2 of the First Amended Agreement;
WHEREAS, on October 1, 1997, Greenbrier exercised options to
purchase 25,500 REIT Shares pursuant to the 1994 stock option plan of Crescent
Equities and, in connection therewith, Crescent Equities shall receive credit
for a Capital Contribution to the Partnership of $1,012,031.25;
WHEREAS, on October 7, 1997, Crescent Equities issued 138 REIT Shares
to each of Morton H. Meyerson, William F. Quinn and Paul E. Rowsey, III in
payment of trust managers' fees and, in connection therewith, Crescent Equities
shall receive credit for an aggregate Capital Contribution to the Partnership of
$16,767;
WHEREAS, on October 8, 1997, Crescent Equities issued 10,000,000 REIT
Shares in a public stock offering at a cash price of $39.00 per share, which
cash proceeds were contributed to the Partnership by Crescent Equities pursuant
to Section 4.2 of the First Amended Agreement;
-5-
<PAGE> 11
WHEREAS, on October 23, 1997, Christopher J. O'Brien exercised his
Exchange Right with respect to 18,155 Partnership Units;
WHEREAS, on October 24, 1997, Peter M. Joost exercised his Exchange
Right with respect to 25,000 Partnership Units; and
WHEREAS, the General Partner desires to amend Exhibit A to reflect the
transactions described above.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt,
adequacy and sufficiency of which are hereby acknowledged, the parties hereto,
intending legally to be bound, hereby agree as follows:
ARTICAL I
DEFINED TERMS
Except as otherwise herein expressly provided, the following terms and
phrases shall have the meanings set forth below:
"Act" means the Delaware Revised Uniform Limited Partnership Act, as it
may be amended from time to time, and any successor to such statute.
"Additional Funds" has the meaning set forth in Section 4.2.A hereof.
"Additional Limited Partner" has the meaning set forth in Section 4.3
hereof.
"Adjusted Capital Account" means the Capital Account maintained for
each Partner as of the end of each fiscal year (i) increased by any amounts
which such Partner is obligated to restore pursuant to any provision of this
Agreement or is treated as being obligated to restore pursuant to Regulations
Section 1.704-1(b)(2)(ii)(c) or is deemed to be obligated to restore pursuant to
the penultimate sentences of Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5) and (ii) decreased by the items described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account is intended to comply with
the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
"Adjusted Capital Account Deficit" means, with respect to any Partner,
the deficit balance, if any, in such Partner's Adjusted Capital Account as of
the end of the relevant fiscal year.
"Adjusted Property" means any property the Carrying Value of which has
been adjusted pursuant to Section 1.D of Exhibit B hereof. Once an Adjusted
Property is deemed distributed by, and recontributed to, the Partnership for
federal income tax purposes upon a termination thereof pursuant to Section 708
of the Code, such property shall thereafter constitute a
-6-
<PAGE> 12
Contributed Property until the Carrying Value of such property is further
adjusted pursuant to Section 1.D of Exhibit B hereof.
"Adjustment Date" has the meaning set forth in Section 4.2.A(2) hereof.
"Affiliate" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by or under common control with such Person.
"Agreement" means this Second Amended and Restated Agreement of Limited
Partnership, as it may be amended, supplemented or restated from time to time.
"Amstar" means Amstar Continental Plaza Limited Partnership, a Colorado
limited partnership.
"Amstar Required Cash Payment" means the "Required Cash Payment" as
defined in Article III of that certain Contribution Agreement dated February 8,
1994 between Amstar and the Partnership.
"Assignee" means a Person to whom a Limited Partnership Interest has
been transferred in a manner permitted under this Agreement, but who has not
become a Substituted Limited Partner, and who has the rights set forth in
Sections 8.6, 11.3.A and 11.5.
"Available Cash" means, with respect to any period for which such
calculation is being made, (i) the sum of:
A. the Partnership's Net Income or Net Loss, as the case may be,
for such period (without regard to adjustments resulting from
allocations described in Section 1.A-E of Exhibit C),
B. Depreciation and all other noncash charges deducted in
determining Net Income or Net Loss for such period,
C. the amount of any reduction in reserves of the Partnership
referred to in clause (ii)(f) below (including, without limitation,
reductions resulting because the General Partner determines such
amounts are no longer necessary),
D. the excess of proceeds from the sale, exchange, disposition,
or refinancing of Partnership property during such period over the gain
(or loss, as the case may be) recognized from such sale, exchange,
disposition, or refinancing during such period (excluding Terminating
Capital Transactions) as such items of gain or loss are determined in
accordance with Section 1.B of Exhibit B, and
E. all other cash received by the Partnership for such period,
including cash contributions and loan proceeds (other than refinancing
proceeds described in (d) above), that was not included in determining
Net Income or Net Loss for such period;
-7-
<PAGE> 13
(ii) less the sum of:
(a) all principal debt payments made during such period by
the Partnership,
(b) capital expenditures made by the Partnership during such
period,
(c) investments in any entity (including loans made thereto)
to the extent that such investments are not otherwise described in
clauses (ii)(a) or (b),
(d) all other expenditures and payments not deducted in
determining Net Income or Net Loss for such period,
(e) any amount included in determining Net Income or Net Loss
for such period that was not received by the Partnership during such
period, and
(f) the amount of any increase in reserves (including,
without limitation, working capital accounts or other cash or similar
balances) established during such period which the General Partner
determines are necessary or appropriate in its sole and absolute
discretion.
Notwithstanding the foregoing, Available Cash shall not include any
cash received or reductions in reserves, or take into account any disbursements
made or reserves established, after commencement of the dissolution and
liquidation of the Partnership.
"Bankruptcy" of a Person shall be deemed to have occurred when (a) the
Person commences a voluntary proceeding seeking liquidation, reorganization or
other relief under any bankruptcy, insolvency or other similar law now or
hereafter in effect, (b) the Person is adjudged as bankrupt or insolvent, or a
final and nonappealable order for relief under any bankruptcy, insolvency or
similar law now or hereafter in effect has been entered against the Person, (c)
the Person executes and delivers a general assignment for the benefit of the
Person's creditors, (d) the Person files an answer or other pleading admitting
or failing to contest the material allegations of a petition filed against the
Person in any proceeding of the nature described in clause (b) above, (e) the
Person seeks, consents to or acquiesces in the appointment of a trustee,
receiver or liquidator for the Person or for all or any substantial part of the
Person's properties, (f) any proceeding seeking liquidation, reorganization or
other relief under any bankruptcy, insolvency or other similar law now or
hereafter in effect has not been dismissed within one hundred twenty (120) days
after the commencement thereof, (g) the appointment without the Person's consent
or acquiescence of a trustee, receiver or liquidator has not been vacated or
stayed within ninety (90) days of such appointment, or (h) an appointment
referred to in clause (g) is not vacated within ninety (90) days after the
expiration of any such stay.
-8-
<PAGE> 14
"Book-Tax Disparities" means, with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or Adjusted
Property and the adjusted basis thereof for federal income tax purposes as of
such date. A Partner's share of the Partnership's Book-Tax Disparities in all of
its Contributed Property and Adjusted Property will be reflected by the
difference between such Partner's Capital Account balance as maintained pursuant
to Exhibit B and the hypothetical balance of such Partner's Capital Account
computed as if it had been maintained strictly in accordance with federal income
tax accounting principles.
"Business Day" means any day except a Saturday, Sunday or other day on
which banking institutions in the State of New York are authorized or obligated
by law or executive order to close.
"Canyon Contribution Agreement" means that certain Contribution
Agreement, dated July 26, 1996, by and between the Partnership and Canyon Ranch.
"Canyon Ranch" means Canyon Ranch, Inc. an Arizona corporation.
"Canyon Ranch Property" means the property and assets specified in the
Canyon Contribution Agreement.
"Capital Account" means the Capital Account maintained for a Partner
pursuant to Exhibit B hereof.
"Capital Contribution" means, with respect to any Partner, any cash,
cash equivalents or the Net Asset Value of Contributed Property which such
Partner contributes to the Partnership.
"Carrying Value" means (i) with respect to a Contributed Property or
Adjusted Property, the Gross Asset Value of such property reduced (but not below
zero) by all Depreciation with respect to such property charged to the Partners'
Capital Accounts and (ii) with respect to any other Partnership property, the
adjusted basis of such property for federal income tax purposes, all as of the
time of determination. The Carrying Value of any property shall be adjusted from
time to time in accordance with Exhibit B hereof, and to reflect changes,
additions or other adjustments to the Carrying Value for improvements and
dispositions and acquisitions of Partnership properties, as deemed appropriate
by the General Partner.
"Cash Amount" means an amount of cash equal to the Value, as of the
date of receipt by Crescent Equities of a Notice of Exchange, of the REIT Shares
Amount. Notwithstanding the foregoing, if the Crescent Group raises the Cash
Amount through an offering of securities, borrowings or otherwise, the Cash
Amount shall be reduced by an amount equal to the expenses incurred by the
Crescent Group in connection with raising such funds (to the extent that such
expenses are allocable to funds used to pay the Cash Amount); provided, however,
that the total reduction of the Cash Amount for such expenses shall not exceed
five percent (5%) of the total Cash Amount as determined prior to reduction for
such expenses.
-9-
<PAGE> 15
"Certificate" means the Certificate of Limited Partnership of the
Partnership filed in the office of the Secretary of State of Delaware, as
amended from time to time in accordance with the terms hereof and the Act.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, as interpreted by the applicable regulations
thereunder. Any reference herein to a specific section or sections of the Code
shall be deemed to include a reference to any corresponding provision of future
law.
"Consultant Unit Agreement" means that certain Consultant Unit
Agreement, dated August 15, 1995, by and between Greenbrier and the Partnership.
"Contributed Funds" has the meaning set forth in Section 4.2.A(2)
hereof.
"Contributed Property" means each property or other asset (but
excluding cash), in such form as may be permitted by the Act, contributed to the
Partnership or deemed contributed to the Partnership on termination and
reconstitution thereof pursuant to Section 708 of the Code. Once the Carrying
Value of a Contributed Property is adjusted pursuant to Section 1.D of Exhibit B
hereof, such property shall no longer constitute a Contributed Property for
purposes of Exhibit B hereof, but shall be deemed an Adjusted Property for such
purposes.
"Contribution Date" has the meaning set forth in Section 4.3 hereof.
"Crescent Equities" means Crescent Real Estate Equities Company, a
Texas real estate investment trust.
"Crescent Group" means Crescent Equities, the General Partner, and any
wholly owned subsidiaries of Crescent Equities or the General Partner.
"Crescent Loan" has the meaning set forth in Section 4.2.A(1) hereof.
"Declaration of Trust" means the Declaration of Trust of Crescent
Equities, as it may be amended, supplemented or restated from time to time.
"Deemed Partnership Interest Value" as of any date shall mean, with
respect to a Partner, the product of (i) the Deemed Value of the Partnership as
of such date, multiplied by (ii) such Partner's Partnership Interest as of such
date.
"Deemed Value of the Partnership" as of any date shall mean the
quotient of the following amounts:
(i) the product of (a) the Value of a REIT Share as of such date,
multiplied by (b) the total number of REIT Shares issued and
outstanding as of the close of business on such date
(excluding treasury shares and, for purposes of Section 4.2
hereof, excluding any REIT Shares issued in exchange for
Contributed Funds to be
-10-
<PAGE> 16
contributed to the Partnership by Crescent Equities on the
Adjustment Date for which the calculation is being made),
divided by
(ii) the aggregate Partnership Interest of Crescent Equities and
the General Partner as of such date.
"Demand Notice" has the meaning set forth in Section 16.2 hereof.
"Depreciation" means, for each fiscal year, an amount equal to the
federal income tax depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such year, except that if the Carrying
Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such year or other period, Depreciation shall be an
amount which bears the same ratio to such beginning Carrying Value as the
federal income tax depreciation, amortization, or other cost recovery deduction
for such year bears to such beginning adjusted tax basis; provided, however,
that if the federal income tax depreciation, amortization, or other cost
recovery deduction for such year is zero, Depreciation shall be determined with
reference to such beginning Carrying Value using any reasonable method selected
by the General Partner.
"Employee Limited Partner" has the meaning set forth in Section 4.7.C
hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor statute.
"Exchange Factor" means 1.0, provided that in the event that Crescent
Equities (i) pays a dividend on its outstanding REIT Shares in REIT Shares or
makes a distribution to all holders of its outstanding REIT Shares in REIT
Shares, (ii) subdivides its outstanding REIT Shares, or (iii) combines its
outstanding REIT Shares into a smaller number of REIT Shares, the Exchange
Factor shall be adjusted by multiplying the Exchange Factor by a fraction, the
numerator of which shall be the number of REIT Shares that would be issued and
outstanding on the record date for such event if such dividend, distribution,
subdivision or combination had occurred as of such date, and the denominator of
which shall be the actual number of REIT Shares issued and outstanding on the
record date for such dividend, distribution, subdivision or combination. Any
adjustment of the Exchange Factor shall become effective immediately after the
effective date of such event retroactive to the record date for such event;
provided, however, that if Crescent Equities receives a Notice of Exchange after
the record date, but prior to the effective date, of any such event, the
Exchange Factor shall be determined as if Crescent Equities had received the
Notice of Exchange immediately prior to the record date for such event.
"Exchange Right" has the meaning set forth in Section 8.6 hereof.
"Exchanging Person" has the meaning set forth in Section 8.6.A hereof.
"Falcon Point Property" means the Falcon Point single family
residential development located in Houston, Texas.
-11-
<PAGE> 17
"First Amended Agreement" has the meaning set forth in the recitals to
this Agreement.
"Funding Loan Proceeds" means the net cash proceeds received by the
Crescent Group in connection with any Funding Loan, after deduction of all costs
and expenses incurred by the Crescent Group in connection with such Funding
Loan.
"Funding Loan(s)" means any borrowing or refinancing of borrowings by
or on behalf of the Crescent Group from any lender for the purpose of causing
Crescent Equities to advance the proceeds thereof to the Partnership as a loan
pursuant to Section 4.2.A(1) hereof.
"General Partner" means Crescent Real Estate Equities, Ltd. (formerly
known as CRE General Partner, Inc.), a Delaware corporation which is a wholly
owned subsidiary of Crescent Equities, its duly admitted successors and assigns
and any other Person who is a General Partner at the time of reference thereto.
"General Partnership Interest" means the Partnership Interest held by
the General Partner.
"Greenbrier" means Texas Greenbrier Associates, Inc., a Texas
corporation.
"Greenbrier Agreement" means that certain Agreement of Acceptance of
the Partnership Agreement executed by Greenbrier and delivered to the General
Partner.
"Gross Asset Value" of any Contributed Property or Properties
contributed by a Partner to the Partnership in connection with the execution of
this Agreement means the Net Asset Value of such Contributed Property or
Properties as set forth in Exhibit A hereof, increased by any liabilities either
treated as assumed by the Partnership upon the contribution of such property or
properties or to which such property or properties are treated as subject when
contributed pursuant to the provisions of Section 752 of the Code. The Gross
Asset Value of any other Contributed Property or Properties means the fair
market value of such property or properties at the time of contribution as
determined by the General Partner using such reasonable method of valuation as
it may adopt. The General Partner shall, in its sole and absolute discretion,
use such method as it deems reasonable and appropriate to allocate the aggregate
of the Gross Asset Value of Contributed Properties contributed in a single or
integrated transaction among the separate properties on a basis proportional to
their respective fair market values.
"HA Development Corporation" means Houston Area Development Corp., a
Texas corporation that will own the Falcon Point Property and the Huntington
Woods Property.
"Huntington Woods Property" means the Huntington Woods single family
residential development located in Houston, Texas.
"Incapacity" or "Incapacitated" means, (i) as to any individual
Partner, death, total physical disability or entry of an order by a court of
competent jurisdiction adjudicating him incompetent to manage his Person or his
estate; (ii) as to any corporation which is a Partner, the filing of a
certificate of dissolution, or its equivalent, for the corporation or the
revocation of its charter; (iii)
-12-
<PAGE> 18
as to any partnership which is a Partner, the dissolution and commencement of
winding up of the partnership; (iv) as to any estate which is a Partner, the
distribution by the fiduciary of the estate's entire interest in the
Partnership; (v) as to any trustee of a trust which is a Partner, the
termination of the trust (but not the substitution of a new trustee); or (vi) as
to any Partner, the Bankruptcy of such Partner.
"Indemnitee" means (i) any Person made a party to a proceeding by
reason of his status as (A) a member of the Crescent Group, (B) a director or
officer of the Partnership or of a member of the Crescent Group, or (C) an
attorney-in-fact of the General Partner acting pursuant to Section 7.9.C, and
(ii) such other Persons (including Affiliates of the General Partner or the
Partnership) as the General Partner may designate from time to time, in its sole
and absolute discretion.
"Initial Agreement" has the meaning set forth in the recitals to this
Agreement.
"IRS" means the Internal Revenue Service, which administers the
internal revenue laws of the United States.
"Lien" means any liens, security interests, mortgages, deeds of trust,
charges, claims, encumbrances, pledges, options, rights of first offer or first
refusal and any other rights or interests of any kind or nature, actual or
contingent, or other similar encumbrances of any nature whatsoever.
"Limited Partner" means any Person named as a Limited Partner in
Exhibit A attached hereto, as such Exhibit may be amended from time to time, or
any Substituted Limited Partner, Additional Limited Partner, or Employee Limited
Partner, in such Person's capacity as a Limited Partner in the Partnership.
"Limited Partnership Interest" means a Partnership Interest of a
Limited Partner in the Partnership and includes any and all benefits to which
the holder of such a Partnership Interest may be entitled as provided in this
Agreement, together with all obligations of such Person to comply with the terms
and provisions of this Agreement.
"Liquidating Event(s)" has the meaning set forth in Section 13.1
hereof.
"Liquidator" has the meaning set forth in Section 13.2 hereof.
"Management Company" means Crescent Development Management Corp., a
Texas corporation that will provide management services to the Mira Vista
Property, the Falcon Point Property, the Huntington Woods Property, and certain
other properties that may be acquired by the Partnership in the future. The
Partnership will own one (1) share of voting common stock and nine thousand
eight hundred and ninety-nine (9,899) shares of nonvoting common stock of the
Management Company.
-13-
<PAGE> 19
"Mira Vista Property" means the single family residential development
located in Fort Worth, Texas, and a ninety-eight percent (98%) interest in the
limited liability company that owns the adjacent Mira Visa Golf Club.
"MV Development Corporation" means Mira Vista Development Corp., a
Texas corporation that will own the Mira Vista Property.
"Net Asset Value" in the case of any Contributed Property contributed
by a Partner to the Partnership in connection with the execution of this
Agreement shall be determined on an aggregate basis with respect to all of the
properties contributed by such Partner to the Partnership, and means the
aggregate Gross Asset Values of such properties, reduced by any liabilities
either treated as assumed by the Partnership upon the contribution of such
properties or to which such properties are treated as subject when contributed
pursuant to the provisions of Section 752 of the Code. The aggregate Net Asset
Values of the properties contributed by each Partner to the Partnership in
connection with the execution of this Agreement are set forth in Exhibit A. In
the case of any other Contributed Property and as of the time of its
contribution to the Partnership, Net Asset Value means the Gross Asset Value of
such property, reduced by any liabilities either treated as assumed by the
Partnership upon such contribution or to which such property is treated as
subject when contributed pursuant to Section 752 of the Code.
"Net Income" means, for any taxable period, the excess, if any, of the
Partnership's items of income and gain for such taxable period over the
Partnership's items of loss and deduction for such taxable period. The items
included in the calculation of Net Income shall be determined in accordance with
Section 1.B of Exhibit B. Once an item of income, gain, loss or deduction that
has been included in the initial computation of Net Income is subjected to the
special allocation rules in Exhibit C, Net Income or the resulting Net Loss,
whichever the case may be, shall be recomputed without regard to such item.
"Net Loss" means, for any taxable period, the excess, if any, of the
Partnership's items of loss and deduction for such taxable period over the
Partnership's items of income and gain for such taxable period. The items
included in the calculation of Net Loss shall be determined in accordance with
Section 1.B of Exhibit B. Once an item of income, gain, loss or deduction that
has been included in the initial computation of Net Loss is subjected to the
special allocation rules in Exhibit C, Net Loss or the resulting Net Income,
whichever the case may be, shall be recomputed without regard to such items.
"New Interests" has the meaning set forth in Section 8.7.C hereof.
"New Securities" has the meaning set forth in Section 8.7.C hereof.
"Nonrecourse Built-in Gain" means, with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage or negative
pledge securing a Nonrecourse Liability, the amount of any taxable gain that
would be allocated to the Partners pursuant to Section 2.B of Exhibit C if such
properties were disposed of in a taxable transaction in full satisfaction of
such liabilities and for no other consideration.
-14-
<PAGE> 20
"Non-Unitholder Partnership Interest" means a Limited Partnership
Interest that does not have Partnership Units associated therewith.
"Nonrecourse Deductions" has the meaning set forth in Regulations
Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for a fiscal
year shall be determined in accordance with the rules of Regulations Section
1.704-2(c).
"Nonrecourse Liability" has the meaning set forth in Regulations
Section 1.752-1(a)(2).
"Notice of Exchange" means the Notice of Exchange substantially in the
form of Exhibit D to this Agreement.
"Partner" means a General Partner or a Limited Partner, and "Partners"
means the General Partner and the Limited Partners.
"Partner Minimum Gain" means an amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i)(3).
"Partner Nonrecourse Debt" has the meaning set forth in Regulations
Section 1.704-2(b)(4).
"Partner Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Partnership year
shall be determined in accordance with the rules of Regulations Section
1.704-2(i)(2).
"Partnership" means the limited partnership formed under the Act and
pursuant to this Agreement.
"Partnership Interest" means an ownership interest in the Partnership
representing a Capital Contribution by either a Limited Partner or the General
Partner and includes any and all benefits to which the holder of such a
Partnership Interest may be entitled as provided in this Agreement, together
with all obligations of such Person to comply with the terms and provisions of
this Agreement. The Partnership Interest of each Partner shall be expressed as a
percentage of the total Partnership Interests owned by all of the Partners, as
specified in Exhibit A attached hereto, as such Exhibit may be amended from time
to time. All Partnership Interests shall be calculated to the nearest one
millionth of one percent (0.000000%), with amounts equal to or greater than
0.0000005% being rounded up to the next one millionth of one percent, and with
amounts less than 0.0000005% being rounded down to the next one millionth of one
percent.
"Partnership Minimum Gain" has the meaning set forth in Regulations
Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as
any net increase or
-15-
<PAGE> 21
decrease in Partnership Minimum Gain, for a fiscal year shall be determined in
accordance with the rules of Regulations Section 1.704-2(d).
"Partnership Record Date" means the record date established by the
General Partner for the distribution of Available Cash pursuant to Section 5.3
hereof, which record date shall be the same as the record date established by
Crescent Equities or otherwise pursuant to the Texas Act for a distribution to
its shareholders of some or all of its portion of such distribution.
"Partnership Unit" means a unit representing the Exchange Rights
associated with the Partnership Interests issued to certain of the Limited
Partners pursuant to the terms of this Agreement, which unit may be exchanged
for REIT Shares or cash through the exercise of the Exchange Rights set forth in
Sections 8.6. The number of Partnership Units of each Limited Partner shall be
as specified in Exhibit A attached hereto, as such Exhibit may be amended from
time to time. The Partnership Units may be evidenced by certificates as set
forth in Section 4.1.C hereof.
"Person" means an individual or a corporation, partnership, trust,
unincorporated organization, association or other entity.
"Qualified Individual" has the meaning set forth in Section 16.2
hereof.
"RainAm Investors" means RainAm Investment Properties Ltd., a Texas
limited partnership.
"Recapture Income" means any gain recognized by the Partnership
(computed without regard to any adjustment required by Section 734 or Section
743 of the Code) upon the disposition of any property or asset of the
Partnership, which gain is characterized as ordinary income because it
represents the recapture of deductions previously taken with respect to such
property or asset.
"Regulations" means the income tax regulations promulgated under the
Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Regulatory Allocations" has the meaning set forth in Section 1.H of
Exhibit C hereof.
"REIT" means a real estate investment trust under Sections 856 through
860 of the Code.
"REIT Share" means a common share of beneficial interest of Crescent
Equities.
"REIT Shares Amount" means a number of REIT Shares equal to the product
of (i) the number of Partnership Units to be exchanged by an Exchanging Person
pursuant to Section 8.6, multiplied by (ii) the Exchange Factor; provided that
in the event Crescent Equities issues to all holders of REIT Shares rights,
options, warrants or convertible or exchangeable securities entitling the
shareholders to subscribe for or purchase REIT Shares, or any other securities
or
-16-
<PAGE> 22
property (collectively, the "rights"), then the REIT Shares Amount shall also
include such rights that a holder of that number of REIT Shares would be
entitled to receive.
"Representative" has the meaning set forth in Section 7.12 hereof.
"Requesting Party" has the meaning set forth in Section 16.2 hereof.
"Residual Gain" or "Residual Loss" means any item of gain or loss, as
the case may be, of the Partnership recognized for federal income tax purposes
resulting from a sale, exchange or other disposition of Contributed Property or
Adjusted Property, to the extent such item of gain or loss is not allocable
pursuant to Section 2.B.1(a) or 2.B.2(a) of Exhibit C to eliminate Book-Tax
Disparities.
"Responding Party" has the meaning set forth in Section 16.2 hereof.
"SEC" means the United States Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor statute.
"Sonoma" means Rahn Sonoma, Ltd., a Florida limited partnership.
"Sonoma Contribution Agreement" means that certain Contribution
Agreement, dated September 13, 1996, by and among Crescent Real Estate Equities,
Inc., the Partnership, Sonoma, Peter H. Roberts and John H. Anderson.
"Sonoma Property" means the property and assets specified in the Sonoma
Contribution Agreement.
"Specified Exchange Date" means the tenth Business Day after receipt by
Crescent Equities of a Notice of Exchange, unless applicable law requires a
later date. Notwithstanding the foregoing, if Crescent Equities elects to pay
all or any portion of the consideration to an Exchanging Person in cash, the
Specified Exchange Date may be extended for an additional period to the extent
required for the Crescent Group to raise the funds required to pay the cash
consideration to the Exchanging Person.
"Stock Incentive Plan" means The 1994 Crescent Real Estate Equities,
Inc. Stock Incentive Plan, as amended from time to time, or any other stock
incentive plan adopted by Crescent Equities.
"Subsidiary Development Corporation(s)" means MV Development
Corporation and HA Development Corporation, and either of them.
"Substituted Limited Partner" means a Person who is admitted as a
Limited Partner to the Partnership pursuant to Section 11.4.
-17-
<PAGE> 23
"Terminating Capital Transaction" means any sale or other disposition
of all or substantially all of the assets of the Partnership or a related series
of transactions that, taken together, result in the sale or other disposition of
all or substantially all of the assets of the Partnership.
"Texas Act" means the Texas Real Estate Investment Trust Act, as the
same may be amended from time to time, or any successor statute thereto.
"Trading Day" means a day on which the principal national securities
exchange on which the REIT Shares are listed or admitted to trading is open for
the transaction of business or, if the REIT Shares are not listed or admitted to
trading, means a Business Day.
"Transaction" has the meaning set forth in Section 11.2.C hereof.
"Unrealized Gain" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (i) the fair
market value of such property (as determined under Exhibit B hereof) as of such
date, over (ii) the Carrying Value of such property (prior to any adjustment to
be made on such date pursuant to Exhibit B hereof) as of such date.
"Unrealized Loss" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (i) the Carrying
Value of such property (prior to any adjustment to be made on such date pursuant
to Exhibit B hereof) as of such date, over (ii) the fair market value of such
property (as determined under Exhibit B hereof) as of such date.
"Value" means, with respect to a REIT Share as of any date, the average
of the "closing price" for the ten (10) consecutive Trading Days immediately
preceding such date (except as provided to the contrary in Sections 4.2, 4.3 and
4.6 hereof). The "closing price" for each such Trading Day means the last sale
price, regular way on such day, or, if no such sale takes place on that day, the
average of the closing bid and asked prices on that day, regular way, in either
case as reported on the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange, or if the REIT Shares are not so listed or admitted to trading, as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange (including
the National Market System of the National Association of Securities Dealers,
Inc. Automated Quotation System) on which the REIT Shares are listed or admitted
to trading or, if the REIT Shares are not so listed or admitted to trading, the
last quoted price or, if not quoted, the average of the high bid and low asked
prices in the over-the-counter market, as reported by the National Association
of Securities Dealers, Inc. Automated Quotation System or, if such system is no
longer in use, the principal automated quotation system then in use or, if the
REIT Shares are not so quoted by any such system, the average of the closing bid
and asked prices as furnished by a professional market maker selected by the
board of directors of the General Partner making a market in the REIT Shares,
or, if there is no such market maker or such closing prices otherwise are not
available, the fair market value of the REIT Shares as of such day, as
determined by the board of directors of the General Partner in its sole
discretion. In the event Crescent Equities issues to all holders of REIT Shares
rights, options, warrants or convertible or exchangeable securities entitling
the shareholders to subscribe for or purchase REIT Shares or any other property,
then the Value of a
-18-
<PAGE> 24
REIT Share shall include the value of such rights, as determined by the board of
directors of the General Partner acting in good faith on the basis of such
quotations and other information as it considers, in its reasonable judgment,
appropriate.
ARTICLE II
ORGANIZATIONAL MATTERS
Section 2.1 Continuation of Partnership
The Partners hereby continue the Partnership as a limited partnership
pursuant to the provisions of the Act and upon the terms and conditions set
forth in this Agreement. Except as expressly provided herein to the contrary,
the rights and obligations of the Partners and the administration and
termination of the Partnership shall be governed by the Act. The Partnership
Interest of each Partner shall be personal property for all purposes.
Section 2.2 Name
The name of the Partnership is Crescent Real Estate Equities Limited
Partnership. The Partnership's business may be conducted under any other name or
names deemed advisable by the General Partner, including the name of the General
Partner or any Affiliate thereof. The words "Limited Partnership," "L.P." "Ltd."
or similar words or letters shall be included in the Partnership's name where
necessary for purposes of complying with the laws of any jurisdiction that so
requires. The General Partner in its sole and absolute discretion may change the
name of the Partnership at any time and from time to time and shall notify the
Limited Partners of such change in the regular communication to the Limited
Partners next succeeding the effectiveness of the change of name.
Section 2.3 Principal Office and Registered Agent
The principal office of the Partnership is 777 Main Street, Suite 2700,
Fort Worth, Texas 76102, or such other place as the General Partner may from
time to time designate. The registered agent of the Partnership is The
Prentice-Hall Corporation System, Inc., located at 1013 Centre Road, in the city
of Wilmington, County of New Castle, Delaware 19805, or such other Person as the
General Partner may from time to time designate. The Partnership may maintain
offices at such other place or places within or outside the State of Delaware as
the General Partner deems advisable.
Section 2.4 Power of Attorney
A. Each Limited Partner constitutes and appoints the General
Partner, any Liquidator, and authorized officers and attorneys-in-fact of each,
and each of those acting singly, in each case with full power of substitution,
as its true and lawful agent and attorney-in-fact, with full power and authority
in its name, place and stead to:
-19-
<PAGE> 25
(1) execute, swear to, acknowledge, deliver, file and record
in the appropriate public offices (a) all certificates,
documents and other instruments (including, without
limitation, the Certificate and all amendments or
restatements of this Agreement or the Certificate) that
the General Partner or the Liquidator deems appropriate
or necessary to qualify or continue the existence or
qualification of the Partnership as a limited partnership
(or a partnership in which the limited partners have
limited liability) in the State of Delaware and in all
other jurisdictions in which the Partnership may conduct
business or own property; (b) all instruments that the
General Partner deems appropriate or necessary to reflect
any amendment, change, modification or restatement of
this Agreement made in accordance with its terms; (c) all
conveyances and other instruments or documents that the
General Partner or Liquidator, as the case may be, deems
appropriate or necessary to reflect the dissolution and
liquidation of the Partnership pursuant to the terms of
this Agreement, including, without limitation, a
certificate of cancellation; and (d) all instruments
relating to the Capital Contribution of any Partner or
the admission, withdrawal, removal or substitution of any
Partner made pursuant to the terms of this Agreement; and
(2) execute, swear to, acknowledge and file all ballots,
consents, approvals, waivers, certificates and other
instruments appropriate or necessary, in the sole and
absolute discretion of the General Partner, to make,
evidence, give, confirm or ratify any vote, consent,
approval, agreement or other action which is made or
given by the Partners hereunder or is consistent with the
terms of this Agreement or appropriate or necessary, in
the sole discretion of the General Partner, to effectuate
the terms or intent of this Agreement.
Nothing contained herein shall be construed as authorizing the General Partner
to amend this Agreement except in accordance with Article 14 hereof or as may be
otherwise expressly provided for in this Agreement.
B. The foregoing power of attorney is hereby declared to be
irrevocable and a power coupled with an interest, in recognition of the fact
that each of the Partners will be relying upon the power of the General Partner
to act as contemplated by this Agreement in any filing or other action by it on
behalf of the Partnership, and it shall survive and not be affected by the
subsequent Incapacity of any Limited Partner or the transfer of all or any
portion of such Limited Partner's Partnership Interest and shall extend to such
Limited Partner's heirs, successors, assigns and personal representatives. Each
such Limited Partner hereby agrees to be bound by any representation made by the
General Partner, acting in good faith pursuant to such power of attorney; and
each such Limited Partner hereby waives any and all defenses which may be
available to contest, negate or disaffirm the action of the General Partner,
taken in good faith under such power of attorney. Each Limited Partner shall
execute and deliver to the General Partner or the Liquidator, within fifteen
(15) days after receipt of the General Partner's or Liquidator's request
therefor, such further designation, powers of attorney and other instruments as
the General Partner or the
-20-
<PAGE> 26
Liquidator, as the case may be, deems necessary to effectuate this Agreement and
the purposes of the Partnership.
Section 2.5 Term
The term of the Partnership commenced on February 9, 1994, and shall
continue until December 31, 2093, unless it is dissolved sooner pursuant to the
provisions of Article 13 or as otherwise provided by law.
ARTICLE III
PURPOSE
Section 3.1 Purpose and Business
The purpose and nature of the business to be conducted by the
Partnership is (i) to conduct any business that may be lawfully conducted by a
limited partnership organized pursuant to the Act, including, without
limitation, to acquire, hold, own, develop, construct, improve, maintain,
operate, sell, lease, transfer, encumber, convey, exchange, and otherwise
dispose of or deal with real and personal property of all kinds; to acquire
stock ownership interests in and to exercise all of the powers of a stockholder
in the Subsidiary Development Corporations and the Management Company; (ii) to
enter into any partnership, joint venture or other similar arrangement to engage
in any of the foregoing or the ownership of interests in any entity engaged in
any of the foregoing; and to exercise all of the powers of an owner in any such
entity; and (iii) to do anything necessary, appropriate, proper, advisable,
desirable, convenient or incidental to the foregoing; provided, however, that
such business shall be limited to and conducted in such a manner as to permit
Crescent Equities at all times to qualify as a REIT, unless Crescent Equities
voluntarily terminates its REIT status pursuant to its Declaration of Trust. In
connection with the foregoing, and without limiting Crescent Equities' right in
its sole discretion to cease qualifying as a REIT, the Partners acknowledge that
Crescent Equities' current status as a REIT inures to the benefit of all the
Partners and not solely the Crescent Group.
Section 3.2 Powers
Subject to all of the terms, covenants, conditions and limitations
contained in this Agreement and any other agreement entered into by the
Partnership, the Partnership shall have full power and authority to do any and
all acts and things necessary, appropriate, proper, advisable, desirable,
incidental to or convenient for the furtherance and accomplishment of the
purposes and business described herein and for the protection and benefit of the
Partnership, including, without limitation, full power and authority, directly
or through its ownership interest in other entities, to enter into, perform and
carry out contracts of any kind, borrow money and issue evidences of
indebtedness, whether or not secured by mortgage, deed of trust, pledge or other
lien, acquire and develop real property, and lease, sell, transfer or otherwise
dispose of real property; provided, however, that the Partnership shall not
take, or refrain from taking, any action which, in the judgment of General
Partner, in its sole and absolute discretion, (i) could adversely affect the
ability of Crescent Equities to achieve or maintain qualification as a REIT,
(ii) could subject Crescent
-21-
<PAGE> 27
Equities to any additional taxes under Section 857 or Section 4981 of the Code,
or (iii) could violate any law or regulation of any governmental body or agency
having jurisdiction over Crescent Equities or its securities, unless such action
(or inaction) shall have been specifically consented to by the General Partner
in writing.
ARTICLE IV
CAPITAL CONTRIBUTIONS
Section 4.1 Capital Contributions of the Partners
A. Each Partner listed in Exhibit A has previously made a
Capital Contribution to the Partnership as specified in the First Amended
Agreement or in the Recitals portion of this Agreement, as the case may be, in
exchange for its Partnership Units and Partnership Interest set forth in
Exhibit A.
B. The Partners shall own Partnership Units in the amounts
set forth in Exhibit A and shall have Partnership Interests in the Partnership
as set forth in Exhibit A, which Partnership Units and Partnership Interests
shall be adjusted in Exhibit A from time to time by the General Partner to the
extent necessary to reflect accurately the exercise of Exchange Rights, Capital
Contributions, transfers of Partnership Interests, admissions of Additional
Limited Partners or Employee Limited Partners, or similar events. Except as
provided in Section 10.5, or as a result of directly paying any Partnership
debt, the Partners shall have no obligation to make any additional Capital
Contributions or loans to the Partnership.
C. The interest of each Limited Partner in Partnership Units
may be evidenced by one or more certificates in such form as the General Partner
may from time to time prescribe. Upon surrender to the General Partner of a
certificate evidencing the ownership of Partnership Units accompanied by proper
evidence of authority to transfer, the General Partner shall cancel the old
certificate, issue a new certificate to the Person entitled thereto and record
the transaction upon its books. The transfer of Partnership Units may be
effectuated only in connection with a transfer of a Limited Partnership Interest
pursuant to the terms of Section 8.6 or Article 11 hereof. The General Partner
may issue a new certificate or certificates in place of any certificate or
certificates previously issued, which previously-issued certificate or
certificates are alleged to have been lost, stolen or destroyed, upon the making
of an affidavit of that fact by the owner claiming the certificate or
certificates to be lost, stolen or destroyed. When issuing such new certificate
or certificates, the General Partner may, in its discretion and as a condition
precedent to the issuance thereof, require the owner of such lost, stolen or
destroyed certificate or certificates, or its legal representative, to give the
Partnership a bond in such sum as the General Partner may direct as indemnity
against any claim that may be made against the Partnership with respect to the
certificate or certificates alleged to have been lost, stolen or destroyed.
Section 4.2 Additional Funding
A. If the General Partner determines that it is in the best
interests of the Partnership to provide for additional Partnership funds
("Additional Funds") for any Partnership purpose in excess of any other funds
determined by the General Partner to be available to the
-22-
<PAGE> 28
Partnership, the General Partner (i) may cause the Partnership to obtain such
funds from outside borrowings, (ii) may cause the Partnership to obtain such
funds by the admission of Additional Limited Partners pursuant to Section 4.3
hereof, or (iii) may elect to have Crescent Equities provide such Additional
Funds to the Partnership. On any date that Crescent Equities provides Additional
Funds to the Partnership (the "Funding Date"):
(1) to the extent the General Partner elects to borrow all or
any portion of the Additional Funds through a Funding
Loan, the General Partner shall cause Crescent Equities
to lend (the "Crescent Loan") to the Partnership the
Funding Loan Proceeds on comparable terms and conditions,
including interest rate, repayment schedule and costs and
expenses, as shall be applicable with respect to or
incurred in connection with the Funding Loan; or
(2) to the extent the General Partner does not elect to
borrow all or any portion of the Additional Funds by
entering into a Funding Loan, the General Partner shall
cause Crescent Equities to contribute to the Partnership
as an additional Capital Contribution the amount of the
Additional Funds not loaned to the Partnership as a
Crescent Loan (the "Contributed Funds") (hereinafter,
each Funding Date on which Crescent Equities so
contributes Contributed Funds pursuant to this
subparagraph (2) is referred to as an "Adjustment Date").
The Crescent Group may raise such Contributed Funds
through a private placement or public offering of REIT
Shares or otherwise. The Partnership shall assume or pay
the expenses, including any applicable underwriting
discounts incurred by the Crescent Group in connection
with raising such Contributed Funds through a private
placement or public offering of its securities or
otherwise (i.e., Crescent Equities shall be treated as
contributing to the Partnership as Contributed Funds the
gross amount of funds raised, and the Partnership shall
be charged with the cost of raising such funds, with such
cost allocated to all of the Partners in accordance with
Article VI of the Agreement).
B. Effective on each Adjustment Date, Crescent Equities
shall receive an additional Partnership Interest (and the Partnership Interest
of each Limited Partner other than Crescent Equities shall be reduced) such
that:
(1) the Partnership Interest of each Limited Partner not
owning Partnership Units (other than Crescent Equities) shall be equal to a
fraction, the numerator of which is equal to the Deemed Partnership Interest
Value of such Limited Partner (computed as of the Business Day immediately
preceding the Adjustment Date) and the denominator of which is equal to the sum
of (i) the Deemed Value of the Partnership (computed as of the Business Day
immediately preceding the Adjustment Date) and (ii) the amount of Contributed
Funds contributed by Crescent Equities on such Adjustment Date;
(2) the combined Partnership Interest of Crescent Equities
and the General Partner shall be equal to a fraction, the numerator of which is
equal to the sum of (i) the
-23-
<PAGE> 29
combined Deemed Partnership Interest Value of Crescent Equities and the General
Partner (computed as of the Business Day immediately preceding the Adjustment
Date) and (ii) the amount of the Contributed Funds contributed by Crescent
Equities on such Adjustment Date and the denominator of which is equal to the
sum of (x) the Deemed Value of the Partnership (computed as of the Business Day
immediately preceding the Adjustment Date) and (y) the amount of the Contributed
Funds contributed by Crescent Equities on such Adjustment Date. The Partnership
Interest of the General Partner shall remain one percent (1%), and the
Partnership Interest of Crescent Equities shall be equal to the combined
Partnership Interest determined in clause (2) of the preceding sentence, reduced
by one percentage point (1%); and
(3) the Partnership Interest of each Limited Partner owning
Partnership Units shall be equal to the product of the following: (i) the
difference obtained from subtracting (x) the sum of the combined Partnership
Interest of Crescent Equities and the General Partner as calculated in Section
4.2.B(2) hereof, plus the aggregate Non-Unitholder Partnership Interests as
calculated in Section 4.2.B(1) hereof, from (y) one hundred percent (100%), and
(ii) a fraction, the numerator of which is equal to the number of Partnership
Units held by such Limited Partner on such Adjustment Date, and the denominator
of which is equal to the total number of Partnership Units held by all Limited
Partners on such Adjustment Date.
The General Partner shall be authorized on behalf of each of the
Partners to amend this Agreement to reflect the increase in the Partnership
Interest of Crescent Equities and the corresponding reduction of the Partnership
Interests of the other Limited Partners in accordance with the provisions of
this Section 4.2. The number of Partnership Units owned by the Limited Partners
and Assignees shall not be decreased in connection with any additional
contribution of funds to the Partnership by Crescent Equities pursuant to this
Section 4.2. Notwithstanding anything to the contrary contained in this
Agreement, for purposes of calculating the "Deemed Value of the Partnership" and
the "Deemed Partnership Interest Value" under this Section 4.2.B with respect to
cash amounts raised by Crescent in a private placement or public offering of
REIT Shares and contributed to the Partnership as Contributed Funds, the "Value"
of a REIT Share shall be the gross offering price (prior to deduction of any
expenses, including without limitation selling commissions or underwriting
discounts) per REIT Share sold in the private placement or public offering.
C. The Partners hereby acknowledge and agree that any Additional
Funds provided by the Crescent Group (through Crescent Equities) to the
Partnership pursuant to this Section 4.2 may be in the form of real property or
an interest therein rather than cash. In the event that real property or an
interest therein is contributed by Crescent Equities to the Partnership pursuant
to this Section 4.2:
(1) to the extent that the consideration given in exchange for
such real property or interest therein is in the form of indebtedness, Crescent
Equities shall be deemed to have made a Crescent Loan to the Partnership
pursuant to Section 4.2.A(1) hereof in an amount equal to the amount of such
indebtedness; and
-24-
<PAGE> 30
(2) to the extent that the consideration given in exchange for
such real property or interest therein is in the form of cash or REIT Shares,
(i) Crescent Equities shall be deemed to have contributed Contributed Funds to
the Partnership pursuant to Section 4.2.A(2) hereof in an amount equal to the
amount of cash or the Value (computed as of the Business Day immediately
preceding the date on which such real property or interest therein is
contributed to the Partnership) of the REIT Shares given as consideration, and
(ii) the Partnership Interests of the Limited Partners shall be adjusted as set
forth in Section 4.2.B hereof.
To the extent that the consideration given for such real property or interest
therein is New Securities, the provisions of Section 8.7.C hereof shall apply to
the contribution of the real property or interest therein by Crescent Equities
to the Partnership.
Section 4.3 Issuance of Additional Partnership Interests
At any time after the date hereof, without the consent of any Partner,
but subject to the provisions of Section 12.2 hereof, the General Partner may,
upon its determination that the issuance of additional Partnership Interests is
in the best interests of the Partnership, cause the Partnership to issue
Partnership Interests to and admit as a limited partner in the Partnership, any
Person (the "Additional Limited Partner") in exchange for the contribution by
such Person of cash and/or property in such amounts as is determined appropriate
by the General Partner to further the purposes of the Partnership under Section
3.1 hereof. In the event that an Additional Limited Partner is admitted to the
Partnership pursuant to this Section 4.3:
(1) if the Additional Limited Partner does not receive any
Partnership Units in connection with the receipt of his
or its Partnership Interest, the Partnership Interest of
such Additional Limited Partner shall be equal to a
fraction, the numerator of which is equal to the total
dollar amount of the cash contributed and/or the Net
Asset Value of the property contributed by the Additional
Limited Partner as of the date of contribution to the
Partnership (the "Contribution Date") and the denominator
of which is equal to the sum of (i) the Deemed Value of
the Partnership (computed as of the Business Day
immediately preceding the Contribution Date) and (ii) the
total dollar amount of the cash contributed and/or the
Net Asset Value of the property contributed by the
Additional Partner as of the Contribution Date;
(2) the Partnership Interest of Crescent Equities shall be
reduced, as of the Contribution Date, such that the
combined Partnership Interest of Crescent Equities and
the General Partner shall be equal to a fraction, the
numerator of which is equal to the combined Deemed
Partnership Interest Value of Crescent Equities and the
General Partner (computed as of the Business Day
immediately preceding the Contribution Date) and the
denominator of which is equal to the sum of (i) the
Deemed Value of the Partnership (computed as of the
Business Day immediately preceding the Contribution Date)
and (ii) the total dollar amount of the cash contributed
and/or the Net Asset Value of the property contributed by
the Additional Limited Partner as of
-25-
<PAGE> 31
the Contribution Date (with the Partnership Interest of
the General Partner remaining at one percent (1%), and
the Partnership Interest of Crescent Equities equal to
the combined Partnership Interest determined above in
this Section 4.3(2), reduced by one percentage point
(1%));
(3) the Partnership Interest of each existing Limited Partner
not owning Partnership Units (other than Crescent
Equities) shall be reduced, as of the Contribution Date,
such that the Partnership Interest of each such Limited
Partner shall be equal to a fraction, the numerator of
which is equal to the Deemed Partnership Interest Value
of such Limited Partner (computed as of the Business Day
immediately preceding the Contribution Date) and the
denominator of which is equal to the sum of (i) the
Deemed Value of the Partnership (computed as of the
Business Day immediately preceding the Contribution Date)
and (ii) the total dollar amount of the cash contributed
and/or the Net Asset Value of the property contributed by
the Additional Limited Partner as of the Contribution
Date; and
(4) The Partnership Interest of each existing Limited Partner
owning Partnership Units and of the Additional Limited
Partner, if such Additional Partner receives Partnership
Units in connection with the receipt of his or its
Partnership Interest, shall be equal to the product of
the following: (i) the difference obtained from
subtracting (x) the sum of the combined Partnership
Interest of Crescent Equities and the General Partner as
calculated in Section 4.3(2) hereof, plus the aggregate
Non-Unitholder Partnership Interests as calculated in
Sections 4.2(1) and (3) hereof, from (y) one hundred
percent (100%), and (ii) a fraction, the numerator of
which is equal to the number of Partnership Units held by
such Limited Partner on such Contribution Date, and the
denominator of which is equal to the total number of
Partnership Units held by all Limited Partners (including
the Additional Limited Partner) on such Contribution
Date.
The General Partner shall be authorized on behalf of each of the
Partners to amend this Agreement to reflect the admission of any Additional
Limited Partner and any reduction of the Partnership Interests of the other
Limited Partners in accordance with the provisions of this Section 4.3.
The number of Partnership Units owned by the Limited Partners and
Assignees shall not be decreased in connection with any admission of an
Additional Limited Partner pursuant to this Section 4.3. The General Partner may
(but is not required to) grant to an Additional Limited Partner Partnership
Units, which Partnership Units shall enable the Additional Limited Partner to
participate in the Exchange Rights, upon such terms and conditions as are deemed
appropriate by the General Partner. Notwithstanding anything to the contrary
contained in this Agreement, if the value of the Partnership Units granted to an
Additional Limited Partner is determined based on the average of the "closing
price" of a REIT Share for a period of time other than the ten (10)-day period
specified in the Article I definition of "Value" (including, without limitation,
a
-26-
<PAGE> 32
determination based on the "closing price" of a REIT Share for the Trading Day
immediately preceding the admission of such Additional Limited Partner), then
such other time period shall be used in calculating the "Value" of a REIT Share
for purposes of calculating the "Deemed Value of the Partnership" and the
"Deemed Partnership Interest Value" under this Section 4.3 with respect to the
admission of such Additional Limited Partner.
Section 4.4 No Preemptive Rights
Except as otherwise set forth in Section 4.2.A, no Person shall have
any preemptive, preferential or other similar right with respect to the making
of additional Capital Contributions or loans to the Partnership.
Section 4.5 No Interest on Capital
No Partner shall be entitled to interest on its Capital Contribution or
its Capital Account.
Section 4.6 Stock Incentive Plans
A. Grants of REIT Shares. If grants of REIT Shares are made
in connection with a Stock Incentive Plan,
(1) Crescent Equities shall, as soon as practicable after such
grant, contribute to the capital of the Partnership an amount equal to the price
(if any) paid to Crescent Equities by the party receiving the grant of REIT
Shares;
(2) Crescent Equities shall, as of the date on which the grant
of REIT Shares is made, be deemed to have contributed to the Partnership as
Contributed Funds pursuant to Section 4.2.A(2) hereof an amount equal to the
fair market value (computed using the "closing price" (as such term is defined
in the definition of the term "Value" in Article I hereof) as of the date on
which the grant of REIT Shares is made) of the REIT Shares delivered by Crescent
Equities to such party; and
(3) the General Partner's Partnership Interest shall remain
unchanged, and the Partnership Interests of Crescent Equities and the other
Limited Partners shall be adjusted as set forth in Section 4.2, based on the
amount deemed to be contributed, determined pursuant to Section 4.6.A(2);
provided that, for purposes of calculating the "Deemed Value of the Partnership"
and the "Deemed Partnership Interest Value" under Section 4.2, the "Value" of a
REIT Share shall be the "closing price" (as such term is defined in the
definition of the term "Value" in Article I hereof) of a REIT Share as of the
date on which the grant of REIT Shares is made.
B. Exercise of Stock Options. If stock options granted in connection
with a Stock Incentive Plan are exercised:
(1) Crescent Equities shall, as soon as practicable after such
exercise, contribute to the capital of the Partnership an amount equal to the
exercise price paid to Crescent Equities by the exercising party;
-27-
<PAGE> 33
(2) Crescent Equities shall, as of the date on which the
purchase of the REIT Shares is consummated by such exercising party, be deemed
to have contributed to the Partnership as Contributed Funds pursuant to Section
4.2.A(2) hereof an amount equal to the fair market value (computed using the
"closing price" (as such term is defined in the definition of "Value" in Article
I hereof) as of the date on which such purchase of REIT Shares is consummated by
such exercising party) of the REIT Shares delivered by Crescent Equities to such
exercising party; and
(3) the General Partner's Partnership Interest shall remain
unchanged, and the Partnership Interests of Crescent Equities and the other
Limited Partners shall be adjusted as set forth in Section 4.2, based on the
amount deemed to be contributed, determined pursuant to Section 4.6.B(2);
provided that, for purposes of calculating the "Deemed Value of the Partnership"
and the "Deemed Partnership Interest Value" under Section 4.2, the "Value" of a
REIT Share shall be the "closing price" (as such term is defined in the
definition of the term "Value" in Article I hereof) of a REIT Share as of the
date on which the purchase of REIT Shares is consummated by the exercising
party.
Section 4.7 Other Equity Compensation Plans
A. The Partnership may adopt a compensation plan for its
employees, agents or consultants pursuant to which the Partnership may grant
Limited Partnership Interests (including Partnership Units, which Partnership
Units shall enable the Limited Partner to participate in the Exchange Rights),
or options to acquire Limited Partnership Interests (including Partnership
Units, which Partnership Units shall enable the Limited Partner to participate
in the Exchange Rights), to one or more of its employees, agents or consultants
upon such terms and conditions as may be deemed necessary or appropriate by the
General Partner.
B. The Management Company may adopt a compensation plan for
its employees, agents or consultants pursuant to which the Management Company
may grant Limited Partnership Interests (including Partnership Units, which
Partnership Units shall enable the Limited Partner to participate in the
Exchange Rights), or options to acquire Limited Partnership Interests (including
Partnership Units, which Partnership Units shall enable the Limited Partner to
participate in the Exchange Rights), to one or more of its employees, agents or
consultants. The Partnership may sell Limited Partnership Interests (including
Partnership Units, which Partnership Units shall enable the Limited Partner to
participate in the Exchange Rights) to the Management Company for delivery to
its employees, agents or consultants. The price at which the Partnership shall
sell such Partnership Interests to the Management Company shall be the fair
market value of such Partnership Interests, as determined by the General Partner
in its reasonable discretion.
C. Upon any admission of an employee, agent or consultant of
the Partnership or the Management Company as an additional Limited Partner (an
"Employee Limited Partner") pursuant to Section 4.7.A or 4.7.B above, the
Partnership Interests of the other Partners shall be diluted, on a pro rata
basis, in proportion to their respective Partnership Interests, to reflect the
admission of the Employee Limited Partner. Notwithstanding the foregoing, the
Partnership Interest of the General Partner shall not be diluted upon the
admission of the Employee Limited Partner; any dilution that would otherwise
occur with respect to the Partnership Interest of the
-28-
<PAGE> 34
General Partner in accordance with the terms of the preceding sentence shall be
allocated instead to Crescent Equities. The number of Partnership Units owned by
the Limited Partners and Assignees shall not be decreased in connection with any
admission of an Employee Limited Partner.
D. In addition to the compensation plans described in
Sections 4.6, 4.7.A and 4.7.B hereof, the General Partner, in its sole and
absolute discretion and without the approval of the Limited Partners, may
propose and adopt on behalf of the Partnership employee benefit plans or other
incentive compensation plans (including, without limitation, plans granting REIT
Shares or options to purchase REIT Shares, plans granting Partnership Interests
(including Partnership Units) or options to purchase Partnership Interests
(including Partnership Units), "phantom" equity plans or other plans in which
compensation is tied to revenue or income amounts, or based on increases in the
market value of equity ownership interests) for the benefit of employees, agents
or consultants of any member of the Crescent Group, the Partnership, the
Management Company, the Subsidiary Development Corporation(s) or any Affiliate
of the foregoing in respect of services performed, directly or indirectly, for
the benefit of the Crescent Group, the Partnership, the Management Company or
the Subsidiary Development Corporation(s).
ARTICLE V
DISTRIBUTIONS
Section 5.1 Initial Partnership Distributions
Upon execution of the First Amended and Restated Agreement, the
Partnership made (i) a distribution of one million five hundred thousand dollars
($1,500,000) to RainAm Investors, and (ii) a distribution in an amount equal to
the Amstar Required Cash Payment to Amstar. In addition, the Partnership
returned to the General Partner, CRE Limited Partner, Inc. and Gerald W. Haddock
the initial capital contributions of one dollar ($1), seventy-four dollars ($74)
and twenty-five dollars ($25), respectively, previously made by such Persons to
the Partnership.
Section 5.2 Requirement and Characterization of Distributions
The General Partner shall cause the Partnership to distribute quarterly
all, or such portion deemed appropriate by the General Partner, of Available
Cash generated by the Partnership during such quarter to the Partners who are
Partners on the Partnership Record Date with respect to such quarter in
accordance with their respective Partnership Interests on such Partnership
Record Date. The General Partner shall take such reasonable efforts, as
determined by it in its sole and absolute discretion and consistent with the
qualification of Crescent Equities as a REIT, to distribute Available Cash to
the Limited Partners so as to preclude any such distribution or portion thereof
from being treated as part of a sale of property to the Partnership by a Limited
Partner under Section 707 of the Code or the Regulations thereunder; provided
that the General Partner and the Partnership shall not have any liability to a
Limited Partner under any circumstances as a result of any distribution to a
Limited Partner being so treated. Notwithstanding the foregoing, the General
Partner shall use its best efforts to cause the Partnership to distribute
sufficient amounts to enable Crescent Equities to pay shareholder dividends that
will (i) allow Crescent Equities to
-29-
<PAGE> 35
achieve and maintain qualification as a REIT, and (ii) avoid the imposition of
any additional taxes under Section 857 or Section 4981 of the Code.
Section 5.3 Amounts Withheld
All amounts withheld pursuant to the Code or any provisions of any
state or local tax law and Section 10.5 hereof with respect to any allocation,
payment or distribution to a Partner shall be treated as amounts distributed to
such Partner pursuant to Section 5.2 for all purposes under this Agreement.
Section 5.4 Distributions In Kind
Pursuant to Section 17-605 of the Act, the General Partner has the
authority to make in-kind distributions of assets to the Partners. Any such
distributions in kind shall be distributed among the Partners in the same manner
as set forth in Section 5.2 with respect to Available Cash (provided that
distributions in kind made after commencement of the liquidation of the
Partnership shall be distributed to the Partners in accordance with Section
13.2). The General Partner shall determine the fair market value of any assets
distributed in kind using such reasonable method of valuation as it may adopt.
Section 5.5 Distributions Upon Liquidation
Proceeds from a Terminating Capital Transaction and any other cash
received or reductions in reserves made after commencement of the liquidation of
the Partnership shall be distributed to the Partners in accordance with Section
13.2.
ARTICLE VI
ALLOCATIONS
Section 6.1 Allocations For Capital Account Purposes
For purposes of maintaining the Capital Accounts and in determining the
rights of the Partners among themselves, the Partnership's items of income,
gain, loss and deduction (computed in accordance with Exhibit B hereof) shall be
allocated among the Partners in each taxable year (or portion thereof) as
provided herein below.
A. Net Income. After giving effect to the special allocations
set forth in Section 1 of Exhibit C, Net Income shall be allocated (i) first, to
the General Partner to the extent that Net Losses previously allocated to the
General Partner pursuant to the last sentence of Section 6.1.B exceed Net Income
previously allocated to the General Partner pursuant to this clause (i) of
Section 6.1.A, and (ii) thereafter, Net Income shall be allocated to the
Partners in accordance with their respective Partnership Interests.
B. Net Losses. After giving effect to the special allocations
set forth in Section 1 of Exhibit C, Net Losses shall be allocated to the
Partners in accordance with their
-30-
<PAGE> 36
respective Partnership Interests, provided that Net Losses shall not be
allocated to any Limited Partner pursuant to this Section 6.1.B to the extent
that such allocation would cause such Limited Partner to have an Adjusted
Capital Account Deficit at the end of such taxable year (or increase any
existing Adjusted Capital Account Deficit). All Net Losses in excess of the
limitations set forth in this Section 6.1.B shall be allocated to the General
Partner.
C. Allocations to Reflect Issuance of New Interests. In the
event that the Partnership issues New Interests to Crescent Equities pursuant to
Section 8.7.C, the General Partner shall make such revisions to Sections 6.1.A
and B above as it determines are necessary to reflect the issuance of such New
Interests.
Section 6.2 Allocation of Nonrecourse Debt
For purposes of Regulations Section 1.752-3(a), the Partners agree that
Nonrecourse Liabilities of the Partnership in excess of the sum of (i) the
amount of Partnership Minimum Gain and (ii) the total amount of Nonrecourse
Built-in Gain shall be allocated among the Partners in accordance with their
respective Partnership Interests.
ARTICLE VII
MANAGEMENT AND OPERATIONS OF BUSINESS
Section 7.1 Management
A. Except as otherwise expressly provided in this Agreement,
all management powers over the business and affairs of the Partnership are
exclusively vested in the General Partner, and no Limited Partner shall have any
right to participate in or exercise control or management power over the
business and affairs of the Partnership. The General Partner may not be removed
by the Limited Partners with or without cause. In addition to the powers now or
hereafter granted a general partner of a limited partnership under applicable
law or which are granted to the General Partner under any other provision of
this Agreement, the General Partner, subject to Section 7.3 hereof, shall have
full power and authority to do all things and perform all acts specified in this
Agreement or otherwise deemed necessary or desirable by it to conduct the
business of the Partnership, to exercise all Partnership powers set forth in
Section 3.2 hereof and to effectuate the Partnership purposes set forth in
Section 3.1 hereof (to the extent consistent with allowing Crescent Equities at
all times to qualify as a REIT, unless Crescent Equities voluntarily terminates
its REIT status pursuant to the Declaration of Trust), including, without
limitation, to:
(1) acquire interests in real or personal property of any
kind and type, and any and all kinds of interests
therein, and determine the manner in which title thereto
is to be held; manage, insure against loss, protect and
subdivide any such property; improve, develop or
redevelop any such property; dedicate for public use,
vacate any such property subdivisions or parts thereof,
or resubdivide such property or any part thereof; lease,
renew or extend leases, amend, change or modify the terms
and provisions of leases, and grant options to lease and
options to renew leases and options to purchase;
-31-
<PAGE> 37
partition, sell or otherwise dispose of all or any
portion of such property; exchange all or any portion of
such property for other real or personal property; grant
easements or charges of any kind; release, convey or
assign any right, title or interest in or about or
easement appurtenant to such property or any part
thereof; construct and reconstruct, remodel, alter,
repair, add to or take from buildings on such property;
insure any Person having an interest in or responsibility
for the care, management or repair of such property;
direct the trustee of any land trust to mortgage, lease,
convey or contract to convey the real estate held in such
land trust or to execute and deliver deeds, mortgages,
notes, and any and all documents pertaining to the
property subject to such land trust or in any matter
regarding such trust; and execute assignments of all or
any part of the beneficial interest in such land trust;
(2) employ, engage or contract with or dismiss from
employment or engagement Persons to the extent deemed
necessary by the General Partner for the operation and
management of the Partnership business, including, but
not limited to, employees, including employees having
such titles as the General Partner may from time to time
specify, such as "chairman of the board," "chief
executive officer," chief operating officer,"
"president," "vice president," "secretary," "treasurer";
contractors; subcontractors; engineers; architects;
surveyors; mechanics; consultants; accountants;
attorneys; insurance brokers; real estate brokers; and
others;
(3) make expenditures, borrow money, procure loans and
advances from any Person for Partnership purposes
(including, without limitation, borrow money to permit
the Partnership to make distributions in such amounts as
will permit Crescent Equities (so long as Crescent
Equities elects to qualify as a REIT) to avoid the
payment of any federal income tax (including, for this
purpose, any excise tax pursuant to Section 4981 of the
Code) and to make distributions to its shareholders
sufficient to permit Crescent Equities to maintain REIT
status) and apply for and secure, from any Person, credit
or accommodations; contract, assume or guarantee
liabilities and obligations, direct or contingent and of
every kind and nature with or without security; and
repay, prepay, discharge, settle, adjust, compromise, or
liquidate any such loan, advance, credit, obligation or
liability;
(4) pledge, hypothecate, mortgage, assign, deposit, deliver,
enter into sale and leaseback arrangements or otherwise
give as security or as additional or substitute security,
any and all Partnership property, tangible or intangible,
including, but not limited to, real estate and beneficial
interests in land trusts, and make substitutions thereof,
and receive any proceeds thereof upon the release or
surrender thereof; sign, execute and deliver any and all
assignments, deeds and other contracts and instruments in
writing; authorize, give, make, procure, accept and
receive moneys, payments, property,
-32-
<PAGE> 38
notices, demands, vouchers, receipts, releases,
compromises and adjustments; waive notices, demands,
protests and authorize and execute waivers of every kind
and nature; negotiate, execute, deliver and receive
written agreements, undertakings and instruments of
every kind and nature; give oral instructions and make
oral agreements; and generally to do any and all other
acts and things incidental to any of the foregoing;
(5) acquire and enter into any contract of insurance which
the General Partner deems necessary or appropriate for
the protection of the Partnership and the Partners, for
the conservation of the Partnership's assets or for any
purpose convenient or beneficial to the Partnership;
(6) conduct any and all banking transactions on behalf of the
Partnership; adjust and settle checking, savings, and
other accounts with such institutions as the General
Partner shall deem appropriate; draw, sign, execute,
accept, endorse, guarantee, deliver, receive and pay any
checks, drafts, bills of exchange, acceptances, notes,
obligations, undertakings and other instruments for or
relating to the payment of money in, into, or from any
account in the Partnership's name; execute, procure,
consent to and authorize extensions and renewals of the
same; and make deposits and withdraw the same and
negotiate or discount commercial paper, acceptances,
negotiable instruments, bills of exchange and dollar
drafts;
(7) demand, sue for, receive, and otherwise take steps to
collect or recover all debts, rents, proceeds, interests,
dividends, goods, chattels, income from property, damages
and all other property, to which the Partnership may be
entitled or which are or may become due the Partnership
from any Person; commence, prosecute or enforce, or
defend, answer or oppose, contest and abandon all legal
proceedings in which the Partnership is or may hereafter
be interested; settle, compromise or submit to
arbitration any accounts, debts, claims, disputes and
matters which may arise between the Partnership and any
other Person and grant an extension of time for the
payment or satisfaction thereof on any terms, with or
without security; and indemnify any Indemnitees against
liabilities and contingencies in accordance with the
provisions of Section 7.7 of this Agreement or otherwise;
(8) take all reasonable measures necessary to insure
compliance by the Partnership with applicable laws, and
other contractual obligations and arrangements entered
into by the Partnership from time to time in accordance
with the provisions of this Agreement, including periodic
reports as required to lenders; and use all due diligence
to insure that the Partnership is in compliance with its
contractual obligations;
(9) form, acquire a debt or equity ownership interest in, and
contribute or loan property to, any further corporations,
limited or general partnerships, joint
-33-
<PAGE> 39
ventures, real estate investment trusts, or other
entities upon such terms and conditions as General
Partner deems appropriate;
(10) invest assets of the Partnership on a temporary basis in
commercial paper, government securities, checking or
savings accounts, money market funds, or any other highly
liquid investments deemed appropriate by the General
Partner; make loans, including participating or
convertible loans, to other Persons (including, without
limitation, the Subsidiary Development Corporation(s) and
the Management Company) upon such terms and conditions,
and for such security, as deemed appropriate by the
General Partner; repay obligations of any Person in which
the Partnership has an equity investment (including,
without limitation, the Subsidiary Development
Corporation(s) and the Management Company); and purchase
existing debt obligations held by other Persons,
including participating or convertible debt obligations,
upon such terms and conditions, and for such security, as
deemed appropriate by the General Partner;
(11) negotiate, execute and perform any contracts, conveyance
or other instruments that the General Partner considers
useful or necessary to the conduct of the Partnership's
operations or the implementation of the General Partner's
powers under this Agreement;
(12) distribute Partnership cash or other assets in accordance
with this Agreement;
(13) maintain the Partnership's books and records;
(14) prepare and deliver all financial, regulatory, tax and
other filings or reports to governmental or other
agencies having jurisdiction over the Partnership; and
(15) take any action in connection with the Partnership's
direct or indirect investment in any other Person.
B. Each of the Limited Partners agrees that the General
Partner is authorized to execute, deliver and perform the above-mentioned
agreements and transactions on behalf of the Partnership without any further
act, approval or vote of the Partners, notwithstanding any other provisions of
this Agreement (except as provided in Section 7.3), the Act or any applicable
law, rule or regulation. The execution, delivery or performance by the General
Partner or the Partnership of any agreement authorized or permitted under this
Agreement shall not constitute a breach by the General Partner of any duty that
the General Partner may owe the Partnership or the Limited Partners or any other
Persons under this Agreement or of any duty stated or implied by law or equity.
-34-
<PAGE> 40
C. At all times from and after the date hereof, the General
Partner may cause the Partnership to obtain and maintain (i) casualty, liability
and other insurance on the properties of the Partnership and (ii) liability
insurance for the Indemnitees hereunder.
D. At all times from and after the date hereof, the General
Partner may cause the Partnership to establish and maintain working capital
reserves in such amounts as the General Partner, in its sole and absolute
discretion, deems appropriate and reasonable from time to time.
E. In exercising its authority under this Agreement, the
General Partner may, but shall be under no obligation to, take into account the
tax consequences to any Partner of any action taken by it. The General Partner
and the Partnership shall not have liability to a Limited Partner under any
circumstances as a result of an income tax liability incurred by such Limited
Partner as a result of an action (or inaction) by the General Partner pursuant
to its authority under this Agreement.
Section 7.2 Certificate of Limited Partnership
To the extent that such action is determined by the General Partner to
be necessary or appropriate, the General Partner shall file amendments to and
restatements of the Certificate and do all things necessary or appropriate to
maintain the Partnership as a limited partnership (or a partnership in which the
limited partners have limited liability) under the laws of the State of Delaware
and each other jurisdiction in which the Partnership may elect to do business or
own property. Subject to the terms of Section 8.5.A(3) hereof, the General
Partner shall not be required, before or after filing, to deliver or mail a copy
of the Certificate or any amendment thereto to any Limited Partner. The General
Partner shall use all reasonable efforts to cause to be filed such other
certificates or documents as may be reasonable and necessary or appropriate for
the continuation, qualification and operation of a limited partnership (or a
partnership in which the limited partners have limited liability) in the State
of Delaware and any other jurisdiction in which the Partnership may elect to do
business or own property.
Section 7.3 Restrictions on General Partner's Authority
The General Partner shall not have the authority to:
A. take any action in contravention of this Agreement or
which would make it impossible to carry on the ordinary business of the
Partnership;
B. possess Partnership property, or assign any rights in
specific Partnership property, for other than a Partnership purpose;
C. do any act in contravention of applicable law; or
D. perform any act that would subject a Limited Partner to
liability as a general partner in any jurisdiction or any other liability except
as provided herein or under the Act.
-35-
<PAGE> 41
Section 7.4 Reimbursement of the Crescent Group
A. Except as provided in this Section 7.4 and elsewhere in
this Agreement (including the provisions of Articles 5 and 6 regarding
distributions, payments, and allocations to which it may be entitled), the
General Partner shall not be compensated for its services as general partner of
the Partnership.
B. The Crescent Group shall be reimbursed on a monthly basis,
or such other basis as the General Partner may determine in its sole and
absolute discretion, for all expenses the Crescent Group incurs relating to the
ownership and operation of, or for the benefit of, the Partnership, provided
that the amount of any such reimbursement shall be reduced by any interest paid
to the Crescent Group with respect to bank accounts or other instruments held by
it as permitted in Section 7.5. The Limited Partners acknowledge that the
Crescent Group's sole business is the ownership of interests in and operation of
the Partnership, and that all of the Crescent Group's operating expenses
(including, without limitation, costs and expenses relating to the formation and
continuity of existence of the Crescent Group, costs and expenses associated
with compliance with the periodic reporting requirements and all other rules and
regulations of the SEC or any other federal, state or local regulatory body,
salaries payable to officers and employees of the Crescent Group, fees and
expenses payable to directors of the Crescent Group, and all other operating or
administrative costs of the Crescent Group) are incurred for the benefit of the
Partnership and shall be reimbursed by the Partnership. Such reimbursements
shall be in addition to any reimbursement to the Crescent Group as a result of
indemnification pursuant to Section 7.7 hereof. If and to the extent any
reimbursements to the Crescent Group are determined for federal income tax
purposes not to constitute payment of expenses of the Partnership, the amounts
so determined shall constitute guaranteed payments within the meaning of Section
707(c) of the Code, shall be treated consistently therewith by the Partnership
and all Partners, and shall not be treated as distributions for purposes of
computing the Partners' Capital Accounts.
Section 7.5 Outside Activities of the Crescent Group
The Crescent Group shall not directly or indirectly enter into or
conduct any business, other than in connection with the ownership, acquisition
and disposition of Partnership Interests and the management of the business of
the Partnership, and such activities as are incidental thereto. The Crescent
Group shall not own any assets other than Partnership Interests in the
Partnership, and such bank accounts or similar instruments as it deems necessary
to carry out its responsibilities contemplated under this Agreement and the
Declaration of Trust. The Crescent Group shall not borrow funds for the purpose
of making distributions to the shareholders of any member of the Crescent Group
unless such borrowing is effectuated through the Partnership. Notwithstanding
anything to the contrary contained above in this Section 7.5, Crescent Equities
may form additional direct or indirect wholly owned subsidiary entities to serve
as general partners of partnerships or managing members of limited liability
companies in which the Partnership also owns a direct or indirect ownership
interest, provided that (i) the General Partner determines that the formation of
the subsidiary entities is necessary or appropriate to further the business
objectives of the Partnership and (ii) the subsidiary entities (a) make capital
contributions in exchange for their ownership interests in the partnerships and
limited liability companies on a pro
-36-
<PAGE> 42
rata basis with the Partnership and (b) do not own more than one percent (1%) of
the total ownership interests in any such partnership or limited liability
company.
Section 7.6 Contracts with Affiliates
A. The Partnership may contribute assets and loan funds to
joint ventures, other partnerships, corporations or other business entities in
which it is or thereby becomes a participant upon such terms and subject to such
conditions consistent with this Agreement and applicable law as the General
Partner, in its sole and absolute discretion, deems advisable. The foregoing
authority shall not create any right or benefit in favor of any such other
business entities.
B. Except as expressly permitted by this Agreement, no
Partner or Affiliate of a Partner shall sell, transfer or convey any property
to, purchase any property from, lend or borrow funds, provide services to, or
enter into any other transaction with the Partnership, directly or indirectly,
except pursuant to transactions that are on terms that are fair and reasonable
and no less favorable to the Partnership than could be obtained from an
unaffiliated third party.
C. The General Partner is expressly authorized to enter into,
in the name and on behalf of the Partnership, noncompetition agreements and
other conflict avoidance agreements for its benefit with various Affiliates of
the Partnership and its Partners, on such terms as the General Partner, in its
sole and absolute discretion, believes are advisable.
Section 7.7 Indemnification
A. The Partnership shall indemnify each Indemnitee from and
against any and all losses, claims, damages, liabilities, joint or several,
expenses (including, without limitation, attorneys' fees and other legal fees
and expenses), judgments, fines, settlements, and other amounts arising from any
and all claims, demands, actions, suits or proceedings, civil, criminal,
administrative or investigative, that relate to the operations of the
Partnership as set forth in this Agreement in which such Indemnitee may be
involved, or is threatened to be involved, as a party or otherwise, unless it is
established that: (i) the act or omission of the Indemnitee was material to the
matter giving rise to the proceedings and either was committed in bad faith or
was the result of active and deliberate dishonesty; (ii) the Indemnitee actually
received an improper personal benefit in money, property or services; or (iii)
in the case of any criminal proceeding, the Indemnitee had reasonable cause to
believe that the act or omission was unlawful. Without limitation, the foregoing
indemnity shall extend to any liability of any Indemnitee, pursuant to a loan
guaranty or otherwise, for any indebtedness of the Partnership or any subsidiary
entity (including, without limitation, any indebtedness which the Partnership or
any subsidiary entity has assumed or taken subject to), and the General Partner
is hereby authorized and empowered, on behalf of the Partnership, to enter into
one or more indemnity agreements consistent with the provisions of this Section
7.7 in favor of any Indemnitee having or potentially having liability for any
such indebtedness. The termination of any proceeding by judgment, order or
settlement does not create a presumption that the Indemnitee did not meet the
requisite standard of conduct set forth in this Section 7.7.A. The termination
of any proceeding by conviction of an Indemnitee or upon a plea
-37-
<PAGE> 43
of nolo contendre or its equivalent by an Indemnitee, or an entry of an order of
probation against an Indemnitee prior to judgment, creates a rebuttable
presumption that such Indemnitee acted in a manner contrary to that specified in
this Section 7.7.A with respect to the subject matter of such proceeding.
B. The right to indemnification conferred in this Section 7.7
shall be a contract right and shall include the right of each Indemnitee to be
paid by the Partnership the expenses incurred in defending any such proceeding
in advance of its final disposition; provided, however, that the payment of such
expenses in advance of the final disposition of a proceeding shall be made only
upon delivery to the Partnership of (i) a written affirmation of the Indemnitee
of his or her good faith belief that the standard of conduct necessary for
indemnification by the Partnership pursuant to this Section 7.7 has been met,
and (ii) a written undertaking by or on behalf of the Indemnitee to repay all
amounts so advanced if it shall ultimately be determined that the standard of
conduct has not been met.
C. The indemnification provided pursuant to this Section 7.7
shall continue as to a Person who has ceased to have the status of an Indemnitee
pursuant to clause (i) of the definition of "Indemnitee" set forth in Article I
hereof and shall inure to the benefit of the heirs, successors, assigns,
executors and administrators of any such Person, or to a Person whose status as
an Indemnitee was originally established pursuant to clause (ii) of such
definition and was later terminated for any reason other than the affirmative
decision of the General Partner to terminate such status; provided, however,
that except as provided in Section 7.7.D with respect to proceedings seeking to
enforce rights to indemnification, the Partnership shall indemnify any such
Person seeking indemnification in connection with a proceeding (or part thereof)
initiated by such Person only if such proceeding (or part thereof) was
authorized by the General Partner.
D. If a claim under Sections 7.7.A, 7.7.B or 7.7.C is not
paid in full by the Partnership within thirty (30) calendar days after a written
claim has been received by the Partnership, the Indemnitee making such claim may
at any time thereafter (but prior to payment of the claim) bring suit against
the Partnership to recover the unpaid amount of the claim and, if successful, in
whole or in part, such Indemnitee shall be entitled to be paid also the expense
of prosecuting such claim. It shall be a defense to any such action (other than
an action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking,
if any, has been tendered to the Partnership) that the Indemnitee has not met
the standards of conduct set forth above which make it permissible for the
Partnership to indemnify the Indemnitee for the amount claimed, but the burden
of proving such defense shall be on the Partnership. Neither the failure of the
Partnership to have made a determination prior to the commencement of such
action that indemnification of the Indemnitee is proper in the circumstances
because he or she has met the applicable standard of conduct set forth herein
nor an actual determination by the Partnership that the Indemnitee has not met
such applicable standard of conduct, shall be a defense to the action or create
a presumption that the Indemnitee has not met the applicable standard of
conduct.
E. Following any "change in control" of Crescent Equities of
the type required to be reported under Item 1 of Form 8-K promulgated under the
Exchange Act, any
-38-
<PAGE> 44
determination as to entitlement to indemnification shall be made by independent
legal counsel selected by the Indemnitee, which such independent legal counsel
shall be retained by the General Partner on behalf of the Partnership and at the
expense of the Partnership.
F. The right to indemnification and the payment of expenses
incurred in defending a proceeding in advance of its final disposition conferred
in this Section 7.7 shall not be exclusive of any other right which any person
may have or hereafter acquire under any statute or agreement, or pursuant to any
vote of the Partners, or otherwise.
G. The Partnership may purchase and maintain insurance, at
its expense, on its own behalf and on behalf of any Indemnitee and of such other
Persons as the General Partner shall determine, against any liability (including
expenses) that may be asserted against and incurred by such Person in connection
with the Partnership's activities pursuant to this Agreement, whether or not the
Partnership would have the power to indemnify such Person against such liability
under the terms of this Agreement. In addition, the Partnership may, together
with Crescent Equities, enter into indemnification agreements with one or more
of the Indemnitees pursuant to which the Partnership and Crescent Equities shall
jointly and severally agree to indemnify such Indemnitee(s) to the fullest
extent permitted by law, and advance to such Indemnitee(s) all related expenses,
subject to reimbursement if it is subsequently determined that indemnification
is not permitted.
H. Any indemnification pursuant to this Section 7.7 shall be
made only out of assets of the Partnership, and neither the General Partner nor
any Limited Partner shall have any obligation to contribute to the capital of
the Partnership or otherwise provide funds to enable the Partnership to fund its
obligations under this Section 7.7.
I. No Limited Partner shall be liable for the obligations of
the Partnership by reason of the indemnification provisions set forth in this
Agreement.
J. An Indemnitee shall not be denied indemnification in whole
or in part pursuant to this Section 7.7 because such Indemnitee has an interest
in the transaction to which the indemnification relates if the transaction
otherwise was permitted by the terms of this Agreement.
K. The provisions of this Section 7.7 are for the benefit of
the Indemnitees, their heirs, successors, assigns, executors and administrators,
and shall not be deemed to create any rights for the benefit of any other
Person. Any amendment, modification or repeal of this Section 7.7 or any
provision hereof shall be prospective only and shall not in any way affect the
limitations on the Partnership's liability to any Indemnitee under this Section
7.7 as in effect immediately prior to such amendment, modification or repeal
with respect to claims arising from or relating to matters occurring, in whole
or in part, prior to such amendment, modification or repeal, regardless of when
such claims may arise or be asserted.
Section 7.8 Liability of the General Partner
A. Notwithstanding anything to the contrary set forth in this
Agreement, the General Partner shall not be liable for monetary damages to the
Partnership or any Partners for
-39-
<PAGE> 45
losses sustained or liabilities incurred as a result of errors in judgment or of
any act or omission if the General Partner acted in good faith.
B. The Limited Partners expressly acknowledge that the
General Partner is acting on behalf of the Partnership and the shareholders of
Crescent Equities collectively, that the General Partner is under no obligation
to consider the separate interests of the Limited Partners (including, without
limitation, the tax consequences to Limited Partners) in deciding whether to
cause the Partnership to take (or decline to take) any actions, and that the
General Partner shall not be liable to the Partnership or to any Partner for
monetary damages for losses sustained, liabilities incurred, or benefits not
derived by Limited Partners in connection with such decisions, provided that the
General Partner has acted in good faith.
C. Subject to its obligations and duties as General Partner
set forth in Section 7.1.A hereof, the General Partner may exercise any of the
powers granted to it by this Agreement and perform any of the duties imposed
upon it hereunder either directly or by or through its agents. The General
Partner shall not be responsible for any misconduct or negligence on the part of
any such agent appointed by it in good faith.
D. Any amendment, modification or repeal of this Section 7.8
or any provision hereof shall be prospective only and shall not in any way
affect the limitations on the General Partner's liability to the Partnership and
the Limited Partners under this Section 7.8 as in effect immediately prior to
such amendment, modification or repeal with respect to claims arising from or
relating to matters occurring, in whole or in part, prior to such amendment,
modification or repeal, regardless of when such claims may arise or be asserted.
Section 7.9 Other Matters Concerning the General Partner
A. The General Partner may rely, and shall be protected in
acting or refraining from acting, upon any resolution, certificate, statement,
instrument, opinion, report, notice, request, consent, order, bond, debenture,
or other paper or document believed by it to be genuine and to have been signed
or presented by the proper party or parties.
B. The General Partner may consult with legal counsel,
accountants, appraisers, management consultants, investment bankers and other
consultants and advisers selected by it, and any act taken or omitted to be
taken in reliance upon the opinion of such Persons as to matters which such
General Partner reasonably believes to be within such Person's professional or
expert competence shall be conclusively presumed to have been done or omitted in
good faith.
C. The General Partner shall have the right, in respect of
any of its powers or obligations hereunder, to act through any of its duly
authorized officers and a duly appointed attorney or attorneys-in-fact. Each
such attorney shall, to the extent provided by the General Partner in the power
of attorney, have full power and authority to do and perform all and every act
and duty which is permitted or required to be done by the General Partner
hereunder.
-40-
<PAGE> 46
D. Notwithstanding any other provision of this Agreement or
the Act, any action of the General Partner on behalf of the Partnership or any
decision of the General Partner to refrain from acting on behalf of the
Partnership, undertaken in the good faith belief that such action or omission is
necessary or advisable in order (i) to protect the ability of Crescent Equities
to achieve or maintain qualification as a REIT or (ii) to avoid the incurring by
Crescent Equities of any taxes under Section 857 or Section 4981 of the Code, is
expressly authorized under this Agreement and is deemed approved by all of the
Limited Partners, to the extent such approval may be necessary.
Section 7.10 Title to Partnership Assets
Title to Partnership assets, whether real, personal or mixed and
whether tangible or intangible, shall be deemed to be owned by the Partnership
as an entity, and no Partner, individually or collectively, shall have any
ownership interest in such Partnership assets or any portion thereof. Title to
any or all of the Partnership assets may be held in the name of the Partnership,
the General Partner or one or more nominees, as the General Partner may
determine, including Affiliates of the General Partner. The General Partner
hereby declares and warrants that any Partnership assets for which legal title
is held in the name of the General Partner or any nominee or Affiliate of the
General Partner shall be held by the General Partner for use and benefit of the
Partnership in accordance with the provisions of this Agreement; provided,
however, that the General Partner shall use its best efforts to cause beneficial
and record title to such assets to be vested in the Partnership as soon as
reasonably practicable. All Partnership assets shall be recorded as the property
of the Partnership in its books and records, irrespective of the name in which
legal title to such Partnership assets is held.
Section 7.11 Reliance by Third Parties
Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Partnership shall be entitled to assume that the General
Partner has full power and authority to encumber, sell or otherwise use in any
manner any and all assets of the Partnership and to enter into any contracts on
behalf of the Partnership, and such Person shall be entitled to deal with the
General Partner as if it were the Partnership's sole party in interest, both
legally and beneficially. Each Limited Partner hereby waives any and all
defenses or other remedies which may be available against such Person to
contest, negate or disaffirm any action of the General Partner in connection
with any such dealing. In no event shall any Person dealing with the General
Partner or its representatives be obligated to ascertain that the terms of this
Agreement have been complied with or to inquire into the necessity or expedience
of any act or action of the General Partner or its representatives. Each and
every certificate, document or other instrument executed on behalf of the
Partnership by the General Partner or its representatives shall be conclusive
evidence in favor of any and every Person relying thereon or claiming thereunder
that (i) at the time of the execution and delivery of such certificate, document
or instrument, this Agreement was in full force and effect, (ii) the Person
executing and delivering such certificate, document or instrument was duly
authorized and empowered to do so for and on behalf of the Partnership, and
(iii) such certificate, document or instrument was duly executed and delivered
in accordance with the terms and provisions of this Agreement and is binding
upon the Partnership.
-41-
<PAGE> 47
Section 7.12 Limited Partner Representatives
Any Limited Partner may (but shall not be required to) appoint a
representative (the "Representative") who shall have full power and authority to
exercise all rights, including consent rights, of such Limited Partner under
this Agreement. Any such appointment shall be made in a writing delivered by the
Limited Partner to the General Partner. The same Person may serve as
Representative for more than one Limited Partner. Any action taken by a
Representative on behalf of a Limited Partner shall be fully binding on such
Limited Partner. The General Partner shall be entitled to rely on the actions
taken by a Representative without further evidence of its authority or further
action by the Limited Partner who appointed such Representative. Any appointment
of a Representative shall remain effective until rescinded in a writing
delivered by the Limited Partner to the General Partner. A Limited Partner may
revoke its designation of a Representative, or replace a designated
Representative with a different Representative, at any time by delivering
written notice of such action to the General Partner.
ARTICLE VIII
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 8.1 Limitation of Liability
The Limited Partners shall have no liability under this Agreement
except as expressly provided in this Agreement, including Section 10.5 hereof,
or under the Act.
Section 8.2 Management of Business
No Limited Partner (other than any officer, director, employee,
partner, agent or trustee of the General Partner, the Partnership or any of
their Affiliates, in his, her or its capacity as such) shall take part in the
operation, management or control (within the meaning of the Act) of the
Partnership's business, transact any business in the Partnership's name or have
the power to sign documents for or otherwise bind the Partnership. The
transaction of any such business by the General Partner, any of its Affiliates
or any officer, director, employee, partner, agent or trustee of the General
Partner, the Partnership or any of their Affiliates, in their capacity as such,
shall not affect, impair or eliminate the limitations on the liability of the
Limited Partners under this Agreement.
Section 8.3 Outside Activities of Limited Partners
Subject to Section 7.5 hereof, and subject to any agreements entered
into pursuant to Section 7.6.C hereof and any other agreements entered into by a
Limited Partner or its Affiliates with the Partnership, any Limited Partner and
any officer, director, employee, agent, trustee, Affiliate or shareholder of any
Limited Partner shall be entitled to and may have business interests and engage
in business activities in addition to those relating to the Partnership,
including business interests and activities in direct competition with the
Partnership. Neither the Partnership nor any Partners shall have any rights by
virtue of this Agreement in any business ventures of any Limited Partner. None
of the Limited Partners nor any other Person shall have the rights by virtue of
this
-42-
<PAGE> 48
Agreement or the partnership relationship established hereby in any business
ventures of any other Person, other than the Crescent Group, and such Person
shall have no obligation pursuant to this Agreement to offer any interest in any
such business ventures to the Partnership, any Limited Partner or any such other
Person, even if such opportunity is of a character which, if presented to the
Partnership, any Limited Partner or such other Person, could be taken by such
Person.
Section 8.4 Return of Capital
Except pursuant to the Exchange Rights set forth in Section 8.6, no
Limited Partner shall be entitled to the withdrawal or return of his Capital
Contribution, except to the extent of distributions made pursuant to this
Agreement or upon termination of the Partnership as provided herein. No Limited
Partner shall have priority over any other Limited Partner either as to the
return of Capital Contributions or, except to the extent provided by Exhibit C
hereof or as permitted by Section 8.7.C, or otherwise expressly provided in this
Agreement, as to profits, losses or distributions.
Section 8.5 Rights of Limited Partners Relating to the Partnership
A. In addition to other rights provided by this Agreement or
by the Act, and except as limited by Section 8.5.C hereof, each Limited Partner
shall have the right, for a purpose reasonably related to such Limited Partner's
interest as a limited partner in the Partnership, upon written demand with a
statement of the purpose of such demand and at such Limited Partner's own
expense:
(1) to obtain a copy of the Partnership's federal, state and
local income tax returns for each fiscal year;
(2) to obtain a current list of the name and last known
business, residence or mailing address of each Partner;
provided, however, that the General Partner may require,
as a condition of providing such list to the Limited
Partner, that the Limited Partner confirm in writing to
the General Partner that the names of the Partners and
other information provided by the list will be held in
strictest confidence and no distribution of the list will
be made;
(3) to obtain a copy of this Agreement and the Certificate,
and all amendments to the Agreement and the Certificate,
together with executed copies of all powers of attorney
pursuant to which this Agreement, the Certificate and all
amendments to the Agreement and the Certificate have been
executed; and
(4) to obtain true and full information regarding the amount
of cash and a description and statement of any other
property or services contributed by each Partner and which
each Partner has agreed to contribute in the future, and
the date on which each became a Partner.
-43-
<PAGE> 49
B. The Partnership shall notify each Limited Partner in
writing of any change made to the Exchange Factor. Such written notification
shall be included with the quarterly financial statements that are sent to each
Limited Partner pursuant to Section 9.3 hereof.
C. Notwithstanding any other provision of this Section 8.5,
the General Partner may keep confidential from the Limited Partners, for such
period of time as the General Partner determines in its sole and absolute
discretion to be reasonable, any information that (i) the General Partner
believes to be in the nature of trade secrets or other information the
disclosure of which the General Partner in good faith believes is not in the
best interests of the Partnership, or (ii) the Partnership is required by law or
by agreements with unaffiliated third parties to keep confidential.
Section 8.6 Exchange Rights
A. Subject to the limitations set forth herein, in Section
8.6.B below and in Exhibit A, each Limited Partner or Assignee owning
Partnership Units shall have the right (the "Exchange Right") to require
Crescent Equities to exchange on any Specified Exchange Date all or any portion
of the Partnership Units owned by such Limited Partner or Assignee (an
"Exchanging Person") for consideration consisting of (i) an amount of cash equal
to the Cash Amount, (ii) a number of REIT Shares equal to the REIT Shares
Amount, or (iii) any combination of (i) or (ii) above, with the decision as to
the type of consideration to be given to the Exchanging Person to be made by
Crescent Equities, in its sole and absolute discretion. The Exchange Right shall
be exercised pursuant to a Notice of Exchange delivered to Crescent Equities by
the Exchanging Person, accompanied by any certificate or certificates evidencing
the Partnership Units to be exchanged. If Crescent Equities elects to pay all or
any portion of the consideration to an Exchanging Person in cash, the Crescent
Group agrees to use its best efforts to raise any required funds as quickly as
possible after receipt of the Notice of Exchange.
B. Notwithstanding anything to the contrary contained in
Section 8.6.A above, to the extent that the delivery of REIT Shares to an
Exchanging Person pursuant to Section 8.6.A above would cause the Exchanging
Person to violate the applicable "Ownership Limit" or the "Existing Holder
Limit" set forth in the Declaration of Trust, Crescent Equities may not deliver
REIT Shares to such Exchanging Person but may, in its sole and absolute
discretion, elect to either (1) pay the consideration to the Exchanging Person
in the form of the Cash Amount, or (2) refuse, in whole or in part, to accept
the Notice of Exchange.
Section 8.7 Covenants Relating to the Exchange Rights
A. Crescent Equities shall at all times reserve for issuance
such number of REIT Shares as may be necessary to enable it to issue such REIT
Shares in full satisfaction of the Exchange Rights with respect to all
Partnership Units which are from time to time outstanding.
B. As long as Crescent Equities shall be obligated to file
periodic reports under the Exchange Act, Crescent Equities shall use its best
efforts to file such reports in such manner as shall enable any recipient of
REIT Shares issued pursuant to Section 8.6 in reliance upon an
-44-
<PAGE> 50
exemption from registration under the Securities Act to continue to be eligible
to utilize Rule 144 promulgated by the SEC pursuant to the Securities Act, or
any successor rule or regulation or statute thereunder, for the resale thereof.
C. Crescent Equities shall not issue any additional REIT
Shares (other than REIT Shares contemplated by Sections 4.2 and 8.6 and REIT
Shares issued pursuant to a Stock Incentive Plan) other than on a pro rata basis
to all holders of REIT Shares. Crescent Equities shall not issue any preferred
stock or rights, options, warrants or convertible or exchangeable securities
containing the right to subscribe for or purchase REIT Shares ("New Securities")
other than to all holders of REIT Shares unless (i) the General Partner shall
cause the Partnership to issue to Crescent Equities preferred equity ownership
interests or rights, options, warrants or convertible or exchangeable securities
of the Partnership ("New Interests") having designations, preferences and other
rights, all such that the economic interests are substantially similar to those
of the New Securities, and (ii) Crescent Equities contributes the proceeds from
the issuance of such New Securities and from the exercise of rights contained in
such New Securities to the Partnership. The Partners hereby acknowledge and
agree that the proceeds received by Crescent Equities in exchange for the
issuance of New Securities may be cash or real property or an interest therein.
If any New Securities are subsequently converted or exchanged for REIT Shares,
(i) Crescent Equities shall, as of the date on which the conversion or exchange
is consummated, be deemed to have contributed to the Partnership as Contributed
Funds pursuant to Section 4.2.A(2) hereof an amount equal to the Value (computed
as of the Business Day immediately preceding the date on which such conversion
or exchange of the New Securities is consummated) of the REIT Shares delivered
by Crescent Equities to such holder of New Securities, and (ii) the Partnership
Interests of Crescent Equities and the other Limited Partners shall be adjusted
as set forth in Section 4.2. The number of Partnership Units held by the Limited
Partners shall not be decreased in connection with the issuance of any New
Securities or in connection with any subsequent conversion or exchange of any
New Securities for REIT Shares.
D. Each Limited Partner and Assignee covenants and agrees
that all Partnership Units delivered for exchange pursuant to Section 8.6 hereof
shall be delivered to Crescent Equities free and clear of all Liens and,
notwithstanding anything herein contained to the contrary, Crescent Equities
shall be under no obligation to acquire Partnership Units which are or may be
subject to any Liens. Each Limited Partner and Assignee further agrees that, in
the event any state or local property transfer tax is payable as a result of the
transfer of its Partnership Units to Crescent Equities, such Limited Partner or
Assignee shall assume and pay such transfer tax.
E. In the event Crescent Equities purchases REIT Shares, then
the General Partner shall cause the Partnership to purchase from Crescent
Equities a portion of its Partnership Interest on the same terms that Crescent
Equities purchased such REIT Shares.
Section 8.8 Other Matters Relating to the Exchange Rights
A. Any Partnership Units transferred to Crescent Equities in
connection with the exercise of the Exchange Rights shall be canceled.
-45-
<PAGE> 51
B. Upon any transfer of Partnership Units by an Exchanging
Person to Crescent Equities pursuant to Section 8.6 above, the Partnership
Interest of such Limited Partner or Assignee shall be decreased (and the
Partnership Interest of Crescent Equities shall be correspondingly increased) as
provided in this Section 8.8.B. The Partnership Interest of such Limited Partner
or Assignee subsequent to the exchange event shall be equal to the product of
the following: (i) the Partnership Interest of such Limited Partner or Assignee
immediately prior to the exchange event, multiplied by (ii) a fraction, the
numerator of which is the total Partnership Units owned by such Limited Partner
or Assignee immediately after the exchange event, and the denominator of which
is the total number of Partnership Units owned by such Limited Partner or
Assignee immediately prior to the exchange event. Notwithstanding the foregoing,
if a Limited Partner or Assignee owns Partnership Units and also owns
Partnership Interests issued pursuant to Section 4.3 or 4.7 above, which
Partnership Interests were not associated with Partnership Units, the portion of
the Partnership Interest of such Limited Partner or Assignee that represents the
Partnership Interests issued pursuant to Section 4.3 or 4.7 shall not be subject
to reduction pursuant to the provisions of this Section 8.8.B.
ARTICLE IX
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1 Records and Accounting
The General Partner shall keep or cause to be kept at the principal
office of the Partnership appropriate books and records with respect to the
Partnership's business, including, without limitation, all books and records
necessary to provide to the Limited Partners any information, lists and copies
of documents required to be provided pursuant to Section 8.5 hereof. Any records
maintained by or on behalf of the Partnership in the regular course of its
business may be kept on, or be in the form of, punch cards, magnetic tape,
photographs, micrographics or any other information storage device, provided
that the records so maintained are convertible into clearly legible written form
within a reasonable period of time. The books of the Partnership shall be
maintained, for financial and tax reporting purposes, on an accrual basis in
accordance with generally accepted accounting principles.
Section 9.2 Fiscal Year
The fiscal year of the Partnership shall be the calendar year.
Section 9.3 Reports
As soon as practicable after the close of each fiscal quarter (other
than the last quarter of the fiscal year), the General Partner shall cause to be
mailed to each Limited Partner a quarterly report containing financial
statements of the Partnership, or of the Crescent Group if such statements are
prepared solely on a consolidated basis with the Crescent Group, for such fiscal
quarter, presented in accordance with generally accepted accounting principles.
As soon as practicable after the close of each fiscal year, the General Partner
shall cause to be mailed to each Limited Partner an annual report containing
financial statements of the Partnership, or of the Crescent Group
-46-
<PAGE> 52
if such statements are prepared solely on a consolidated basis with the Crescent
Group, for such fiscal year, presented in accordance with generally accepted
accounting principles. The annual financial statements shall be audited by a
nationally recognized firm of independent public accountants selected by the
General Partner.
ARTICLE X
TAX MATTERS
Section 10.1 Preparation of Tax Returns
The General Partner shall arrange for the preparation and timely
filing of all returns of Partnership income, gains, deductions, losses and other
items required of the Partnership for federal, state and local income tax
purposes, and the delivery to the Limited Partners of all tax information
reasonably required by the Limited Partners for federal, state and local income
tax reporting purposes.
Section 10.2 Tax Elections
Except as otherwise provided herein, the General Partner shall, in its
sole and absolute discretion, determine whether to make any available election
or choose any available reporting method pursuant to the Code or state or local
tax law; provided, however, that the General Partner shall make the election
under Section 754 of the Code in accordance with applicable regulations
thereunder. The General Partner shall have the right to seek to revoke any such
election (including, without limitation, the election under Section 754 of the
Code) or change any reporting method upon the General Partner's determination in
its sole and absolute discretion that such revocation is in the best interests
of all of the Partners.
Section 10.3 Tax Matters Partner
A. The General Partner shall be the "tax matters partner" of
the Partnership for federal income tax purposes. Pursuant to Section 6223(c)(3)
of the Code, upon receipt of notice from the IRS of the beginning of an
administrative proceeding with respect to the Partnership, the tax matters
partner shall furnish the IRS with the name, address and profits interest of
each of the Limited Partners, provided that such information is provided to the
Partnership by the Limited Partners.
B. The tax matters partner is authorized, but not required:
(1) to enter into any settlement with the IRS with respect to
any administrative or judicial proceedings for the
adjustment of Partnership items required to be taken into
account by a Partner for income tax purposes (such
administrative proceedings being referred to as a "tax
audit" and such judicial proceedings being referred to as
"judicial review"), and in the settlement agreement the
tax matters partner may expressly state that such
agreement shall bind all Partners, except that such
settlement agreement shall not bind
-47-
<PAGE> 53
any Partner (i) who (within the time prescribed pursuant
to the Code and Regulations) files a statement with the
IRS providing that the tax matters partner shall not
have the authority to enter into a settlement agreement
on behalf of such Partner or (ii) who is a "notice
partner" (as defined in Section 6231 of the Code) or a
member of a "notice group" (as defined in Section
6223(b)(2) of the Code);
(2) in the event that a notice of a final administrative
adjustment at the Partnership level of any item required
to be taken into account by a Partner for tax purposes (a
"final adjustment") is mailed to the tax matters partner,
to seek judicial review of such final adjustment,
including the filing of a petition for readjustment with
the Tax Court or the United States Claims Court, or the
filing of a complaint for refund with the District Court
of the United States for the district in which the
Partnership's principal place of business is located;
(3) to intervene in any action brought by any other Partner
for judicial review of a final adjustment;
(4) to file a request for an administrative adjustment with
the IRS at any time and, if any part of such request is
not allowed by the IRS, to file an appropriate pleading
(petition or complaint) for judicial review with respect
to such request;
(5) to enter into an agreement with the IRS to extend the
period for assessing any tax which is attributable to any
item required to be taken into account by a Partner for
tax purposes, or an item affected by such item; and
(6) to take any other action on behalf of the Partners of the
Partnership in connection with any tax audit or judicial
review proceeding to the extent permitted by applicable
law or regulations.
The taking of any action and the incurring of any expense by the tax
matters partner in connection with any such proceeding, except to the extent
required by law, is a matter in the sole and absolute discretion of the tax
matters partner and the provisions relating to indemnification of Indemnitees
set forth in Section 7.7 of this Agreement shall be fully applicable to the tax
matters partner in its capacity as such.
C. The tax matters partner shall receive no compensation for
its services. All third party costs and expenses incurred by the tax matters
partner in performing its duties as such (including legal and accounting fees)
shall be borne by the Partnership. Nothing herein shall be construed to restrict
the Partnership from engaging an accounting firm to assist the tax matters
partner in discharging its duties hereunder.
-48-
<PAGE> 54
Section 10.4 Organizational Expenses
The Partnership shall elect to deduct expenses, if any, incurred by it
in organizing the Partnership ratably over a sixty (60)-month period as provided
in Section 709 of the Code.
Section 10.5 Withholding
Each Limited Partner hereby authorizes the Partnership to withhold from
or pay on behalf of or with respect to such Limited Partner any amount of
federal, state, local, or foreign taxes that the General Partner determines that
the Partnership is required to withhold or pay with respect to any amount
distributable or allocable to such Limited Partner pursuant to this Agreement,
including, without limitation, any taxes required to be withheld or paid by the
Partnership pursuant to Sections 1441, 1442, 1445, or 1446 of the Code. Any
amount paid on behalf of or with respect to a Limited Partner shall constitute a
loan by the Partnership to such Limited Partner, which loan shall be repaid by
such Limited Partner within fifteen (15) days after notice from the General
Partner that such payment must be made unless (i) the Partnership withholds such
payment from a distribution which would otherwise be made to the Limited
Partner, or (ii) the General Partner determines, in its sole and absolute
discretion, that such payment may be satisfied out of the available funds of the
Partnership which would, but for such payment, be distributed to the Limited
Partner. Any amounts withheld pursuant to the foregoing clauses (i) or (ii)
shall be treated as having been distributed to such Limited Partner. Each
Limited Partner hereby unconditionally and irrevocably grants to the Partnership
a security interest in such Limited Partner's Partnership Interest to secure
such Limited Partner's obligation to pay to the Partnership any amounts required
to be paid pursuant to this Section 10.5. In the event that a Limited Partner
fails to pay any amounts owed to the Partnership pursuant to this Section 10.5
when due, the General Partner may, in its sole and absolute discretion, elect to
make the payment to the Partnership on behalf of such defaulting Limited
Partner, and in such event shall be deemed to have loaned such amount to such
defaulting Limited Partner and, until repayment of such loan, shall succeed to
all rights and remedies of the Partnership as against such defaulting Limited
Partner (including, without limitation, the right to receive distributions). Any
amounts payable by a Limited Partner hereunder shall bear interest at the base
rate on corporate loans at large United States money center commercial banks, as
published from time to time in the Wall Street Journal, plus four percentage
points (but not higher than the maximum lawful rate) from the date such amount
is due (i.e., fifteen (15) days after demand) until such amount is paid in full.
Each Limited Partner shall take such actions as the Partnership or the General
Partner shall request in order to perfect or enforce the security interest
created hereunder.
ARTICLE XI
TRANSFERS AND WITHDRAWALS
Section 11.1 Transfer
A. The term "transfer," when used in this Article 11 with
respect to a Partnership Interest, shall be deemed to refer to a transaction by
which the General Partner purports
-49-
<PAGE> 55
to assign its General Partnership Interest to another Person or by which a
Limited Partner purports to assign its Limited Partnership Interest to another
Person, and includes a sale, assignment, gift, pledge, encumbrance,
hypothecation, mortgage, exchange or any other disposition by law or otherwise.
The term "transfer" when used in this Article 11 does not include any exchange
of Partnership Units by a Limited Partner pursuant to Section 8.6.
B. No Partnership Interest shall be transferred, in whole or
in part, except in accordance with the terms and conditions set forth in this
Article 11. Any transfer or purported transfer of a Partnership Interest not
made in accordance with this Article 11 shall be null and void.
Section 11.2 Transfer of Partnership Interests of the General Partner
A. The General Partner shall not withdraw from the
Partnership or transfer all or any portion of its interest in the Partnership
except in connection with a transaction described in Section 11.2.B or 11.2.C.
B. Crescent Equities shall not engage in any merger,
consolidation or other combination with or into another Person, or sale of all
or substantially all of its assets, or any reclassification, or recapitalization
or change of outstanding REIT Shares (other than a reincorporation, a
reorganization primarily for the purpose of changing domicile or converting to
corporate form, a change in par value, or from par value to no par value, or as
a result of a subdivision or combination as described in the definition of
"Exchange Factor," which require no consent of the Limited Partners under this
Agreement) ("Transaction"), unless the Transaction either:
(1) includes a merger of the Partnership or sale of
substantially all of the assets of the Partnership, as a
result of which all Limited Partners will receive for each
Partnership Unit an amount of cash, securities, or other
property equal to the product of the Exchange Factor and
the greatest amount of cash, securities or other property
paid to a holder of one REIT Share in consideration of one
REIT Share at any time during the period from and after
the date on which the Transaction is consummated, provided
that if, in connection with the Transaction, a purchase,
tender or exchange offer shall have been made to and
accepted by the holders of more than fifty percent (50%)
of the outstanding REIT Shares, the holders of Partnership
Units shall receive the greatest amount of cash,
securities, or other property which a Limited Partner
would have received had it exercised the Exchange Right
and received REIT Shares in exchange for all of its
Partnership Units immediately prior to the expiration of
such purchase, tender or exchange offer; or
(2) provides that the Partnership shall continue as a separate
entity and grants to the Limited Partners exchange rights
with respect to the ownership interests in the new entity
that are substantially equivalent to the Exchange Rights
provided for in Section 8.6.
-50-
<PAGE> 56
C. Crescent Equities shall not transfer all or any portion
of its ownership interest in the General Partner; provided, however, that
Crescent Equities may liquidate the General Partner.
Section 11.3 Transfer of Partnership Interests of Limited Partners
Other Than Crescent Equities
A. Subject to the provisions of Sections 11.3.C, 11.3.D,
11.3.E, 11.3.F and 11.3.G hereof, any Limited Partner other than Crescent
Equities may freely transfer all or any portion of its Partnership Interest. Any
transferee of a Limited Partnership Interest (whether such transferee is a
Substituted Limited Partner or an Assignee) shall also become the owner of any
Partnership Units associated with such Limited Partnership Interest, and shall
be entitled to exercise the Exchange Rights with respect to such Partnership
Units in accordance with the terms and conditions set forth in Section 8.6
above.
B. If a Limited Partner is Incapacitated, the executor,
administrator, trustee, committee, guardian, conservator or receiver of such
Limited Partner's estate shall have all the rights of a Limited Partner, but not
more rights than those enjoyed by other Limited Partners, for the purpose of
settling or managing the estate and such power as the Incapacitated Limited
Partner possessed to transfer all or any part of its interest in the
Partnership. The Incapacity of a Limited Partner, in and of itself, shall not
dissolve or terminate the Partnership.
C. The General Partner may prohibit any transfer otherwise
permitted under this Section 11.3 by a Limited Partner of its Partnership
Interest if, in the opinion of legal counsel to the Partnership, such transfer
would require filing of a registration statement under the Securities Act or
would otherwise violate any federal or state securities laws or regulations
applicable to the Partnership or the Partnership Interest.
D. No transfer by a Limited Partner of its Partnership
Interest may be made to any Person if (i) in the opinion of legal counsel for
the Partnership, it would result in the Partnership being treated as an
association taxable as a corporation for federal income tax purposes, or result
in a termination of the Partnership for federal income tax purposes, (ii) in the
opinion of the legal counsel for the Partnership, it would adversely affect the
ability of Crescent Equities to continue to qualify as a REIT or subject
Crescent Equities to any additional taxes under Section 857 or Section 4981 of
the Code, or (iii) the General Partner determines that such transfer is
effectuated through or, together with other similar transfers, could result in
the creation of an "established securities market" or a "secondary market (or
the substantial equivalent thereof)" or otherwise increase the likelihood that
the Partnership would be treated as a "publicly traded partnership" within the
meaning of Code Section 7704 and the related Notice 88-75, 1988-2 C.B. 386, and
Treasury Regulations Section 1.7704-1.
E. No transfer by a Limited Partner of its Partnership
Interest may be made (i) to any Person who lacks the legal right, power or
capacity to own a Partnership Interest, (ii) in violation of any provision of
any mortgage or trust deed (or the note or bond secured thereby) constituting a
Lien against an asset of the Partnership, (iii) in violation of applicable law,
or (iv) if
-51-
<PAGE> 57
such transfer would, in the opinion of counsel to the Partnership, cause any
portion of the assets of the Partnership to constitute assets of any employee
benefit plan pursuant to Department of Labor regulations section 2510.2-101.
F. No transfer of a Limited Partnership Interest may be made
to a lender to the Partnership or any Person who is related (within the meaning
of Regulations Section 1.752-4(b)) to any lender to the Partnership whose loan
constitutes a Nonrecourse Liability, except with the consent of the General
Partner, which consent may be granted or withheld in the sole and absolute
discretion of the General Partner.
Section 11.4 Substituted Limited Partners
A. Except as otherwise expressly provided in the last
sentence of this Section 11.4.A, no Limited Partner shall have the right to
substitute a transferee as a Limited Partner in its place without the consent of
the General Partner, which consent may be granted or withheld by the General
Partner in its sole and absolute discretion. The General Partner's failure or
refusal to permit a transferee of a Limited Partnership Interest to become a
Substituted Limited Partner shall not give rise to any cause of action against
the Partnership or any Partner. Notwithstanding anything to the contrary
contained above in this Section 11.4.A, if the transferee of a Limited
Partnership Interest is a Person listed on Exhibit E attached hereto, the
General Partner shall be required to admit such transferee as a Substituted
Limited Partner, provided that (i) the transfer of the Limited Partnership
Interest to such Person is not prohibited under the provisions of Sections
11.3.C through G hereof, and (ii) such transferee complies with the provisions
of the second sentence of Section 11.4.B hereof.
B. A transferee who has been admitted as a Substituted
Limited Partner in accordance with this Article 11 shall have all the rights and
powers and be subject to all the restrictions and liabilities of a Limited
Partner under this Agreement. The admission of any transferee as a Substituted
Limited Partner shall be subject to the transferee executing and delivering to
the Partnership an acceptance of all of the terms and conditions of this
Agreement (including, without limitation, the provisions of Section 2.4) and
such other documents or instruments as may be required to effect the admission.
C. Upon the admission of a Substituted Limited Partner, the
General Partner shall amend Exhibit A to reflect the name, address, number of
Partnership Units, and Partnership Interest of such Substituted Limited Partner
and to eliminate or adjust, if necessary, the name, address and interest of the
predecessor of such Substituted Limited Partner.
Section 11.5 Assignees
If the General Partner, in its sole and absolute discretion, does not
consent to the admission of any permitted transferee under Section 11.3 as a
Substituted Limited Partner, as described in Section 11.4, such transferee shall
be considered an Assignee for purposes of this Agreement. An Assignee shall be
deemed to have had assigned to it, and shall be entitled to receive
distributions from the Partnership and the share of Net Income, Net Losses,
Recapture Income, and any
-52-
<PAGE> 58
other items of income, gain, loss, deduction and credit of the Partnership
attributable to the Partnership Interest transferred to such transferee, but
shall not be entitled to vote such Partnership Interest on any matter presented
to the Limited Partners for a vote (such Partnership Interest being deemed to
have been voted on such matter in the same proportion as all other Partnership
Interests held by the Limited Partners are voted). In the event any such
transferee desires to make a further transfer of any such Partnership Interest,
such transferee shall be subject to all of the provisions of this Article 11 to
the same extent and in the same manner as any Limited Partner desiring to make a
transfer of a Partnership Interest.
Section 11.6 General Provisions
A. No Limited Partner may withdraw from the Partnership other
than as a result of a permitted transfer of all of such Limited Partner's
Partnership Interest in accordance with this Article 11 or pursuant to an
exchange of its Partnership Interest under Section 8.6.
B. Any Limited Partner who shall transfer all of its
Partnership Interest in a permitted transfer pursuant to this Article 11 or
pursuant to an exchange of all of its Partnership Units under Section 8.6 shall
cease to be a Limited Partner.
C. If any Partnership Interest is exchanged pursuant to
Section 8.6 or transferred pursuant to this Article 11 at any time other than
the end of a fiscal year, Net Income, Net Loss, each item thereof and all other
items attributable to such interest for such fiscal year shall be allocated
between the transferor Partner and the transferee Partner in the same ratio as
the number of days in such fiscal year before and after such transfer, except
that gain or loss attributable to the sale or other disposition of all or any
substantial portion of the Partnership assets or to other extraordinary
non-recurring items shall be allocated to the owner of the Partnership Interest
as of the date of closing of the sale or other disposition, or, with respect to
other extraordinary non-recurring items, the date the profit is realized or the
loss is incurred, as the case may be. Solely for purposes of the allocations to
be made under the preceding sentence (but not for any other purpose), (i) any
Partnership Interest that is exchanged or otherwise transferred prior to the
eighth day of a month shall receive allocations under the preceding sentence as
if it had been transferred on the first day of the month, (ii) any Partnership
Interest that is exchanged or otherwise transferred on or after the eighth day
of a month and prior to the twenty-third day of such month shall receive
allocations under the preceding sentence as if it had been transferred on the
fifteenth day of the month, and (iii) any Partnership Interest that is exchanged
or otherwise transferred on or after the twenty-third day of a month shall
receive allocations under the preceding sentence as if it had been transferred
on the first day of the next succeeding month. All distributions of Available
Cash with respect to which the Partnership Record Date is before the date of
such transfer or exchange shall be made to the transferor Partner, and all
distributions of Available Cash thereafter shall be made to the transferee
Partner.
Section 11.7 Acquisition of Partnership Interest by Partnership
The Partnership may acquire, by purchase, redemption or otherwise, any
Partnership Interest or other interest of a Partner in the Partnership. Any
Partnership Interest or other interest
-53-
<PAGE> 59
so acquired by the Partnership shall be deemed canceled. In the event that a
Partnership Interest is acquired by the Partnership pursuant to this Section
11.7, the Partnership Interest of each other existing Partner shall be
increased, as of the date of acquisition of such Partnership Interest by the
Partnership, such that the Partnership Interest of each Partner shall be equal
to the sum of (a) each Partner's existing Partnership Interest, plus (b) the
product obtained by multiplying (i) each Partner's existing Partnership Interest
by (ii) a fraction, the numerator of which is equal to the Partnership Interest
acquired by the Partnership and the denominator of which is equal to the result
obtained by subtracting (A) one minus (B) the Partnership Interest acquired by
the Partnership.
ARTICLE XII
ADMISSION OF PARTNERS
Section 12.1 Admission of Substituted General Partner
A successor to all of the General Partner's General Partnership
Interest pursuant to Section 11.2 hereof who is proposed to be admitted as a
substituted General Partner shall be admitted to the Partnership as the General
Partner, effective simultaneously with such transfer. Any such transferee shall
carry on the business of the Partnership without dissolution. In each case, the
admission shall be subject to the substituted General Partner executing and
delivering to the Partnership an acceptance of all of the terms and conditions
of this Agreement and such other documents or instruments as may be required to
effect the admission.
Section 12.2 Admission of Additional or Employee Limited Partners
A. After the admission to the Partnership of the Limited
Partners on the date hereof, a Person who makes a Capital Contribution to the
Partnership in accordance with Section 4.3 hereof or receives a Limited
Partnership Interest pursuant to Section 4.7 hereof shall be admitted to the
Partnership as an Additional Limited Partner or Employee Limited Partner, as the
case may be, only upon furnishing to the General Partner (i) evidence of
acceptance in form satisfactory to the General Partner of all of the terms and
conditions of this Agreement, including, without limitation, the power of
attorney granted in Section 2.4 hereof, and (ii) such other documents or
instruments as may be required in the discretion of the General Partner in order
to effect such Person's admission as an Additional Limited Partner or Employee
Limited Partner, as the case may be. The admission of any Person as an
Additional Limited Partner or Employee Limited Partner, as the case may be,
shall become effective on the date upon which the name of such Person is
recorded on the books and records of the Partnership, following the consent of
the General Partner to such admission.
B. If any Additional Limited Partner or Employee Limited
Partner is admitted to the Partnership at any time other than the end of a
fiscal year, Net Income, Net Loss, each item thereof and all other items for
such fiscal year shall be allocated among such Additional Limited Partner or
Employee Limited Partner and all other Partners by taking into account their
varying interests during such fiscal year in accordance with Section 706(d) of
the Code. For this purpose, Net Income, Net Loss, each item thereof and all
other items for such fiscal year shall be prorated based on the portion of the
taxable year that has elapsed prior to the admission of such Additional
-54-
<PAGE> 60
Limited Partner or Employee Limited Partner, except that gain or loss
attributable to the sale or other disposition of all or any substantial portion
of the Partnership assets or to other extraordinary non-recurring items shall be
allocated to the Partners who own Partnership Interests as of the date of
closing of the sale or other disposition, or, with respect to other
extraordinary non-recurring items, the date the profit is realized or the loss
is incurred, as the case may be. All distributions of Available Cash with
respect to which the Partnership Record Date is before the date of admission of
such Additional Limited Partner or Employee Limited Partner shall be made solely
to Partners other than the Additional Limited Partner or Employee Limited
Partner, and all distributions of Available Cash thereafter shall be made to all
Partners including the Additional Limited Partner or Employee Limited Partner.
C. Greenbrier has executed and delivered to the General
Partner the Greenbrier Agreement. The General Partner, exercising its discretion
pursuant to Section 12.2.A hereof, hereby agrees that the Greenbrier Agreement
is the sole document required to effectuate the admission to the Partnership of
Greenbrier as an Additional Limited Partner. The Greenbrier Agreement contains
an "evergreen" provision so that it shall be deemed reexecuted and delivered to
the General Partner by Greenbrier if, as and whenever it shall acquire future
installments of Partnership Units under the Consultant Unit Agreement if, prior
to the acquisition of any such future installment, it shall have exchanged all
of its Partnership Units and consequently ceased to be a Limited Partner
pursuant to Section 11.6.B hereof. Accordingly, if, as and whenever Greenbrier
receives Partnership Units pursuant to the terms of the Consultant Unit
Agreement, the General Partner shall automatically admit Greenbrier as an
Additional Limited Partner without requiring any additional documentation from
Greenbrier, even if Greenbrier is not at that time a Limited Partner of the
Partnership.
Section 12.3 Amendment of Agreement and Certificate of Limited
Partnership
For the admission to the Partnership of any Partner in accordance with
the provisions of this Agreement, the General Partner shall take all steps
necessary and appropriate under the Act to amend the records of the Partnership
and, if necessary, to prepare as soon as practical an amendment of this
Agreement (including an amendment of Exhibit A) and, if required by law, shall
prepare and file an amendment to the Certificate and may for this purpose
exercise the power of attorney granted pursuant to Section 2.4 hereof.
ARTICLE XIII
DISSOLUTION AND LIQUIDATION
Section 13.1 Dissolution
The Partnership shall not be dissolved by the admission of Substituted
Limited Partners, Additional Limited Partners or Employee Limited Partners, or
by the admission of a substituted General Partner in accordance with the terms
of this Agreement. Upon the withdrawal of the General Partner, any substituted
General Partner shall continue the business of the Partnership. The Partnership
shall dissolve, and its affairs shall be wound up, upon the first to occur of
any of the following ("Liquidating Events"):
-55-
<PAGE> 61
A. the expiration of its term as provided in Section 2.5
hereof;
B. an event of withdrawal of the General Partner, as defined
in the Act (other than (i) a liquidation of the General Partner into Crescent
Equities, in which event Crescent Equities shall become the General Partner, or
(ii) an event of Bankruptcy), unless within ninety (90) days after the
withdrawal remaining Partners owning a majority-in-interest of the total
Partnership Interests of the remaining Partners agree in writing to continue the
business of the Partnership and to the appointment, effective immediately prior
to the date of withdrawal, of a substitute General Partner;
C. an election to dissolve the Partnership made in writing by
the General Partner;
D. entry of a decree of judicial dissolution of the
Partnership pursuant to the provisions of the Act;
E. the sale of all or substantially all of the assets and
properties of the Partnership, unless the General Partner elects to continue the
Partnership business for the purpose of the receipt and the collection of
indebtedness or the collection of other consideration to be received in exchange
for the assets of the Partnership (which activities shall be deemed to be part
of the winding up of the Partnership); or
F. a final and non-appealable judgment is entered by a court
with appropriate jurisdiction ruling that either Crescent Equities or the
General Partner is bankrupt or insolvent, or a final and non-appealable order
for relief is entered by a court with appropriate jurisdiction against either
Crescent Equities or the General Partner, in each case under any federal or
state bankruptcy or insolvency laws as now or hereafter in effect, unless prior
to the entry of such order or judgment remaining Partners owning a
majority-in-interest of the total Partnership Interests of the remaining
Partners agree in writing to continue the business of the Partnership and to the
appointment, effective as of a date prior to the date of such order or judgment,
of a substituted General Partner.
Section 13.2 Winding Up
A. Upon the occurrence of a Liquidating Event, the
Partnership shall continue solely for the purposes of winding up its affairs in
an orderly manner, liquidating its assets (subject to the provisions of Section
13.2.B below), and satisfying the claims of its creditors and Partners. No
Partner shall take any action that is inconsistent with, or not necessary to or
appropriate for, the winding up of the Partnership's business and affairs. The
General Partner (or, in the event there is no remaining General Partner, any
Person elected by Limited Partners owning a majority-in-interest of the total
Partnership Interests of the Limited Partners (the "Liquidator")) shall be
responsible for overseeing the winding up and dissolution of the Partnership and
shall take full account of the Partnership's liabilities and property and the
Partnership property shall be liquidated as promptly as is consistent with
obtaining the fair market value thereof, and the proceeds
-56-
<PAGE> 62
therefrom (which may, to the extent determined by the General Partner, include
shares of stock in Crescent Equities) shall be applied and distributed in the
following order:
(1) First, to the payment and discharge of all of the
Partnership's debts and liabilities to creditors other
than the Partners;
(2) Second, to the payment and discharge of all of the
Partnership's debts and liabilities to the Partners; and
(3) The balance, if any, to the General Partner and Limited
Partners in accordance with their positive Capital Account
balances, after giving effect to all contributions,
distributions, and allocations for all periods.
The General Partner shall not receive any additional compensation for any
services performed pursuant to this Article 13.
B. Notwithstanding the provisions of Section 13.2.A hereof
which require liquidation of the assets of the Partnership, but subject to the
order of priorities set forth therein, if prior to or upon dissolution of the
Partnership the Liquidator determines that an immediate sale of part or all of
the Partnership's assets would be impractical or would cause undue loss to the
Partners, the Liquidator may, in its sole and absolute discretion, defer for a
reasonable time the liquidation of any assets except those necessary to satisfy
liabilities of the Partnership (including to those Partners as creditors) and/or
distribute to the Partners, in lieu of cash, as tenants in common and in
accordance with the provisions of Section 13.2.A hereof, undivided interests in
such Partnership assets as the Liquidator deems not suitable for liquidation.
Any such distributions in kind shall be made only if, in the good faith judgment
of the Liquidator, such distributions in kind are in the best interest of the
Partners, and shall be subject to such conditions relating to the disposition
and management of such properties as the Liquidator deems reasonable and
equitable and to any agreements governing the operation of such properties at
such time. The Liquidator shall determine the fair market value of any property
distributed in kind using such reasonable method of valuation as it may adopt.
C. As part of the liquidation and winding-up of the
Partnership, a proper accounting shall be made of the Capital Account of each
Partner, including an analysis of changes to the Capital Account from the date
of the last previous accounting. Financial statements presenting such accounting
shall include a report of an independent certified public accountant selected by
the Liquidator.
D. As part of the liquidation and winding-up of the
Partnership, the Liquidator may sell Partnership assets (or assets owned by the
Subsidiary Corporations, the Management Company, or any other entity in which
the Partnership is an owner), at the best price and on the best terms and
conditions as the Liquidator in good faith believes are reasonably available at
the time.
-57-
<PAGE> 63
Section 13.3 Compliance with Timing Requirements of Regulations
In the event the Partnership is "liquidated" within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made pursuant
to this Article 13 to the General Partner and Limited Partners who have positive
Capital Accounts in compliance with Regulations Section 1.704-1(b)(2)(ii)(b)(2).
If any Partner has a deficit balance in its Capital Account (after giving effect
to all contributions, distributions and allocations for all taxable years,
including the year during which such liquidation occurs), such Partner shall
have no obligation to make any contribution to the capital of the Partnership
with respect to such deficit, and such deficit shall not be considered a debt
owed to the Partnership or to any other Person for any purpose whatsoever. In
the discretion of the Liquidator, a pro rata portion of the distributions that
would otherwise be made to the General Partner and Limited Partners pursuant to
this Article 13 may be:
(i) distributed to a trust established for the benefit of the
General Partner and Limited Partners for the purposes of liquidating Partnership
assets, collecting amounts owed to the Partnership, and paying any contingent or
unforeseen liabilities or obligations of the Partnership or of the General
Partner arising out of or in connection with the Partnership. The assets of any
such trust shall be distributed to the General Partner and Limited Partners from
time to time, in the reasonable discretion of the Liquidator, in the same
proportions as the amount distributed to such trust by the Partnership would
otherwise have been distributed to the General Partner and Limited Partners
pursuant to this Agreement; or
(ii) withheld to provide a reasonable reserve for Partnership
liabilities (contingent or otherwise) and to reflect the unrealized portion of
any installment obligations owed to the Partnership, provided that such withheld
amounts shall be distributed to the General Partner and Limited Partners as soon
as practicable.
Section 13.4 Deemed Distribution and Recontribution
Notwithstanding any other provisions of this Article 13, in the event
the Partnership is liquidated within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g) but no Liquidating Event has occurred, the Partnership's
property shall not be liquidated, the Partnership's liabilities shall not be
paid or discharged, and the Partnership's affairs shall not be wound up.
Instead, the Partnership shall be deemed to have distributed the Partnership
property in kind to the General Partner and Limited Partners, who shall be
deemed to have assumed and taken such property subject to all Partnership
liabilities, all in accordance with their respective Capital Accounts.
Immediately thereafter, the General Partner and Limited Partners shall be deemed
to have recontributed the Partnership property in kind to the Partnership, which
shall be deemed to have assumed and taken such property subject to all such
liabilities.
Section 13.5 Rights of Limited Partners
Except as otherwise provided in this Agreement, each Limited Partner
shall look solely to the assets of the Partnership for the return of its Capital
Contribution and shall have no right or power to demand or receive property
other than cash from the Partnership. No Limited Partner
-58-
<PAGE> 64
shall have priority over any other Limited Partner as to the return of its
Capital Contributions, distributions, or allocations, except as permitted by
Section 8.7.C or otherwise expressly provided in this Agreement.
Section 13.6 Documentation of Liquidation
Upon the completion of the liquidation of the Partnership cash and
property as provided in Section 13.2 hereof, the Partnership shall be terminated
and the Certificate and all qualifications of the Partnership as a foreign
limited partnership in jurisdictions other than the State of Delaware shall be
canceled and such other actions as may be necessary to terminate the Partnership
shall be taken. The Liquidator shall have the authority to execute and record
any and all documents or instruments required to effect the dissolution,
liquidation and termination of the Partnership.
Section 13.7 Reasonable Time for Winding-Up
A reasonable time shall be allowed for the orderly winding-up of the
business and affairs of the Partnership and the liquidation of its assets
pursuant to Section 13.2 hereof, in order to minimize any losses otherwise
attendant upon such winding-up, and the provisions of this Agreement shall
remain in effect between the Partners during the period of liquidation.
Section 13.8 Liability of the Liquidator
The Liquidator shall be indemnified and held harmless by the
Partnership from and against any and all claims, demands, liabilities, costs,
damages and causes of action of any nature whatsoever arising out of or
incidental to the Liquidator's taking of any action authorized under or within
the scope of this Agreement; provided, however, that the Liquidator shall not be
entitled to indemnification, and shall not be held harmless, where the claim,
demand, liability, cost, damage or cause of action at issue arises out of:
(1) a matter entirely unrelated to the Liquidator's action or
conduct pursuant to the provisions of this Agreement; or
(2) the proven willful misconduct or gross negligence of the
Liquidator.
Section 13.9 Waiver of Partition
Each Partner hereby waives any right to a partition of the Partnership
property.
ARTICLE XIV
AMENDMENT OF AGREEMENT
Section 14.1 Amendments
A. Amendments to this Agreement may be proposed by the
General Partner. Except as provided in Section 14.1.B or 14.1.C, a proposed
amendment shall be adopted and be
-59-
<PAGE> 65
effective as an amendment hereto if it is approved by the General Partner and
Limited Partners owning a majority-in-interest of the total Percentage Interests
of the Limited Partners.
B. Notwithstanding Section 14.1.A, the General Partner shall
have the power, without the Consent of the Limited Partners, to amend this
Agreement as may be required to facilitate or implement any of the following
purposes:
(1) to add to the obligations of the General Partner or
surrender any right or power granted to the General
Partner or any Affiliate of the General Partner for the
benefit of the Limited Partners;
(2) to reflect the admission, substitution, termination, or
withdrawal of Partners in accordance with this Agreement
(including, without limitation, adjustments to Exhibit A
to reflect such events, as set forth in Section 4.1.B
hereof); and
(3) to reflect a change that is of an inconsequential nature
and does not adversely affect the Limited Partners in any
material respect, or to cure any ambiguity, correct or
supplement any provision in this Agreement not
inconsistent with law or with other provisions, or make
other changes with respect to matters arising under this
Agreement that will not be inconsistent with law or with
the provisions of this Agreement.
C. Notwithstanding anything to the contrary contained in
Section 14.1.A hereof, this Agreement shall not be amended without the prior
written consent of each Partner adversely affected if such amendment would (i)
convert a Limited Partner's interest in the Partnership into a general partner's
interest, (ii) modify the limited liability of a Limited Partner, (iii) alter
rights of the Partner to receive distributions pursuant to Article 5, or the
allocations specified in Article 6 (except as permitted pursuant to Sections
4.2, 4.3, 4.6, 4.7, 8.7 and Section 14.1.B(3) hereof), (iv) alter or modify the
Exchange Rights set forth in Section 8.6, or the right set forth in Section
11.2.C, (v) cause the termination of the Partnership prior to the time set forth
in Sections 2.5 or 13.1, or (vi) amend this Section 14.1.C. Further, no
amendment may alter the restrictions on the General Partner's authority set
forth in Section 7.3 without the consent of all Limited Partners.
ARTICLE XV
PARTNER REPRESENTATIONS AND WARRANTIES
Section 15.1 Representations and Warranties
A. Each Partner represents and warrants severally and not
jointly, and solely on behalf of itself, to the Partnership and the other
Partners as follows:
-60-
<PAGE> 66
(1) Organization. If such Partner is not a natural person,
such Partner is duly formed and validly existing and is qualified to do business
and in good standing in the jurisdictions in which it does business.
(2) Due Authorization; Binding Agreement. This Agreement
has been duly executed and delivered by such Partner, or an authorized
representative of such Partner, and constitutes a legal, valid and binding
obligation of such Partner, enforceable against such Partner in accordance with
the terms hereof.
(3) Consents and Approvals. No consent, waiver, approval
or authorization of, or filing, registration or qualification with, or notice
to, any governmental unit or any other person is required to be made, obtained
or given by such Partner in connection with the execution, delivery and
performance of this Agreement other than consents, waivers, approvals or
authorizations which have been obtained prior to the date hereof.
(4) No Conflict with Other Documents or Violation of Law.
The execution of this Agreement by such Partner and such Partner's performance
of the transactions contemplated herein will not violate any document,
instrument, agreement, stipulation, judgment, order, or any applicable federal,
state or local law, ordinance or regulation to which such Partner is a party or
by which such Partner is bound.
B. Each Limited Partner represents and warrants that its
Limited Partnership Interest is being acquired for its own account and not with
a view to the distribution or other sale thereof, except in a transaction which
is exempt from registration under the Securities Act or registered thereunder.
Any distribution or other sale of the Limited Partnership Interest of such
Limited Partner shall be subject to the provisions of Section 11.3 hereof. Such
Limited Partner further represents and warrants to the Partnership and the other
Partners as follows:
(1) If such Limited Partner is a corporation, partnership
or a Massachusetts business trust or similar business trust, it has not been
formed for the specific purpose of acquiring the Limited Partnership Interest,
and has total assets in excess of Five Million Dollars ($5,000,000);
(2) If such Limited Partner is an individual, he or she
had an individual income in excess of $200,000 in each of the two most recent
tax years or joint income with his or her spouse in excess of $300,000 in each
of those years and has a reasonable expectation of reaching at least the same
income level in the current year;
(3) Such Limited Partner is a sophisticated investor with
the capacity to protect its own interests in investments of this nature, and is
capable of evaluating the merits and risks of an investment in the Limited
Partnership Interest;
(4) Such Limited Partner has had an opportunity to ask
questions and receive answers concerning the investment in the Limited
Partnership Interest, and has all of the information deemed by it to be
necessary or appropriate to evaluate the investment in the Limited Partnership
Interest and the risks and merits thereof;
(5) Such Limited Partner is aware of the following:
-61-
<PAGE> 67
(i) An investment in the Limited Partnership Interest
is speculative, with no assurance of any income therefrom;
(ii) No federal or state agency has made any finding
or determination as to the fairness of the acquisition, or any recommendation or
endorsement of such acquisition;
(iii) Transferability of the Limited Partnership
Interest is restricted and, accordingly, it may not be possible for such Limited
Partner to liquidate the Limited Partnership Interest in case of emergency; and
(iv) With respect to the tax aspects of an investment
in the Limited Partnership Interest, such Limited Partner in making this
acquisition is not relying to any degree upon the advice of Crescent Equities or
the Partnership, or any Person affiliated therewith, but rather solely upon its
own legal, financial and tax advisors.
ARTICLE XVI
ARBITRATION OF DISPUTES
Section 16.1 Arbitration
Notwithstanding anything to the contrary contained in this Agreement,
all claims, disputes and controversies between the parties hereto (including,
without limitation, any claims, disputes and controversies between the
Partnership and any one or more of the Partners and any claims, disputes and
controversies among any two or more Partners) arising out of or in connection
with this Agreement or the Partnership created hereby, relating to the validity,
construction, performance, breach, enforcement or termination thereof, or
otherwise, shall be resolved by binding arbitration in the State of Texas, in
accordance with this Article 16 and, to the extent not inconsistent herewith,
the Expedited Procedures and Commercial Arbitration Rules of the American
Arbitration Association.
Section 16.2 Procedures
Any arbitration called for by this Article 16 shall be conducted in
accordance with the following procedures:
(1) The Partnership or any partner (the "Requesting Party")
may demand arbitration pursuant to Section 16.1 hereof at any time by giving
written notice of such demand (the "Demand Notice") to all other Partners and
(if the Requesting Party is not the Partnership) to the Partnership, which
Demand Notice shall describe in reasonable detail the nature of the claim,
dispute or controversy.
(2) Within fifteen (15) days after the giving of a Demand
Notice, the Requesting Party, on the one hand, and each of the other Partners
and/or the Partnership against whom the claim has been made or with respect to
which a dispute has arisen (collectively, the "Responding Party"), on the other
hand, shall select and designate in writing to the other party one reputable,
disinterested individual deemed competent to arbitrate the claim, dispute or
controversy (a
-62-
<PAGE> 68
"Qualified Individual") willing to act as an arbitrator of the claim, dispute or
controversy. Within fifteen (15) days after the foregoing selections have been
made, the arbitrators so selected shall jointly select a third Qualified
Individual willing to act as an arbitrator of the claim, dispute or controversy.
In the event that the two arbitrators initially selected are unable to agree on
a third arbitrator within the second fifteen (15) day period referred to above,
then, on the application of either party, the American Arbitration Association
shall promptly select and appoint a Qualified Individual to act as the third
arbitrator. The three arbitrators selected pursuant to this Section 16.2(2)
shall constitute the arbitration panel for the arbitration in question.
(3) The presentations of the parties hereto in the arbitration
proceeding shall be commenced and completed within sixty (60) days after the
selection of the arbitration panel pursuant to Section 16.2(2) above, and the
arbitration panel shall render its decision in writing within thirty (30) days
after the completion of such presentations. Any decision concurred in by any two
(2) of the arbitrators shall constitute the decision of the arbitration panel,
and unanimity shall not be required.
(4) The arbitration panel shall have the discretion to include
in its decision a direction that all or part of the attorneys' fees and costs of
any party or parties and/or the costs of such arbitration be paid by any other
party or parties. On the application of a party before or after the initial
decision of the arbitration panel, and proof of its attorneys' fees and costs,
the arbitration panel shall order the other party to make any payments directed
pursuant to the preceding sentence.
(5) Notwithstanding anything to the contrary contained above
in this Section 16.2, if either party fails to select a Qualified Individual to
act as an arbitrator for such party with the fifteen (15) day time period set
forth in the first sentence of Section 16.2(2), the Qualified Individual
selected by the other party shall serve as sole arbitrator under this Section
16.2 in lieu of the arbitration panel. Such sole arbitrator shall have all of
the rights and duties of the arbitration panel set forth above in this Section
16.2.
Section 16.3 Binding Character
Any decision rendered by the arbitration panel pursuant to this Article
16 shall be final and binding on the parties hereto, and judgment thereon may be
entered by any state or federal court of competent jurisdiction
Section 16.4 Exclusivity
Arbitration shall be the exclusive method available for resolution of
claims, disputes and controversies described in Section 16.1 hereof, and the
Partnership and its Partners stipulate that the provisions hereof shall be a
complete defense to any suit, action, or proceeding in any court or before any
administrative or arbitration tribunal with respect to any such claim,
controversy or dispute. The provisions of this Article 16 shall survive the
dissolution of the Partnership.
-63-
<PAGE> 69
Section 16.5 No Alteration of Agreement
Nothing contained herein shall be deemed to give the arbitrators any
authority, power or right to alter, change, amend, modify, add to, or subtract
from any of the provisions of this Agreement.
ARTICLE XVII
GENERAL PROVISIONS
Section 17.1 Addresses and Notice
All notices, requests, demands and other communications hereunder to a
Partner shall be in writing and shall be deemed to have been duly given if
delivered by hand or if sent by certified mail, return receipt requested,
properly addressed and postage prepaid, or transmitted by commercial overnight
courier to the Partner at the address set forth in Exhibit A or at such other
address as the Partner shall notify the General Partner in writing. Such
communications shall be deemed sufficiently given, served, sent or received for
all purposes at such time as delivered to the addressee (with the return receipt
or delivery receipt being deemed conclusive evidence of such delivery) or at
such time as delivery is refused by the addressee upon presentation.
Section 17.2 Titles and Captions
All article or section titles or captions in this Agreement are for
convenience only. They shall not be deemed part of this Agreement and in no way
define, limit, extend or describe the scope or intent of any provisions hereof.
Except as specifically provided otherwise, (i) references to "Articles" and
"Sections" are to Articles and Sections of this Agreement, and (ii) references
to "Exhibits" are to the Exhibits attached to this Agreement. Each Exhibit
attached hereto and referred to herein is hereby incorporated by reference.
Section 17.3 Pronouns and Plurals
Whenever the context may require, any pronoun used in this Agreement
shall include the corresponding masculine, feminine or neuter forms, and the
singular form of nouns, pronouns and verbs shall include the plural and vice
versa. Any references in this Agreement to "including" shall be deemed to mean
"including without limitation."
Section 17.4 Further Action
The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purpose of this Agreement.
-64-
<PAGE> 70
Section 17.5 Binding Effect
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
Section 17.6 Creditors
None of the provisions of this Agreement shall be for the benefit of,
or shall be enforceable by, any creditor of the Partnership.
Section 17.7 Waiver
No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute waiver of any
such breach or any other covenant, duty, agreement or condition.
Section 17.8 No Agency
Nothing contained herein shall be construed to constitute any partner
the agent of another Partner, except as specifically provided herein, or in any
manner to limit the Partners in the carrying on of their own respective
businesses or activities.
Section 17.9 Entire Understanding
This Agreement constitutes the entire agreement and understanding among
the Partners and supersedes any prior understanding and/or written or oral
agreements among them respecting the subject matter herein.
Section 17.10 Counterparts
This Agreement may be executed in counterparts, all of which together
shall constitute one agreement binding on all the parties hereto,
notwithstanding that all such parties are not signatories to the original or the
same counterpart. Each party shall become bound by this Agreement immediately
upon affixing its signature hereto.
Section 17.11 Applicable Law
This Agreement shall be construed in accordance with and governed by
the laws of the State of Delaware, without regard to the principles of conflicts
of law. The laws of the State of Delaware shall be applied in construing the
Agreement in connection with all arbitration proceedings under Article XVI;
provided that, to the extent that the laws of another jurisdiction are otherwise
applicable as to procedural requirements relating to the arbitration, the
procedural requirements of such other jurisdiction shall be complied with.
-65-
<PAGE> 71
Section 17.12 Invalidity of Provisions
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respects, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
Section 17.13 Guaranty by Crescent Equities
Crescent Equities unconditionally and irrevocably guarantees to the
Limited Partners the performance by the General Partner of the obligations of
the General Partner under this Agreement. This guaranty is exclusively for the
benefit of the Limited Partners and shall not extend to the benefit of any
creditor of the Partnership.
Section 17.14 Restriction on Sale of Sonoma Property
The General Partner hereby acknowledges that the Partnership's ability
to sell or otherwise transfer the Sonoma Property is subject to certain
restrictions under the Sonoma Contribution Agreement for a period of seven (7)
years after the date of the Sonoma Contribution Agreement, or as otherwise set
forth at the end of Article II of the Sonoma Contribution Agreement.
-66-
<PAGE> 72
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
GENERAL PARTNER:
CRESCENT REAL ESTATE EQUITIES, LTD.,
a Delaware corporation
/s/ CRESCENT REAL ESTATE EQUITIES, LTD.
---------------------------------------
LIMITED PARTNERS:
as set forth in Exhibit A hereto:
By: CRESCENT REAL ESTATE EQUITIES,
LTD., as attorney-in-fact
pursuant to Sections 2.4 and
14.1.B of the Agreement
/s/ CRESCENT REAL ESTATE EQUITIES, LTD.
---------------------------------------
[EXHIBITS OMITTED]
-67-
<PAGE> 73
FIRST AMENDMENT
TO THE SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
THIS FIRST AMENDMENT TO THE SECOND AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP, dated
as of February 19, 1998, is entered into by and among Crescent Real Estate
Equities, Ltd., a Delaware corporation, on its own behalf as sole general
partner (the "General Partner") of Crescent Real Estate Equities Limited
Partnership, a Delaware limited partnership (the "Partnership"), and as
attorney-in-fact for each of the existing limited partners (the "Limited
Partners") of the Partnership pursuant to Sections 2.4 and 14.1.B of the Second
Amended and Restated Agreement of Limited Partnership of Crescent Real Estate
Equities Limited Partnership, dated as of November 1, 1997, hereinafter referred
to as the "Effective Agreement."
WITNESSETH:
WHEREAS, the Partnership was formed pursuant to that certain Certificate
of Limited Partnership dated February 9, 1994 and filed on February 9, 1994 in
the office of the Secretary of State of Delaware, and that certain Agreement of
Limited Partnership dated as of February 9, 1994 (the "Initial Agreement");
WHEREAS, the Initial Agreement, as previously amended and restated, was
amended and restated in its entirety by the Effective Agreement;
WHEREAS, the individuals set forth in the following table exercised
options to purchase REIT Shares for the respective number of shares, on the
respective date, pursuant to the respective stock option plan and for which
Crescent Equities shall receive credit for the respective Capital Contribution
to the Partnership indicated opposite each such individual's name:
<TABLE>
<CAPTION>
Number of REIT Capital
Individual Exercise Date Shares Purchased Stock Option Plan Contribution
-------------- ------------- ---------------- ----------------- ------------
<S> <C> <C> <C> <C>
Julie C. Carey 11/10/97 800 1995 Plan $ 28,350.00
Anna Dean 11/24/97 200 First Amended and $ 7,562.50
Restated 1995 Plan
Howard Lovett 12/4/97 3,000 1995 Plan $117,000.00
Howard Lovett 12/4/97 2,000 First Amended and $ 78,000.00
Restated 1995 Plan
Bobby Vann 12/5/97 200 First Amended and $ 7,775.00
Restated 1995 Plan
Bret Angle 12/5/97 200 First Amended and $ 7,775.00
Restated 1995 Plan
</TABLE>
<PAGE> 74
<TABLE>
<S> <C> <C> <C> <C>
Howard Lovett 12/19/97 200 1995 Plan $ 7,737.50
Lynn B. Sonsel 1/5/98 200 First Amended and $ 7,937.50
Restated 1995 Plan
Fred Hoeckstra 1/21/98 200 First Amended and $ 7,237.50
Restated 1995 Plan
Anthony M. Frank 2/2/98 2,800 First Amended and $ 97,125.00
Restated 1995 Plan
</TABLE>
WHEREAS, the individuals and entities set forth in the following table
exercised their Exchange Rights with respect to the respective number of
Partnership Units, on the respective date indicated opposite each such
individual's or entity's name:
<TABLE>
<CAPTION>
Number of
Partnership Units
Individual or Entity Exercise Date Exchanged
------------------------------ -------------------- --------------------
<S> <C> <C>
Gerald W. Haddock 12/12/97 5,000
Pridemore Asset Trust UA 1/1/98 8,064
Scott Asset Trust UA 1/1/98 8,064
Peter G. Henry 1/2/98 7,149
University of Arizona 1/5/98 61,250
Foundation
The Joost Family Living Trust 1/6/98 2,110
Scott Asset Trust UA 1/16/98 1,364
Pridemore Asset Trust UA 1/16/98 1,364
Robert J. Stirk 1/19/98 2,000
Peter G. Henry 1/28/98 10,000
The Lone Star Trust 1/29/98 4,220
</TABLE>
WHEREAS, on December 8, 1997, Richard E. Rainwater assigned 1,300
Partnership Units to Darla D. Moore;
WHEREAS, on December 19, 1997, Crescent Equities issued 5,375,000 REIT
Shares in a public stock offering at a cash price of $38.125 per share, which
cash proceeds aggregating $204,921,875 were contributed to the Partnership by
Crescent Equities pursuant to Section 4.2 of the Effective Agreement;
WHEREAS, effective as of December 31, 1997, Crescent Equities issued
30,933 REIT Shares to Senterra Real Estate Group, L.L.C. ("Senterra") in
satisfaction of certain obligations of the Partnership to Senterra, and, in
connection therewith, Crescent Equities shall receive credit for a Capital
Contribution to the Partnership of $1,200,000;
WHEREAS, on January 5, 1998, Canyon Ranch, Inc. assigned 61,250
Partnership Units to the University of Arizona Foundation;
-2-
<PAGE> 75
WHEREAS, on January 8, 1998. Crescent Equities issued 196 REIT Shares to
each of Morton H. Meyerson, William F. Quinn, and Paul E. Rowsey, III in
payment of trust managers' fees and, in connection therewith, Crescent Equities
shall receive credit for a Capital Contribution to the Partnership of $20,064;
WHEREAS, on January 16, 1998, Darla D. Moore assigned 682 Partnership
Units to the Scott Asset Trust UA and 682 Partnership Units to the Pridemore
Asset Trust UA;
WHEREAS, on January 16, 1998, Richard E. Rainwater assigned 682
Partnership Units to the Scott Asset Trust UA and 682 Partnership Units to the
Pridemore Asset Trust UA;
WHEREAS, on February 19,1998, Crescent Equities issued 8,000,000 6-3/4%
Series A Convertible Cumulative Preferred Shares ("Series A Preferred Shares")
and, in connection therewith, the General Partner, pursuant to Section 8.7.C of
the Effective Agreement, is required to cause the Partnership to issue to
Crescent Equities preferred equity ownership interests in the Partnership
("Series A Preferred Partnership Units"), and, pursuant to its authority under
Sections 6.1.C and 8.7.C of the Effective Agreement, desires to make such
revisions to the Agreement as are necessary to reflect the issuance of the
Series A Preferred Partnership Units; and
WHEREAS, the General Partner desires to amend the Effective Agreement
pursuant to its authority under Sections 2.4 and 14.1.B of the Effective
Agreement and the powers of attorney granted to the General Partner by the
Limited Partners in order to reflect the aforementioned.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt,
adequacy and sufficiency of which are hereby acknowledged, the parties hereto,
intending legally to be bound, hereby agree as follows:
1. In order to reflect (i) the Capital Contributions of Crescent Equities
aggregating $366,500 in connection with the exercise of options to purchase
REIT Shares by Julie C. Carey, Anna Dean, Howard Lovett, Bobby Vann, Bret
Angle, Lynn B. Sonsel, Fred Hoeckstra and Anthony M. Frank, as more fully set
forth above, (ii) the exercise by Gerald W. Haddock, the Pridemore Asset Trust
UA, the Scott Asset Trust UA, Peter G. Henry, the University of Arizona
Foundation, The Joost Family Living Trust, Robert J. Stirk, and the Lone Star
Trust of their Exchange Rights with respect to Partnership Units, as more fully
set forth above, (iii) the assignment by Richard E. Rainwater of 1,300
Partnership Units to Darla D. Moore, (iv) the Capital Contribution by Crescent
Equities on December 19, 1997 of $204,921,875 in connection with the public
stock offering of 5,375,000 REIT Shares at $38,125 per share, (v) the
assignment by Canyon Ranch, Inc. of 61,250 Partnership Units to the University
of Arizona Foundation, (vi) the Capital Contribution by Crescent Equities on
December 31, 1997, of $1,200,000 in connection with the issuance OF 30,933 REIT
Shares to Senterra in satisfaction of certain obligations of the Partnership to
Senterra, (vii) the Capital Contribution by Crescent Equities on January 8,
1998, of $20,064 in connection with the issuance of 196 REIT shares to each of
Morton H. Meyerson, William F. Quinn, and Paul E. Rowsey, III in payment of
trust managers' fees, (viii) the assignment by Darla D. Moore of 682
Partnership Units to each of the Scott Irrevocable Asset Trust and the
Pridemore Irrevocable Asset Trust, and (ix) the assignment by Richard E.
Rainwater of 682 Partnership Units to each of the Scott Irrevocable Asset Trust
and the Pridemore Irrevocable Asset Trust, Exhibit A to the Effective Agreement
is hereby deleted in its entirety and replaced with the Exhibit A attached to
this First Amendment and made a part hereof.
-3-
<PAGE> 76
2. Pursuant to Section 8.7.C of the Effective Agreement, effective as of
February 19, 1998, the issuance date of Series A Preferred Shares by Crescent
Equities, the Partnership hereby issues 8,000,000 Series A Preferred
Partnership Units to Crescent Equities.
(a) Crescent Equities shall have a zero percentage Partnership Interest
with respect to such Series A Preferred Partnership Units and shall have no
voting rights other than the right to vote on any amendment to the Effective
Agreement if such amendment would (i) convert the Series A Preferred Partnership
Units into a general partner's interest, (ii) modify the limited liability of
Crescent Equities with respect to the Series A Preferred Partnership Units, or
(iii) alter the distribution, redemption, conversion or liquidation rights of
the Series A Preferred Partnership Units as set forth in paragraphs 2(b) through
(e) below.
(b) Notwithstanding Section 5.2 of the Effective Agreement, and prior to
any distributions of Available Cash under such provision, the General Partner
shall cause distributions of Available Cash to be made quarterly in cash on the
15th day, or if not a Business Day, the next succeeding Business Day, of
February, May, August and November in each year, beginning November 15, 1998,
(or on any other date on which Crescent Equities makes a distribution of
accrued, unpaid quarterly distributions to the holders of Series A Preferred
Shares) to Crescent Equities in an amount equal to the amount that is required
to be distributed by Crescent Equities on that date to the holders of Series A
Preferred Shares.
(c) Notwithstanding Sections 6.1.A and B of the Effective Agreement
(i) Each year, after giving effect to the special allocations set
forth in Section 1 of Exhibit C to the Effective Agreement, gross income of the
Partnership shall be allocated first to Crescent Equities until the cumulative
amount allocated under this paragraph 2(c)(i) to Crescent Equities for the
current year and all prior years is equal to the cumulative amount for the
current year and all prior years of the distributions made to Crescent Equities
under paragraph 2(b) above and the portion of the distributions made to Crescent
Equities under paragraph 2(d) below (if any) that exceeds $25 per Series A
Preferred Partnership Unit. Any remaining Net Profits or Net Losses (other than
gain or loss from a sale or other disposition of all or substantially all of the
assets of the Partnership, which shall be allocated as set forth in paragraphs
2(c)(ii) and (iii) below) shall be allocated as set forth in Sections 6.1.A and
B of the Effective Agreement.
(ii) The gain of the Partnership from a sale or other disposition of
all or substantially all of the assets of the Partnership shall be allocated
among the Partners as follows: (A) first, to Crescent Equities in the amount
necessary to cause its Capital Account balance to be equal to the liquidation
preference payable by Crescent Equities on the outstanding Series A Preferred
Shares (the "Liquidation Preference") (i.e., a liquidation payment of $25 per
Series A Preferred Partnership Unit, necessary, plus and accrued, unpaid
quarterly distribution thereon), (B) second, to the Partners in the amounts
necessary, and in the ratio of such amounts, to cause the Capital Account
balance of Crescent Equities in excess of the liquidation Preference and the
Capital Account of each other Partner to be in the same ratio as their
respective Partnership Interests, and (iii) thereafter, to all of the Partners
in proportion to their respective Partnership Interests
(iii) The loss of the Partnership from a sale or other disposition of
all or substantially all of the assets of the Partnership shall be allocated
among the Partners as follows: (A) first, to the Partners, if any, having
positive Capital Account balances, in the amounts necessary, and in the ratio of
such amounts, so as to cause the positive Capital Account Balance of Crescent
-4-
<PAGE> 77
Equities to equal the Liquidation Preference and the positive Capital Account
balance of each other Partner to equal zero (or, if there is insufficient loss
to accomplish this result, loss shall be allocated in a manner so as to cause
the positive Capital Account balance of Crescent Equities in excess of the
Liquidation Preference and the positive Capital Account balance of each other
Partner to be in the same ratio as their respective Partnership Interests), (B)
second, to Crescent Equities, until its positive Capital Account balance equals
zero, and (C) thereafter, to the Partners in proportion to their respective
Partnership Interests.
(d) In the event that Crescent Equities exercises its redemption right
with respect to the Series A Preferred Shares, the Partnership shall
concurrently redeem a corresponding amount of Series A Preferred Partnership
Units at the same redemption price paid by Crescent Equities for the Series A
Preferred Shares (i.e., a redemption payment of $25 per Series A Preferred
Partnership Unit, plus any accrued, unpaid quarterly distribution thereon).
(e) Upon exercise of any conversion right with respect to Series A
Preferred Shares, (i) Crescent Equities shall, as of the date on which the
conversion is consummated, be deemed to have contributed to the Partnership as
Contributed Funds pursuant to Section 4.2.A(2) of the Effective Agreement an
amount equal to the Value (computed as of the Business Day immediately
preceding the date on which such conversion is consummated) of the REIT Shares
delivered by Crescent Equities to such holder of Series A Preferred Shares, (ii)
the Partnership Interests of Crescent Equities and the other Limited Partners
shall be adjusted as set forth in Section 4.2 of the Effective Agreement, and
(iii) a corresponding portion of Series A Preferred Partnership Units shall be
retired.
3. Except as the context may otherwise require, any terms used in this
First Amendment which are defined in the Effective Agreement shall have the
same meaning for purposes of this First Amendment as in the Effective
Agreement.
4. Except as herein amended, the Effective Agreement is hereby ratified,
confirmed, and reaffirmed for all purposes and in all respects.
IN WITNESS WHEREOF, the undersigned has executed this First Amendment as
of the date first written above.
GENERAL PARTNER:
CRESCENT REAL ESTATE EQUITIES, LTD.,
a Delaware corporation, on its own
behalf and as attorney-in-fact for the
Limited Partners pursuant to Sections
2.4 and 14.1.B of the Effective
Agreement
By: /s/ DAVID M. DEAN
-----------------------------
Name: David M. Dean
-----------------------------
Title: Senior Vice President, Law
-----------------------------
[EXHIBITS OMITTED]
-5-
<PAGE> 78
SECOND AMENDMENT
TO THE SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
THIS SECOND AMENDMENT TO THE SECOND AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP, dated
as of March 2, 1998, is entered into by and among Crescent Real Estate Equities,
Ltd., a Delaware corporation, on its own behalf as sole general partner (the
"General Partner") of Crescent Real Estate Equities Limited Partnership, a
Delaware limited partnership (the "Partnership"), and as attorney-in-fact for
each of the existing limited partners (the "Limited Partners") of the
Partnership pursuant to Sections 2.4 and 14.1.B of the Second Amended and
Restated Agreement of Limited Partnership of Crescent Real Estate Equities
Limited Partnership, dated as of November 1, 1997, as amended by the First
Amendment to the Second Amended and Restated Agreement of Limited Partnership
of Crescent Real Estate Equities Limited Partnership, dated as of February
19, 1998, hereinafter referred to as the "Effective Agreement."
WITNESSETH:
WHEREAS, the Partnership was formed pursuant to that certain
Certificate of Limited Partnership dated February 9, 1994 and filed on February
9, 1994 in the office of the Secretary of State of Delaware and that certain
Agreement of Limited Partnership dated as of February 9, 1994 (the "Initial
Agreement");
WHEREAS, the Initial Agreement, as previously amended and restated,
was amended and restated in its entirety by the Effective Agreement:
WHEREAS, on March 2, 1998, the Partnership issued Limited Partnership
Interest including 125,155 Partnership Units to Senterra Real Estate Group,
L.L.C. ("Senterra") in exchange for the contribution by Senterra to the
Partnership of the property and assets, including providing noncompetition
agreements (the "Property"), specified in that certain Asset Contribution
Agreement dated as of October 7, 1996, as amended on December 31, 1997, and
March 2, 1998 (the "Contract");
WHEREAS, Senterra immediately distributed 83,441, 20,857 and 20,857
Partnership Units to Senterra Corporation, a Texas corporation, Myron G.
Blalock III ("Blalock"), and Neil H. Tofsky ("Tofsky"), respectively; and
WHEREAS, the General Partner desires to amend the Effective Agreement
pursuant to its authority under Sections 2.4 and 14.1.B of the Effective
Agreement and the powers of attorney granted to the General Partner by the
Limited Partners in order to reflect the aforementioned.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained and other good and valuable consideration, the
receipt, adequacy and sufficiency of which are hereby acknowledged, the parties
hereto, intending legally to be bound, hereby agree as follows:
<PAGE> 79
1. In order to reflect the issuance of a Limited Partnership interest
including 125,155 Partnership Units to Senterra and Senterra's immediate
distribution of 83,441, 20,857 and 20,857 Partnership Units to Senterra
Corporation, Blalock, and Tofsky, respectively, Exhibit A to the Effective
Agreement is hereby deleted in its entirety and replaced with the Exhibit A
attached to this Second Amendment and made a part hereof.
2. Each of Senterra Corporation, Blalock, and Tofsky hereby
acknowledges that it acquired a Limited Partnership Interest in exchange for a
Capital Contribution by Senterra of the Property, which Capital Contribution
has a Net Asset Value of $8,521,500.
3. Each of Senterra Corporation, Blalock, and Tofsky hereby
acknowledges its acceptance of all of the terms and conditions of the Effective
Agreement, including without limitation the power of attorney granted in Section
2.4 of the Effective Agreement, and all of the terms and conditions hereof.
4. Except as the context may otherwise require, any terms used in this
Second Amendment which are defined in the Effective Agreement shall have the
same meaning for purposes of this Second Amendment as in the Effective
Agreement.
5. Except as herein amended, the Effective Agreement is hereby
ratified, confirmed, and reaffirmed for all purposes and in all respects.
IN WITNESS WHEREOF, the undersigned has executed this Second Amendment
as of the date first written above.
GENERAL PARTNER:
CRESCENT REAL ESTATE EQUITIES, LTD.,
a Delaware corporation, on its own
behalf and as attorney-in-fact for the
Limited Partners pursuant to Sections
2.4 and 14.1.B of the Effective
Agreement
By: /s/ DAVID M. DEAN
--------------------------------
Name: DAVID M. DEAN
--------------------------------
Title: Senior Vice President, Law
--------------------------------
[EXHIBITS OMITTED]
-2-
<PAGE> 80
NEW LIMITED PARTNERS:
/s/ MYRON G. BLALOCK, III
---------------------------------------
Myron G. Blalock, III
/s/ NEIL H. TOFSKY
---------------------------------------
Neil H. Tofsky
SENTERRA CORPORATION, a Texas
corporation
By: /s/ DOUGLAS W. SCHNITZER
-----------------------------------
Name: Douglas W. Schnitzer
Title: President
The undersigned is executing this Second Amendment for the sole purpose
of evidencing its contribution to the Partnership of the property and assets
specified in the Contract in exchange for a Limited Partnership Interest
including 123,155 Partnership Units, and its immediate withdrawal as a Partner
in connection with the distribution of 20,857 Partnership Units to each of
Blalock and Tofsky, and 83,441 Partnership Units to Senterra Corporation.
SENTERRA REAL ESTATE GROUP, L.L.C., a
Texas limited liability company
By: /s/ NEIL H. TOFSKY
-----------------------------------
Name: Neil H. Tofsky
Title: President
[EXHIBITS OMITTED]
-3-
<PAGE> 81
THIRD AMENDMENT
TO THE SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
CRESCENT REAL ESTATE
EQUITIES LIMITED PARTNERSHIP
THIS THIRD AMENDMENT TO THE SECOND AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP (this
"Third Amendment"), dated as of April 27, 1998, is entered into by and among
Crescent Real Estate Equities, Ltd., a Delaware corporation, on its own behalf
as sole general partner (the "General Partner") of Crescent Real Estate
Equities Limited Partnership, a Delaware limited partnership (the
"Partnership"), and as attorney-in-fact for each of the existing limited
partners (the "Limited Partners") of the Partnership pursuant to Sections 2.4
and 14.1.B of the Second Amended and Restated Agreement of Limited Partnership
of Crescent Real Estate Equities Limited Partnership, dated as of November 1,
1997, as amended by the First Amendment to the Second Amended and Restated
Agreement of Limited Partnership of Crescent Real Estate Equities Limited
Partnership, dated as of February 19, 1998, and the Second Amendment to the
Second Amended and Restated Agreement of Limited Partnership of Crescent Real
Estate Equities Limited Partnership, dated as of March 2, 1998, hereinafter
referred to as the "Effective Agreement."
W I T N E S S E T H:
WHEREAS, the Partnership was formed pursuant to that certain Certificate
of Limited Partnership dated February 9, 1994 and filed on February 9, 1994 in
the office of the Secretary of State of Delaware and that certain Agreement of
Limited Partnership dated as of February 9, 1994 (the "Initial Agreement");
WHEREAS, the Initial Agreement, as previously amended and restated, was
amended and restated in its entirety by the Effective Agreement;
WHEREAS, Armada/Hoffler Holding Company, a Virginia corporation ("AHHC"),
and Lano International, Inc., a Delaware corporation ("Lano"), as assignor, and
the Partnership, as assignee, entered into that certain Assignment and
Assumption Agreement dated as of the 20th day of March, 1998, as amended by a
First Amendment dated March 23, 1998, and a Second Amendment dated April 27,
1998, (hereinafter referred to collectively as the "Assignment and Assumption
Agreement");
WHEREAS, under the Assignment and Assumption Agreement, (i) AHHC has
agreed to contribute to the Partnership its interest in that certain Agreement
of Sale dated May 30, 1997 by and between Rosewood Georgetown Joint Venture, a
Texas joint venture, as seller, and Lano and AHHC, as purchaser (the
"Contract") in exchange for a Limited Partnership Interest in the Partnership,
and (ii) Lano has agreed to transfer a portion of its interest in the Contract
to the Partnership in exchange for cash and to contribute the remainder of its
interest in the Contract to the
<PAGE> 82
Partnership in exchange for the issuance of a Limited Partnership Interest to
Alan R. Novak ("Novak"), the sole shareholder of Lano;
WHEREAS, the General Partner desires to reflect the admission of AHHC and
Novak as Additional Limited Partners, in exchange for the Capital Contributions
described above, pursuant to Section 4.3 of the Effective Agreement, upon the
terms and conditions set forth herein;
WHEREAS, the General Partner further desires to grant Partnership Units
(as defined in Article I of the Effective Agreement) to Novak and AHHC pursuant
to Section 4.3 of the Effective Agreement upon the terms and conditions set
forth herein; and
WHEREAS, the General Partner desires to amend the Effective Agreement
pursuant to its authority under Sections 2.4 and 14.1.B of the Effective
Agreement and the powers of attorney granted to the General Partner by the
Limited Partners in order to reflect the aforementioned.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt,
adequacy and sufficiency of which are hereby acknowledged, the parties hereto,
intending legally to be bound, hereby agree as follows:
1. In exchange for the Capital Contribution of AHHC described above
(which Capital Contribution has a Net Asset Value of $4,940,095), the
Partnership hereby admits AHHC as an Additional Limited Partner effective as of
the date hereof, pursuant to Section 4.3 of the Effective Agreement, with AHHC
having the Partnership Interest and number of Partnership Units set forth on
Exhibit A hereto opposite its name.
2. In exchange for the Capital Contribution of Lano described above
(which Capital Contribution has a Net Asset Value of $2,509,905), the
Partnership hereby admits Novak as an Additional Limited Partner effective as
of the date hereof, pursuant to Section 4.3 of the Effective Agreement, with
Novak having the Partnership Interest and number of Partnership Units set forth
on Exhibit A hereto opposite its name.
3. Each of Novak and AHHC hereby acknowledges its acceptance of all of
the terms and conditions of the Effective Agreement, including without
limitation the power of attorney granted in Section 2.4 of the Effective
Agreement, and all of the terms and conditions hereof.
4. Novak and AHHC, each for itself, hereby irrevocably constitutes and
appoints the General Partner, with full power of substitution, its true and
lawful attorney for each of Novak and AHHC and in the name, place, and stead of
each of them, and for each of their use and benefit, to execute a future
amendment to the Effective Agreement and such other documents and instruments,
and to take such actions, as the General Partner deems necessary, desirable or
appropriate to effect the issuance of additional Partnership Units or, as the
case may be, the retirement and cancellation of Partnership Units pursuant to
the provisions of the Assignment and Assumption Agreement. Each of Novak and
AHHC agrees that this power of attorney is a power coupled with an interest and
shall survive and not be effected by the termination of this Third
-2-
<PAGE> 83
Amendment (unless and until replaced by a power of attorney granting at least
the same rights to the General Partner) or by the transfer of all or any
portion of either Novak's or AHHC's Limited Partnership Interest and shall
extend to the successors and assigns of Novak and AHHC. Each of Novak and AHHC
hereby agrees to be bound by any representation made by the General Partner,
acting in good faith under this power of attorney, and each of Novak and AHHC
hereby waives any and all defenses which may be available to contest, negate or
disaffirm the action of the General Partner, taken in good faith under this
power of attorney.
5. Neither Novak nor AHHC may sell, assign, transfer, convey, or
otherwise dispose of its Partnership Units for twelve (12) months from the date
of this Third Amendment.
6. Notwithstanding anything to the contrary contained in Section 2.C of
Exhibit C to the Effective Agreement, for purposes of Section 2.B(1)(a) of such
Exhibit C, the General Partner shall have the authority, in its sole and
absolute discretion, to elect the method to be used under Treasury Regulations
section 1.704-3 to take into account the variation between the fair market
value and the adjusted tax basis of the Contract as of the date of its
contribution to the Partnership.
7. In order to reflect the issuance of a Limited Partnership Interest
including 36,185 Partnership Units to Novak and a Limited Partnership Interest
including 71,222 Partnership Units to AHHC, Exhibit A to the Effective
Agreement is hereby deleted in its entirety and replaced with the Exhibit A
attached to this Third Amendment and made a part hereof.
8. Except as the context may otherwise require, any terms used in this
Third Amendment which are defined in the Effective Agreement shall have the
same meaning for purposes of this Third Amendment as in the Effective
Agreement.
9. This Third Amendment may be executed in several counterparts, each of
which will be deemed an original, and all of which will constitute but one and
the same instrument.
10. Except as herein amended, the Effective Agreement is hereby ratified,
confirmed, and reaffirmed for all purposes and in all respects.
-3-
<PAGE> 84
IN WITNESS WHEREOF, the undersigned has executed this Third Amendment as
of the date first written above.
GENERAL PARTNER:
---------------
CRESCENT REAL ESTATE EQUITIES, LTD.,
a Delaware corporation, on its own behalf
and as attorney-in-fact for the Limited
Partners pursuant to Sections 2.4 and
14.1.B of the Effective Agreement
By: /s/ David M. Dean
-------------------------------------
Name: David M. Dean
-----------------------------------
Title: Senior Vice President, Law
----------------------------------
NEW LIMITED PARTNERS:
/s/ Alan R. Novak
----------------------------------------
Alan R. Novak
ARMADA/HOFFLER HOLDING COMPANY, a
Virginia corporation
By: /s/ A. Russell Kirk
-------------------------------------
Name: A. Russell Kirk
-----------------------------------
Title: Vice Chairman
----------------------------------
[Exhibits omitted.]
-4-
<PAGE> 85
FOURTH AMENDMENT TO
THE SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
THIS FOURTH AMENDMENT TO THE SECOND AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP (this
"Fourth Amendment"), dated as of June 1, 1998, is entered into by and among
Crescent Real Estate Equities, Ltd., a Delaware corporation, on its own behalf
as sole general partner (the "General Partner") of Crescent Real Estate Equities
Limited Partnership, a Delaware limited partnership (the "Partnership"), and as
attorney-in-fact for each of the existing limited partners (the "Limited
Partners") of the Partnership pursuant to Sections 2.4 and 14.1.B of the Second
Amended and Restated Agreement of Limited Partnership of Crescent Real Estate
Equities Limited Partnership, dated as of November 1, 1997, as amended by the
First Amendment to the Second Amended and Restated Agreement of Limited
Partnership of Crescent Real Estate Equities Limited Partnership, dated as of
February 19, 1998, the Second Amendment to the Second Amended and Restated
Agreement of Limited Partnership of Crescent Real Estate Equities Limited
Partnership, dated as of March 2, 1998, and the Third Amendment to the Second
Amended and Restated Agreement of Limited Partnership of Crescent Real Estate
Equities Limited Partnership, dated as of April 27, 1998 (hereinafter referred
to as the "Effective Agreement"), Myers Group III, Inc. (formerly known as
Freezer Services-West Point, Inc.), a Nebraska corporation and Myers Group IV,
Inc. (formerly known as Freezer Services-Texarkana, Inc.), a Nebraska
corporation.
W I T N E S S E T H:
WHEREAS, the Partnership was formed pursuant to that certain Certificate of
Limited Partnership dated February 9, 1994 and filed on February 9, 1994 in the
office of the Secretary of State of Delaware and that certain Agreement of
Limited Partnership dated as of February 9, 1994 (the "Initial Agreement");
WHEREAS, the Initial Agreement, as previously amended and restated, was
amended and restated in its entirety by the Effective Agreement;
WHEREAS, on April 29, 1998 Crescent Equities issued 1,365,138 REIT Shares
in a public stock offering at a cash price of $32.2742 per REIT Share, which
cash proceeds were contributed to the Partnership by Crescent Equities pursuant
to Section 4.2 of the Effective Agreement;
WHEREAS, the Partnership, Freezer Services-West Point, Inc. ("Myers Group
III"), Freezer Services-Texarkana, Inc. ("Myers Group IV") and certain other
parties entered into that certain Asset Purchase Agreement dated as of the 25th
day of March, 1998 (the "Purchase Agreement");
<PAGE> 86
WHEREAS, under the Purchase Agreement, (i) Myers Group III has agreed to
contribute to the Partnership a 40% undivided interest in certain assets, free
and clear of any all encumbrances other than certain permitted encumbrances, as
more fully set forth in the Purchase Agreement (the "Myers Group III Contributed
Assets") in exchange for a Limited Partnership Interest in the Partnership, and
(ii) Myers Group IV has agreed to contribute to the Partnership a 40% undivided
interest in certain assets, free and clear of any all encumbrances other than
certain permitted encumbrances, as more fully set forth in the Purchase
Agreement (the "Myers Group IV Contributed Assets") in exchange for a Limited
Partnership Interest in the Partnership;
WHEREAS, the General Partner desires to reflect the admission of Myers
Group III and Myers Group IV as Additional Limited Partners, in exchange for the
Capital Contributions described above, pursuant to Section 4.3 of the Effective
Agreement, upon the terms and conditions set forth herein;
WHEREAS, the General Partner further desires to grant Partnership Units (as
defined in Article I of the Effective Agreement) to Myers Group III and Myers
Group IV pursuant to Section 4.3 of the Effective Agreement upon the terms and
conditions set forth herein; and
WHEREAS, the General Partner desires to amend the Effective Agreement
pursuant to its authority under Sections 2.4 and 14.1.B of the Effective
Agreement and the powers of attorney granted to the General Partner by the
Limited Partners in order to reflect the aforementioned.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt,
adequacy and sufficiency of which are hereby acknowledged, the parties hereto,
intending legally to be bound, hereby agree as follows:
1. Crescent Equities shall receive credit for a Capital Contribution to the
Partnership of $44,058,737 on April 29, 1998 pursuant to Sections 4.2 of the
Effective Agreement in connection with the issuance of 1,365,138 REIT Shares in
a public stock offering.
2. In exchange for the Capital Contribution of Myers Group III described
above (which Capital Contribution has a Net Asset Value of $489,183), the
Partnership hereby admits Myers Group III as an Additional Limited Partner
effective as of the date hereof, pursuant to Section 4.3 of the Effective
Agreement, with Myers Group III having the Limited Partnership Interest and
number of Partnership Units set forth on Exhibit A hereto opposite its name.
3. In exchange for the Capital Contribution of Myers Group IV described
above (which Capital Contribution has a Net Asset Value of $3,510,817), the
Partnership hereby admits Myers Group IV as an Additional Limited Partner
effective as of the date hereof, pursuant to Section 4.3 of the Effective
Agreement, with Myers Group IV having the Limited Partnership Interest and
number of Partnership Units set forth on Exhibit A hereto opposite its name.
4. Each of Myers Group III and Myers Group IV hereby acknowledges its
acceptance of all of the terms and conditions of the Effective Agreement,
including without limitation the
-2-
<PAGE> 87
power of attorney granted in Section 2.4 of the Effective Agreement, and all of
the terms and conditions hereof.
5. Myers Group III and Myers Group IV, each for itself, hereby irrevocably
constitutes and appoints the General Partner, with full power of substitution,
its true and lawful attorney for each of Myers Group III and Myers Group IV and
in the name, place, and stead of each of them, and for each of their use and
benefit, to execute a future amendment to the Effective Agreement and such other
documents and instruments, and to take such actions, as the General Partner
deems necessary, desirable or appropriate to effect any adjustment to the
Limited Partnership Interest (and the number of Partnership Units) of Myers
Group III or Myers Group IV pursuant to the provisions of the Purchase
Agreement. Each of Myers Group III and Myers Group IV agrees that this power of
attorney is a power coupled with an interest and shall survive and not be
effected by the termination of this Fourth Amendment (unless and until replaced
by a power of attorney granting at least the same rights to the General Partner)
or by the transfer of all or any portion of either Myers Group III's or Myers
Group IV's Limited Partnership Interest and shall extend to the successors and
assigns of Myers Group III and Myers Group IV. Each of Myers Group III and Myers
Group IV hereby agrees to be bound by any representation made by the General
Partner, acting in good faith under this power of attorney, and each of Myers
Group III and Myers Group IV hereby waives any and all defenses which may be
available to contest, negate or disaffirm the action of the General Partner,
taken in good faith under this power of attorney.
6. Notwithstanding anything to the contrary contained in Section 2.C of
Exhibit C to the Effective Agreement, for purposes of Section 2.B(1)(a) of such
Exhibit C, the General Partner shall have the authority, in its sole and
absolute discretion, to elect the method to be used under Treasury Regulations
section 1.704-3 to take into account the variation between the fair market value
and the adjusted tax basis of the Myers Group III Contributed Assets and the
Myers Group IV Contributed Assets as of their date of contribution to the
Partnership.
7. In addition to the transfer restrictions set forth in Article 11 of the
Effective Agreement, each of Myers Group III and Myers Group IV hereby
acknowledges the transfer restrictions set forth in Section 5.14 of the Purchase
Agreement, and further agrees that it (and any successor owner of its Limited
Partnership Interest) shall not transfer any Limited Partnership Interest owned
by it except in a transfer that constitutes a transfer of all of its Limited
Partnership Interest and Partnership Units, to a Person that constitutes only
one "partner" in the Partnership for purposes of Regulations Section 1.7704-1.
8. In order to reflect the issuance of a Limited Partnership Interest
including 7,123 Partnership Units to Myers Group III and a Limited Partnership
Interest including 51,121 Partnership Units to Myers Group IV, Exhibit A to the
Effective Agreement is hereby deleted in its entirety and replaced with the
Exhibit A attached to this Fourth Amendment and made a part hereof.
9. Each of Myers Group III and Myers Group IV hereby agrees to execute (or
cause its beneficial owners to execute, as required) any and all applications,
documents or disclosures
-3-
<PAGE> 88
which may be required by any regulating agency or commission having jurisdiction
over any aspect of the gaming industry or gaming establishments.
10. The General Partner hereby confirms that, as of the date of this Fourth
Amendment, the Exchange Factor is two (2).
11. Except as the context may otherwise require, any terms used in this
Fourth Amendment which are defined in the Effective Agreement shall have the
same meaning for purposes of this Fourth Amendment as in the Effective
Agreement.
12. This Fourth Amendment may be executed in several counterparts, each of
which will be deemed an original, and all of which will constitute but one and
the same instrument.
13. Except as herein amended, the Effective Agreement is hereby ratified,
confirmed, and reaffirmed for all purposes and in all respects.
[SIGATURES ARE CONTAINED ON THE FOLLOWING PAGE.]
-4-
<PAGE> 89
IN WITNESS WHEREOF, the undersigned has executed this Fourth Amendment
as of the date first written above.
GENERAL PARTNER:
CRESCENT REAL ESTATE EQUITIES, LTD., a Delaware
corporation, on its own behalf and as
attorney-in-fact for the Limited Partners pursuant
to Sections 2.4 and 14.1.B of the Effective
Agreement
By: /s/ DAVID M. DEAN
-----------------------------------------------
Name: DAVID M. DEAN
---------------------------------------------
Title: Senior Vice President, Law
--------------------------------------------
ADDITIONAL LIMITED PARTNERS:
MYERS GROUP III, INC. (formerly Freezer
Services-West Point, Inc.), a Nebraska corporation
By: /s/ CHARLES C. MYERS
-----------------------------------------------
Name: CHARLES C. MYERS
---------------------------------------------
Title:
--------------------------------------------
MYERS GROUP IV, INC. (formerly Freezer
Services-Texarkana, Inc.), a Nebraska corporation
By: /s/ CHARLES C. MYERS
-----------------------------------------------
Name: CHARLES C. MYERS
---------------------------------------------
Title:
--------------------------------------------
[EXHIBITS OMITTED]
-5-
<PAGE> 90
FIFTH AMENDMENT
TO THE SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
CRESCENT REAL ESTATE
EQUITIES LIMITED PARTNERSHIP
THIS FIFTH AMENDMENT TO THE SECOND AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP, dated
as of June 30, 1998, is entered into by Crescent Real Estate Equities, Ltd., a
Delaware corporation, on its own behalf as sole general partner (the "General
Partner") of Crescent Real Estate Equities Limited Partnership, a Delaware
limited partnership (the "Partnership"), and as attorney-in-fact for each of
the existing limited partners (the "Limited Partners") of the Partnership
pursuant to Sections 2.4 and 14.1.B of the Second Amended and Restated
Agreement of Limited Partnership of Crescent Real Estate Equities Limited
Partnership, dated as of November 1, 1997, as amended by the First Amendment to
the Second Amended and Restated Agreement of Limited Partnership of Crescent
Real Estate Equities Limited Partnership, dated as of February 19, 1998, and
the Second Amendment to the Second Amended and Restated Agreement of Limited
Partnership of Crescent Real Estate Equities Limited Partnership, dated as of
March 2, 1998, and the Third Amendment to the Second Amended and Restated
Agreement of Limited Partnership of Crescent Real Estate Equities Limited
Partnership, dated as of April 27, 1998, and the Fourth Amendment to the Second
Amended and Restate Agreement of Limited Partnership of Crescent Real Estate
Equities Limited Partnership, dated as of June 1, 1998, hereinafter referred to
as the "Effective Agreement."
W I T N E S S E T H:
WHEREAS, the Partnership was formed pursuant to that certain Certificate
of Limited Partnership dated February 9, 1994 and filed on February 9, 1994 in
the office of the Secretary of State of Delaware, and that certain Agreement of
Limited Partnership dated as of February 9, 1994 (the "Initial Agreement");
WHEREAS, the Initial Agreement, as previously amended and restated, was
amended and restated in its entirety by the Effective Agreement;
WHEREAS, on June 30, 1998, Crescent Equities issued 6,948,734 $32.38
Series B Convertible Preferred Shares ("Series B Preferred Shares") and, in
connection therewith, the General Partner, pursuant to Section 8.7.C of the
Effective Agreement, is required to cause the Partnership to issue to Crescent
Equities preferred equity ownership interests in the Partnership ("Series B
Preferred Partnership Units"), and, pursuant to its authority under Sections
6.1.C and 8.7.C of the Effective Agreement, desires to make such revisions to
the Agreement as are necessary to reflect the issuance of the Series B
Preferred Partnership Units; and
WHEREAS, the General Partner desires to amend the Effective Agreement
pursuant to its authority under Sections 2.4 and 14.1.B of the Effective
Agreement and the powers of attorney granted to the General Partner by the
Limited Partners in order to reflect the aforementioned.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt,
adequacy and sufficiency of
<PAGE> 91
which are hereby acknowledged, the parties hereto, intending legally to be
bound, hereby agree as follows:
1. Pursuant to Section 8.7.C of the Effective Agreement, effective as of
June 30, 1998, the issuance date of Series B Preferred Shares by Crescent
Equities, the Partnership hereby issues 6,948,734 Series B Preferred
Partnership Units to Crescent Equities.
(a) Crescent Equities shall have a zero percentage Partnership Interest
with respect to such Series B Preferred Partnership Units and shall have no
voting rights other than the right to vote on any amendment to the Effective
Agreement if such amendment would (i) convert the Series B Preferred
Partnership Units into a general partner's interest, (ii) modify the limited
liability of Crescent Equities with respect to the Series B Preferred
Partnership Units, or (iii) alter the distribution, redemption, conversion or
liquidation rights of the Series B Preferred Partnership Units as set forth in
paragraphs 1(b) through (e) below.
(b) Notwithstanding Section 5.2 of the Effective Agreement, and prior to
any distributions of Available Cash under such provision, the General Partner
shall cause distributions of Available Cash to be made in cash, on any date on
which Crescent Equities makes a distribution of accrued, unpaid quarterly
distributions to the holders of Series A Preferred Shares or of extraordinary
cash distributions to the holders of Series B Preferred Shares, to Crescent
Equities in an amount equal to the amount that is required to be distributed by
Crescent Equities on that date to the holders of Series A Preferred Shares and
Series B Preferred Shares. Notwithstanding Section 5.4 of the Effective
Agreement, the General Partner shall cause the Partnership to make non-cash
distributions of assets to Crescent Equities on any date on which Crescent
Equities is required to make non-cash distributions of assets to the Series B
Preferred Shares in an amount equal to the amount that is required to be
distributed by Crescent Equities on that date to the holders of the Series B
Preferred Shares.
(c) Notwithstanding Sections 6.1.A and B of the Effective Agreement:
(i) Each year, after giving effect to the special allocations set
forth in Section 1 of Exhibit C to the Effective Agreement, gross income of the
Partnership shall be allocated first to Crescent Equities until the cumulative
amount allocated under this paragraph 1(c)(i) to Crescent Equities for the
current year and all prior years is equal to the cumulative amount for the
current year and all prior years of the sum of (A) the distributions made to
Crescent Equities under paragraph 1(b) above, and (B) the portion of the
distributions made to Crescent Equities under paragraph 2(d) of the First
Amendment (if any) that exceeds $25 per Series A Preferred Partnership Unit.
Any remaining Net Profits or Net Losses (other than gain or loss from a sale or
other disposition of all or substantially all of the assets of the Partnership,
which shall be allocated as set forth in paragraphs 1(c)(ii) and (iii) below)
shall be allocated as set forth in Sections 6.1.A and B of the Effective
Agreement.
(ii) The gain of the Partnership from a sale or other disposition of
all or substantially all of the assets of the Partnership shall be allocated
among the Partners as follows: (A) first, to Crescent Equities in the amount
necessary to cause its Capital Account balance to be equal to the liquidation
preferences payable by Crescent Equities on the outstanding Series A Preferred
Shares and Series B Preferred Shares (the "Liquidation Preferences") (i.e., a
liquidation payment of $25 per Series A Preferred Partnership Unit, plus any
accrued, unpaid quarterly distribution thereon, and a liquidation payment of
$32.38 per Series B Preferred Partnership Unit, plus
-2-
<PAGE> 92
any accrued, unpaid extraordinary distribution thereon, subject to reduction on
a pro rata basis (as more fully set forth in the respective "Statements of
Designation" for the Series A Preferred Shares and the Series B Preferred
Shares) to the extent that there are insufficient funds to pay the
aforementioned liquidation preferences in full), (B) second, to the Partners in
the amounts necessary, and in the ratio of such amounts, to cause the Capital
Account balance of Crescent Equities in excess of the Liquidation Preferences
and the Capital Account of each other Partner to be in the same ratio as their
respective Partnership Interests, and (iii) thereafter, to all of the Partners
in proportion to their respective Partnership Interests.
(iii) The loss of the Partnership from a sale or other disposition
of all or substantially all of the assets of the Partnership shall be allocated
among the Partners as follows: (A) first, to the Partners, if any, having
positive Capital Account balances, in the amounts necessary, and in the ratio
of such amounts, so as to cause the positive Capital Account Balance of
Crescent Equities to equal the Liquidation Preferences and the positive Capital
Account balance of each other Partner to equal zero (or, if there is
insufficient loss to accomplish this result, loss shall be allocated in a
manner so as to cause the positive Capital Account balance of Crescent Equities
in excess of the Liquidation Preference and the positive Capital Account
balance of each other Partner to be in the same ratio as their respective
Partnership Interests), (B) second, to Crescent Equities, until its positive
Capital Account balance equals zero, and (C) thereafter, to the Partners in
proportion to their respective Partnership Interests.
(d) In the event that Crescent Equities exercises its redemption right
with respect to the Series B Preferred Shares and pays the redemption price in
cash, the Partnership shall concurrently redeem a corresponding amount of
Series B Preferred Partnership Units at the same redemption price paid by
Crescent Equities for the Series B Preferred Shares.
(e) Upon exercise of any conversion right with respect to Series B
Preferred Shares or upon any redemption of Series B Preferred Shares in
exchange for REIT shares, (i) Crescent Equities shall, as of the date on which
the conversion (or redemption, as the case may be) is consummated, be deemed to
have contributed to the Partnership as Contributed Funds pursuant to Section
4.2.A(2) of the Effective Agreement an amount equal to the Value (computed as
of the Business Day immediately preceding the date on which such conversion (or
redemption, as the case may be) is consummated) of the REIT Shares delivered by
Crescent Equities to such holder of Series B Preferred Shares, (ii) the
Partnership Interests of Crescent Equities and the other Limited Partners shall
be adjusted as set forth in Section 4.2 of the Effective Agreement, and (iii) a
corresponding portion of Series B Preferred Partnership Units shall be retired.
(f) Notwithstanding anything to the contrary contained in paragraph 2(e)
of the First Amendment or in paragraph 1(e) of this Fifth Amendment, to the
extent that Crescent Equities pays cash to the holder of Series A Preferred
Shares (or Series B Preferred Shares, as the case may be) in lieu of fractional
shares upon conversion of such Series A Preferred Shares (or Series B Preferred
Shares, as the case may be) to REIT Shares, such cash payment shall be treated
as a redemption of the corresponding portion of the Series A Preferred Shares
(or Series B Preferred Shares, as the case may be) in accordance with paragraph
2(d) of the First Amendment (or paragraph 1(d) of this Fifth Amendment, as the
case may be).
2. In order to reflect the issuance of Series B Preferred Partnership
Units, Exhibit A to the Effective Agreement is hereby deleted in its entirety
and replaced with the Exhibit A attached to this Fifth Amendment and made a
part hereof.
-3-
<PAGE> 93
3. Except as the context may otherwise require, any terms used in this
Fifth Amendment which are defined in the Effective Agreement shall have the
same meaning for purposes of this Fifth Amendment as in the Effective
Agreement.
4. Except as herein amended, the Effective Agreement is hereby ratified,
confirmed, and reaffirmed for all purposes and in all respects.
IN WITNESS WHEREOF, the undersigned has executed this Fifth Amendment as
of the date first written above.
GENERAL PARTNER:
---------------
CRESCENT REAL ESTATE EQUITIES,
LTD., a Delaware corporation, on
its own behalf and as
attorney-in-fact for the Limited
Partners pursuant to Sections 2.4
and 14.1.B of the Effective
Agreement
By: /s/ Dallas E. Lucas
--------------------------------
Name: Dallas E. Lucas
------------------------------
Title: Chief Financial Officer
-----------------------------
[Exhibits omitted.]
-4-
<PAGE> 1
EXHIBIT 10.16
FIFTH AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
DATED JUNE 30, 1998
among
CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
and
BANKBOSTON, N.A.,
THE OTHER BANKS WHICH ARE A
PARTY TO THIS AGREEMENT
and
OTHER BANKS WHICH MAY BECOME
PARTIES TO THIS AGREEMENT
and
BANKBOSTON, N.A., AS AGENT
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
SECTION 1. DEFINITIONS AND RULES OF INTERPRETATION . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
Section 1.1. Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -1-
Section 1.2. Rules of Interpretation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -16-
SECTION 2. THE REVOLVING CREDIT FACILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
Section 2.1. Commitment to Lend . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
Section 2.2. Facility Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -17-
Section 2.3. Reduction of Commitment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
Section 2.4. Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
Section 2.5. Interest on Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -18-
Section 2.6. Requests for Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -19-
Section 2.7. Funds for Loans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
Section 2.8. Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
Section 2.9. Use of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -20-
SECTION 3. REPAYMENT OF THE LOANS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
Section 3.1. Stated Maturity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
Section 3.2. Mandatory Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -21-
Section 3.3. Optional Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
Section 3.4. Partial Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
Section 3.5. Effect of Prepayments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -22-
Section 3.6. Proceeds from Debt or Equity Offering . . . . . . . . . . . . . . . . . . . . . . . -23-
SECTION 4. CERTAIN GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
Section 4.1. Conversion Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -23-
Section 4.2. Closing Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
Section 4.3. Agent's Fee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
Section 4.4. Funds for Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -24-
Section 4.5. Computations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
Section 4.6. Inability to Determine Eurodollar Rate . . . . . . . . . . . . . . . . . . . . . . -25-
Section 4.7. Illegality . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
Section 4.8. Additional Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -25-
Section 4.9. Additional Costs, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -26-
Section 4.10. Capital Adequacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
Section 4.11. Indemnity of Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -27-
Section 4.12. Interest on Overdue Amounts; Late Charge . . . . . . . . . . . . . . . . . . . . . -28-
Section 4.13. Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
Section 4.14. Limitation on Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
SECTION 5. COLLATERAL SECURITY AND GUARANTY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
Section 5.1. Security . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
Section 5.2. Subsidiary Guarantors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -28-
SECTION 6. REPRESENTATIONS AND WARRANTIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
Section 6.1. Corporate Authority, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -29-
Section 6.2. Governmental Approvals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
Section 6.3. Title to Properties; Leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . -30-
Section 6.4. Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -31-
Section 6.5. No Material Changes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -31-
Section 6.6. Franchises, Patents, Copyrights, Etc. . . . . . . . . . . . . . . . . . . . . . . . -31-
Section 6.7. Litigation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -31-
Section 6.8. No Materially Adverse Contracts, Etc. . . . . . . . . . . . . . . . . . . . . . . . -32-
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
Section 6.9. Compliance with Other Instruments, Laws, Etc. . . . . . . . . . . . . . . . . . . . -32-
Section 6.10. Tax Status . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
Section 6.11. No Event of Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -32-
Section 6.12. Holding Company and Investment Company Acts . . . . . . . . . . . . . . . . . . . . -32-
Section 6.13. Absence of UCC Financing Statements, Etc. . . . . . . . . . . . . . . . . . . . . . -33-
Section 6.14. Certain Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
Section 6.15. Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
Section 6.16. Regulations U and X . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -33-
Section 6.17. Environmental Compliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -34-
Section 6.18. Subsidiaries; Investment Partnerships . . . . . . . . . . . . . . . . . . . . . . . -35-
Section 6.19. Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
Section 6.20. Property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
Section 6.21. Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
Section 6.22. Partners and the Guarantor . . . . . . . . . . . . . . . . . . . . . . . . . . . . -36-
Section 6.23. Solvency . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
Section 6.24. Other Debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
Section 6.25. Magellan Transaction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
Section 6.26. Contribution Agreement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
Section 6.27. Applicability of Representations and Warranties to Residential Corporations and
Investment Partnerships. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -37-
SECTION 7. AFFIRMATIVE COVENANTS OF THE BORROWER . . . . . . . . . . . . . . . . . . . . . . . . . . . . -38-
Section 7.1. Punctual Payment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -38-
Section 7.2. Maintenance of Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -38-
Section 7.3. Records and Accounts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -38-
Section 7.4. Financial Statements, Certificates and Information . . . . . . . . . . . . . . . . -38-
Section 7.5. Notices . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -40-
Section 7.6. Existence; Maintenance of Properties . . . . . . . . . . . . . . . . . . . . . . . -42-
Section 7.7. Insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
Section 7.8. Taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -42-
Section 7.9. Inspection of Properties and Books . . . . . . . . . . . . . . . . . . . . . . . . -43-
Section 7.10. Compliance with Laws, Contracts, Licenses, and Permits . . . . . . . . . . . . . . -43-
Section 7.11. Further Assurances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -43-
Section 7.12. Ownership of Real Estate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -43-
Section 7.13. Investment Advisor . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -44-
Section 7.14. Non-Competition Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . -44-
Section 7.15. Business Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -44-
Section 7.16. Intentionally Omitted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -44-
Section 7.17. Limiting Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -44-
Section 7.18. More Restrictive Agreements . . . . . . . . . . . . . . . . . . . . . . . . . . . . -45-
Section 7.19. Applicability of Covenants to Residential Corporations and Investment Partnerships. -45-
Section 7.20. Distributions of Income to the Borrower. . . . . . . . . . . . . . . . . . . . . . -45-
SECTION 8. CERTAIN NEGATIVE COVENANTS OF THE BORROWER . . . . . . . . . . . . . . . . . . . . . . . . . . -45-
Section 8.1. Restrictions on Indebtedness . . . . . . . . . . . . . . . . . . . . . . . . . . . -46-
Section 8.2. Restrictions on Liens, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -47-
Section 8.3. Restrictions on Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . -48-
Section 8.4. Merger, Consolidation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -50-
Section 8.5. Sale and Leaseback . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -50-
Section 8.6. Compliance with Environmental Laws . . . . . . . . . . . . . . . . . . . . . . . . -50-
Section 8.7. Distributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -52-
Section 8.8. Asset Sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -52-
Section 8.9. Development Activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -52-
Section 8.10. Investment Opportunities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -53-
Section 8.11. Refinancing of Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -53-
Section 8.12. Variable Rate Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -54-
</TABLE>
-ii-
<PAGE> 4
<TABLE>
<S> <C>
Section 8.13. Restriction on Prepayment of Indebtedness . . . . . . . . . . . . . . . . . . . . -54-
Section 8.14. Bankruptcy Remote Subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . -54-
Section 8.15. Magellan Transaction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -54-
SECTION 9. FINANCIAL COVENANTS OF THE BORROWER. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -55-
Section 9.1. Liabilities to Worth Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . -55-
Section 9.2. Debt Service Coverage. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -55-
Section 9.3. Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -55-
Section 9.4. Tangible Net Worth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -55-
Section 9.5. Secured Debt to Assets Ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . -55-
Section 9.6. Fixed Charge Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -55-
Section 9.7. Fixed Charge and Preferred Distribution Coverage . . . . . . . . . . . . . . . . . -55-
Section 9.8. Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -55-
Section 9.9. Real Estate Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -55-
Section 9.10. Value Adjustment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -56-
Section 9.11. [Intentionally Omitted]. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -56-
Section 9.12. Unencumbered Operating Properties. . . . . . . . . . . . . . . . . . . . . . . . -56-
SECTION 10. CLOSING CONDITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -57-
Section 10.1. Loan Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -57-
Section 10.2. Certified Copies of Organizational Documents . . . . . . . . . . . . . . . . . . . -57-
Section 10.3. Bylaws; Resolutions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -57-
Section 10.4. Incumbency Certificate; Authorized Signers . . . . . . . . . . . . . . . . . . . . -57-
Section 10.5. Opinion of Counsel . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -57-
Section 10.6. Payment of Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -58-
Section 10.7. Performance; No Default . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -58-
Section 10.8. Representations and Warranties . . . . . . . . . . . . . . . . . . . . . . . . . . -58-
Section 10.9. Proceedings and Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . -58-
Section 10.10. Intentionally Omitted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -58-
Section 10.11. Compliance Certificate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -58-
Section 10.12. Real Estate Spreadsheet . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -58-
Section 10.13. Contribution Agreement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -59-
Section 10.14. Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -59-
SECTION 11. CONDITIONS TO ALL BORROWINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -59-
Section 11.1. Prior Conditions Satisfied . . . . . . . . . . . . . . . . . . . . . . . . . . . . -59-
Section 11.2. Representations True; No Default . . . . . . . . . . . . . . . . . . . . . . . . . -59-
Section 11.3. No Legal Impediment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -59-
Section 11.4. Governmental Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -59-
Section 11.5. Proceedings and Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . -59-
Section 11.6. Borrowing Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -59-
SECTION 12. EVENTS OF DEFAULT; ACCELERATION; ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . -60-
Section 12.1. Events of Default and Acceleration . . . . . . . . . . . . . . . . . . . . . . . . -60-
Section 12.2. Limitation of Cure Periods . . . . . . . . . . . . . . . . . . . . . . . . . . . . -63-
Section 12.3. Termination of Commitments . . . . . . . . . . . . . . . . . . . . . . . . . . . . -64-
Section 12.4. Remedies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -64-
Section 12.5. Distribution of Proceeds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -64-
SECTION 13. SETOFF . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -65-
SECTION 14. THE AGENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -65-
Section 14.1. Authorization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -65-
Section 14.2. Employees and Agents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -66-
Section 14.3. No Liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -66-
</TABLE>
-iii-
<PAGE> 5
<TABLE>
<S> <C>
Section 14.4. No Representations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -66-
Section 14.5. Payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -67-
Section 14.6. Holders of Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -68-
Section 14.7. Indemnity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -68-
Section 14.8. Agent as Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -68-
Section 14.9. Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -68-
Section 14.10. Duties in the Case of Enforcement . . . . . . . . . . . . . . . . . . . . . . . . -68-
SECTION 15. EXPENSES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -69-
SECTION 16. INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -70-
SECTION 17. SURVIVAL OF COVENANTS, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -71-
SECTION 18. ASSIGNMENT AND PARTICIPATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -71-
Section 18.1. Conditions to Assignment by Banks . . . . . . . . . . . . . . . . . . . . . . . . -71-
Section 18.2. Register . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -72-
Section 18.3. New Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -73-
Section 18.4. Participations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -73-
Section 18.5. Pledge by Bank . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -73-
Section 18.6. No Assignment by Borrower . . . . . . . . . . . . . . . . . . . . . . . . . . . . -73-
Section 18.7. Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -74-
Section 18.8. Restrictions on Assignment. . . . . . . . . . . . . . . . . . . . . . . . . . . . -74-
SECTION 19. NOTICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -74-
SECTION 20. RELATIONSHIP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -75-
SECTION 21. GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE . . . . . . . . . . . . . . . . . . . . . -75-
SECTION 22. HEADINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -76-
SECTION 23. COUNTERPARTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -76-
SECTION 24. ENTIRE AGREEMENT, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -76-
SECTION 25. WAIVER OF JURY TRIAL AND CERTAIN DAMAGE CLAIMS . . . . . . . . . . . . . . . . . . . . . . . -76-
SECTION 26. DEALINGS WITH THE BORROWER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -77-
SECTION 27. CONSENTS, AMENDMENTS, WAIVERS, ETC. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -77-
SECTION 28. SEVERABILITY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -78-
SECTION 29. NO UNWRITTEN AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -78-
SECTION 30. TIME OF THE ESSENCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . -78-
</TABLE>
-iv-
<PAGE> 6
LIST OF EXHIBITS:
A FORM OF NOTE
B FORM OF LOAN REQUEST
C FORM OF COMPLIANCE CERTIFICATE
LIST OF SCHEDULES:
Schedule 1 Banks and Commitments
Schedule 6.3 Title to Properties
Schedule 6.7 Litigation
Schedule 6.18(a) Subsidiaries of Borrower
Schedule 6.18(b) Investment Partnerships of Borrower
Schedule 8.1(h) Existing Indebtedness
-v-
<PAGE> 7
FIFTH AMENDED AND RESTATED
REVOLVING CREDIT AGREEMENT
THIS FIFTH AMENDED AND RESTATED REVOLVING CREDIT AGREEMENT is made the
30th day of June, 1998, by and among CRESCENT REAL ESTATE EQUITIES LIMITED
PARTNERSHIP (the "Borrower"), a Delaware limited partnership having its
principal place of business at 777 Main Street, Suite 2100, Fort Worth, Texas
76102, and BANKBOSTON, N.A., a national banking association, formerly known as
The First National Bank of Boston, the other Banks which are a party hereto,
and the other lending institutions which may become parties hereto pursuant to
Section 18 (the "Banks"), and BANKBOSTON, N.A., a national banking association,
formerly known as The First National Bank of Boston, as Administrative and
Syndication Agent for the Banks (the "Agent"), and NATIONSBANK, N.A., SUCCESSOR
BY MERGER WITH NATIONSBANK OF TEXAS, N.A., as Documentation Agent for the
Banks.
RECITALS.
WHEREAS, Borrower, BankBoston and Agent have entered into that certain
Revolving Credit Agreement dated June 18, 1996, as amended and restated
pursuant to that certain First Amended and Restated Revolving Credit Agreement
among Borrower, BankBoston and certain other Banks and Agent dated August 14,
1996, as further amended and restated pursuant to that certain Second Amended
and Restated Revolving Credit Agreement among Borrower, BankBoston and certain
other Banks and Agent dated June 6, 1997, as further amended and restated
pursuant to that certain Third Amended and Restated Revolving Credit Agreement
among Borrower, BankBoston and certain other Banks and Agent dated September
22, 1997, and as further amended and restated pursuant to that certain Fourth
Amended and Restated Revolving Credit Agreement among Borrower, BankBoston and
certain other Banks and Agent dated December 19, 1997 (the "Amended Credit
Agreement"); and
WHEREAS, Borrower has requested that BankBoston increase the Total
Commitment and amend certain provisions of the Amended Credit Agreement; and
WHEREAS, the Borrower, the Banks and the Agent desire to amend and
restate the Amended Credit Agreement in its entirety;
NOW, THEREFORE, in consideration of the recitals herein and the mutual
covenants contained herein, the parties hereto hereby amend and restate the
Amended Credit Agreement in its entirety as follows:
SECTION 1. DEFINITIONS AND RULES OF INTERPRETATION.
Section 1.1. Definitions. The following terms shall have the
meanings set forth in this Section l or elsewhere in the provisions of this
Agreement referred to below:
<PAGE> 8
Agent. BankBoston, N.A., acting as agent for the Banks, its
successors and assigns.
Agent's Head Office. The Agent's head office located at 100 Federal
Street, Boston, Massachusetts 02110, or at such other location as the Agent may
designate from time to time by notice to the Borrower and the Banks.
Agent's Special Counsel. Long Aldridge & Norman LLP or such other
counsel as may be approved by the Agent.
Agreement. This Fifth Amended and Restated Revolving Credit
Agreement, including the Schedules and Exhibits hereto.
Applicable Margin. On any date that the higher of the Implied Ratings
issued from time to time by either of the Rating Agencies for the Borrower is
an Investment Grade Rating, the Applicable Margin for Eurodollar Rate Loans
shall be as set forth below based on the higher of Implied Ratings issued by
either of the Rating Agencies:
<TABLE>
<CAPTION>
Rating LIBOR Rate Loans
------ ----------------
<S> <C>
BBB+/Baa1 or better 0.90%
BBB/Baa2 1.050%
BBB-/Baa3 1.20%
</TABLE>
In the event that either of the Rating Agencies issues an Implied Rating for
the Borrower that is an Investment Grade Rating, or in the event of any change
in an Implied Rating of the Borrower by either of the Rating Agencies, or if
the Borrower's Implied Rating, after having obtained an Investment Grade
Rating, shall cease at any time to be an Investment Grade Rating by either of
the Rating Agencies (but subject to the provisions within the definition of the
term "Investment Grade Rating"), such change shall effect a change in the
Applicable Margin, as applicable, on the first Business Day after the Rating
Notice Date. On any date that the higher of the Implied Ratings for the
Borrower is not an Investment Grade Rating, or the Borrower has not obtained an
Investment Grade Rating from either of the Rating Agencies, the Applicable
Margin for Eurodollar Rate Loans shall be one and three-eighths percent
(1.375%). It is the intention of the parties that if the Borrower shall only
obtain an Investment Grade Rating from one of the Rating Agencies without
seeking an Investment Grade Rating from the other of the Rating Agencies, the
Borrower shall be entitled to the benefit of the rate reductions described
above; provided that if the Borrower shall have obtained an Investment Grade
Rating from both of the Rating Agencies, the higher of the two ratings (or the
loss of the Investment Grade Rating from either or both of the Rating Agencies
thereafter) shall control.
Asset Value. The purchase price of Real Estate (including
improvements and related fixtures, personal property and intangibles) and
ordinary related purchase transaction costs
-2-
<PAGE> 9
without deduction for depreciation, or if the Real Estate has been developed by
such Person, the completed construction costs determined in accordance with
generally accepted accounting principles without deduction for depreciation.
If the Real Estate is purchased as a part of a group of properties, the Asset
Value shall be calculated based upon a reasonable allocation by the Borrower of
the aggregate purchase price among all Real Estate purchased in such
transaction.
Balance Sheet Date. December 31, 1997 (as adjusted for purchases
subsequent to such date and prior to the date hereof).
BankBoston. BankBoston, N.A., a national banking association,
formerly known as The First National Bank of Boston.
Banks. BankBoston, the other Banks that are a party to this Agreement
and any other Person who becomes an assignee of any rights of a Bank pursuant
to Section 18.
Base Rate. The greater of (a) the annual rate of interest announced
from time to time by BankBoston at its head office in Boston, Massachusetts as
its "base rate" or (b) one-half of one percent (0.5%) above the Federal Funds
Effective Rate (rounded upwards, if necessary, to the next one-eighth of one
percent). Any change in the rate of interest payable hereunder resulting from
a change in the Base Rate shall become effective as of the opening of business
on the day on which such change in the Base Rate becomes effective.
Base Rate Loans. Those Loans bearing interest calculated by reference
to the Base Rate.
Behavioral Healthcare Facilities. The "Collective Leased Properties",
as such term is defined in the Master Lease Agreement.
Borrower. As defined in the preamble hereto.
Business Day. Any day on which banking institutions in Boston,
Massachusetts are open for the transaction of banking business and, in the case
of Eurodollar Rate Loans, which also is a Eurodollar Business Day.
Capitalized Lease. A lease under which a Person is the lessee or
obligor, the discounted future rental payment obligations under which are
required to be capitalized on the balance sheet of the lessee or obligor in
accordance with generally accepted accounting principles; provided that if the
total of such future rental payment obligations is less than $250,000.00, then
such lease shall be treated as an expense of such Person and not as a
Capitalized Lease.
Cash. At any time, the sum of the Borrower's cash, marketable
securities and other cash equivalents, including restricted cash.
CBHS. Charter Behavioral Health Systems, LLC, a Delaware limited
liability company.
-3-
<PAGE> 10
CERCLA. See Section 6.17.
Closing Date. The first date on which all of the conditions set forth
in Section 10 and Section 11 have been satisfied.
Code. The Internal Revenue Code of 1986, as amended.
Commitment. With respect to each Bank, the amount set forth on
Schedule 1 hereto as the amount of such Bank's Commitment to make or maintain
Loans to the Borrower, as the same may be reduced from time to time in
accordance with the terms of this Agreement.
Commitment Percentage. With respect to each Bank, the percentage set
forth on Schedule 1 hereto as such Bank's percentage of the aggregate
Commitments of all of the Banks.
Compliance Certificate. See Section 7.4(d).
Consolidated or combined. With reference to any term defined herein,
that term as applied to the accounts of a Person and its Subsidiaries,
consolidated or combined in accordance with generally accepted accounting
principles.
Consolidated Cash Flow. With respect to any period of the Borrower or
CBHS, as applicable, an amount equal to the sum of the following amounts of the
Borrower and its Subsidiaries or CBHS, as applicable: (a) the Net Income of
such Person for such period plus (b) depreciation and amortization, interest
expense, and any extraordinary or non-recurring losses deducted in calculating
such Net Income minus (c) any extraordinary or nonrecurring gains included in
calculating such Net Income, all as determined in accordance with generally
accepted accounting principles.
Consolidated Tangible Net Worth. The amount by which Consolidated
Total Assets exceeds Consolidated Total Liabilities, and less the sum of:
(a) the total book value of all assets of a Person and
its Subsidiaries properly classified as intangible assets under
generally accepted accounting principles, including such items as
goodwill, the purchase price of acquired assets in excess of the fair
market value thereof, trademarks, trade names, service marks, brand
names, copyrights, patents and licenses, and rights with respect to
the foregoing; plus
(b) all amounts representing any write-up in the book
value of any assets of such Person or its Subsidiaries resulting from
a revaluation thereof subsequent to the Balance Sheet Date; plus
(c) all amounts representing minority interests which are
applicable to third parties.
-4-
<PAGE> 11
Consolidated Total Assets. All assets of a Person and its
Subsidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles. All real estate assets shall be valued on an
undepreciated cost basis, except as otherwise shown on the financial statements
provided pursuant to Section 6.4 or as adjusted pursuant to Section 9.10. The
Borrower shall account for its investments which are not consolidated in
accordance with the equity method of accounting.
Consolidated Total Liabilities. All liabilities of a Person and its
Subsidiaries determined on a consolidated basis in accordance with generally
accepted accounting principles and all Indebtedness of such Person and its
Subsidiaries, whether or not so classified.
Contribution Agreement. The Contribution Agreement dated of even date
herewith between the Borrower and the Subsidiary Guarantors a party thereto as
of the date hereof, and each other Subsidiary Guarantor which may hereafter
become a party thereto.
Conversion Request. A notice given by the Borrower to the Agent of
its election to convert or continue a Loan in accordance with Section 4.1.
Crescent Guarantor. Crescent Real Estate Equities Company, a Texas
real estate investment trust, having a usual place of business at 777 Main
Street, Suite 2100, Fort Worth, Texas 76102.
Debt Offering. The issuance and sale to the general public or as a
private placement by the Borrower or the Crescent Guarantor subsequent to the
date of this Agreement of any debt securities of the Borrower or Crescent
Guarantor for cash or the right to receive payment in the future.
Debt Service. For any period, the sum of all interest (including
capitalized interest) and mandatory principal payments due and payable during
such period excluding any balloon payments due upon maturity of any
indebtedness.
Default. See Section 12.1.
Distribution. With respect to Crescent Guarantor, the declaration or
payment of any dividend or distribution on or in respect of any shares of any
class of capital stock or beneficial interest of Crescent Guarantor, other
than dividends or distributions payable solely in equity securities of Crescent
Guarantor; the purchase, redemption, exchange or other retirement of any shares
of any class of capital stock or beneficial interest of Crescent Guarantor,
directly or indirectly through a Subsidiary of Crescent Guarantor or otherwise;
the return of capital by Crescent Guarantor to its shareholders as such; or any
other distribution on or in respect of any shares of any class of capital stock
or beneficial interest of Crescent Guarantor. With respect to the Borrower,
the declaration or payment of any distribution of cash or cash flow to the
partners of the Borrower; the return of capital by the Borrower to its
partners; or any other distribution on or in respect of any partnership
interests in the Borrower.
-5-
<PAGE> 12
Dollars or $. Dollars in lawful currency of the United States of
America.
Domestic Lending Office. Initially, the office of each Bank
designated as such in Schedule 1 hereto; thereafter, such other office of such
Bank, if any, located within the United States that will be making or
maintaining Base Rate Loans.
Drawdown Date. The date on which any Loan is made or is to be made,
and the date on which any Loan which is made prior to the Maturity Date is
converted or combined in accordance with Section 4.1.
Employee Benefit Plan. Any employee benefit plan within the meaning
of Section 3(3) of ERISA maintained or contributed to by the Borrower or any
ERISA Affiliate, other than a Multiemployer Plan.
Environmental Laws. See Section 6.17(a).
Equity Offering. The issuance and sale to the general public or as a
private placement by the Borrower or Crescent Guarantor subsequent to the date
of this Agreement of any partnership interests or equity securities of the
Borrower or Crescent Guarantor, as applicable, for cash or the right to receive
payment in the future (it being acknowledged that an Equity Offering shall not
include (a) the issuance of limited partnership interests in the Borrower other
than for cash to a seller or partner thereof in connection with the acquisition
of Real Estate or the conversion thereof into equity securities of Crescent
Guarantor, or (b) the exercise or conversion of options to acquire equity
securities of Crescent Guarantor or the Borrower or the issuance of restricted
stock under incentive compensation plans maintained by Borrower or Crescent
Guarantor for itself or its Subsidiaries, directors, officers and employees).
ERISA. The Employee Retirement Income Security Act of 1974, as
amended and in effect from time to time.
ERISA Affiliate. Any Person which is treated as a single employer with
the Borrower under Section 414 of the Code.
ERISA Reportable Event. A reportable event with respect to a
Guaranteed Pension Plan within the meaning of Section 4043 of ERISA and the
regulations promulgated thereunder as to which the requirement of notice has
not been waived.
Eurocurrency Reserve Rate. For any day with respect to a Eurodollar
Rate Loan, the maximum rate (expressed as a decimal) at which any lender
subject thereto would be required to maintain reserves under Regulation D of
the Board of Governors of the Federal Reserve System (or any successor or
similar regulations relating to such reserve requirements) against
"Eurocurrency Liabilities" (as that term is used in Regulation D or any
successor or similar regulation), if such liabilities were outstanding. The
Eurocurrency Reserve Rate shall be adjusted automatically on and as of the
effective date of any change in the Eurocurrency Reserve Rate.
-6-
<PAGE> 13
Eurodollar Business Day. Any day on which commercial banks are open
for international business (including dealings in Dollar deposits) in London or
such other eurodollar interbank market as may be selected by the Agent and the
Banks in their sole discretion acting in good faith.
Eurodollar Lending Office. Initially, the office of each Bank
designated as such in Schedule 1 hereto; thereafter, such other office of such
Bank, if any, that shall be making or maintaining Eurodollar Rate Loans.
Eurodollar Rate. For any Interest Period with respect to a Eurodollar
Rate Loan, the rate per annum equal to the quotient (rounded upwards to the
nearest 1/16 of one percent) of (a) the rate at which the Reference Bank's
Eurodollar Lending Office is offered Dollar deposits two Eurodollar Business
Days prior to the beginning of such Interest Period in whatever interbank
eurodollar market may be selected by the Reference Bank in its sole discretion,
acting in good faith, for delivery on the first day of such Interest Period for
the number of days comprised therein and in an amount comparable to the amount
of the Eurodollar Rate Loan to which such Interest Period applies, divided by
(b) a number equal to 1.00 minus the Eurocurrency Reserve Rate.
Eurodollar Rate Loans. Loans bearing interest calculated by reference
to a Eurodollar Rate.
Event of Default. See Section 12.1.
Existing Fixed Rate Indebtedness. Collectively, (i) the long term
fixed rate debt provided to Crescent Real Estate Funding I, L.P. ("Funding I")
by Nomura Asset Capital Corporation ("Nomura") in the principal face amount of
$239,000,000 which matures on August 11, 2027, as evidenced by that certain
Promissory Note dated August 24, 1995 made by Funding I to the order of Nomura
in the principal face amount of $239,000,000 which has been assigned to LaSalle
National Bank, as Trustee under that certain Pooling and Servicing Agreement
dated October 1, 1995; (ii) the long term fixed rate debt provided to Crescent
Real Estate Funding II, L.P. ("Funding II") by Nomura in the original principal
face amount of $161,000,000, which matures on March 11, 2028, as evidenced by
that certain Promissory Note dated August 24, 1995, made by Funding II to the
order of Nomura in the principal face amount of $161,000,000, which has been
assigned to LaSalle National Bank, as Trustee under that certain Pooling and
Servicing Agreement dated April 1, 1996; (iii) the long term fixed rate debt
provided to Borrower in the principal face amount of $63,500,000 which matures
on December 31, 2002, as evidenced by that certain Note dated December 11, 1995
made by Borrower to the order of Connecticut General Life Insurance Company in
the principal face amount of $63,500,000; (iv) the long term fixed rate debt
provided to The Woodlands Corporation ("Woodlands") in the principal face
amount of $13,000,000, which matures on September 1, 2001, as evidenced by that
certain Promissory Note dated August 10, 1994, made by Woodlands to the order
of Hartford Life Insurance Company; (v) the long term fixed rate debt provided
to 301 Congress Avenue, L.P. ("301 Congress") by Northwestern Mutual Life
Insurance Company ("Northwestern") in the original principal face amount of
$26,000,000, which matures on January 1, 2004, as evidenced by that certain
Promissory Note dated December 26, 1996 made by 301 Congress to the order of
Northwestern
-7-
<PAGE> 14
in the principal face amount of $26,000,000; (vi) the debt maturing on July 1,
1999, in the original face amount of $115,000,000, assumed by Crescent Real
Estate Funding III, L.P. ("Funding III"), Crescent Real Estate Funding IV, L.P.
("Funding IV"), and Crescent Real Estate Funding V, L.P. ("Funding V") pursuant
to an Assumption Agreement dated October 7, 1996, as evidenced by that certain
Promissory Note Secured by Deed of Trust dated June 30, 1994 made by Greenway
Plaza, Ltd. and Nine Greenway, Ltd. to the order of Nomura in the principal
face amount of $115,000,000, which has been assigned to LaSalle National Bank,
as Trustee under that certain Pooling and Servicing Agreement dated as of
August 1, 1994; (vii) the debt maturing on July 1, 2020, in the original face
amount of $8,900,000.00, assumed by Crescent Real Estate Funding VI, L.P.
("Funding VI") pursuant to a Consent and Assumption Agreement dated December 5,
1996, as evidenced by that certain Promissory Note dated June 28, 1995 made by
Canyon Ranch-Bellefontaine Associates, L.P. to the order of Nomura in the
principal face amount of $8,900,000.00 which has been assigned to LaSalle
National Bank, as Trustee under that certain Pooling and Servicing Agreement
dated as of August 1, 1995; (viii) a $250,000,000.00 senior unsecured debt
security designated as the 7 1/8% Notes maturing September 15, 2007; and (ix) a
$150,000,000.00 senior unsecured debt security designated as the 6 5/8% Notes
maturing September 15, 2002.
Federal Funds Effective Rate. For any day, the rate per annum equal
to the weighted average of the rates on overnight Federal funds transactions
with members of the Federal Reserve System arranged by Federal funds brokers,
as published for such day (or, if such day is not a Business Day, for the next
preceding Business Day) by the Federal Reserve Bank of New York, or, if such
rate is not so published for any day that is a Business Day, the average of the
quotations for such day on such transactions received by the Agent from three
(3) Federal funds brokers of recognized standing selected by the Agent.
Fixed Charges. With respect to any Person for any fiscal period, an
amount equal to Debt Service plus Non- Incremental Revenue Generating Capital
Expenditures plus/minus Rent Adjustments, all as determined in accordance with
generally accepted accounting principles.
Funds Available for Distribution. With respect to any Person for any
fiscal period, an amount equal to Funds from Operations plus non-real estate
depreciation and the amortization of deferred financing costs plus/minus Rent
Adjustments minus Non-Incremental Revenue Generating Capital Expenditures
(excluding any extraordinary or nonrecurring non-tenant related capital
expenditures).
Funds from Operations. With respect to any Person for any fiscal
period, the net income (or deficit) of such Person computed in accordance with
generally accepted accounting principles, excluding financing costs and gains
(or losses) from debt restructuring and sales of property, plus depreciation
(except non-real estate depreciation) and amortization (except the amortization
of deferred financing costs), and after adjustments for unconsolidated
partnerships and joint ventures.
-8-
<PAGE> 15
generally accepted accounting principles. Principles that are (a)
consistent with the principles promulgated or adopted by the Financial
Accounting Standards Board and its predecessors, as in effect from time to time
and (b) consistently applied with past financial statements of the Borrower
adopting the same principles; provided that a certified public accountant
would, insofar as the use of such accounting principles is pertinent, be in a
position to deliver an unqualified opinion (other than a qualification
regarding changes in generally accepted accounting principles) as to financial
statements in which such principles have been properly applied.
General Partner. Crescent Real Estate Equities, Ltd., a Delaware
corporation.
Guaranteed Pension Plan. Any employee pension benefit plan within the
meaning of Section 3(2) of ERISA maintained or contributed to by the Borrower
or any ERISA Affiliate the benefits of which are guaranteed on termination in
full or in part by the PBGC pursuant to Title IV of ERISA, other than a
Multiemployer Plan.
Guarantor. Collectively, Crescent Guarantor and each Subsidiary
Guarantor, and individually any one such Guarantor.
Guarantor's Compliance Certificate. The compliance certificate which
Crescent Guarantor is required to provide to the Agent pursuant to the terms of
the Guaranty.
Guaranty. Collectively, the Unconditional Guaranty of Payment and
Performance, dated of even date herewith, made by Crescent Guarantor in favor
of the Agent and the Banks, and each Unconditional Guaranty of Payment and
Performance which is executed by a Subsidiary Guarantor, as the same may be
modified or amended, each such Guaranty to be in form and substance
satisfactory to the Agent and the Majority Banks.
Hazardous Substances. See Section 6.17(b).
Implied Rating. With respect to a Person, the most recent rating
issued from time to time by a Rating Agency as is applicable to such Person's
senior unsecured long-term debt, or if no such senior unsecured long-term debt
is outstanding, then the most recent rating issued from time to time by a
Rating Agency as would hypothetically be applicable to such Person's senior
unsecured long-term debt (i.e., an implied rating).
Indebtedness. All obligations, contingent and otherwise, that in
accordance with generally accepted accounting principles should be classified
upon the obligor's balance sheet as liabilities, or to which reference should
be made by footnotes thereto, including in any event and whether or not so
classified: (a) all debt and similar monetary obligations, whether direct or
indirect; (b) all liabilities secured by any mortgage, pledge, security
interest, lien, charge or other encumbrance existing on property owned or
acquired subject thereto, whether or not the liability secured thereby shall
have been assumed; (c) all guarantees, endorsements and other contingent
obligations whether direct or indirect in respect of indebtedness of others,
including any obligation
-9-
<PAGE> 16
to supply funds to or in any manner to invest directly or indirectly in a
Person, to purchase indebtedness, or to assure the owner of indebtedness
against loss through an agreement to purchase goods, supplies or services for
the purpose of enabling the debtor to make payment of the indebtedness held by
such owner or otherwise, the obligation to reimburse the issuer in respect of
any letter of credit, and obligations under interest rate swaps and similar
agreements, excluding, however, any such guarantees, endorsements and other
contingent obligations which when satisfied, funded or vested give rise to
corresponding assets under generally accepted accounting principles; (d) any
obligation as a lessee or obligor under a Capitalized Lease; (e) all
subordinated debt; and (f) all obligations to purchase under agreements to
acquire, or otherwise to contribute money with respect to, properties under
"development" within the meaning of Section 8.9.
Interest Payment Date. (a) As to each Loan, the first day of each
calendar month during the term of such Loan, and (b) also as to each Eurodollar
Rate Loan, the last day of the Interest Period relating thereto.
Interest Period. With respect to each Eurodollar Rate Loan (a)
initially, the period commencing on the Drawdown Date of such Loan and ending
one, two, three, six or twelve months thereafter, and (b) thereafter, each
period commencing on the day following the last day of the next preceding
Interest Period applicable to such Loan and ending on the last day of one of
the periods set forth above, as selected by the Borrower in a Conversion
Request; provided that all of the foregoing provisions relating to Interest
Periods are subject to the following:
(A) if any Interest Period with respect to a Eurodollar
Rate Loan would otherwise end on a day that is not a Eurodollar
Business Day, that Interest Period shall end and the next Interest
Period shall commence on the next preceding or succeeding Eurodollar
Business Day as determined conclusively by the Reference Bank in
accordance with the then current bank practice in the Eurodollar
interbank market;
(B) if the Borrower shall fail to give notice as provided
in Section 4.1, the Borrower shall be deemed to have requested a
conversion of the affected Eurodollar Rate Loan to a Base Rate Loan on
the last day of the then current Interest Period with respect thereto;
and
(C) no Interest Period relating to any Eurodollar Rate
Loan shall extend beyond the Maturity Date.
Investment Grade Rating. With respect to any Person, an Implied
Rating equal to or more favorable than BBB- with respect to a rating issued by
Standard & Poors Corporation (or in the case of a rating issued by Moody's
Investor Service, Inc., a rating of Baa3). If, at any time after a Person
obtains an Investment Grade Rating, (a) no Implied Rating for such Person's
senior unsecured long-term debt shall have been issued or confirmed in writing
by either of the Rating Agencies within the previous 365 days, or (b) the
rating system of either of the Rating Agencies (as opposed to the rating of a
Person) shall change, or (c) either of the Rating Agencies shall no longer
perform the functions of a securities rating agency, then the Borrower and the
Agent shall promptly negotiate in good faith to amend the reference to the
specific ratings in this definition for the determination of the Investment
Grade Rating, and pending such amendment, the applicable
-10-
<PAGE> 17
rating in effect as of the date the event described in this paragraph occurred
shall continue to apply.
Investment Partnerships. Investments in joint ventures, general
partnerships, limited partnerships, limited liability companies or any other
business association, excluding the Residential Corporations, formed for the
purpose of acquiring Investments of the type permitted in Section 8.3.
Investments. With respect to any Person, all shares of capital stock,
evidences of Indebtedness and other securities issued by any other Person, all
loans, advances, or extensions of credit to, or contributions to the capital
of, any other Person, all purchases of the securities or business or integral
part of the business of any other Person and commitments and options to make
such purchases, all interests in real property, and all other investments;
provided, however, that the term "Investment" shall not include (i) equipment,
inventory and other tangible personal property acquired in the ordinary course
of business, or (ii) current trade and customer accounts receivable for
services rendered in the ordinary course of business and payable in accordance
with customary trade terms. In determining the aggregate amount of Investments
outstanding at any particular time: (a) the amount of any investment
represented as a guaranty shall be taken at not less than the principal amount
of the obligations guaranteed and still outstanding; (b) there shall be
included as an Investment all interest accrued with respect to Indebtedness
constituting an Investment unless and until such interest is paid; (c) there
shall be deducted in respect of each such Investment any amount received as a
return of capital (but only by repurchase, redemption, retirement, repayment,
liquidating dividend or liquidating distribution); (d) there shall not be
deducted in respect of any Investment any amounts received as earnings on such
Investment, whether as dividends, interest or otherwise, except that accrued
interest included as provided in the foregoing clause (b) may be deducted when
paid; and (e) there shall not be deducted from the aggregate amount of
Investments any decrease in the value thereof.
Leases. Leases, licenses and agreements whether written or oral,
relating to the use or occupation of space in or on the Real Estate by persons
other than the Borrower.
Liens. See Section 8.2.
Limited Partner. Crescent Guarantor, successor by merger with CRE
Limited Partner, Inc., a Delaware corporation.
Loan Documents. This Agreement, the Notes, the Guaranty and all other
documents, instruments or agreements now or hereafter executed or delivered by
or on behalf of the Borrower or a Guarantor in connection with the Loans.
Loan or Loans. An individual loan or the aggregate loans, as the case
may be, to be made by the Banks hereunder.
Loan Request. See Section 2.6.
-11-
<PAGE> 18
Magellan. Magellan Health Services, Inc., a Delaware corporation.
Majority Banks. As of any date, the Bank or Banks whose aggregate
Commitment Percentage is equal to or greater than the required percentage, as
determined by the Banks, required to approve such matter, as disclosed by the
Agent to the Borrower from time to time.
Master Lease Agreement. That certain Master Lease Agreement dated
June 12, 1997 between Crescent Real Estate Funding VII, L.P., as Landlord, and
CBHS and certain other parties, as Tenant.
Maturity Date. June 6, 2000, or such earlier date on which the Loans
shall become due and payable pursuant to the terms hereof.
Modified Book Asset Value. For each type of direct or indirect
interest in real estate (undeveloped land, hotels/resorts, behavioral
healthcare facilities and Class A institutional quality office buildings,
retail properties, industrial and warehouse properties), an amount equal to the
sum of the aggregate net book value of assets of that type (determined in
accordance with the acquisition cost of such assets and as shown on the books
and records of the Borrower), plus that type of Real Estate's applicable share
of real estate depreciation since the date of the Borrower's initial public
offering, plus that type of Real Estate's applicable share of the one-time
market value adjustment described in Section 9.10.
Multiemployer Plan. Any multiemployer plan within the meaning of
Section 3(37) of ERISA maintained or contributed to by the Borrower or any
ERISA Affiliate.
Net Income (or Deficit). With respect to any Person (or any asset of
any Person) for any fiscal period, the net income (or deficit) of such Person
(or attributable to such asset), after deduction of all expenses, taxes and
other proper charges, determined in accordance with generally accepted
accounting principles.
Non-Competition Agreements. Noncompetition Agreements dated May 5,
1994, from Richard E. Rainwater, John C. Goff and Gerald W. Haddock.
Non-Incremental Revenue Generating Capital Expenditures. With respect
to any Person for any fiscal period, an amount equal to the sum of the amount
of capital expenditures paid in cash by such Person or with respect to such
asset (other than tenant related building improvements) during such fiscal
period and considered to be "Non-Incremental Revenue Generating", as such term
is defined by industry standards and as applied by the Borrower historically,
plus the amount of leasing costs (including leasing commission and tenant
improvements) paid in cash by such Person or with respect to such asset during
such fiscal period and considered to be "Non-Incremental Revenue Generating",
as such term is defined by industry standards and as applied by the Borrower
historically.
-12-
<PAGE> 19
Non-Recourse Indebtedness. Indebtedness of the Borrower or a
Subsidiary which is secured by one or more parcels of Real Estate and related
personal property or interests therein and Short-term Investments and is not a
general obligation of the Borrower or any Subsidiary, the holder of such
Indebtedness having recourse solely to the parcels of Real Estate securing such
Indebtedness, the improvements and leases thereon and the rents and profits
thereof and the Short-term Investments securing such Indebtedness.
Notes. See Section 2.4.
Notice. See Section 19.
Obligations. All indebtedness, obligations and liabilities of the
Borrower to any of the Banks and the Agent, individually or collectively, under
this Agreement or any of the other Loan Documents or in respect of any of the
Loans or the Notes, or other instruments at any time evidencing any of the
foregoing, whether existing on the date of this Agreement or arising or
incurred hereafter, direct or indirect, joint or several, absolute or
contingent, matured or unmatured, liquidated or unliquidated, secured or
unsecured, arising by contract, operation of law or otherwise.
Outstanding. With respect to the Loans, the aggregate unpaid
principal thereof as of any date of determination.
PBGC. The Pension Benefit Guaranty Corporation created by Section
4002 of ERISA and any successor entity or entities having similar
responsibilities.
Permitted Liens. Liens, security interests and other encumbrances
permitted by Section 8.2.
Person. Any individual, corporation, partnership, limited liability
company, trust, unincorporated association, business, or other legal entity,
and any government or any governmental agency or political subdivision thereof.
Preferred Distributions. For any period, the amount of any and all
Distributions due and payable to the holders of any form of preferred stock or
partnership interest (whether perpetual, convertible or otherwise) or other
ownership or beneficial interest in Crescent Guarantor or Borrower that
entitles the holders thereof to preferential payment or distribution priority
with respect to dividends, distributions, assets or other payments over the
holders of any other stock, partnership interest or other ownership or
beneficial interest in such Person.
Prospectus. The 10-K of Crescent Guarantor, dated December 31, 1996
and filed with the SEC.
Rating Agencies. Standard & Poor's Corporation and Moody's Investors
Service, Inc.
Rating Notice. See Section 7.4(i).
-13-
<PAGE> 20
Rating Notice Date. The earlier of (a) the date a Rating Notice is
received by the Agent, or (b) the date the Agent, having received actual notice
of a change by the Rating Agency of the Borrower's Implied Rating, sends notice
to the Borrower of such change, provided that nothing contained herein shall
imply any obligation of the Agent to monitor such rating changes.
Real Estate. All real property at any time owned or leased (as lessee
or sublessee) by the Borrower or any of its Subsidiaries or any Investment
Partnerships.
Record. The grid attached to any Note, or the continuation of such
grid, or any other similar record, including computer records, maintained by
any Bank with respect to any Loan referred to in such Note.
Reference Bank. BankBoston.
Register. See Section 18.2.
REIT Status. With respect to Crescent Guarantor, its status as a real
estate investment trust as defined in Section 856(a) of the Code.
Release. See Section 6.17(c)(iii).
Rent Adjustments. For any Person, straight line adjustments to rent
payable under Leases, as determined in accordance with generally accepted
accounting principles.
Rent Payments. For any period, the "Rent" as such term is defined in
the Master Lease Agreement.
Residential Corporations. Collectively Mira Vista Development Corp.,
Houston Area Development Corp., Crescent Development Management Corp.,
Woodlands Land Company, Inc. and Desert Mountain Development Corporation.
Revocation Costs. See Section 2.6.
Sale Agreement. That certain Real Estate Purchase and Sale Agreement
dated as of January 29, 1997, between the Borrower, as Purchaser, and Magellan,
as Seller, as amended by that certain First Amendment to Real Estate Purchase
and Sale Agreement dated as of February 28, 1997, between the Borrower and
Magellan, and as further amended by that certain Second Amendment to Real
Estate Purchase and Sale Agreement dated as of May 29, 1997 between the
Borrower and Magellan, with respect to the purchase of the Behavioral
Healthcare Facilities.
SEC. The federal Securities and Exchange Commission.
Secured Indebtedness. Indebtedness of a Person that is pursuant to a
Capitalized Lease or is directly or indirectly secured by a Lien.
-14-
<PAGE> 21
Short-term Investments. Investments described in subsections (a)
through (g), inclusive, of Section 8.3.
State. A state of the United States of America.
Subsidiary. (a) Any corporation, association, partnership, trust, or
other business entity of which the designated parent shall at any time own
directly or indirectly through a Subsidiary or Subsidiaries at least a majority
(by number of votes or controlling interests) of the outstanding Voting
Interests, (b) any other entity the accounts of which are consolidated with the
accounts of the Borrower, and (c) as to the Borrower specifically, any of the
Residential Corporations. A Subsidiary may also include an Investment
Partnership to the extent the provisions of clause (a), (b) or (c) apply.
Subsidiary Guarantor. CresCal Properties, L.P., CresTex Development,
L.C. and each additional Subsidiary which becomes a Guarantor pursuant to
Section 5.2.
Test Period. See Section 9.2.
Total Commitment. The sum of the Commitments of the Banks, as in
effect from time to time. As of the date of this Agreement, the Total
Commitment is $750,000,000.00 (with BankBoston having a Commitment of
$275,000,000.00), provided that after BankBoston sells down its present
Commitment to $100,000,000.00, the Total Commitment shall increase up to a
maximum of $850,000,000.00 as and when one or more Banks shall acquire from
BankBoston all or a portion of the additional Commitment of $100,000,000.00.
Type. As to any Loan, its nature as a Base Rate Loan or a Eurodollar
Rate Loan.
Unencumbered Operating Property. An Unencumbered Operating Property
shall mean Real Estate (a) which is owned one hundred percent (100%) in fee
simple by the Borrower, or (b) in which the Borrower owns a leasehold interest
pursuant to a mortgageable ground lease having a remaining term of not less
than fifty (50) years (calculated from the date of acquisition of such
interest), or (c) which is owned by an entity which is controlled by the
Borrower or in which the Borrower is the general partner or managing member
provided that (i) the Borrower has control over all major and day-to-day
decisions with respect to the operation of such entity (including, without
limitation, the decision to sell or encumber the assets of such entity), (ii)
the organizational agreements of such entity specifically authorize the
Borrower to pledge the assets of such entity as security for the Obligations,
and (iii) the Borrower certifies to the Agent that applicable law does not
preclude such entity from pledging its assets to secure the Obligations; and in
any case which satisfies all of the following conditions:
(x) such Unencumbered Operating Property shall be free and clear
of all Liens other than the Liens permitted in Section 8.2(i), (iii) and (vi);
and
-15-
<PAGE> 22
(y) such Unencumbered Operating Property shall consist solely of
Real Estate which is an income producing operating property.
Variable Interest Rate. A rate of interest payable with respect to
Indebtedness that may vary, float or change during the term of such
Indebtedness (that is, a rate of interest that is not fixed for the entire term
of such Indebtedness).
Voting Interests. Stock or similar ownership interests, of any class
or classes (however designated), the holders of which are at the time entitled,
as such holders, (a) to vote for the election of a majority of the directors
(or persons performing similar functions) of the corporation, association,
partnership, trust or other business entity involved, or (b) to control,
manage, or conduct the business of the corporation, partnership, association,
trust or other business entity involved.
Section 1.2. Rules of Interpretation.
(a) A reference to any document or agreement shall
include such document or agreement as amended, modified or supplemented from
time to time in accordance with its terms and the terms of this Agreement.
(b) The singular includes the plural and the plural
includes the singular. Without limiting the foregoing, a reference to
Guarantor shall be a reference to any or all Guarantors as the context may
permit or require.
(c) A reference to any law includes any amendment or
modification to such law.
(d) A reference to any Person includes its permitted
successors and permitted assigns.
(e) Accounting terms not otherwise defined herein have
the meanings assigned to them by generally accepted accounting principles
applied on a consistent basis by the accounting entity to which they refer.
(f) The words "include", "includes" and "including" are
not limiting.
(g) The words "approval" and "approved", as the context
so determines, means an approval in writing given to the party seeking approval
after full and fair disclosure to the party giving approval of all material
facts necessary in order to determine whether approval should be granted.
(h) All terms not specifically defined herein or by
generally accepted accounting principles, which terms are defined in the
Uniform Commercial Code as in effect in the Commonwealth of Massachusetts, have
the meanings assigned to them therein.
-16-
<PAGE> 23
(i) Reference to a particular "Section ", refers to that
section of this Agreement unless otherwise indicated.
(j) The words "herein", "hereof", "hereunder" and words
of like import shall refer to this Agreement as a whole and not to any
particular section or subdivision of this Agreement.
SECTION 2. THE REVOLVING CREDIT FACILITY.
Section 2.1. Commitment to Lend. Subject to the terms and conditions
set forth in this Agreement, each of the Banks severally agrees to lend to the
Borrower, and the Borrower may borrow (and repay and reborrow) from time to
time between the Closing Date and the Maturity Date, upon notice by the
Borrower to the Agent given in accordance with Section 2.6, such sums as are
requested by the Borrower for the purposes set forth in Section 2.9 (but
subject to the limitations set forth in Section 2.9) up to a maximum aggregate
principal amount outstanding (after giving effect to all amounts requested) at
any one time equal to such Bank's Commitment; provided, that, in all events no
Default or Event of Default shall have occurred and be continuing and the
Borrower's financial statements as required pursuant to Section 2.6(iii) shall
demonstrate compliance with all covenants set forth therein; and provided,
further, that the outstanding principal amount of the Loans (after giving
effect to all amounts requested) shall not at any time exceed the Total
Commitment. The Loans shall be made pro rata in accordance with each Bank's
Commitment Percentage. Each request for a Loan hereunder shall constitute a
representation and warranty by the Borrower that all of the conditions set
forth in Section 10 and Section 11, in the case of the initial Loan, and
Section 11, in the case of all other Loans, have been satisfied on the date of
such request (except as otherwise permitted in Paragraph 4 of the form of Loan
Request with respect to warranties and representations). No Bank shall have
any obligation to make Loans to the Borrower in the maximum aggregate principal
amount outstanding of more than the principal face amount of its Note.
Notwithstanding anything herein to the contrary, the Banks shall have no
obligation to make Loans to the Borrower in the maximum aggregate principal
amount outstanding of more than $750,000,000.00, provided that after BankBoston
sells down its present Commitment to $100,000,000.00, the Total Commitment
shall be increased up to a maximum of $850,000,000.00 as and when one or more
Banks shall acquire from BankBoston all or a portion of the additional
Commitment of $100,000,000.00.
Section 2.2. Facility Fee. The Borrower agrees to pay to the Agent
for the accounts of the Banks in accordance with their respective Commitment
Percentages a facility fee calculated at the rate of one-fourth of one percent
(0.25%) per annum on the daily amount by which the Total Commitment exceeds the
outstanding principal amount of Loans during each calendar quarter or portion
thereof commencing on the date hereof and ending on the Maturity Date. The
facility fee shall be payable quarterly in arrears on the fifth day of each
calendar quarter for the immediately preceding calendar quarter or portion
thereof, or on any earlier date on which the Commitments shall be reduced or
shall terminate as provided in Section 2.3, with a final payment on the
Maturity Date. Any payment due under this Section 2.2 shall be prorated for
any partial calendar quarter.
-17-
<PAGE> 24
Section 2.3. Reduction of Commitment. The Borrower shall have the
right at any time and from time to time upon five Business Days' prior written
notice to the Agent to reduce by $5,000,000 or an integral multiple of $100,000
in excess thereof or to terminate entirely the unborrowed portion of the
Commitments, whereupon the Commitments of the Banks shall be reduced pro rata
in accordance with their respective Commitment Percentages of the amount
specified in such notice or, as the case may be, terminated, any such reduction
to be without penalty (unless such reduction requires repayment of a Eurodollar
Rate Loan). Promptly after receiving any notice of the Borrower delivered
pursuant to this Section 2.3, the Agent will notify the Banks of the substance
thereof. Upon the effective date of any such reduction or termination, the
Borrower shall pay to the Agent for the respective accounts of the Banks the
full amount of any facility fee under Section 2.2 then accrued on the amount of
the reduction. No reduction or termination of the Commitment may be
reinstated. Notwithstanding the foregoing, unless the Commitments are
terminated in full, in no event shall the aggregate Commitments be reduced to
less than $375,000,000.00.
Section 2.4. Notes. The Loans shall be evidenced by separate
promissory notes of the Borrower in substantially the form of Exhibit A hereto
(collectively, the "Notes"), dated of even date with this Agreement and
completed with appropriate insertions. One Note shall be payable to the order
of each Bank in the principal amount equal to such Bank's Commitment or, if
less, the outstanding amount of all Loans made by such Bank, plus interest
accrued thereon, as set forth below (provided that, without increasing the
Commitment of BankBoston, the initial Note delivered to BankBoston shall be in
the principal amount equal to the sum of BankBoston's Commitment and the
remaining Commitment of $100,000,000.00). The Borrower irrevocably authorizes
each Bank to make or cause to be made, at or about the time of the Drawdown
Date of any Loan or at the time of receipt of any payment of principal thereof,
an appropriate notation on such Bank's Record reflecting the making of such
Loan or (as the case may be) the receipt of such payment. The outstanding
amount of the Loans set forth on such Bank's Record shall be prima facie
evidence of the principal amount thereof owing and unpaid to such Bank, but the
failure to record, or any error in so recording, any such amount on such Bank's
Record shall not limit or otherwise affect the obligations of the Borrower
hereunder or under any Note to make payments of principal of or interest on any
Note when due. By delivery of the Notes, there shall not be deemed to have
occurred, and there has not otherwise occurred, any payment, satisfaction or
novation of the Indebtedness evidenced by the "Notes" described in the Amended
Credit Agreement, which Indebtedness is instead allocated among the Banks as of
the date hereof and evidenced by the Notes and their respective Commitment
Percentages, and the Banks shall as of the date hereof make such adjustments to
the outstanding loans of such Banks so that such outstanding Loans are
consistent with their respective Commitment Percentages.
Section 2.5. Interest on Loans.
(a) Each Base Rate Loan shall bear interest for the
period commencing with the Drawdown Date thereof and ending on the date on
which such Base Rate Loan is paid in full or is converted to a Eurodollar Rate
Loan from a Base Rate Loan at the Base Rate.
-18-
<PAGE> 25
(b) Each Eurodollar Rate Loan shall bear interest for the
period commencing with the Drawdown Date thereof and ending on the last day of
the Interest Period with respect thereto at the rate per annum equal to the sum
of the Applicable Margin plus the Eurodollar Rate determined for such Interest
Period.
(c) The Borrower promises to pay interest on each Loan in
arrears on each Interest Payment Date with respect thereto.
(d) Base Rate Loans and Eurodollar Rate Loans may be
converted to Loans of the other Type as provided in Section 4.1.
Section 2.6. Requests for Loans. The Borrower (i) shall notify the
Agent of a potential request for a Loan as soon as possible prior to the
Borrower's proposed Drawdown Date, and (ii) shall give to the Agent written
notice in the form of Exhibit B hereto (or telephonic notice confirmed in
writing in the form of Exhibit B hereto) of each Loan requested hereunder (a
"Loan Request") no later than 10:00 a.m. three (3) Business Days prior to the
proposed Drawdown Date. The Agent shall promptly notify each of the Banks
following the receipt of a Loan Request, but in any event no later than 2:00
p.m. three (3) Business Days prior to the proposed Drawdown Date. Borrower
shall not make a Loan Request more frequently than three times each month.
Each such notice shall specify with respect to the requested Loan the proposed
principal amount, Drawdown Date, Interest Period (if applicable) and Type.
Each such notice shall also contain (i) a statement as to the purpose for which
such advance shall be used (which purpose shall be in accordance with the terms
of Section 2.9), (ii) a certification by the chief financial or chief
accounting officer of the General Partner that the Borrower is and will be in
compliance with all covenants under the Loan Documents after giving effect to
the making of such Loan, (iii) a Compliance Certificate prepared using the
financial statements of the Borrower most recently provided or required to be
provided to the Agent under Section 6.4 or Section 7.4 adjusted in the best
good faith estimate of the Borrower to give effect to the proposed advance and
incorporating the operating performance of any asset to be acquired, and (iv)
the Guarantor's Compliance Certificate prepared using the financial statements
of Crescent Guarantor most recently provided or required to be provided to the
Agent pursuant to the Guaranty adjusted in the best good faith estimate of
Crescent Guarantor to the date of the proposed advance. Promptly upon receipt
of any such notice, the Agent shall notify each of the Banks thereof. Except
as provided in this Section 2.6, each such Loan Request shall be irrevocable
and binding on the Borrower and shall obligate the Borrower to accept the Loan
requested from the Banks on the proposed Drawdown Date, provided that, in
addition to the Borrower's other remedies against any Bank which fails to
advance its proportionate share of a requested Loan, such Loan Request may be
revoked by the Borrower by notice received by the Agent no later than the
Drawdown Date if any Bank fails to advance its proportionate share of the
requested Loan in accordance with the terms of this Agreement, provided further
that the Borrower shall be liable in accordance with the terms of this
Agreement to any Bank which is prepared to advance its proportionate share of
the requested Loan for any costs, expenses or damages incurred by such Bank as
a result of the Borrower's election to revoke such Loan Request (the
"Revocation Costs"). Nothing herein shall prevent the Borrower from seeking
recourse against any Bank that fails to advance its proportionate share of a
requested Loan as required by this Agreement. The
-19-
<PAGE> 26
Borrower may, without any liability for the payment of the Revocation Costs or
other cost or penalty, revoke a Loan Request by delivering notice thereof to
each of the Banks no later than 3:00 p.m. three (3) Business Days prior to the
Drawdown Date. Each Loan Request shall be (a) for a Base Rate Loan in a
minimum aggregate amount of $1,000,000 or an integral multiple of $100,000 in
excess thereof, or (b) for a Eurodollar Rate Loan in a minimum aggregate amount
of $2,000,000 or an integral multiple of $100,000 in excess thereof; provided,
however, that there shall be no more than five (5) Eurodollar Rate Loans
outstanding at any one time.
Section 2.7. Funds for Loans.
(a) Not later than 11:00 a.m. (Boston time) on the
proposed Drawdown Date of any Loans, each of the Banks will make available to
the Agent, at the Agent's Head Office, in immediately available funds, the
amount of such Bank's Commitment Percentage of the amount of the requested
Loans which may be disbursed pursuant to Section 2.1. Upon receipt from each
Bank of such amount, and upon receipt of the documents required by Section 10
and Section 11 and the satisfaction of the other conditions set forth therein,
to the extent applicable, the Agent will make available to the Borrower the
aggregate amount of such Loans made available to the Agent by the Banks by wire
transfer in accordance with Borrower's instructions. The failure or refusal of
any Bank to make available to the Agent at the aforesaid time and place on any
Drawdown Date the amount of its Commitment Percentage of the requested Loans to
the extent it is obligated to fund such Loan hereunder shall not relieve any
other Bank from its several obligation hereunder to make available to the Agent
the amount of such other Bank's Commitment Percentage of any requested Loans,
including any additional Loans that may be requested by the Borrower subject to
the terms and conditions hereof to provide funds to replace those not advanced
by the Bank so failing or refusing, provided that the Borrower may by notice
received by the Agent no later than the Drawdown Date refuse to accept any Loan
which is not fully funded in accordance with the Borrower's Loan Request
subject to the terms of Section 2.6 (except that such refusal shall not relieve
the Borrower of its obligation to pay the Revocation Costs); provided further
that no Bank shall be obligated to advance any amount in excess of the limits
set forth in Section 2.1. In the event of any such failure or refusal, the
Banks not so failing or refusing shall be entitled to a priority position as
against the Bank or Banks so failing or refusing for such Loans as provided in
Section 12.4.
(b) Unless Agent shall have been notified by any Bank
prior to the applicable Drawdown Date that such Bank will not make available to
Agent such Bank's pro rata share of a proposed Loan, Agent may in its
discretion assume that such Bank has made such Loan available to Agent in
accordance with the provisions of this Agreement and Agent may, if it chooses,
in reliance upon such assumption make such Loan available to Borrower, and such
Bank shall be liable to the Agent for the amount of such advance.
Section 2.8. Intentionally Omitted.
Section 2.9. Use of Proceeds. The Borrower will use the proceeds of
the Loans solely to provide short-term financing (a) for the acquisition of fee
interests in Real Estate which is utilized principally for Class A office
space, behavioral healthcare facilities and/or hotel/resort properties
-20-
<PAGE> 27
which are of institutional quality or other income-producing real estate
reasonably satisfactory to the Majority Banks, subject to the limitations in
Section 9.9, (b) for working capital purposes, (c) for the acquisition of
non-income producing land assets or real estate assets which are held in fee
simple or in any form other than undivided fee simple ownership (such as
cotenancy interests, leasehold interests, partnership interests, shares of
stock in corporations owning real estate, or through mortgages or participation
interests in or assignments of mortgages), subject however to the limitations
in Section 9.9, and (d) for such other purposes as the Majority Banks in their
discretion from time to time may agree to in writing. Without the consent of
the Majority Banks, in no event may any amount advanced under the Loan be used
directly or indirectly (i) to pay dividends or other distributions to any
partner or member of the Borrower, the Crescent Guarantor or the shareholders
of the Crescent Guarantor or (ii) except as expressly permitted in Section 8.9,
with respect to the obligations described in Schedule 8.1(h) or with respect to
the Investments described in Section 8.3(k) and (l), to make advances, loans,
Investments or other contributions to, or in any other manner "downstream"
into, Crescent Real Estate Funding I, L.P., Crescent Real Estate Funding II,
L.P., Crescent Real Estate Funding III, L.P., Crescent Real Estate Funding IV,
L.P., Crescent Real Estate Funding V, L.P., Crescent Real Estate Funding VI,
L.P., Crescent Real Estate Funding VII, L.P. or any other Subsidiary or
Investment Partnership of the Borrower whether now existing or hereafter
formed. Without the consent of the Majority Banks, except with respect to the
development of Phase II at the project commonly referred to as "The Avallon"
(and the potential development of Phase III at the Avallon), tenant
improvements and the renovation or demolition and construction of the "Frost
Bank Garage" to be constructed at the northeast corner of the intersection of
Lavaca Street and Ninth Street in Austin, Texas, on land acquired by the
Borrower in connection with the acquisition of the Frost Bank Plaza Building,
the Surtran Garage at Continental Plaza, the convention hotel at Houston
Center, an office building near The Crescent and an office building near
Washington Harbor in Washington, D.C. as permitted pursuant to Section 8.9, no
portion of the proceeds of the Loan shall be used to develop or construct new
commercial real estate projects or for the substantial renovation or
rehabilitation of commercial real estate projects.
SECTION 3. REPAYMENT OF THE LOANS.
Section 3.1. Stated Maturity. The Borrower promises to pay on the
Maturity Date and there shall become absolutely due and payable on the Maturity
Date, all of the Loans outstanding on such date, together with any and all
accrued and unpaid interest thereon.
Section 3.2. Mandatory Prepayments. The Borrower promises to pay
principal of the Loans prior to stated maturity, as follows:
(a) If at any time the aggregate outstanding principal
amount of the Loans exceeds the Total Commitment, then the Borrower
shall immediately upon demand from Agent pay the amount of such excess
to the Agent for the respective accounts of the Banks for application
to the Loans (it being acknowledged that in the event the Borrower
makes such payment as provided herein, the Borrower shall not be in
default of Section 9.3).
-21-
<PAGE> 28
(b) All of the Borrower's interest in the gross proceeds
of each and every sale or refinancing of real estate assets of the
Borrower and its Subsidiaries and Investment Partnerships (whether
held directly or indirectly but excluding Borrower's interest in the
gross proceeds of sales or refinancings of real estate assets by
Subsidiaries and Investment Partnerships whose primary business is the
subdivision and sale of residential land) provided such gross proceeds
are in an amount in excess of $10,000,000.00 (provided further that
the exclusion of sales with gross proceeds equal to or less than
$10,000,000.00 shall be capped at $25,000,000.00 per year), less all
reasonable costs, expenses and commissions paid to unrelated parties
and less any Indebtedness (other than the Obligations) secured by such
asset to be satisfied as a part of such sale or refinance, shall be
promptly paid by the Borrower to the Agent for the account of the
Banks as a prepayment of the Loans to the extent of the outstanding
balance of the Loans; provided that, (x) so long as (i) there has been
no acceleration of the maturity of the Obligations pursuant to Section
12.1, (ii) no Event of Default under Section 12.1(a), (b), (d), (g),
(h), (i), (j), (k), (l), (m), (n), and (o) has occurred and is
continuing, or (iii) no breach of the covenants contained in Section
8.1, Section 8.2, Section 8.3 or Section 8.7 has occurred and is
continuing, the Borrower shall not as a result of this Section 3.2(b)
be required to reduce the principal balance of the Loans to less than
$50,000,000.00; and (y) with respect to the Borrower's interest in the
gross proceeds of a sale or refinancing of real estate assets of a
Subsidiary or Investment Partnership in which the Borrower does not
own a majority (by number of votes or controlling interests) of the
outstanding Voting Interests, the Borrower shall pay such gross
proceeds to the Agent for the account of the Banks as soon as
distributed to the Borrower by such Subsidiary or Investment
Partnership.
Section 3.3. Optional Prepayments. The Borrower shall have
the right, at its election, to prepay the outstanding amount of the
Loans, as a whole or in part, at any time without penalty or premium;
provided, that the full or partial prepayment of the outstanding
amount of any Eurodollar Rate Loans pursuant to this Section 3.3 may
be made only on the last day of the Interest Period relating thereto
except as otherwise required pursuant to Section 4.7. The Borrower
shall give the Agent, no later than 10:00 a.m., Boston time, at least
three (3) Business Days prior written notice of any prepayment
pursuant to this Section 3.3, in each case specifying the proposed
date of payment of Loans and the principal amount to be paid.
Section 3.4. Partial Prepayments. Each partial prepayment of the
Loans under Section 3.2 and Section 3.3 shall be in the minimum amount of
$500,000.00 or an integral multiple of $100,000 in excess thereof (unless the
Loans are being prepaid in full), shall be accompanied by the payment of
accrued interest on the principal prepaid to the date of payment and, after
payment of such interest, shall be applied, in the absence of instruction by
the Borrower, first to the principal of Base Rate Loans and then to the
principal of Eurodollar Rate Loans.
Section 3.5. Effect of Prepayments. Amounts of the Loans prepaid
under Section 3.2 and Section 3.3 prior to the Maturity Date may be reborrowed
as provided in Section 2. Except as otherwise expressly provided herein, all
payments shall first be applied to accrued but unpaid interest and then to
principal.
-22-
<PAGE> 29
Section 3.6. Proceeds from Debt or Equity Offering. The Borrower
shall cause all gross proceeds of each and every Debt Offering and Equity
Offering, less all reasonable costs, fees, expenses, underwriting commissions,
fees and discounts incurred in connection therewith, to be promptly paid by the
Borrower to the Agent for the account of the Banks as a prepayment of the Loans
to the extent of the outstanding balance of the Loans; provided that, subject
to the limitations contained in Section 3.2(b) above, the Borrower shall not as
a result of this Section 3.6 be required to reduce the principal balance of the
Loans to less than $50,000,000.00.
SECTION 4. CERTAIN GENERAL PROVISIONS.
Section 4.1. Conversion Options.
(a) The Borrower may elect from time to time to convert
any outstanding Loan to a Loan of another Type and such Loan shall thereafter
bear interest as a Base Rate Loan or a Eurodollar Rate Loan, as applicable;
provided that (i) with respect to any such conversion of a Eurodollar Rate Loan
to a Base Rate Loan, the Borrower shall give the Agent at least three Business
Days' prior written notice of such election, and such conversion shall only be
made on the last day of the Interest Period with respect to such Eurodollar
Rate Loan; (ii) with respect to any such conversion of a Base Rate Loan to a
Eurodollar Rate Loan, the Borrower shall give the Agent at least four
Eurodollar Business Days' prior written notice of such election and the
Interest Period requested for such Loan, the principal amount of the Loan so
converted shall be in a minimum aggregate amount of $2,000,000 or an integral
multiple of $100,000 in excess thereof and, after giving effect to the making
of such Loan, there shall be no more than five (5) Eurodollar Rate Loans
outstanding at any one time; and (iii) no Loan may be converted into a
Eurodollar Rate Loan when any Default or Event of Default has occurred and is
continuing. All or any part of the outstanding Loans of any Type may be
converted as provided herein, provided that no partial conversion shall result
in a Base Rate Loan in an aggregate principal amount of less than $1,000,000 or
a Eurodollar Rate Loan in an aggregate principal amount of less than $2,000,000
and that the aggregate principal amount of each Loan shall be in an integral
multiple of $100,000. On the date on which such conversion is being made, each
Bank shall take, to the extent it deems it necessary to do so, such action as
is necessary to transfer its Commitment Percentage of such Loans to its
Domestic Lending Office or its Eurodollar Lending Office, as the case may be.
Each Conversion Request relating to the conversion of a Base Rate Loan to a
Eurodollar Rate Loan shall be irrevocable by the Borrower.
(b) Any Loan may be continued as such Type upon the
expiration of an Interest Period with respect thereto by compliance by the
Borrower with the terms of Section 4.1; provided that no Eurodollar Rate Loan
may be continued as such when any Default or Event of Default has occurred and
is continuing, but shall be automatically converted to a Base Rate Loan on the
last day of the Interest Period relating thereto ending during the continuance
of any Default or Event of Default.
-23-
<PAGE> 30
(c) In the event that the Borrower does not notify the
Agent of its election hereunder with respect to any Loan, such Loan shall be
automatically converted to a Base Rate Loan at the end of the applicable
Interest Period.
Section 4.2. Closing Fee. The Borrower has paid to BankBoston
certain closing fees pursuant to an Agreement Regarding Fees dated of even date
herewith among the Borrower and BankBoston. BankBoston has paid to the Banks a
closing fee in accordance with their separate agreement.
Section 4.3. Agent's Fee. The Borrower shall pay to the Agent, for
the Agent's own account, an Agent's fee calculated at the rate of $50,000.00
per year. The Agent's fee shall be payable quarterly in arrears on the first
day of each calendar quarter for the immediately preceding calendar quarter or
portion thereof. The Agent's fee for any partial calendar quarter shall be
prorated.
Section 4.4. Funds for Payments.
(a) All payments of principal, interest, facility fees,
Agent's fees, closing fees and any other amounts due hereunder or under any of
the other Loan Documents shall be made to the Agent, for the respective
accounts of the Banks and the Agent, as the case may be, at the Agent's Head
Office, not later than 3:00 p.m. (Boston time) on the day when due, in each
case in immediately available funds. To the extent funds are available in such
account, the Agent is hereby authorized to charge the account of the Borrower
with BankBoston, on the dates when the amount thereof shall become due and
payable, with the amounts of the principal of and interest on the Loans and all
fees, charges, expenses and other amounts owing to the Agent and/or the Banks
under the Loan Documents.
(b) All payments by the Borrower hereunder and under any
of the other Loan Documents shall be made without setoff or counterclaim and
free and clear of and without deduction for any taxes, levies, imposts, duties,
charges, fees, deductions, withholdings, compulsory loans, restrictions or
conditions of any nature now or hereafter imposed or levied by any jurisdiction
or any political subdivision thereof or taxing or other authority therein
unless the Borrower is compelled by law to make such deduction or withholding.
If any such obligation is imposed upon the Borrower with respect to any amount
payable by it hereunder or under any of the other Loan Documents, the Borrower
will pay to the Agent, for the account of the Banks or (as the case may be) the
Agent, on the date on which such amount is due and payable hereunder or under
such other Loan Document, such additional amount in Dollars as shall be
necessary to enable the Banks or the Agent to receive the same net amount which
the Banks or the Agent would have received on such due date had no such
obligation been imposed upon the Borrower. The Borrower will deliver promptly
to the Agent certificates or other valid vouchers for all taxes or other
charges deducted from or paid with respect to payments made by the Borrower
hereunder or under such other Loan Document.
-24-
<PAGE> 31
Section 4.5. Computations. All computations of interest on the Loans
and of other fees to the extent applicable shall be based on a 360-day year and
paid for the actual number of days elapsed. Except as otherwise provided in
the definition of the term "Interest Period" with respect to Eurodollar Rate
Loans, whenever a payment hereunder or under any of the other Loan Documents
becomes due on a day that is not a Business Day, the due date for such payment
shall be extended to the next succeeding Business Day, and interest shall
accrue during such extension. The outstanding amount of the Loans as reflected
on the records of the Agent from time to time shall be considered prima facie
evidence of such amount.
Section 4.6. Inability to Determine Eurodollar Rate. In the event
that, prior to the commencement of any Interest Period relating to any
Eurodollar Rate Loan, the Agent shall determine in the exercise of its good
faith business judgment that adequate and reasonable methods do not exist for
ascertaining the Eurodollar Rate for such Interest Period, the Agent shall
forthwith give notice of such determination (which shall be conclusive and
binding on the Borrower and the Banks) to the Borrower and the Banks. In such
event (a) any Loan Request with respect to Eurodollar Rate Loans shall be
automatically withdrawn and shall be deemed a request for Base Rate Loans and
(b) each Eurodollar Rate Loan will automatically, on the last day of the then
current Interest Period thereof, become a Base Rate Loan, and the obligations
of the Banks to make Eurodollar Rate Loans shall be suspended until the Agent
determines in the exercise of its good faith business judgment that the
circumstances giving rise to such suspension no longer exist, whereupon the
Agent shall so notify the Borrower and the Banks.
Section 4.7. Illegality. Notwithstanding any other provisions
herein, if any present or future law, regulation, treaty or directive or the
interpretation or application thereof shall make it unlawful, or any central
bank or other governmental authority having jurisdiction over a Bank or its
Eurodollar Lending Office shall assert that it is unlawful, for any Bank to
make or maintain Eurodollar Rate Loans, such Bank shall forthwith give notice
of such circumstances to the Agent and the Borrower and thereupon (a) the
commitment of the Banks to make Eurodollar Rate Loans or convert Loans of
another type to Eurodollar Rate Loans shall forthwith be suspended and (b) the
Eurodollar Rate Loans then outstanding shall be converted automatically to Base
Rate Loans on the last day of each Interest Period applicable to such
Eurodollar Rate Loans or within such earlier period as may be required by law.
Section 4.8. Additional Interest. If any Eurodollar Rate Loan or any
portion thereof is repaid or is converted to a Base Rate Loan for any reason on
a date which is prior to the last day of the Interest Period applicable to such
Eurodollar Rate Loan, the Borrower will pay to the Agent upon demand for the
account of the Banks in accordance with their respective Commitment
Percentages, in addition to any amounts of interest otherwise payable
hereunder, any amounts required to compensate the Banks for any losses, costs
or expenses which may reasonably be incurred as a result of such payment or
conversion, including, without limitation, an amount equal to daily interest
for the unexpired portion of such Interest Period on the Eurodollar Rate Loan
or portion thereof so repaid or converted at a per annum rate equal to the
excess, if any, of (a) the interest rate calculated on the basis of the
Eurodollar Rate applicable to such Eurodollar Rate Loan (including any spread
over such Eurodollar Rate) minus (b) the yield obtainable by the
-25-
<PAGE> 32
Agent upon the purchase of debt securities customarily issued by the Treasury
of the United States of America which have a maturity date most closely
approximating the last day of such Interest Period (it being understood that
the purchase of such securities shall not be required in order for such amounts
to be payable).
Section 4.9. Additional Costs, Etc. Notwithstanding anything herein
to the contrary, if any present or future applicable law, which expression, as
used herein, includes statutes, rules and regulations thereunder and legally
binding interpretations thereof by any competent court or by any governmental
or other regulatory body or official with appropriate jurisdiction charged with
the administration or the interpretation thereof and requests, directives,
instructions and notices at any time or from time to time hereafter made upon
or otherwise issued to any Bank or the Agent by any central bank or other
fiscal, monetary or other authority (whether or not having the force of law),
shall:
(a) subject any Bank or the Agent to any tax, levy,
impost, duty, charge, fee, deduction or withholding of any nature with respect
to this Agreement, the other Loan Documents, such Bank's Commitment or the
Loans (other than taxes based upon or measured by the income or profits of such
Bank or the Agent), or
(b) materially change the basis of taxation (except for
changes in taxes on income or profits) of payments to any Bank of the principal
of or the interest on any Loans or any other amounts payable to any Bank under
this Agreement or the other Loan Documents, or
(c) impose or increase or render applicable any special
deposit, reserve, assessment, liquidity, capital adequacy or other similar
requirements (whether or not having the force of law) against assets held by,
or deposits in or for the account of, or loans by, or commitments of an office
of any Bank, or
(d) impose on any Bank or the Agent any other conditions
or requirements with respect to this Agreement, the other Loan Documents, the
Loans, such Bank's Commitment, or any class of loans or commitments of which
any of the Loans or such Bank's Commitment forms a part; and the result of any
of the foregoing is
(i) to increase the cost to any Bank of making,
funding, issuing, renewing, extending or maintaining any of the Loans or such
Bank's Commitment, or
(ii) to reduce the amount of principal, interest
or other amount payable to such Bank or the Agent hereunder on account of such
Bank's Commitment or any of the Loans, or
(iii) to require such Bank or the Agent to make any
payment or to forego any interest or other sum payable hereunder, the amount of
which payment or foregone interest or other sum is calculated by reference to
the gross amount of any sum receivable or deemed received by such Bank or the
Agent from the Borrower hereunder,
-26-
<PAGE> 33
then, and in each such case, the Borrower will, within thirty (30) days of
demand made by such Bank or (as the case may be) the Agent at any time and from
time to time and as often as the occasion therefor may arise, pay to such Bank
or the Agent such additional amounts as such Bank or the Agent shall determine
in good faith to be sufficient to compensate such Bank or the Agent for such
additional cost, reduction, payment or foregone interest or other sum. Each
Bank and the Agent in determining such amounts may use any reasonable averaging
and attribution methods, generally applied by such Bank or the Agent.
Notwithstanding the foregoing, the Borrower shall have the right, in lieu of
making the payment referred to in this Section 4.9, to prepay the Loan of the
applicable Bank within thirty (30) days of such demand and avoid the payment of
the amounts otherwise due under this Section 4.9, provided, however, that the
Borrower shall be required to pay together with such prepayment of the Loan all
other costs, damages and expenses otherwise due under Section 4.8 of this
Agreement as a result of such prepayment, and following such prepayment, the
Total Commitment shall be reduced by the amount of the Loan so prepaid, and the
Commitment Percentages of the remaining Banks shall be adjusted based on the
percentage that each Bank's Commitment bears to the adjusted Total Commitment.
Section 4.10. Capital Adequacy. If after the date hereof any Bank
reasonably determines that (a) the adoption of or change in any law, rule,
regulation or guideline regarding capital requirements for banks or bank
holding companies or any change in the interpretation or application thereof by
any governmental authority charged with the administration thereof, or (b)
compliance by such Bank or its parent bank holding company with any guideline,
request or directive of any such entity regarding capital adequacy (whether or
not having the force of law), has the effect of reducing the return on such
Bank's or such holding company's capital as a consequence of such Bank's
commitment to make Loans hereunder to a level below that which such Bank or
holding company could have achieved but for such adoption, change or compliance
(taking into consideration such Bank's or such holding company's then existing
policies with respect to capital adequacy and assuming the full utilization of
such entity's capital) by any amount deemed by such Bank to be material, then
such Bank may notify the Borrower thereof. The Borrower agrees to pay to such
Bank the amount of such reduction in the return on capital as and when such
reduction is determined, upon presentation by such Bank of a statement of the
amount setting forth the Bank's calculation thereof. In determining such
amount, such Bank may use any reasonable averaging and attribution methods.
Section 4.11. Indemnity of Borrower. The Borrower agrees to
indemnify each Bank and to hold each Bank harmless from and against any loss,
cost or expense that such Bank may sustain or incur as a consequence of (a)
default by the Borrower in payment of the principal amount of or any interest
on any Eurodollar Rate Loans as and when due and payable, including any such
loss or expense arising from interest or fees payable by such Bank to lenders
of funds obtained by it in order to maintain its Eurodollar Rate Loans, or (b)
default by the Borrower in making a borrowing or conversion after the Borrower
has given (or is deemed to have given) a Loan Request or a Conversion Request
(excluding, however, any Loan Request that pursuant to Section 2.6 may be
revoked without penalty and the deemed withdrawal of a Loan Request pursuant to
Section 4.6), or (c) default by the Borrower in making the payments or
performing its obligations under Sections 4.8, 4.9, 4.10, 4.12 or 4.13.
-27-
<PAGE> 34
Section 4.12. Interest on Overdue Amounts; Late Charge. Overdue
principal and (to the extent permitted by applicable law) interest on the Loans
and all other overdue amounts payable hereunder or under any of the other Loan
Documents shall bear interest payable on demand at a rate per annum equal to
four percent (4.0%) above the Base Rate until such amount shall be paid in full
(after as well as before judgment), or if such rate shall exceed the maximum
rate permitted by law, then at the maximum rate permitted by law. In addition,
the Borrower shall pay a late charge equal to three percent (3%) of any amount
of interest and/or principal payable on the Loans or any other amounts payable
hereunder or under the Loan Documents, which is not paid within ten days of the
date when due.
Section 4.13. Certificate. A certificate, prepared in good faith by
a Bank consistent with such Bank's practice in calculating such amounts,
setting forth any amounts payable pursuant to Section 4.8, Section 4.9, Section
4.10, Section 4.11 or Section 4.12 and a brief explanation of such amounts
which are due, submitted by any Bank or the Agent to the Borrower, shall be
conclusive in the absence of manifest error.
Section 4.14. Limitation on Interest. Notwithstanding anything in
this Agreement to the contrary, all agreements between the Borrower and the
Banks and the Agent, whether now existing or hereafter arising and whether
written or oral, are hereby limited so that in no contingency, whether by
reason of acceleration of the maturity of any of the Obligations or otherwise,
shall the interest contracted for, charged or received by the Banks exceed the
maximum amount permissible under applicable law. If, from any circumstance
whatsoever, interest would otherwise be payable to the Banks in excess of the
maximum lawful amount, the interest payable to the Banks shall be reduced to
the maximum amount permitted under applicable law; and if from any circumstance
the Banks shall ever receive anything of value deemed interest by applicable
law in excess of the maximum lawful amount, an amount equal to any excessive
interest shall be applied to the reduction of the principal balance of the
Obligations and to the payment of interest or, if such excessive interest
exceeds the unpaid balance of principal of the Obligations, such excess shall
be refunded to the Borrower. All interest paid or agreed to be paid to the
Banks shall, to the extent permitted by applicable law, be amortized, prorated,
allocated and spread throughout the full period until payment in full of the
principal of the Obligations (including the period of any renewal or extension
thereof) so that the interest thereon for such full period shall not exceed the
maximum amount permitted by applicable law. This section shall control all
agreements between the Borrower and the Banks and the Agent.
SECTION 5. COLLATERAL SECURITY AND GUARANTY.
Section 5.1. Security. The Banks have agreed to make the Loans to the
Borrower on an unsecured basis. Notwithstanding the foregoing, the Obligations
shall be guaranteed by Guarantor pursuant to the Guaranty.
Section 5.2. Subsidiary Guarantors. In the event that the Borrower
shall after the Closing Date have an Investment in any Subsidiary in which
Borrower directly or indirectly owns a one hundred percent (100%) interest and
in which the Borrower has control over all major day-to-day decisions with
respect to the operation of such entity, Borrower shall cause such Subsidiary
to
-28-
<PAGE> 35
execute and deliver to Agent a Guaranty, and such Subsidiary shall become a
Guarantor hereunder. The Borrower shall further cause such Subsidiary to
become a party to the Contribution Agreement. The organizational agreements of
such Subsidiary or such other resolutions or consents satisfactory to Agent
shall specifically authorize such Subsidiary to guarantee the Obligations. The
Borrower shall further cause all representations, covenants and agreements in
the Loan Documents with respect to Guarantors to be true and correct with
respect to such Guarantor. In connection with the delivery of such Guaranty,
the Borrower shall deliver to the Agent such organizational documents,
resolutions, consents, opinions and other documents and instruments as the
Agent may reasonably require.
SECTION 6. REPRESENTATIONS AND WARRANTIES.
The Borrower represents and warrants to the Agent and the Banks as
follows.
Section 6.1. Corporate Authority, Etc.
(a) Organization; Good Standing. The Borrower is a
Delaware limited partnership duly organized pursuant to a Limited Partnership
Agreement and a Limited Partnership Certificate dated February 9, 1994 filed
with the Secretary of State of Delaware and is validly existing and in good
standing under the laws of Delaware. The General Partner is a Delaware
corporation duly organized pursuant to its Articles of Incorporation and
amendments thereto filed with the Secretary of State of Delaware and is validly
existing and in good standing under the laws of Delaware. Crescent Guarantor
is a Texas real estate investment trust duly organized pursuant to its
Declaration of Trust and amendments thereto filed with the Secretary of State
of Texas and is validly existing and in good standing under the laws of the
State of Texas. The Subsidiary Guarantors are limited partnerships, limited
liability companies or other entities duly organized and validly existing and
in good standing under the laws of their respective State of organization.
Each of the Borrower, the General Partner and the Guarantor (i) has all
requisite power to own its respective properties and conduct its respective
business as now conducted and as presently contemplated, and (ii) as to the
Borrower, is in good standing as a foreign entity and is duly authorized to do
business in the jurisdictions where its respective Real Estate is located to
the extent required, and as to the Borrower, the General Partner and the
Guarantor, in each other jurisdiction where a failure to be so qualified in
such other jurisdiction could have a materially adverse effect on the business,
assets or financial condition of such Person. Crescent Guarantor is a real
estate investment trust in full compliance with and entitled to the benefits of
Section 856 of the Code. The Borrower is a qualified subsidiary of a real
estate investment trust within the meaning of the Code.
(b) Subsidiaries; Investment Partnerships. Each of the
Subsidiaries and Investment Partnerships of the Borrower (i) is a corporation,
limited partnership, limited liability company or trust duly organized under
the laws of its State of organization and is validly existing and in good
standing under the laws thereof, (ii) has all requisite power to own its
property and conduct its business as now conducted and as presently
contemplated and (iii) is in good standing
-29-
<PAGE> 36
and is duly authorized to do business in each jurisdiction where a failure to
be so qualified could have a materially adverse effect on the business, assets
or financial condition such Person.
(c) Authorization. The execution, delivery and
performance of this Agreement and the other Loan Documents to which the
Borrower, the General Partner or the Guarantor is or is to become a party and
the transactions contemplated hereby and thereby (i) are within the authority
of such Person, (ii) have been duly authorized by all necessary proceedings on
the part of such Person, (iii) do not and will not conflict with or result in
any breach or contravention of any provision of law, statute, rule or
regulation to which such Person is subject or any judgment, order, writ,
injunction, license or permit applicable to such Person, (iv) do not and will
not conflict with or constitute a default (whether with the passage of time or
the giving of notice, or both) under any provision of the articles of
incorporation, partnership agreement, declaration of trust or other charter
documents or bylaws of, or any agreement or other instrument binding upon, such
Person or any of its properties, and (v), except as provided in the Loan
Documents, do not and will not result in or require the imposition of any lien
or other encumbrance on any of the properties, assets or rights of such Person.
(d) Enforceability. The execution and delivery of this
Agreement and the other Loan Documents to which the Borrower, the General
Partner or the Guarantor is or is to become a party are valid and legally
binding obligations of such Person enforceable in accordance with the
respective terms and provisions hereof and thereof, except as enforceability is
limited by bankruptcy, insolvency, reorganization, moratorium or other laws
relating to or affecting generally the enforcement of creditors' rights and
except to the extent that availability of the remedy of specific performance or
injunctive relief is subject to the discretion of the court before which any
proceeding therefor may be brought.
Section 6.2. Governmental Approvals. The execution, delivery and
performance of this Agreement and the other Loan Documents to which the
Borrower, the General Partner or the Guarantor is or is to become a party and
the transactions contemplated hereby and thereby do not require the approval or
consent of, or filing with, any governmental agency or authority other than
those already obtained.
Section 6.3. Title to Properties; Leases. Except as set forth on
Schedule 6.3 hereto, the Borrower and its Subsidiaries own all of the assets
reflected in the consolidated balance sheet of the Borrower as at the Balance
Sheet Date or acquired since that date (except property and assets sold or
otherwise disposed of in the ordinary course of business since that date),
subject to no rights of others, including any mortgages, leases, conditional
sales agreements, title retention agreements, liens or other encumbrances
except Liens permitted by this Agreement. Without limiting the foregoing, the
Borrower and its Subsidiaries and Investment Partnerships have good and
marketable (or with respect to any properties in Texas, good and indefeasible)
fee simple title to or leasehold estate in all real property reasonably
necessary for the operation of its business, free from all liens or
encumbrances of any nature whatsoever, except for Permitted Liens. The
Borrower or its Subsidiaries is the insured under owners' policies of title
insurance covering all
-30-
<PAGE> 37
real property owned by it, in each case in an amount not less than the purchase
price for such real property.
Section 6.4. Financial Statements. The Borrower has furnished or
caused Guarantor to furnish to each of the Banks: (a) the consolidated balance
sheet of the Borrower and its Subsidiaries and of Guarantor and its
Subsidiaries as of the Balance Sheet Date certified by the chief financial or
accounting officer of the General Partner and Guarantor, respectively, as
fairly presenting the balance sheet of such Persons for such period, and (b)
certain other financial information relating to the Borrower, Guarantor and
their Subsidiaries requested by the Agent. Guarantor has furnished to each of
the Banks the consolidated balance sheet of Guarantor and its Subsidiaries as
of the Balance Sheet Date. Such balance sheet and statements have been
prepared in accordance with generally accepted accounting principles and fairly
present the financial condition of the Borrower and Guarantor and their
respective Subsidiaries as of such dates and the results of the operations of
the Borrower and Guarantor and their respective Subsidiaries for such periods.
There are no liabilities, contingent or otherwise, of the Borrower, Guarantor
or any of their respective Subsidiaries involving material amounts not
disclosed in said financial statements and the related notes thereto.
Section 6.5. No Material Changes. Since the Balance Sheet Date,
there has occurred no materially adverse change in the financial condition or
business of the Borrower, the Guarantor and their respective Subsidiaries taken
as a whole as shown on or reflected in the consolidated balance sheet of the
Borrower and the Guarantor as of the Balance Sheet Date, or its consolidated
statement of income or cash flows for the fiscal year then ended, other than
changes in the ordinary course of business that have not had any materially
adverse effect either individually or in the aggregate on the business or
financial condition of such Person and changes reflected in the consolidated
balance sheet, consolidated statement of income or cash flows, or other
financial information submitted to the Agent after the Balance Sheet Date.
Section 6.6. Franchises, Patents, Copyrights, Etc. The Borrower, its
Subsidiaries, its Investment Partnerships and the General Partner possess all
franchises, patents, copyrights, trademarks, trade names, servicemarks,
licenses and permits, and rights in respect of the foregoing, adequate for the
conduct of their business substantially as now conducted without known
violation of any rights of others, except where a failure to possess such
rights could not have a materially adverse effect on the business, assets or
financial condition of such Person.
Section 6.7. Litigation. Except as stated on Schedule 6.7 there are
no actions, suits, proceedings or investigations of any kind pending or to the
best of the Borrower's knowledge and belief threatened against the Borrower,
the General Partner, the Guarantor or any of the Borrower's Subsidiaries or
Investment Partnerships before any court, tribunal or administrative agency or
board that, if adversely determined, might, either in any case or in the
aggregate, materially adversely affect the properties, assets, financial
condition or business of such Person or materially impair the right of such
Person to carry on business substantially as now conducted by it, or result in
any liability not adequately covered by insurance, or for which adequate
reserves are not maintained on the balance sheet of such Person, or which
question the validity of this Agreement
-31-
<PAGE> 38
or any of the other Loan Documents, any action taken or to be taken pursuant
hereto or thereto or any lien or security interest created or intended to be
created pursuant hereto or thereto, or which will adversely affect the ability
of such Person to pay and perform the Obligations in the manner contemplated by
this Agreement and the other Loan Documents.
Section 6.8. No Materially Adverse Contracts, Etc. Neither the
Borrower, the General Partner, the Guarantor nor any of the Borrower's
Subsidiaries or Investment Partnerships is subject to any charter, corporate or
other legal restriction, or any judgment, decree, order, rule or regulation
that has or is expected in the future to have a materially adverse effect on
the business, assets or financial condition of such Person. Neither the
Borrower, the General Partner, the Guarantor nor any of the Borrower's
Subsidiaries or Investment Partnerships is a party to any contract or agreement
that has or is expected, in the judgment of the partners or officers of such
Person, to have any materially adverse effect on the business of any of them.
Section 6.9. Compliance with Other Instruments, Laws, Etc. Neither
the Borrower, the General Partner, the Guarantor nor any of the Borrower's
Subsidiaries or Investment Partnerships is in violation of any provision of its
partnership agreement, charter or other organizational documents, bylaws, or
any agreement or instrument to which it may be subject or by which it or any of
its properties may be bound or any decree, order, judgment, statute, license,
rule or regulation, in any of the foregoing cases in a manner that could result
in the imposition of substantial penalties or materially and adversely affect
the financial condition, properties or business of such Person.
Section 6.10. Tax Status. The Borrower, the General Partner, the
Guarantor and each of the Borrower's Subsidiaries and Investment Partnerships
(a) has made or filed all federal and state income and all other tax returns,
reports and declarations required by any jurisdiction to which it is subject,
if applicable or required, except to the extent such Person has obtained an
extension of the deadline to file such return, (b) has paid all taxes and other
governmental assessments and charges shown or determined to be due on such
returns, reports and declarations, if applicable or required, except those
being contested in good faith and by appropriate proceedings or where a failure
to so pay could not have a materially adverse effect on the business, assets or
financial condition of such Person and (c) has set aside on its books
provisions reasonably adequate for the payment of all taxes for periods
subsequent to the periods to which such returns, reports or declarations apply,
if applicable or required. There are no unpaid taxes in any material amount
claimed to be due by the taxing authority of any jurisdiction except for those
that are being contested as permitted by this Agreement, and the partners or
officers of such Person know of no basis for any such claim.
Section 6.11. No Event of Default. No Default or Event of Default
has occurred and is continuing.
Section 6.12. Holding Company and Investment Company Acts. Neither
the Borrower, the General Partner, the Guarantor nor any of the Borrower's
Subsidiaries or Investment Partnerships is a "holding company", or a
"subsidiary company" of a "holding company", or an "affiliate" of a "holding
company", as such terms are defined in the Public Utility Holding Company Act
of 1935;
-32-
<PAGE> 39
nor is it an "investment company", or an "affiliate company" or a "principal
underwriter" of an "investment company", as such terms are defined in the
Investment Company Act of 1940.
Section 6.13. Absence of UCC Financing Statements, Etc. Except with
respect to Liens permitted by Section 8.2, there is no financing statement,
security agreement, chattel mortgage, real estate mortgage or other document
filed or recorded with any filing records, registry, or other public office,
that purports to cover, affect or give notice of any present or possible future
lien on, or security interest or security title in, any property of the
Borrower or its Subsidiaries or rights thereunder.
Section 6.14. Certain Transactions. Except as set forth in the
Prospectus, none of the partners, officers, trustees, directors, or employees
of the Borrower, the General Partner, the Guarantor or any of the Borrower's
Subsidiaries is a party to any material transaction with the Borrower or any of
its Subsidiaries (other than for services as partners, employees, officers,
trustees and directors), including any contract, agreement or other arrangement
providing for the furnishing of services to or by, providing for rental of real
or personal property to or from, or otherwise requiring payments to or from any
partner, officer, trustee, director or such employee or, to the knowledge of
the Borrower, any corporation, partnership, trust or other entity in which any
partner, officer, trustee, director, or any such employee has a substantial
interest or is an officer, director, trustee or partner, unless such contract,
agreement or other arrangement is an arms-length arrangement with terms
comparable to those which would be obtained from an unaffiliated Person or is
otherwise approved by the Agent. For the purposes of this Section 6.14, a
transaction shall be deemed "material" to the extent such transaction would be
required to be disclosed to the shareholders of Crescent Guarantor pursuant to
applicable securities laws (including, without limitation, Item 404 of
Regulation SK promulgated by the SEC).
Section 6.15. Employee Benefit Plans. The Borrower and each ERISA
Affiliate has fulfilled its obligations under the minimum funding standards of
ERISA and the Code with respect to each Employee Benefit Plan, Multiemployer
Plan or Guaranteed Pension Plan and is in compliance in all material respects
with the presently applicable provisions of ERISA and the Code with respect to
each Employee Benefit Plan, Multiemployer Plan or Guaranteed Pension Plan.
Neither the Borrower nor any ERISA Affiliate has (a) sought a waiver of the
minimum funding standard under Section 412 of the Code in respect of any
Employee Benefit Plan, Multiemployer Plan or Guaranteed Pension Plan, (b)
failed to make any contribution or payment to any Employee Benefit Plan,
Multiemployer Plan or Guaranteed Pension Plan, or made any amendment to any
Employee Benefit Plan, Multiemployer Plan or Guaranteed Pension Plan, which has
resulted or could result in the imposition of a Lien or the posting of a bond
or other security under ERISA or the Code, or (c) incurred any liability under
Title IV of ERISA other than a liability to the PBGC for premiums under Section
4007 of ERISA. None of the Real Estate constitutes a "plan asset" of any
Employee Plan, Multiemployer Plan or Guaranteed Pension Plan.
-33-
<PAGE> 40
Section 6.16. Regulations U and X. No portion of any Loan is to be
used by Borrower for the purpose of purchasing or carrying any "margin
security" or "margin stock" as such terms are used in Regulations U and X of
the Board of Governors of the Federal Reserve System, 12 C.F.R. Parts 221 and
224.
Section 6.17. Environmental Compliance. The Borrower has taken all
commercially reasonable steps necessary to investigate the past and present
conditions and usage of the Real Estate and the operations conducted thereon
and, based upon such investigation, makes the following representations and
warranties. All of the representations and warranties in this Section 6.17
with respect to the Real Estate shall be deemed to except to the matters
specifically set forth in the written environmental site assessment reports
with respect thereto provided to the Agent on or before thirty (30) days after
receipt of written notice from the Agent of those environmental reports that
are in Agent's possession with respect to existing Real Estate, or within sixty
(60) days of the acquisition of Real Estate with respect to Real Estate
acquired after the date hereof, provided that, except for any such exceptions
approved by the Majority Banks, none of such exceptions may individually or in
the aggregate have a materially adverse effect on the business, assets or
financial condition of the Borrower, the General Partner or any of the
Borrower's Subsidiaries or Investment Partnerships.
(a) To the best of the Borrower's knowledge, none of the
Borrower, the General Partner or the Borrower's Subsidiaries or Investment
Partnerships or any operator of the Real Estate, or any operations thereon is
in violation, or alleged violation, of any judgment, decree, order, law,
license, rule or regulation pertaining to environmental matters, including
without limitation, those arising under the Resource Conservation and Recovery
Act ("RCRA"), the Comprehensive Environmental Response, Compensation and
Liability Act of 1980 as amended ("CERCLA"), the Superfund Amendments and
Reauthorization Act of 1986 ("SARA"), the Federal Clean Water Act, the Federal
Clean Air Act, the Toxic Substances Control Act, or any state or local statute,
regulation, ordinance, order or decree relating to the environment (hereinafter
"Environmental Laws"), which violation involves the Real Estate and would have
a material adverse effect on the environment or the business, assets or
financial condition of such Person.
(b) Neither the Borrower, the General Partner nor any of
the Borrower's Subsidiaries or Investment Partnerships has received notice from
any third party including, without limitation, any federal, state or local
governmental authority, (i) that it has been identified by the United States
Environmental Protection Agency ("EPA") as a potentially responsible party
under CERCLA with respect to a site listed on the National Priorities List, 40
C.F.R. Part 300 Appendix B (1986); (ii) that any hazardous waste, as defined
by 42 U.S.C. Section 9601(5), any hazardous substances as defined by 42 U.S.C.
Section 9601(14), any pollutant or contaminant as defined by 42 U.S.C. Section
9601(33) or any toxic substances, oil or hazardous materials or other chemicals
or substances regulated by any Environmental Laws ("Hazardous Substances")
which it has generated, transported or disposed of have been found at any site
at which a federal, state or local agency or other third party has conducted or
has ordered that the Borrower, the General Partner or any of the Borrower's
Subsidiaries or Investment Partnerships conduct a remedial investigation,
-34-
<PAGE> 41
removal or other response action pursuant to any Environmental Law; or (iii)
that it is or shall be a named party to any claim, action, cause of action,
complaint, or legal or administrative proceeding (in each case, contingent or
otherwise) arising out of any third party's incurrence of costs, expenses,
losses or damages of any kind whatsoever in connection with the release of
Hazardous Substances.
(c) To the best of the Borrower's knowledge, or in the
case of Real Estate acquired after the date hereof, to the best of the
Borrower's knowledge except as may be disclosed to Agent in writing upon the
acquisition of the same: (i) no portion of the Real Estate has been used as a
landfill or for dumping or for the handling, processing, storage or disposal of
Hazardous Substances except in accordance with applicable Environmental Laws,
and no underground tank or other underground storage receptacle for Hazardous
Substances is located on any portion of the Real Estate; (ii) in the course of
any activities conducted by the Borrower, the General Partner, the Borrower's
Subsidiaries or Investment Partnerships or the operators of any of their
properties, no Hazardous Substances have been generated or are being used on
the Real Estate except in the ordinary course of business and in accordance
with applicable Environmental Laws; (iii) there has been no past or present
releasing, spilling, leaking, pumping, pouring, emitting, emptying,
discharging, injecting, escaping, disposing or dumping (a "Release") or
threatened Release of Hazardous Substances on, upon, into or from the Real
Estate, which Release would have a material adverse effect on the value of any
of the Real Estate or adjacent properties or the environment; (iv) there have
been no Releases on, upon, from or into any real property in the vicinity of
any of the Real Estate which, through soil or groundwater contamination, may
have come to be located on, and which would have a material adverse effect on
the value of, the Real Estate; and (v) any Hazardous Substances that have been
generated on any of the Real Estate have been transported off-site only by
carriers having an identification number issued by the EPA or approved by a
state or local environmental regulatory authority having jurisdiction regarding
the transportation of such substance and treated or disposed of only by
treatment or disposal facilities maintaining valid permits as required under
all applicable Environmental Laws, which transporters and facilities have been
and are, to the best of the Borrower's knowledge, operating in compliance with
such permits and applicable Environmental Laws.
(d) Neither the Borrower, the General Partner, the
Borrower's Subsidiaries, nor any Real Estate is subject to any applicable
Environmental Law requiring the performance of Hazardous Substances site
assessments, or the removal or remediation of Hazardous Substances, or the
giving of notice to any governmental agency or the recording or delivery to
other Persons of an environmental disclosure document or statement by virtue of
the transactions set forth herein and contemplated hereby, or to the
effectiveness of any other transactions contemplated hereby.
Section 6.18. Subsidiaries; Investment Partnerships. Schedule
6.18(a) sets forth, as of the date hereof, all of the Subsidiaries of the
Borrower, the form and jurisdiction of organization of each of the
Subsidiaries, and the Borrower's ownership interest therein. Schedule 6.18(b)
sets forth, as of the date hereof, all of the Investment Partnerships of the
Borrower, the form and jurisdiction of
-35-
<PAGE> 42
organization of each of the Investment Partnerships, the Borrower's ownership
interest therein and the other owners of the Investment Partnership.
Section 6.19. Loan Documents. All of the representations and
warranties made by or on behalf of the Borrower, the General Partner, the
Guarantor and the Borrower's Subsidiaries and Investment Partnerships made in
this Agreement and the other Loan Documents or any document or instrument
delivered to the Agent or the Banks pursuant to or in connection with any of
such Loan Documents are true and correct in all material respects, and neither
the Borrower nor the Guarantor has failed to disclose such information as is
necessary to make such representations and warranties not misleading.
Section 6.20. Property. All of the Borrower's and its Subsidiaries'
and Investment Partnerships' Real Estate are in good condition and working
order subject to ordinary wear and tear, other than with respect to deferred
maintenance existing as of the date of acquisition of such property which is
being corrected or repaired in the ordinary course of business. The Borrower
further has completed an appropriate investigation of the environmental
condition of each such property owned or leased by the Borrower or its
Subsidiaries or Investment Partnerships as of the later of the date of the
Borrower's, such Subsidiary's or such Investment Partnership's purchase thereof
or the date upon which such property was last security for Indebtedness of the
Borrower, such Subsidiary or such Investment Partnership, including preparation
or updating of a "Phase I" report and, if recommended by the "Phase I" report,
a "Phase II" report, in each case prepared by a recognized environmental
engineer in accordance with customary standards which discloses that such
property is not in violation of the representations and covenants set forth in
this Agreement, unless satisfactory remediation actions are being taken. There
are no unpaid or outstanding real estate or other taxes or assessments on or
against any property of the Borrower or any of its Subsidiaries or Investment
Partnerships which are payable by the Borrower or its Subsidiaries or
Investment Partnerships (except only real estate or other taxes or assessments,
that are not yet due and payable or are being protested as permitted by this
Agreement). There are no pending eminent domain proceedings against any
property of the Borrower or its Subsidiaries or Investment Partnerships or any
part thereof, and, to the knowledge of the Borrower, no such proceedings are
presently threatened or contemplated by any taking authority which may
individually or in the aggregate have any materially adverse effect on the
business or financial condition of the Borrower. None of the property of
Borrower or its Subsidiaries or Investment Partnerships is now damaged as a
result of any fire, explosion, accident, flood or other casualty in any manner
which individually or in the aggregate would have any materially adverse effect
on the business or financial condition of the Borrower.
Section 6.21. Brokers. Neither the Borrower nor any of its
Subsidiaries has engaged or otherwise dealt with any broker, finder or similar
entity in connection with this Agreement or the Loans contemplated hereunder.
Section 6.22. Partners and the Guarantor. General Partner is the
sole general partner of the Borrower and owns a 1% partnership interest in the
Borrower. Crescent Guarantor is the sole shareholder of the General Partner.
Crescent Guarantor is a limited partner of the Borrower and
-36-
<PAGE> 43
as of the date of this Agreement owns approximately an 89% limited partnership
interest in the Borrower. Crescent Guarantor owns no assets other than its
stock in the General Partner, its interest in the Borrower as the Limited
Partner, Cash and Short-Term Investments.
Section 6.23. Solvency. As of the Closing Date and after giving
effect to the transactions contemplated by this Agreement and the other Loan
Documents, including all of the Loans to be made hereunder, neither the
Borrower nor the Guarantor is insolvent on a balance sheet basis such that the
sum of such Person's assets exceeds the sum of such Person's liabilities, the
Borrower and the Guarantor are able to pay their respective debts as they
become due, and the Borrower and the Guarantor have sufficient capital to carry
on their respective businesses.
Section 6.24. Other Debt. None of the Borrower, the Guarantor nor
any of their respective Subsidiaries nor any of the Investment Partnerships is
in default of the payment of any Indebtedness or the terms of any other
mortgage, deed of trust, security agreement, financing agreement, indenture or
other material lease or agreement to which any of them is a party which relates
to Indebtedness or other obligations which individually or in the aggregate
exceed $1,000,000.00. None of the Borrower or the Guarantor is a party to or
bound by any agreement, instrument or indenture that may require the
subordination in right or time of payment of any of the Obligations to any
other indebtedness or obligation of the Borrower or the Guarantor. The
Borrower and the Guarantor have made available to the Agent copies of all
agreements, mortgages, deeds of trust, financing agreements or other material
agreements binding upon the Borrower and the Guarantor and their Subsidiaries
or their respective properties and entered into by the Borrower or the
Guarantor and their Subsidiaries as of the date of this Agreement with respect
to any Indebtedness of such Borrower or Guarantor and their Subsidiaries.
Section 6.25. Magellan Transaction. As of the date hereof, the
Borrower has provided the Agent with correct and complete copies of all
documentation relating to the Borrower's acquisition of the Behavioral
Healthcare Facilities from Magellan.
Section 6.26. Contribution Agreement. The Borrower and the
Subsidiary Guarantors have executed and delivered the Contribution Agreement,
and the Contribution Agreement constitutes the valid and legally binding
obligations of such parties enforceable against them in accordance with the
terms and provisions thereof, except as enforceability is limited by
bankruptcy, insolvency, reorganization, moratorium or other laws relating to or
affecting generally the enforcement of creditors' rights and except to the
extent that availability of the remedy of specific performance or injunctive
relief is subject to the discretion of the court before which any proceeding
therefor may be brought.
Section 6.27. Applicability of Representations and Warranties to
Residential Corporations and Investment Partnerships. By acceptance of this
Agreement, the Banks agree that the representations and warranties made by
Borrower with respect to Investment Partnerships in which the Borrower does not
own a controlling interest or otherwise control the day to day business
operations shall be limited to the best of Borrower's knowledge and belief.
-37-
<PAGE> 44
SECTION 7. AFFIRMATIVE COVENANTS OF THE BORROWER.
The Borrower covenants and agrees that, so long as any Loan or Note is
outstanding or any Bank has any obligation to make any Loans:
Section 7.1. Punctual Payment. The Borrower will duly and punctually
pay or cause to be paid the principal and interest on the Loans and all
interest and fees provided for in this Agreement, all in accordance with the
terms of this Agreement and the Notes as well as all other sums owing pursuant
to the Loan Documents.
Section 7.2. Maintenance of Office. The Borrower will maintain its
chief executive office at 777 Main Street, Suite 2100, Tarrant County, Fort
Worth, Texas, or at such other place in the United States of America as the
Borrower shall designate upon prior written notice to the Agent and the Banks,
where notices, presentations and demands to or upon the Borrower in respect of
the Loan Documents may be given or made.
Section 7.3. Records and Accounts. The Borrower will (a) keep, and
cause each of its Subsidiaries to keep, true and accurate records and books of
account in which full, true and correct entries will be made in accordance with
generally accepted accounting principles and (b) maintain reasonably adequate
accounts and reserves for all taxes (including income taxes), depreciation and
amortization of its properties and the properties of its Subsidiaries,
contingencies and other reserves. Neither the Borrower nor any of its
Subsidiaries shall, without the prior written consent of the Majority Banks
make any material change to the accounting procedures used by such Person in
preparing the financial statements and other information described in Section
6.4.
Section 7.4. Financial Statements, Certificates and Information. The
Borrower will deliver to the Agent:
(a) as soon as practicable, but in any event not later
than 95 days after the end of each fiscal year of the Borrower and the Crescent
Guarantor, the audited consolidated balance sheet of the Borrower and its
Subsidiaries and the Crescent Guarantor at the end of such year, and the
related audited consolidated statements of income, changes in capital and cash
flows for such year, each setting forth in comparative form the figures for the
previous fiscal year and all such statements to be in reasonable detail,
prepared in accordance with generally accepted accounting principles, and
accompanied by an auditor's report prepared without qualification by Arthur
Andersen & Co. or by another "Big Six" accounting firm, and any other
information the Banks may need to complete a financial analysis of the
Borrower, together with a written statement from such accountants to the effect
that they have read a copy of this Agreement, and that, in making the
examination necessary to said certification, they have obtained no knowledge of
any Default or Event of Default, or, if such accountants shall have obtained
knowledge of any then existing Default or Event of Default they shall disclose
in such statement any such Default or Event of Default; provided that such
accountants shall not be liable to the Agent or the Banks for failure to obtain
knowledge of any Default or Event of Default;
-38-
<PAGE> 45
(b) as soon as practicable, but in any event not later
than 45 days after the end of each fiscal quarter of the Borrower (including
the fourth fiscal quarter in each year), copies of the unaudited consolidated
balance sheet of the Borrower and its Subsidiaries as at the end of such
quarter, and the related unaudited consolidated statements of income, changes
in capital and cash flows for the portion of the Borrower's fiscal year then
elapsed, all in reasonable detail and prepared in accordance with generally
accepted accounting principles, together with a certification by the principal
financial or accounting officer of the General Partner that the information
contained in such financial statements fairly presents the financial position
of the Borrower and its Subsidiaries on the date thereof (subject to year-end
adjustments);
(c) contemporaneously with the delivery of the financial
statements referred to in clause (a) above, a statement of all contingent
liabilities of the Borrower and its Subsidiaries which are not reflected in
such financial statements or referred to in the notes thereto (including,
without limitation, all guarantees, endorsements and other contingent
obligations in respect of indebtedness of others, and obligations to reimburse
the issuer in respect of any letters of credit);
(d) simultaneously with the delivery of the financial
statements referred to in subsections (a) and (b) above, a statement (a
"Compliance Certificate") certified by the principal financial or accounting
officer of the General Partner in the form of Exhibit C hereto setting forth in
reasonable detail computations evidencing compliance with the covenants
contained in Section 9 and the other covenants described therein, and (if
applicable) reconciliations to reflect changes in generally accepted accounting
principles since the Balance Sheet Date;
(e) simultaneously with the delivery of the financial
statements referred to in subsections (a) and (b) above and the Compliance
Certificate referred to in subsection (d) above, a spreadsheet listing each
parcel of Real Estate and its location, date of acquisition, whether such Real
Estate is owned by the Borrower or a Subsidiary or Investment Partnership, size
(square footage for office, retail, industrial and warehouse assets; number of
rooms for hotel/resort assets; and number of beds for behavioral healthcare
facilities), occupancy level for the quarter most recently ended, cost
(appraised value if acquired prior to October, 1995), rolling four quarter Net
Income (actual lease payments received by the Borrower for hotel/resort assets
and behavioral healthcare facilities) and for office building, retail,
industrial and warehouse assets, the major tenants and percentage of gross
leasable area occupied;
(f) not later than 60 days following each acquisition of
an interest in Real Estate by the Borrower or any of its Subsidiaries or
Investment Partnerships (which for the purposes of this Section 7.4(f) shall
include the Investments described in Section 8.3(i)), each of the following
(provided that with respect to the Investments described in Section 8.3(i), the
following items shall be provided to the extent the same are reasonably
available to the Borrower or its Subsidiaries or Investment Partnerships): (i)
a description of the property acquired, and (ii) a Compliance Certificate
prepared using the financial statements of the Borrower most recently provided
or required to be provided to the Banks under Section 6.4 or this Section 7.4
adjusted in the best good-faith estimate of the Borrower to give effect to such
acquisition and demonstrating that no Default or
-39-
<PAGE> 46
Event of Default with respect to the covenants referred to therein shall exist
after giving effect to such acquisition;
(g) promptly after they are filed with the Internal
Revenue Service, copies of all annual federal income tax returns and amendments
thereto of the Borrower, the General Partner and the Limited Partner;
(h) prior to the acquisition by the Borrower of any Real
Estate or interest therein costing in excess of $1,000,000.00, a statement of
Borrower that no Default or Event of Default exists or would be caused as a
result of such acquisition;
(i) not later than five (5) Business Days after the
Borrower receives notice of the same from either of the Rating Agencies or
otherwise learns of the same, notice of the issuance of any change in the
rating by either of the Rating Agencies in respect of any debt of the Borrower
(including any change in an Implied Rating), together with the details thereof,
and of any announcement by either of the Rating Agencies that any such rating
is "under review" or that any such rating has been placed on a watch list or
that any similar action has been taken by either of the Rating Agencies
(collectively a "Rating Notice");
(j) such financial statements and other information with
respect to CBHS as shall be reasonably required by the Agent to test compliance
with the covenants contained in Section 9.11; and
(k) from time to time such other financial data and
information in the possession of the Borrower or its Subsidiaries or Investment
Partnerships (including without limitation auditors' management letters,
property inspection and environmental reports and information as to zoning and
other legal and regulatory changes affecting the Borrower or its Subsidiaries
or Investment Partnerships) as the Agent may reasonably request.
Section 7.5. Notices.
(a) Defaults. The Borrower will promptly notify the
Agent in writing of the occurrence of any Default or Event of Default. If any
Person shall give any notice or take any other action in respect of a claimed
default (whether or not constituting an Event of Default) under this Agreement
or under any note, obligation or other evidence of indebtedness to which or
with respect to which the Borrower, the General Partner, the Guarantor or any
of the Borrower's Subsidiaries or Investment Partnerships is a party or
obligor, whether as principal or surety, and such default would permit the
holder of such note or obligation or other evidence of indebtedness to
accelerate the maturity thereof, which acceleration would have a material
adverse effect on the Borrower, the General Partner, the Guarantor or any of
the Borrower's Subsidiaries or Investment Partnerships, the Borrower shall
forthwith give written notice thereof to the Agent describing the notice or
action and the nature of the claimed default.
-40-
<PAGE> 47
(b) Environmental Events. The Borrower will promptly
give notice to the Agent (i) upon the Borrower obtaining knowledge of any
potential or known Release, or threat of Release, of any Hazardous Substances
at or from any Real Estate of the Borrower or its Subsidiaries or Investment
Partnerships; (ii) of any violation of any Environmental Law that the Borrower
or any of its Subsidiaries or Investment Partnerships reports in writing or is
reportable by such Person in writing (or for which any written report
supplemental to any oral report is made) to any federal, state or local
environmental agency and (iii) upon becoming aware thereof, of any inquiry,
proceeding, investigation, or other action, including a notice from any agency
of potential environmental liability, of any federal, state or local
environmental agency or board, that in either case involves any Real Estate of
the Borrower or its Subsidiaries or Investment Partnerships or has the
potential to materially affect the assets, liabilities, financial conditions or
operations of the Borrower or any Subsidiary or Investment Partnership.
(c) Notice of Litigation and Judgments. The Borrower
will give notice to the Agent in writing within 15 days of becoming aware of
any litigation or proceedings threatened in writing or any pending litigation
and proceedings affecting the Borrower, the General Partner, any of the
Borrower's Subsidiaries or Investment Partnerships or the Guarantor or to which
any of such persons is or is to become a party involving an uninsured claim
against any of such Persons that could reasonably be expected to have a
materially adverse effect on such Person and stating the nature and status of
such litigation or proceedings. The Borrower will give notice to the Agent, in
writing, in form and detail satisfactory to the Agent and each of the Banks,
within ten days of any judgment not covered by insurance, whether final or
otherwise, against the Borrower, the General Partner, any of the Borrower's
Subsidiaries or Investment Partnerships or the Guarantor in an amount in excess
of $500,000.00.
(d) Notice of Proposed Sales, Encumbrances, Refinance or
Transfer of Property. The Borrower will give notice to the Agent of any
proposed or completed sale, encumbrance, refinance or transfer by the Borrower
or its Subsidiaries or Investment Partnerships of any Real Estate or any other
Investment described in Section 8.3(i) within any fiscal quarter of the
Borrower, such notice to be submitted together with the Compliance Certificate
provided or required to be provided to the Banks under Section 7.4 with respect
to such fiscal quarter. The Compliance Certificate shall with respect to any
proposed or completed sale, encumbrance, refinance or transfer be adjusted in
the best good-faith estimate of the Borrower to give effect to such sale,
encumbrance, refinance or transfer and demonstrate that no Default or Event of
Default with respect to the covenants referred to therein shall exist after
giving effect to such sale, encumbrance, refinance or transfer.
Notwithstanding the foregoing, in the event of any sale, encumbrance, refinance
or transfer by the Borrower or its Subsidiaries or Investment Partnerships of
any Real Estate or any other Investment described in Section 8.3(i) involving
an amount in excess of $35,000,000.00, the Borrower shall promptly give notice
to the Agent of such transaction, which notice shall be accompanied by a
Compliance Certificate prepared using the financial statements of the Borrower
most recently provided or required to be provided to the Banks under Section
6.4 or Section 7.4 adjusted as provided in the preceding sentence.
-41-
<PAGE> 48
Section 7.6. Existence; Maintenance of Properties.
(a) The Borrower will do or cause to be done all things
necessary to preserve and keep in full force and effect its existence as a
Delaware limited partnership. The Borrower will cause each of its Subsidiaries
and Investment Partnerships to do or cause to be done all things necessary to
preserve and keep in full force and effect its legal existence. The Borrower
will do or cause to be done all things necessary to preserve and keep in full
force all of its material rights and franchises and those of its Subsidiaries
and Investment Partnerships. The Borrower will, and will cause each of its
Subsidiaries to, continue to engage primarily in the businesses now conducted
by it and in related businesses, unless otherwise consented to by the Majority
Banks.
(b) Irrespective of whether proceeds of the Loans are
available for such purpose, the Borrower (i) will cause all of its properties
and those of its Subsidiaries and Investment Partnerships used or useful in the
conduct of its business or the business of its Subsidiaries and Investment
Partnerships to be maintained and kept in good condition, repair and working
order (ordinary wear and tear excepted) and supplied with all necessary
equipment, and (ii) will cause to be made all necessary repairs, renewals,
replacements, betterments and improvements thereof in all cases in which the
failure so to do would have a material adverse effect on the condition of its
properties or on the financial condition, assets or operations of the Borrower
and its Subsidiaries.
Section 7.7. Insurance. The Borrower will procure and maintain or
cause to be procured and maintained insurance covering the Borrower and the
Guarantor and their respective Subsidiaries and Investment Partnerships and
their respective properties (the cost of such insurance to be borne by the
insured thereunder) in such amounts and against such risks and casualties as
are customary for properties of similar character and location, due regard
being given to the type of improvements thereon, their construction, location,
use and occupancy.
Section 7.8. Taxes. The Borrower and each Subsidiary and Investment
Partnership will duly pay and discharge, or cause to be paid and discharged,
before the same shall become overdue, all taxes, assessments and other
governmental charges imposed upon it and upon the Real Estate, sales and
activities, or any part thereof, or upon the income or profits therefrom, as
well as all claims for labor, materials, or supplies that if unpaid might by
law become a lien or charge upon any of its property; provided that any such
tax, assessment, charge, levy or claim need not be paid if the validity or
amount thereof shall currently be contested in good faith by appropriate
proceedings and if the Borrower or such Subsidiary or Investment Partnership
shall have set aside on its books reasonably adequate reserves with respect
thereto; and provided, further, that forthwith upon the commencement of
proceedings to foreclose any lien that may have attached as security therefor,
the Borrower and each Subsidiary and Investment Partnership of the Borrower
either (i) will provide a bond issued by a surety reasonably acceptable to the
Agent and sufficient to stay all such proceedings or (ii) if no such bond is
provided, will pay each such tax, assessment, charge, levy or claim.
-42-
<PAGE> 49
Section 7.9. Inspection of Properties and Books. The Borrower shall
permit the Banks, through the Agent or any representative designated by the
Agent, to visit and inspect any of the properties of the Borrower or any of its
Subsidiaries or Investment Partnerships, to examine the books of account of the
Borrower and its Subsidiaries and Investment Partnerships (and to make copies
thereof and extracts therefrom) and to discuss the affairs, finances and
accounts of the Borrower and its Subsidiaries and Investment Partnerships with,
and to be advised as to the same by, its officers, all at such reasonable times
and intervals as the Agent or any Bank may reasonably request. The Agent shall
use good faith efforts to coordinate such visits and inspections so as to
minimize the interference with and disruption to the Borrower's normal business
operations. From and after the occurrence of an Event of Default which is
continuing, the Borrower shall bear the costs and expenses incurred by Agent or
its representatives in conducting such visits or inspections.
Section 7.10. Compliance with Laws, Contracts, Licenses, and Permits.
The Borrower will comply with, and will cause each of its Subsidiaries and
Investment Partnerships to comply in all respects with (i) all applicable laws
and regulations now or hereafter in effect wherever its business is conducted,
including all Environmental Laws, (ii) the provisions of its corporate charter,
partnership agreement or declaration of trust, as the case may be, and other
charter documents and bylaws, (iii) the Prospectus, (iv) all agreements and
instruments (other than the Loan Documents) to which it is a party or by which
it or any of its properties may be bound, (v) all applicable decrees, orders,
and judgments, and (vi) all licenses and permits required by applicable laws
and regulations for the conduct of its business or the ownership, use or
operation of its properties, except when a failure to so comply with the
foregoing (i) - (vi) would not have a material adverse effect on the business,
assets or financial condition of the Borrower or such Subsidiary or Investment
Partnership. If at any time while any Loan or Note is outstanding or the Banks
have any obligation to make Loans hereunder, any authorization, consent,
approval, permit or license from any officer, agency or instrumentality of any
government shall become necessary or required in order that the Borrower may
fulfill any of its obligations hereunder, the Borrower will immediately take or
cause to be taken all steps necessary to obtain such authorization, consent,
approval, permit or license.
Section 7.11. Further Assurances. The Borrower will cooperate with,
and will cause each of its Subsidiaries to cooperate with the Agent and the
Banks and execute such further instruments and documents as the Banks or the
Agent shall reasonably request to carry out to their satisfaction the
transactions contemplated by this Agreement and the other Loan Documents.
Section 7.12. Ownership of Real Estate. All interests (whether
direct or indirect) of the Borrower, the General Partner, the Guarantor or
their respective Subsidiaries or the Borrower's Investment Partnerships in
income- producing real estate assets acquired after the date hereof shall be
owned directly by the Borrower or, subject to the terms of Section 8.3(m),
Investment Partnerships (other than interests in residential real estate
developments held by the Residential Corporations and other than as
specifically permitted in Section 8.14).
-43-
<PAGE> 50
Section 7.13. Investment Advisor. The Borrower shall be
self-directed and the Borrower shall not retain or otherwise rely on any other
Person for investment advisory services.
Section 7.14. Non-Competition Agreements. The Non-Competition
Agreements have been duly executed and delivered, are in full force and effect,
and are the legal, valid and binding obligations of the parties thereto,
enforceable in accordance with their terms. Without the prior written consent
of the Agent, the Borrower shall not (a) amend or modify any of the
Non-Competition Agreements, (b) terminate or surrender any of the
Non-Competition Agreements, or (c) waive or release any other party thereto
from the performance or observation by such Person of any obligation or
condition of any of the Non-Competition Agreements (provided that the foregoing
shall not prohibit Richard E. Rainwater, Gerald W. Haddock or John C. Goff from
obtaining waivers to specific transactions from a majority of the independent
directors of Crescent Guarantor as provided therein). The Borrower shall, at
no cost or expense to the Agent, enforce, short of termination, the performance
and observance of each and every term, condition and covenant of each of the
Non-Competition Agreements to be performed or observed by the other parties
thereunder, and appear in and defend any action arising out of, or in any
manner connected with, any of the Non-Competition Agreements, and give prompt
notice to the Agent of any claim of default under any of the Non-Competition
Agreements, whether given by the Borrower to the other party thereto, or given
by the other party thereto to the Borrower.
Section 7.15. Business Operations. The Borrower shall operate its
business substantially as described in the Prospectus and in compliance with
the terms and conditions of this Agreement and the Loan Documents.
Section 7.16. Intentionally Omitted.
Section 7.17. Limiting Agreements.
(a) Neither Borrower, the Guarantor, nor any of their
respective Subsidiaries or Investment Partnerships shall enter into any
agreement, instrument or transaction which has or may have the effect of
prohibiting or limiting Borrower's ability to pledge to Agent Real Estate which
is owned by the Borrower and is free and clear of all Liens other than the
Liens permitted in Section 8.2(i), (iii) and (vi) or any other assets of the
Borrower as security for the Loans. Borrower shall take, and shall cause
Guarantor and their respective Subsidiaries and Investment Partnerships to
take, such actions as are necessary to preserve the right and ability of
Borrower to pledge those Real Estate and other assets as security for the Loans
without any such pledge after the date hereof causing or permitting the
acceleration (after the giving of notice or the passage of time, or otherwise)
of any other Indebtedness of Borrower, Guarantor, or any of their respective
Subsidiaries or Investment Partnerships.
(b) Borrower shall, upon demand, provide to the Agent
such evidence as the Agent may reasonably require to evidence compliance with
this Section 7.17, which evidence shall include, without limitation, copies of
any agreements or instruments which would in any way restrict or limit the
Borrower's ability to pledge assets as security for Indebtedness, or which
-44-
<PAGE> 51
provide for the occurrence of a default (after the giving of notice or the
passage of time, or otherwise) if assets are pledged in the future as security
for Indebtedness of the Borrower or any of its Subsidiaries.
Section 7.18. More Restrictive Agreements. Should the Borrower or
the Guarantor enter into or modify any agreements or documents pertaining to
any existing or future Indebtedness, Debt Offering or Equity Offering, which
agreements or documents include covenants, whether affirmative or negative (or
any other provision which may have the same practical effect as any of the
foregoing), which are individually or in the aggregate more restrictive against
the Borrower, the Guarantor or their respective Subsidiaries than those set
forth in Articles 8 or 9 of this Agreement or Paragraph 11 of the Guaranty, the
Borrower shall promptly notify the Agent and, if requested by the Majority
Banks, the Borrower, the Agent, and the Majority Banks shall promptly amend
this Agreement and the other Loan Documents to include some or all of such more
restrictive provisions as determined by the Majority Banks in their sole
discretion.
Section 7.19. Applicability of Covenants to Residential Corporations
and Investment Partnerships. By acceptance of this Agreement, the Banks agree
that the Borrower's obligations to cause the Residential Corporations and
Investment Partnerships to comply with the covenants set forth in Articles 7
and 8 of this Agreement shall be limited to the full extent that the Borrower
has the legal right, whether by contract, at law or in equity, to cause
compliance by the Residential Corporations with such covenants.
Section 7.20. Distributions of Income to the Borrower. The Borrower
shall cause all of its Subsidiaries and Investment Partnerships to promptly
distribute to the Borrower (but not less frequently than once each fiscal
quarter of the Borrower), whether in the form of dividends, distributions or
otherwise, all profits, proceeds or other income relating to or arising from
its Subsidiaries' or Investment Partnerships' use, operation, financing,
refinancing, sale or other disposition of their respective assets and
properties after (a) the payment by each Subsidiary or Investment Partnership
of its Debt Service and operating expenses for such quarter and (b) the
establishment of reasonable reserves for the payment of operating expenses not
paid on at least a quarterly basis and capital improvements to be made to such
Subsidiary's or Investment Partnership's assets and properties approved by such
Subsidiary or Investment Partnership in the ordinary course of business
consistent with its past practices. Notwithstanding the foregoing, the
Borrower shall enforce its rights at law and in equity to receive distributions
from (i) the Residential Corporations at the same time that distributions are
made to other shareholders of the Residential Corporations, and (ii)
Subsidiaries and Investment Partnerships of the Borrower in which the Borrower
owns less than a majority (by number of votes or controlling interests) of the
outstanding Voting Interests.
SECTION 8. CERTAIN NEGATIVE COVENANTS OF THE BORROWER.
The Borrower covenants and agrees that, so long as any Loan or Note is
outstanding or any of the Banks has any obligation to make any Loans:
-45-
<PAGE> 52
Section 8.1. Restrictions on Indebtedness. Subject to the provisions
of Section 9, the Borrower will not, and will not permit any of its
Subsidiaries to, create, incur, assume, guarantee or be or remain liable,
contingently or otherwise, with respect to any Indebtedness other than:
(a) Indebtedness to the Banks arising under any of the
Loan Documents;
(b) Current liabilities of the Borrower or its
Subsidiaries incurred in the ordinary course of business but not incurred
through (i) the borrowing of money, or (ii) the obtaining of credit except for
credit on an open account basis customarily extended and in fact extended in
connection with normal purchases of goods and services;
(c) Indebtedness in respect of taxes, assessments,
governmental charges or levies and claims for labor, materials and supplies to
the extent that payment therefor shall not at the time be required to be made
in accordance with the provisions of Section 7.8;
(d) Indebtedness in respect of judgments or awards that
have been in force for less than the applicable period for taking an appeal so
long as execution is not levied thereunder or in respect of which the Borrower
shall at the time in good faith be prosecuting an appeal or proceedings for
review and in respect of which a stay of execution shall have been obtained
pending such appeal or review;
(e) Endorsements for collection, deposit or negotiation
and warranties of products or services, in each case incurred in the ordinary
course of business;
(f) Non-recourse Indebtedness of the Borrower or any
Subsidiary of the Borrower, provided that neither the Borrower nor any of its
Subsidiaries shall incur any Non-recourse Indebtedness in excess of
$10,000,000.00 in any single transaction unless it shall have provided to the
Agent a statement that no Default or Event of Default exists and a Compliance
Certificate demonstrating that the Borrower will be in compliance with its
covenants referred to therein after giving effect to such incurrence;
(g) Indebtedness in respect of reverse repurchase
agreements having a term of not more than 180 days with respect to Investments
described in Section 8.3(d) or (e);
(h) Indebtedness existing on the date of this Agreement
and listed and described on Schedule 8.1(h) hereto;
(i) Other recourse Indebtedness of the Borrower and its
Subsidiaries in an aggregate outstanding principal amount (excluding the
Obligations) not exceeding $600,000,000.00 provided that (i) no more than
$300,000,000.00 of such Indebtedness may be held by lenders other than one or
more of the Banks, and (ii) neither the Borrower nor any of its Subsidiaries
shall incur any recourse Indebtedness described in this Section 8.1(i) in
excess of $10,000,000.00 in any single transaction unless it shall have
provided to the Agent a statement that no Default or Event of Default exists
and a Compliance Certificate demonstrating that the
-46-
<PAGE> 53
Borrower will be in compliance with its covenants referred to therein after
giving effect to such incurrence;
(j) Indebtedness of Subsidiaries of the Borrower to the
Borrower; and
(k) unsecured Debt Offerings which have been granted an
Investment Grade Rating by either of the Rating Agencies at the time of
issuance; provided (i) at the time such Indebtedness is issued the scheduled
maturity date of such Indebtedness is not earlier than two (2) years after the
Maturity Date (after giving effect to any extension of the Maturity Date which
may have been requested by the Borrower prior to the issuance of such
Indebtedness or approved by the Banks, whether or not the same has become
effective), and (ii) if any covenants or restrictions imposed upon the Borrower
or its Subsidiaries or the Guarantor in connection with such Indebtedness are
individually or in the aggregate more restrictive against the Borrower, its
Subsidiaries and the Guarantor than the covenants and restrictions imposed
pursuant to this Agreement or the other Loan Documents, the Borrower shall
promptly notify the Agent and if requested by the Majority Banks, the Borrower,
the Guarantor, the Agent, and the Majority Banks shall promptly amend this
Agreement and the other Loan Documents to include some or all of such more
restrictive provisions as determined by the Majority Banks in their sole
discretion; and provided further that neither the Borrower, its Subsidiaries
nor the Guarantor shall incur any of the Indebtedness described in this Section
8.1(k) unless it shall have provided to the Banks prior written notice of the
proposed issuance of such Indebtedness, a statement that no Default or Event of
Default exists and a Compliance Certificate that the Borrower will be in
compliance with its covenants referred to herein after giving effect to such
incurrence.
Section 8.2. Restrictions on Liens, Etc. The Borrower will not, and
will not permit any of its Subsidiaries to, (a) create or incur or suffer to be
created or incurred or to exist any lien, encumbrance, mortgage, pledge,
negative pledge, charge, restriction or other security interest of any kind
upon any of its property or assets of any character whether now owned or
hereafter acquired, or upon the income or profits therefrom; (b) transfer any
of its property or assets or the income or profits therefrom for the purpose of
subjecting the same to the payment of Indebtedness or performance of any other
obligation in priority to payment of its general creditors; (c) acquire, or
agree or have an option to acquire, any property or assets upon conditional
sale or other title retention or purchase money security agreement, device or
arrangement; (d) suffer to exist for a period of more than 60 days after the
same shall have been incurred any Indebtedness or claim or demand against it
that if unpaid might by law or upon bankruptcy or insolvency, or otherwise, be
given any priority whatsoever over its general creditors; (e) pledge or
otherwise encumber any accounts, contract rights, general intangibles, chattel
paper or instruments, with or without recourse; or (f) incur or maintain any
obligation to any holder of Indebtedness of the Borrower or such Subsidiary
which prohibits the creation or maintenance of any lien securing the
Obligations (collectively "Liens"); provided that the Borrower and any
Subsidiary of the Borrower may create or incur or suffer to be created or
incurred or to exist:
-47-
<PAGE> 54
(i) liens on properties to secure taxes, assessments and
other governmental charges or claims for labor, material or supplies
in respect of obligations not overdue;
(ii) liens on properties in respect of judgments, awards
or indebtedness, the Indebtedness with respect to which is permitted
by Section 8.1(d), Section 8.1(f) or Section 8.1(i);
(iii) encumbrances on properties consisting of easements,
rights of way, zoning restrictions, restrictions on the use of real
property, landlord's or lessor's liens under leases to which the
Borrower or a Subsidiary of the Borrower is a party, and other minor
non-monetary liens or encumbrances none of which interferes materially
with the use of the property affected in the ordinary conduct of the
business of the Borrower and its Subsidiaries, which encumbrances or
liens do not individually or in the aggregate have a materially
adverse effect on the business of the Borrower individually or of the
Borrower and its Subsidiaries on a consolidated basis;
(iv) [intentionally omitted];
(v) liens on Real Estate and Short-term Investments
securing Non-recourse Indebtedness permitted by Section 8.1(f) or
recourse Indebtedness permitted by Section 8.1(i);
(vi) liens in favor of the Agent and the Banks under the
Loan Documents; and
(vii) liens on office equipment, vehicles, furnishings or
equipment incurred in the ordinary course of business securing a
maximum aggregate outstanding Indebtedness of not more than
$1,000,000.00.
Section 8.3. Restrictions on Investments. The Borrower will not, and
will not permit any of its Subsidiaries to, make or permit to exist or to
remain outstanding any Investment except Investments in:
(a) marketable direct or guaranteed obligations of the
United States of America that mature within one (1) year from the date of
purchase by the Borrower or its Subsidiary;
(b) marketable direct obligations of any of the
following: Federal Home Loan Mortgage Corporation, Student Loan Marketing
Association, Federal Home Loan Banks, Federal National Mortgage Association,
Government National Mortgage Association, Bank for Cooperatives, Federal
Intermediate Credit Banks, Federal Financing Banks, Export-Import Bank of the
United States, Federal Land Banks, or any other agency or instrumentality of
the United States of America;
-48-
<PAGE> 55
(c) demand deposits, certificates of deposit, bankers
acceptances and time deposits of United States banks having total assets in
excess of $100,000,000; provided, however, that the aggregate amount at any
time so invested with any single bank having total assets of less than
$1,000,000,000 will not exceed $200,000;
(d) securities commonly known as "commercial paper"
issued by a corporation organized and existing under the laws of the United
States of America or any State which at the time of purchase are rated by
Moody's Investors Service, Inc. or by Standard & Poor's Corporation at not less
than "P 2" if then rated by Moody's Investors Service, Inc., and not less than
"A 2", if then rated by Standard & Poor's Corporation;
(e) mortgage-backed securities guaranteed by the
Government National Mortgage Association, the Federal National Mortgage
Association or the Federal Home Loan Mortgage Corporation and other
mortgage-backed bonds which at the time of purchase are rated by Moody's
Investors Service, Inc. or by Standard & Poor's Corporation at not less than
"Aa" if then rated by Moody's Investors Service, Inc. and not less than "AA" if
then rated by Standard & Poor's Corporation;
(f) repurchase agreements having a term not greater than
90 days and fully secured by securities described in the foregoing subsection
(a), (b) or (e) with banks described in the foregoing subsection (c) or with
financial institutions or other corporations having total assets in excess of
$500,000,000;
(g) shares of so-called "money market funds" registered
with the SEC under the Investment Company Act of 1940 which maintain a level
per-share value, invest principally in investments described in the foregoing
subsections (a) through (f) and have total assets in excess of $50,000,000;
(h) Subject to the provisions of Section 9.9, Investments
in fee interests or mortgageable ground leases having a remaining term
(calculated from the date of acquisition of such interest) of not less than
fifty (50) years in Real Estate utilized principally for behavioral healthcare
facilities, Class A office space, retail, industrial, warehouse and/or
hotel/resort properties which are of institutional quality or other
income-producing real estate approved by the Majority Banks, including earnest
money deposits relating thereto and transaction costs;
(i) Subject to the provisions of Section 9.9, Investments
in undeveloped land and Real Estate which are held in a form other than
undivided fee simple ownership or mortgageable ground leases having a remaining
term (calculated from the date of acquisition of such interest) of not less
than fifty (50) years (such as, without limitation, cotenancy interests,
leasehold interests, partnership interests, membership in a limited liability
company, shares of stock in corporations owning real estate, or through
mortgages or participation interests in or assignments of mortgages);
-49-
<PAGE> 56
(j) Investments in publicly traded securities of other
publicly traded companies; provided, however, that the aggregate amount at any
time so invested shall not exceed $50,000,000.00;
(k) Investments in convertible non-voting preferred stock
and/or voting common stock of Fresh Choice, Inc.; provided, however, that the
aggregate amount at any time so invested shall not exceed $14,000,000.00;
(l) Investments in HBCLP, Inc. or affiliated funds;
provided, however, that the aggregate amount at any time so invested shall not
exceed $75,000,000.00; and
(m) Investments in (i) Investment Partnerships in which
the Borrower (A) shall own not less than a fifty percent (50%) interest, (B)
shall either be the managing partner, member or similar managing entity or
shall share such day-to-day management responsibilities with another Person,
and (C) shall have sufficient voting interests or other rights to veto or block
any major actions to be taken by any other Person owning an interest in such
Investment Partnership, and (ii) Investment Partnerships not meeting the
foregoing criteria; provided that the aggregate value of the Borrower's equity
Investments pursuant to clause (ii) shall not exceed ten percent (10%) of the
Modified Book Asset Value of the Consolidated Total Assets of the Borrower and
its Subsidiaries.
Section 8.4. Merger, Consolidation. The Borrower will not, and will
not permit any of its Subsidiaries to, become a party to any merger,
consolidation or other business combination except (i) the merger or
consolidation of one or more of the Subsidiaries of the Borrower with and into
the Borrower and (ii) the merger or consolidation of two or more Subsidiaries
of the Borrower. Notwithstanding any other provision of this Agreement to the
contrary, the proposed merger of the Borrower with Station Casinos, Inc. shall
require the unanimous consent of the Banks.
Section 8.5. Sale and Leaseback. The Borrower will not, and will not
permit any of its Subsidiaries to, enter into any arrangement, directly or
indirectly, whereby the Borrower or any Subsidiary of the Borrower shall sell
or transfer any Real Estate owned by it in order that then or thereafter the
Borrower or any Subsidiary shall lease back such Real Estate.
Section 8.6. Compliance with Environmental Laws. The Borrower will
not, and will not permit any of its Subsidiaries or Investment Partnerships or
any tenants or other occupants of any of the Real Estate, to do any of the
following: (a) use any of the Real Estate or any portion thereof as a facility
for the handling, processing, storage or disposal of Hazardous Substances,
except for small quantities of Hazardous Substances used in the ordinary course
of business and in compliance with all applicable Environmental Laws, (b) cause
or permit to be located on any of the Real Estate any underground tank or other
underground storage receptacle for Hazardous Substances except in full
compliance with Environmental Laws, (c) generate any Hazardous Substances on
any of the Real Estate except in full compliance with Environmental Laws, (d)
conduct any activity at any Real Estate or use any Real Estate in any manner so
as to cause a Release of Hazardous Substances on, upon or into the Real Estate
or any surrounding properties or any threatened Release of Hazardous Substances
which might give rise to liability under
-50-
<PAGE> 57
CERCLA or any other Environmental Law, or (e) directly or indirectly transport
or arrange for the transport of any Hazardous Substances (except in compliance
with all Environmental Laws).
The Borrower shall:
(i) in the event of any change in Environmental Laws
governing the assessment, release or removal of Hazardous Substances, which
change would lead a prudent lender to require additional testing to avail
itself of any statutory insurance or limited liability, take all action
(including, without limitation, the conducting of engineering tests at the sole
expense of the Borrower) to confirm that no Hazardous Substances are or ever
were Released or disposed of on the Real Estate; and
(ii) if any Release or disposal of Hazardous Substances
shall occur or shall have occurred on the Real Estate (including without
limitation any such Release or disposal occurring prior to the acquisition of
such Real Estate by the Borrower or its Subsidiary or Investment Partnership),
cause the prompt containment and removal of such Hazardous Substances and
remediation of the Real Estate in full compliance with all applicable laws and
regulations and to the reasonable satisfaction of the Majority Banks; provided,
that the Borrower shall be deemed to be in compliance with Environmental Laws
for the purpose of this clause (ii) so long as it or a responsible third party
with sufficient financial resources is taking reasonable action to remediate or
manage any event of noncompliance to the reasonable satisfaction of the
Majority Banks and no action shall have been commenced by any enforcement
agency. The Majority Banks may engage their own environmental engineer to
review the environmental assessments and the Borrower's compliance with the
covenants contained herein.
At any time after an Event of Default shall have occurred hereunder,
or, whether or not an Event of Default shall have occurred, at any time that
the Agent or the Majority Banks shall have reasonable grounds to believe that a
Release or threatened Release of Hazardous Substances may have occurred,
relating to any Real Estate, or that any of the Real Estate is not in
compliance with the Environmental Laws, the Agent may at its election (and will
at the request of the Majority Banks) obtain such environmental assessments of
such Real Estate prepared by an environmental engineer as may be necessary or
advisable for the purpose of evaluating or confirming (i) whether any Hazardous
Substances are present in the soil or water at or adjacent to such Real Estate
and (ii) whether the use and operation of such Real Estate comply with all
Environmental Laws. Environmental assessments may include detailed visual
inspections of such Real Estate including, without limitation, any and all
storage areas, storage tanks, drains, dry wells and leaching areas, and the
taking of soil samples, as well as such other investigations or analyses as are
necessary or appropriate for a complete determination of the compliance of such
Real Estate and the use and operation thereof with all applicable Environmental
Laws. All such environmental assessments shall be at the sole cost and expense
of the Borrower.
-51-
<PAGE> 58
Section 8.7. Distributions.
(a) The Borrower shall not pay any Distribution to the
partners of the Borrower which for any four (4) successive quarters is in
excess of (i) ninety percent (90%) of its Funds from Operations for such fiscal
quarters, or (ii) one hundred percent (100%) of its Funds Available for
Distribution for such fiscal quarters; provided that the limitation contained
in this Section 8.7(a) shall not preclude the Borrower from making
Distributions to Crescent Guarantor in an amount equal to the minimum
distributions required under the Code to maintain the REIT Status of Crescent
Guarantor, as evidenced by a certification of the principal financial or
accounting officer of the General Partner containing calculations in detail
reasonably satisfactory in form and substance to the Agent.
(b) In the event that a Default under Section 12.1(a) or
(b) or an Event of Default shall have occurred and be continuing, the Borrower
shall make no Distributions other than Distributions to Crescent Guarantor in
an amount equal to the minimum distributions required under the Code to
maintain the REIT Status of Crescent Guarantor, as evidenced by a certification
of the principal financial or accounting officer of the General Partner
containing calculations in detail reasonably satisfactory in form and substance
to the Agent.
(c) Notwithstanding the foregoing, at any time when an
Event of Default shall have occurred and the maturity of the Obligations has
been accelerated, at the option of the Majority Banks the Borrower shall not
make any Distributions whatsoever, directly or indirectly.
Section 8.8. Asset Sales. Except for sales by the Residential
Corporations in the ordinary course of development of residential developments
with related amenities, neither the Borrower nor any Subsidiary shall sell,
transfer or otherwise dispose of any Real Estate (except as the result of a
condemnation or casualty and except for the granting of Permitted Liens)
involving an amount in excess of $5,000,000.00 in any single transaction unless
there shall have been delivered to the Agent a statement that no Default or
Event of Default exists or will exist after giving effect to such sale,
transfer or other disposition.
Section 8.9. Development Activity. Without the consent of the
Majority Banks, neither the Borrower nor any Subsidiary or Investment
Partnership shall engage, directly or indirectly, in the development,
construction or substantial renovation or rehabilitation of commercial real
estate (provided that the foregoing shall not be deemed to be breached by the
residential real estate development activities by the Residential Corporations
nor the development activities permitted by the partnership agreements for the
Woodlands and Americold URS nor the restoration or rehabilitation of commercial
real estate following damage by casualty or condemnation). The Borrower
acknowledges that the decision of the Majority Banks to grant or withhold such
consent shall be based on such factors as the Majority Banks deem relevant in
their sole discretion, including without limitation, evidence of sufficient
funds both from borrowings (other than from the Loans) and equity to complete
such development and evidence that the Borrower or its Subsidiary or Investment
Partnership has the resources and expertise necessary to complete such project.
Without limiting the foregoing, the Borrower acknowledges that for the purposes
-52-
<PAGE> 59
of this Agreement, (a) any interest by the Borrower, any Subsidiary or any
Investment Partnership in a property which is proposed to be developed, or any
interest therein pursuant to which the Borrower, any Subsidiary or any
Investment Partnership has the right to approve site plans or other plans and
specifications or pursuant to which such parties' obligations are conditioned
upon the achievement of certain leasing levels, (b) any agreement by the
Borrower, any Subsidiary or any Investment Partnership which obligates such
party to contribute or otherwise advance funds in connection with or upon
completion of the development of a property, or (c) any acquisition of a
property which is proposed to be developed or which is under development and
lease-up at the time such agreement is entered into, shall be considered a
"development" for the purposes of this Section 8.9. Notwithstanding the
foregoing, the Borrower is currently developing for its own account an office
building not exceeding 110,000 square feet on Phase II of the land owned by
Borrower in Austin, Texas known as "The Avallon" and may develop an office
building not exceeding 80,000 square feet on Phase III of the land owned by
Borrower in Austin, Texas known as "The Avallon", provided that with respect to
each such building (a) BMC Software or an affiliate thereof shall have
executed and delivered to Borrower a lease to occupy not less than sixty-five
percent (65%) of such building within one (1) year of completion of the same,
and (b) the actual cost of developing improvements thereon with respect to each
such building shall not exceed $15,000,000.00. Notwithstanding the foregoing,
Borrower can engage in, and proceeds of the Loans may be used for, (i) the
construction of tenant improvements within space to be occupied by tenants of
buildings owned by the Borrower or its Subsidiaries, (ii) the renovation or
demolition and reconstruction of the Surtran Garage at Continental Plaza,
provided that the cost of such renovation or demolition and reconstruction
shall not exceed $20,000,000.00, (iii) the construction of the Frost Bank
Garage in Austin, Texas, (iv) the construction for its own account of an
approximately 1,000 room hotel and related amenities on land owned by the
Borrower at Houston Center, (v) the construction for its own account of an
office building not exceeding 1,000,000 square feet on land owned by the
Borrower near The Crescent and (vi) the construction for its own account of an
office building not exceeding 160,000 square feet on land owned by the Borrower
near Washington Harbor in Washington, D.C. Nothing herein shall prohibit the
Borrower or any Subsidiary or Investment Partnership from acquiring Real Estate
which has been developed and initially leased by another Person.
Section 8.10. Investment Opportunities. During the term of the
Non-Competition Agreements, the Borrower shall cause each of Richard E.
Rainwater, Gerald W. Haddock and John C. Goff to offer to the Borrower all real
estate investment opportunities that are presented to any of such individuals,
and if the Borrower elects not to participate in such opportunity, the Borrower
shall not permit any of such individuals, or any Person controlling, controlled
by or under common control with any of such individuals, to participate in such
investment, unless such transaction is approved by a majority of the
independent directors of Crescent Guarantor as permitted in the Non-Competition
Agreements.
Section 8.11. Refinancing of Assets. No asset of the Borrower or its
Subsidiaries shall be financed or refinanced unless the gross proceeds
therefrom equal or exceed fifty-five percent (55%) of the original acquisition
cost by Borrower or such Subsidiary of such asset; provided that such
percentage shall be reduced to forty percent (40%) for hotel/resort assets.
-53-
<PAGE> 60
Section 8.12. Variable Rate Debt.
(a) Borrower shall not permit all or any portion of the
Existing Fixed Rate Indebtedness to be refinanced or otherwise replaced by
Indebtedness (i) which has a Variable Interest Rate (unless such Variable
Interest Rate is hedged or otherwise capped pursuant to an interest rate swap,
cap or other agreement acceptable to the Agent that provides that such Variable
Interest Rate shall not through the maturity date of such Indebtedness exceed a
rate equal to the sum of (x) the then-current yield on obligations of the
United States Treasury having a maturity date the same as (to the extent
practicable) such Indebtedness, determined by the Agent as of the date of the
incurrence of such Indebtedness, plus (y) three percent (3.0%)), or (ii) has a
scheduled maturity date which is earlier than the maturity date with respect to
the portion of the Existing Fixed Rate Indebtedness that is being refinanced or
replaced, or (iii) which provides for any principal amortization or other
scheduled payments of principal, other than the payment of principal at
maturity.
(b) Notwithstanding Section 8.12(a)(i), Indebtedness in
an amount not to exceed twenty-five percent (25%) of the Modified Book Asset
Value of the Consolidated Total Assets of the Borrower and its Subsidiaries may
be Indebtedness that is payable with respect to a Variable Interest Rate that
is not hedged or otherwise capped as described in Section 8.12(a)(i) and that
has a maturity date of greater than twelve (12) months.
Section 8.13. Restriction on Prepayment of Indebtedness. The
Borrower shall not prepay, redeem or purchase the principal amount, in whole or
in part, of any Indebtedness other than the Obligations after the occurrence of
any Event of Default; provided, however, that this Section 8.13 shall not
prohibit the prepayment of Indebtedness which is financed solely from the
proceeds of a new loan which would otherwise be permitted by the terms of
Section 8.1.
Section 8.14. Bankruptcy Remote Subsidiaries. Without the prior
written consent of the Majority Banks, Borrower shall not create any new single
purpose, special purpose or other so-called bankruptcy remote subsidiaries
(such as a REMIC), as determined by the Agent in its reasonable discretion,
other than in connection with the acquisition of the Behavioral Healthcare
Facilities (provided that its debt shall not exceed $350,000,000.00).
Section 8.15. Magellan Transaction. Without the prior written
consent of the Majority Banks, the Borrower will not materially modify or alter
the terms or structure of its transaction with Magellan and CBHS as contained
in (i) the Master Lease Agreement; (ii) that certain Subordination Agreement
dated June 16, 1997 among Magellan, Charter Franchise Services, LLC, Crescent
Real Estate Funding VII, L.P. and CBHS; (iii) the Sale Agreement; (iv) that
certain Warrant Purchase Agreement dated January 29, 1997 between the Borrower
and Magellan; and (v) any and all other agreements, documents and instruments
relating to the acquisition of the Behavioral Healthcare Facilities by the
Borrower or Crescent Real Estate Funding VII, L.P.
-54-
<PAGE> 61
SECTION 9. FINANCIAL COVENANTS OF THE BORROWER.
The Borrower covenants and agrees that, so long as any Loan or Note is
outstanding or any Bank has any obligation to make any Loans it will comply
with the following:
Section 9.1. Liabilities to Worth Ratio. The Borrower will not
permit the ratio of Consolidated Total Liabilities to Consolidated Tangible Net
Worth of the Borrower to exceed 1 to 1.
Section 9.2. Debt Service Coverage. The Borrower will not permit the
Consolidated Cash Flow of the Borrower and its Subsidiaries for any period of
four consecutive fiscal quarters (treated as a single accounting period) (the
"Test Period") to be less than 2.5 times the Debt Service of the Borrower and
its Subsidiaries for the Test Period.
Section 9.3. Intentionally Omitted.
Section 9.4. Tangible Net Worth. Borrower will not permit its
Consolidated Tangible Net Worth (as adjusted pursuant to Section 9.10) to be
less than $2,000,000,000.00 plus seventy percent (70%) of the net proceeds from
each Equity Offering subsequent to March 31, 1998.
Section 9.5. Secured Debt to Assets Ratio. The Borrower will not
permit the ratio of the Secured Indebtedness of the Borrower and its
Subsidiaries to the Consolidated Total Assets of the Borrower and its
Subsidiaries to exceed .40 to 1.
Section 9.6. Fixed Charge Coverage. Borrower will not permit the
Consolidated Cash Flow for the Test Period to be less than 2 times the Fixed
Charges of the Borrower and its Subsidiaries for the Test Period.
Section 9.7. Fixed Charge and Preferred Distribution Coverage.
Borrower will not permit the Consolidated Cash Flow for the Test Period to be
less than 1.5 times the sum of (a) the Fixed Charges of the Borrower and its
Subsidiaries for the Test Period plus (b) the Preferred Distributions of
Crescent Guarantor and the Borrower for the Test Period.
Section 9.8. Total Liabilities. The Borrower shall not permit the
Consolidated Total Liabilities of the Borrower and its Subsidiaries to be
greater than 5 times the Consolidated Cash Flow of the Borrower and its
Subsidiaries. In the event that a parcel of Real Estate has only been owned by
the Borrower or a Subsidiary for a portion of the period for which data is
needed to test compliance with this covenant, the Borrower shall annualize the
data which is available in such manner as the Agent determines in its sole
discretion so as to allow the test to be performed with respect to the full
period.
Section 9.9. Real Estate Assets. The Borrower shall not permit (i)
the ratio of the Modified Book Asset Value of its direct and indirect interests
in non-income producing land assets and mortgages secured by non-income
producing land to the Consolidated Total Assets of the Borrower and its
Subsidiaries to exceed .10 to 1; (ii) the ratio of the Modified Book Asset
Value
-55-
<PAGE> 62
of its direct and indirect interests in hotels/resorts to the Consolidated
Total Assets of the Borrower and its Subsidiaries to exceed .20 to 1; (iii) the
ratio of the Modified Book Asset Value of its direct and indirect interests in
behavioral healthcare facilities to the Consolidated Total Assets of the
Borrower and its Subsidiaries to exceed .15 to 1; and (iv) the ratio of the
Modified Book Asset Value of its direct and indirect interests in Class A
institutional quality office buildings, retail properties, industrial and
warehouse properties to the Consolidated Total Assets of the Borrower and its
Subsidiaries to be less than .50 to 1. For the purposes of this Section 9.9,
the interest of Spectrum Mortgage Associates, L.P. in the land at the project
commonly known as Spectrum Center shall be excluded from the calculation in (i)
above. Furthermore, for the purposes of this Section 9.9, the Consolidated
Total Assets of the Borrower and its Subsidiaries shall be reduced by the Cash
and accounts receivable of the Borrower and its Subsidiaries.
Section 9.10. Value Adjustment. The Borrower and the Banks have
agreed to a one-time market value adjustment increase in the amount of
$63,500,000.00 to the value of the assets of the Borrower as of the date of
this Agreement, and the financial covenants set forth in Section 9.1, Section
9.4, Section 9.5 and Section 9.9 (including without limitation the Borrower's
Consolidated Tangible Net Worth and the value of the Borrower's Consolidated
Total Assets) shall for the term of this Agreement be tested against the market
value of the Borrower's assets, based on such one-time market value adjustment,
plus all real estate depreciation to such assets since the date of the
Borrower's initial public offering.
Section 9.11. [Intentionally Omitted].
Section 9.12. Unencumbered Operating Properties. The Borrower shall
at all times own Unencumbered Operating Properties which satisfy all of the
following conditions: (i) the aggregate Asset Value of the Unencumbered
Operating Properties shall not be less than one hundred fifty percent (150%) of
the Borrower's unsecured Indebtedness (including without limitation the
Obligations) outstanding from time to time; (ii) the Consolidated Cash Flow of
the Borrower and its Subsidiaries with respect to the Unencumbered Operating
Properties for the Test Period shall not be less than twelve percent (12%) of
the Borrower's unsecured Indebtedness (including without limitation the
Obligations) outstanding from time to time; (iii) no more than twenty-five
percent (25%) of the aggregate Asset Value of the Unencumbered Operating
Properties shall be owned by Investment Partnerships; and (iv) at least fifty
percent (50%) of the aggregate Asset Value of the Unencumbered Operating
Properties shall be Class A institutional quality office buildings, retail,
industrial and warehouse properties. In the event that an Unencumbered
Operating Property has only been owned by the Borrower or a Subsidiary for a
portion of the period for which data is needed to test compliance with this
covenant, the Borrower shall annualize the data which is available in such
manner as the Agent determines in its sole discretion so as to allow the test
to be performed with respect to the full period. In order for the Behavioral
Healthcare Facilities to remain Unencumbered Operating Properties (i) the
Consolidated Cash Flow of CBHS for the Test Period must not be less than 1.5
times the Rent Payments payable to Crescent Real Estate Funding VII, L.P.
("Funding VII") for the Test Period, and (ii) CBHS shall be in full compliance
with its obligations under the Master Lease Agreement in all material respects.
In the event that data needed to perform this test is not available for a
portion of the Test Period, the Borrower shall annualize the data which is
available in such manner as the Agent determines in its sole discretion so as
to allow the test to be performed with
-56-
<PAGE> 63
respect to the full Test Period. For the purpose of performing this test, the
Consolidated Cash Flow of CBHS shall be calculated without deduction for
franchise fees payable by CBHS to Magellan.
SECTION 10. CLOSING CONDITIONS.
The obligations of the Agent and the Banks to make the initial Loans
shall be subject to the satisfaction of the following conditions precedent on
or prior to June 29, 1998:
Section 10.1. Loan Documents. Each of the Loan Documents shall have
been duly executed and delivered by the respective parties thereto, shall be in
full force and effect and shall be in form and substance reasonably
satisfactory to the Majority Banks in their good faith determination. The
Agent shall have received a fully executed copy of each such document, except
that each Bank shall have received a fully executed counterpart of its Note.
Section 10.2. Certified Copies of Organizational Documents. The
Agent shall have received from the Borrower a copy, certified as of a recent
date by the appropriate officer of each State in which the Borrower, the
General Partner or Guarantor, as applicable, is organized or in which the Real
Estate is located and a duly authorized partner or officer of such Person, as
applicable, to be true and complete, of the partnership agreement or corporate
charter of the Borrower, the General Partner or such Guarantor, as applicable,
or its qualification to do business, as applicable, as in effect on such date
of certification.
Section 10.3. Bylaws; Resolutions. All action on the part of the
Borrower, the General Partner and the Guarantor necessary for the valid
execution, delivery and performance by the Borrower, the General Partner and
the Guarantor of this Agreement and the other Loan Documents to which such
Person is or is to become a party shall have been duly and effectively taken,
and evidence thereof satisfactory to the Agent shall have been provided to the
Agent. The Agent shall have received from the General Partner and Guarantor
true copies of their respective bylaws and the resolutions adopted by their
respective board of directors authorizing the transactions described herein,
each certified by its secretary as of a recent date to be true and complete.
Section 10.4. Incumbency Certificate; Authorized Signers. The Agent
shall have received from the General Partner and Guarantor an incumbency
certificate, dated as of the Closing Date, signed by a duly authorized officer
of the General Partner and Guarantor and giving the name and bearing a specimen
signature of each individual who shall be authorized to sign, in the name and
on behalf of the General Partner and Guarantor, each of the Loan Documents to
which such Person is or is to become a party. The Agent shall have also
received from the Borrower a certificate, dated as of the Closing Date, signed
by a duly authorized partner of the Borrower and giving the name and specimen
signature of each individual who shall be authorized to make Loan and
Conversion Requests, and give notices and to take other action on behalf of the
Borrower under the Loan Documents.
Section 10.5. Opinion of Counsel. The Agent shall have received a
favorable opinion addressed to the Banks and the Agent and dated as of the
Closing Date, in form and substance reasonably
-57-
<PAGE> 64
satisfactory to the Agent, from counsel of the Borrower, the General Partner
and the Guarantor (a) stating that all Loan Documents have been duly
authorized, executed and delivered by Borrower and Guarantor are valid, binding
and enforceable against Borrower and Guarantor including, without limitation,
the choice of law provisions of the Loan Documents, (b) indicating the due
organization, legal existence and good standing of Borrower, General Partner
and Guarantor in the state of its formation, (c) stating that the Loan is not
usurious under Massachusetts law (without resort to any "usury savings" clause
in the Loan Documents), (d) stating that to Borrower's counsel's current actual
knowledge there is no material action, suit or proceeding pending or threatened
against or affecting Borrower, General Partner and Guarantor before any court,
administrative agency, arbitrator or governmental authority, and (e) such other
matters as are reasonably requested by Agent's Special Counsel.
Section 10.6. Payment of Fees. The Borrower shall have paid to
BankBoston the fees required to be paid pursuant to Section 4.2.
Section 10.7. Performance; No Default. The Borrower shall have
performed and complied with all terms and conditions herein required to be
performed or complied with by it on or prior to the Closing Date, and on the
Closing Date there shall exist no Default or Event of Default.
Section 10.8. Representations and Warranties. The representations
and warranties made by the Borrower, the General Partner and the Guarantor in
the Loan Documents or otherwise made by or on behalf of the Borrower, the
General Partner, the Guarantor or the Borrower's Subsidiaries or Investment
Partnerships in connection therewith or after the date thereof shall have been
true and correct in all material respects when made and shall also be true and
correct in all material respects on the Closing Date, subject to the provisions
of Section 6.27 above.
Section 10.9. Proceedings and Documents. All proceedings in
connection with the transactions contemplated by this Agreement and the other
Loan Documents shall be reasonably satisfactory to the Agent and the Agent's
Special Counsel in form and substance, and the Agent shall have received all
information and such counterpart originals or certified copies of such
documents and such other certificates, opinions or documents as the Agent and
the Agent's Special Counsel may reasonably require.
Section 10.10. Intentionally Omitted.
Section 10.11. Compliance Certificate. A Compliance Certificate and
a Guarantor's Compliance Certificate dated as of the date of the Closing Date
demonstrating compliance with each of the covenants calculated therein as of
the most recent fiscal quarter end for which the Borrower or Crescent Guarantor
has provided financial statements under Section 6.4 or the Guaranty, as
applicable, adjusted in the best good faith estimate of the Borrower or
Crescent Guarantor, as applicable, dated as of the date of the Closing Date
shall have been delivered to the Agent.
Section 10.12. Real Estate Spreadsheet. The Agent shall have
received the spreadsheet on the Real Estate described in Section 6.4 above.
-58-
<PAGE> 65
Section 10.13. Contribution Agreement. The Agent shall have received
an executed counterpart of the Contribution Agreement.
Section 10.14. Other. The Agent shall have reviewed such other
documents, instruments, certificates, opinions, assurances, consents and
approvals as the Agent or the Agent's Special Counsel may reasonably have
requested.
SECTION 11. CONDITIONS TO ALL BORROWINGS.
The obligations of the Banks to make any Loan, whether on or after the
Closing Date, shall also be subject to the satisfaction of the following
conditions precedent:
Section 11.1. Prior Conditions Satisfied. All conditions set forth
in Section 10 shall continue to be satisfied as of the date upon which any Loan
is to be made.
Section 11.2. Representations True; No Default. Each of the
representations and warranties made by or on behalf of the Borrower, the
General Partner, the Guarantor and the Borrower's Subsidiaries and Investment
Partnerships contained in this Agreement, the other Loan Documents or in any
document or instrument delivered pursuant to or in connection with this
Agreement shall be true as of the date as of which they were made and shall
also be true at and as of the time of the making of such Loan, with the same
effect as if made at and as of that time (except to the extent of changes
resulting from transactions contemplated or permitted by this Agreement and the
other Loan Documents and changes occurring in the ordinary course of business
that singly or in the aggregate are not materially adverse, and except to the
extent that such representations and warranties relate expressly to an earlier
date) and no Default or Event of Default shall have occurred and be continuing.
Section 11.3. No Legal Impediment. No change shall have occurred in
any law or regulations thereunder or interpretations thereof that in the
reasonable opinion of any Bank would make it illegal for such Bank to make such
Loan.
Section 11.4. Governmental Regulation. Each Bank shall have received
such statements in substance and form reasonably satisfactory to such Bank as
such Bank shall require for the purpose of compliance with any applicable
regulations of the Comptroller of the Currency or the Board of Governors of the
Federal Reserve System.
Section 11.5. Proceedings and Documents. All proceedings in
connection with the Loan shall be satisfactory in substance and in form to the
Majority Banks, and the Majority Banks shall have received all information and
such counterpart originals or certified or other copies of such documents as
the Majority Banks may reasonably request.
Section 11.6. Borrowing Documents. In the case of any request for a
Loan, the Agent shall have received a copy of each of the following:
-59-
<PAGE> 66
(a) the request for a Loan required by Section 2.6 in the
form of Exhibit B hereto, fully completed; and
(b) the Compliance Certificate and the Guarantor's
Compliance Certificate required by clauses (iii) and (iv) of Section 2.6
prepared in a manner reasonably acceptable to the Agent.
SECTION 12. EVENTS OF DEFAULT; ACCELERATION; ETC.
Section 12.1. Events of Default and Acceleration. If any of the
following events ("Events of Default" or, if the giving of notice or the lapse
of time or both is required, then, prior to such notice or lapse of time,
"Defaults") shall occur:
(a) the Borrower shall fail to pay any principal of the
Loans when the same shall become due and payable, whether at the stated date of
maturity or any accelerated date of maturity or at any other date fixed for
payment;
(b) the Borrower shall fail to pay any interest on the
Loans or any other sums due hereunder or under any of the other Loan Documents,
when the same shall become due and payable, whether at the stated date of
maturity or any accelerated date of maturity or at any other date fixed for
payment;
(c) the Borrower shall fail to comply with any covenant
contained in Section 7.17;
(d) the Borrower shall fail to comply with any covenant
contained in Section 9, and such failure shall continue for 30 days after
written notice thereof shall have been given to the Borrower by the Agent;
provided, however, that no Event of Default shall exist hereunder upon the
breach of either of the covenants described in Section 9.12(iii) or (iv) in the
event that the Borrower cures such default within one hundred eighty (180) days
following receipt of written notice of such default;
(e) the Borrower or any of its Subsidiaries or the
Guarantor shall fail to perform any other term, covenant or agreement contained
herein or in any of the other Loan Documents (other than those specified above
in this Section 12);
(f) any representation or warranty made by or on behalf
of the Borrower, its General Partner, the Guarantor or any of the Borrower's
Subsidiaries or Investment Partnerships in this Agreement or any other Loan
Document, report, certificate, financial statement, request for a Loan, or in
any other document or instrument delivered pursuant to or in connection with
this Agreement, any advance of a Loan or any of the other Loan Documents shall
prove to have been false in any material respect upon the date when made or
deemed to have been made or repeated;
(g) the Borrower, any of its general partners, the
Guarantor or any of the Borrower's Subsidiaries shall fail to pay at maturity,
or within any applicable period of grace, any obligation for borrowed money or
credit received, or fail to observe or perform any material term,
-60-
<PAGE> 67
covenant or agreement contained in any agreement by which it is bound,
evidencing or securing any such borrowed money or credit received for such
period of time as would permit (assuming the giving of appropriate notice if
required) the holder or holders thereof or of any obligations issued thereunder
to accelerate the maturity thereof;
(h) the Borrower, any of its general partners, the
Guarantor or any of the Borrower's Subsidiaries, (1) shall make an assignment
for the benefit of creditors, or admit in writing its general inability to pay
or generally fail to pay its debts as they mature or become due, or shall
petition or apply for the appointment of a trustee or other custodian,
liquidator or receiver of the Borrower, any of its general partners, the
Guarantor or any of the Borrower's Subsidiaries or of any substantial part of
the assets of any thereof, (2) shall commence any case or other proceeding
relating to the Borrower, any of its general partners, the Guarantor or any of
the Borrower's Subsidiaries under any bankruptcy, reorganization, arrangement,
insolvency, readjustment of debt, dissolution or liquidation or similar law of
any jurisdiction, now or hereafter in effect, or (3) shall take any action to
authorize or in furtherance of any of the foregoing;
(i) a petition or application shall be filed for the
appointment of a trustee or other custodian, liquidator or receiver of the
Borrower, any of its general partners, the Guarantor or any of the Borrower's
Subsidiaries or any substantial part of the assets of any thereof, or a case or
other proceeding shall be commenced against the Borrower, any of its general
partners, the Guarantor or any of the Borrower's Subsidiaries under any
bankruptcy, reorganization, arrangement, insolvency, readjustment of debt,
dissolution or liquidation or similar law of any jurisdiction, now or hereafter
in effect, and the Borrower, any of its general partners, the Guarantor or any
of the Borrower's Subsidiaries shall indicate its approval thereof, consent
thereto or acquiescence therein or such petition, application, case or
proceeding shall not have been dismissed within 90 days following the filing or
commencement thereof;
(j) a decree or order is entered appointing any such
trustee, custodian, liquidator or receiver or adjudicating the Borrower, any of
its general partners, the Guarantor or any of the Borrower's Subsidiaries
bankrupt or insolvent, or approving a petition in any such case or other
proceeding, or a decree or order for relief is entered in respect of the
Borrower, any of its general partners, the Guarantor or any of the Borrower's
Subsidiaries, in an involuntary case under federal bankruptcy laws as now or
hereafter constituted;
(k) there shall remain in force, undischarged,
unsatisfied and unstayed, for more than 60 days, whether or not consecutive,
any uninsured final judgment against the Borrower, any of its general partners,
the Guarantor or any of the Borrower's Subsidiaries that, with other
outstanding uninsured final judgments, undischarged, against the Borrower, any
of its general partners, the Guarantor or any of the Borrower's Subsidiaries
exceeds in the aggregate $10,000,000.00;
(l) if any of the Loan Documents shall be canceled,
terminated, revoked or rescinded otherwise than in accordance with the terms
thereof or with the express prior written agreement, consent or approval of the
Banks, or any action at law, suit in equity or other legal
-61-
<PAGE> 68
proceeding to cancel, revoke or rescind any of the Loan Documents shall be
commenced by or on behalf of the Borrower, any of its general partners, the
Guarantor, any of the Borrower's Subsidiaries or Investment Partnerships or any
of their respective stockholders, partners or beneficiaries, or any court or
any other governmental or regulatory authority or agency of competent
jurisdiction shall make a determination that, or issue a judgment, order,
decree or ruling to the effect that, any one or more of the Loan Documents is
illegal, invalid or unenforceable in accordance with the terms thereof;
(m) any dissolution, termination, partial or complete
liquidation, merger or consolidation of the Borrower, any of its general
partners or the Guarantor, or any sale, transfer or other disposition of the
assets of the Borrower, any of its general partners or the Guarantor, other
than as permitted under the terms of this Agreement or the other Loan
Documents;
(n) any suit or proceeding shall be filed against the
Borrower, the Guarantor or any of their respective assets, which in the good
faith business judgment of the Majority Banks after giving consideration to the
likelihood of success of such suit or proceeding and the availability of
insurance to cover any judgment with respect thereto and based on the
information available to them, if adversely determined, would have a materially
adverse affect on the ability of the Borrower or the Guarantor to perform each
and every one of its respective obligations under and by virtue of the Loan
Documents;
(o) the Borrower, any of its general partners, the
Guarantor or any of the Borrower's or the Guarantor's Subsidiaries shall be
indicted for a federal crime, a punishment for which could include the
forfeiture of any assets of such Person;
(p) with respect to any Guaranteed Pension Plan, an ERISA
Reportable Event shall have occurred and the Majority Banks shall have
determined in their reasonable discretion that such event reasonably could be
expected to result in liability of the Borrower, any of its general partners,
the Guarantor or any of the Borrower's Subsidiaries to the PBGC or such
Guaranteed Pension Plan in an aggregate amount exceeding $1,000,000 and such
event in the circumstances occurring reasonably could constitute grounds for
the termination of such Guaranteed Pension Plan by the PBGC or for the
appointment by the appropriate United States District Court of a trustee to
administer such Guaranteed Pension Plan; or a trustee shall have been appointed
by the United States District Court to administer such Plan; or the PBGC shall
have instituted proceedings to terminate such Guaranteed Pension Plan;
(q) the Guarantor denies that it has any liability or
obligation under the Guaranty, or shall notify the Agent or any of the Banks of
the Guarantor's intention to attempt to cancel or terminate the Guaranty, or
shall fail to observe or comply with any term, covenant, condition or agreement
under the Guaranty;
(r) (1) at least two of Richard Rainwater, John C. Goff
and Gerald Haddock shall not collectively occupy two of the following
positions: Chairman of the Board, Chief Executive Officer, Vice-Chairman and
President of Crescent Guarantor, or (2) Richard
-62-
<PAGE> 69
Rainwater, John C. Goff and Gerald Haddock in the aggregate shall no longer own
units in the Borrower or shares in Crescent Guarantor which, on a combined
basis, equal to at least a ten percent (10%) economic interest in the Borrower
(provided, however, in the event that the circumstances described in (1) or (2)
have occurred as a result of the death or mental incapacity of any of such
Persons, the same shall not constitute an Event of Default hereunder so long as
within six (6) months from the date of such death or mental incapacitation the
Majority Banks shall have approved the individual or individuals who shall
replace such Person as the Chairman of the Board, Chief Executive Officer,
Vice- Chairman or President, as applicable, of Crescent Guarantor and who shall
own such interests in the Borrower and Crescent Guarantor), or (3) without the
prior written approval of the Majority Banks there shall be any other material
change in the management of Crescent Guarantor or the Borrower; or
(s) any default or Event of Default, as defined in any of
the other Loan Documents, shall occur;
then, and in any such event, the Agent may, and upon the request of the
Majority Banks shall, by notice in writing to the Borrower declare all amounts
owing with respect to this Agreement, the Notes and the other Loan Documents to
be, and they shall thereupon forthwith become, immediately due and payable
without presentment, demand, protest or other notice of any kind, all of which
are hereby expressly waived by the Borrower; provided that in the event of any
Event of Default specified in Section 12.1(h), Section 12.1(i) or Section
12.1(j), all such amounts shall become immediately due and payable
automatically and without any requirement of notice from any of the Banks or
the Agent.
Section 12.2. Limitation of Cure Periods.
(a) Notwithstanding anything contained in Section 12.1 to
the contrary, (i) no Event of Default shall exist hereunder upon the occurrence
of any failure described in Section 12.1(a) or Section 12.1(b) in the event
that the Borrower cures such default within five (5) days following receipt of
written notice of such default, provided, however, that Borrower shall not be
entitled to receive more than two (2) notices in the aggregate pursuant to this
clause (i) in any period of 365 days ending on the date of any such occurrence
of default, and provided further that no such cure period shall apply to any
payments due upon the maturity of the Notes, and (ii) no Event of Default shall
exist hereunder upon the occurrence of any failure described in Section 12.1(e)
in the event that the Borrower cures such default with thirty (30) days
following receipt of written notice of such default, provided that the
provisions of this clause shall not pertain to defaults consisting of a failure
to comply with Section 7.4(d) or to any default excluded from any provision of
cure of defaults contained in any other of the Loan Documents.
(b) Notwithstanding the provisions of Section 12.1(d),
the cure period provided therein shall not be allowed and the occurrence of a
Default thereunder immediately shall constitute an Event of Default for all
purposes of this Agreement and the other Loan Documents if, within the period
of twelve months immediately preceding the occurrence of such Default, there
shall have occurred two periods of cure or portions thereof under said
subsection.
-63-
<PAGE> 70
Section 12.3. Termination of Commitments. If any one or more Events
of Default specified in Section 12.1(h), Section 12.1(i) or Section 12.1(j)
shall occur, then immediately and without any action on the part of the Agent
or any Bank any unused portion of the credit hereunder shall terminate and the
Banks shall be relieved of all obligations to make Loans to the Borrower. If
any other Event of Default shall have occurred, the Agent, upon the election of
the Majority Banks, may by notice to the Borrower terminate the obligation to
make Loans to the Borrower. No termination under this Section 12.3 shall
relieve the Borrower of its obligations to the Banks arising under this
Agreement or the other Loan Documents. Nothing in this Section 12.3 shall
limit or impair the terms of this Agreement (including Section 2.1) which
provide that the Banks shall have no obligation to make Loans upon the
occurrence of a Default or Event of Default.
Section 12.4. Remedies. In case any one or more of the Events of
Default shall have occurred and be continuing, and whether or not the Banks
shall have accelerated the maturity of the Loans pursuant to Section 12.1, the
Agent on behalf of the Banks, may, with the consent of the Majority Banks but
not otherwise, proceed to protect and enforce their rights and remedies under
this Agreement, the Notes or any of the other Loan Documents by suit in equity,
action at law or other appropriate proceeding, whether for the specific
performance of any covenant or agreement contained in this Agreement and the
other Loan Documents or any instrument pursuant to which the Obligations are
evidenced, including to the full extent permitted by applicable law the
obtaining of the ex parte appointment of a receiver, and, if such amount shall
have become due, by declaration or otherwise, proceed to enforce the payment
thereof or any other legal or equitable right. No remedy herein conferred upon
the Agent or the holder of any Note is intended to be exclusive of any other
remedy and each and every remedy shall be cumulative and shall be in addition
to every other remedy given hereunder or now or hereafter existing at law or in
equity or by statute or any other provision of law. In the event that all or
any portion of the Obligations is collected by or through an attorney-at-law,
the Borrower shall pay all reasonable costs of collection including, but not
limited to, reasonable attorney's fees.
Section 12.5. Distribution of Proceeds. In the event that, following
the occurrence or during the continuance of any Event of Default, any monies
are received in connection with the enforcement of any of the Loan Documents,
or otherwise with respect to the realization upon any of the assets of the
Borrower or the Guarantor, such monies shall be distributed for application as
follows:
(a) First, to the payment of, or (as the case may be) the
reimbursement of, the Agent for or in respect of all reasonable costs,
expenses, disbursements and losses which shall have been incurred or sustained
by the Agent to protect or preserve any collateral or in connection with the
collection of such monies by the Agent, for the exercise, protection or
enforcement by the Agent of all or any of the rights, remedies, powers and
privileges of the Agent under this Agreement or any of the other Loan Documents
or in support of any provision of adequate indemnity to the Agent against any
taxes or liens which by law shall have, or may have, priority over the rights
of the Agent to such monies;
-64-
<PAGE> 71
(b) Second, to all other Obligations in such order or
preference as the Majority Banks shall determine; provided, however, that (i)
distributions in respect of such other Obligations shall be made pari passu
among Obligations with respect to the Agent's fee payable pursuant to Section
4.3 and all other Obligations, (ii) in the event that any Bank shall have
wrongfully failed or refused to make an advance under Section 2.7 and such
failure or refusal shall be continuing, advances made by other Banks during the
pendency of such failure or refusal shall be entitled to be repaid as to
principal and accrued interest in priority to the other Obligations described
in this subsection (b), and (iii) Obligations owing to the Banks with respect
to each type of Obligation such as interest, principal, fees and expenses,
shall be made among the Banks pro rata; and provided further that the Majority
Banks may in their discretion make proper allowance to take into account any
Obligations not then due and payable; and
(c) Third, the excess, if any, shall be returned to the
Borrower or to such other Persons as are entitled thereto.
SECTION 13. SETOFF.
Regardless of the adequacy of any collateral, during the continuance of
any Event of Default, any deposits (general or specific, time or demand,
provisional or final, regardless of currency, maturity, or the branch of where
such deposits are held) or other sums credited by or due from any of the Banks
to the Borrower or the Guarantor and any securities or other property of the
Borrower or the Guarantor in the possession of such Bank may be applied to or
set off against the payment of Obligations and any and all other liabilities,
direct, or indirect, absolute or contingent, due or to become due, now existing
or hereafter arising, of the Borrower to such Bank. Each of the Banks agrees
with each other Bank that if such Bank shall receive from the Borrower or the
Guarantor, whether by voluntary payment, exercise of the right of setoff, or
otherwise, and shall retain and apply to the payment of the Note or Notes held
by such Bank any amount in excess of its ratable portion of the payments
received by all of the Banks with respect to the Notes held by all of the
Banks, such Bank will make such disposition and arrangements with the other
Banks with respect to such excess, either by way of distribution, pro tanto
assignment of claims, subrogation or otherwise as shall result in each Bank
receiving in respect of the Notes held by it its proportionate payment as
contemplated by this Agreement; provided that if all or any part of such excess
payment is thereafter recovered from such Bank, such disposition and
arrangements shall be rescinded and the amount restored to the extent of such
recovery, but without interest.
SECTION 14. THE AGENT.
Section 14.1. Authorization. The Agent is authorized to take such
action on behalf of each of the Banks and to exercise all such powers as are
hereunder and under any of the other Loan Documents and any related documents
delegated to the Agent, together with such powers as are reasonably incident
thereto, provided that no duties or responsibilities not expressly assumed
herein or therein shall be implied to have been assumed by the Agent. The
obligations of Agent hereunder are primarily administrative in nature, and
nothing contained in this Agreement, or any of the other Loan Documents shall
be construed to constitute the Agent as a trustee for any Bank
-65-
<PAGE> 72
or to create an agency or fiduciary relationship. The Borrower and any other
Person shall be entitled to conclusively rely on a statement from the Agent
that it has the authority to act for and bind the Banks pursuant to this
Agreement and the other Loan Documents.
Section 14.2. Employees and Agents. The Agent may exercise its
powers and execute its duties by or through employees or agents and shall be
entitled to take, and to rely on, advice of counsel concerning all matters
pertaining to its rights and duties under this Agreement and the other Loan
Documents. The Agent may utilize the services of such Persons as the Agent may
reasonably determine, and all reasonable fees and expenses of any such Persons
shall be paid by the Borrower.
Section 14.3. No Liability. Neither the Agent nor any of its
shareholders, directors, officers or employees nor any other Person assisting
them in their duties nor any agent, or employee thereof, shall be liable for
any waiver, consent or approval given or any action taken, or omitted to be
taken, in good faith by it or them hereunder or under any of the other Loan
Documents, or in connection herewith or therewith, or be responsible for the
consequences of any oversight or error of judgment whatsoever, except that the
Agent or such other Person, as the case may be, shall be liable for losses due
to its willful misconduct or gross negligence.
Section 14.4. No Representations. The Agent shall not be responsible
for the execution or validity or enforceability of this Agreement, the Notes,
any of the other Loan Documents or any instrument at any time constituting, or
intended to constitute, collateral security for the Notes, or for the value of
any such collateral security or for the validity, enforceability or
collectability of any such amounts owing with respect to the Notes, or for any
recitals or statements, warranties or representations made herein, or any
agreement, instrument or certificate delivered in connection therewith or in
any of the other Loan Documents or in any certificate or instrument hereafter
furnished to it by or on behalf of the Borrower or any of its Subsidiaries or
Investment Partnerships or the Guarantor, or be bound to ascertain or inquire
as to the performance or observance of any of the terms, conditions, covenants
or agreements herein or in any other of the Loan Documents. The Agent shall
not be bound to ascertain whether any notice, consent, waiver or request
delivered to it by the Borrower or the Guarantor or any of their respective
Subsidiaries or Investment Partnerships or any holder of any of the Notes shall
have been duly authorized or is true, accurate and complete. The Agent has not
made nor does it now make any representations or warranties, express or
implied, nor does it assume any liability to the Banks, with respect to the
creditworthiness or financial condition of the Borrower or any of its
Subsidiaries or Investment Partnerships or the Guarantor. Each Bank
acknowledges that it has, independently and without reliance upon the Agent or
any other Bank, and based upon such information and documents as it has deemed
appropriate, made its own credit analysis and decision to enter into this
Agreement. Each Bank also acknowledges that it will, independently and without
reliance upon the Agent or any other Bank, based upon such information and
documents as it deems appropriate at the time, continue to make its own credit
analysis and decisions in taking or not taking action under this Agreement and
the other Loan Documents.
-66-
<PAGE> 73
Section 14.5. Payments.
(a) A payment by the Borrower or the Guarantor to the
Agent hereunder or under any of the other Loan Documents for the account of any
Bank shall constitute a payment to such Bank. The Agent agrees to distribute
to each Bank not later than one Business Day after the Agent's receipt of good
funds, determined in accordance with the Agent's customary practices, such
Bank's pro rata share of payments received by the Agent for the account of the
Banks except as otherwise expressly provided herein or in any of the other Loan
Documents. In the event that the Agent fails to distribute such amounts within
one Business Day as provided above, the Agent shall pay interest on such amount
at a rate per annum equal to the Federal Funds Effective Rate from time to time
in effect.
(b) If in the opinion of the Agent the distribution of
any amount received by it in such capacity hereunder, under the Notes or under
any of the other Loan Documents might involve it in liability, it may refrain
from making distribution until its right to make distribution shall have been
adjudicated by a court of competent jurisdiction. If a court of competent
jurisdiction shall adjudge that any amount received and distributed by the
Agent is to be repaid, each Person to whom any such distribution shall have
been made shall either repay to the Agent its proportionate share of the amount
so adjudged to be repaid or shall pay over the same in such manner and to such
Persons as shall be determined by such court.
(c) Notwithstanding anything to the contrary contained in
this Agreement or any of the other Loan Documents, any Bank that fails (i) to
make available to the Agent its pro rata share of any Loan or (ii) to comply
with the provisions of Section 13 with respect to making dispositions and
arrangements with the other Banks, where such Bank's share of any payment
received, whether by setoff or otherwise, is in excess of its pro rata share of
such payments due and payable to all of the Banks, in each case as, when and to
the full extent required by the provisions of this Agreement, shall be deemed
delinquent (a "Delinquent Bank") and shall be deemed a Delinquent Bank until
such time as such delinquency is satisfied. A Delinquent Bank shall be deemed
to have assigned any and all payments due to it from the Borrower and the
Guarantor, whether on account of outstanding Loans, interest, fees or
otherwise, to the remaining nondelinquent Banks for application to, and
reduction of, their respective pro rata shares of all outstanding Loans. The
Delinquent Bank hereby authorizes the Agent to distribute such payments to the
nondelinquent Banks in proportion to their respective pro rata shares of all
outstanding Loans. A Delinquent Bank shall be deemed to have satisfied in full
a delinquency when and if, as a result of application of the assigned payments
to all outstanding Loans of the nondelinquent Banks or as a result of other
payments by the Delinquent Banks to the nondelinquent Banks, the Banks'
respective pro rata shares of all outstanding Loans have returned to those in
effect immediately prior to such delinquency and without giving effect to the
nonpayment causing such delinquency.
-67-
<PAGE> 74
Section 14.6. Holders of Notes. Subject to the terms of Article 18,
the Agent may deem and treat the payee of any Note as the absolute owner or
purchaser thereof for all purposes hereof until it shall have been furnished in
writing with a different name by such payee or by a subsequent holder, assignee
or transferee.
Section 14.7. Indemnity. The Banks ratably agree hereby to indemnify
and hold harmless the Agent from and against any and all claims, actions and
suits (whether groundless or otherwise), losses, damages, costs, expenses
(including any expenses for which the Agent has not been reimbursed by the
Borrower as required by Section 15), and liabilities of every nature and
character arising out of or related to this Agreement, the Notes or any of the
other Loan Documents or the transactions contemplated or evidenced hereby or
thereby, or the Agent's actions taken hereunder or thereunder, except to the
extent that any of the same shall be directly caused by the Agent's willful
misconduct or gross negligence.
Section 14.8. Agent as Bank. In its individual capacity, BankBoston
shall have the same obligations and the same rights, powers and privileges in
respect to its Commitment and the Loans made by it, and as the holder of any of
the Notes as it would have were it not also the Agent.
Section 14.9. Resignation. Subject to the terms of Section 18.1, the
Agent may resign at any time by giving 30 calendar days' prior written notice
thereof to the Banks and the Borrower. Upon any such resignation, the Majority
Banks, subject to the terms of Section 18.1, shall have the right to appoint as
a successor Agent any Bank or any bank whose senior debt obligations are rated
not less than "A" or its equivalent by Moody's Investors Service, Inc. or not
less than "A" or its equivalent by Standard & Poor's corporation and which has
a net worth of not less than $500,000,000. Unless a Default or Event of
Default shall have occurred and be continuing, such successor Agent shall be
reasonably acceptable to the Borrower. If no successor Agent shall have been
appointed and shall have accepted such appointment within thirty (30) days
after the retiring Agent's giving of notice of resignation, then the retiring
Agent may, on behalf of the Banks, appoint a successor Agent, which shall be a
bank whose debt obligations are rated not less than "A" or its equivalent by
Moody's Investors Service, Inc. or not less than "A" or its equivalent by
Standard & Poor's Corporation and which has a net worth of not less than
$500,000,000. Upon the acceptance of any appointment as Agent hereunder by a
successor Agent, such successor Agent shall thereupon succeed to and become
vested with all the rights, powers, privileges and duties of the retiring or
removed Agent, and the retiring Agent shall be discharged from its duties and
obligations hereunder as Agent. After any retiring Agent's resignation, the
provisions of this Agreement and the other Loan Documents shall continue in
effect for its benefit in respect of any actions taken or omitted to be taken
by it while it was acting as Agent. Upon any change in the Agent under this
Agreement, the resigning Agent shall execute such assignments of and amendments
to the Loan Documents as may be necessary to substitute the successor Agent for
the resigning Agent.
Section 14.10. Duties in the Case of Enforcement. In case one or
more Events of Default have occurred and shall be continuing, and whether or
not acceleration of the Obligations shall have occurred, the Agent shall, if
(a) so requested by the Majority Banks and (b) the Banks have
-68-
<PAGE> 75
provided to the Agent such additional indemnities and assurances against
expenses and liabilities as the Agent may reasonably request, proceed to
exercise all or any legal and equitable and other rights or remedies as it may
have. The Majority Banks may direct the Agent in writing as to the method and
the extent of any such exercise, the Banks hereby agreeing to indemnify and
hold the Agent harmless from all liabilities incurred in respect of all actions
taken or omitted in accordance with such directions, provided that the Agent
need not comply with any such direction to the extent that the Agent reasonably
believes the Agent's compliance with such direction to be unlawful or
commercially unreasonable in any applicable jurisdiction.
SECTION 15. EXPENSES.
The Borrower agrees to pay (a) the reasonable costs of producing and
reproducing this Agreement, the other Loan Documents and the other agreements
and instruments mentioned herein, (b) except as otherwise specifically provided
herein, any taxes (including any interest and penalties in respect thereto)
payable by the Agent or any of the Banks, including any recording, mortgage,
documentary or intangibles taxes in connection with the Loan Documents, or
other taxes payable on or with respect to the transactions contemplated by this
Agreement (other than taxes based upon the Agent's or any Bank's gross or net
income), (c) the reasonable fees, expenses and disbursements of the counsel to
the Agent and any local counsel to the Agent incurred in connection with the
preparation, administration or interpretation of the Loan Documents and other
instruments mentioned herein (excluding, however, the preparation of agreements
evidencing participations granted under Section 18.4), each closing hereunder,
and amendments, modifications, approvals, consents or waivers hereto or
hereunder (it being understood and agreed that the Borrower shall pay to the
Agent for the account of the Banks a fee in the amount of $10,000.00 for each
material amendment or waiver (as determined by the Agent in its sole
discretion) requested by Borrower and granted by the Agent or the Banks, with
such fee to be split equally among the Banks), (d) the reasonable fees,
expenses and disbursements of the Agent incurred by the Agent in connection
with the preparation, administration or interpretation of the Loan Documents
and other instruments mentioned herein, and the making of each advance
hereunder, (e) all reasonable out-of-pocket expenses (including reasonable
attorneys' fees and costs, which attorneys may be employees of any Bank or the
Agent and the fees and costs of appraisers, engineers, investment bankers or
other experts retained by any Bank or the Agent) incurred by any Bank or the
Agent in connection with (i) the enforcement of or preservation of rights under
any of the Loan Documents against the Borrower, any of its general partners or
the Guarantor or the administration thereof after the occurrence of a Default
or Event of Default and (ii) any litigation, proceeding or dispute whether
arising hereunder or otherwise, in any way related to the Agent's or any of the
Bank's relationship with the Borrower, any of its general partner, the
Guarantor or any of their respective Subsidiaries or Investment Partnerships
unless the Borrower, such general partner, such Guarantor or such Subsidiary or
Investment Partnership is the prevailing party in such litigation, proceeding
or dispute, and (f) all reasonable fees, expenses and disbursements of the
Agent incurred in connection with UCC searches, UCC filings, title rundowns,
title searches or mortgage recordings. The covenants of this Section 15 shall
survive payment or satisfaction of payment of amounts owing with respect to the
Notes.
-69-
<PAGE> 76
SECTION 16. INDEMNIFICATION.
The Borrower agrees to indemnify and hold harmless the Agent and the Banks
and each director, officer, employee, agent and Person who controls the Agent
or any Bank from and against any and all claims, actions and suits, whether
groundless or otherwise, and from and against any and all liabilities, losses,
damages and expenses of every nature and character arising out of or relating
to this Agreement or any of the other Loan Documents or the transactions
contemplated hereby and thereby including, without limitation, (a) any leasing
fees and any brokerage, finders or similar fees asserted against any Person
indemnified under this Section 16 based upon any agreement, arrangement or
action made or taken, or alleged to have been made or taken, by the Borrower,
any of its general partners, the Guarantor or any of the Borrower's
Subsidiaries or Investment Partnerships (provided that the Borrower shall not
be required to indemnify a Bank from and against any agreement that is proven
to have been made by a Bank to pay any brokerage fees or commissions), (b) any
condition of the Real Estate first occurring prior to the Agent or the Banks or
their nominee acquiring title to the applicable Real Estate by the exercise of
any applicable foreclosure remedies or by deed in lieu of foreclosure, (c) any
actual or proposed use by the Borrower of the proceeds of any of the Loans, (d)
any actual or alleged infringement of any patent, copyright, trademark, service
mark or similar right of the Borrower, any of its general partners, the
Guarantor or any of the Borrower's Subsidiaries or Investment Partnerships, (e)
the Borrower, the Guarantor or any Subsidiary or Investment Partnership of the
Borrower entering into or performing this Agreement or any of the other Loan
Documents, (f) any actual or alleged violation of any law, ordinance, code,
order, rule, regulation, approval, consent, permit or license relating to the
Real Estate which violation first occurred prior to the Agent or the Banks or
their nominee acquiring title to the applicable Real Estate by the exercise of
any applicable foreclosure remedies or by deed in lieu of foreclosure, or (g)
with respect to the Borrower, each of its general partners, the Guarantor, the
Borrower's Subsidiaries and Investment Partnerships and their respective
properties and assets, the violation of any Environmental Law, the Release or
threatened Release of any Hazardous Substances or any action, suit, proceeding
or investigation brought or threatened with respect to any Hazardous Substances
(including, but not limited to claims with respect to wrongful death, personal
injury or damage to property), first occurring prior to the Agent or the Banks
or their nominee acquiring title to the applicable Real Estate by the exercise
of any applicable foreclosure remedies or by deed in lieu of foreclosure, in
each case including, without limitation, the reasonable fees and disbursements
of counsel and allocated costs of internal counsel incurred in connection with
any such investigation, litigation or other proceeding; provided, however, that
the Borrower shall not be obligated under this Section 16 to indemnify any
Person for liabilities arising from such Person's own gross negligence or
willful misconduct. In litigation, or the preparation therefor, the Banks and
the Agent shall be entitled to select a single law firm as their own counsel
and, in addition to the foregoing indemnity, the Borrower agrees to pay
promptly the reasonable fees and expenses of such counsel. If, and to the
extent that the obligations of the Borrower under this Section 16 are
unenforceable for any reason, the Borrower hereby agrees to make the maximum
contribution to the payment in satisfaction of such obligations which is
permissible under applicable law. The provisions of this Section 16 shall
survive the repayment of the Loans and the termination of the obligations of
the Banks hereunder.
-70-
<PAGE> 77
SECTION 17. SURVIVAL OF COVENANTS, ETC.
All covenants, agreements, representations and warranties made herein, in
the Notes, in any of the other Loan Documents or in any documents or other
papers delivered by or on behalf of the Borrower, any of its general partners,
the Guarantor or any of the Borrower's Subsidiaries or Investment Partnerships
pursuant hereto or thereto shall be deemed to have been relied upon by the
Banks and the Agent, notwithstanding any investigation heretofore or hereafter
made by any of them, and shall survive the making by the Banks of any of the
Loans, as herein contemplated, and shall continue in full force and effect so
long as any amount due under this Agreement or the Notes or any of the other
Loan Documents remains outstanding or any Bank has any obligation to make any
Loans. The indemnification obligations of the Borrower provided herein and the
other Loan Documents shall survive the full repayment of amounts due and the
termination of the obligations of the Banks hereunder and thereunder to the
extent provided herein and therein. All statements contained in any
certificate or other paper delivered to any Bank or the Agent at any time by or
on behalf of the Borrower, any of its general partners, the Guarantor or any of
the Borrower's Subsidiaries or Investment Partnerships pursuant hereto or in
connection with the transactions contemplated hereby shall constitute
representations and warranties by the Borrower, its general partners, the
Guarantor or such Subsidiary or Investment Partnership hereunder.
SECTION 18. ASSIGNMENT AND PARTICIPATION.
Section 18.1. Conditions to Assignment by Banks. Except as provided
herein, each Bank may assign to one or more banks or other entities all or a
portion of its interests, rights and obligations under this Agreement
(including all or a portion of its Commitment Percentage and Commitment and the
same portion of the Loans at the time owing to it, and the Notes held by it);
provided that (a) the Agent shall have given its prior written consent to such
assignment, which consent shall not be unreasonably withheld (provided that
such consent shall not be required for any assignment to another Bank or to a
wholly-owned subsidiary of such Bank provided that such assignee shall remain a
wholly-owned subsidiary of such Bank), (b) each such assignment shall be of a
constant, and not a varying, percentage of all the assigning Bank's rights and
obligations under this Agreement, (c) the parties to such assignment shall
execute and deliver to the Agent, for recording in the Register (as hereinafter
defined), a notice of such assignment, together with any Notes subject to such
assignment, (d) in no event shall any voting, consent or approval rights of a
Bank be assigned to any Person controlling, controlled by or under common
control with, or which is not otherwise free from influence or control by, the
Borrower, any of its general partners, the Guarantor or their respective
Subsidiaries or Investment Partnerships, which rights shall instead be
allocated pro rata among the other remaining Banks, (e) such assignee shall
have a net worth as of the date of such assignment of not less than
$500,000,000 unless such requirement is waived in writing by the Borrower and
the Agent, (f) such assignment is subject to the terms of any intercreditor
agreement among the Banks and the Agent, and (g) such assignee shall acquire an
interest in the Loans of not less than $10,000,000.00. Upon such execution,
delivery, acceptance and recording, of such notice of assignment, (i) the
assignee thereunder shall be a party hereto and all other Loan Documents
executed by the Banks and, to the extent provided in such assignment, have the
rights and obligations of a Bank hereunder, (ii) the
-71-
<PAGE> 78
assigning Bank shall, to the extent provided in such assignment and upon
payment to the Agent of the registration fee referred to in Section 18.2, be
released from its obligations under this Agreement, and (iii) the Agent may
unilaterally amend Schedule 1 to reflect such assignment. In connection with
each assignment, the assignee shall represent and warrant to the Agent, the
assignor and each other Bank as to whether such assignee is controlling,
controlled by, under common control with or is not otherwise free from
influence or control by, the Borrower, its general partners, and the Guarantor
or their respective Subsidiaries or Investment Partnerships. Notwithstanding
anything herein to the contrary, in the event that BankBoston shall at any time
hold a Commitment equal to or less than $40,000,000.00 then BankBoston shall
first provide written notice thereof to the Banks and shall offer to resign as
Agent, which offer must be accepted in writing by the Majority Banks within
fifteen (15) days of delivery of such notice by Agent (for the purposes of this
sentence only BankBoston shall be deemed to have accepted its own offer to
resign). A failure to accept such offer within such period shall be deemed a
rejection of such offer. NationsBank shall have a period of fifteen (15)
calendar days following the acceptance by the Majority Banks of BankBoston's
offer to resign within which to elect to replace BankBoston as Agent (provided,
however, that the option of NationsBank to replace BankBoston as Agent shall be
null and void in the event that NationsBank has at such time, without regard to
any assignment to be made by BankBoston, a Commitment which is not greater than
or equal to the Commitment of each other Bank other than BankBoston or in the
event that within such thirty (30) calendar day period the Majority Banks do
not approve NationsBank so acting as Agent). In the event that the Majority
Banks have accepted BankBoston's offer to resign and NationsBank declines to
replace BankBoston as Agent, is not eligible to replace BankBoston as Agent or
is not approved by the Majority Banks as the successor Agent as provided above,
BankBoston shall thereafter resign as Agent as provided in this Agreement in
the event that a successor Agent from among the Banks is not selected by the
Majority Banks or does not accept such appointment within fifteen (15) calendar
days following receipt of notice from Agent that NationsBank has declined to
replace BankBoston as Agent or a determination or vote that NationsBank is
ineligible or not approved. Except with respect to the rights of NationsBank
as provided above to succeed BankBoston as Agent, each Agent, as a condition to
any resignation of its position as Agent shall be required to provide written
notice thereof to the other Banks and provide the Majority Banks an opportunity
to designate a successor Agent within thirty (30) calendar days following
receipt of such notice in the same manner as provided above. Upon any change
in the Agent under this Agreement, the resigning or removed Agent shall execute
such assignments of and amendments to the Loan Documents as may be necessary to
substitute the successor Agent for the resigning or removed Agent.
Section 18.2. Register. The Agent shall maintain a copy of each
assignment delivered to it and a register or similar list (the "Register") for
the recordation of the names and addresses of the Banks and the Commitment
Percentages of, and principal amount of the Loans owing to the Banks from time
to time. The entries in the Register shall be conclusive, in the absence of
manifest error, and the Borrower, the Agent and the Banks may treat each Person
whose name is recorded in the Register as a Bank hereunder for all purposes of
this Agreement. The Register shall be available for inspection by the Borrower
and the Banks at any reasonable time and from time to time upon
-72-
<PAGE> 79
reasonable prior notice. Upon each such recordation, the assigning Bank agrees
to pay to the Agent a registration fee in the sum of $5,000.
Section 18.3. New Notes. Upon its receipt of an assignment executed
by the parties to such assignment, together with each Note subject to such
assignment, the Agent shall (a) record the information contained therein in the
Register, and (b) give prompt notice thereof to the Borrower and the Banks
(other than the assigning Bank). Within five Business Days after receipt of
such notice, the Borrower, at its own expense, shall execute and deliver to the
Agent, in exchange for each surrendered Note, a new Note to the order of such
assignee in an amount equal to the amount assumed by such assignee pursuant to
such assignment and, if the assigning Bank has retained some portion of its
obligations hereunder, a new Note to the order of the assigning Bank in an
amount equal to the amount retained by it hereunder, and shall cause the
Guarantor to deliver to the Agent an acknowledgment in form and substance
reasonably satisfactory to the Agent to the effect that the Guaranty extends to
and is applicable to each new Note. Such new Notes shall provide that they are
replacements for the surrendered Notes, shall be in an aggregate principal
amount equal to the aggregate principal amount of the surrendered Notes, shall
be dated the effective date of such assignment and shall otherwise be in
substantially the form of the assigned Notes. The surrendered Notes shall be
canceled and returned to the Borrower.
Section 18.4. Participations. Each Bank may sell participations to
one or more banks or other entities in all or a portion of such Bank's rights
and obligations under this Agreement and the other Loan Documents; provided
that (a) any such sale or participation shall not affect the rights and duties
of the selling Bank hereunder to the Borrower, (b) such participation shall not
entitle such participant to any rights or privileges under this Agreement or
the Loan Documents, including, without limitation, the right to approve
waivers, amendments or modifications, (c) such participant shall have no direct
rights against the Borrower, any of its general partners, the Guarantor or any
of their respective Subsidiaries or Investment Partnerships except the rights
granted to the Banks pursuant to Section 13, (d) such sale is effected in
accordance with all applicable laws, and (e) such participant shall not be a
Person controlling, controlled by or under common control with, or which is not
otherwise free from influence or control by, the Borrower, any of its general
partners, the Guarantor or any of their respective Subsidiaries or Investment
Partnerships.
Section 18.5. Pledge by Bank. Any Bank may at any time pledge all or
any portion of its interest and rights under this Agreement (including all or
any portion of its Note) to any of the twelve Federal Reserve Banks organized
under Section 4 of the Federal Reserve Act, 12 U.S.C. Section 341. No such
pledge or the enforcement thereof shall release the pledgor Bank from its
obligations hereunder or under any of the other Loan Documents.
Section 18.6. No Assignment by Borrower. The Borrower shall not
assign or transfer any of its rights or obligations under any of the Loan
Documents without the prior written consent of each of the Banks.
-73-
<PAGE> 80
Section 18.7. Disclosure. The Borrower agrees that in addition to
disclosures made in accordance with standard banking practices any Bank may
disclose information obtained by such Bank pursuant to this Agreement to
assignees or participants and potential assignees or participants hereunder.
Section 18.8. Restrictions on Assignment. Notwithstanding anything
in this Agreement to the contrary, no Bank other than BankBoston shall be
permitted to assign all or any portion of its interests, rights and obligations
under this Agreement (including all or a portion of its Commitment Percentage
and Commitment and the same portion of the Loans at the time owing to it, and
the Notes held by it) or the other Loan Documents prior to the date that is one
hundred eighty days (180) following the Closing Date without the prior written
consent of BankBoston, which consent maybe withheld by BankBoston in its sole
and absolute discretion. Nothing herein shall prevent the sale by a Bank of a
participation pursuant to Section 18.4 of this Agreement during such period.
SECTION 19. NOTICES.
Each notice, demand, election or request provided for or permitted to
be given pursuant to this Agreement (hereinafter in this Section 19 referred to
as "Notice"), but specifically excluding to the maximum extent permitted by law
any notices of the institution or commencement of foreclosure proceedings, must
be in writing and shall be deemed to have been properly given or served by
personal delivery or by sending same by overnight courier or by depositing same
in the United States Mail, postpaid and registered or certified, return receipt
requested, or as expressly permitted herein, by telegraph, telecopy, telefax or
telex, and addressed as follows:
If to the Agent or any Bank, at the address set forth on the signature
page for the Agent or such Bank; and
If to the Borrower:
Crescent Real Estate Equities Limited Partnership
777 Main Street
Suite 2100
Fort Worth, Texas 76102
Attn: Dallas E. Lucas
Telecopy No.: 817/878-0429
-74-
<PAGE> 81
with a copy to:
Crescent Real Estate Equities Limited Partnership
777 Main Street
Suite 2100
Fort Worth, Texas 76102
Attn: David M. Dean, Esq.
Telecopy No.: 817/878-0429
and to each other Bank which may hereafter become a party to this Agreement at
such address as may be designated by such Bank. Each Notice shall be effective
upon being personally delivered or upon being sent by overnight courier or upon
being deposited in the United States Mail as aforesaid. The time period in
which a response to such Notice must be given or any action taken with respect
thereto (if any), however, shall commence to run from the date of receipt if
personally delivered or sent by overnight courier, or if so deposited in the
United States Mail, the earlier of three (3) Business Days following such
deposit or the date of receipt as disclosed on the return receipt. Rejection
or other refusal to accept or the inability to deliver because of changed
address for which no notice was given shall be deemed to be receipt of the
Notice sent. By giving at least fifteen (15) days prior Notice thereof, the
Borrower, a Bank or Agent shall have the right from time to time and at any
time during the term of this Agreement to change their respective addresses and
each shall have the right to specify as its address any other address within
the United States of America.
SECTION 20. RELATIONSHIP.
Neither the Agent nor any Bank has any fiduciary relationship with or
fiduciary duty to the Borrower, the Guarantor or their respective Subsidiaries
arising out of or in connection with this Agreement or the other Loan Documents
or the transactions contemplated hereunder or thereunder, and the relationship
between each Bank and the Borrower is solely that of a lender and borrower, and
nothing contained herein or in any of the other Loan Documents shall in any
manner be construed as making the parties hereto partners, joint venturers or
any other relationship other than lender and borrower.
SECTION 21. GOVERNING LAW; CONSENT TO JURISDICTION AND SERVICE.
THIS AGREEMENT AND EACH OF THE OTHER LOAN DOCUMENTS EXCEPT AS OTHERWISE
SPECIFICALLY PROVIDED THEREIN, ARE CONTRACTS UNDER THE LAWS OF THE COMMONWEALTH
OF MASSACHUSETTS AND SHALL FOR ALL PURPOSES BE CONSTRUED IN ACCORDANCE WITH AND
GOVERNED BY THE LAWS OF SUCH STATE (EXCLUDING THE LAWS APPLICABLE TO CONFLICTS
OR CHOICE OF LAW). THE BORROWER AGREES THAT ANY SUIT FOR THE ENFORCEMENT OF
THIS AGREEMENT OR ANY OF THE OTHER LOAN DOCUMENTS MAY BE BROUGHT IN THE COURTS
OF THE COMMONWEALTH OF MASSACHUSETTS OR ANY FEDERAL COURT SITTING THEREIN AND
-75-
<PAGE> 82
CONSENTS TO THE NONEXCLUSIVE JURISDICTION OF SUCH COURT AND THE SERVICE OF
PROCESS IN ANY SUCH SUIT BEING MADE UPON THE BORROWER BY MAIL AT THE ADDRESS
SPECIFIED IN SECTION 19. THE BORROWER HEREBY WAIVES ANY OBJECTION THAT IT MAY
NOW OR HEREAFTER HAVE TO THE VENUE OF ANY SUCH SUIT OR ANY SUCH COURT OR THAT
SUCH SUIT IS BROUGHT IN AN INCONVENIENT COURT.
SECTION 22. HEADINGS.
The captions in this Agreement are for convenience of reference only
and shall not define or limit the provisions hereof.
SECTION 23. COUNTERPARTS.
This Agreement and any amendment hereof may be executed in several
counterparts and by each party on a separate counterpart, each of which when so
executed and delivered shall be an original, and all of which together shall
constitute one instrument. In proving this Agreement it shall not be necessary
to produce or account for more than one such counterpart signed by the party
against whom enforcement is sought.
SECTION 24. ENTIRE AGREEMENT, ETC.
The Loan Documents and any other documents executed in connection
herewith or therewith express the entire understanding of the parties with
respect to the transactions contemplated hereby. Neither this Agreement nor
any term hereof may be changed, waived, discharged or terminated, except as
provided in Section 27.
SECTION 25. WAIVER OF JURY TRIAL AND CERTAIN DAMAGE CLAIMS.
EACH OF THE BORROWER, THE AGENT AND THE BANKS HEREBY WAIVES ITS RIGHT
TO A JURY TRIAL WITH RESPECT TO ANY ACTION OR CLAIM ARISING OUT OF ANY DISPUTE
IN CONNECTION WITH THIS AGREEMENT, ANY NOTE OR ANY OF THE OTHER LOAN DOCUMENTS,
ANY RIGHTS OR OBLIGATIONS HEREUNDER OR THEREUNDER OR THE PERFORMANCE OF SUCH
RIGHTS AND OBLIGATIONS. EXCEPT TO THE EXTENT EXPRESSLY PROHIBITED BY LAW, THE
BORROWER HEREBY WAIVES ANY RIGHT IT MAY HAVE TO CLAIM OR RECOVER IN ANY SUCH
LITIGATION ANY SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES OR ANY
DAMAGES OTHER THAN, OR IN ADDITION TO, ACTUAL DAMAGES. THE BORROWER (A)
CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF ANY BANK OR THE AGENT
HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH BANK OR THE AGENT WOULD NOT,
IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVERS AND (B)
ACKNOWLEDGES THAT THE AGENT AND THE BANKS HAVE BEEN INDUCED
-76-
<PAGE> 83
TO ENTER INTO THIS AGREEMENT AND THE OTHER LOAN DOCUMENTS TO WHICH THEY ARE
PARTIES BY, AMONG OTHER THINGS, THE WAIVERS AND CERTIFICATIONS CONTAINED IN
THIS SECTION 25.
SECTION 26. DEALINGS WITH THE BORROWER.
The Banks and their affiliates may accept deposits from, extend credit
to and generally engage in any kind of banking, trust or other business with
the Borrower, its Subsidiaries, its Investment Partnerships or any of their
affiliates regardless of the capacity of the Bank hereunder.
SECTION 27. CONSENTS, AMENDMENTS, WAIVERS, ETC.
Except as otherwise expressly provided in this Agreement, any consent
or approval required or permitted by this Agreement may be given, and any term
of this Agreement or of any other instrument related hereto or mentioned herein
may be amended, and the performance or observance by the Borrower of any terms
of this Agreement or such other instrument or the continuance of any Default or
Event of Default may be waived (either generally or in a particular instance
and either retroactively or prospectively) with, but only with, the written
consent of the Majority Banks. Notwithstanding the foregoing, none of the
following may occur without the written consent of each Bank: a change in the
rate of interest on and the term of the Notes; except as provided in Section
18, a change in the amount of the Commitments of the Banks; a reduction or
waiver of the principal of any unpaid Loan or any interest thereon; a change in
the amount of any fee payable to a Bank hereunder; an extension of Maturity
Date; the release of the Borrower, the Guarantor, any Subsidiary which has
executed any of the Loan Documents except as otherwise provided herein; any
modification to require a Bank to fund a pro rata share of a request for an
advance of the Loans made by the Borrower other than based on its Commitment
Percentage; a change to this Section 27; any postponement of any date fixed for
any payment of principal of or interest on the Loan; any change in the manner
of distribution of any payments to the Banks or Agent; a change to the
provisions of Section 2.1 which provide that the Banks shall not be required to
make an advance of proceeds of the Loan following a Default or Event of Default
(provided that the foregoing shall not limit the ability of the Majority Banks
to waive a Default or Event of Default or agree to make an advance
notwithstanding such Default of Event of Default); or an amendment of the
definition of Majority Banks or of any requirement for consent by all of the
Banks. The amount of the Agent's fee payable for the Agent's account and the
provisions of Section 14 may not be amended without the written consent of the
Agent. The Borrower agrees to enter into such modifications or amendments of
this Agreement or the other Loan Documents as reasonably may be requested by
BankBoston in connection with the syndication by BankBoston of its Commitment,
provided that no such amendment or modification materially affects or increases
any of the obligations of the Borrower hereunder. No waiver shall extend to or
affect any obligation not expressly waived or impair any right consequent
thereon. No course of dealing or delay or omission on the part of the Agent or
any Bank in exercising any right shall operate as a waiver thereof or otherwise
be prejudicial thereto. No notice to or demand upon the Borrower shall entitle
the Borrower to other or further notice or demand in similar or other
circumstances.
-77-
<PAGE> 84
SECTION 28. SEVERABILITY.
The provisions of this Agreement are severable, and if any one clause
or provision hereof shall be held invalid or unenforceable in whole or in part
in any jurisdiction, then such invalidity or unenforceability shall affect only
such clause or provision, or part thereof, in such jurisdiction, and shall not
in any manner affect such clause or provision in any other jurisdiction, or any
other clause or provision of this Agreement in any jurisdiction.
SECTION 29. NO UNWRITTEN AGREEMENTS.
THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE
PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR
SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
SECTION 30. TIME OF THE ESSENCE.
Time is of the essence with respect to each and every covenant,
agreement and obligation of the Borrower under this Agreement and the other
Loan Documents.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
-78-
<PAGE> 85
IN WITNESS WHEREOF, the undersigned have duly executed this Agreement as a
sealed instrument the date first set forth above.
CRESCENT REAL ESTATE EQUITIES LIMITED
PARTNERSHIP, a Delaware limited
partnership, by its sole general partner
By: Crescent Real Estate Equities, Ltd.,
a Delaware corporation
By: /s/ DALLAS E. LUCAS
---------------------------------
Name: Dallas E. Lucas
---------------------------
Title: Chief Financial Officer
--------------------------
[CORPORATE SEAL]
[Signatures continued on next page]
-78-
<PAGE> 86
BANKBOSTON, N.A., a national banking association,
formerly known as The First National Bank of
Boston, individually and as Agent
By: /s/ [ILLEGIBLE]
--------------------------------------------
Its: Vice President
--------------------------------------------
BankBoston, N.A.
115 Perimeter Center Place, N.E.
Suite 500
Atlanta, Georgia 30346
Attn: Dan Stegemoeller
Facsimile: 770/390-8434
and
BankBoston, N.A.
100 Federal Street
Boston, Massachusetts 02110
Attn: Real Estate Division
Facsimile: 617/434-7108
[Signatures continued on next page]
-79-
<PAGE> 87
NATIONSBANK, N.A., SUCCESSOR BY
MERGER WITH NATIONSBANK OF TEXAS,
N.A., individually and as Documentation Agent
By: /s/ JOHN D. MORROW
----------------------------------------
John D. Morrow
Its: Vice President
----------------------------------------
NationsBank, N.A.
901 Main Street
NationsBank Plaza
51st Floor
Dallas, Texas 75202
Attn: Real Estate Administration
Facsimile: 214/508-1571
[Signatures continued on next page]
-80-
<PAGE> 88
BANKERS TRUST COMPANY, individually and
as Documentation Agent
By: /s/ STEVEN P. LYSHAM
-----------------------------------
Its: Vice President
-----------------------------------
Bankers Trust Company
130 Liberty Street
25th Floor
New York, New York 10006
Attn: Alexander B. Johnson
Facsimile: 212/669-0752
[Signatures continued on next page]
-81-
<PAGE> 89
FIRST AMERICAN BANK TEXAS, S.S.B.
By: /s/ JEFFREY C. SCHULTZ
-----------------------------------
JEFFREY C. SCHULTZ
Its: VICE PRESIDENT
-----------------------------------
First American Bank Texas, S.S.B.
14651 Dallas Parkway
Suite 400
Dallas, Texas 75240
Attn: Jeff Schultz
Facsimile: 972/419-3308
[Signatures continued on next page]
-82-
<PAGE> 90
COMERICA BANK
By: /s/ SCOTT HELMER
-----------------------------------
SCOTT HELMER
Its: ASSISTANT VICE PRESIDENT
-----------------------------------
Comerica Bank
500 Woodward Avenue, 7th Floor
Detroit, Michigan 48226-3256
Attn: Scott Helmer
Facsimile: 313/222-9295
[Signatures continued on next page]
-83-
<PAGE> 91
KBC BANK N.V.
By: /s/ ROBERT SNAUFFER
-----------------------------------
Robert Snauffer
Its: Vice President
-----------------------------------
By: /s/ FRANCIS X. PAYNE
-----------------------------------
FRANCIS X. PAYNE
Its: VICE PRESIDENT
-----------------------------------
KBC Bank N.V.
Suite 1750
1349 West Peachtree Street
Atlanta, Georgia 30309
Attn: Mike Sawicki
Facsimile: 404/876-3212
[Signatures continued on next page]
-84-
<PAGE> 92
CHASE BANK OF TEXAS, NATIONAL
ASSOCIATION
By: /s/ WENDEL M. PARDUE
-----------------------------------
WENDEL M. PARDUE
Its: VICE PRESIDENT
-----------------------------------
Chase Bank of Texas, National
Association
2200 Ross Avenue
7th Floor
Dallas, Texas 75201
Attn: Randy Lieberman
Facsimile: 214/965-2290
-85-
<PAGE> 93
THE BANK OF NOVA SCOTIA, ACTING
THROUGH ITS SAN FRANCISCO AGENCY
By: /s/ [ILLEGIBLE]
-----------------------------------
Its: RELATIONSHIP MANAGER
-----------------------------------
The Bank of Nova Scotia,
Acting Through Its San Francisco Agency
500 California Street
Suite 2100
San Francisco, California 94119
Attn: Paul Stiplosek
Facsimile: 415/397-0791
[Signatures continued on next page]
-86-
<PAGE> 94
SOCIETE GENERALE, SOUTHWEST AGENCY
By: /s/ SCOTT GOSLEE
-----------------------------------
Scott Goslee
Its: Vice President
-----------------------------------
Societe Generale,
Southwest Agency
2001 Ross Avenue
Suite 4900
Dallas, Texas 75201
Attn: Jeff Etter
Facsimile: 214/979-2727
[Signatures continued on next page]
-87-
<PAGE> 95
COMMERZBANK AG, ATLANTA AGENCY
By: /s/ DAVID M. SCHWARZ
-----------------------------------
David M. Schwarz
Its: Vice President
-----------------------------------
By: /s/ CHRISTINE H. FINKEL
-----------------------------------
Christine H. Finkel
Its: Assistant Vice President
-----------------------------------
CommerzBank AG,
Atlanta Agency
1230 Peachtree Street, N.E.
Suite 3500
Atlanta, Georgia 30309
Attn Mark Wortmann
Facsimile: 404/888-6539
[Signatures continued on next page]
-88-
<PAGE> 96
THE SUMITOMO BANK, LIMITED
By: /s/ YASUO MIYAZAWA
-----------------------------------
YASUO MIYAZAWA
Its: JOINT GENERAL MANAGER
-----------------------------------
The Sumitomo Bank, Limited
277 Park Avenue, 6th Floor
New York, New York 10172
Attn: Anthony Mugno
Facsimile: 212/224-4887
-89-
<PAGE> 97
GUARANTY FEDERAL BANK, F.S.B.
By: /s/ ROBERT W. TALKINGTON
-----------------------------------
Robert W. Talkington
Its: Senior Vice President, Lending
-----------------------------------
Guaranty Federal Bank, F.S.B.
8333 Douglas Avenue
Dallas, Texas 75225
Attn: Lesa Balsley
Facsimile: 214/360-8910
-90-
<PAGE> 98
DRESDNER BANK AG, NEW YORK AND
GRAND CAYMAN BRANCHES
By: /s/ MICHAEL A. SETON
-----------------------------------
Michael A. Seton
Its: Assistant Vice President
-----------------------------------
By: /s/ JOHANNES BOECKMANN
-----------------------------------
JOHANNES BOECKMANN
Its: First Vice President
-----------------------------------
Dresdner Bank AG, New York and
Grand Cayman Branches
75 Wall Street
New York, New York 10005
Attn: Michael Seton
Facsimile: 212/429-2781
-91-
<PAGE> 99
BANK ONE, TEXAS, NATIONAL ASSOCIATION
By: /s/ M.C. COCKERLINE
-----------------------------------
M.C. Cockerline
Its: Relationship Manager/AVP
-----------------------------------
Bank One, Texas, National Association
500 Throckmorton
Suite 1008
Fort Worth, Texas 76102
Attn: Ms. M.C.Cockerline
Fax: 817/884-5688
-92-
<PAGE> 100
SUMMIT BANK
By: /s/ [ILLEGIBLE]
-----------------------------------
Its: Regional Vice President
-----------------------------------
Summit Bank
Commerce Center
1800 Chapel Avenue West
Cherry Hill, NJ 08002
Attn: Ms. Amy Brown
Fax: 609/486-3717
-93-
<PAGE> 101
EXHIBIT A
FORM NOTE
$______________ June 30, 1998
FOR VALUE RECEIVED, the undersigned CRESCENT REAL ESTATE EQUITIES
LIMITED PARTNERSHIP, a Delaware limited partnership, hereby promises to pay to
_______________________________________ or order, in accordance with the terms
of that certain Fifth Amended and Restated Revolving Credit Agreement dated
June 30, 1998 (the "Credit Agreement"), as from time to time in effect, among
the undersigned, BankBoston, N.A., for itself and as Agent, and such other
Banks as may be from time to time named therein, to the extent not sooner paid,
on or before the Maturity Date, the principal sum of __________________________
DOLLARS ($______________), or such amount as may be advanced by the payee
hereof under the Credit Agreement with daily interest from the date hereof,
computed as provided in the Credit Agreement, on the principal amount hereof
from time to time unpaid, at a rate per annum on each portion of the principal
amount which shall at all times be equal to the rate of interest applicable to
such portion in accordance with the Credit Agreement, and with interest on
overdue principal and, to the extent permitted by applicable law, on overdue
installments of interest and late charges at the rates provided in the Credit
Agreement. Interest shall be payable on the dates specified in the Credit
Agreement, except that all accrued interest shall be paid at the stated or
accelerated maturity hereof or upon the prepayment in full hereof. Capitalized
terms used herein and not otherwise defined herein shall have the meanings set
forth in the Credit Agreement.
Payments hereunder shall be made to BankBoston, N.A., as Agent for the
payee hereof, 100 Federal Street, Boston, Massachusetts 02110.
This Note is one of one or more Notes evidencing borrowings under and
is entitled to the benefits and subject to the provisions of the Credit
Agreement. The principal of this Note may be due and payable in whole or in
part prior to the maturity date stated above and is subject to mandatory
prepayment in the amounts and under the circumstances set forth in the Credit
Agreement, and may be prepaid in whole or from time to time in part, all as set
forth in the Credit Agreement.
Notwithstanding anything in this Note to the contrary, all agreements
between the Borrower and the Banks and the Agent, whether now existing or
hereafter arising and whether written or oral, are hereby limited so that in no
contingency, whether by reason of acceleration of the maturity of any of the
Obligations or otherwise, shall the interest contracted for, charged or
received by the Banks exceed the maximum amount permissible under applicable
law. If, from any circumstance whatsoever, interest would otherwise be payable
to the Banks in excess of the maximum lawful amount, the interest payable to
the Banks shall be reduced to the maximum amount permitted under applicable
law; and if from any circumstance the Banks shall ever receive
<PAGE> 102
anything of value deemed interest by applicable law in excess of the maximum
lawful amount, an amount equal to any excessive interest shall be applied to
the reduction of the principal balance of the Obligations and to the payment of
interest or, if such excessive interest exceeds the unpaid balance of principal
of the Obligations, such excess shall be refunded to the Borrower. All
interest paid or agreed to be paid to the Banks shall, to the extent permitted
by applicable law, be amortized, prorated, allocated and spread throughout the
full period until payment in full of the principal of the Obligations
(including the period of any renewal or extension thereof) so that the interest
thereon for such full period shall not exceed the maximum amount permitted by
applicable law. This paragraph shall control all agreements between the
Borrower and the Banks and the Agent.
In case an Event of Default shall occur, the entire principal amount
of this Note may become or be declared due and payable in the manner and with
the effect provided in said Credit Agreement.
This Note shall be governed by and construed in accordance with the
laws of the Commonwealth of Massachusetts (without giving effect to the
conflict of laws rules of any jurisdiction).
The undersigned maker and all guarantors and endorsers, hereby waive
presentment, demand, notice, protest, notice of intention to accelerate the
indebtedness evidenced hereby, notice of acceleration of the indebtedness
evidenced hereby and all other demands and notices in connection with the
delivery, acceptance, performance and enforcement of this Note, except as
specifically otherwise provided in the Credit Agreement, and assent to
extensions of time of payment or forbearance or other indulgence without
notice.
This Note is a note executed in amendment and restatement in part of
the "Notes" as defined in the Amended Credit Agreement.
IN WITNESS WHEREOF the undersigned has by its duly authorized
officers, executed this Note under seal as of the day and year first above
written.
CRESCENT REAL ESTATE EQUITIES LIMITED
PARTNERSHIP, a Delaware limited
partnership, by its sole general partner
By: Crescent Real Estate Equities, Ltd.,
a Delaware corporation
By:
---------------------------------
Name:
----------------------------
Title:
---------------------------
[CORPORATE SEAL]
-2-
<PAGE> 103
EXHIBIT B
FORM OF REQUEST FOR LOAN
BankBoston, N.A.,
for itself and as Agent
115 Perimeter Center Place, N.E.
Suite 500
Atlanta, Georgia 30346
Attn: Dan Stegemoeller
Ladies and Gentlemen:
Pursuant to the provisions of Section 2.6 of the Fifth Amended and
Restated Revolving Credit Agreement dated June 30, 1998, as from time to time
in effect (the "Credit Agreement"), among Crescent Real Estate Equities Limited
Partnership (the "Borrower"), BankBoston, N.A., for itself and as Agent, and
the other Banks from time to time party thereto, the Borrower hereby requests
and certifies as follows:
1. Loan. The Borrower hereby requests a Loan under Section 2.1
of the Credit Agreement:
Principal Amount: $
Type (Eurodollar, Base Rate):
Drawdown Date: , 19
Interest Period:
to be wire transferred to the following account:
---------------------------------------------
---------------------------------------------
---------------------------------------------
2. Use of Proceeds. Such Loan shall be used for the following
purposes permitted by Section 2.9 of the Credit Agreement:
[Describe]
<PAGE> 104
3. No Default. The undersigned chief financial or chief
accounting officer of the General Partner certifies that the Borrower is and
will be in compliance with all covenants under the Loan Documents after giving
effect to the making of the Loan requested hereby. Attached to this Request for
Loan is a Compliance Certificate and a Guarantor's Compliance Certificate
prepared using the financial statements of the Borrower and Crescent Guarantor
most recently provided or required to be provided under Section 6.4 or Section
7.4 of the Credit Agreement or the Guaranty, as applicable, adjusted in the best
good-faith estimate of the Borrower and Crescent Guarantor to give effect to the
making of the Loan requested hereby.
4. Representations True. Each of the representations and
warranties made by or on behalf of the Borrower, the General Partner, the
Guarantor and the Borrower's Subsidiaries and Investment Partnerships contained
in the Credit Agreement, in the other Loan Documents or in any document or
instrument delivered pursuant to or in connection with the Credit Agreement was
true as of the date as of which it was made and shall also be true at and as of
the Drawdown Date for the Loan requested hereby, with the same effect as if
made at and as of such Drawdown Date (except to the extent of changes resulting
from transactions contemplated or permitted by the Credit Agreement and the
other Loan Documents and changes occurring in the ordinary course of business
that singly or in the aggregate are not materially adverse, and except to the
extent that such representations and warranties relate expressly to an earlier
date, such as the representations in Section 6.4) and no Default or Event of
Default has occurred and is continuing.
5. Other Conditions. All other conditions to the making of the
Loan requested hereby set forth in Section 11 of the Credit Agreement have been
satisfied.
6. Drawdown Date. Except to the extent, if any, specified by
notice actually received by the Agent prior to the Drawdown Date specified
above, the foregoing representations and warranties shall be deemed to have
been made by the Borrower on and as of such Drawdown Date.
7. Definitions. Terms defined in the Credit Agreement are used
herein with the meanings so defined.
-2-
<PAGE> 105
IN WITNESS WHEREOF, I have hereunto set my hand this _____ day of
_______________, 199___.
CRESCENT REAL ESTATE EQUITIES LIMITED
PARTNERSHIP, a Delaware limited
partnership, by its sole general
partner
By: Crescent Real Estate Equities, Ltd.,
a Delaware corporation
By:
--------------------------------
Chief Financial or
Chief Accounting Officer
-3-
<PAGE> 106
EXHIBIT C
FORM OF
COMPLIANCE CERTIFICATE
BankBoston, N.A.,
for itself and as Agent
115 Perimeter Center Place, N.E.
Suite 500
Atlanta, Georgia 30346
Attn: Dan Stegemoeller
Ladies and Gentlemen:
Reference is made to the Fifth Amended and Restated Revolving Credit
Agreement dated June 30, 1998 (the "Credit Agreement") by and among Crescent
Real Estate Equities Limited Partnership (the "Borrower"), BankBoston, N.A.,
for itself and as Agent, and the other Banks from time to time party thereto.
Terms defined in the Credit Agreement and not otherwise defined herein are used
herein as defined in the Credit Agreement.
Pursuant to the Credit Agreement, the Borrower is furnishing to you
herewith (or has most recently furnished to you) the financial statements of
the Borrower and its Subsidiaries for the fiscal period ended _______________
(the "Balance Sheet Date"). Such financial statements have been prepared in
accordance with generally accepted accounting principles and present fairly the
financial position of the Borrower and the Subsidiaries covered thereby at the
date thereof and the results of their operations for the periods covered
thereby, subject in the case of interim statements only to normal year-end
audit adjustments.
This certificate is submitted in compliance with requirements of
Section 2.6(iii), Section 7.4(d), Section 7.4(f), Section 7.5(d), Section
8.1(f), Section 8.1(i), Section 8.1(k), Section 8.8, Section 10.11 or Section
11.6(b) of the Credit Agreement. IF THIS CERTIFICATE IS PROVIDED UNDER A
PROVISION OTHER THAN SECTION 7.4(D), THE CALCULATIONS PROVIDED BELOW ARE MADE
USING THE FINANCIAL STATEMENTS OF THE BORROWER AND ITS SUBSIDIARIES AS OF THE
BALANCE SHEET DATE ADJUSTED IN THE BEST GOOD-FAITH ESTIMATE OF THE BORROWER TO
GIVE EFFECT TO THE MAKING OF A LOAN, ACQUISITION OR DISPOSITION OF PROPERTY OR
OTHER EVENT THAT OCCASIONS THE PREPARATION OF THIS CERTIFICATE; AND THE NATURE
OF SUCH EVENT AND THE BORROWER'S ESTIMATE OF ITS EFFECTS ARE SET FORTH IN
REASONABLE DETAIL IN AN ATTACHMENT HERETO. The undersigned officer of the
General Partner is its chief financial or chief accounting officer.
The undersigned officer has caused the provisions of the Credit
Agreement to be reviewed and has no knowledge of any Default or Event of
Default. (Note: If the signer does have knowledge of any Default or Event of
Default, the form of certificate should be revised to specify the Default or
Event of Default, the nature thereof, the actions taken, being taken or
proposed
<PAGE> 107
to be taken by the Borrower with respect thereto in order to cure such Default
or Event of Default and the time period required to cure such Default or Event
of Default.]
The Borrower is providing the following information to demonstrate
compliance as of the date hereof with the following covenants:
1. Section 7.5(d). Transfers and Encumbrances.
Describe sales, encumbrances, refinances
and other transfers referred to in
Section 7.5(d).
NOTE: Assets may not be refinanced unless
proceeds equal or exceed 55% of cost (40% for
hotel/resort assets) (see Section 8.11)
2. Section 8.1(i). Recourse Indebtedness.
A. Amount of recourse Indebtedness
(other than the Loans) pursuant to Section 8.1(A) $________
Amount may not exceed $600,000,000.00
B. Amount of recourse Indebtedness
(other than Loans) held by lenders other than
one or more of the Banks $________
Amount may not exceed $300,000,000.00
3. Section 8.3(m). Investment Partnerships.
A. Aggregate value of Borrower's equity Investments
in Investment Partnerships under Section 8.3(m)(ii) $________
B. Modified Book Asset Value of Consolidated
Total Assets $________
A may not exceed 10% of B
4. Section 8.7. Distributions.
A. Amount of Distributions for previous
4 quarters:
-2-
<PAGE> 108
Quarter ending __________ $________
Quarter ending __________ $________
Quarter ending___________ $________
Quarter ending___________ $________
Total Distributions for previous 4 quarters $________
B. Funds from Operations for previous
4 quarters:
Quarter ending___________ $________
Quarter ending___________ $________
Quarter ending___________ $________
Quarter ending___________ $________
Total Funds from Operations for previous 4 quarters $________
C. Funds Available for Distribution for previous
4 quarters:
Quarter ending___________ $________
Quarter ending___________ $________
Quarter ending___________ $________
Quarter ending___________ $________
Total Funds Available for Distribution
for previous 4 quarters $________
D. A is ____% of B
(A may not exceed 90% of B)
E. A is ____% of C
(A may not exceed 100% of C)
-3-
<PAGE> 109
5. Section 8.12(b). Variable Rate Debt.
A. Total Indebtedness (excluding
Indebtedness described in Section 8.1(b)-(e)) $________
B. Principal Balance of Indebtedness
payable with respect to a Variable Interest Rate
and that has a maturity date of greater than 12 months $________
C. Principal Amount of Indebtedness described in
Item 5.B that is not hedged or capped as
provided in Section 8.12(b) $________
D. Modified Book Asset Value of
Consolidated Total Assets $________
E. C is ____% of D
(C may not exceed 25% of D)
6. Section 8.14. Subsidiaries.
Describe new Subsidiaries established by Borrower
and compliance with Section 8.14.
7. Section 9.1. Liabilities to Worth Ratio.
(For changes to the Balance Sheet since the last statement
or advance, use the attached adjustment form.)
A. Consolidated Total Liabilities
per balance sheet $________
B. Consolidated Tangible Net Worth
Consolidated Total Assets per
balance sheet $________
One-time market adjustment $________
Plus real estate depreciation since date of IPO $________
Consolidated Total Assets after
one-time market adjustment and adjustment for
depreciation $________
Minus Consolidated Total
Liabilities per balance sheet ($________)
-4-
<PAGE> 110
Minus aggregate book value of
intangible assets ($________)
Minus asset write-up amounts,
if any ($________)
Minus minority interests applicable to third parties ($________)
Total $________
C. Ratio of A to B ________
Ratio of A to total of B may not exceed 1 to 1
8. Section 9.2. Debt Service Coverage.
A. Consolidated Cash Flow
Net Income for 4 quarters ending __________ $________
Plus Depreciation and amortization $________
Plus Interest expense $________
Plus Extraordinary or non-recurring
losses $________
Minus extraordinary or non-
recurring gains ($________)
Total for most recent 4 quarters $________
B. Debt Service for four prior
quarters
Principal Paid $________
Interest Paid $________
Total
-5-
<PAGE> 111
C. Ratio of A to B
(expressed as a percentage) _________%
A must equal or exceed 250% of total of B
9. Section 9.4. Tangible Net Worth.
(For changes to the Balance Sheet since the last
statement or advance, use attached adjustment form.)
A. Consolidated Tangible Net Worth
(from Item 7.B above) $________
Consolidated Tangible Net Worth may
not be less than $2,000,000,000.00.
10. Section 9.5 Secured Indebtedness.
A. Secured Indebtedness $________
B. Consolidated Total Assets
Consolidated Total Assets per balance sheet $________
One-time market adjustment $________
Plus real estate depreciation since date of IPO $________
Consolidated Total Assets,
after one-time market adjustment
and adjustment for real estate depreciation
since date of IPO $________
C. Ratio of A to B ________
Ratio of A to B may not exceed 0.40 to 1
11. Section 9.6. Fixed Charge Coverage.
A. Consolidated Cash Flow for previous 4 quarters
(from Item 8.A above) $________
-6-
<PAGE> 112
B. Fixed Charges
Debt Service for 4 quarters ending
___________ $________
Plus Non-Incremental Revenue
Generating Capital Expenditures $________
Plus/Minus Rent Adjustments $________
(Note: A negative Rent Adjustment shown on the
Borrower's financial statements shall
be shown as a positive number here)
Total for most recent 4 quarters $________
C. Ratio of A to total of B (expressed as a percentage) _________%
A must equal or exceed 200% of total of B
12. Section 9.7. Fixed Charge and Preferred Distribution Coverage
A. Consolidated Cash Flow for previous 4 quarters
(from Item 8.A above) $________
B. Fixed Charges for previous 4 quarters
(from Item 11.B above) $________
C. Preferred Distributions for previous 4 quarters $________
C. Ratio of A to sum of B+C
(expressed as a percentage) ________%
A must equal or exceed 150% of the sum of B+C.
13. Section 9.8. Total Liabilities to Consolidated Cash Flow
A. Consolidated Total Liabilities per balance sheet $________
B. Consolidated Cash Flow
(from Item 8.A above adjusted to annualize assets owned for
partial period) $________
C. Ratio of A to B ________
Such ratio shall not exceed 5 to 1
-7-
<PAGE> 113
14. Section 9.9. Real Estate Assets.
A. Modified Book Asset Value of hotels/resorts $________
B. Modified Book Asset Value of behavioral healthcare
facilities $________
C. Modified Book Asset Value of Class A Office
Buildings, retail properties and industrial and
warehouse properties $________
D. Modified Book Asset Value of non-income
producing land assets or
mortgages secured by non-income
producing land valued at cost $________
E. Consolidated Total Asset Value after one-time
market adjustment and adjustment for real estate
depreciation since date of IPO
(from Item 10.B above) $________
Total $________
F. Ratio of A to E ________
(may not exceed .20 to 1)
G. Ratio of B to E ________
(may not exceed .15 to 1)
H. Ratio of C to E ________
(may not be less than .50 to 1)
I. Ratio of D to E ________
(may not exceed .10 to 1)
15. Section 9.12. Unencumbered Operating Properties.
I. A. Asset Value of Unencumbered Operating
Properties (Attached Schedule of
Unencumbered Operating Properties and
Asset Value of each) $________
B. Unsecured Indebtedness of Borrower $________
-8-
<PAGE> 114
C. A is ___% of B
(A may not be less than 150% of B)
II. A. Consolidated Cash Flow
for previous 4 quarters
with respect to Unencumbered
Operating Properties $________
B. Unsecured Indebtedness of the
Borrower $________
C. A is ________% of B (A must not be
less than 12% of B)
III. A. Asset Value of Unencumbered Operating Properties
from 15.I.A. above $________
B. Asset Value of Unencumbered Operating Properties
owned by Investment Partnerships $________
C. B is ___% of A (B may not exceed 25% of A)
IV. A. Asset Value of Unencumbered Operating Properties
from 15.I.A. above $________
B. Asset Value of Unencumbered Operating Properties
consisting of Class A institutional quality office and
retail buildings and properties $________
C. B is ____% of A (B must be at least 50% of A)
V. A. Consolidated Cash Flow for CBHS for
previous 4 quarters $________
B. Rent Payments for previous 4 quarters $________
C. Ratio of A to B (expressed as percentage) ________%
(A must equal or exceed 150% of B)
-9-
<PAGE> 115
IN WITNESS WHEREOF, I have hereunto set my hand this _____ day of
____________, 199___.
CRESCENT REAL ESTATE EQUITIES LIMITED
PARTNERSHIP, a Delaware limited
partnership, by its sole general partner
By: Crescent Real Estate Equities, Ltd.,
a Delaware corporation
By:
--------------------------------
Chief Financial or
Chief Accounting Officer
[Schedules omitted.]
-10-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND STATEMENT OF OPERATIONS FOUND ON PAGES 3 AND 4
OF THE COMPANY'S FORM 10-Q FOR THE YEAR TO-DATE, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<CASH> 121,673
<SECURITIES> 0
<RECEIVABLES> 76,529
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 966,676
<PP&E> 4,075,798
<DEPRECIATION> (329,192)
<TOTAL-ASSETS> 4,911,484
<CURRENT-LIABILITIES> 94,750
<BONDS> 2,004,596
0
425,000
<COMMON> 1,208
<OTHER-SE> 2,226,667
<TOTAL-LIABILITY-AND-EQUITY> 4,911,484
<SALES> 0
<TOTAL-REVENUES> 330,253
<CGS> 0
<TOTAL-COSTS> 174,656
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 72,172
<INCOME-PRETAX> 95,432
<INCOME-TAX> 0
<INCOME-CONTINUING> 85,852
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 80,902
<EPS-PRIMARY> .68
<EPS-DILUTED> .65
</TABLE>
