<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 SEPTEMBER 30, 1998
COMMISSION FILE NO 1-13038
CRESCENT REAL ESTATE EQUITIES COMPANY
- - -------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
TEXAS 52-1862813
- - --------------------------------------------- ---------------------------------------
(State or other jurisdiction of incorporation (I.R.S. Employer Identification Number)
or organization)
</TABLE>
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 November 9, 1998.
<TABLE>
<S> <C>
Preferred Shares, par value $.01 per share:
Series A: 8,000,000
Series B: 6,948,734
Common Shares, par value $.01 per share: 114,296,903
</TABLE>
- - --------------------------------------------------------------------------------
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> <C>
Item 1. Financial Statements
Consolidated Balance Sheets as of September 30, 1998 (Unaudited) and
December 31, 1997 (Audited) .................................................. 3
Consolidated Statements of Operations for the three and nine months ended
September 30, 1998 and 1997 (Unaudited)........................................ 4
Consolidated Statement of Shareholders' Equity for the nine months ended
September 30, 1998 (Unaudited)................................................. 5
Consolidated Statements of Cash Flows for the nine months ended
September 30, 1998 and 1997 (Unaudited) ....................................... 6
Notes to Financial Statements.................................................. 7
Item 2. Management's Discussion and Analysis of Financial
Condition and Historical Results of Operations................................. 19
Item 3. Quantitative and Qualitative Disclosures about Market Risk..................... 38
PART II: OTHER INFORMATION
Item 1. Legal Proceedings.............................................................. 38
Item 2. Changes in Securities.......................................................... 39
Item 3. Defaults Upon Senior Securities................................................ 39
Item 4. Submission of Matters to a Vote of Security Holders............................ 39
Item 5. Other Information.............................................................. 40
Item 6. Exhibits and Reports on Form 8-K............................................... 40
</TABLE>
2
<PAGE> 3
CRESCENT REAL ESTATE EQUITIES COMPANY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
(NOTES 1 AND 2)
<TABLE>
<CAPTION>
SEPTEMBER 30, DECEMBER 31,
1998 1997
----------- -----------
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS:
Investments in Real Estate:
Land $ 385,487 $ 353,374
Land held for development or sale 105,387 94,954
Building and improvements 3,549,869 2,923,097
Furniture, fixtures and equipment 61,463 51,705
Less - accumulated depreciation (356,675) (278,194)
----------- -----------
Net investment in real estate 3,745,531 3,144,936
Cash and cash equivalents 90,052 66,622
Restricted cash and cash equivalents 37,516 41,528
Accounts receivable, net 24,928 30,179
Deferred rent receivable 63,383 39,588
Investments in real estate mortgages and equity of
unconsolidated companies 746,211 601,770
Notes receivable, net 172,027 156,676
Other assets, net 102,331 98,681
----------- -----------
Total assets $ 4,981,979 $ 4,179,980
=========== ===========
LIABILITIES:
Borrowings under credit facility $ 750,000 $ 350,000
Notes payable 1,523,554 1,360,124
Accounts payable, accrued expenses and other liabilities 114,820 127,258
----------- -----------
Total liabilities 2,388,374 1,837,382
----------- -----------
FORWARD SHARE PURCHASE AGREEMENT: 151,013 --
COMMITMENTS AND CONTINGENCIES:
MINORITY INTERESTS:
Operating partnership, 6,549,629 and 6,397,072 units,
respectively 128,831 117,103
Investment joint ventures 26,841 28,178
----------- -----------
Total minority interests 155,672 145,281
----------- -----------
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 September 30, 1998 200,000 --
Series B Convertible Preferred Shares, 6,948,734 shares issued
and outstanding at September 30, 1998 225,000 --
Common shares, $.01 par value, authorized 250,000,000 shares,
120,945,262 shares issued, 114,286,008 shares outstanding, and 6,659,254
shares held in treasury as of September 30, 1998, and 117,977,907 shares
issued and outstanding as of
December 31, 1997 1,095 1,179
Additional paid-in capital 1,969,816 2,253,928
Deferred compensation on restricted shares (90) (283)
Retained deficit (99,769) (57,507)
Accumulated other comprehensive income (9,132) --
----------- -----------
Total shareholders' equity 2,286,920 2,197,317
----------- -----------
Total liabilities and shareholders' equity $ 4,981,979 $ 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)
(NOTES 1, 2 AND 3)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS FOR THE NINE MONTHS
ENDED SEPTEMBER 30, ENDED SEPTEMBER 30,
------------------------------- ------------------------------
(UNAUDITED) (UNAUDITED)
1998 1997 1998 1997
------------- ------------- ------------- ------------
<S> <C> <C> <C> <C>
REVENUES:
Office and retail properties $ 146,037 $ 92,014 $ 409,937 $ 247,333
Hotel properties 12,798 9,032 38,350 26,453
Behavioral healthcare properties 13,824 13,824 41,471 15,966
Interest and other income 7,134 5,187 20,288 10,364
------------- ------------- ------------- ------------
Total revenues 179,793 120,057 510,046 300,116
------------- ------------- ------------- ------------
EXPENSES:
Real estate taxes 18,531 10,607 51,937 28,229
Repairs and maintenance 10,379 6,301 28,181 17,244
Other rental property operating 33,338 22,500 93,003 59,100
Corporate general and administrative 4,335 2,372 11,036 9,855
Interest expense 39,148 23,075 111,275 54,687
Amortization of deferred financing costs 2,315 937 4,565 2,157
Depreciation and amortization 29,770 20,549 84,602 50,840
Write-off of costs associated with
terminated acquisitions 18,435 -- 18,435 --
------------- ------------- ------------- ------------
Total expenses 156,251 86,341 403,034 222,112
------------- ------------- ------------- ------------
Operating income 23,542 33,716 107,012 78,004
OTHER INCOME:
Equity in net income of unconsolidated
companies 9,253 1,119 21,215 6,262
------------- ------------- ------------- ------------
INCOME BEFORE MINORITY INTERESTS 32,795 34,835 128,227 84,266
Minority interests (3,217) (4,432) (12,797) (12,018)
------------- ------------- ------------- ------------
NET INCOME 29,578 30,403 115,430 72,248
PREFERRED STOCK DIVIDENDS (3,375) -- (8,325) --
------------- ------------- ------------- ------------
NET INCOME AVAILABLE TO COMMON
SHAREHOLDERS $ 26,203 $ 30,403 $ 107,105 $ 72,248
============= ============= ============= ============
PER COMMON SHARE DATA:
Net Income - Basic $ 0.22 $ 0.30 $ 0.90 $ 0.83
============= ============= ============= ============
Net Income - Diluted $ 0.21 $ 0.29 $ 0.85 $ 0.79
============= ============= ============= ============
WEIGHTED AVERAGE SHARES
OUTSTANDING - BASIC 120,819,630 99,894,600 119,660,343 87,364,374
============= ============= ============= ============
WEIGHTED AVERAGE SHARES
OUTSTANDING - DILUTED 134,172,062 104,257,252 127,165,200 91,169,765
============= ============= ============= ============
</TABLE>
The accompanying notes are an integral
part of these financial statements.
4
<PAGE> 5
CRESCENT REAL ESTATE EQUITIES COMPANY
CONSOLIDATED STATEMENT
OF SHAREHOLDERS' EQUITY
(DOLLARS IN THOUSANDS)
(NOTES 1, 2 AND 9)
<TABLE>
<CAPTION>
PREFERRED STOCK COMMON STOCK ADDITIONAL
------------------------- ------------------------- PAID-IN
SHARES NET VALUE SHARES PAR VALUE CAPITAL
---------- --------- ----------- --------- -----------
<S> <C> <C> <C> <C> <C>
SHAREHOLDERS' EQUITY, December 31, 1997 -- $ -- 117,977,907 $ 1,179 $ 2,253,928
Issuance of common shares -- -- 2,651,039 27 65,004
Issuance of preferred shares 14,948,734 425,000 -- -- (9,000)
Exercise of common share options -- -- 44,364 -- 612
Cancellation of restricted shares -- -- (6,638) -- (100)
Issuance of common shares in exchange for Operating
Partnership units -- -- 278,590 3 5,468
Amortization of deferred compensation -- -- -- -- --
Settlement of forward share purchase agreement -- -- (6,659,254) (67) (200,766)
Reclassification of forward share purchase agreement -- -- -- (47) (145,330)
Dividends paid -- -- -- -- --
Net income available to common shareholders -- -- -- -- --
Unrealized loss on available-for-sale securities -- -- -- -- --
---------- --------- ----------- -------- -----------
SHAREHOLDERS' EQUITY, September 30, 1998 (unaudited) 14,948,734 $ 425,000 114,286,008 $ 1,095 $ 1,969,816
========== ========= =========== ======== ===========
<CAPTION>
DEFERRED ACCUMULATED
COMPENSATION RETAINED OTHER
ON RESTRICTED EARNINGS COMPREHENSIVE
SHARES (DEFICIT) INCOME TOTAL
---------- ----------- ---------- ------------
<S> <C> <C> <C> <C>
SHAREHOLDERS' EQUITY, December 31, 1997 $ (283) $ (57,507) $ -- $ 2,197,317
Issuance of common shares -- -- -- 65,031
Issuance of preferred shares -- -- -- 416,000
Exercise of common share options -- -- -- 612
Cancellation of restricted shares 100 -- -- --
Issuance of common shares in exchange for Operating
Partnership units 5,471
Amortization of deferred compensation 93 -- -- 93
Settlement of forward share purchase agreement -- (8,466) -- (209,299)
Reclassification of forward share purchase agreement -- (5,636) -- (151,013)
Dividends paid -- (135,265) -- (135,265)
Net income available to common shareholders -- 107,105 -- 107,105
Unrealized loss on available-for-sale securities -- -- (9,132) (9,132)
---------- ----------- ---------- ------------
SHAREHOLDERS' EQUITY, September 30, 1998 (unaudited) $ (90) $ (99,769) $ (9,132) $ 2,286,920
========== =========== ========== ============
</TABLE>
The accompanying notes are an integral
part of these financial statements.
5
<PAGE> 6
CRESCENT REAL ESTATE EQUITIES COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
(DOLLARS IN THOUSANDS)
(NOTES 1, 2 AND 4)
<TABLE>
<CAPTION>
FOR THE NINE MONTHS
ENDED SEPTEMBER 30,
-------------------------------
(UNAUDITED)
1998 1997
------------- -------------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 115,430 $ 72,248
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 89,167 52,997
Minority interests 12,797 12,018
Non-cash compensation 155 157
Equity in earnings net of distributions
received from unconsolidated companies -- (252)
Distributions received in excess of equity in
earnings from unconsolidated companies 11,881 --
Decrease (increase) in accounts receivable 5,251 (8,681)
Increase in deferred rent receivable (23,795) (14,432)
Increase in other assets (21,637) (23,879)
Decrease in restricted cash and cash equivalents 4,560 4,944
(Decrease) increase in accounts payable, accrued
expenses and other liabilities (12,438) 39,768
------------- -------------
Net cash provided by operating activities 181,371 134,888
------------- -------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of investment properties (527,076) (1,347,902)
Development of investment properties (14,796) (8,364)
Capital expenditures - rental properties (35,073) (14,497)
Tenant improvement and leasing costs - rental properties (53,700) (27,121)
Increase in restricted cash and cash equivalents (548) (524)
Investment in unconsolidated companies (120,537) (328,468)
Decrease (increase) in escrow deposits -
acquisition of investment properties 5,360 (4,190)
Increase in notes receivable (15,351) (134,329)
------------- -------------
Net cash used in investing activities (761,721) (1,865,395)
------------- -------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt financing costs (3,436) (11,329)
Borrowings under credit facility 672,150 612,500
Payments under credit facility (272,150) (336,000)
Debt proceeds 158,100 990,696
Debt payments (250,903) (158,100)
Capital distributions - joint venture partner (2,343) (2,061)
Proceeds from common shares offerings 43,959 760,460
Proceeds from exercise of common share options 612 953
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 (8,325) --
Dividends and unitholder distributions (149,884) (93,215)
------------- -------------
Net cash provided by financing activities 603,780 1,751,997
------------- -------------
INCREASE IN CASH AND CASH EQUIVALENTS 23,430 21,490
CASH AND CASH EQUIVALENTS,
Beginning of period 66,622 25,592
------------- -------------
CASH AND CASH EQUIVALENTS,
End of period $ 90,052 $ 47,082
============= =============
</TABLE>
The accompanying notes are an integral
part of these financial statements.
6
<PAGE> 7
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 September 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, 90 behavioral healthcare properties (the "Behavioral
Healthcare Properties"), seven full-service hotels with a total of 2,257 rooms
and two destination health and fitness resorts that can accommodate up to 462
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 September 30, 1998, owned or operated 97
refrigerated storage properties with an aggregate of approximately 515 million
cubic feet (the "Refrigerated Storage Properties"). The Company also has a 42.5%
partnership interest in a partnership, the primary holdings of which 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 its other subsidiaries.
The following table sets forth, by subsidiary, the Properties owned by
such subsidiary as of September 30, 1998:
7
<PAGE> 8
<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")
Crescent Real Estate Albuquerque Plaza, Barton Oaks Plaza One, Briargate Office and
Funding II, L.P.: Research Center, Hyatt Regency Albuquerque, Hyatt Regency Beaver Creek, Las Colinas Plaza,
("Funding II") Liberty Plaza I & II, MacArthur 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 the current presentation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
On January 1, 1998, the Company adopted Statement of Financial
Accounting Standards ("SFAS") No. 130, "Reporting Comprehensive Income," which
establishes standards for reporting and display of comprehensive income and its
components. As a result of the adoption of SFAS No. 130, comprehensive income
has been displayed as part of the statement of shareholders' equity. During the
nine months ended September 30, 1998, the Company held securities classified as
available-for-sale which had unrealized losses during the period of $9,132.
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 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.
8
<PAGE> 9
3. EARNINGS PER SHARE:
The Company adopted SFAS No. 128, "Earnings Per Share" ("EPS"), for
the year ended December 31, 1997, which superseded APB Opinion No. 15 for
periods ending after December 15, 1997. SFAS No. 128 specifies the computation,
presentation and disclosure requirements for earnings per share. Primary EPS and
Fully Diluted EPS are replaced by Basic EPS and Diluted EPS, respectively. Basic
EPS, unlike Primary EPS, excludes all dilution while Diluted EPS, like Fully
Diluted EPS, reflects the potential dilution that could occur if securities or
other contracts to issue common shares were exercised or converted into common
shares.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------------------------------
1998 1997
---------------------------------- ---------------------------------
Net Wtd. Avg. Per Share Net Wtd. Avg. Per Share
Income Shares Amount Income Shares Amount
------- ---------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS -
Net income available
to common shareholders $26,203 120,820 $ 0.22 $ 30,403 99,895 $ 0.30
========== ==========
Effect of Dilutive Securities:
Common share and unit -- 3,565 -- 4,362
options
Assumed conversion of -- 8,311 -- --
preferred shares
Additional common shares
obligation relating to:
Forward share purchase
agreement 1,579 747 -- --
Equity swap agreement -- 729 -- --
------- ---------- --------- ----------
Diluted EPS -
Net income available
to common shareholders $27,782 134,172 $ 0.21 $ 30,403 104,257 $ 0.29
======= ========== ========== ========= ========== ==========
</TABLE>
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED SEPTEMBER 30,
----------------------------------------------------------------------
1998 1997
---------------------------------- ---------------------------------
Net Wtd. Avg. Per Share Net Wtd. Avg. Per Share
Income Shares Amount Income Shares Amount
-------- ---------- ---------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Basic EPS - $107,105 119,660 $ 0.90 $ 72,248 87,364 $ 0.83
========== ==========
Net income available
to common shareholders
Effect of Dilutive Securities:
Common share and unit
options -- 4,243 -- 3,806
Assumed conversion of
preferred shares
Additional common shares -- 2,770 -- --
obligation relating to:
Forward share purchase
agreement 1,579 249 -- --
Equity swap agreement -- 243 -- --
-------- ---------- --------- ----------
Diluted EPS -
Net income available
to common shareholders $108,684 127,165 $ 0.85 $ 72,248 91,170 $ 0.79
======== ======== ========== ========= ========== ==========
</TABLE>
9
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4. SUPPLEMENTAL DISCLOSURES TO STATEMENTS OF CASH FLOWS:
<TABLE>
<CAPTION>
Nine months ended
September 30,
1998 1997
-------- --------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Interest paid $110,067 $ 52,594
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 $ 5,471 $ 426
Issuance of operating partnership units in settlement
of obligation $ 8,522 $ --
Issuance of operating partnership units in conjunction
with investments $ 11,450 $ --
Common share obligation in conjunction with an
investment $ 21,000 $ --
Mortgage note assumed in conjunction with property
acquisitions $ 46,934 $ --
Debt incurred in conjunction with termination of equity
swap agreement $209,299 $ --
Reclassification of forward share purchase agreement
from equity to liability in conjunction with the term
extension $151,013 $ --
Unrealized loss on available-for-sale securities $ 9,132 $ --
</TABLE>
5. INVESTMENTS IN REAL ESTATE MORTGAGES AND EQUITY OF UNCONSOLIDATED
COMPANIES:
The following is a summary of the Company's ownership in significant
unconsolidated companies:
<TABLE>
<CAPTION>
COMPANY'S OWNERSHIP
ENTITY CLASSIFICATIONS AS OF SEPTEMBER 30, 1998
- - -------------------------------------------- ------------------------------------- --------------------------
<S> <C> <C>
Desert Mountain Development Corporation Residential Development Corporation 95%(1)
Houston Area Development Corp. Residential Development Corporation 94%(1)
The Woodlands Land Development Company, Inc. Residential Development Corporation 95%(1)
Crescent Development Management Corp. Residential Development Corporation 90%(1)
Mira Vista Development Corp. Residential Development Corporation 94%(1)
Crescent CS Holdings Corp. Crescent Refrigerated Storage Corporation 95%(2)
Crescent CS Holdings II Corp. Crescent Refrigerated Storage Corporation 95%(2)
The Woodlands Commercial
Properties Company, L.P. Other (various commercial properties) 42.5%
Main Street Partners, L.P. Other (office property - Bank One Center) 50%
</TABLE>
10
<PAGE> 11
- - ---------------------
(1) See Item 2. the Residential Development Properties Table for the
Residential Development Corporation's ownership interest in Residential
Development Properties.
(2) Each of the Crescent Refrigerated Storage Corporations has a 40%
interest in a partnership that owns one of the Refrigerated Storage
Corporations. Accordingly, each of the Crescent Refrigerated Storage
Corporations has an indirect 40% interest in certain of the
Refrigerated Storage Properties.
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," "Refrigerated Storage Corporations," and "Other," as applicable,
as of September 30, 1998.
BALANCE SHEETS AT SEPTEMBER 30, 1998:
<TABLE>
<CAPTION>
RESIDENTIAL REFRIGERATED
DEVELOPMENT STORAGE
CORPORATIONS CORPORATIONS OTHER
------------ ------------ ----------
<S> <C> <C> <C>
Real estate, net $ 618,830 $1,440,196 $ 462,631
Cash 20,239 12,230 30,873
Other assets 164,456 362,777 63,910
---------- ---------- ----------
Total Assets $ 803,525 $1,815,203 $ 557,414
========== ========== ==========
Notes payable $ 308,399 $ 630,098 $ 250,000
Notes payable to the Company 190,240 -- 9,341
Other liabilities 74,913 464,904 49,254
Equity 229,973 720,201 248,819
---------- ---------- ----------
Total Liabilities and Equity $ 803,525 $1,815,203 $ 557,414
========== ========== ==========
Company's investments in real estate
mortgages and equity of uncon-
solidated companies $ 312,619 $ 275,192 $ 158,400
========== ========== ==========
</TABLE>
SUMMARY STATEMENTS OF OPERATIONS:
<TABLE>
<CAPTION>
FOR THE NINE MONTHS ENDED
SEPTEMBER 30, 1998
-----------------------------------------------
RESIDENTIAL REFRIGERATED
DEVELOPMENT STORAGE
CORPORATIONS CORPORATIONS OTHER
------------- ------------ --------
<S> <C> <C> <C>
Total revenues........................... $ 206,566 $ 395,413 $ 55,930
Total expenses........................... 182,316 396,745 47,302
------------- ------------ --------
Net income (loss)........................ $ 24,250 $ (1,332) $ 8,628
============= ============ ========
Company's equity in net income (loss)
of unconsolidated companies........... $ 18,375 $ (1,032) $ 3,872
============= ============ ========
</TABLE>
11
<PAGE> 12
6. NOTES PAYABLE AND BORROWINGS UNDER CREDIT FACILITY:
<TABLE>
<CAPTION>
Balance at
Following is a summary of the Company's debt financing at September 30, 1998: September 30,
1998
-------------
<S> <C>
SECURED DEBT
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
Merrill Lynch Promissory Note due December 14, 1998(2), bears interest at 30-day
LIBOR plus 75 basis points (at September 30, 1998, the rate was 6.09%) with an
interest-only term, secured by the Houston Center mixed-use Property complex.......... 209,299
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(3), 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 September 30, 1998 the rate was 7.79% subject to a
rate cap of 10%) with an interest-only term, secured by the Funding
III, IV and V Properties.............................................................. 115,000
Chase Manhattan Note due September 30, 2001, bears interest at 30-day LIBOR plus
an average rate of 1.75% (at September 30, 1998, the rate was 7.41%) with an
interest-only term, secured by Fountain Place Office Property.. ...................... 97,123
CIGNA Note due December 2002, bears interest at 7.47% with an interest-only
term, secured by the MCI Tower Office Property and Denver Marriott City Center
Hotel Property........................................................................ 63,500
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.................................................. 44,541
Metropolitan Life Note III, due December 1999, bears interest at 7.74% with an
interest-only term, secured by the Datran Center Office Property...................... 40,000
Northwestern Note due January 2003, bears interest at 7.65% with an 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.................................... 11,893
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(4), secured by
the Funding VI property............................................................... 8,614
</TABLE>
12
<PAGE> 13
<TABLE>
<CAPTION>
Balance at
September 30,
1998
-----------------
<S> <C>
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....................................... 6,821
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............................................................................... 763
UNSECURED DEBT
Line of Credit with BankBoston, N.A. ("BankBoston") ("Credit Facility") (see
description of Credit Facility below)........................................................ 750,000
Short-term BankBoston Note II due October 30, 1998, bears interest at Eurodollar
rate plus 120 basis points (at September 30, 1998, the rate was 6.83%) with an
interest-only term........................................................................... 100,000(5)
2007 Notes bear interest at a fixed rate of 7.50% with a ten-year interest-only
term, due September 2007(6).................................................................. 250,000
2002 Notes bear interest at a fixed rate of 7.00% with a five-year interest-only
term, due September 2002(6).................................................................. 150,000
-----------
Total Notes Payable $ 2,273,554
===========
</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 $220,000.
(2) On November 11, 1998, the Company and Merrill Lynch agreed in
principle, subject to negotiation of final documentation, to modify the
note (i) to provide for a payment of $25,000 of principal on December
14, 1998, (ii) to extend its term to September 14, 1999 and (iii) to
increase the interest rate to approximately 200 basis points above
30-day LIBOR. In connection with this extension, the Company expects to
pay an extension fee of approximately $1,500.
(3) 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.
(4) 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.
(5) Prior to the maturity date of the note, the Company repaid the note
with proceeds from a new $260,000 secured variable-rate loan with a
three-year interest-only term.
(6) 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 were also
subject to adjustment in the event that the Notes were assigned a
rating that was not an investment grade 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 level below
investment grade) from Standard & Poor's ("S&P"). Because of the rating
from S&P, the interest rates on the Notes increased 37.5 basis points
on July 28, 1998.
13
<PAGE> 14
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 September 30, 1998,
the Company was in compliance with all covenants. As of September 30, 1998, the
interest rate was 6.83%.
7. FORWARD SHARE PURCHASE AGREEMENT:
On August 12, 1997, the Company entered into two transactions with
affiliates of the predecessor of UBS AG ("UBS"). In one transaction, the Company
sold 4,700,000 common shares to UBS for approximately $148,000 and received
approximately $145,000 in net proceeds. In the other transaction, the Company
entered into a forward share purchase agreement with UBS. On August 11, 1998,
the Company paid a fee of approximately $3,000 to UBS in connection with the
exercise by the Company and UBS of the right to extend the term of the forward
share purchase agreement until August 12, 1999. In connection with the extension
of the forward share purchase agreement, the Company for financial accounting
purposes will account for the forward share purchase agreement as a liability
rather than as equity commencing on August 12, 1998, the date of the extension.
Under the forward share purchase agreement, the Company is committed to
settle its obligations under the agreement by purchasing 4,700,000 common shares
from UBS by August 12, 1999. The price to be paid by the Company for the
4,700,000 common shares (the "Settlement Price") will be determined on the date
the Company settles the forward share purchase agreement and will be calculated
based on the gross proceeds received by Company from the original issuance of
common shares to UBS, plus a forward accretion component equal to LIBOR plus 75
basis points, minus an adjustment for the Company's distributions paid to UBS.
The forward accretion component represents a guaranteed rate of return to UBS.
The Company may fulfill its settlement obligations under the forward
share purchase agreement in cash or common shares, at its option, on or before
August 12, 1999. In the event that the Company elects to fulfill its settlement
obligations in common shares, UBS will sell, on behalf of the Company, a
sufficient number of common shares to realize the Settlement Price. If, as a
result of an increase in the market price of the common shares, the number of
common shares required to be sold to achieve the Settlement Price is less than
the number of common shares previously issued to UBS, UBS will deliver common
shares to the Company. In contrast, if, as a result of a decrease in the market
price of the common shares, such number of common shares is greater than the
number of common shares previously issued to UBS, the Company will deliver
additional common shares to UBS.
On a quarterly basis, if the number of common shares previously
delivered to UBS is not sufficient to permit UBS to realize the Settlement Price
through the sale of such common shares, the Company is obligated to deliver
additional common shares to UBS. The Company included, in the calculation of
diluted earnings per share for the quarter ended September 30, 1998,
approximately 747,000 contingently issuable common shares. The Company
calculated this number of contingently issuable common shares using the
Company's average share price for the quarter ended September 30, 1998 of
$28.31. According to the terms of the forward share purchase agreement, had the
closing share price of $25.25 on September 30, 1998 been used, approximately
1,400,000 common shares would have been contingently issuable. In that event,
the Company's net income - diluted per common share would have been $0.21 and
$0.85, respectively, for the three and nine months ended September 30, 1998 and
the net book value per common share outstanding at September 30, 1998 would have
been $17.40.
On November 12, 1998, the Company was obligated under the forward share
purchase agreement, based on the $22.75 closing price of the common shares on
the New York Stock Exchange on November 11, 1998, to issue approximately
2,100,000 additional common shares. If the obligation to issue such additional
common shares had existed as of September 30, 1998, the Company's net income -
diluted per common share would have been $0.20 and $0.85, respectively, for the
three and nine months ended September 30, 1998 and the net book
14
<PAGE> 15
value per common share outstanding at September 30, 1998 would have been
$17.30. To the extent that the Company is obligated, as a result of a decline in
the market price of the common shares, to issue additional common shares in the
future under the terms of the forward share purchase agreement, the issuance
will reduce the Company's net income per common share and net book value per
common share.
8. 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 nine months ended September 30, 1998, there
were 139,295 units exchanged for 278,590 common shares.
9. SHAREHOLDERS' EQUITY:
COMMON SHARE OFFERINGS
On April 23, 1998, the Company completed an offering of 1,365,138
common shares at $32.27 per share (the "April 1998 Unit Investment Trust
Offering") to Merrill Lynch. Net proceeds to the Company from the April 1998
Unit Investment Trust Offering were approximately $43,959. The net proceeds were
used to reduce borrowings outstanding under the Credit Facility.
On September 4, 1998, the Company announced a planned rights offering.
Under the proposed rights offering by the Company and the proposed rights
offering by the Operating Partnership, the Company's shareholders and the
Operating Partnership's unitholders will receive rights to purchase the
Company's common shares and units at an exercise price of $22 per common share
and $44 per unit in an aggregate amount of approximately $215,000. The Company
currently is assessing its needs for short-term capital and, based on its
evaluation, will determine the appropriate timing and terms of the rights
offerings. In the event that the Company proceeds with its rights offerings and
the exercise price is less than the then-current market price for the common
shares, shareholders who do not exercise their rights in full will experience a
decrease in their percentage ownership and economic interests in the Company.
PREFERRED SHARE 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 30, 1998, the Company completed an offering (the "June 1998
Preferred Offering") of 6,948,734 Series B convertible preferred shares at
$32.38 per share (the "Series B Preferred Shares") in an aggregate principal
amount of approximately $225,000 to The Prudential Insurance Company of America
and certain of its affiliates. The Company used the proceeds from the offering,
net of professional fees, of approximately $224,750, to repay approximately
$170,000 of short-term indebtedness and to make an indirect investment of
approximately $54,750 in five additional Refrigerated Storage Properties. Based
on the underwriting fees the Company has typically paid in connection with past
underwritten public offerings, management estimates that if the shares had been
sold in an underwritten public offering, the Company would have incurred
approximately $12,000 in underwriting fees and offering costs. In that case, the
Company would have been required to sell approximately 372,000 additional shares
(based on the $32.38 per share price on the date of the offering) to raise the
same amount of net proceeds. Holders of the Series B Preferred Shares will not
be entitled to regular quarterly cash distributions, but will be entitled to
receive certain extraordinary
15
<PAGE> 16
cash distributions, and stock and other non-cash distributions, if any are
made. On October 7, 1998, the Series B Preferred Shares became convertible at
any time, at the option of the holder. Upon the election of the holder, the
Series B Preferred Shares will convert into the Company's common shares at a
conversion rate which is calculated by comparing the investment return produced
by the common shares of the Company and an investment return of a portfolio of
equity REITs as computed by The National Association of Real Estate Investment
Trusts ("NAREIT Return"). The Company has calculated that, as of September 30,
1998, the Series B Preferred Shares would have been convertible into
approximately 8,300,000 common shares. The Series B Preferred Shares rank senior
to the common shares and rank on a parity with the outstanding Series A
Preferred Shares as to rights to receive distributions and to participate in
distributions or payments upon any liquidation, dissolution or winding up of the
Company. The Company will estimate quarterly non-cash dividends, for the
purposes of calculating net income available 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.
EQUITY SWAP AGREEMENT
On February 20, 1998 and June 25, 1998, the Company issued 525,000
common shares and 759,254 common shares, respectively, to Merrill Lynch,
pursuant to the terms of the equity swap agreement dated December 12, 1997, as a
result of the decline in market price of the common shares from 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
share or net book value per common share.
Effective September 30, 1998, the Company terminated the equity swap
agreement with Merrill Lynch. As of that date, the Company repurchased the
6,659,254 common shares held by Merrill Lynch and terminated the additional
contingent share obligation provided for under that agreement by issuing a
$209,299 promissory note due December 14, 1998. This note, which bears interest
at the rate of 75 basis points above 30-day LIBOR is secured by a first mortgage
lien on the Houston Center mixed-use Property complex. On November 11, 1998, the
Company and Merrill Lynch agreed in principle, subject to negotiation of final
documentation, to modify the note (i) to provide for a payment of $25,000 of
principal on December 14, 1998, (ii) to extend its term to September 14, 1999
and (iii) to increase the interest rate to approximately 200 basis points above
30-day LIBOR. In connection with this extension, the Company expects to pay an
extension fee of approximately $1,500.
DISTRIBUTIONS
COMMON SHARES
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 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.
PREFERRED SHARES
On May 15, 1998, the Company paid a cash dividend on the Company's
Series A Preferred Shares of $3,264, or $.408 per share, to shareholders of
record on April 30, 1998. The initial quarterly dividend was from the issue date
(February 19, 1998) of the Series A Preferred Shares to May 15, 1998. The
dividend represented an annualized dividend of $1.69 per share.
On August 14, 1998, the Company paid a cash dividend on the Company's
Series A Preferred Shares of $3,376, or $.422 per share, to shareholders of
record on July 31, 1998. The dividend represented an annualized dividend of
$1.69 per share.
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<PAGE> 17
10. ACQUISITIONS AND RECENT INVESTMENT DEVELOPMENTS:
OFFICE, RETAIL AND HOTEL PROPERTIES
During the nine months ended September 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 a short-term note with BankBoston, which has subsequently
been repaid.
<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 Central 2/13/98 Houston, TX 100 $ 155,250 N/A N/A 1,278,000
Washington Harbour 2/25/98 Washington, D.C. 100 $ 161,000 N/A N/A 536,000
Datran Center 5/1/98 Miami, FL 100 $ 70,550 N/A N/A 472,000
BP Plaza 6/30/98 Houston, TX 100 $ 79,100 N/A N/A 561,000
</TABLE>
On September 10, 1998, the Company and The Prudential Insurance
Company of America ceased negotiations regarding the purchase of Woodfield
Corporate Center, Two Town Center and 6701 Tower office properties.
REFRIGERATED STORAGE PROPERTIES
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%.
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 $163,000. These Properties contain approximately 90 million cubic
feet of refrigerated storage space. The Company's cash investment in connection
with the acquisitions from Freezer Services, Inc. and Carmar Group was
approximately $36,700 and $55,900 respectively.
BEHAVIORAL HEALTHCARE PROPERTIES
On March 3, 1998, Crescent Operating, Inc. ("COI") entered into an
agreement to acquire Magellan's 50% interest in Charter Behavioral Health
Systems, LLP ("CBHS") in exchange for $30,000 in common stock of COI. However,
on August 19, 1998, Magellan and COI each announced that negotiations for the
sale of Magellan's interest in CBHS to COI had been terminated.
11. PENDING INVESTMENT
On July 9, 1998, the Company announced that, together with Reckson
Associates Realty Corporation ("Reckson"), it had entered into a merger
agreement (as amended and restated, the "Merger Agreement") pursuant to which
Metropolitan Partners, LLC ("Metropolitan"), a newly formed limited liability
company owned equally by the Company and Reckson (collectively, the "Buying
Entities"), would acquire Tower Realty Trust ("Tower") for an
17
<PAGE> 18
aggregate purchase price of approximately $733,000 (the "Merger"). The Merger
Agreement provides for payment of the purchase price in a combination of cash,
common shares of the Company and Reckson, and assumption of debt by
Metropolitan.
On November 2, 1998, Tower filed suit against the Buying Entities for
declaratory and other relief, including damages of not less than $75,000,
arising out of the alleged anticipatory repudiation by the Buying Entities of
the Merger Agreement. Tower's lawsuit followed meetings in which representatives
of the Buying Entities had questioned, among other things, whether certain
conditions to closing could be met by Tower. The Buying Entities have advised
Tower that they have not terminated the Merger Agreement and consider the Merger
Agreement to be in full force and effect, subject to its terms and conditions.
As with any litigation, it is not possible to predict the outcome of the pending
action. 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. The Company intends to contest Tower's claims vigorously.
12. PRO FORMA FINANCIAL INFORMATION
The pro forma financial information for the nine months ended
September 30, 1998 assumes the completion, in each case as of January 1, 1998,
of (i) the February 1998 Preferred Offering; (ii) the April 1998 Unit
Investment Trust Offering, (iii) the June 1998 Preferred Offering; (iv) the
1998 completed investments (see Note 10), subsequent events (see Note 14), and
related financing and share and unit issuances; (v) the termination of the
equity swap agreement with Merrill Lynch; and (vi) the reclassification, for
financial accounting purposes, of the forward share purchase agreement with UBS
as a liability rather than as equity. Due to the pending suit by Tower, and
because the Buying Entities believe that Tower may be unable to satisfy certain
conditions to closing, the Company has presented the pro forma financial
information below to include, and in the alternative, to exclude the Pending
Investment (see Note 11). The pro forma information assumes, as of January 1,
1998, that all offering proceeds were used for repayment of indebtedness
incurred for investments.
<TABLE>
<CAPTION>
For the nine months ended
For the nine months ended September 30, 1998
September 30, 1998 (Excluding Pending Investment)
--------------------------------- ----------------------------------
<S> <C> <C>
Total revenues $522,094 $522,094
Operating income $ 87,004 $ 91,144
Income before minority interests $116,931 $113,508
Net income available to
Common Shareholders $ 94,637 $ 91,320
Per common share data:
Net income - Basic $ 0.81 $ 0.80
Net income - Diluted $ 0.73 $ 0.72
</TABLE>
The pro forma operating results combine the Company's consolidated
historical statement of operations for the nine months ended September 30, 1998
with the following adjustments:
(i) Adjustment to rental income and operating expenses for the
1998 acquired office properties
(ii) Adjustment to depreciation based on acquisition prices
associated with the 1998 acquired office, hotel and golf
course properties
(iii) Adjustment to rental income for the 1998 acquired hotel and
golf course properties to reflect the lease payment (base rent
and percentage rent) from the hotel and golf course lessee to
the Company as calculated by applying the rent provisions (as
defined in the lease agreements) to the historical revenues of
the hotel and golf course properties
(iv) Adjustment to equity in net income of unconsolidated companies
for the Refrigerated Storage Corporations 1998 acquired
Refrigerated Storage Properties
(v) Adjustment to increase interest expense as a result of
interest costs for long and short-term financing for
investments
(vi) 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
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<PAGE> 19
(vii) 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.
13. COMMITMENTS AND CONTINGENCIES:
The Company was 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 have merged 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. The Company subsequently
notified Station that it was exercising its termination rights under the Merger
Agreement based on Station's 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. The Company subsequently notified Station that the
Merger Agreement had been terminated in accordance with its terms. 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
$115,000 of a class of Station's redeemable preferred stock.
The Company has stated that it intends to contest Station's 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.
See Note 11 for a description of pending litigation to which the
Company and Tower are parties.
14. SUBSEQUENT EVENTS:
DISTRIBUTION
On November 3, 1998, the Company paid a cash dividend and unitholder
distribution of $70,045, or $.55 per share and equivalent unit, to shareholders
and equivalent unitholders of record on October 14, 1998. The dividend
represented an approximately 45% increase over the prior quarter's dividend of
$.38 per share and equivalent unit and an annualized dividend of $2.20 per share
and equivalent unit.
ACQUISITION
On October 13, 1998, the Company acquired Sonoma Golf Course, an
18-hole golf course located in Sonoma County, California, for approximately
$15,250. The course is near the Sonoma Mission Inn and Spa and has a 4,000
square foot club house with a banquet facility. The Company simultaneously
entered into an 8-year lease of the property with COI. The Company believes that
the golf course will enhance the amenities provided to the Sonoma Mission Inn
and Spa Hotel guests.
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 herein, shall have the meanings
ascribed to those terms in the footnotes to the financial statements.
19
<PAGE> 20
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. Among the factors
that might cause such a difference are the following: changes in real estate
conditions (including rental rates and competing properties) or in industries in
which the Company's principal tenants compete; the Company's ability to timely
lease unoccupied square footage and timely release occupied square footage upon
expiration; the Company's ability to generate revenues sufficient to meet debt
service payments and other operating expenses; 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 concentration of a significant percentage of the Company's assets in Texas
and Colorado; 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; changes in general economic conditions; risks
related to certain ongoing litigation with Station and Tower; 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; 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 SEPTEMBER 30, 1998 AND 1997
Total revenues increased approximately $59.7 million, or 49.7%, to
$179.8 million for the three months ended September 30, 1998, as compared to
$120.1 million for the three months ended September 30, 1997. The increase in
Office and Retail Property revenues of $54.0 million is primarily attributable
to: (i) the acquisition of nine Office Properties in 1998, which resulted in
$18.2 million of incremental revenues; (ii) the acquisition of 26 Office
Properties and one Retail Property in 1997, which resulted in $28.7 million of
incremental revenues; and (iii) an increase in Office and Retail Property
revenues of $7.1 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 $3.8 million is primarily attributable to
the acquisition of three full-service Hotel Properties in 1997, which resulted
in $3.4 million of incremental revenues. The increase in interest and other
income of $1.9 million is primarily attributable to (i) a $23.9 million increase
in notes receivable as a result of loans to Crescent Operating, Inc. ("COI") and
(ii) interest earned on available cash.
Total expenses increased $70.0 million, or 81.1%, to $156.3 million for
the three months ended September 30, 1998, as compared to $86.3 million for the
three months ended September 30, 1997. The increase in rental property operating
expenses of $22.8 million is primarily attributable to: (i) the acquisition of
nine Office Properties in 1998, which resulted in $7.4 million of incremental
expenses; (ii) the acquisition of 26 Office Properties and one Retail Property
in 1997, which resulted in $12.6 million of incremental expenses; and (iii) an
increase in Office and Retail Property expenses of $2.8 million from the
Properties owned as of January 1, 1997, which is primarily due to occupancy
increases at these Properties. Depreciation and amortization expense increased
$9.2 million primarily due to the acquisitions of Office, Retail and Hotel
Properties in 1997 and 1998. The increase in interest expense of $16.1 million
is primarily attributable to: (i) $6.6 million of interest payable under the
Notes due 2002 and Notes due 2007, which were issued in a private offering in
September 1997; (ii) $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) $.8 million of interest payable under the Metropolitan Life
Note I, which was assumed in connection with the acquisition of Energy Centre in
December 1997; (iv) $.9 million of interest payable under the Metropolitan Life
Notes III and IV, which were assumed in connection with the acquisition of
Datran Center in May 1998; (v) $1.2 million of incremental interest associated
with the reclassification of the UBS forward share purchase agreement to a
liability following an extension of the term on August 12, 1998; and (vi) $3.9
million of incremental interest payable due to draws under the Credit Facility
and short-term borrowings with BankBoston (average balance outstanding for third
quarter 1998 and 1997 was
20
<PAGE> 21
$728.5 million and $510.3 million, respectively). All of these financing
arrangements were used to fund investments and working capital. The increase in
corporate general and administrative expense of $2.0 million is primarily
attributable to incremental costs associated with the operations of the Company
as a result of property additions to the Company's portfolio and the
implementation in May 1998 of EITF 97-11, "Accounting for Internal Costs
Relating to Real Estate Property Acquisitions", by the Company. An additional
increase in total expenses of $18.4 million is due to a non-recurring write-off
of costs associated with terminated acquisitions.
Equity in net income of unconsolidated companies increased $8.2
million, or 745.5%, to $9.3 million for the three months ended September 30,
1998, as compared to $1.1 million for the three months ended September 30, 1997.
The increase is primarily attributable to: (i) an increase in equity in net
income of Residential Development Corporations of $4.8 million which is
primarily attributable to: (a) the investment in The Woodlands Land Development
Company, Inc. in July 1997, and Desert Mountain Development Corporation in
August 1997, which resulted in $2.7 million of incremental net income; and (b)
an increase in sales of lots by Mira Vista Development Corporation, which
resulted in $1.4 million of incremental net income; (ii) an increase in equity
in net income of Refrigerated Storage Corporations of $.5 million, which is
primarily attributable to the incremental net income as a result of the
investment in the Crescent Refrigerated Storage Corporations in October 1997;
and (iii) an increase in equity in net income of other unconsolidated companies
of $2.9 million is primarily attributable to the investment in The Woodlands
Commercial Properties Company, L.P. in July 1997.
RESULTS OF OPERATIONS - NINE MONTHS ENDED SEPTEMBER 30, 1998 AND 1997
Total revenues increased approximately $209.9 million, or 69.9%, to
$510.0 million for the nine months ended September 30, 1998, as compared to
$300.1 million for the nine months ended September 30, 1997. An increase in
Office and Retail Property revenues of $162.6 million is primarily attributable
to: (i) the acquisition of nine Office Properties in 1998, which resulted in
$37.0 million of incremental revenues; (ii) the acquisition of 26 Office
Properties and one Retail Property in 1997, which resulted in $103.4 million of
incremental revenues; and (iii) an increase in Office and Retail Property
revenues of $22.2 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 $11.9 million is primarily attributable
to the acquisition of three full-service Hotel Properties in 1997, which
resulted in $10.1 million of incremental revenues. The increase in Behavioral
Healthcare Property revenues of $25.5 million is attributable to the acquisition
of the Behavioral Healthcare Properties in June 1997. The increase in interest
and other income of $9.9 million is primarily attributable to (i) the sale of
marketable securities and (ii) the $112.9 million increase in notes receivable
as a result of (a) the May 1997 acquisition of certain notes included in the
Carter-Crowley portfolio and (b) loans to COI.
Total expenses increased $180.9 million, or 81.4%, to $403.0 million
for the nine months ended September 30, 1998, as compared to $222.1 million for
the nine months ended September 30, 1997. The increase in rental property
operating expenses of $68.5 million is primarily attributable to: (i) the
acquisition of nine Office Properties in 1998, which resulted in $14.1 million
of incremental expenses; (ii) the acquisition of 26 Office Properties and one
Retail Property in 1997, which resulted in $48.2 million of incremental
expenses; and (iii) an increase in Office and Retail Property expenses of $6.2
million from Properties owned as of January 1, 1997, which is primarily due to
occupancy increases at these Properties. Depreciation and amortization expense
increased $33.8 million primarily due to the acquisitions of Office, Retail,
Hotel and the Behavioral Healthcare Properties in 1997 and 1998. The increase in
interest expense of $56.6 million is primarily attributable to: (i) $21.2
million of interest payable under the Notes due 2002 and Notes due 2007, which
were issued in a private offering in September 1997; (ii) $5.6 million of
interest payable under the Chase Manhattan Note, which was assumed in connection
with the acquisition of Fountain Place in November 1997; (iii) $3.9 million of
interest payable on the BankBoston Note II, which the Company entered into in
August 1997; (iv) $2.3 million of interest payable under the Metropolitan Life
Note I, which was assumed in connection with the acquisition of Energy Centre in
December 1997; (v) $1.5 million of interest payable under the Metropolitan Life
Notes III and IV, which were assumed in connection with the acquisition of
Datran Center in May 1988; (vi) $1.2 million of incremental interest associated
with the reclassification of the UBS forward share purchase agreement to a
liability following an extension of the terms on August 11, 1998; and (vii)
$21.3 million of incremental interest payable due to draws under the Credit
Facility and short-term borrowings with BankBoston (average balance outstanding
for nine months ended September 30, 1998 and 1997 was $769.8 million and $352.8
million, respectively). All of these financing arrangements were used to fund
investments and working capital. The increase in corporate general and
administrative expense of $1.2 million is primarily attributable to the
incremental costs associated with the operations of the Company as a result of
property
21
<PAGE> 22
additions to the Company's portfolio and the implementation, in May 1998, of
EITF 97-11, "Accounting for Internal Costs Relating to Real Estate Property
Acquisitions" by the Company. An additional increase in total expenses of $18.4
million is due to a non-recurring write-off of costs associated with terminated
acquisitions.
Equity in net income of unconsolidated companies increased $14.9
million, or 236.5%, to $21.2 million for the nine months ended September 30,
1998, as compared to $6.3 million for the nine months ended September 30, 1997.
The increase is primarily attributable to: (i) an increase in net income of
Residential Development Corporations of $14.6 million which is primarily
attributable to the investment in The Woodlands Land Development Company, Inc.
in July 1997, and Desert Mountain Development Corporation in August 1997, which
resulted in $10.9 million of incremental net income and (ii) an increase in
equity in net income of other unconsolidated companies of $1.4 million is
primarily attributable to the investment in The Woodlands Commercial Properties
Company, L.P. in July 1997, which resulted in $4.0 million of incremental net
income partially offset by the 1997 distributions received of $3.1 million from
the Company's investment in HBCLP, Inc. (the primary asset of which is the
investment in Hudson Bay Partners, L.P., an investment partnership in which the
Company holds an effective 95% economic interest). The increase in equity in net
income of Residential Development Corporations and other unconsolidated
companies is partially offset by an incremental loss of $1.0 million from
investments in the Crescent Refrigerated Storage Corporations.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $90.1 million and $66.6 million at
September 30, 1998 and December 31, 1997, respectively. The increase is
attributable to $603.8 million and $181.4 million of cash provided by financing
and operating activities, respectively, offset by $761.7 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
($400.0 million), net proceeds from the February and June 1998 Preferred
Offerings ($416.0 million) and net proceeds from the April 1998 Unit Investment
Trust Offering ($44.0 million). The inflow from cash provided by financing
activities is partially offset by (i) distributions paid to common shareholders
and unitholders ($149.9 million); (ii) net payments under the short-term $250
million BankBoston Note due July 1998 ($92.8 million); and (iii) distributions
paid to preferred shareholders ($8.3 million). The inflow from operating
activities is primarily attributable to property operations, and 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
$761.7 million of cash flow primarily in the following investing activities: (i)
the acquisition of nine Office Properties and one Hotel Property ($527.1
million); (ii) recurring and non-recurring tenant improvement and leasing costs
for the Office and Retail Properties ($53.7 million); (iii) capital expenditures
for rental properties ($35.1 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 ($14.8 million); (v) increased investment in
unconsolidated companies ($120.5 million), which is primarily attributable to
the additional investment in the Crescent Refrigerated Storage Corporations and
(vi) increased notes receivable ($15.4 million) which is primarily due to loans
to COI.
On February 19, 1998, the Company completed an offering of 8,000,000
shares of 6 3/4% Series A convertible cumulative 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 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 $191.2 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 issuance 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. Net proceeds to the Company
from the April 1998 Unit Investment Trust Offering were approximately $44.0
million. The net proceeds were used to reduce borrowings outstanding under the
Credit Facility.
On June 30, 1998, the Company completed an offering of 6,948,734 Series
B convertible preferred shares in an aggregate principal amount of approximately
$225.0 million to The Prudential Insurance Company of America and
22
<PAGE> 23
certain of its affiliates. The Company used the proceeds from the offering, net
of professional fees, of approximately $224,750, to repay approximately $170,000
of short-term indebtedness and to make an indirect investment of approximately
$54,750 in five additional Refrigerated Storage Properties. Based on the
underwriting fees the Company has typically paid in connection with past
underwritten public offerings, management estimates that if the shares had been
sold in an underwritten public offering, the Company would have incurred
approximately $12 million in underwriting fees and offering costs. In that case,
the Company would have been required to sell approximately 372,000 additional
shares (based on the $32.38 per share price on the date of the offering) to
raise the same amount of net proceeds. Holders of the Series B Preferred Shares
will not be entitled to regular quarterly cash distributions, but will be
entitled to receive certain extraordinary cash distributions, and stock and
other non-cash distributions, if any are made. On October 7, 1998, the Series B
Preferred Shares became convertible at any time, at the option of the holder.
Upon the election of the holder, the Series B Preferred Shares will convert into
the Company's common shares at a conversion rate which is calculated by
comparing the investment return produced by the common shares of the Company and
an investment return of a portfolio of equity REIT's as computed by NAREIT. The
Company has calculated that, as of September 30, 1998, the Series B Preferred
Shares would have been convertible into approximately 8.3 million common shares.
The Series B Preferred Shares rank senior to the common shares and rank on a
parity with the outstanding Series A Preferred Shares as to rights to receive
distributions and to participate in distributions or payments upon any
liquidation, dissolution or winding up of the Company. The Company will estimate
quarterly non-cash dividends, for the purposes of calculating net income
available 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 August 12, 1997, the Company entered into two transactions with
affiliates of UBS. In one transaction, the Company sold 4,700,000 common shares
to UBS for approximately $148 million and received approximately $145 million in
net proceeds. In the other transaction, the Company entered into a forward share
purchase agreement with UBS. On August 11, 1998, the Company paid a fee of
approximately $3 million to UBS in connection with the exercise by the Company
and UBS of the right to extend the term of the forward share purchase agreement
until August 12, 1999. In connection with the extension of the forward share
purchase agreement, the Company for financial accounting purposes will account
for the forward share purchase agreement as the issuance of a liability rather
than as equity commencing on August 12, 1998, the date of the extension.
Under the forward share purchase agreement, the Company is committed to
settle its obligations under the agreement by purchasing 4,700,000 common shares
from UBS by August 12, 1999. The price to be paid by the Company for the
4,700,000 common shares (the "Settlement Price") will be determined on the date
the Company settles the forward share purchase agreement and will be calculated
based on the gross proceeds received by Company from the original issuance of
common shares to UBS, plus a forward accretion component equal to LIBOR plus 75
basis points, minus an adjustment for the Company's distributions paid to UBS.
The forward accretion component represents a guaranteed rate of return to UBS.
The Company may fulfill its settlement obligations under the forward
share purchase agreement in cash or common shares, at its option, at any time on
or before August 12, 1999.
In the event that the Company elects to fulfill its settlement
obligations in cash, it will decrease the Company's liquidity. Accordingly, the
Company will evaluate its sources of capital and the potential uses of its
capital at the time that settlement is required under the forward share purchase
agreement or at such earlier time as it determines to settle the agreement.
In the event that the Company elects to fulfill its settlement
obligations in common shares, UBS will sell, on behalf of the Company, a
sufficient number of common shares to realize the Settlement Price. If, as a
result of an increase in the market price of the common shares, the number of
common shares required to be sold to achieve the Settlement Price is less than
the number of common shares previously issued to UBS, UBS will deliver common
shares to the Company. In contrast, if, as a result of a decrease in the market
price of the common shares, such number of common shares is greater than the
number of common shares previously issued to UBS, the Company will deliver
additional common shares to UBS.
On a quarterly basis, if the number of common shares previously
delivered to UBS is not sufficient to permit UBS to realize the Settlement Price
through the sale of such common shares, the Company is obligated to deliver
23
<PAGE> 24
additional common shares to UBS. The Company included, in the calculation of
diluted earnings per share for the quarter ended September 30, 1998,
approximately 747,000 contingently issuable common shares. The Company
calculated this number of contingently issuable common shares using the
Company's average share price for the quarter ended September 30, 1998 of
$28.31. According to the terms of the forward share purchase agreement, had the
closing share price of $25.25 on September 30, 1998 been used, approximately
1,400,000 common shares would have been contingently issuable. In that event,
the Company's net income - diluted per common share would have been $0.21 and
$0.85, respectively, for the three and nine months ended September 30, 1998 and
the net book value per common share outstanding at September 30, 1998 would have
been $17.40.
On November 12, 1998, the Company was obligated under the forward share
purchase agreement, based on the $22.75 closing price of the common shares on
the New York Stock Exchange on November 11, 1998, to issue approximately
2,100,000 additional common shares. If the obligation to issue such additional
common shares had existed as of September 30, 1998, the Company's net income -
diluted per common share would have been $0.20 and $0.85, respectively, for the
three and nine months ended September 30, 1998 and the net book value per common
share outstanding at September 30, 1998 would have been $17.30. To the extent
that the Company is obligated, as a result of a decline in the market price of
the common shares, to issue additional common shares in the future under the
terms of the forward share purchase agreement, the issuance will reduce the
Company's net income per common share and net book value per common share.
The Company currently is evaluating various alternatives that would
result in the settlement of the agreement prior to the expiration date on August
12, 1999.
On February 20, 1998 and June 25, 1998, the Company issued 525,000
common shares and 759,254 common shares, respectively, to Merrill Lynch,
pursuant to the terms of the equity swap agreement dated December 12, 1997, as a
result of the decline in market price of the common shares from 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.
Effective September 30, 1998, the Company terminated the equity swap
agreement with Merrill Lynch. As of that date, the Company repurchased the
6,659,254 common shares held by Merrill Lynch and terminated the additional
contingent share obligation provided for under that arrangement by issuing a
$209.3 million promissory note due December 14, 1998. This note, which bears
interest at the rate of 75 basis points above 30-day LIBOR is secured by a first
mortgage lien on the Houston Center mixed-use Property complex. On November 11,
1998, the Company and Merrill Lynch agreed in principle, subject to negotiation
of final documentation, to modify the note (i) to provide for a payment of $25
million of principal on December 14, 1998, (ii) to extend its term to September
14, 1999 and (iii) to increase the interest rate to approximately 200 basis
points above 30-day LIBOR. In connection with this extension, the Company
expects to pay an extension fee of approximately $1.5 million.
On September 4, 1998, the Company announced a planned rights offering.
Under the proposed rights offering by the Company and the proposed rights
offering by the Operating Partnership, the Company's shareholders and the
Operating Partnership's unitholders will receive rights to purchase the
Company's common shares and the Operating Partnership's units at an exercise
price of $22 per common share in an aggregate amount of approximately $215
million. The Company currently is assessing its needs for short-term capital
and, based on its evaluation, will determine the appropriate timing and terms of
the rights offerings. In the event that the Company proceeds with its rights
offerings and the exercise price is less than the then-current market price for
the common shares, shareholders who do not exercise their rights in full will
experience a decrease in their percentage ownership and economic interests in
the Company.
The Company was a party to the Merger Agreement between the Company and
Station. Pursuant to the Merger Agreement, Station would have merged 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.
The Company subsequently notified Station that it was exercising its termination
rights under the Merger Agreement based on Station's 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. The Company subsequently notified
Station that the Merger Agreement had been terminated in accordance with its
terms. Station and the Company are currently involved in litigation relating to
the Merger Agreement. Each of Station and the Company are seeking damages from
24
<PAGE> 25
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 intends to contest Station's 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.
The Company is a party to the Merger Agreement pursuant to which
Metropolitan (a newly formed limited liability company owned equally by the
Company and Reckson) would merge with Tower. On November 2, 1998, Tower filed
suit against Reckson, the Company and the general partner of Metropolitan for
declaratory and other relief, including damages of not less than $75 million,
arising out of the alleged anticipatory repudiation by Reckson, the Company and
the general partner of Metropolitan of the Merger Agreement. The Company has
advised Tower that it has not terminated the Merger Agreement and considers the
Merger Agreement to be in full force and effect, subject to its terms and
conditions.
The Company intends to contest Tower's claims vigorously. As with any
litigation, it is not possible to predict the outcome of the pending action. 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 of November 12, 1998, the Company had no commitments for investment
property acquisition or development costs or for other material capital
expenditures except as described above.
The Company expects to meet its short-term liquidity requirements
primarily through cash flow provided by operating activities. The Company
believes that cash flow provided by operating activities will be adequate to
fund normal recurring operating expenses, debt service requirements, recurring
capital expenditures and distributions to shareholders and unitholders, as well
as non-recurring capital expenditures, such as tenant improvement and leasing
costs related to previously unoccupied space. To the extent the Company's cash
flow from operating activities is not sufficient to finance non-recurring
capital expenditures, the Company expects to finance such activities with
available cash reserves or additional debt financing.
The Company expects to meet its long-term liquidity requirements
through long-term secured and unsecured borrowings and other debt and equity
financing alternatives. As of November 12, 1998, the Company's long-term
liquidity requirements consisted primarily of maturities under the Company's
fixed and variable rate debt.
Debt and equity financing alternatives currently available to the
Company to satisfy its liquidity requirements and commitments for material
capital expenditures include additional proceeds from the refinancing of
existing secured and unsecured debt, obtaining additional debt secured by
existing investment properties or by investment property acquisitions or
developments and issuances of units or common shares to existing holders or in
exchange for contributions of investment properties.
The Company intends to maintain its qualifications 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.
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<PAGE> 26
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 9/30/98 DATE 9/30/98
----------- ---------- ------- ---- -------
<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 11,893 8.88 September 2001 11,893
Metropolitan Life Note II 44,541 6.93 December 2002 44,541
Metropolitan Life Note III 40,000 7.74 December 1999 40,000
Metropolitan Life Note IV 6,821 7.11 December 1999 6,821
Northwestern Life Note 26,000 7.65 January 2003 26,000
Nomura Funding VI Note 8,614 10.07 July 2020(3) 8,614
Rigney Promissory Note 763 8.50 November 2012 763
---------- ---- ----------
Subtotal/Weighted Average $ 602,132 7.75% $ 602,132
========== ==== ==========
Secured Capped Variable Rate Debt:
LaSalle Note III $ 115,000 7.79% July 1999 $ 115,000
========== ==== ==========
Secured Variable Rate Debt:
Merrill Lynch Note $ 209,299 6.09% December 1998(4) $ 209,299
Chase Manhattan Note 97,123 7.41 September 2001 97,123
---------- ---- ----------
Subtotal/Weighted Average $ 306,422 6.51% $ 306,422
========== ==== ==========
Unsecured Fixed Rate Debt:
Notes due 2007(5) $ 250,000 7.50% September 2007 $ 250,000
Notes due 2002(5) 150,000 7.00 September 2002 150,000
---------- ---- ----------
Subtotal/Weighted Average $ 400,000 7.31% $ 400,000
========== ==== ==========
Unsecured Variable Rate Debt:
Line of Credit $ 750,000 6.83% June 2000 $ 750,000
BankBoston Note II 100,000 6.83 October 1998 100,000(6)
---------- ---- ----------
Subtotal/Weighted Average $ 850,000 6.83% $ 850,000
========== ==== ==========
TOTAL/WEIGHTED AVERAGE $2,273,554 7.16% $2,273,554
========== ==== ==========
</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) 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) On November 11, 1998, the Company and Merrill Lynch agreed in
principle, subject to negotiation of final documentation, to modify the
note (i) to provide for a payment of $25 million of principal on
December 14, 1998, (ii) to extend its term to September 14, 1999 and
(iii) to increase the interest rate to approximately 200 basis points
above 30-day LIBOR. In connection with this extension, the Company
expects to pay an extension fee of approximately $1.5 million.
(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
26
<PAGE> 27
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 were
also subject to adjustment in the event that the Notes were assigned a
rating that was not an investment grade 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 level below investment grade) from S&P. Because of
the rating from S&P, the interest rates on the Notes increased 37.5
basis points on July 28, 1998.
(6) Prior to the maturity date of the note, the Company repaid
the note with proceeds from a new $260 million secured variable-rate
loan with a three-year interest-only term.
Based on the Company's total market capitalization of $5.9 billion and
$5.8 billion at September 30, 1998 and November 9, 1998, respectively, (at a
share price of $25.25 and $23.625 which were the closing prices of the common
shares on the New York Stock Exchange on September 30, 1998 and November 9,
1998, respectively, and including the full conversion of all units of minority
interest in the Operating Partnership plus total indebtedness), the Company's
indebtedness (which was $2.3 billion at both September 30, 1998 and November 9,
1998) represented 38% and 40% of its total market capitalization at September
30, 1998 and November 9, 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 re-evaluation and modification.
The Company's debt service coverage ratio for both the three months
and the nine months ended September 30, 1998 was approximately 3.2. Debt service
coverage for the particular period is generally calculated as net income plus
depreciation and amortization plus interest expense plus extraordinary or
non-recurring losses minus extraordinary or non-recurring gains, divided by debt
service (including principal and interest payable during the period of
calculation). The most restrictive debt service coverage ratio the company is
required to maintain as stipulated by the Company's debt arrangement is 2.5.
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 nine months
ended September 30, 1998 and 1997 were $149.9 million and $93.2 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.
27
<PAGE> 28
STATEMENTS OF FUNDS FROM OPERATIONS
(dollars in thousands)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1998 1997 1998 1997
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Income before minority interests $ 32,795 $ 34,835 $ 128,227 $ 84,266
Adjustments:
Depreciation and amortization of real
estate assets 29,204 20,214 82,919 49,434
Write-off of costs associated with
terminated acquisitions 18,435 -- 18,435 --
Adjustment for investments in real estate
mortgages and equity of
unconsolidated companies 13,237 1,434 40,735 2,107
Minority interest in joint ventures (200) (390) (1,006) (1,192)
Interest expense and amortization of deferred
financing costs related to the
forward share purchase agreement (1) 1,579 -- 1,579 --
Preferred stock dividends (3,375) -- (8,325) --
--------- --------- --------- ---------
Funds from operations $ 91,675 $ 56,093 $ 262,564 $ 134,615
========= ========= ========= =========
Investment Segments:
Office and retail properties $ 85,118 $ 51,612 $ 241,237 $ 141,057
Hotel properties 12,567 8,818 37,677 25,816
Behavioral healthcare properties 13,824 13,824 41,471 15,966
Refrigerated storage properties 7,729 -- 19,267 --
Residential development properties 12,446 3,199 36,533 5,871
Corporate general & administrative (4,335) (2,372) (11,036) (9,855)
Interest expense (37,569) (23,075) (109,696) (54,687)
Preferred stock dividends (3,375) -- (8,325) --
Other(2) 5,270 4,087 15,436 10,447
--------- --------- --------- ---------
Funds from operations $ 91,675 $ 56,093 $ 262,564 $ 134,615
========= ========= ========= =========
</TABLE>
- - --------------------------
(1) Includes the interest and amortization of deferred financing costs for
the UBS forward share purchase agreement commencing August 12, 1998,
because the diluted common shares and units outstanding include the
Company's obligation to issue common shares pursuant to the forward
share purchase agreement.
(2) Includes interest and other income less depreciation and amortization
of non-real assets and amortization of deferred financing costs.
28
<PAGE> 29
RECONCILIATION OF FUNDS FROM OPERATIONS TO NET CASH PROVIDED
BY OPERATING ACTIVITIES
(dollars in thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1998 1997
--------- ---------
<S> <C> <C>
Funds From Operations $ 262,564 $ 134,615
Adjustments:
Depreciation and amortization of non-real estate assets 1,108 905
Write-off of costs associated with terminated acquisitions (18,435) --
Amortization of deferred financing costs 4,565 2,157
Minority interest in joint ventures profit and depreciation
and amortization of real estate assets 1,581 1,693
Interest expense and amortization of deferred financing costs
related to the forward share purchase agreement (1,579) --
Adjustment for investments in real estate mortgages and equity
of unconsolidated companies (40,735) (2,107)
Change in deferred rent receivable (23,795) (14,432)
Change in current assets and liabilities (24,264) 12,152
Equity in earnings in excess of distributions received from
unconsolidated companies -- (252)
Distributions received in excess of equity in earnings from
unconsolidated companies 11,881 --
Preferred stock dividends 8,325 --
Non-cash compensation 155 157
--------- ---------
Net Cash Provided by Operating Activities $ 181,371 $ 134,888
========= =========
</TABLE>
29
<PAGE> 30
OFFICE PROPERTIES
The following table sets forth certain information about the Office
Properties as of September 30, 1998.
<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 75% $ 21.79
The Crescent Office Towers.. 1 Uptown/Turtle Creek 1985 1,204,720 100 29.09
Fountain Place.............. 1 CBD 1986 1,200,266 96 18.37
Trammell Crow Center(3)..... 1 CBD 1984 1,128,331 92 24.90
Stemmons Place.............. 1 Stemmons Freeway 1983 634,381 91 14.19
Spectrum Center(4).......... 1 Far North Dallas 1983 598,250 80(5) 21.11
Waterside Commons........... 1 Las Colinas 1986 458,739 100 17.81
Caltex House................ 1 Las Colinas 1982 445,993 96 27.39
Reverchon Plaza............. 1 Uptown/Turtle Creek 1985 374,165 95 17.73
The Aberdeen................ 1 Far North Dallas 1986 320,629 100 18.19
MacArthur Center I & II..... 1 Las Colinas 1982/1986 294,069 92(5) 19.33
Stanford Corporate Centre... 1 Far North Dallas 1985 265,507 100 17.00
The Amberton................ 1 Central Expressway 1982 255,052 84 11.56
Concourse Office Park....... 1 LBJ Freeway 1972-1986 244,879 91 13.70
12404 Park Central.......... 1 LBJ Freeway 1987 239,103 100 20.79
Palisades Central II........ 1 Richardson/Plano 1985 237,731 90 19.37
3333 Lee Parkway............ 1 Uptown/Turtle Creek 1983 233,769 98 19.40
Liberty Plaza I & II........ 1 Far North Dallas 1981/1986 218,813 98 13.31
The Addison................. 1 Far North Dallas 1981 215,016 100 17.67
The Meridian................ 1 LBJ Freeway 1984 213,915 92 15.54
Palisades Central I......... 1 Richardson/Plano 1980 180,503 94 15.25
Walnut Green................ 1 Central Expressway 1986 158,669 94 17.18
Greenway II................. 1 Richardson/Plano 1985 154,329 99 19.48
Addison Tower............... 1 Far North Dallas 1987 145,886 95 13.86
Greenway I & IA............. 2 Richardson/Plano 1983 146,704 100 21.95
5050 Quorum................. 1 Far North Dallas 1981 133,594 88(5) 15.67
Cedar Springs Plaza......... 1 Uptown/Turtle Creek 1982 110,923 84 17.28
Valley Centre............... 1 Las Colinas 1985 74,861 99 15.63
One Preston Park............ 1 Far North Dallas 1980 40,525 84 16.10
---- ---------- ----- ------------
Subtotal/Weighted Average. 30 11,460,279 92% $ 20.38
---- ---------- ----- ------------
FORT WORTH
Continental Plaza........... 1 CBD 1982 954,895 41%(5) $ 15.44
---- ---------- ----- ------------
HOUSTON
Greenway Plaza Office
Portfolio................... 10 Richmond-Buffalo 1969-1982 4,286,277 90% $ 15.62
Speedway
Houston Center............... 3 CBD 1974-1983 2,764,418 95 15.40
Post Oak Central............. 3 West Loop/Galleria 1974-1981 1,277,516 95 16.45
The Woodlands Office
Properties(6) ............... 12 The Woodlands 1980-1996 810,630 99 15.36
BP Plaza..................... 1 Katy Freeway 1992 561,065 100 18.26
Three Westlake Park(7)....... 1 Katy Freeway 1983 414,251 99 13.45
U.S. Home Building........... 1 West Loop/Galleria 1982 399,777 80 14.96
---- ---------- ----- ------------
Subtotal/Weighted Average. 31 10,513,934 93% $ 15.68
---- ---------- ----- ------------
AUSTIN
Frost Bank Plaza............ 1 CBD 1984 433,024 84%(5) $ 18.84
301 Congress Avenue(8)...... 1 CBD 1986 418,338 89 21.28
Bank One Tower.............. 1 CBD 1974 389,503 96 16.95
Austin Centre............... 1 CBD 1986 343,665 96 20.25
The Avallon................. 1 Northwest 1993/1997 232,301(9) 89(5) 19.23
Barton Oaks Plaza One....... 1 Southwest 1986 99,895 100 19.92
---- ---------- ----- ------------
Subtotal/Weighted Average 6 1,916,726 91% $ 19.31
---- ---------- ----- ------------
</TABLE>
30
<PAGE> 31
<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 99% $ 18.08
Ptarmigan Place............. 1 Cherry Creek 1984 418,630 93 16.34
Regency Plaza One........... 1 DTC 1985 309,862 98 21.20
AT&T Building............... 1 CBD 1982 184,581 80 14.91
The Citadel................. 1 Cherry Creek 1987 130,652 97(5) 20.72
55 Madison.................. 1 Cherry Creek 1982 137,176 85(5) 17.29
44 Cook..................... 1 Cherry Creek 1984 124,174 87(5) 17.86
--- ---------- ----- ------------
Subtotal/Weighted Average 7 1,855,882 94% $ 18.10
--- ---------- ----- ------------
COLORADO SPRINGS
Briargate Office and 1 Colorado Springs 1988 252,857 100 $ 15.56
--- ---------- ----- ------------
Research Center
LOUISIANA
NEW ORLEANS
Energy Centre............... 1 CBD 1984 761,500 77% $ 15.16
1615 Poydras................ 1 CBD 1984 508,741 82 15.04
--- ---------- ----- ------------
Subtotal/Weighted Average 2 1,270,241 79% $ 15.11
--- ---------- ----- ------------
FLORIDA
MIAMI
Miami Center................ 1 CBD 1983 782,686 79% $ 23.60
Datran Center............... 2 South Dade/Kendall 1986/1988 472,236 91 21.00
--- ---------- ----- ------------
Subtotal/Weighted Average 3 1,254,922 83% $ 22.52
--- ---------- ----- ------------
ARIZONA
PHOENIX
Two Renaissance Square...... 1 Downtown/CBD 1990 476,373 94%(5) $ 23.27
6225 North 24th Street...... 1 Camelback Corridor 1981 86,451 83 21.53
--- ---------- ----- ------------
Subtotal/Weighted Average 2 562,824 92% $ 23.03
--- ---------- ----- ------------
WASHINGTON, D.C.
WASHINGTON, D.C.
Washington Harbour........ 2 Georgetown 1986 536,206 91%(5) $ 36.03
--- ---------- ----- ------------
NEBRASKA
OMAHA
Central Park Plaza.......... 1 CBD 1982 409,850 100% $ 15.38
--- ---------- ----- ------------
NEW MEXICO
ALBUQUERQUE
Albuquerque Plaza........... 1 CBD 1990 366,236 96% $ 18.91
--- ---------- ----- ------------
CALIFORNIA
SAN FRANCISCO
160 Spear Street............. 1 South of Market/CBD 1984 276,420 99% $ 25.31
--- ---------- ----- ------------
SAN DIEGO
Chancellor Park (10)........ 1 UTC 1988 195,733 88%(5) $ 21.11
--- ---------- ----- ------------
TOTAL/WEIGHTED AVERAGE.... 89 31,827,005 90%(5) $ 18.63
=== ========== ===== =============
</TABLE>
- - -------------------------------------------
(1) Calculated based on base rent payable as of September 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.
31
<PAGE> 32
(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 September 30, 1998. If such leases had commenced as of
September 30, 1998, the percent leased for Office Properties would have
been 93%. The total percent leased for such Properties would have been
as follows: Spectrum Center - 86%; MacArthur Centers I & II - 97%; 5050
Quorum - 94%; Continental Plaza - 98%; Frost Bank Plaza - 92%; The
Avallon - 100%; The Citadel - 100%; 55 Madison - 90%; 44 Cook - 96%;
Two Renaissance Square - 97%; Washington Harbour - 94%; and Chancellor
Park - 91%.
(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 10 months.
(10) 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 September 30, 1998, 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
3,389,395 square feet of unleased space.
<TABLE>
<CAPTION>
PERCENTAGE
PERCENTAGE OF TOTAL ANNUAL
NET RENTABLE OF LEASED ANNUAL FULL-SERVICE
AREA NET RENTABLE ANNUAL FULL-SERVICE RENT PER
NUMBER OF REPRESENTED AREA FULL-SERVICE RENT NET
TENANTS WITH BY EXPIRING REPRESENTED RENT UNDER REPRESENTED RENTABLE
EXPIRING LEASES BY EXPIRING EXPIRING LEASES AREA
YEAR OF LEASE EXPIRATION LEASES (SQUARE FEET) LEASES LEASES(1) BY EXPIRING EXPIRING(1)
- - ------------------------ ------------ ------------- ------------ ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
1998.............. 241 882,634 3.2% $15,703,604 2.8% $17.79
1999.............. 434 3,539,998 12.4 63,585,141 11.1 17.96
2000 ............. 402 3,369,645 11.8 64,291,001 11.3 19.08
2001.............. 394 3,896,729 13.7 70,341,653 12.3 18.05
2002.............. 305 3,568,679 12.5 72,494,834 12.7 20.31
2003.............. 238 2,441,882 8.6 45,761,373 8.0 18.74
2004 ............. 103 2,907,549 10.2 58,322,593 10.2 20.06
2005.............. 67 2,217,071 7.8 47,283,863 8.3 21.33
2006.............. 27 645,670 2.3 13,466,561 2.4 20.86
2007.............. 31 1,172,105 4.2 26,020,047 4.6 22.20
2008 and thereafter 58 3,795,648 13.3 93,479,035 16.3 24.63
</TABLE>
- - --------------------------
(1) 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.
32
<PAGE> 33
BEHAVIORAL HEALTHCARE PROPERTIES
BEHAVIORAL HEALTHCARE PROPERTIES TABLE
The following chart sets forth the locations of the 90 Behavioral
Healthcare Properties by state:
<TABLE>
<CAPTION>
Number of Number of Number of Number of
State Facilities Beds State Facilities Beds
- - ----- ---------- ---- ----- ---------- ----
<S> <C> <C> <C> <C> <C>
Alabama 1 70 Mississippi 2 217
Arkansas 2 109 North Carolina 4 410
Arizona 2 170 New Hampshire 2 100
California 8 649 New Jersey 1 150
Delaware 1 72 Nevada 1 84
Florida 12 648 Ohio 1 42
Georgia 15 986 Pennsylvania 1 169
Indiana 8 577 South Carolina 3 248
Kansas 2 160 Tennessee 1 204
Kentucky 3 251 Texas 9 816
Louisiana 1 0 Utah 2 196
Maryland 1 0 Virginia 3 285
Minnesota 1 40 Wisconsin 2 160
Missouri 1 96 ----- -----
Total 90(1) 6,909
===== =====
</TABLE>
_______________________
(1) Because of the Company's status as a REIT for federal income tax purposes,
it does not operate the Behavioral Healthcare Properties and has leased the
Behavioral Healthcare Properties to Charter Behavioral Health Systems, LLC
pursuant to a long-term lease.
HOTEL PROPERTIES
The following table sets forth certain information about the Hotel
Properties for the nine months ended September 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 nine months ended September 30,
---------------------------------------
Revenue
Average Average Per
Year Occupancy Daily Available
Completed/ Rate Rate Room
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 81% 82% $ 126 $ 118 $ 102 $ 96
Four Seasons Hotel-Houston Houston, TX 1982 399 65 68 179 159 116 108
Hyatt Regency Albuquerque Albuquerque,NM 1990 395 70 75 102 99 71 74
Omni Austin Hotel Austin, TX 1986 314 80 78 114 102 90 81
Hyatt Regency Beaver Creek Avon, CO 1989 276(2) 72 70 240 231 173 162
Sonoma Mission Inn & Spa Sonoma, CA 1927/1987/1997 198(3) 84 90 230 205 193 183
Ventana Country Inn Big Sur, CA 1975/1982/1988 62 58(4) 86 380 329 221(4) 284
----- ----- ----- ----- ----- ----- -----
TOTAL/WEIGHTED AVERAGE 2,257 74% 77% $ 158 $ 147 $ 118 $ 113
===== ===== ===== ===== ===== ===== =====
<CAPTION>
Destination Health & Fitness Resorts: Guest Nights
------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Canyon-Ranch - Tucson Tucson, AZ 1980 250(5)
Canyon Ranch - Lenox Lenox, MA 1989 212(5)
----
TOTAL/WEIGHTED AVERAGE 462 87%(6) 83%(6) $ 493(7) $ 466(7) $ 414(8) $ 370(8)
===== ===== ===== ===== ===== ===== =====
</TABLE>
33
<PAGE> 34
- - ----------------------
(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 1998, the number of available rooms at Hyatt Regency Beaver Creek
has been reduced to 276 due to 19 rooms being converted into a 20,000
square foot spa.
(3) In July 1997, 30 additional rooms were completed.
(4) Temporarily closed from February 1, 1998 through May 1, 1998 due to
flooding in the region affecting the roadway passage to the hotel.
(5) Represents available guest nights, which is the maximum number of
guests that the resort can accommodate per night.
(6) Represents the number of paying and complimentary guests for the
period, divided by the maximum number of available guest nights for the
period.
(7) Represents the average daily "all-inclusive" guest package charges for
the period, divided by the average daily number of paying guests for
the period.
(8) Represents the total "all-inclusive" guest package charges for the
period, divided by the maximum number of available guest nights for the
period.
REFRIGERATED STORAGE PROPERTIES
The Company owns an indirect 38% interest in each of the two
Refrigerated Storage Corporations, that, as of September 30, 1998, owned or
operated 97 Refrigerated Storage Properties with an aggregate of approximately
515 million cubic feet.
The following table shows the location and size of facility for each of
the Refrigerated Storage Properties as of September 30, 1998:
<TABLE>
<CAPTION>
TOTAL CUBIC TOTAL CUBIC
NUMBER OF FOOTAGE NUMBER OF FOOTAGE
STATE PROPERTIES (IN MILLIONS) STATE PROPERTIES (IN MILLIONS)
----- ---------- ------------- ----- ---------- -----------
<S> <C> <C> <C> <C> <C>
Alabama 6 9.9 Mississippi 1 4.7
Arizona 1 2.9 Missouri 2 37.2
Arkansas 6 31.3 Nebraska 2 4.4
California 11 45.3 New York 1 11.8
Colorado 2 3.3 North Carolina 3 8.5
Florida 5 7.8 Oklahoma 2 2.1
Georgia 7 41.3 Oregon 6 40.4
Idaho 2 18.7 Pennsylvania 4 51.6
Illinois 2 11.6 South Carolina 1 1.6
Indiana 1 9.1 South Dakota 2 6.3
Iowa 2 12.6 Tennessee 3 10.6
Kansas 3 41.2 Texas 3 24.3
Kentucky 1 2.7 Utah 1 8.6
Maine 1 1.8 Virginia 1 1.9
Massachusetts 6 15.2 Washington 6 28.7
Minnesota 1 3.8 Wisconsin 2 14.0
----- -------
TOTAL 97 515.2
===== =======
</TABLE>
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.
34
<PAGE> 35
RESIDENTIAL DEVELOPMENT PROPERTIES TABLE
The following table sets forth certain information as of
September 30, 1998, relating to the Residential Development Properties.
<TABLE>
<CAPTION>
Total Total
Residential Residential Total Lots/Units Lots/Units
Residential Development Development Lots/ Developed Closed
Development Properties Type of Corporation's Units Since Since
Corporation(1) (RDP) RDP(2) Location Ownership % Planned Inception Inception
- - ----------- ----- ------ -------- ------------ ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Mira Vista Mira Vista SF Fort Worth, TX 100.00% 710 677 524
Development Corp. The Highlands SF Breckenridge, CO 12.25% 750 270 227
------- ------- -------
Total Mira Vista Development Corp 1,460 947 751
------- ------- -------
Houston Area Falcon Point SF Houston, TX 100.0% 1,205 556 329
Development Corp. Spring Lakes SF Houston, TX 100.0% 536 93 34
------- ------- -------
Total Houston Area Development Corp. 1,741 649 363
------- ------- -------
Crescent The Reserve at
Development Frisco SF Frisco, CO 60.0% 134 134 107
Management Villa Montane
Corp. Townhomes TH Avon, CO 30.0% 27(4) - -
Villa Montane
Club TS Avon, CO 30.0% 746(4) - -
Villas at Beaver
Creek TH Avon, CO 30.0% 10(4) 7 7
Deer Trail SFH Avon, CO 60.0% 16(4) - -
Buckhorn
Townhomes TH Avon, CO 60.0% 24(4) - -
Bear Paw Lodge CO Avon, CO 60.0% 43(4) - -
------- ------- -------
Total Crescent Developement Management Corp. 1,000 141 114
------- ------- -------
The Woodlands The Woodlands SF The Woodlands, TX 42.5% 38,313 19,365 18,502
Land Company ------- ------- -------
Inc.
Desert Mountain Desert Mountain SF Scottsdale, AZ 93.0% 2,543 2,000 1,715
Development ------- ------- -------
Corp.
Total 45,057 23,102 21,445
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Average
Closed Range of
Residential Sale Proposed
Residential Development Price Sale Prices
Development Properties Per Lot/ Per Lot/Unit
Corporation(1) (RDP) Unit ($) ($)(3)
- - ----------- ----- -------- ------
<S> <C> <C> <C>
Mira Vista Mira Vista 96,000 50,000 - 265,000
Development The Highlands 140,000 55,000 - 250,000
Corp.
Houston Area Falcon Point 31,000 22,000 - 60,000
Development Spring Lakes 31,000 22,000 - 33,000
Corp.
Crescent The Reserve at
Development Frisco 95,000 60,000 - 165,000
Management Villa Montane
Corp. Townhomes N/A 515,000 - 1,700,000
Villa Montane
Club N/A 18,000 - 150,000
Villas at Beaver
Creek 2,070,000 1,625,000 - 3,245,000
Deer Trail N/A 2,560,000 - 3,325,000
Buckhorn
Townhomes N/A 945,000 - 1,850,000
Bear Paw Lodge N/A 1,495,000 - 1,895,000
The Woodlands The Woodlands 40,000 14,500 - 500,000
Land Company
Inc.
Desert Mountain Desert Mountain 300,000(5) 150,000 - 2,500,000(5)
Development
Corp.
</TABLE>
35
<PAGE> 36
- - -------------------------------
(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 September 30, 1998, 17 units were under contract at Villa Montane
Townhomes representing $17.2 million in sales proceeds, 703 contracts were
pre-sold at Villa Montane Club representing $42.2 million in sales
proceeds, two units were under contract at Villas at Beaver Creek
representing $4.9 million in sales proceeds, nine units were under contract
at Deer Trail representing $26.6 million in sales, 15 units were under
contract at Buckhorn Townhomes representing $20.1 million in sales, and
five units were under contract at Bear Paw Lodge representing $8.9 million
in sales.
(5) Excludes golf membership which are approximately $125,000.
36
<PAGE> 37
YEAR 2000 COMPLIANCE
The year 2000 issue relates to whether computer systems will properly
recognize date-sensitive information to allow accurate processing of
transactions and data relating to the year 2000 and beyond. In addition, the
year 2000 issue relates to whether non-Information Technology (IT) systems that
depend on embedded computer technology will recognize the year 2000. Systems
that do not properly recognize such information could generate erroneous
information or fail.
In early 1998, the Company assigned a group of individuals with the
task of creating a program to identify, understand and address the myriad of
issues associated with the year 2000 problem. The group's initial step in
assessing the Company's year 2000 readiness consists of a comprehensive review
of IT and non-IT systems at the Company's principal executive offices and at the
Company's Properties to identify any systems that are date sensitive and,
accordingly, could have potential year 2000 problems.
The Company is in the process of conducting such comprehensive review
of all mission critical IT systems, such as in-house accounting and property
management systems, network operating systems, telecommunication systems and
desktop software systems, and determining whether they are year 2000 compliant.
The Company believes that such review is approximately 60% completed and it is
expected that the review will be completed on or before June 30, 1999. In
addition, as a result of the Company's normal upgrade and replacement process,
most network and desktop equipment currently meets the requirements for year
2000 compliance. Although the initial assessment and testing is not yet
complete, we have not identified any significant problem areas and believe that
the mission critical systems -AS/400 and accounting system, local network
servers, WAN equipment, and the majority of desktop PC's are, or can be, made
compliant with minor software upgrades.
For non-IT systems, the Company is also in the process of conducting
such comprehensive review of computer hardware and software in mechanical
systems and developing a program to repair or replace non-IT systems that are
not year 2000 compliant. The Company believes that such review is approximately
60% completed and it is expected that the review will be completed on or before
June 30, 1999. The Company's non-IT systems or embedded technology are
primarily property-related and include escalator and elevator service, building
automation (e.g. energy management and HVAC systems), security access systems,
fire and life safety systems, etc.
The Company believes that the greatest exposure lies with third parties
such as its tenants, vendors, financial institutions and transfer agent and
unaffiliated joint venture partners. The Company depends on its tenants for
rents and cash flows, its financial institutions for availability of cash, its
transfer agent to maintain and track investor information, its vendors for
day-to-day services and its unaffiliated joint venture partners for operations
and management of certain of the Company's Properties. If any of these third
parties are unable to meet their obligations to the Company because of the year
2000 problem, such a failure may have a material adverse effect on the financial
condition or results of operations of the Company. Although the Company is in
the process of working with such third parties in order to attempt to eliminate
its year 2000 concerns, the cost and timing of the third party year 2000
compliance is not within the Company's control and no assurance can be given
with respect to the cost and timing of such efforts or the potential effects of
any failure to comply.
The majority of the work performed to date has been performed by
employees of the Company without significant additional costs to the Company.
Although the program has not yet been fully developed and the total cost to
specifically remediate IT and non-IT systems, therefore, has not fully been
quantified, the Company currently estimates that the total cost to repair and
replace IT and non-IT systems that are not year 2000 compliant (not including
costs associated with the Company's normal upgrade and replacement process) will
be approximately $1.2 million. Management does not believe that such estimated
total cost will have a material adverse effect on the Company's financial
condition or results of operations.
The Company currently believes that it will have performed all year
2000 compliance testing and completed its remedial measures on its IT and non-IT
systems prior to September 30, 1999. Based on the progress the Company has made
in addressing the Company's year 2000 issues and its plan and timeline to
complete its compliance program, the Company does not currently foresee
significant risks associated with the Company's year 2000 compliance at this
time. Management does not believe that the year 2000 issue will pose significant
problems in its IT or non-IT systems, or that
37
<PAGE> 38
resolution of any potential problems with respect to these systems will have a
material adverse effect on the Company's financial condition or results of
operations. Management believes that the year 2000 risks to the Company's
financial condition or results of operation associated with a failure of non-IT
systems is immaterial due to the fact that each of the Company's Properties has,
for the most part, separate non-IT systems. Accordingly, in general a year 2000
problem that is experienced at one Property should have no effect on the other
Company Properties. In addition, management believes that the Company will have
sufficient time to correct those system problems within its control before the
year 2000. Since the Company's major source of income is rental payments under
long-term leases, the failure of the Company's mission critical IT systems is
not expected to have a material adverse effect on the Company's financial
condition or results of operations. Even if the Company were to experience
problems with its IT systems, the payment of rent under the leases would not be
excused. In addition, the Company expects to correct those IT system problems
within its control before the year 2000, thereby minimizing or avoiding the
increased cost of correcting problems after the fact.
Because the Company is still evaluating the status of its systems and
those of third parties with which it conducts business, the Company has not yet
developed a comprehensive contingency plan and it is very difficult to identify
"the most reasonably likely worst-case scenario" at this time. As the Company
identifies significant risks related to the Company's year 2000 compliance or if
the Company's year 2000 compliance program's progress deviates substantially
from the anticipated timeline, the Company will develop appropriate contingency
plans.
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.
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
judgement 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 judgement that Station's alleged
breaches under the Merger Agreement excuse the Company from any further
obligations under the Merger Agreement, and (iii) a declaratory judgement 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.
38
<PAGE> 39
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 million. 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 million of the
redeemable preferred stock, (ii) damages consisting of compensatory damages
(which Station states it believes to be in excess of $400 million), costs
associated with Station's obtaining capital needed to replace the $115 million
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 judgement 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 intends to contest Station's 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.
On July 9, 1998, the Company announced that, together with Reckson
Associates Realty Corporation ("Reckson"), it had entered into a merger
agreement (as amended and restated on August 11, 1998, the "Merger Agreement")
pursuant to which Metropolitan Partners, LLC ("Metropolitan"), a newly formed
limited liability company owned equally by the Company and Reckson, would
acquire Tower Realty Trust ("Tower") for an aggregate purchase price of
approximately $733 million (the "Merger"). On November 2, 1998, Tower filed an
action in the Supreme Court of the State of New York, County of New York,
against Reckson, the Company and Metropolitan (collectively, the "Defendants"),
for declaratory and other relief, including damages of not less than $75
million, arising out of the alleged anticipatory repudiation by Reckson, the
Company and the general partner of Metropolitan of the Merger Agreement.
The Company has advised Tower that it has not terminated the Merger
Agreement and considers the Merger Agreement to be in full force and effect,
subject to its terms and conditions. The Company intends to contest Tower's
claims vigorously. As with any litigation, it is not possible to predict the
outcome of the pending action. 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.
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults Upon Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders
None
39
<PAGE> 40
Item 5. Other information
Under the proxy rules of the Securities and Exchange Commission,
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.
Under the Bylaws, a shareholder must comply with certain procedures to
nominate persons for election to the Board of Trust Managers or to propose other
business to be considered at an annual meeting of shareholders. These procedures
provide that shareholders desiring to make nominations for trust managers and/or
to bring a proper subject before a meeting must do so by notice timely delivered
to the Secretary of the Company. The Secretary of the Company generally must
receive notice of any such proposal not less than seventy (70) days nor more
than ninety (90) days prior to the anniversary of the preceding year's annual
meeting of shareholders. In the case of proposals for the 1999 annual meeting of
shareholders, the Secretary of the Company must receive notice of any such
proposal no earlier than March 10, 1998, and no later than March 30, 1998 (other
than proposals intended to be included in the proxy statement and form of proxy,
which, as noted above, must be received by December 31, 1998). Generally, such
shareholder notice must set forth (a) as to each nominee for trust manager, all
information relating to such nominee that is required to be disclosed in
solicitations of proxies for election of trust managers under the proxy rules of
the Commission; (b) as to any other business, a brief description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in such business of such
shareholder; and (c) as to the shareholder, (i) the name and address of such
shareholder, (ii) the class or series and number of shares of beneficial
interest of the Company which are owned beneficially and of record by such
shareholder, and (iii) the date(s) upon which the shareholder acquired ownership
of such shares. The chairman of the annual meeting shall have the power to
declare that any proposal not meeting these and any other applicable
requirements imposed by the Bylaws shall be disregarded. A copy of the Bylaws
may be obtained without charge on written request to David M. Dean, Senior Vice
President, Law, and Secretary, 777 Main Street, Suite 2100, Fort Worth, Texas
76102.
In addition, 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, unless the Secretary of the
Company receives notice of any such matter no earlier than March 10, 1998, and
no later than March 30, 1998, and the notice complies with the other
requirements described in the preceding paragraph.
Item 6. Exhibits and Reports on Form 8-K.
(a) The following exhibits are filed as part of this report.
<TABLE>
<S> <C>
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 herewith)
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 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)
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 as Exhibit 4.05 to the Registrant's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1998 (the "1998 10-Q") and incorporated herein by reference)
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 as Exhibit 4.07 to the 1998
10-Q and incorporated herein by reference)
4.08 -- 7 1/8% Note due 2007 of Crescent Real Estate Equities Limited Partnership (filed as Exhibit 4.08 to the
1998 10-Q and incorporated herein by reference)
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)
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 September 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)
</TABLE>
<PAGE> 41
<TABLE>
<S> <C>
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, as amended (filed herewith)
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 as Exhibit 10.17 to the 1998
10-Q and incorporated herein by reference)
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)
10.18 -- Form of Registration Rights, Lock-Up and Pledge Agreement (filed as Exhibit No. 10.05 to the Registrant's
Registration Statement on Form S-11 (File No. 33-90226) and incorporated herein by reference)
27.01 -- Financial Data Schedule (filed herewith)
</TABLE>
40
<PAGE> 42
(b) Reports on Form 8-K.
Form 8-K dated June 30, 1998, filed July 9, 1998 for the
purpose of (i) announcing, under Item 5 Other Events, the Company's
probable acquisitions of 6701 Tower, Two Town Center and Woodfield
Corporate Center, and the acquisition of BP Plaza, and (ii) filing
under Item 7 - Financial Statements, Pro Forma Financial Information
and Exhibits, the Reports of Independent Public Accountants, with
respect to 6701 Tower, Two Town Center, Woodfield Corporate Center and
BP Plaza, the Statements of Excess of Revenues Over Specific Operating
Expenses and notes thereto, with respect to 6701 Tower, Two Town
Center, Woodfield Corporate Center and BP Plaza, 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 August 7, 1998, describing under Item
5 - Other Events, (i) that the Company is exercising its termination
rights under the Merger Agreement with Station because of Station's
material breach of the Merger Agreement, (ii) as a result, the Company
has filed an action in federal court in Texas seeking damages and
declatory relief, (iii) that the Company also intends to cancel its
proposed rights offering, and the proposed increase in the quarterly
distribution which were both contingent upon the completion of the
merger with Station and (iv) that the Company no longer considers the
merger with Station to be probable.
Form 8-K/A dated April 17, 1998 and filed August 13, 1998
restating under Item 5 - Other Events, certain factors that may be
relevant to the Company's forward looking statements.
Form 8-K/A dated June 30, 1998 and filed September 16, 1998
stating under Item 5 - Other Events that the Company no longer
considers probable the acquisitions of 6701 Tower, Two Town Center and
Woodfield Corporate Center and revising Item 7 - Financial Statements,
Pro Forma Financial Information and Exhibits, to reflect the completed
acquisition of BP Plaza only.
Form 8-K/A dated January 16, 1998 and filed September 16, 1998
stating under Item 5 - Other Events, that the Company no longer
considers the merger with Station probable and eliminating the
financial information contained in Item 7 - Financial Statements, Pro
Forma Financial Information and Exhibits.
41
<PAGE> 43
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: November 16, 1998 Gerald W. Haddock, President and
------------------ Chief Executive Officer
/s/ Jerry R. Crenshaw, Jr.
-----------------------------------------
Date: November 16, 1998 Jerry R. Crenshaw Jr., Vice President,
------------------ Controller and Co-Chief Financial Officer
/s/ Bruce A. Picker
-----------------------------------------
Date: November 16, 1998 Bruce A. Picker, Vice President,
------------------ Treasurer and Co-Chief Financial Officer
42
<PAGE> 44
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NO. EXHIBIT PAGE
------- ------- ------------
<C> <S> <C>
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 herewith)
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 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)
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 as Exhibit 4.05 to the Registrant's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1998 (the "1998 10-Q")
and incorporated herein by reference)
</TABLE>
<PAGE> 45
<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 as Exhibit 4.07 to the 1998
10-Q and incorporated herein by reference)
4.08 -- 7 1/8% Note due 2007 of Crescent Real Estate Equities
Limited Partnership (filed as Exhibit 4.08 to the
1998 10-Q and incorporated herein by reference)
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)
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 September 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> 46
<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, as amended (filed herewith)
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 as Exhibit 10.17 to the 1998
10-Q and incorporated herein by reference)
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)
10.18 -- Form of Registration Rights, Lock-Up and Pledge Agreement
(filed as Exhibit No. 10.05 to the Registrant's Registration
Statement on Form S-11 (File No. 33-90226) and incorporated
herein by reference)
27.01 -- Financial Data Schedule (filed herewith)
</TABLE>
<PAGE> 1
EXHIBIT 3.02
AMENDED AND RESTATED BYLAWS
OF
CRESCENT REAL ESTATE EQUITIES COMPANY
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
ARTICLE I - OFFICES AND RECORDS............................................ 1
Section 1.1 - Principal Office ....................................... 1
Section 1.2 - Additional Offices ..................................... 1
Section 1.3 - Books and Records ...................................... 1
ARTICLE II - SHAREHOLDERS ................................................. 1
Section 2.1 - Annual Meeting ......................................... 1
Section 2.2 - Special Meetings ....................................... 2
Section 2.3 - Place of Meeting ....................................... 2
Section 2.4 - Notice of Meeting ...................................... 2
Section 2.5 - Meeting Without Notice; Waiver of Notice ............... 3
Section 2.6 - Quorum ................................................. 3
Section 2.7 - Adjournment ............................................ 4
Section 2.8 - Proxies ................................................ 4
Section 2.9 - Notice of Shareholder Business and Nominations ......... 4
A. Annual Meeting of Shareholders ............................... 4
B. Special Meetings of Shareholders ............................. 7
C. General ...................................................... 7
Section 2.10 - Procedure for Election of Trust Managers .............. 8
Section 2.11 - Vote of Shareholders .................................. 9
Section 2.12 - Opening and Closing the Polls ......................... 10
Section 2.13 - Inspectors ............................................ 10
Section 2.14 - Informal Action ....................................... 10
ARTICLE III - BOARD OF TRUST MANAGERS ..................................... 11
Section 3.1 - General Powers ......................................... 11
Section 3.2 - Number, Tenure and Qualifications ...................... 11
Section 3.3 - Composition of the Board of Trust Managers ............. 12
Section 3.4 - Regular Meetings ....................................... 12
Section 3.5 - Special Meetings ....................................... 13
Section 3.6 - Notice ................................................. 13
Section 3.7 - Quorum ................................................. 14
</TABLE>
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<TABLE>
<S> <C>
Section 3.8 - Participation By Conference Telephone .................. 14
Section 3.9 - Presumption of Assent .................................. 15
Section 3.10 - Adjournments .......................................... 15
Section 3.11 - Informal Action ....................................... 15
Section 3.12 - Vacancies ............................................. 15
Section 3.13 - Removal ............................................... 16
Section 3.14 - Committees ............................................ 16
ARTICLE IV - OFFICERS ..................................................... 19
Section 4.1 - Categories of Officers ................................. 19
Section 4.2 - Election and Term of Office ............................ 19
Section 4.3 - Chairman of the Board .................................. 20
Section 4.4 - Vice Chairman of the Board ............................. 20
Section 4.4 - Chief Executive Officer ................................ 20
Section 4.5 - President .............................................. 21
Section 4.6 - Vice Presidents ........................................ 21
Section 4.7 - Secretary .............................................. 22
Section 4.8 - Treasurer .............................................. 22
Section 4.9 - Removal ................................................ 23
Section 4.10 - Salaries .............................................. 23
Section 4.11 - Vacancies ............................................. 24
Section 4.12 - Resignations .......................................... 24
ARTICLE V - SHARE CERTIFICATES AND TRANSFERS .............................. 24
Section 5.1 - Share Certificates ..................................... 24
Section 5.2 - Record Date and Closing of Transfer Books .............. 25
Section 5.3 - Registered Shareholders ................................ 26
Section 5.4 - Lost Certificates ...................................... 26
ARTICLE VI - MISCELLANEOUS PROVISIONS ..................................... 27
Section 6.1 - Fiscal Year ............................................ 27
Section 6.2 - Dividends .............................................. 27
Section 6.3 - Seal ................................................... 27
Section 6.4 - Execution of Written Instruments ....................... 27
Section 6.5 - Signing of Checks and Notes ............................ 27
Section 6.6 - Voting of Securities Held in Other Entities ............ 27
</TABLE>
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<PAGE> 4
<TABLE>
<S> <C>
Section 6.7 - Indemnification and Insurance .......................... 28
A. Definitions .................................................. 28
B. Indemnification .............................................. 29
C. Successful Defense ........................................... 30
D. Determinations ............................................... 31
E. Advancement of Expenses ...................................... 32
F. Enforcement .................................................. 32
G. Procedure Upon a Change in Control ........................... 33
H. Employee Benefit Plans ....................................... 34
I. Authorization to Purchase Insurance .......................... 34
J. Other Indemnification and Insurance .......................... 34
K. Notice ....................................................... 35
L. Construction ................................................. 35
M. Continuing Offer, Reliance, Etc .............................. 35
N. Indemnification of Shareholders .............................. 36
O. Authority to Further Indemnify ............................... 36
P. Effect of Amendment .......................................... 36
ARTICLE VII - AMENDMENTS .................................................. 37
</TABLE>
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<PAGE> 5
AMENDED AND RESTATED BYLAWS
OF
CRESCENT REAL ESTATE EQUITIES COMPANY
ORGANIZED UNDER THE LAWS OF THE STATE OF TEXAS
ARTICLE I
OFFICES AND RECORDS
SECTION 1.1 PRINCIPAL OFFICE. The initial address of the principal office
of the Company in the State of Texas is 777 Main Street, Suite 2100, Fort Worth,
Texas 76102.
SECTION 1.2 ADDITIONAL OFFICES. The Company may have such other offices,
either within or without the State of Texas, as the Board of Trust Managers from
time to time may designate or as the business of the Company from time to time
may require.
SECTION 1.3 BOOKS AND RECORDS. The books and records of the Company may be
kept, either within or without the State of Texas, at such place or places as
the Board of Trust Managers from time to time may designate.
ARTICLE II
SHAREHOLDERS
SECTION 2.1 ANNUAL MEETING. An annual meeting of the shareholders of the
Company shall be held each year, commencing with 1997, on such date and at such
time as may be fixed by resolution of the Board of Trust Managers.
<PAGE> 6
SECTION 2.2 SPECIAL MEETINGS. Subject to the rights of the holders of any
class or series of preferred shares of the Company ("Preferred Shares") to elect
additional trust managers under specified circumstances, special meetings of the
shareholders may be called only by the Chairman of the Board, the Vice Chairman
of the Board, the Chief Executive Officer, the President, the Board of Trust
Managers pursuant to a resolution adopted by a majority of the total number of
trust managers constituting the whole Board of Trust Managers (the "Whole
Board"), or by written request to the Secretary by the holders of not less than
25 percent of all of the shares then outstanding and entitled to vote at such
meeting (the "Voting Shares"); provided that (i) the Secretary shall inform the
shareholders requesting such meeting of the reasonably estimated cost of
preparing and disseminating notice thereof and shall not be required to give
such notice until the Company has received payment in such amount from such
shareholders and (ii) unless requested by holders of a majority of the Voting
Shares, the Secretary shall not be required to call a special meeting to
consider any matter which is substantially the same as a matter voted on at any
special meeting of the shareholders held during the twelve (12) months preceding
the request to call such new special meeting.
SECTION 2.3 PLACE OF MEETING. Meetings shall be held at the principal
office of the Company or at such other place, within or without the State of
Texas, as the Board of Trust Managers from time to time by resolution may
designate.
SECTION 2.4 NOTICE OF MEETING. Written or printed notice, stating the
place, day and hour of the meeting and, in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be prepared and
delivered by the Company, not less than ten (10) days nor more than sixty (60)
days before the date of the meeting, personally or by mail, to each shareholder
of record entitled to vote at such meeting and to each
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<PAGE> 7
shareholder or other person, if any, entitled to notice of the meeting. If
delivered by mail, such notice shall be deemed to be delivered when deposited in
the United States mail with postage thereon prepaid, addressed to the
shareholder at his or her address as it appears on the share transfer books of
the Company. If delivered personally, such notice shall be deemed given when so
delivered to the shareholder as provided above and if by facsimile, such notice
shall be deemed given upon completion of the facsimile transmission to the
shareholder as provided above. Meetings may be held without notice if all
shareholders entitled to vote are present, or if notice is waived by those not
present in accordance with Section 2.5 of these Bylaws. Any previously scheduled
meeting of the shareholders may be postponed by resolution of the Board of Trust
Managers upon public notice given prior to the date scheduled for such meeting.
SECTION 2.5 MEETING WITHOUT NOTICE; WAIVER OF NOTICE. Either before or
after a shareholders' meeting, a shareholder may waive notice thereof by
executing a waiver of notice to be filed with the Company's records of
shareholder meetings. Any such written notice shall be deemed to be the
equivalent of notice pursuant to Section 2.4 hereof. Attendance at a
shareholders' meeting, either in person or by proxy, by a person entitled to
notice thereof shall constitute a waiver of notice of the meeting unless such
person attends for the sole and express purpose of objecting to the transaction
of business on the ground that the meeting was not lawfully called or convened.
SECTION 2.6 QUORUM. Except as otherwise provided by law or by the
Declaration of Trust of the Company, as the same may be amended or restated from
time to time (the "Declaration of Trust"), the holders of a majority of the
Voting Shares, represented in person or
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<PAGE> 8
by proxy, shall constitute a quorum at a meeting of shareholders, except that
when specified business is to be voted on by a class or series voting as a
class, the holders of a majority of the shares of such class or series shall
constitute a quorum for the transaction of such business.
SECTION 2.7 ADJOURNMENT. A meeting of shareholders convened on the date
for which it was called may be adjourned prior to the completion of business
thereat to a date not more than one hundred twenty (120) days after the record
date of the original meeting. Notice of a subsequent meeting held as a result of
an adjournment, other than by announcement at the meeting at which the
adjournment was taken, shall not be necessary. If a quorum is present or
represented at such subsequent meeting, any business may be transacted thereat
which could have been transacted at the meeting which was adjourned.
SECTION 2.8 PROXIES. At all meetings of shareholders, a shareholder
entitled to vote may vote in person or by proxy executed in writing thereby or
by his duly authorized attorney-in-fact. A proxy shall not be valid after eleven
(11) months from the date of its execution unless a longer period is expressly
stated therein. A proxy shall be revocable unless the proxy form states
conspicuously that the proxy is irrevocable and the proxy is coupled with an
interest. Each proxy must be filed with the Secretary of the Company or his
representative at or before the time of the meeting to which it relates.
SECTION 2.9 NOTICE OF SHAREHOLDER BUSINESS AND NOMINATIONS.
A. ANNUAL MEETING OF SHAREHOLDERS.
(1) Nominations of persons for election to the Board of Trust
Managers of the Company and the proposal of business to be considered by the
shareholders may be made at
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<PAGE> 9
an annual meeting of shareholders (i) pursuant to the Company's notice of
meeting delivered pursuant to Section 2.4 of these Bylaws; (ii) by or at the
direction of the Chairman of the Board of Trust Managers; or (iii) by any
shareholder of the Company who is entitled to vote at the meeting, who has
complied with the notice procedures set forth in clauses (2) and (3) of this
Paragraph A and who was a shareholder of record at the time such notice is
delivered to the Secretary of the Company.
(2) For nominations or other business to be properly brought
before an annual meeting by a shareholder pursuant to clause (iii) of Paragraph
A(1) of this Section 2.9, the shareholder must have given timely notice thereof
in writing to the Secretary of the Company. To be timely, a shareholder's notice
shall be delivered to the Secretary at the principal office of the Company not
less than seventy (70) days nor more than ninety (90) days prior to the
anniversary of the preceding year's annual meeting; provided, however, that,
with respect to the 1997 annual meeting, the date of the 1996 annual meeting
shall be deemed to be June 17, 1996, and further provided that in the event that
the date of an annual meeting is advanced by more than thirty (30) days or
delayed by more than sixty (60) days from such anniversary date, to be timely
notice by the shareholder must be so delivered not earlier than the ninetieth
(90th) day prior to such annual meeting and not later than the close of business
on the later of the seventieth (70th) day prior to such annual meeting or the
tenth (10th) day following the day on which public announcement of the date of
such meeting is first made. Such shareholder's notice shall set forth (i) as to
each person whom the shareholder proposes to nominate for election or reelection
as a trust manager, all information relating to such person that is required to
be disclosed in solicitations of proxies for election of trust managers, or is
otherwise required, pursuant to
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<PAGE> 10
Regulation 14A under the Securities Exchange Act of 1934, as amended, or any
successor statute thereto (the "Exchange Act"), including such person's written
consent to being named in the proxy statement as a nominee and to serving as a
trust manager if elected; (ii) as to any other business that the shareholder
proposes to bring before the meeting, a brief description of the business
desired to be brought before the meeting, the reasons for conducting such
business at the meeting and any material interest in such business of such
shareholder and the beneficial owner, if any, on whose behalf the proposal is
made; and (iii) as to the shareholder giving the notice and the beneficial
owner, if any, on whose behalf the nomination or proposal is made (a) the name
and address of such shareholder, as they appear on the Company's share transfer
books, and the name and address of such beneficial owner; (b) the class or
series and number of shares of beneficial interest of the Company which are
owned beneficially and of record by such shareholder and such beneficial owner;
and (c) the date or dates upon which the shareholder acquired ownership of such
shares.
(3) Notwithstanding anything in the second sentence of
Paragraph A(2) of this Section 2.9 to the contrary, in the event that the number
of trust managers to be elected to the Board of Trust Managers of the Company is
increased and there is no public announcement naming all of the nominees for
trust manager or specifying the size of the increased Board of Trust Managers
made by the Company at least seventy (70) days prior to the first anniversary of
the preceding year's annual meeting, a shareholder's notice required by
Paragraph A of this Section 2.9 shall also be considered timely, but only with
respect to nominees for any new positions created by such increase, if it shall
be delivered to the Secretary at the principal
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<PAGE> 11
executive offices of the Company not later than the close of business on the
tenth (10th) day following the day on which such public announcement is first
made by the Company.
B. SPECIAL MEETINGS OF SHAREHOLDERS. Only such business shall be conducted
at a special meeting of shareholders as shall have been brought before the
meeting pursuant to the Company's notice of meeting pursuant to Section 2.4 of
these Bylaws. Nominations of persons for election to the Board of Trust Managers
may be made at a special meeting of shareholders at which trust managers are to
be elected pursuant to the Company's notice of meeting (i) by or at the
direction of the Board of Trust Managers or (ii) by any shareholder of the
Company who is entitled to vote at the meeting, who complies with the notice
procedures set forth in this Section 2.9 and who is a shareholder of record at
the time such notice is delivered to the Secretary of the Company. Nominations
by shareholders of persons for election to the Board of Trust Managers may be
made at such a special meeting of shareholders if the shareholder's notice as
required by Paragraph A(2) of this Section 2.9 shall be delivered to the
Secretary at the principal office of the Company not earlier than the ninetieth
(90th) day prior to such special meeting and not later than the close of
business on the later of the seventieth (70th) day prior to such special meeting
or the tenth (10th) day following the day on which public announcement is first
made of the date of the special meeting and of the nominees proposed by the
Board of Trust Managers to be elected at such meeting.
C. GENERAL.
(1) Only persons who are nominated in accordance with the
procedures set forth in this Section 2.9 shall be eligible to serve as trust
managers, and only such business shall
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<PAGE> 12
be conducted at a meeting of shareholders as shall have been brought before the
meeting in accordance with the procedures set forth in this Section. Except as
otherwise provided by law, the Declaration of Trust or these Bylaws, the
chairman of the meeting shall have the power and duty to determine whether a
nomination or any business proposed to be brought before the meeting was made or
brought in accordance with the procedures set forth in this Section 2.9 and, if
any proposed nomination or business is determined not to be in compliance
herewith, to declare that such defective nomination or proposal shall be
disregarded.
(2) For purposes of this Section 2.9, "public announcement"
shall mean disclosure in a press release reported by the Dow Jones News Service,
Associated Press or comparable national news service or in a document publicly
filed by the Company with the Securities and Exchange Commission pursuant to
Section 13, 14 or 15(d) of the Exchange Act.
(3) Notwithstanding the foregoing provisions of this Section
2.9, a shareholder shall also comply with all applicable requirements of the
Exchange Act and the rules and regulations thereunder with respect to the
matters set forth herein. Nothing in this Bylaw shall be deemed to affect any
rights of shareholders to request inclusion of proposals in the Company's proxy
statement pursuant to Rule l4a-8 under the Exchange Act or to create any
additional rights with respect to any such inclusion.
SECTION 2.10 PROCEDURE FOR ELECTION OF TRUST MANAGERS. Subject to the
rights of the holders of any class or series of Preferred Shares to elect trust
managers under specified circumstances, and to the laws of the State of Texas,
each shareholder having the right to vote for the election of trust managers
shall, unless otherwise provided in the Declaration of Trust or by
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<PAGE> 13
applicable law, have the right to vote, in person or by proxy, the number of
shares owned by such shareholder for as many persons as there are to be elected
and for whose election such shareholder has the right to vote. Unless otherwise
provided by the Declaration of Trust, no shareholder shall have the right or be
permitted to cumulate his or her votes on any basis. Election of trust managers
at all meetings of the shareholders at which trust managers are to be elected
may be viva voce, unless the chairman of the meeting shall order, or any
shareholder shall demand, that voting be by written ballot, and, except as
otherwise expressly provided with respect to the right of the holders of any
series of Preferred Shares to elect additional trust managers under specified
circumstances, a majority of the votes cast thereat shall elect. Voting on any
other question or election may be viva voce, unless the chairman of the meeting
shall order, or any shareholder shall demand, that voting be by written ballot.
SECTION 2.11 VOTE OF SHAREHOLDERS. Subject to the rights of the holders of
any class or series of Preferred Shares to elect trust managers under specified
circumstances, and to the laws of the State of Texas, each shareholder having
the right to vote shall be entitled at every meeting of shareholders to one (1)
vote for every share standing in his or her name on the record date fixed by the
Board of Trust Managers pursuant to Section 5.2 of these Bylaws. Except as
otherwise provided by law, the Declaration of Trust, these Bylaws, any
resolution adopted by the Board of Trust Managers authorizing a series of
Preferred Shares, or any resolution adopted by a majority of the Whole Board,
all matters submitted to the shareholders at any meeting (other than the
election of trust managers) shall be decided by a majority of the votes cast
with respect thereto.
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SECTION 2.12 OPENING AND CLOSING THE POLLS. The chairman of the meeting
shall fix, and announce at the meeting, the date and time of the opening and the
closing of the polls for each matter upon which the shareholders are to vote at
the meeting.
SECTION 2.13 INSPECTORS. At any meeting of shareholders, the chairman of
such meeting may, and upon the request of any shareholder shall, appoint one or
more persons as inspectors for such meeting. Such inspector or inspectors shall
ascertain and report the number of shares represented at such meeting in person
or by proxy, based upon the determination of such inspector or inspectors of the
validity and effect of proxies, count all votes, report the results and perform
such other acts as are proper to conduct voting with impartiality and fairness
to all shareholders. Each report of inspectors shall be in writing and signed by
the inspector or, if there is more than one, by a majority of inspectors acting
at such meeting, in which event the report of the majority shall be the report
of the inspectors. The report of the inspector or inspectors on the number of
shares represented at a meeting and the results of voting thereat shall be prima
facie evidence thereof.
SECTION 2.14 INFORMAL ACTION. Any action required or permitted to be taken
at a meeting of shareholders may be taken without a meeting if the following are
filed with the Company's records of shareholder meetings:
(1) a unanimous written consent which sets forth the action
and is signed by each shareholder entitled to vote thereon; and
(2) a written waiver of any right to dissent signed by each
shareholder, if any, entitled to notice of the meeting but not entitled to vote
thereat.
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ARTICLE III
BOARD OF TRUST MANAGERS
SECTION 3.1 GENERAL POWERS. The business and affairs of the Company shall
be managed by, or under the direction of, its Board of Trust Managers. In
addition to the powers and authorities expressly conferred by these Bylaws, the
Board of Trust Managers may exercise all such powers of the Company and do all
such lawful acts and things as are not by law or by the Declaration of Trust or
these Bylaws required to be exercised or done by the shareholders.
SECTION 3.2 NUMBER, TENURE AND QUALIFICATIONS. Subject to the rights of
the holders of any class or series of Preferred Shares to elect trust managers
under specified circumstances, the number of trust managers shall be fixed from
time to time pursuant to a resolution adopted by a majority of the Whole Board,
but shall consist of not more than twenty-five (25) nor less than three (3)
trust managers who need not be residents of the State of Texas and need not hold
shares in the Company; provided that if, at any time, the Company has fewer than
three (3) shareholders, the number of trust managers may be less than three (3),
but not less than the number of shareholders. At all times as the Board of Trust
Managers shall consist of three (3) or more trust managers, the trust managers,
other than those who may be elected by the holders of any class or series of
Preferred Shares, shall be divided, with respect to the time for which they
severally hold office, into three (3) classes, as nearly equal in number as
possible, with the term of office of the first class to expire at the first
annual meeting of shareholders held after such division into classes, the term
of office of the second class to expire at the second annual meeting of
shareholders held after such division into classes and the term of office of the
third class to expire at the third annual meeting of shareholders held after
such division into classes. Each
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<PAGE> 16
trust manager shall hold office until his or her successor shall have been duly
elected and qualified. At each annual meeting of shareholders commencing with
the first annual meeting held after such division into classes, trust managers
elected to succeed those trust managers whose terms then expire shall be elected
for a term of office to expire at the third (3rd) succeeding annual meeting of
shareholders after their election, with each trust manager to hold office until
his or her successor shall have been duly elected and qualified.
SECTION 3.3 COMPOSITION OF THE BOARD OF TRUST MANAGERS. Except during a
period of vacancy or vacancies on the Board of Trust Managers, a majority of the
trust managers at all times shall be persons who are not affiliates (as that
term is defined in the next succeeding sentence) of (i) the Company other than
affiliation solely by reason of service as a trust manager of the Company or
(ii) Rainwater, Inc. or any successor entity thereto (the "Independent Trust
Managers"). For purposes of this Section 3.3, "affiliate" shall mean, with
respect to the Company or Rainwater, Inc., any individual who (i) directly or
indirectly controls, is controlled by or is under common control with, such
entity or (ii) any officer, director, trust manager, general partner or trustee
of such entity (other than a trust manager of the Company who otherwise would be
deemed to be an affiliate of the Company solely by reason of service as a trust
manager).
SECTION 3.4 REGULAR MEETINGS. A regular meeting of the Board of Trust
Managers to elect officers and consider other business shall be held without
notice other than this Section 3.4 immediately after, and at the same place as,
each annual meeting of shareholders. The Board of Trust Managers may, by
resolution, designate the time and place for additional regular meetings without
notice other than such resolution.
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SECTION 3.5 SPECIAL MEETINGS. Special meetings of the Board of Trust
Managers shall be called at the request of the Chairman of the Board, the Vice
Chairman of the Board, the Chief Executive Officer, the President or a majority
of the Board of Trust Managers. The person or persons authorized to call special
meetings of the Board of Trust Managers may fix the place and time of the
meeting.
SECTION 3.6 NOTICE. Notice of any special meeting shall be given to each
trust manager at his business or residence as recorded in the books and records
of the Company or at such other address as such trust manager may designate in
writing to the Secretary of the Company by mail, by telegram or express courier,
charges prepaid, by facsimile or telephonic communication. If mailed, such
notice shall be deemed adequately delivered if deposited in the United States
mails so addressed, with postage thereon prepaid, at least five (5) days before
the day of such meeting. If by telegram, such notice shall be deemed adequately
delivered if the telegram is delivered to the telegraph company at least
twenty-four (24) hours before the time set for such meeting. If by express
courier, the notice shall be deemed adequately given if delivered to the courier
company at least two (2) days before the day of such meeting. If by telephone or
facsimile, the notice shall be deemed adequately delivered if given at least
twelve (12) hours prior to the time set for such meeting. Neither the business
to be transacted at, nor the purpose of, any regular or special meeting of the
Board of Trust Managers need be specified in the notice of such meeting, except
for amendments to these Bylaws as provided under Article VII hereof. A meeting
may be held at any time without notice if all the trust managers are present or
if those not present waive notice of the meeting in writing, either before or
after such meeting. Attendance of a trust manager at a meeting shall constitute
waiver of notice of that meeting unless he or she attends for the sole and
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<PAGE> 18
express purpose of objecting to the transaction of business on the ground that
the meeting was not lawfully called or convened.
SECTION 3.7 QUORUM. A number of trust managers equal to at least a
majority of the trust managers then in office shall constitute a quorum for the
transaction of business; provided, however, that if the Whole Board consists of
two or three trust managers, two trust managers shall constitute a quorum, if
the Whole Board consists of one trust manager, one trust manager shall
constitute a quorum and that in no event may less than one third (1/3) of the
Whole Board constitute a quorum. Anything else herein to the contrary
notwithstanding, if at any meeting of the Board of Trust Managers there shall be
less than a quorum present, a majority of the trust managers present may adjourn
the meeting from time to time without further notice. Except as may otherwise be
provided by the Declaration of Trust, these Bylaws or applicable law, the act of
the majority of the trust managers present at a meeting at which a quorum is
present shall be the act of the Board of Trust Managers. The trust managers
present at a duly organized meeting may continue to transact business until
adjournment, notwithstanding the withdrawal or departure of enough trust
managers to leave less than a quorum.
SECTION 3.8 PARTICIPATION BY CONFERENCE TELEPHONE. Members of the Board of
Trust Managers, or any committee thereof, may participate in a meeting of such
Board or committee by means of conference telephone or similar communications
equipment by means of which all persons participating in the meeting can hear
each other, and participation in a meeting pursuant to this Section 3.8 shall
constitute presence in person at such meeting.
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SECTION 3.9 PRESUMPTION OF ASSENT. A trust manager of the Company who is
present at a meeting of the trust managers at which action on any corporate
matter is taken shall be presumed to have assented to the action taken unless
his or her dissent shall be entered in the minutes of the meeting or unless he
or she shall file a written dissent to such action with the person acting as the
secretary of the meeting before the adjournment thereof.
SECTION 3.10 ADJOURNMENTS. Any meeting of the Board of Trust Managers may
be adjourned prior to the completion of business thereat. Notice of the
subsequent meeting held as a result of an adjournment, other than by
announcement at the meeting at which the adjournment is taken, shall not be
necessary. If a quorum is present at such subsequent meeting, any business may
be transacted thereat which could have been transacted at the meeting which was
adjourned.
SECTION 3.11 INFORMAL ACTION. If all of the trust managers consent in
writing to any action required or permitted to be taken at a meeting of the
Board of Trust Managers or a committee thereof and the writing or writings
evidencing such consent is or are filed by the Secretary of the Company with the
minutes of proceedings of the Board of Trust Managers or such committee, the
action shall be as valid as though it had been taken at a meeting of the Board
or committee.
SECTION 3.12 VACANCIES. Except as otherwise provided in this Section 3.12,
subject to the rights of the holders of any class or series of Preferred Shares
to elect additional trust managers under specified circumstances, unless the
Board of Trust Managers otherwise determines, vacancies resulting from death,
resignation, retirement, disqualification, or other cause relating to a
then-existing Board position shall be filled by the affirmative vote of a
majority of the remaining trust managers, though less than a quorum of the Board
of Trust Managers, and newly
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created trust managerships resulting from an increase in the authorized number
of trust managers shall be filled by the affirmative vote of a majority of the
Whole Board and, in either event, trust managers so chosen shall hold office for
a term expiring at the annual meeting of shareholders at which the term of
office of the class to which they have been elected expires and until such trust
manager's successor shall have been duly elected and qualified. No decrease in
the number of authorized trust managers constituting the Whole Board shall
shorten the term of any incumbent trust manager. Vacancies on the Board of Trust
Managers due to the removal of a trust manager may be filled by the shareholders
at an annual or special meeting called for that purpose, and trust managers so
chosen shall hold office for a term expiring at the annual meeting of
shareholders at which the term of office of the class to which they have been
elected expires and until each such trust manager's successor shall have been
duly elected and qualified. The appointment or election of a successor trust
manager shall be considered an amendment to the Declaration of Trust.
SECTION 3.13 REMOVAL. Subject to the rights of the holders of any class or
series of Preferred Shares to elect additional trust managers under specified
circumstances, any trust manager, or the entire Board of Trust Managers, may be
removed from office at any time, but only for cause and only by the affirmative
vote of the holders of at least 80 percent of the then outstanding Voting
Shares, voting together as a single class.
SECTION 3.14 COMMITTEES. The Board of Trust Managers, by resolution or
resolutions passed by a majority of the Whole Board, may designate from among
the members of the trust managers one or more committees which, to the extent
provided in such resolution or resolutions, shall have and may exercise all of
the authority of the Board of Trust Managers in
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the business and affairs of the Company to the extent consistent with the Texas
Real Estate Investment Trust Act, as amended from time to time, or any successor
statute thereto (the "Texas REIT Act"), except the power to amend the
Declaration of Trust, to approve a plan of merger or share exchange, to declare
dividends or distributions on shares, to amend these Bylaws, to issue shares
except in the manner and to the extent prescribed by the Declaration of Trust,
these Bylaws or any resolution designating the committee, to fill vacancies in
the trust managers or in the committee, to elect or remove officers of the
Company or members of the committee, to fix the compensation of any member of
the committee, to recommend to the shareholders any action requiring shareholder
approval, or to approve any merger, consolidation or share exchange which does
not require shareholder approval, each committee to consist of two (2) or more
trust managers of the Company, including, without limitation the following
committees:
(1) An Executive Committee, which shall have such authority as
shall be delegated by the Board of Trust Managers, including,
without limitation, authority to acquire and dispose of real
property and to execute contracts and agreements on behalf of
the full Board of Trust Managers including, without
limitation, those relating to the incurrence of debt by the
Company or subsidiaries thereof, and shall advise the Board of
Trust Managers from time to time with respect to such matters
as the Board of Trust Managers shall direct.
(2) An Audit Committee, which shall consist of Outside Trust
Managers (as defined below). The Audit Committee shall make
recommendations concerning the engagement of independent
public accountants, review with the independent public
accountants the plans and results of each audit engagement,
approve
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professional services provided by the independent public
accountants, review the independence of the independent public
accountants, consider the range of audit and non-audit fees
and review the adequacy of the Company's internal accounting
controls.
(3) An Executive Compensation Committee, which shall determine
compensation for the Company's executive officers and shall
administer any share incentive or other compensation plans
adopted by the Company.
For purposes of this Section 3.14, "Outside Trust Managers" shall mean trust
managers who are not (i) officers or former officers of the Company or any
subsidiary thereof; (ii) employees of the Company or any subsidiary or division
thereof; (iii) relatives of an executive officer; (iv) holders of more than five
(5) percent of the Voting Shares of the Company or any subsidiary thereof; (v)
members of any organization acting as an adviser, consultant, legal counsel or
in a similar capacity with respect to the Company and receiving compensation
therefor on an ongoing basis from the Company, in addition to trust managers
fees; or (vi) with reference to any particular transaction, interested trust
managers within the meaning of Section 4.20 of the Texas REIT Act or any
successor provision thereto. The Board of Trust Managers may designate one or
more trust managers as alternate members of any committee, who may replace any
absent or disqualified member at any meeting of such committee. Unless the Board
of Trust Managers shall provide otherwise, the presence of one-half (1/2) of the
total membership of any committee of the Board of Trust Managers shall
constitute a quorum for the transaction of business at any meeting of such
committee and the act of a majority of those present shall be the act of such
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committee. Each committee shall keep regular minutes of its proceedings and
report the same to the full Board of Trust Managers when so requested.
ARTICLE IV
OFFICERS
SECTION 4.1 CATEGORIES OF OFFICERS. The elected officers of the Company
shall consist of a Chairman of the Board, a Vice Chairman of the Board, a Chief
Executive Officer, a President, one or more Executive Vice Presidents or Vice
Presidents, a Secretary and a Treasurer. Such other officers, assistant
officers, agents and employees as the Board of Trust Managers may from time to
time deem necessary may be elected by the Board of Trust Managers or appointed
by the Chairman of the Board. The Chairman of the Board and the Vice Chairman of
the Board shall be chosen from among the trust managers. Two or more offices may
be held by the same person, except that a person may not concurrently serve as
the President and a Vice President or Executive Vice President. Each officer
chosen or appointed in the manner prescribed by the Board of Trust Managers
shall have such powers and duties as generally pertain to his or her office or
offices, subject to the specific provisions of this Article IV. Such officers
also shall have such powers and duties as from time to time may be conferred by
the Board of Trust Managers or by any committee thereof authorized to do so.
SECTION 4.2 ELECTION AND TERM OF OFFICE. The elected officers of the
Company shall be elected annually by the Board of Trust Managers at the regular
meeting of the Board of Trust Managers held after each annual meeting of the
shareholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as is convenient. Each
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officer shall hold office until his or her successor shall have been duly
elected and shall have qualified, or until his or her death or until he or she
shall resign or be removed from office.
SECTION 4.3 CHAIRMAN OF THE BOARD. The Chairman of the Board shall preside
at all meetings of the shareholders and of the Board of Trust Managers. The
Chairman of the Board shall be responsible for general management of the affairs
of the Company and shall perform all duties incidental to the office which may
be required by law, and all such other duties as may properly be required by the
Board of Trust Managers. Except where by law the signature of the Chief
Executive Officer or the President is required, the Chairman of the Board shall
possess the same power as the Chief Executive Officer and the President to sign
all certificates, contracts, and other instruments of the Company which may be
authorized by the Board of Trust Managers. The Chairman of the Board shall make
such reports to the Board of Trust Managers and the shareholders as are properly
required by the Board of Trust Managers. The Chairman of the Board shall see
that all orders and resolutions of the Board of Trust Managers and of any
committee thereof are carried into effect.
SECTION 4.4 VICE CHAIRMAN OF THE BOARD. The Vice Chairman of the Board
shall, in the absence of the Chairman, preside at all meetings of the
shareholders and of the Board of Trust Managers. The Vice Chairman of the Board
shall, together with the Chairman of the Board and the Chief Executive Officer,
act in a general executive capacity and shall have such powers and duties as
from time to time may be established by the Board of Trust Managers.
SECTION 4.5 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall act
in a general executive capacity and shall assist the Chairman of the Board in
the administration and operation
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of the Company's business and general supervision of its policies and affairs.
The Chief Executive Officer may, in the absence of or because of the inability
to act of the Chairman of the Board, perform all duties of the Chairman of the
Board and, in the absence of or because of the inability to act of the Chairman
of the Board and the Vice Chairman of the Board, preside at all meetings of
shareholders and of the Board of Trust Managers. The Chief Executive Officer may
sign, alone or with the Secretary or any assistant secretary or any other
officer of the Company properly authorized by the Board of Trust Managers,
certificates, contracts and other instruments of the Company as authorized by
the Board of Trust Managers.
SECTION 4.6 PRESIDENT. The President shall be the chief operating officer
of the Company, shall act in a general executive capacity and shall assist the
Chairman of the Board and the Chief Executive Officer in the administration and
operation of the Company's business and general supervision of its policies and
affairs. The President may, in the absence of or because of the inability to act
of the Chairman of the Board and the Chief Executive Officer, perform all duties
of the Chairman of the Board and, in the absence of or because of the inability
to act of the Chairman of the Board, the Vice Chairman of the Board and the
Chief Executive Officer, preside at all meetings of shareholders and of the
Board of Trust Managers. The President may sign, alone or with the Secretary or
any assistant secretary or any other officer of the Company properly authorized
by the Board of Trust Managers, certificates, contracts and other instruments of
the Company as authorized by the Board of Trust Managers.
SECTION 4.7 VICE PRESIDENTS. The Vice President or Vice Presidents, if
any, including any Executive Vice Presidents, shall perform the duties of the
Chief Executive Officer and the President in the absence or disability of both
the Chief Executive Officer and the President, and
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shall have such powers and perform such other duties as the Board of Trust
Managers or the Chairman of the Board from time to time may prescribe.
SECTION 4.8 SECRETARY. The Secretary shall give, or cause to be given,
notice of all meetings of shareholders and trust managers and all other notices
required by law, by the Declaration of Trust or by these Bylaws, and in case of
his or her absence or refusal or neglect so to do, any such notice may be given
by any person thereunto directed by the Chairman of the Board, the Vice Chairman
of the Board, the Chief Executive Officer, the President or the Board of Trust
Managers, upon whose request the meeting is called, as provided in these Bylaws.
The Secretary shall record all the proceedings of the meetings of the Board of
Trust Managers, any committees thereof and the shareholders of the Company in a
book or books to be kept for that purpose, and shall perform such other duties
as from time to time may be prescribed by the Board of Trust Managers, the
Chairman of the Board, the Chief Executive Officer or the President. The
Secretary shall have custody of the seal, if any, of the Company and shall affix
the same to all instruments requiring it, when authorized by the Board of Trust
Managers, the Chairman of the Board, the Chief Executive Officer or the
President, and shall attest to the same.
SECTION 4.9 TREASURER. The Treasurer shall have custody of all Company
funds and securities and shall keep full and accurate account of receipts and
disbursements in books belonging to the Company. The Treasurer shall deposit all
moneys and other valuable effects in the name and to the credit of the Company
in such depositories as may be designated by the Board of Trust Managers. The
Treasurer shall disburse the funds of the Company in such manner as may be
ordered by the Board of Trust Managers, the Chairman of the Board, the Chief
Executive Officer or the President, taking proper vouchers for such
disbursements. The
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Treasurer shall render to the Chairman of the Board, the Chief Executive
Officer, the President and the Board of Trust Managers, whenever requested, an
account of all his or her transactions as Treasurer and of the financial
condition of the Company. If required by the Board of Trust Managers, the
Treasurer shall give the Company a bond for the faithful discharge of his or her
other duties in such amount and with such surety as the Board of Trust Managers
shall prescribe. The Treasurer also shall perform such duties and have such
powers as the Board of Trust Managers from time to time may prescribe.
SECTION 4.10 REMOVAL. Any officer elected by the Board of Trust Managers
or appointed in the manner prescribed hereby may be removed by a majority of the
members of the Whole Board whenever, in their judgment, the best interests of
the Company would be served thereby. No elected or appointed officer shall have
any contractual rights against the Company for compensation by virtue of such
election or appointment beyond the date of the election or appointment of his or
her successor, his or her death, resignation or removal, whichever event shall
first occur, except as otherwise provided in an employment or similar contract
or under an employee deferred compensation plan.
SECTION 4.11 SALARIES. The Board of Trust Managers shall fix the salaries
of the Chairman of the Board, the Vice Chairman of the Board, the Chief
Executive Officer and the President of the Company, or may delegate the
authority to do so to a duly constituted Executive Compensation Committee. The
salaries of other officers, agents and employees of the Company may be fixed by
the Board of Trust Managers, by a committee of the Board, by the Chairman of the
Board or by another officer or committee to whom that function has been
delegated by the Board of Trust Managers or the Chairman of the Board.
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SECTION 4.12 VACANCIES. Any newly created office or vacancy in any office
because of death, resignation or removal shall be filled by the Board of Trust
Managers or, in the case of an office not specifically provided for in Section
4.1 hereof, by or in the manner prescribed by the Board of Trust Managers. The
officer so selected shall hold office until his or her successor is duly
selected and shall have qualified, unless he or she sooner resigns or is removed
from office in the manner provided in these Bylaws.
SECTION 4.13 RESIGNATIONS. Any trust manager or officer, whether elected
or appointed, may resign at any time by serving written notice of such
resignation on the Chairman of the Board, the Chief Executive Officer, the
President or the Secretary, and such resignation shall be deemed to be effective
as of the close of business on the date said notice is received by the Chairman
of the Board, the Chief Executive Officer, the President or the Secretary. No
action shall be required of the Board of Trust Managers or the shareholders to
make any such resignation effective.
ARTICLE V
SHARE CERTIFICATES AND TRANSFERS
SECTION 5.1 SHARE CERTIFICATES. Each shareholder shall be entitled to a
certificate or certificates, in a form approved by the Board of Trust Managers
and consistent with the Texas REIT Act, which shall represent and certify the
number, kind and class of shares owned by him or her in the Company. Each
certificate shall be signed by the Chairman of the Board, the President or a
Vice President, and by the Secretary or the Treasurer (or an assistant secretary
or assistant treasurer, if any) and, pursuant to resolutions of the Board of
Trust Managers, any such signature may be in facsimile. In case any officer,
transfer agent or registrar who has signed, or
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whose facsimile signature has been placed on, a certificate has ceased to hold
such office before the certificate is issued, it nevertheless may be issued by
the Company with the same effect as if he or she held such office at the date of
issue.
SECTION 5.2 RECORD DATE AND CLOSING OF TRANSFER BOOKS. The Board of Trust
Managers may fix, in advance, a date as the record date for the purpose of
determining shareholders entitled to notice of, or to vote at, any meeting of
shareholders, or shareholders entitled to receive payment of any dividend or
distribution or the allotment of any rights, or the shareholders entitled to
exercise any rights in respect of any change, conversion or exchange of stock,
or in order to make a determination of shareholders for any other proper
purpose. The record date may not be prior to the close of business on the day
the record date is fixed. Such record date shall not be prior to the close of
business on the day such date is fixed and not more than sixty (60) days, and in
case of a meeting of shareholders, not less than ten (10) days, prior to the
date on which the particular action requiring such determination of shareholders
is to be taken. The stock transfer books of the Company may not be closed for a
period longer than twenty (20) days.
If no record date is fixed and the Company's stock transfer books are not
closed, the determination of shareholders entitled to notice of, or to vote at,
a meeting of shareholders shall be at the close of the business on the day on
which notice of the meeting is mailed. If no record date is fixed, the record
date for determining shareholders for any purpose other than that specified in
the preceding sentence shall be at the close of business on the day on which the
resolution of the Board of Trust Managers relating thereto is adopted.
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When a determination of shareholders of record entitled to notice of,
or to vote at, any meeting of shareholders has been made as provided in this
Section 5.2, such determination shall apply to any future meeting in respect of
an adjournment thereof, unless the trust managers fix a new record date under
this section for such future meeting.
SECTION 5.3 REGISTERED SHAREHOLDERS. The Company shall be entitled to
treat the holder of record of shares as the holder in fact and, except as
otherwise provided by the laws of the State of Texas, shall not be bound to
recognize any equitable or other claim to or interest in the shares.
Shares of the Company shall be transferred on its books only upon the
surrender to the Company of the share certificates duly endorsed or accompanied
by proper evidence of succession, assignment or authority to transfer, and upon
presentation of adequate evidence of the validity of the transfer under this
Section 5.3 and the laws of the State of Texas. In that event, the surrendered
certificates shall be canceled, new certificates issued to the person entitled
to them and the transaction recorded on the books of the Company.
SECTION 5.4 LOST CERTIFICATES. The Board of Trust Managers may direct a
new certificate to be issued in place of a certificate alleged to have been
destroyed or lost if the owner makes an affidavit that it is destroyed or lost.
The Board, in its discretion, may, as a condition precedent to issuing the new
certificate, require the owner to give the Company a bond as indemnity against
any claim that may be made against the Company on the certificate allegedly
destroyed or lost.
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ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.1 FISCAL YEAR. The fiscal year of the Company shall begin on the
first (1st) day of January and end on the thirty-first (31st) day of December of
each year.
SECTION 6.2 DIVIDENDS. The Board of Trust Managers may from time to time
declare, and the Company may pay, dividends on its outstanding shares in the
manner and upon the terms and conditions provided by law and the Declaration of
Trust.
SECTION 6.3 SEAL. The seal of the Company, if any, shall have inscribed
thereon the name of the Company and shall be in such form as may be approved by
the Board of Trust Managers. The seal may be used by causing it or a facsimile
thereof to be impressed, affixed or otherwise reproduced.
SECTION 6.4 EXECUTION OF WRITTEN INSTRUMENTS. Contracts, deeds, documents,
and other instruments shall be executed by the Chairman of the Board, the Chief
Executive Officer, the President or a Vice President and attested by the
Secretary or an assistant secretary, unless the Board of Trust Managers shall
designate other authorized signatories or other procedures for their execution.
SECTION 6.5 SIGNING OF CHECKS AND NOTES. Checks, notes, drafts, and
demands for money shall be signed by such person or persons as may be designated
by the Board of Trust Managers, the Chairman of the Board, the Chief Executive
Officer or the President.
SECTION 6.6 VOTING OF SECURITIES HELD IN OTHER ENTITIES. In the absence of
other arrangements by the Board of Trust Managers, securities issued by any
other trust, corporation,
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partnership or other entity and owned or controlled by this Company may be voted
at any securityholders' meeting of such other entity by the Chairman of the
Board of this Company or, if he or she is not present at the meeting, by the
Chief Executive Officer, the President or any Vice President of this Company,
and in the event none of the Chairman of the Board, the Chief Executive Officer,
the President or any Vice President is to be present at a meeting, the
securities may be voted by such person as the Chairman of the Board and the
Secretary of the Company shall, by duly executed proxy, designate to represent
the Company at the meeting.
SECTION 6.7 INDEMNIFICATION AND INSURANCE.
A. DEFINITIONS. In this Section 6.7:
(1) "COMPANY" includes any domestic or foreign predecessor of
the Company in a merger, consolidation, or other transaction in which the
liabilities of the predecessor are transferred to the Company by operation of
law and in any other transaction in which the Company assumes the liabilities of
the predecessor but does not specifically exclude liabilities that are the
subject of this Section 6.7.
(2) "INDEMNITEE" means (i) any present or former Trust
Manager, officer, employee or agent of the Company, (ii) any person who while
serving in any of the capacities referred to in clause (i) hereof served at the
Company's request as a director, officer, partner, venturer, proprietor,
trustee, employee, agent or similar functionary of another real estate
investment trust or foreign or domestic corporation, partnership, joint venture,
sole proprietorship, trust, employee benefit plan or other enterprise, and (iii)
any person nominated or
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designed by (or pursuant to authority granted by) the Trust Managers or any
committee thereof to serve in any of the capacities referred to in clause (i) or
(ii) hereof.
(3) "OFFICIAL CAPACITY" means (i) when used with respect to a
Trust Manager, the office of Trust Manager of the Company and (ii) when used
with respect to a person other than a Trust Manager, the elective or appointive
office of the Company held by such person or the employment or agency
relationship undertaken by such person on behalf of the Company, but in each
case does not include service for any other real estate investment trust or
foreign or domestic corporation or any partnership, joint venture, sole
proprietorship, trust, employee benefit plan or other enterprise.
(4) "PROCEEDING" means any threatened, pending or completed
action, suit or proceeding, whether civil, criminal, administrative, arbitrative
or investigative, any appeal in such an action, suit or proceeding, and any
inquiry or investigation that could lead to such an action, suit or proceeding.
B. INDEMNIFICATION. The Company shall indemnify every Indemnitee against
all judgments, penalties (including excise and similar taxes), fines, amounts
paid in settlement and reasonable expenses actually incurred by the Indemnitee
in connection with any Proceeding in which he was, is or is threatened to be
named defendant or respondent, or in which he was or is a witness without being
named a defendant or respondent, by reason, in whole or in part, of his serving
or having served, or having been nominated or designated to serve, in any of the
capacities referred to in Section 6.7.A(1), if it is determined in accordance
with Section 6.7.D that the Indemnitee (a) conducted himself in good faith, (b)
reasonably believed, in the case of
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conduct in his Official Capacity, that his conduct was in the Company's best
interests and, in all other cases, that his conduct was at least not opposed to
the Company's best interests, and (c) in the case of any criminal proceeding,
had no reasonable cause to believe that his conduct was unlawful; provided,
however, that in the event that an Indemnitee is found liable to the Company or
is found liable on the basis that personal benefit was improperly received by
the Indemnitee the indemnification (i) is limited to reasonable expenses
actually incurred by the Indemnitee in connection with the Proceeding and (ii)
shall not be made in respect of any Proceeding in which the Indemnitee shall
have been found liable for willful or intentional misconduct in the performance
of his duty to the Company. Except as provided in the immediately preceding
proviso to the first sentence of this Section 6.7.B, no indemnification shall be
made under this Section 6.7.B in respect of any Proceeding in which such
Indemnitee shall have been (x) found liable on the basis that personal benefit
was improperly received by him, whether or not the benefit resulted from an
action taken in the Indemnitee's Official Capacity, or (y) found liable to the
Company. The termination of any Proceeding by judgment, order, settlement or
conviction, or on a plea of nolo contendere or its equivalent, is not of itself
determinative that the Indemnitee did not meet the requirements set forth in
clauses (a), (b) or (c) in the first sentence of this Section 6.7.B. An
Indemnitee shall be deemed to have been found liable in respect of any claim,
issue or matter only after the Indemnitee shall have been so adjudged by a court
of competent jurisdiction after exhaustion of all appeals therefrom. Reasonable
expenses shall include, without limitation, all court costs and all fees and
disbursements of attorneys for the Indemnitee.
C. SUCCESSFUL DEFENSE. Without limitation of Section 6.7.B and in addition
to the indemnification provided for in Section 6.7.B, the Company shall
indemnify every
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Indemnitee against reasonable expenses incurred by such person in connection
with any Proceeding in which he is a witness or a named defendant or respondent
because he served in any of the capacities referred to in Section 6.7.A(1), if
such person has been wholly successful, on the merits or otherwise, in defense
of the Proceeding.
D. DETERMINATIONS. Any indemnification under Section 6.7.B
(unless ordered by a court of competent jurisdiction) shall be made by the
Company only upon a determination that indemnification of the Indemnitee is
proper in the circumstances because he has met the applicable standard of
conduct. Such determination shall be made (a) by the Trust Managers by a
majority vote of a quorum consisting of Trust Managers who, at the time of such
vote, are not named defendants or respondents in the Proceeding; (b) if such a
quorum cannot be obtained, then by a majority vote of a committee of the Trust
Managers, duly designated to act in the matter by a majority vote of all Trust
Managers (in which designation Trust Managers who are named defendants or
respondents in the Proceeding may participate), such committee to consist solely
of two (2) or more Trust Managers who, at the time of the committee vote, are
not named defendants or respondents in the Proceeding; (c) by special legal
counsel selected by the Trust Managers or a committee thereof by vote as set
forth in clauses (a) or (b) of this Section 6.7.D or, if the requisite quorum of
all of the Trust Managers cannot be obtained and such committee cannot be
established, by a majority vote of all of the Trust managers (in which Trust
Managers who are named defendants or respondents in the Proceeding may
participate); or (d) by the shareholders in a vote that excludes the shares held
by Trust Managers that are named defendants or respondents in the Proceeding.
Determination as to reasonableness of expenses shall be made in the same manner
as the determination that indemnification is permissible, except that if the
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determination that indemnification is permissible is made by special legal
counsel, determination as to reasonableness of expenses must be made in the
manner specified in clause (c) of the preceding sentence for the selection of
special legal counsel. In the event a determination is made under this Section
6.7.D that the Indemnitee has met the applicable standard of conduct as to some
matters but not as to others, amounts to be indemnified may be reasonably
prorated.
E. ADVANCEMENT OF EXPENSES. Reasonable expenses (including court costs and
attorneys' fees) incurred by an Indemnitee who was or is a witness or was, is or
is threatened to be made a named defendant or respondent in a Proceeding shall
be paid or reimbursed by the Company at reasonable intervals in advance of the
final disposition of such Proceeding, and without making any of the
determinations specified in Section 6.7.D, after receipt by the Company of (a) a
written affirmation by such Indemnitee of his good faith belief that he has met
the standard of conduct necessary for indemnification by the Company under this
Section 6.7 and (b) a written undertaking by or on behalf of such Indemnitee to
repay the amount paid or reimbursed by the Company if it shall ultimately be
determined that he is not entitled to be indemnified by the Company as
authorized in this Section 6.7. Such written undertaking shall be an unlimited
general obligation of the Indemnitee but need not be secured and it may be
accepted without reference to financial ability to make repayment.
Notwithstanding any other provision of this Section 6.7, the Company may pay or
reimburse expenses incurred by an Indemnitee in connection with his appearance
as a witness or other participation in a Proceeding at a time when he is not
named a defendant or respondent in the Proceeding.
F. ENFORCEMENT. If a claim under paragraph B of this Section 6.7 is not
paid in full by the Company within thirty (30) calendar days after a written
claim has been received by
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<PAGE> 37
the Company, the claimant may at any time thereafter (but prior to payment of
the claim) bring suit against the Company to recover the unpaid amount of the
claim and, if successful, in whole or in part, the claimant 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 Company) that the
claimant has not met the standards of conduct which make it permissible under
the Texas REIT Act for the Company to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be on the Company. Neither
the failure of the Company (including its Board of Trust Managers, independent
legal counsel or stockholders) to have made a determination prior to the
commencement of such action that indemnification of the claimant is proper in
the circumstances because he or she has met the applicable standard of conduct
set forth in the Texas REIT Act, nor an actual determination by the Company
(including its Board of Trust Managers, independent legal counsel or
stockholders) that the claimant has not met such applicable standard of conduct,
shall be a defense to the action or create a presumption that the claimant has
not met the applicable standard of conduct.
G. PROCEDURE UPON A CHANGE IN CONTROL. Following any "change in control"
of the Company of the type required to be reported under Item 1 of Form 8-K
promulgated under the Exchange Act, any determination as to entitlement to
indemnification shall be made by independent legal counsel selected by the
claimant, which such independent legal counsel shall be retained by the Board of
Trust Managers on behalf of the Company.
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<PAGE> 38
H. EMPLOYEE BENEFIT PLANS. For purposes of this Section 6.7, the Company
shall be deemed to have requested an Indemnitee to serve an employee benefit
plan whenever the performance by him of his duties to the Company also imposed
or imposes duties on or otherwise involved or involves services by him to the
plan or participants or beneficiaries of the plan. Excise taxes assessed on an
Indemnitee with respect to an employee benefit plan pursuant to applicable law
shall be deemed fines. Action taken or omitted by an Indemnitee with respect to
an employee benefit plan in the performance of his duties for a purpose
reasonably believed by him to be in the interest of the participants and
beneficiaries of the plan shall be deemed to be for a purpose which is not
opposed to the best interests of the Company.
I. AUTHORIZATION TO PURCHASE INSURANCE. The Company may purchase and
maintain insurance, at its expense, on its own behalf and on behalf of any
person who is or was a trust manager, officer, employee or agent of the Company
or who while a trust manager, officer, employee or agent of the Company is or
was serving at the request of the Company as a trust manager, officer, partner,
trustee, employee or agent of another foreign or domestic corporation,
partnership, joint venture, trust or other enterprise, or employee benefit plan,
against any liability asserted against and incurred by such person in any such
capacity or arising out of such person's position, whether or not the Company
would have the power to indemnify such person against such expense or liability
under the Texas REIT Act.
J. OTHER INDEMNIFICATION AND INSURANCE. The indemnification provided by
this Section 6.7 shall (a) not be deemed exclusive of, or to preclude, any other
rights to which those seeking indemnification may at any time be entitled under
the Company's Declaration of Trust, any law, agreement or vote of shareholders
or disinterested Trust Managers, or otherwise,
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<PAGE> 39
or under any policy or policies of insurance purchased and maintained by the
Company on behalf of any Indemnitee, both as to action in his Official Capacity
and as to action in any other capacity, (b) continue as to a person who has
ceased to be in the capacity by reason of which he was an Indemnitee with
respect to matters arising during the period he was in such capacity, and (c)
inure to the benefit of the heirs, executors and administrators of such a
person.
K. NOTICE. Any indemnification of or advance of expenses to an Indemnitee
in accordance with this Section 6.7 shall be reported in writing to the
shareholders of the Company with or before the notice or waiver of notice of the
next shareholders' meeting or with or before the next submission to shareholders
of a consent to action without a meeting and, in any case, within the
twelve-month period immediately following the date of the indemnification or
advance.
L. CONSTRUCTION. The indemnification provided by this Section 6.7 shall be
subject to all valid and applicable laws, including, without limitation, the
Texas REIT Act, and, in the event this Section 6.7 or any of the provisions
hereof or the indemnification contemplated hereby are found to be inconsistent
with or contrary to any such valid laws, the latter shall be deemed to control
and this Section 6.7 shall be regarded as modified accordingly, and, as so
modified, shall continue in full force and effect.
M. CONTINUING OFFER, RELIANCE, ETC. The provisions of this Section 6.7 (a)
are for the benefit of, and may be enforced by, each Indemnitee of the Company,
the same as if set forth in their entirety in a written instrument duly executed
and delivered by the Company and such Indemnitee and (b) constitute a continuing
offer to all present and future Indemnitees. The
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<PAGE> 40
Company, by its adoption of these Bylaws, (x) acknowledges and agrees that each
Indemnitee of the Company has relied upon and will continue to rely upon the
provisions of this Section 6.7 in becoming, and serving in any of the capacities
referred to in Section 6.7.A(1) hereof, (y) waives reliance upon, and all
notices of acceptance of, such provisions by such Indemnitees and (z)
acknowledges and agrees that no present or future Indemnitee shall be prejudiced
in his right to enforce the provisions of this Section 6.7 in accordance with
their terms by any act or failure to act on the part of the Company.
N. INDEMNIFICATION OF SHAREHOLDERS. The Company shall indemnify each
shareholder against any claim or liability to which the shareholder may become
subject by reason of being or having been a shareholder. The Company shall
reimburse each shareholder for all legal and other expenses reasonably incurred
by such shareholder in connection with any such claim or liability.
O. AUTHORITY TO FURTHER INDEMNIFY. The Company may, to the extent
authorized from time to time by the Trust Managers, grant rights of
indemnification and rights to be paid by the Company the expenses incurred in
defending any proceeding in advance of its final disposition to any employee or
agent of the Company to the fullest extent of the provisions of this Section 6.7
with respect to the indemnification and advancement of expenses of Trust
Managers and officers of the Company.
P. EFFECT OF AMENDMENT. No amendment, modification or repeal of this
Section 6.7 or any provision of this Section 6.7 shall in any manner terminate,
reduce or impair the right of any past, present or future Indemnitees to be
indemnified by the Company, nor the
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<PAGE> 41
obligation of the Company to indemnify any such Indemnitees, under and in
accordance with the provisions of this Section 6.7 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 be
asserted.
ARTICLE VII
AMENDMENTS
These Bylaws may be amended, added to, rescinded or repealed at any
meeting of the Board of Trust Managers or of the shareholders, provided that
notice of the proposed change was given (i) in the case of a meeting of the
shareholders, in the notice of the meeting given pursuant to Section 2.4 of
these Bylaws and (ii) in the case of a meeting of the Board of Trust Managers,
in a notice given pursuant to Section 3.4 or 3.6 hereof, as the case may be;
provided, however, that, in the case of amendments by shareholders, except as
otherwise specifically required by law, notwithstanding any other provisions of
these Bylaws or the Declaration of Trust or any provision of law which might
otherwise permit a lesser vote or no vote, but in addition to any affirmative
vote of the holders of any particular class or series of the Voting Shares
required by law, the Declaration of Trust or these Bylaws with respect to any
class or series of Preferred Shares, the affirmative vote of the holders of that
proportion of the Voting Shares necessary to approve an amendment to the
Company's Declaration of Trust pursuant to such Declaration of Trust and the
Texas REIT Act, voting together as a single class, shall be required to alter,
amend or repeal any provision of these Bylaws.
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<PAGE> 42
AMENDMENT TO AMENDED AND RESTATED BYLAWS
(UNANIMOUS CONSENT DATED AS OF SEPTEMBER 23, 1997)
* * * * *
FURTHER RESOLVED, that the Chief Executive Officer and President be,
and hereby is, appointed to serve as the sole member of the New Pricing
Committee, a special committee of this Board of Trust Managers...;
* * * * *
FURTHER RESOLVED, that to the extent that the appointment of the
President and Chief Executive Officer as the sole member of the New Pricing
Committee is inconsistent with the Bylaws, this resolution shall constitute an
amendment of the Bylaws solely for purposes of the appointment and
authorization of the New Pricing Committee.
<PAGE> 43
SECOND AMENDMENT TO AMENDED AND RESTATED BYLAWS
(ADOPTED AT A SPECIAL MEETING OF THE BOARD OF TRUST MANAGERS
HELD ON MARCH 9, 1998)
Article IV of the Bylaws is amended and restated in its entirety to read as
follows:
* * * * *
ARTICLE IV
OFFICERS AND AGENTS
SECTION 4.1 CATEGORIES OF OFFICERS AND AGENTS. The elected officers of the
Company shall consist of a Chairman of the Board, a Vice Chairman of the Board,
a Chief Executive Officer, a President, Treasurer, and one or more Senior Vice
Presidents (each an "Officer" and two or more "Officers"). In addition, the
Board of Trust Managers may from time to time elect, and the Chairman of the
Board, the Vice Chairman of the Board, the Chief Executive Officer, the
President or any of them may appoint, one or more Vice Presidents, a Secretary,
one or more Assistant Secretaries, one or more Assistant Treasurers, and such
other nonexecutive officers, assistant officers, agents and employees (each an
"Agent" and two or more "Agents"; when the terms "officer" or "officers" without
initial capitalization is used in these Bylaws, then such terms refer to both an
Officer and an Agent unless otherwise specified or the context otherwise
requires) as the Board of Trust Managers may from time to time deem necessary
may be elected by the Board of Trust Managers or appointed by the Chairman of
the Board, the Vice Chairman of the Board or the Chief Executive Officer. The
Chairman of the Board and the Vice Chairman of the Board shall be chosen from
among the trust managers. Two or more offices may be held by the same person,
except that a person may not concurrently serve as the President and a Senior
Vice President. Each Officer shall have such powers and duties as generally
pertain to his or her office or offices, subject to the specific provisions of
this Article IV; such Officers also shall have such powers and duties as from
time to time may be conferred by the Board of Trust Managers or by any committee
thereof authorized to do so. Each Agent shall have only such powers and duties
as are prescribed to such Agent by the Board of Trust Managers, any committee
thereof authorized to confer powers and duties upon such Agent, any executive
officer authorized to appoint such Agent or as specifically set forth in Article
IV of these Bylaws. Only Officers shall be considered "officers" of the Company
under the provisions of Section 4.10(F) of the Act; Agents shall not be
considered officers but instead shall be considered non-officerial agents of the
Company under the provisions of Section 4.10(F) of the Act.
SECTION 4.2 ELECTION AND TERM OF OFFICE. The elected Officers of the
Company shall be, and the elected Agents of the Company may be, elected annually
by the Board of Trust Managers at the regular meeting of the Board of Trust
Managers held after each annual meeting of the shareholders. If the election of
Officers shall not be held at such meeting, such election shall be held as soon
thereafter as is convenient. Each Officer and each Agent shall hold office until
his or her successor shall have been duly elected and shall have qualified, or
until his or her death or until he or she shall resign or be removed from
office.
<PAGE> 44
SECTION 4.3 CHAIRMAN OF THE BOARD. The Chairman of the Board shall preside
at all meetings of the shareholders and of the Board of Trust Managers. The
Chairman of the Board shall be responsible for general management of the affairs
of the Company and shall perform all duties incidental to the office which may
be required by law, and all such other duties as may properly be required by the
Board of Trust Managers. Except where by law the signature of the Chief
Executive Officer or the President is required, the Chairman of the Board shall
possess the same power as the Chief Executive Officer and the President to sign
all certificates, contracts, and other instruments of the Company which may be
authorized by the Board of Trust Managers. The Chairman of the Board shall make
such reports to the Board of Trust Managers and the shareholders as are properly
required by the Board of Trust Managers. The Chairman of the Board shall see
that all orders and resolutions of the Board of Trust Managers and of any
committee thereof are carried into effect.
SECTION 4.4 VICE CHAIRMAN OF THE BOARD. The Vice Chairman of the Board
shall, in the absence of the Chairman, preside at all meetings of the
shareholders and of the Board of Trust Managers. The Vice Chairman of the Board
shall, together with the Chairman of the Board and the Chief Executive Officer,
act in a general executive capacity and shall have such powers and duties as set
forth in these Bylaws or as from time to time may be established by the Board of
Trust Managers. The Vice Chairman of the Board may, in the absence of or because
of the inability to act of the Chairman of the Board, and if so authorized by
the Board of Trust Managers, perform all duties of the Chairman of the Board.
Except where by law the signature of the Chief Executive Officer or the
President is required, the Vice Chairman of the Board shall possess the same
power as the Chief Executive Officer and the President to sign all certificates,
contracts, and other instruments of the Company which may be authorized by the
Board of Trust Managers.
SECTION 4.5 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer shall act
in a general executive capacity and shall assist the Chairman of the Board in
the administration and operation of the Company's business and general
supervision of its policies and affairs. The Chief Executive Officer may, in the
absence of or because of the inability to act of the Chairman of the Board,
perform all duties of the Chairman of the Board and, in the absence of or
because of the inability to act of the Chairman of the Board and the Vice
Chairman of the Board, preside at all meetings of shareholders and of the Board
of Trust Managers. The Chief Executive Officer may sign, alone or with the
Secretary or any assistant secretary or any other officer of the Company
properly authorized by the Board of Trust Managers, certificates, contracts and
other instruments of the Company as authorized by the Board of Trust Managers.
SECTION 4.6 PRESIDENT. The President shall be the chief operating officer
of the Company, shall act in a general executive capacity and shall assist the
Chairman of the Board and the Chief Executive Officer in the administration and
operation of the Company's business and general supervision of its policies and
affairs. The President may, in the absence of or because of the inability to act
of the Chairman of the Board and the Chief Executive Officer, perform all duties
of the Chairman of the Board and, in the absence of or because of the inability
to act of the Chairman of the Board, the Vice Chairman of the Board and the
Chief Executive Officer, preside
<PAGE> 45
at all meetings of shareholders and of the Board of Trust Managers. The
President may sign, alone or with the Secretary or any assistant secretary or
any other officer of the Company properly authorized by the Board of Trust
Managers, certificates, contracts and other instruments of the Company as
authorized by the Board of Trust Managers.
SECTION 4.7 SENIOR VICE PRESIDENTS. The Senior Vice President or Senior
Vice Presidents, if any, shall perform the duties of the Chief Executive Officer
and the President in the absence or disability of both the Chief Executive
Officer and the President, and shall have such powers and perform such other
duties as the Board of Trust Managers or the Chairman of the Board from time to
time may prescribe.
SECTION 4.7A VICE PRESIDENTS. The Vice President or Vice Presidents, if
any, shall have only such powers and duties as are prescribed to such Vice
President or Vice Presidents by the Board of Trust Managers, any committee
thereof authorized to confer powers and duties upon such Vice President or Vice
Presidents, or any executive officer authorized to appoint such Vice President
or Vice Presidents.
SECTION 4.8 SECRETARY. The Secretary shall give, or cause to be given,
notice of all meetings of shareholders and trust managers and all other notices
required by law, by the Declaration of Trust or by these Bylaws, and in case of
his or her absence or refusal or neglect so to do, any such notice may be given
by any person thereunto directed by the Chairman of the Board, the Vice Chairman
of the Board, the Chief Executive Officer, the President or the Board of Trust
Managers, upon whose request the meeting is called, as provided in these Bylaws.
The Secretary shall record all the proceedings of the meetings of the Board of
Trust Managers, any committees thereof and the shareholders of the Company in a
book or books to be kept for that purpose, and shall perform such other duties
and have such other powers as from time to time may be prescribed by the Board
of Trust Managers, any committee thereof authorized to confer powers and duties
upon the Secretary, or any executive officer authorized to appoint Secretary.
The Secretary shall have custody of the seal, if any, of the Company and shall
affix the same to all instruments requiring it, when authorized by the Board of
Trust Managers, the Chairman of the Board, the Vice Chairman of the Board, the
Chief Executive Officer or the President, and shall attest to the same.
SECTION 4.9 TREASURER. The Treasurer shall have custody of all Company
funds and securities and shall keep full and accurate account of receipts and
disbursements in books belonging to the Company. The Treasurer shall deposit all
moneys and other valuable effects in the name and to the credit of the Company
in such depositories as may be designated by the Board of Trust Managers. The
Treasurer shall disburse the funds of the Company in such manner as may be
ordered by the Board of Trust Managers, the Chairman of the Board, the Vice
Chairman of the Board, the Chief Executive Officer or the President, taking
proper vouchers for such disbursements. The Treasurer shall render to the
Chairman of the Board, the Vice Chairman of the Board, the Chief Executive
Officer, the President and the Board of Trust Managers, whenever requested, an
account of all his or her transactions as Treasurer and of the financial
condition of the Company. If required by the Board of Trust Managers, the
Treasurer shall give the Company a bond for the faithful discharge of his or her
other duties in such amount
<PAGE> 46
and with such surety as the Board of Trust Managers shall prescribe. The
Treasurer also shall perform such duties and have such powers as the Board of
Trust Managers from time to time may prescribe.
SECTION 4.10 REMOVAL. Any Officer or Agent elected by the Board of Trust
Managers or appointed in the manner prescribed hereby may be removed by a
majority of the members of the Whole Board whenever, in their judgment, the best
interests of the Company would be served thereby. No elected or appointed
Officer or Agent shall have any contractual rights against the Company for
compensation by virtue of such election or appointment beyond the date of the
election or appointment of his or her successor, his or her death, resignation
or removal, whichever event shall first occur, except as otherwise provided in
an employment or similar contract or under an employee deferred compensation
plan.
SECTION 4.11 SALARIES. The Board of Trust Managers shall fix the salaries
of the Chairman of the Board, the Vice Chairman of the Board, the Chief
Executive Officer and the President of the Company, or may delegate the
authority to do so to a duly constituted Executive Compensation Committee. The
salaries of other Officers, Agents and employees of the Company may be fixed by
the Board of Trust Managers, by a committee of the Board, by the Chairman of the
Board or by another officer or committee to whom that function has been
delegated by the Board of Trust Managers or the Chairman of the Board.
SECTION 4.12 VACANCIES. Any newly created office or vacancy in any office
because of death, resignation or removal shall be filled by the Board of Trust
Managers, any committee thereof authorized to appoint an officer to fill that
office, or any executive officer authorized to appoint an officer to fill that
office, or, in the case of an office not specifically provided for in Section
4.1 hereof, by or in the manner prescribed by the Board of Trust Managers. The
officer so selected shall hold office until his or her successor is duly
selected and shall have qualified, unless he or she sooner resigns or is removed
from office in the manner provided in these Bylaws.
SECTION 4.13 RESIGNATIONS. Any trust manager, Officer or Agent, whether
elected or appointed, may resign at any time by serving written notice of such
resignation on the Chairman of the Board, the Vice Chairman of the Board, the
Chief Executive Officer, the President or the Secretary, and such resignation
shall be deemed to be effective as of the close of business on the date said
notice is received by the Chairman of the Board, the Vice Chairman of the Board,
the Chief Executive Officer, the President or the Secretary. No action shall be
required of the Board of Trust Managers or the shareholders to make any such
resignation effective.
<PAGE> 47
THIRD AMENDMENT TO AMENDED AND RESTATED BYLAWS
(ADOPTED AT A SPECIAL MEETING OF THE BOARD OF TRUST MANAGERS
HELD ON NOVEMBER 2, 1998)
* * * * *
RESOLVED, that the Bylaws be and hereby are amended for the purpose
and intent of rescinding and repealing the Second Amendment and of restoring
the Bylaws to the version in effect prior to adoption of the Second Amendment;
RESOLVED, that to effect the foregoing purpose, Article IV of the
Bylaws is hereby amended and restated in its entirety as more specifically set
forth ... [below], as the Third Amendment to the Amended and Restated Bylaws of
the Company;
* * * * *
ARTICLE IV
OFFICERS
SECTION 4.1 CATEGORIES OF OFFICERS. The elected officers of the
Company shall consist of a Chairman of the Board, a Vice Chairman of the Board,
a Chief Executive Officer, a President, one or more Executive Vice Presidents
or Vice Presidents, a Secretary and a Treasurer. Such other officers, assistant
officers, agents and employees as the Board of Trust Managers may from time to
time deem necessary may be elected by the Board of Trust Managers or appointed
by the Chairman of the Board. The Chairman of the Board and the Vice Chairman
of the Board shall be chosen from among the trust managers. Two or more offices
may be held by the same person, except that a person may not concurrently serve
as the President and a Vice President or Executive Vice President. Each officer
chosen or appointed in the manner prescribed by the Board of Trust Managers
shall have such powers and duties as generally pertain to his or her office or
offices, subject to the specific provisions of this Article IV. Such officers
also shall have such powers and duties as from time to time may be conferred by
the Board of Trust Managers or by any committee thereof authorized to do so.
SECTION 4.2 ELECTION AND TERM OF OFFICE. The elected officers of the
Company shall be elected annually by the Board of Trust Managers at the regular
meeting of the Board of Trust Managers held after each annual meeting of the
shareholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as is convenient. Each officer
shall hold office until his or her successor shall have been duly elected and
shall have qualified, or until his or her death or until he or she shall resign
or be removed from office.
<PAGE> 48
SECTION 4.3 CHAIRMAN OF THE BOARD. The Chairman of the Board shall
preside at all meetings of the shareholders and of the Board of Trust Managers.
The Chairman of the Board shall be responsible for general management of the
affairs of the Company and shall perform all duties incidental to the office
which may be required by law, and all such other duties as may properly be
required by the Board of Trust Managers. Except where by law the signature of
the Chief Executive Officer or the President is required, the Chairman of the
Board shall possess the same power as the Chief Executive Officer and the
President to sign all certificates, contracts, and other instruments of the
Company which may be authorized by the Board of Trust Managers. The Chairman of
the Board shall make such reports to the Board of Trust Managers and the
shareholders as are properly required by the Board of Trust Managers. The
Chairman of the Board shall see that all orders and resolutions of the Board of
Trust Managers and of any committee thereof are carried into effect.
SECTION 4.4 VICE CHAIRMAN OF THE BOARD. The Vice Chairman of the
Board shall, in the absence of the Chairman, preside at all meetings of the
shareholders and of the Board of Trust Managers. The Vice Chairman of the Board
shall, together with the Chairman of the Board and the Chief Executive Officer,
act in a general executive capacity and shall have such powers and duties as
set forth in these Bylaws or as from time to time may be established by the
Board of Trust Managers. The Vice Chairman of the Board may, in the absence of
or because of the inability to act of the Chairman of the Board, and if so
authorized by the Board of Trust Managers, perform all duties of the Chairman
of the Board. Except where by law the signature of the Chief Executive Officer
or the President is required, the Vice Chairman of the Board shall possess the
same power as the Chief Executive Officer and the President to sign all
certificates, contracts, and other instruments of the Company which may be
authorized by the Board of Trust Managers.
SECTION 4.5 CHIEF EXECUTIVE OFFICER. The Chief Executive Officer
shall act in a general executive capacity and shall assist the Chairman of the
Board in the administration and operation of the Company's business and general
supervision of its policies and affairs. The Chief Executive Officer may, in
the absence of or because of the inability to act of the Chairman of the Board,
perform all duties of the Chairman of the Board and, in the absence of or
because of the inability to act of the Chairman of the Board and the Vice
Chairman of the Board, preside at all meetings of shareholders and of the Board
of Trust Managers. The Chief Executive Officer may sign, alone or with the
Secretary or any assistant secretary or any other officer of the Company
properly authorized by the Board of Trust Managers, certificates, contracts and
other instruments of the Company as authorized by the Board of Trust Managers.
SECTION 4.6 PRESIDENT. The President shall be the chief operating
officer of the Company, shall act in a general executive capacity and shall
assist the Chairman of the Board and the Chief Executive Officer in the
administration and operation of the Company's business and general supervision
of its policies and affairs. The President may, in the absence of or because of
the inability to act of the Chairman
<PAGE> 49
of the Board and the Chief Executive Officer, perform all duties of the
Chairman of the Board and, in the absence of or because of the inability to act
of the Chairman of the Board, the Vice Chairman of the Board and the Chief
Executive Officer, preside at all meetings of shareholders and of the Board of
Trust Managers. The President may sign, alone or with the Secretary or any
assistant secretary or any other officer of the Company properly authorized by
the Board of Trust Managers, certificates, contracts and other instruments of
the Company as authorized by the Board of Trust Managers.
SECTION 4.7 VICE PRESIDENTS. The Vice President or Vice Presidents,
if any, including any Executive Vice Presidents, shall perform the duties of
the Chief Executive Officer and the President in the absence or disability of
both the Chief Executive Officer and the President, and shall have such powers
and perform such other duties as the Board of Trust Managers or the Chairman of
the Board from time to time may prescribe.
SECTION 4.8 SECRETARY. The Secretary shall give, or cause to be
given, notice of all meetings of shareholders and trust managers and all other
notices required by law, by the Declaration of Trust or by these Bylaws, and in
case of his or her absence or refusal or neglect so to do, any such notice may
be given by any person thereunto directed by the Chairman of the Board, the
Vice Chairman of the Board, the Chief Executive Officer, the President or the
Board of Trust Managers, upon whose request the meeting is called, as provided
in these Bylaws. The Secretary shall record all the proceedings of the meetings
of the Board of Trust Managers, any committees thereof and the shareholders of
the Company in a book or books to be kept for that purpose, and shall perform
such other duties as from time to time may be prescribed by the Board of Trust
Managers, the Chairman of the Board, the Vice Chairman of the Board, the Chief
Executive Officer or the President. The Secretary shall have custody of the
seal, if any, of the Company and shall affix the same to all instruments
requiring it, when authorized by the Board of Trust Managers, the Chairman of
the Board, the Vice Chairman of the Board, the Chief Executive Officer or the
President, and shall attest to the same.
SECTION 4.9 TREASURER. The Treasurer shall have custody of all
Company funds and securities and shall keep full and accurate account of
receipts and disbursements in books belonging to the Company. The Treasurer
shall deposit all moneys and other valuable effects in the name and to the
credit of the Company in such depositories as may be designated by the Board of
Trust Managers. The Treasurer shall disburse the funds of the Company in such
manner as may be ordered by the Board of Trust Managers, the Chairman of the
Board, the Vice Chairman of the Board, the Chief Executive Officer or the
President, taking proper vouchers for such disbursements. The Treasurer shall
render to the Chairman of the Board, the Vice Chairman of the Board, the Chief
Executive Officer, the President and the Board of Trust Managers, whenever
requested, an account of all his or her transactions as Treasurer and of the
financial condition of the Company. If required by the Board of Trust Managers,
the Treasurer shall give the Company a bond for
<PAGE> 50
the faithful discharge of his or her other duties in such amount and with such
surety as the Board of Trust Managers shall prescribe. The Treasurer also shall
perform such duties and have such powers as the Board of Trust Managers from
time to time may prescribe.
SECTION 4.10 REMOVAL. Any officer elected by the Board of Trust
Managers or appointed in the manner prescribed hereby may be removed by a
majority of the members of the Whole Board whenever, in their judgment, the
best interests of the Company would be served thereby. No elected or appointed
officer shall have any contractual rights against the Company for compensation
by virtue of such election or appointment beyond the date of the election or
appointment of his or her successor, his or her death, resignation or removal,
whichever event shall first occur, except as otherwise provided in an
employment or similar contract or under an employee deferred compensation plan.
SECTION 4.11 SALARIES. The Board of Trust Managers shall fix the
salaries of the Chairman of the Board, the Vice Chairman of the Board, the
Chief Executive Officer and the President of the Company, or may delegate the
authority to do so to a duly constituted Executive Compensation Committee. The
salaries of other officers, agents and employees of the Company may be fixed by
the Board of Trust Managers, by a committee of the Board, by the Chairman of
the Board or by another officer or committee to whom that function has been
delegated by the Board of Trust Managers or the Chairman of the Board.
SECTION 4.12 VACANCIES. Any newly created office or vacancy in any
office because of death, resignation or removal shall be filled by the Board of
Trust Managers or, in the case of an office not specifically provided for in
Section 4.1 hereof, by or in the manner prescribed by the Board of Trust
Managers. The officer so selected shall hold office until his or her successor
is duly selected and shall have qualified, unless he or she sooner resigns or
is removed from office in the manner provided in these Bylaws.
SECTION 4.13 RESIGNATIONS. Any trust manager or officer, whether
elected or appointed, may resign at any time by serving written notice of such
resignation on the Chairman of the Board, the Vice Chairman of the Board, the
Chief Executive Officer, the President or the Secretary, and such resignation
shall be deemed to be effective as of the close of business on the date said
notice is received by the Chairman of the Board, the Vice Chairman of the
Board, the Chief Executive Officer, the President or the Secretary. No action
shall be required of the Board of Trust Managers or the shareholders to make
any such resignation effective.
<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.
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"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.
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"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
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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.
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"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)
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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.
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"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.
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"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
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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
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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.
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"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
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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:
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(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
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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
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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
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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
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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
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(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
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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
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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;
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(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
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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
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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
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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;
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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,
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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
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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.
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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.
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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
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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
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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
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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
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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.
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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.
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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
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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.
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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
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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.
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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
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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
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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.
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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
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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.
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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
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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
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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
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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
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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"):
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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
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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.
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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
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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
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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:
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(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:
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(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
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"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.
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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.
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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.
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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
--------------------------------
-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> 94
SIXTH AMENDMENT
TO THE SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
THIS SIXTH AMENDMENT TO THE SECOND AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP, dated
as of July 15, 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, and the 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, 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, 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 Stock Option Capital
Individual Exercise Date Shares Purchased Plan Contribution
- - ---------- ------------- ---------------- ----------- ------------
<S> <C> <C> <C> <C>
Alan Powers 3/16/98 600 1994 Plan $20,550.00
Alan Powers 3/16/98 1,200 1995 Plan $41,100.00
</TABLE>
<PAGE> 95
<TABLE>
<CAPTION>
Number of REIT Stock Option Capital
Individual Exercise Date Shares Purchased Plan Contribution
- - ---------- ------------- ---------------- ------------ ------------
<S> <C> <C> <C> <C>
John Walker 3/17/98 2,700 1995 Plan $91,462.50
Morton H. Meyerson 3/30/98 2,800 1995 Plan $101,675.00
Mark Stanfield 4/6/98 600 1995 Plan $22,275.00
Jennifer Miller 4/17/98 400 1995 Plan $13,875.00
Richard Hunt 4/17/98 184 First Amended and $6,382.50
Restated 1995 Plan
Marian T. McWilliams 4/17/98 1,000 1995 Plan $34,687.50
Bobby Moore 4/17/98 200 First Amended and $6,937.50
Restated 1995 Plan
Oscar Flores 4/20/98 400 First Amended and $13,550.00
Restated 1995 Plan
Robert Kowalski 5/26/98 200 First Amended and $6,737.50
Restated 1995 Plan
Alfreda Stanley 6/10/98 100 Second Amended and $3,250.00
Restated 1995 Plan
Bobby Vann 6/10/98 100 Second Amended and $3,250.00
Restated 1995 Plan
Fred Hoekstra 6/11/98 100 Second Amended and $3,187.50
Restated 1995 Plan
Anthony Frank 6/12/98 2,800 First Amended and $87,150.00
Restated 1995 Plan
Anthony Frank 6/12/98 2,800 Second Amended and $87,150.00
Restated 1995 Plan
Julie Garrett 6/12/98 100 Second Amended and $3,112.50
Restated 1995 Plan
Melvin Zuckerman 6/25/98 2,800 First Amended and $90,475.00
Restated 1995 Plan
Dory Bentley 6/30/98 100 Second Amended and $3,362.50
Restated 1995 Plan
Elizabeth Corbell 6/30/98 2,400 1995 Plan $80,700.00
</TABLE>
-2-
<PAGE> 96
<TABLE>
<CAPTION>
Number of REIT Stock Option Capital
Individual Exercise Date Shares Purchased Plan Contribution
- - ---------- ------------- ---------------- ------------ ------------
<S> <C> <C> <C> <C>
James Petrie 7/2/98 200 First Amended and $6,825.00
Restated 1995 Plan
Bill Armendariz 7/8/98 600 Second Amended and $20,662.50
Restated 1995 Plan
Willie Hollie 7/8/98 100 Second Amended and $3,443.75
Restated 1995 Plan
James Bownds 7/8/98 500 Second Amended and $17,218.75
Restated 1995 Plan
Anthony Tillman 7/8/98 100 Second Amended and $3,443.75
Restated 1995 Plan
Timothy McCoy 7/10/98 70 Second Amended and $2,371.25
Restated 1995 Plan
Bret Angle 7/13/98 100 Second Amended and $3,337.50
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
Individual or Entity Exercise Date Units Exchanged
-------------------- ------------- --------------------
<S> <C> <C>
John L. Zogg 4/7/98 292
Peter G. Dann 4/7/98 250
James A. Telling 4/23/98 1,650
Ross E. Bowker 5/27/98 3,250
</TABLE>
WHEREAS, on November 12, 1997, Crescent Equities received $15,406,871
in cash from Kemper Investors Life Insurance Company ("Kemper") and Northwestern
Mutual Life Insurance Company ("Northwestern") for REIT Shares issued to them on
October 7, 1996 (pursuant to section 8.5(b) of that certain Agreement dated
August 15, 1996 among Crescent Equities, Kemper, Northwestern and various other
parties), which cash proceeds were contributed to the Partnership by Crescent
Equities pursuant to Section 4.2 of the Effective Agreement;
-3-
<PAGE> 97
WHEREAS, on February 25, 1998, Crescent Equities issued 525,000 REIT
Shares to Merrill Lynch International at a cash price of $0.01 per share,
pursuant to that certain Swap Agreement, effective as of December 12, 1997, by
and among Crescent Equities and Merrill Lynch International, which cash proceeds
aggregating $5,250 were contributed to the Partnership by Crescent Equities
pursuant to Section 4.2 of the Agreement;
WHEREAS, on April 7, 1998, Crescent Equities issued 179 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
$20,103.94;
WHEREAS, on April 27, 1998, Gerald W. Haddock assigned 1,000
Partnership Units to Diane Haddock;
WHEREAS, on June 24, 1998, Crescent Equities issued 759,254 REIT Shares
to Merrill Lynch International at a cash price of $0.01 per share, pursuant to
that certain Swap Agreement, effective as of December 12, 1997, by and among
Crescent Equities and Merrill Lynch International, which cash proceeds
aggregating $7,592.54 were contributed to the Partnership by Crescent Equities
pursuant to Section 4.2 of the Agreement;
WHEREAS, on June 30, 1998, (i) the Partnership issued 1,046 Partnership
Units valued at $70,343.50 to Texas Greenbrier Associates, Inc. ("Greenbrier")
pursuant to that certain 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, 1998, Crescent Equities issued 194 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
$20,042.63;
WHEREAS, the General Partner desires to correct the description of the
January 8, 1998 issuance of REIT Shares to Morton H. Meyerson, William F. Quinn,
and Paul E. Rowsey, III set forth in the Recitals to the First Amendment to the
Second Amended Agreement to indicate that Crescent Equities issued 176 REIT
Shares to each of Morton H. Meyerson. William F. Quinn, and Paul E. Rowsey, III;
and
WHEREAS, the General Partner desires to amend the Effective Agreement
to reflect the transactions described above and certain other clarifying
amendments 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.
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 $778,172.50 in connection with the exercise of options to
purchase REIT Shares by Alan Powers,
-4-
<PAGE> 98
John Walker, Morton H. Meyerson, Mark Stanfield, Jennifer Miller, Richard Hunt,
Marian T. McWilliams, Bobby Moore, Oscar Flores, Robert Kowalski, Alfreda
Stanley, Bobby Vann, Fred Hoekstra, Anthony Frank, Julie Garrett, Melvin
Zuckerman, Dory Bentley, Elizabeth Corbell, James Petrie, Bill Armendariz,
Willie Hollie, James Bownds, Anthony Tillman, Timothy McCoy, and Bret Angle, as
more fully set forth above, (ii) the exercise by John L. Zogg, Peter G. Dann,
James A. Telling, and Ross E. Bowker of their Exchange Rights with respect to
Partnership Units, as more fully set forth above, (iii) the Capital Contribution
by Crescent Equities on November 11, 1997, of $15,406,871 in connection with the
the cash received from Kemper and Northwestern for the REIT Shares issued to
them on October 7, 1996, (iv) the Capital Contribution by Crescent Equities on
February 25, 1998, of $5,250 in connection with the issuance to Merrill Lynch
International of 525,000 REIT Shares at $0.01 per share, (v) the Capital
Contribution by Crescent Equities on April 7, 1998, of $20,103.94 in connection
with the issuance of 179 REIT Shares to each of Morton H. Meyerson, William F.
Quinn, and Paul E. Rowsey, III in payment of trust managers' fees, (vi) the
assignment by Gerald W. Haddock of 1,000 Partnership Units to Diane Haddock,
(vii) the Capital Contribution by Crescent Equities on June 24, 1998, of
$7,592.54 in connection with the issuance to Merrill Lynch International of
759,254 REIT Shares at $0.01 per share, (viii) the issuance of 1,046 Partnership
Units valued at $70,343.50 to Greenbrier, and Greenbrier's immediate exercise of
its Exchange Rights with respect to such Partnership Units, and (ix) the Capital
Contribution by Crescent Equities on July 8, 1998, of $20,042.63 in connection
with the issuance of 194 REIT Shares to each of Morton H. Meyerson, William F.
Quinn, and Paul E. Rowsey, III in payment of trust managers' fees, Exhibit A to
the Effective Agreement is hereby deleted in its entirety and replaced with the
Exhibit A attached to this Sixth Amendment and made a part hereof.
2. The following new sentence is hereby inserted after the second
sentence of Section 12.2.B:
Solely for purposes of the allocations to be made under the
preceding sentence (but not for any other purpose), (i) any
Additional Limited Partner or Employee Limited Partner that is
admitted to the Partnership prior to the eighth day of a month
shall receive allocations under the preceding sentence as if such
Partner had been admitted on the first day of the month, (ii) any
Additional Limited Partner or Employee Limited Partner that is
admitted to the Partnership 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 such Partner had
been admitted on the fifteenth day of the month, and (iii) any
Additional Limited Partner or Employee Limited Partner that is
admitted to the Partnership on or after the twenty-third day of a
month shall receive allocations under the preceding sentence as
if such Partner had been admitted on the first day of the next
succeeding month.
3. Except as the context may otherwise require, any terms used in this
Sixth Amendment which are defined in the Effective Agreement shall have the same
meaning for purposes of this Sixth Amendment as in the Effective Agreement.
-5-
<PAGE> 99
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 Sixth 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]
-6-
<PAGE> 1
EXHIBIT 10.11
CRESCENT REAL ESTATE EQUITIES, LTD.
FIRST AMENDED AND RESTATED
401(K) PLAN
Defined Contribution Plan 7.7
Restated March 17, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
INTRODUCTION
<S> <C> <C>
ARTICLE I FORMAT AND DEFINITIONS
Section 1.01 ----- Format
Section 1.02 ----- Definitions
ARTICLE II PARTICIPATION
Section 2.01 ----- Active Participant
Section 2.02 ----- Inactive Participant
Section 2.03 ----- Cessation of Participation
ARTICLE III CONTRIBUTIONS
Section 3.01 ----- Employer Contributions
Section 3.01A ----- Rollover Contributions
Section 3.02 ----- Forfeitures
Section 3.03 ----- Allocation
Section 3.04 ----- Contribution Limitation
Section 3.05 ----- Excess Amounts
ARTICLE IV INVESTMENT OF CONTRIBUTIONS
Section 4.01 ----- Investment of Contributions
Section 4.01A ----- Investment in Qualifying Employer Securities
Section 4.01B ----- Limitation on Investment in Qualifying Employer
Securities by Some Participants
ARTICLE V BENEFITS
Section 5.01 ----- Retirement Benefits
Section 5.02 ----- Death Benefits
Section 5.03 ----- Vested Benefits
Section 5.04 ----- When Benefits Start
Section 5.05 ----- Withdrawal Privileges
Section 5.06 ----- Loans to Participants
</TABLE>
TABLE OF CONTENTS 3
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE VI DISTRIBUTION OF BENEFITS
Section 6.01 ----- Form of Distribution
Section 6.02 ----- Election Procedures
Section 6.03 ----- Notice Requirements
Section 6.04 ----- Distributions Under Qualified
Domestic Relations Orders
ARTICLE VII TERMINATION OF PLAN
ARTICLE VIII ADMINISTRATION OF PLAN
Section 8.01 ----- Administration
Section 8.02 ----- Records
Section 8.03 ----- Information Available
Section 8.04 ----- Claim and Appeal Procedures
Section 8.05 ----- Unclaimed Vested Account Procedure
Section 8.06 ----- Delegation of Authority
ARTICLE IX GENERAL PROVISIONS
Section 9.01 ----- Amendments
Section 9.02 ----- Direct Rollovers
Section 9.03 ----- Mergers and Direct Transfers
Section 9.04 ----- Provisions Relating to the Insurer and Other Parties
Section 9.05 ----- Employment Status
Section 9.06 ----- Rights to Plan Assets
Section 9.07 ----- Beneficiary
Section 9.08 ----- Nonalienation of Benefits
Section 9.09 ----- Construction
Section 9.10 ----- Legal Actions
Section 9.11 ----- Small Amounts
Section 9.12 ----- Word Usage
Section 9.13 ----- Transfers Between Plans
ARTICLE X TOP-HEAVY PLAN REQUIREMENTS
Section 10.01 ----- Application
Section 10.02 ----- Definitions
Section 10.03 ----- Modification of Vesting Requirements
Section 10.04 ----- Modification of Contributions
Section 10.05 ----- Modification of Contribution Limitation
PLAN EXECUTION
</TABLE>
TABLE OF CONTENTS 4
<PAGE> 4
INTRODUCTION
The Primary Employer previously established a 401(k) savings plan on
July 1, 1994.
The Primary Employer is of the opinion that the plan document should
be amended and restated and that the plan should be continued. It believes
that the best means to accomplish these changes is to completely amend and
restate the plan's terms, provisions and conditions. This amendment and
restatement of the plan document, effective March 17, 1997, is substituted in
lieu of the prior plan document; provided, however, that the plan shall
continue and shall not constitute a new plan.
The plan, as amended and restated herein, continues to be for the
exclusive benefit of employees of the Employer. All persons covered under the
plan on March 16, 1997, shall continue to be covered under the plan, as amended
and restated herein, with no loss of benefits.
It is intended that the plan, as amended and restated herein, shall
continue to qualify as a profit sharing plan under the Internal Revenue Code of
1986, including any later amendments to the Code.
INTRODUCTION 5
<PAGE> 5
ARTICLE I
FORMAT AND DEFINITIONS
SECTION 1.01--FORMAT.
Words and phrases defined in the DEFINITIONS SECTION of Article I
shall have that defined meaning when used in this Plan, unless the context
clearly indicates otherwise.
These words and phrases have an initial capital letter to aid in
identifying them as defined terms.
SECTION 1.02--DEFINITIONS.
ACCOUNT means, for a Participant, his share of the Investment Fund.
Separate accounting records are kept for those parts of his Account
that result from:
(a) Elective Deferral Contributions
(b) Matching Contributions
(c) Other Employer Contributions
If the Employer elects to include any of these Contributions
in computing the percentages in the EXCESS AMOUNTS SECTION of
Article III, a separate accounting record shall be kept for
any part of his Account resulting from such Employer
Contributions.
(d) Rollover Contributions
If the Participant's Vesting Percentage is less than 100% as to any of
the Employer Contributions, a separate accounting record will be kept
for any part of his Account resulting from such Employer Contributions
and, if there has been a prior Forfeiture Date, from such
Contributions made before a prior Forfeiture Date.
A Participant's Account shall be reduced by any distribution of his
Vested Account and by any Forfeitures. A Participant's Account will
participate in the earnings credited, expenses charged and any
appreciation or depreciation of the Investment Fund. His Account is
subject to any minimum guarantees applicable under the Group Contract
or other investment arrangement.
ACCRUAL COMPUTATION PERIOD means a 12-consecutive month period ending
on the last day of each Plan Year, including corresponding
12-consecutive month periods before July 1, 1994.
ACTIVE PARTICIPANT means an Eligible Employee who is actively
participating in the Plan according to the provisions in the ACTIVE
PARTICIPANT SECTION of Article II.
AFFILIATED SERVICE GROUP means any group of corporations, partnerships
or other organizations of which the Employer is a part and which is
affiliated within the meaning of Code Section 414(m) and regulations
thereunder. Such a group includes at least two organizations one of
which is either a service
ARTICLE I 6
<PAGE> 6
organization (that is, an organization the principal business of which
is performing services), or an organization the principal business of
which is performing management functions on a regular and continuing
basis. Such service is of a type historically performed by employees.
In the case of a management organization, the Affiliated Service Group
shall include organizations related, within the meaning of Code
Section 144(a)(3), to either the management organization or the
organization for which it performs management functions. The term
Controlled Group, as it is used in this Plan, shall include the term
Affiliated Service Group.
ALTERNATE PAYEE means any spouse, former spouse, child or other
dependent of a participant who is recognized by a qualified domestic
relations order as having a right to receive all, or a portion of the
benefits payable under the Plan with respect to such Participant.
ANNIVERSARY DATE means December 31.
ANNUAL COMPENSATION means, on any given date, the Employee's
Compensation for the latest Compensation Year ending on or before the
given date.
ANNUITY STARTING DATE means, for a Participant, the first day of the
first period for which an amount is payable in a single sum.
BENEFICIARY means the person or persons named by a Participant to
receive any benefits under this Plan upon the Participant's death.
Unless a qualified election has been made, for the purpose of
distributing any death benefits before Annuity Starting Date, the
Beneficiary of a married Participant shall be the Participant's
spouse. See the BENEFICIARY SECTION of Article IX.
CLAIMANT means any person who has made a claim for benefits under this
Plan. See the CLAIM AND APPEAL PROCEDURES SECTION of Article VIII.
CODE means the Internal Revenue Code of 1986, as amended.
COMPENSATION means, except as modified in this definition, the total
earnings paid or made available to an Employee by the Employer during
any specified period.
"Earnings" in this definition means Compensation as defined in the
CONTRIBUTION LIMITATION SECTION of Article III.
Compensation shall also include elective contributions. Elective
contributions are amounts excludable from the Employee's gross income
under Code Sections 125, 402(e)(3), 402(h) or 403(b), and contributed
by the Employer, at the Employee's election, to a Code Section 401(k)
arrangement, a simplified employee pension, cafeteria plan or
tax-sheltered annuity. Elective contributions also include
Compensation deferred under a Code Section 457 plan maintained by the
Employer and Employee contributions "picked up" by a governmental
entity and, pursuant to Code Section 414(h)(2), treated as Employer
contributions.
For purposes of the EXCESS AMOUNTS SECTION of Article III, the
Employer may elect to use an alternative nondiscriminatory definition
of Compensation in accordance with the regulations under Code Section
414(s).
Compensation shall exclude earnings paid before the Employee's Entry
Date.
For Plan Years beginning after December 31, 1988, and before January
1, 1994, the annual Compensation of each Participant taken into
account for determining all benefits provided under the Plan for any
year shall not exceed $200,000. For Plan Years beginning on or after
January 1, 1994, the annual Compensation of each Participant taken
into account for determining all benefits provided under the Plan for
any year shall not exceed $150,000.
ARTICLE I 7
<PAGE> 7
The $200,000 limit shall be adjusted by the Secretary at the same time
and in the same manner as under Code Section 415(d). The $150,000
limit shall be adjusted by the Commissioner for increases in the cost
of living in accordance with Code Section 401(a)(17)(B). The cost of
living adjustment in effect for a calendar year applies to any period,
not exceeding 12 months, over which pay is determined (determination
period) beginning in such calendar year. If a determination period
consists of fewer than 12 months, the annual compensation limit will
be multiplied by a fraction the numerator of which is the number of
months in the determination period, and the denominator of which is
12.
In determining the Compensation of a Participant for purposes of the
annual compensation limit, the rules of Code Section 414(q)(6) shall
apply, except that in applying such rules, the term "family" shall
include only the spouse of the Participant and any lineal descendants
of the Participant who have not attained age 19 before the close of
the year. If, as a result of the application of such rules the
adjusted annual compensation limit is exceeded, then (except for
purposes of determining the portion of Compensation up to the
integration level if this Plan provides for permitted disparity) the
limitation shall be prorated among the affected individuals in
proportion to each such individual's Compensation as determined under
this definition prior to the application of this limitation.
If Compensation for any prior determination period is taken into
account in determining a Participant's benefits accruing in the
current Plan Year, the Compensation for that prior determination
period is subject to the annual compensation limit in effect for that
prior determination period. For this purpose, for determination
periods beginning before the first day of the first Plan Year
beginning on or after January 1, 1989, which are used to determine
benefits in Plan Years beginning after December 31, 1988 and before
January 1, 1994, the annual compensation limit is $200,000. For this
purpose, for determination periods beginning before the first day of
the first Plan Year beginning on or after January 1, 1994, which are
used to determine benefits in Plan Years beginning on or after January
1, 1994, the annual compensation limit is $150,000.
Compensation means, for an Employee who is a Leased Employee, the
Employee's Compensation for the services he performs for the Employer,
determined in the same manner as the Compensation of Employees who are
not Leased Employees, regardless of whether such Compensation would be
received directly from the Employer or from the leasing organization.
COMPENSATION YEAR means each one-year period ending on the last day of
the Plan Year, including corresponding periods before July 1, 1994.
CONTRIBUTIONS means
Elective Deferral Contributions
Matching Contributions
Qualified Nonelective Contributions
Discretionary Contributions
Rollover Contributions
ARTICLE I 8
<PAGE> 8
as set out in Article III, unless the context clearly indicates
otherwise.
CONTROLLED GROUP means any group of corporations, trades or businesses
of which the Employer is a part that are under common control. A
Controlled Group includes any group of corporations, trades or
businesses, whether or not incorporated, which is either a
parent-subsidiary group, a brother-sister group, or a combined group
within the meaning of Code Section 414(b), Code Section 414(c) and
regulations thereunder and, for purposes of determining contribution
limitations under the CONTRIBUTION LIMITATION SECTION of Article III,
as modified by Code Section 415(h) and, for the purpose of identifying
Leased Employees, as modified by Code Section 144(a)(3). The term
Controlled Group, as it is used in this Plan, shall include the term
Affiliated Service Group and any other employer required to be
aggregated with the Employer under Code Section 414(o) and the
regulations thereunder.
DIRECT ROLLOVER means a payment by the Plan to the Eligible Retirement
Plan specified by the Distributee.
DISCRETIONARY CONTRIBUTIONS means discretionary contributions made by
the Employer to fund this Plan. See the EMPLOYER CONTRIBUTIONS
SECTION of Article III.
DISTRIBUTEE means an Employee or former Employee. In addition, the
Employee's or former Employee's surviving spouse and the Employee's or
former Employee's spouse or former spouse who is the alternate payee
under a qualified domestic relations order, as defined in Code Section
414(p), are Distributees with regard to the interest of the spouse or
former spouse.
ELECTIVE DEFERRAL CONTRIBUTIONS means Contributions made by the
Employer to fund this Plan in accordance with a qualified cash or
deferred arrangement as described in Code Section 401(k). See the
EMPLOYER CONTRIBUTIONS SECTION of Article III.
ELIGIBILITY SERVICE means an Employee's Period of Service. If he has
more than one Period of Service, or if all or a part of a Period of
Service is not counted, his Eligibility Service shall be determined by
adjusting his Employment Commencement Date so that he has one
continuous period of Eligibility Service equal to the aggregate of all
his countable Periods of Service. An Employee's Eligibility Service
shall be determined on the basis that 30 days equal one month and 365
days equal one year.
However, Eligibility Service is modified as follows:
Period of Military Duty included:
A Period of Military Duty shall be included as service with
the Employer to the extent it has not already been credited.
Period of Severance included (service spanning rule):
A Period of Severance shall be deemed to be a Period of
Service under either of the following conditions:
(a) the Period of Severance immediately follows a period
during which an Employee is not absent from work and
ends within 12 months; or
(b) the Period of Severance immediately follows a period
during which an Employee is absent from work for any
reason other than quitting, being discharged or
retiring (such as a leave of absence or layoff) and
ends within 12 months of the date he was first
absent.
ARTICLE I 9
<PAGE> 9
Controlled Group service included:
An Employee's service with a member firm of a Controlled Group
while both that firm and the Employer were members of the
Controlled Group shall be included as service with the
Employer.
ELIGIBLE EMPLOYEE means any Employee of the Employer who meets the
following requirement. He is not engaged as an independent contractor
or he is not classified as ineligible for participation in the Plan.
ELIGIBLE RETIREMENT PLAN means an individual retirement account
described in Code Section 408(a), an individual retirement annuity
described in Code Section 408(b), an annuity plan described in Code
Section 403(a) or a qualified trust described in Code Section 401(a),
that accepts the Distributee's Eligible Rollover Distribution.
However, in the case of an Eligible Rollover Distribution to the
surviving spouse, an Eligible Retirement Plan is an individual
retirement account or individual retirement annuity.
ELIGIBLE ROLLOVER DISTRIBUTION means any distribution of all or any
portion of the balance to the credit of the Distributee, except that
an Eligible Rollover Distribution does not include:
(a) Any distribution that is one of a series of substantially
equal periodic payments (not less frequently than annually)
made for the life (or life expectancy) of the Distributee or
the joint lives (or joint life expectancies) of the
Distributee and the Distributee's designated Beneficiary, or
for a specified period of ten years or more.
(b) Any distribution to the extent such distribution is required
under Code Section 401(a)(9).
(c) The portion of any distribution that is not includible in
gross income (determined without regard to the exclusion for
net unrealized appreciation with respect to employer
securities).
EMPLOYEE means an individual who is employed by the Employer or any
other employer required to be aggregated with the Employer under Code
Sections 414(b), (c), (m) or (o). A Controlled Group member is
required to be aggregated with the Employer.
The term Employee shall also include any Leased Employee deemed to be
an employee of any employer described in the preceding paragraph as
provided in Code Sections 414(n) or 414(o).
EMPLOYER means the Primary Employer. This will also include any
successor corporation or firm of the Employer which shall, by written
agreement, assume the obligations of this Plan or any predecessor
corporation or firm of the Employer (absorbed by the Employer, or of
which the Employer was once a part) which became a predecessor because
of a change of name, merger, purchase of stock or purchase of assets
and which maintained this Plan.
EMPLOYER CONTRIBUTIONS means
Elective Deferral Contributions
Matching Contributions
Qualified Nonelective Contributions
Discretionary Contributions
as set out in Article III, unless the context clearly indicates
otherwise.
EMPLOYMENT COMMENCEMENT DATE means the date an Employee first performs
an Hour-of-Service.
ARTICLE I 10
<PAGE> 10
ENTRY DATE means the date an Employee first enters the Plan as an
Active Participant. See the ACTIVE PARTICIPANT SECTION of Article II.
FISCAL YEAR means the Primary Employer's taxable year. The last day
of the Fiscal Year is December 31.
FORFEITURE means the part, if any, of a Participant's Account that is
forfeited. See the FORFEITURES SECTION of Article III.
FORFEITURE DATE means, as to a Participant, the date the Participant
incurs five consecutive Vesting Breaks in Service. A Participant
incurs a Vesting Break in Service on the last day of the period used
to determine the Vesting Break in Service.
This is the date on which the Participant's Nonvested Account will be
forfeited unless an earlier forfeiture occurs as provided in the
FORFEITURES SECTION of Article III.
GROUP CONTRACT means the group annuity contract or contracts into
which the Trustee enters with the Insurer for the investment of
Contributions and the payment of benefits under this Plan. The term
Group Contract as it is used in this Plan is deemed to include the
plural unless the context clearly indicates otherwise.
HIGHLY COMPENSATED EMPLOYEE means a highly compensated active Employee
or a highly compensated former Employee.
A highly compensated active Employee means any Employee who performs
service for the Employer during the determination year and who, during
the look-back year is:
(a) An Employee who is a 5% owner, as defined in Section
416(i)(1)(B)(i), at any time during the determination year or
the look-back year.
(b) An Employee who receives compensation in excess of $75,000
(indexed in accordance with Section 415(d) during the
look-back year.
(c) An Employee who receives compensation in excess of $50,000
(indexed in accordance with Section 415(d) during the
look-back year and is a member of the top-paid group for the
look-back year.
ARTICLE I 11
<PAGE> 11
(d) An Employee who is an officer, within the meaning of Section
416(i), during the look-back year and who receives
compensation in the look-back year greater than 50% of the
dollar limitation in effect under Section 415(b)(1)(A) for the
calendar year in which the look-back year begins. The number
of officers is limited to 50 (or, if lesser, the greater of 3
employees or 10% of employees) excluding those employees who
may be excluded in determining the top-paid group.
(e) An Employee who is both described in paragraph b, c or d above
when these paragraphs are modified to substitute the
determination year for the look-back year and one of the 100
Employees who receive the most compensation from the Employer
during the determination year.
If no officer has satisfied the compensation requirement of (c) above
during either a determination year or look-back year, the highest paid
officer for such year shall be treated as a Highly Compensated
Employee.
For this purpose, the determination year shall be the Plan Year. The
look-back year shall be the twelve-month period immediately preceding
the determination year.
A highly compensated former Employee means any Employee who separated
from service (or was deemed to have separated) prior to the
determination year, performs no service for the Employer during the
determination year, and was a highly compensated active Employee for
either the separation year or any determination year ending on or
after the Employee's 55th birthday.
If an Employee is, during a determination year or look-back year, a
family member of either a 5 percent owner who is an active or former
Employee or a Highly Compensated Employee who is one of the 10 most
highly compensated Employees ranked on the basis of compensation paid
by the Employer during such year, then the family member and the 5
percent owner or top-ten highly compensated Employee shall be
aggregated. In such case, the family member and 5 percent owner or
top-ten highly compensated Employee shall be treated as a single
Employee receiving compensation and Plan contributions or benefits
equal to the sum of such compensation and contributions or benefits of
the family member and 5 percent owner or top-ten highly compensated
Employee. For purposes of this definition, family member includes the
spouse, lineal ascendants and descendants of the Employee or former
Employee and the spouses of such lineal ascendants and descendants.
Compensation is compensation within the meaning of Code Section
415(c)(3), including elective or salary reduction contributions to a
cafeteria plan, cash or deferred arrangement or tax-sheltered annuity.
The top- paid group consists of the top 20% of employees ranked on the
basis of compensation received during the year.
Employers aggregated under Section 414(b), (c), (m) or (o) are treated
as a single Employer.
HOUR-OF-SERVICE means, for the elapsed time method of crediting
service in this Plan, each hour for which an Employee is paid, or
entitled to payment, for performing duties for the Employer.
Hour-of-Service means, for the hours method of crediting service in
this Plan, the following:
(a) Each hour for which an Employee is paid, or entitled to
payment, for performing duties for the Employer during the
applicable computation period.
ARTICLE I 12
<PAGE> 12
(b) Each hour for which an Employee is paid, or entitled to
payment, by the Employer because of a period of time in which
no duties are performed (irrespective of whether the
employment relationship has terminated) due to vacation,
holiday, illness, incapacity (including disability), layoff,
jury duty, military duty or leave of absence. Notwithstanding
the preceding provisions of this subparagraph (b), no credit
will be given to the Employee
(1) for more than 501 Hours-of-Service under this
subparagraph (b) because of any single continuous
period in which the Employee performs no duties
(whether or not such period occurs in a single
computation period); or
(2) for an Hour-of-Service for which the Employee is
directly or indirectly paid, or entitled to payment,
because of a period in which no duties are performed
if such payment is made or due under a plan
maintained solely for the purpose of complying with
applicable worker's or workmen's compensation, or
unemployment compensation or disability insurance
laws; or
(3) for an Hour-of-Service for a payment which solely
reimburses the Employee for medical or medically
related expenses incurred by him.
For purposes of this subparagraph (b), a payment shall be
deemed to be made by, or due from the Employer, regardless of
whether such payment is made by, or due from the Employer,
directly or indirectly through, among others, a trust fund or
insurer, to which the Employer contributes or pays premiums
and regardless of whether contributions made or due to the
trust fund, insurer or other entity are for the benefit of
particular employees or are on behalf of a group of employees
in the aggregate.
(c) Each hour for which back pay, irrespective of mitigation of
damages, is either awarded or agreed to by the Employer. The
same Hours-of-Service shall not be credited both under
subparagraph (a) or subparagraph (b) above (as the case may
be) and under this subparagraph (c). Crediting of
Hours-of-Service for back pay awarded or agreed to with
respect to periods described in subparagraph (b) above will be
subject to the limitations set forth in that subparagraph.
The crediting of Hours-of-Service above shall be applied under the
rules of paragraphs (b) and (c) of the Department of Labor Regulation
2530.200b-2 (including any interpretations or opinions implementing
said rules); which rules, by this reference, are specifically
incorporated in full within this Plan. The reference to paragraph (b)
applies to the special rule for determining hours of service for
reasons other than the performance of duties such as payments
calculated (or not calculated) on the basis of units of time and the
rule against double credit. The reference to paragraph (c) applies to
the crediting of hours of service to computation periods.
Hours-of-Service shall be credited for employment with any other
employer required to be aggregated with the Employer under Code
Sections 414(b), (c), (m) or (o) and the regulations thereunder for
purposes of eligibility and vesting. Hours-of-Service shall also be
credited for any individual who is considered an employee for purposes
of this Plan pursuant to Code Section 414(n) or Code Section 414(o)
and the regulations thereunder.
Solely for purposes of determining whether a one-year break in service
has occurred for eligibility or vesting purposes, during a Parental
Absence an Employee shall be credited with the Hours-of-Service which
otherwise would normally have been credited to the Employee but for
such absence, or in any case
ARTICLE I 13
<PAGE> 13
in which such hours cannot be determined, eight Hours-of-Service per
day of such absence. The Hours-of-Service credited under this
paragraph shall be credited in the computation period in which the
absence begins if the crediting is necessary to prevent a break in
service in that period; or in all other cases, in the following
computation period.
INACTIVE PARTICIPANT means a former Active Participant who has an
Account. See the INACTIVE PARTICIPANT SECTION of Article II.
INSURER means Principal Mutual Life Insurance Company and any other
insurance company or companies named by the Trustee or Primary
Employer.
INVESTMENT FUND means the total assets held for the purpose of
providing benefits for Participants. These funds result from
Contributions made under the Plan.
INVESTMENT MANAGER means any fiduciary (other than a trustee or Named
Fiduciary)
(a) who has the power to manage, acquire, or dispose of any assets
of the Plan; and
(b) who (1) is registered as an investment adviser under the
Investment Advisers Act of 1940, or (2) is a bank, as defined
in the Investment Advisers Act of 1940, or (3) is an insurance
company qualified to perform services described in
subparagraph (a) above under the laws of more than one state;
and
(c) who has acknowledged in writing being a fiduciary with respect
to the Plan.
LATE RETIREMENT DATE means the Anniversary Date coinciding with or
next following a Participant's Normal Retirement Date and on which
retirement benefits begin. If a Participant continues to work for the
Employer after his Normal Retirement Date, his Late Retirement Date
shall be the earliest Anniversary Date on or after he ceases to be an
Employee. An earlier or a later Retirement Date may apply if the
Participant so elects. An earlier Retirement Date may apply if the
Participant is age 70 1/2. See the WHEN BENEFITS START SECTION of
Article V.
LEASED EMPLOYEE means any person (other than an employee of the
recipient) who pursuant to an agreement between the recipient and any
other person ("leasing organization") has performed services for the
recipient (or for the recipient and related persons determined in
accordance with Code Section 414(n)(6)) on a substantially full time
basis for a period of at least one year, and such services are of a
type historically performed by employees in the business field of the
recipient employer. Contributions or benefits provided a Leased
Employee by the leasing organization which are attributable to service
performed for the recipient employer shall be treated as provided by
the recipient employer.
A Leased Employee shall not be considered an employee of the recipient
if:
(a) such employee is covered by a money purchase pension plan
providing (1) a nonintegrated employer contribution rate of at
least 10 percent of compensation, as defined in Code Section
415(c)(3), but including amounts contributed pursuant to a
salary reduction agreement which are excludable from the
employee's gross income under Code Sections 125, 402(e)(3),
402(h) or 403(b), (2) immediate participation, and (3) full
and immediate vesting and
ARTICLE I 14
<PAGE> 14
(b) Leased Employees do not constitute more than 20 percent of the
recipient's nonhighly compensated workforce.
LOAN ADMINISTRATOR means the person or positions authorized to
administer the Participant loan program.
The Loan Administrator is the H.R. Director.
MATCHING CONTRIBUTIONS means matching contributions made by the
Employer to fund this Plan. See the EMPLOYER CONTRIBUTIONS SECTION of
Article III.
MONTHLY DATE means each Yearly Date and the same day of each following
month during the Plan Year beginning on such Yearly Date.
NAMED FIDUCIARY means the person or persons who have authority to
control and manage the operation and administration of the Plan.
The Named Fiduciary is the Employer.
NONHIGHLY COMPENSATED EMPLOYEE means an Employee of the Employer who
is neither a Highly Compensated Employee nor a Family Member.
NONVESTED ACCOUNT means the part, if any, of a Participant's Account
that is in excess of his Vested Account.
NORMAL RETIREMENT AGE means the age at which the Participant's normal
retirement benefit becomes nonforfeitable. A Participant's Normal
Retirement Age is the older of age 65 or his age on the date five
years after the first day of the Plan Year in which his Entry Date
occurred.
NORMAL RETIREMENT DATE means the Anniversary Date coinciding with or
next following the date the Participant reaches his Normal Retirement
Age. Unless otherwise provided in this Plan, a Participant's
retirement benefits shall begin on a Participant's Normal Retirement
Date if he has ceased to be an Employee on such date and has a Vested
Account. Even if the Participant is an Employee on his Normal
Retirement Date, he may choose to have his retirement benefit begin on
such date. See the WHEN BENEFITS START SECTION of Article V.
PARENTAL ABSENCE means an Employee's absence from work which begins on
or after the first Yearly Date after December 31, 1984,
(a) by reason of pregnancy of the Employee,
(b) by reason of birth of a child of the Employee,
(c) by reason of the placement of a child with the Employee in
connection with adoption of such child by such Employee, or
(d) for purposes of caring for such child for a period beginning
immediately following such birth or placement.
ARTICLE I 15
<PAGE> 15
PARTICIPANT means either an Active Participant or an Inactive
Participant.
PERIOD OF MILITARY DUTY means, for an Employee
(a) who served as a member of the armed forces of the United
States, and
(b) who was reemployed by the Employer at a time when the Employee
had a right to reemployment in accordance with seniority
rights as protected under Section 2021 through 2026 of Title
38 of the U. S. Code,
the period of time from the date the Employee was first absent from
active work for the Employer because of such military duty to the date
the Employee was reemployed.
PERIOD OF SERVICE means a period of time beginning on an Employee's
Employment Commencement Date or Reemployment Commencement Date
(whichever applies) and ending on his Severance from Service Date.
PERIOD OF SEVERANCE means a period of time beginning on an Employee's
Severance from Service Date and ending on the date he again performs
an Hour-of-Service.
A one-year Period of Severance means a Period of Severance of 12
consecutive months.
Solely for purposes of determining whether a one-year Period of
Severance has occurred for eligibility or vesting purposes, the
12-consecutive month period beginning on the first anniversary of the
first date of a Parental Absence shall not be a one-year Period of
Severance.
PLAN means the 401(k) savings plan of the Employer set forth in this
document, including any later amendments to it.
PLAN ADMINISTRATOR means the person or persons who administer the
Plan.
The Plan Administrator is the Employer.
PLAN YEAR means a period beginning on a Yearly Date and ending on the
day before the next Yearly Date.
PRIMARY EMPLOYER means Crescent Real Estate Equities, Ltd.
QUALIFIED NONELECTIVE CONTRIBUTIONS means contributions (other than
Employer Contributions made to the Plan on behalf of a Participant on
account of Elective Deferral Contributions or on account of
contributions made by the Participant) made by the Employer to fund
this Plan which an Employee may not elect to have paid to him in cash
instead of being contributed to the Plan and which are subject to the
distribution and nonforfeitability requirements under Code Section
401(k). See the EMPLOYER CONTRIBUTIONS SECTION of Article III.
QUALIFYING EMPLOYER SECURITIES means any instrument issued by the
Employer and meeting the requirements of Section 4975(e)(8) of the
Code.
ARTICLE I 16
<PAGE> 16
QUALIFYING EMPLOYER SECURITIES ACCOUNT means for a Participant, his
share of Qualifying Employer Securities.
QUARTERLY DATE means each Yearly Date and the third, sixth and ninth
Monthly Date after each Yearly Date which is within the same Plan
Year.
REEMPLOYMENT COMMENCEMENT DATE means the date an Employee first
performs an Hour-of-Service following a Period of Severance.
REENTRY DATE means the date a former Active Participant reenters the
Plan. See the ACTIVE PARTICIPANT SECTION of Article II.
RETIREMENT DATE means the date a retirement benefit will begin and is
a Participant's Normal or Late Retirement Date, as the case may be.
ROLLOVER CONTRIBUTIONS means the Rollover Contributions which are made
by or for a Participant according to the provisions of the ROLLOVER
CONTRIBUTIONS SECTION of Article III.
SEVERANCE FROM SERVICE DATE means the earlier of
(a) the date on which an Employee quits, retires, dies or is
discharged, or
(b) the first anniversary of the date an Employee begins a
one-year absence from service (with or without pay). This
absence may be the result of any combination of vacation,
holiday, sickness, disability, leave of absence or layoff.
Solely to determine whether a one-year Period of Severance has
occurred for eligibility or vesting purposes for an Employee who is
absent from service beyond the first anniversary of the first day of a
Parental Absence, Severance from Service Date is the second
anniversary of the first day of the Parental Absence. The period
between the first and second anniversaries of the first day of the
Parental Absence is not a Period of Service and is not a Period of
Severance. TEFRA means the Tax Equity and Fiscal Responsibility Act
of 1982.
TEFRA COMPLIANCE DATE means the date a plan is to comply with the
provisions of TEFRA. The TEFRA Compliance Date as used in this Plan
is,
(a) for purposes of contribution limitations, Code Section 415,
(1) if the plan was in effect on July 1, 1982, the first
day of the first limitation year which begins after
December 31, 1982, or
(2) if the plan was not in effect on July 1, 1982, the
first day of the first limitation year which ends
after July 1, 1982.
(b) for all other purposes, the first Yearly Date after December
31, 1983.
ARTICLE I 17
<PAGE> 17
TOTALLY AND PERMANENTLY DISABLED means that a Participant is disabled
as a result of a physical or mental condition resulting from bodily
injury, disease or mental disorder that renders him incapable of
continuing any gainful occupation and is eligible for and receives a
disability benefit under Title II of the Federal Social Security Act.
TRUST means an agreement of trust between the Primary Employer and
Trustee established for the purpose of holding and distributing the
Trust Fund under the provisions of the Plan. The Trust may provide
for the investment of all or any portion of the Trust Fund in the
Group Contract.
TRUST FUND means the total funds held under the Trust for the purpose
of providing benefits for Participants. These funds result from
Contributions made under the Plan which are forwarded to the Trustee
to be deposited in the Trust Fund.
TRUSTEE means the trustee or trustees under the Trust. The term
Trustee as it is used in this Plan is deemed to include the plural
unless the context clearly indicates otherwise.
VALUATION DATE means for the purposes of the date on which the value
of the assets of the Trust is determined. The value of each Account
which is maintained under this Plan shall be determined on the
Valuation Date. In each Plan Year, the Valuation Date shall be the
close of each business day.
VESTED ACCOUNT means the vested part of a Participant's Account. The
Participant's Vested Account is determined as follows.
If the Participant's Vesting Percentage is 100%, his Vested Account
equals his Account.
If the Participant's Vesting Percentage is less than 100%, his Vested
Account equals the sum of (a) and (b) below:
(a) The part of the Participant's Account that results from
Employer Contributions made before a prior Forfeiture Date and
all other Contributions which were 100% vested when made.
(b) The balance of the Participant's Account in excess of the
amount in (a) above multiplied by his Vesting Percentage.
If the Participant has withdrawn any part of his Account resulting
from Employer Contributions, other than the vested Employer
Contributions included in (a) above, the amount determined under this
subparagraph (b) shall be equal to P(AB + D) - D as defined below:
P The Participant's Vesting Percentage.
AB The balance of the Participant's Account in excess of the
amount in (a) above.
D The amount of withdrawal resulting from Employer
Contributions, other than the vested Employer Contributions
included in (a) above.
The Participant's Vested Account is nonforfeitable.
ARTICLE I 18
<PAGE> 18
VESTING BREAK IN SERVICE means a Vesting Computation Period in which
an Employee is credited with 500 or fewer Hours-of-Service. An
Employee incurs a Vesting Break in Service on the last day of a
Vesting Computation Period in which he has a Vesting Break in Service.
If any former Participant is reemployed after a Vesting Break in
Service has occurred, Vesting Service shall include Vesting Service
prior to his Vesting Break in Service subject to the following rules:
(i) If a former Participant has a Vesting Break in Service, his
pre-break and post-break service shall be used for computing
Vesting Service only after he has been employed for one (1)
Year of Service following the date of his reemployment with
the Employer.
(ii) Any former Participant who under the Plan does not have a
nonforfeitable right to any interest in the Plan resulting
from Employer Contributions shall lose credits otherwise
allowable under (i) above if his consecutive Vesting Breaks in
Service equal or exceed the greater of (A) five (5) or (B) the
aggregate number of his pre-break Years of Service;
(iii) After five (5) consecutive Vesting Breaks in Service, a former
Participant's Vested Account balance attributable to pre-break
service shall not be increased as a result of post-break
service;
(iv) If a former Participant who has not had his Years of Service
before a Vesting Break in Service disregarded pursuant to (ii)
above completes a Year of Service (a Vesting Break in Service
previously occurred, but employment had not terminated), he
shall participate in the Plan retroactively from the first day
of the Plan Year during which he completes one (1) Year of
Service.
VESTING COMPUTATION PERIOD means a 12-consecutive month period ending
on the last day of each Plan Year, including corresponding
12-consecutive month periods before July 1, 1994.
VESTING PERCENTAGE means the percentage used to determine the
nonforfeitable portion of a Participant's Account attributable to
Employer Contributions which were not 100% vested when made.
A Participant's Vesting Percentage is shown in the following schedule
opposite the number of whole years of his Vesting Service.
<TABLE>
<CAPTION>
------------------------------------------------
VESTING SERVICE VESTING
(whole years) PERCENTAGE
------------------------------------------------
<S> <C>
Less than 1 0
------------------------------------------------
2 20
------------------------------------------------
2 40
------------------------------------------------
3 60
------------------------------------------------
4 80
------------------------------------------------
5 or more 100
------------------------------------------------
</TABLE>
However, the Vesting Percentage for a Participant who is an Employee
on or after the earliest of (i) the date he reaches his Normal
Retirement Age, (ii) the date of his death, or (iii) the date he
becomes Totally and Permanently Disabled, shall be 100% on such date.
If the schedule used to determine a Participant's Vesting Percentage
is changed, the new schedule shall not
ARTICLE I 19
<PAGE> 19
apply to a Participant unless he is credited with an Hour-of-Service
on or after the date of the change and the Participant's
nonforfeitable percentage on the day before the date of the change is
not reduced under this Plan. The amendment provisions of the
AMENDMENT SECTION of Article IX regarding changes in the computation
of the Vesting Percentage shall apply.
VESTING SERVICE means one year of service for each Vesting Computation
Period in which an Employee is credited with at least 1,000
Hours-of-Service.
However, Vesting Service is modified as follows:
Service before a date excluded:
Service accrued for a Vesting Computation Period ending before
July 1, 1994, is excluded.
Period of Military Duty included:
A Period of Military Duty shall be included as service with
the Employer to the extent it has not already been credited.
For purposes of crediting Hours-of-Service during the Period
of Military Duty, an Hour-of-Service shall be credited
(without regard to the 501 Hour-of-Service limitation) for
each hour an Employee would normally have been scheduled to
work for the Employer during such period.
Controlled Group service included:
An Employee's service with a member firm of a Controlled Group
while both that firm and the Employer were members of the
Controlled Group shall be included as service with the
Employer.
YEARLY DATE means July 1, 1994, and each following January 1.
YEARS OF SERVICE means an Employee's Vesting Service disregarding any
modifications which exclude service.
ARTICLE I 20
<PAGE> 20
ARTICLE II
PARTICIPATION
SECTION 2.01--ACTIVE PARTICIPANT.
(a) An Employee shall first become an Active Participant (begin
active participation in the Plan) on the earliest
Monthly Date on or after March 17, 1997, on which he
is an Eligible Employee and has met both of the
eligibility requirements set forth below. This date
is his Entry Date.
(1) He has completed one month of Eligibility Service
before his Entry Date.
(2) He is age 21 or older.
The requirements in items (1) and (2) above are waived for any
Carter Crowley Properties employee who transfers and becomes a
Crescent Real Estate Equities, Ltd. Employee. This date shall
be an Entry Date if the Eligible Employee has met all the
other eligibility requirements.
Each Employee who was an Active Participant under the Plan on
March 16, 1997, shall continue to be an Active Participant if
he is still an Eligible Employee on March 17, 1997, and his
Entry Date shall not change.
If a person has been an Eligible Employee who has met all the
eligibility requirements above, but is not an Eligible
Employee on the date which would have been his Entry Date, he
shall become an Active Participant on the date he again
becomes an Eligible Employee. This date is his Entry Date.
(b) An Inactive Participant shall again become an Active
Participant (resume active participation in the Plan) on the
date he again performs an Hour-of-Service as an Eligible
Employee. This date is his Reentry Date.
Upon again becoming an Active Participant, he shall cease to
be an Inactive Participant.
(c) A former Participant shall again become an Active Participant
(resume active participation in the Plan) on the date he again
performs an Hour-of-Service as an Eligible Employee. This
date is his Reentry Date.
An Employee may, subject to the approval of the Employer, elect
voluntarily not to participate in the Plan. The election not to participate
must be communicated to the Employer, in writing, at least 30 days before the
beginning of the Plan Year.
There shall be no duplication of benefits for a Participant under this
Plan because of more than one period as an Active Participant.
ARTICLE II 21
<PAGE> 21
ARTICLE III
CONTRIBUTIONS
SECTION 3.01--EMPLOYER CONTRIBUTIONS.
Employer Contributions for Plan Years which end on or after March 17,
1997, may be made without regard to current or accumulated net income,
earnings, or profits of the Employer. Notwithstanding the foregoing, the Plan
shall continue to be designed to qualify as a profit sharing plan for purposes
of Code Sections 401(a), 402, 412, and 417. Such Contributions will be equal
to the Employer Contributions as described below:
(a) The amount of each Elective Deferral Contribution for a
Participant shall be equal to any percentage (not less than 1%
nor more than 15%) of his Compensation for the pay period as
elected in his elective deferral agreement. An Employee who
is eligible to participate in the Plan may file an elective
deferral agreement with the Employer. The elective deferral
agreement to start Elective Deferral Contributions may be
effective on a Participant's Entry Date (Reentry Date, if
applicable) or any following Quarterly Date. The Participant
shall make any change or terminate the elective deferral
agreement by filing a new elective deferral agreement. A
Participant's elective deferral agreement making a change may
be effective on any date an elective deferral agreement to
start Elective Deferral Contributions could be effective. A
Participant's elective deferral agreement to stop Elective
Deferral Contributions may be effective on any date. The
elective deferral agreement must be in writing and effective
before the beginning of the pay period in which Elective
Deferral Contributions are to start, change or stop.
Elective Deferral Contributions are fully (100%) vested and
nonforfeitable.
(b) The amount of each Matching Contribution for a Participant
eligible for an allocation shall be equal to a percentage as
determined by the Employer of the Elective Deferral
Contributions made for him for the Matching Contribution
period, disregarding any Elective Deferral Contributions in
excess of 4% of his Compensation for the Matching Contribution
period. The Matching Contribution period may be a month,
quarter, half-year, or year as determined by the Employer.
Matching Contributions are subject to the Vesting Percentage.
(c) The amount of each Qualified Nonelective Contribution shall be
determined by the Employer. A Qualified Nonelective
Contribution shall be made for a Participant only if he is a
Nonhighly Compensated Employee or a Non-key Employee (as
defined in Article X).
Qualified Nonelective Contributions are fully (100%) vested
and nonforfeitable.
(d) The amount of each Discretionary Contribution shall be
determined by the Employer.
Discretionary Contributions are subject to the Vesting
Percentage.
No Participant shall be permitted to have Elective Deferral
Contributions, as defined in the EXCESS AMOUNTS SECTION of Article III, made
under this Plan, or any other qualified plan maintained by the Employer,
ARTICLE III 22
<PAGE> 22
during any taxable year, in excess of the dollar limitation contained in Code
Section 402(g) in effect at the beginning of such taxable year.
The Employer shall pay to the Trustee its Contributions used to
determine the Actual Deferral Percentage, as defined in the EXCESS AMOUNTS
SECTION of Article III, to the Plan for each Plan Year not later than the end of
the twelve-month period immediately following the Plan Year for which they are
deemed to be paid. Any such Contributions accumulated through payroll
deductions shall be paid to the Trustee as soon as administratively practicable
and in no event later than the 15th business day of the month after the month in
which such amounts otherwise would have been paid to the Participant.
A portion of the Plan assets resulting from Employer Contributions
(but not more than the original amount of those Contributions) may be returned
if the Employer Contributions are made because of a mistake of fact or are more
than the amount deductible under Code Section 404 (excluding any amount which
is not deductible because the Plan is disqualified). The amount involved must
be returned to the Employer within one year after the date the Employer
Contributions are made by mistake of fact or the date the deduction is
disallowed, whichever applies. Except as provided under this paragraph and
Article VII, the assets of the Plan shall never be used for the benefit of the
Employer and are held for the exclusive purpose of providing benefits to
Participants and their Beneficiaries and for defraying reasonable expenses of
administering the Plan.
SECTION 3.01A--ROLLOVER CONTRIBUTIONS.
A Rollover Contribution may be made by or for an Eligible Employee if
the following conditions are met:
(a) The Contribution is a rollover contribution which the Code
permits to be transferred to a plan that meets the
requirements of Code Section 401(a).
(b) If the Contribution is made by the Eligible Employee, it is
made within sixty days after he receives the distribution.
(c) The Eligible Employee furnishes evidence satisfactory to the
Plan Administrator that the proposed transfer is in fact a
rollover contribution that meets conditions (a) and (b) above.
The Rollover Contribution may be made by the Eligible Employee or the
Eligible Employee may direct the trustee or named fiduciary of another plan to
transfer the funds which would otherwise be a Rollover Contribution directly to
this Plan. Such transferred funds shall be called a Rollover Contribution.
The Contribution shall be made according to procedures set up by the Plan
Administrator.
If the Eligible Employee is not an Active Participant at the time the
Rollover Contribution is made, he shall be deemed to be a Participant only for
the purposes of investment and distribution of the Rollover Contribution. He
shall not share in the allocation of Employer Contributions until the time he
meets all the requirements to become an Active Participant.
Rollover Contributions made by or for an Eligible Employee shall be
credited to his Account. The part of the Participant's Account resulting from
Rollover Contributions is fully (100%) vested and nonforfeitable at all times.
A separate accounting record shall be maintained for that part of his Rollover
Contribution which consists of voluntary contributions that were deducted from
the Participant's gross income for Federal income tax purposes.
SECTION 3.02--FORFEITURES.
The Nonvested Account of a Participant shall be forfeited as of the
earlier of the following: the date of the Participant's death, if prior to
such date he had ceased to be an Employee; or his Forfeiture Date. All or a
ARTICLE III 23
<PAGE> 23
part of a Participant's Nonvested Account will be forfeited if, after he
ceases to be an Employee, he receives a distribution of his entire Vested
Account or a distribution of his Vested Account derived from Employer
Contributions which were not 100% vested when made according to the provisions
of the VESTED BENEFITS SECTION of Article V or the SMALL AMOUNTS SECTION of
Article IX. If a Participant's Vested Account is zero on the date he ceases to
be an Employee, he shall be deemed to have received a distribution of his
entire Vested Account on such date. The forfeiture will occur as of the date
he receives the distribution or on the date such provision became effective, if
later. If he receives a distribution of his entire Vested Account, his entire
Nonvested Account will be forfeited. If he receives a distribution of his
Vested Account from Employer Contributions which were not 100% vested when
made, but less than his entire Vested Account, the amount to be forfeited will
be determined by multiplying his Nonvested Account by a fraction. The
numerator of the fraction is the amount of the distribution derived from
Employer Contributions which were not 100% vested when made and the denominator
of the fraction is his entire Vested Account derived from such Employer
Contributions on the date of distribution.
A Forfeiture shall also occur as described in the EXCESS AMOUNTS
SECTION of Article III.
Forfeitures may first be applied to pay expenses under the Plan which
would otherwise be paid by the Employer.
Forfeitures not used to pay expenses shall be applied to reduce the
earliest Employer Contributions made after the Forfeitures are determined.
Forfeitures shall be determined at least once during each taxable year of the
Employer. Upon their application, such Forfeitures shall be deemed to be
Employer Contributions.
Forfeitures of Matching Contributions which relate to excess amounts
shall be applied as provided in the EXCESS AMOUNTS SECTION of Article III.
If a Participant again becomes an Eligible Employee after receiving a
distribution which caused his Nonvested Account to be forfeited, he shall have
the right to repay to the Plan the entire amount of the distribution he
received (excluding any amount of such distribution resulting from
Contributions which were 100% vested when made). The repayment must be made
before the earlier of the date five years after the date he again becomes an
Eligible Employee or the end of the first period of five consecutive Vesting
Breaks in Service which begin after the date of the distribution.
If the Participant makes the repayment provided above, the Plan
Administrator shall restore to his Account an amount equal to his Nonvested
Account which was forfeited on the date of distribution, unadjusted for any
investment gains or losses. If the amount of the repayment is zero dollars
because the Participant was deemed to have received a distribution or the plan
did not have repayment provisions in effect on the date the distribution was
made and he again performs an Hour-of-Service as an Eligible Employee within
the repayment period, the Plan Administrator shall restore the Participant's
Account as if he had made a required repayment on the date he performed such
Hour-of-Service. Restoration of the Participant's Account shall include
restoration of all Code Section 411(d)(6) protected benefits with respect to
that restored Account, according to applicable Treasury regulations. Provided,
however, the Plan Administrator shall not restore the Nonvested Account if a
Forfeiture Date has occurred after the date of the distribution and on or
before the date of repayment and that Forfeiture Date would result in a
complete forfeiture of the amount the Plan Administrator would otherwise
restore.
The Plan Administrator shall restore the Participant's Account by the
close of the Plan Year following the Plan Year in which repayment is made.
Permissible sources for restoration are Forfeitures or Employer Contributions.
The Employer shall contribute, without regard to any requirement or condition
of the EMPLOYER
ARTICLE III 24
<PAGE> 24
CONTRIBUTIONS SECTION of Article III, such additional amount needed to make the
required restoration. The repaid and restored amounts are not included in the
Participant's Annual Addition, as defined in the CONTRIBUTION LIMITATION
SECTION of Article III.
SECTION 3.03--ALLOCATION.
The following Contributions for the Plan Year shall be allocated among
all eligible persons:
Qualified Nonelective Contributions
Discretionary Contributions
The eligible persons are all Participants and former Participants who
(i) are Active Participants on the last day of the Plan Year and had 1,000 or
more Hours-of-Service in the Accrual Computation Period that ends in the Plan
Year or (ii) were Active Participants at any time in the Plan Year and have
died, retired or become Totally and Permanently Disabled. The amount allocated
to such a person shall be determined below and under Article X.
The following Contributions for each Plan Year shall be allocated to
each Participant for whom such Contributions were made under the EMPLOYER
CONTRIBUTIONS SECTION of Article III:
Elective Deferral Contributions
Matching Contributions
These Contributions shall be allocated when made and credited to the
Participant's Account.
The following Contributions are allocated as of the last day of the
Plan Year to each eligible person for whom they are made and credited to his
Account:
Qualified Nonelective Contributions are allocated as of the last day
of each Plan Year. For purposes of this allocation, only Nonhighly Compensated
Employees and Non-key Employees (as defined in Article X) shall be eligible
persons. The amount allocated to each eligible person for the Plan Year shall
be equal to Qualified Nonelective Contributions for the Plan Year, multiplied
by the ratio of (a) his Annual Compensation as of the last day of the Plan Year
to (b) the total of such compensation for all eligible persons. This amount is
credited to his Account.
Discretionary Contributions are allocated as of the last day of each
Plan Year. The amount allocated to each eligible person for the Plan Year
shall be equal to the Discretionary Contributions for the Plan Year, multiplied
by the ratio of (a) his Annual Compensation as of the last day of the Plan Year
to (b) the total of such compensation for all eligible persons. This amount is
credited to his Account.
Notwithstanding anything to the contrary, if this is a Plan that would
otherwise fail to meet the requirements of Code Sections 401(a)(26), 410(b)(1)
or 410(b)(2)(A)(i) and the Regulations thereunder because Employer
Contributions would not be allocated to a sufficient number or percentage of
Participants for a Plan Year, then the following rules shall apply:
(1) The group of Participants eligible to share in the Employer's
Contribution for the Plan Year shall be expanded to include
the minimum number of Participants who would not otherwise be
eligible as are necessary to satisfy the applicable test. The
specific Participants who shall become eligible
ARTICLE III 25
<PAGE> 25
under the terms of this paragraph shall be those who are
actively employed on the last day of the Plan Year and, when
compared to similarly situated Participants, have completed
the greatest number of Hours of Service in the Plan Year.
(2) If after application of paragraph (1) above, the applicable
test is still not satisfied, then the group of Participants
eligible to share in the Employer's Contribution for the Plan
Year shall be further expanded to include the minimum number
of Participants who are not actively employed on the last day
of the Plan Year as are necessary to satisfy the applicable
test. The specific Participants who shall become eligible to
share shall be those Participants, when compared to similarly
situated Participants, who have completed the greatest number
of Hours-of-Service in the Plan Year before terminating
employment.
In determining the amount of Employer Contributions to be allocated to
a Participant who is a Leased Employee, contributions and benefits provided by
the leasing organization which are attributable to services such Leased
Employee performs for the Employer shall be treated as provided by the Employer
and there shall be no duplication of those contributions or benefits under this
Plan.
SECTION 3.04--CONTRIBUTION LIMITATION.
(a) For the purpose of determining the contribution limitation set
forth in this section, the following terms are defined:
Aggregate Annual Addition means, for a Participant with
respect to any Limitation Year, the sum of his Annual
Additions under all defined contribution plans of the
Employer, as defined in this section, for such Limitation
Year. The nondeductible participant contributions which the
Participant makes to a defined benefit plan shall be treated
as Annual Additions to a defined contribution plan. The
Contributions the Employer, as defined in this section, made
for the Participant for a Plan Year beginning on or after
March 31, 1984, to an individual medical benefit account, as
defined in Code Section 415(l)(2), under a pension or annuity
plan of the Employer, as defined in this section, shall be
treated as Annual Additions to a defined contribution plan.
Also, amounts derived from contributions paid or accrued after
December 31, 1985, in Fiscal Years ending after such date,
which are attributable to post-retirement medical benefits
allocated to the separate account of a key employee, as
defined in Code Section 419A(d)(3), under a welfare benefit
fund, as defined in Code Section 419(e), maintained by the
Employer, as defined in this section, are treated as Annual
Additions to a defined contribution plan. The 25% of
Compensation limit under Maximum Permissible Amount does not
apply to Annual Additions resulting from contributions made to
an individual medical account, as defined in Code Section
415(l)(2), or to Annual Additions resulting from contributions
for medical benefits, within the meaning of Code Section 419A,
after separation from service.
Annual Addition means the amount added to a Participant's
account for any Limitation Year which may not exceed the
Maximum Permissible Amount. The Annual Addition under any
plan for a Participant with respect to any Limitation Year,
shall be equal to the sum of (1) and (2) below:
(1) Employer contributions and forfeitures credited to
his account for the Limitation Year.
(2) Participant contributions made by him for the
Limitation Year.
ARTICLE III 26
<PAGE> 26
Before the first Limitation Year beginning after December 31,
1986, the amount under (2) above is the lesser of (i) 1/2 of his
nondeductible participant contributions made for the Limitation Year,
or (ii) the amount, if any, of his nondeductible participant
contributions made for the Limitation Year which is in excess of six
percent of his Compensation, as defined in this section, for such
Limitation Year.
Compensation means all wages for Federal income tax
withholding purposes, as defined under Code Section 3401(a)
(for purposes of income tax withholding at the source),
disregarding any rules limiting the remuneration included as
wages based on the nature or location of the employment or the
services performed.
For any self-employed individual Compensation will mean earned
income.
For purposes of applying the limitations of this section,
Compensation for a Limitation Year is the Compensation
actually paid or made available during such Limitation Year.
Defined Benefit Plan Fraction means, with respect to a
Limitation Year for a Participant who is or has been a
participant in a defined benefit plan ever maintained by the
Employer, as defined in this section, the quotient, expressed
as a decimal, of
(1) the Participant's Projected Annual Benefit under all
such plans as of the close of such Limitation Year,
divided by
(2) on and after the TEFRA Compliance Date, the lesser of
(i) or (ii) below:
(i) 1.25 multiplied by the maximum dollar
limitation which applies to defined benefit
plans determined for the Limitation Year
under Code Sections 415(b) or (d) or
(ii) 1.4 multiplied by the Participant's highest
average compensation as defined in the
defined benefit plan(s),
including any adjustments under Code Section 415(b).
Before the TEFRA Compliance Date, this denominator is
the Participant's Projected Annual Benefit as of the
close of the Limitation Year if the plan(s) provided
the maximum benefit allowable.
The Defined Benefit Plan Fraction shall be modified as
follows:
If the Participant was a participant as of the first day of
the first Limitation Year beginning after December 31, 1986,
in one or more defined benefit plans maintained by the
Employer, as defined in this section, which were in existence
on May 6, 1986, the denominator of this fraction will not be
less than 125 percent of the sum of the annual benefits under
such plans which the Participant had accrued as of the close
of the last Limitation Year beginning before January 1, 1987,
disregarding any changes in the terms and conditions of the
plan after May 5, 1986. The preceding sentence applies only
if the defined benefit plans individually and in the aggregate
satisfied the requirements of Code Section 415 for all
Limitation Years beginning before January 1, 1987.
ARTICLE III 27
<PAGE> 27
Defined Contribution Plan Fraction means, for a Participant
with respect to a Limitation Year, the quotient, expressed as
a decimal, of
(1) the Participant's Aggregate Annual Additions for such
Limitation Year and all prior Limitation Years, under
all defined contribution plans (including the
Aggregate Annual Additions attributable to
nondeductible accounts under defined benefit plans
and attributable to all welfare benefit funds, as
defined in Code Section 419(e) and attributable to
individual medical accounts, as defined in Code
Section 415(l)(2)) ever maintained by the Employer,
as defined in this section, divided by
(2) on and after the TEFRA Compliance Date, the sum of
the amount determined for the Limitation Year under
(i) or (ii) below, whichever is less, and the amounts
determined in the same manner for all prior
Limitation Years during which he has been an Employee
or an employee of a predecessor employer:
(i) 1.25 multiplied by the maximum permissible
dollar amount for each such Limitation Year,
or
(ii) 1.4 multiplied by the maximum permissible
percentage of the Participant's Compensation,
as defined in this section, for each such
Limitation Year.
Before the TEFRA Compliance Date, this denominator is
the sum of the maximum allowable amount of Annual
Addition to his account(s) under all the plan(s) of
the Employer, as defined in this section, for each
such Limitation Year.
The Defined Contribution Plan Fraction shall be modified as
follows:
If the Participant was a participant as of the first day of
the first Limitation Year beginning after December 31, 1986,
in one or more defined contribution plans maintained by the
Employer, as defined in this section, which were in existence
on May 6, 1986, the numerator of this fraction shall be
adjusted if the sum of the Defined Contribution Plan Fraction
and Defined Benefit Plan Fraction would otherwise exceed 1.0
under the terms of this Plan. Under the adjustment, the
dollar amount determined below shall be permanently subtracted
from the numerator of this fraction. The dollar amount is
equal to the excess of the sum of the two fractions, before
adjustment, over 1.0 multiplied by the denominator of his
Defined Contribution Plan Fraction. The adjustment is
calculated using his Defined Contribution Plan Fraction and
Defined Benefit Plan Fraction as they would be computed as of
the end of the last Limitation Year beginning before January
1, 1987, and disregarding any changes in the terms and
conditions of the plan made after May 5, 1986, but using the
Code Section 415 limitations applicable to the first
Limitation Year beginning on or after January 1, 1987.
The Annual Addition for any Limitation Year beginning before
January 1, 1987, shall not be recomputed to treat all employee
contributions as Annual Additions.
For a plan that was in existence on July 1, 1982, for purposes
of determining the Defined Contribution Plan Fraction for any
Limitation Year ending after December 31, 1982, the Plan
Administrator may elect, in accordance with the provisions of
Code Section 415, that the
ARTICLE III 28
<PAGE> 28
denominator for each Participant for all Limitation Years
ending before January 1, 1983, will be equal to
(1) the Defined Contribution Plan Fraction denominator
which would apply for the last Limitation Year ending
in 1982 if an election under this paragraph were not
made, multiplied by.
(2) a fraction, equal to (i) over (ii) below:
(i) the lesser of (A) $51,875, or (B) 1.4,
multiplied by 25% of the Participant's
Compensation, as defined in this section, for
the Limitation Year ending in 1981;
(ii) the lesser of (A) $41,500, or (B) 25% of the
Participant's Compensation, as defined in
this section, for the Limitation Year ending
in 1981.
The election described above is applicable only if the plan
administrators under all defined contribution plans of the
Employer, as defined in this section, also elect to use the
modified fraction.
Employer means any employer that adopts this Plan and all
Controlled Group members and any other entity required to be
aggregated with the employer pursuant to regulations under
Code Section 414(o).
Limitation Year means the 12-consecutive month period within
which it is determined whether or not the limitations of Code
Section 415 are exceeded. Limitation Year means each
12-consecutive month period ending on the last day of each
Plan Year, including corresponding 12-consecutive month
periods before July 1, 1994. If the Limitation Year is other
than the calendar year, execution of this Plan (or any
amendment to this Plan changing the Limitation Year)
constitutes the Employer's adoption of a written resolution
electing the Limitation Year. If the Limitation Year is
changed, the new Limitation Year shall begin within the
current Limitation Year, creating a short Limitation Year.
Maximum Permissible Amount means, for a Participant with
respect to any Limitation Year, the lesser of (1) or (2)
below:
(1) The greater of $30,000 or one-fourth of the maximum
dollar limitation which applies to defined benefit
plans set forth in Code Section 415(b)(1)(A) as in
effect for the Limitation Year. (Before the TEFRA
Compliance Date, $25,000 multiplied by the cost of
living adjustment factor permitted by Federal
regulations.)
(2) 25% of his Compensation, as defined in this section,
for such Limitation Year.
The compensation limitation referred to in (2) shall not apply
to any contribution for medical benefits (within the meaning
of Code Section 401(h) or Code Section 419A(f)(2)) which is
otherwise treated as an annual addition under Code Section
415(l)(1) or Code Section 419A(d)(2).
If there is a short Limitation Year because of a change in
Limitation Year, the Maximum Permissible Amount will not
exceed the maximum dollar limitation which would otherwise
apply multiplied by the following fraction:
Number of months in the short Limitation Year
---------------------------------------------
12
Projected Annual Benefit means a Participant's expected annual
benefit under all defined benefit plan(s) ever maintained by
the Employer, as defined in this section. The Projected
Annual Benefit
ARTICLE III 29
<PAGE> 29
shall be determined assuming that the Participant will
continue employment until the later of current age or normal
retirement age under such plan(s), and that the Participant's
compensation for the current Limitation Year and all other
relevant factors used to determine benefits under such plan(s)
will remain constant for all future Limitation Years. Such
expected annual benefit shall be adjusted to the actuarial
equivalent of a straight life annuity if expressed in a form
other than a straight life or qualified joint and survivor
annuity.
(b) The Annual Addition under this Plan for a Participant during a
Limitation Year shall not be more than the Maximum Permissible
Amount.
(c) Contributions which would otherwise be credited to the
Participant's Account shall be limited or reallocated to the
extent necessary to meet the restrictions of subparagraph (b)
above for any Limitation Year in the following order.
Discretionary Contributions shall be reallocated in the same
manner as described in the ALLOCATION SECTION of Article III
to the remaining Participants to whom the limitations do not
apply for the Limitation Year. The Discretionary
Contributions shall be limited if there are no such remaining
Participants. Qualified Nonelective Contributions shall be
reallocated in the same manner as described in the ALLOCATION
SECTION of Article III to the remaining Participants to whom
the limitations do not apply for the Limitation Year. The
Qualified Nonelective Contributions shall be limited if there
are no such remaining Participants. Elective Deferral
Contributions that are not the basis for Matching
Contributions shall be limited. Matching Contributions shall
be limited to the extent necessary to limit the Participant's
Annual Addition under this Plan to his maximum amount. If
Matching Contributions are limited because of this limit,
Elective Deferral Contributions that are the basis for
Matching Contributions shall be reduced in proportion.
If, due to (i) an error in estimating a Participant's
Compensation as defined in this section, (ii) because the
amount of the Forfeitures to be used to offset Employer
Contributions is more than the amount of the Employer
Contributions due for the remaining Participants, (iii) as a
result of a reasonable error in determining the amount of
elective deferrals (within the meaning of Code Section
402(g)(3)) that may be made with respect to any individual
under the limits of Code Section 415, or (iv) other limited
facts and circumstances, a Participant's Annual Addition is
greater than the amount permitted in (b) above, such excess
amount shall be applied as follows. Matching Contributions
based on Elective Deferral Contributions which are returned
shall be forfeited. If after the return of Elective Deferral
Contributions, an excess amount still exists, and the
Participant is an Active Participant as of the end of the
Limitation Year, the excess amount shall be used to offset
Employer Contributions for him in the next Limitation Year.
If after the return of Elective Deferral Contributions, an
excess amount still exists, and the Participant is not an
Active Participant as of the end of the Limitation Year, the
excess amount will be held in a suspense account which will be
used to offset Employer Contributions for all Participants in
the next Limitation Year. No Employer Contributions that
would be included in the next Limitation Year's Annual
Addition may be made before the total suspense account has
been used.
ARTICLE III 30
<PAGE> 30
(d) A Participant's Aggregate Annual Addition for a Limitation
Year shall not exceed the Maximum Permissible Amount.
If, for the Limitation Year, the Participant has an Annual
Addition under more than one defined contribution plan or a
welfare benefit fund, as defined in Code Section 419(e), or an
individual medical account, as defined in Code Section
415(l)(2), maintained by the Employer, as defined in this
section, and such plans and welfare benefit funds and
individual medical accounts do not otherwise limit the
Aggregate Annual Addition to the Maximum Permissible Amount,
any reduction necessary shall be made first to the profit
sharing plans, then to all other such plans and welfare
benefit funds and individual medical accounts and, if
necessary, by reducing first those that were most recently
allocated. Welfare benefit funds and individual medical
accounts shall be deemed to be allocated first. However,
elective deferral contributions shall be the last
contributions reduced before the welfare benefit fund or
individual medical account is reduced.
If some of the Employer's defined contribution plans were not
in existence on July 1, 1982, and some were in existence on
that date, the Maximum Permissible Amount which is based on a
dollar amount may differ for a Limitation Year. The Aggregate
Annual Addition for the Limitation Year in which the dollar
limit differs shall not exceed the lesser of (1) 25% of
Compensation as defined in this section, (2) $45,475, or (3)
the greater of $30,000 or the sum of the Annual Additions for
such Limitation Year under all the plan(s) to which the
$45,475 amount applies.
(e) If a Participant is or has been a participant in both defined
benefit and defined contribution plans (including a welfare
benefit fund or individual medical account) ever maintained by
the Employer, as defined in this section, the sum of the
Defined Benefit Plan Fraction and the Defined Contribution
Plan Fraction for any Limitation Year shall not exceed 1.0
(1.4 before the TEFRA Compliance Date).
After all other limitations set out in the plans and funds
have been applied, the following limitations shall apply so
that the sum of the Participant's Defined Benefit Plan
Fraction and Defined Contribution Plan Fraction shall not
exceed 1.0 (1.4 before the TEFRA Compliance Date). The
Projected Annual Benefit shall be limited first. If the
Participant's annual benefit(s) equal his Projected Annual
Benefit, as limited, then Annual Additions to the defined
contribution plan(s) shall be limited to the extent needed to
reduce the sum to 1.0 (1.4). First, the voluntary
contributions the Participant may make for the Limitation Year
shall be limited. Next, in the case of a profit sharing plan,
any forfeitures allocated to the Participant shall be
reallocated to remaining participants to the extent necessary
to reduce the decimal to 1.0 (1.4). Last, to the extent
necessary, employer contributions for the Limitation Year
shall be reallocated or limited, and any required and optional
employee contributions to which such employer contributions
were geared shall be reduced in proportion.
If, for the Limitation Year, the Participant has an Annual
Addition under more than one defined contribution plan or
welfare benefit fund or individual medical account maintained
by the Employer, as defined in this section, any reduction
above shall be made first to the profit sharing plans, then to
all other such plans and welfare benefit plans and individual
medical accounts and, if necessary, by reducing first those
that were most recently allocated. However, elective deferral
contributions shall be the last contributions reduced before
the welfare benefit fund or individual medical account is
reduced. The annual addition to the welfare benefit fund and
individual medical account shall be limited last.
ARTICLE III 31
<PAGE> 31
SECTION 3.05--EXCESS AMOUNTS.
(a) For the purposes of this section, the following terms are
defined:
Actual Deferral Percentage means the ratio (expressed as a
percentage) of Elective Deferrall Contributions under this
Plan on behalf of the Eligible Participant for the Plan Year
to the Eligible Participant's Compensation for the Plan Year.
In modification of the foregoing, Compensation shall be
limited to the Compensation received while an Active
Participant. The Elective Deferral Contributions used to
determine the Actual Deferral Percentage shall include Excess
Elective Deferrals (other than Excess Elective Deferrals of
Nonhighly Compensated Employees that arise solely from
Elective Deferral Contributions made under this Plan or any
other plans of the Employer or a Controlled Group member), but
shall exclude Elective Deferral Contributions that are used in
computing the Contribution Percentage (provided the Average
Actual Deferral Percentage test is satisfied both with and
without exclusion of these Elective Deferral Contributions).
Under such rules as the Secretary of the Treasury shall
prescribe in Code Section 401(k)(3)(D), the Employer may elect
to include Qualified Nonelective Contributions and Qualified
Matching Contributions under this Plan in computing the Actual
Deferral Percentage. For an Eligible Participant for whom
such Contributions on his behalf for the Plan Year are zero,
the percentage is zero.
Aggregate Limit means the greater of (1) or (2) below:
(1) The sum of
(i) 125 percent of the greater of the Average
Actual Deferral Percentage of the Nonhighly
Compensated Employees for the Plan Year or
the Average Contribution Percentage of
Nonhighly Compensated Employees under the
Plan subject to Code Section 401(m) for the
Plan Year beginning with or within the Plan
Year of the cash or deferred arrangement and
(ii) the lesser of 200% or two plus the lesser of
such Average Actual Deferral Percentage or
Average Contribution Percentage.
(2) The sum of
(i) 125 percent of the lesser of the Average
Actual Deferral Percentage of the Nonhighly
Compensated Employees for the Plan Year or
the Average Contribution Percentage of
Nonhighly Compensated Employees under the
Plan subject to Code Section 401(m) for the
Plan Year beginning with or within the Plan
Year of the cash or deferred arrangement and
(ii) the lesser of 200% or two plus the greater of
such Average Actual Deferral Percentage or
Average Contribution Percentage.
Average Actual Deferral Percentage means the average
(expressed as a percentage) of the Actual Deferral Percentages
of the Eligible Participants in a group.
Average Contribution Percentage means the average (expressed
as a percentage) of the Contribution Percentages of the
Eligible Participants in a group.
Contribution Percentage means the ratio (expressed as a
percentage) of the Eligible Participant's Contribution
Percentage Amounts to the Eligible Participant's Compensation
for the Plan Year. In
ARTICLE III 32
<PAGE> 32
modification of the foregoing, Compensation shall be limited
to the Compensation received while an Active Participant. For
an Eligible Participant for whom such Contribution Percentage
Amounts for the Plan Year are zero, the percentage is zero.
Contribution Percentage Amounts means the sum of the
Participant Contributions and Matching Contributions (that are
not Qualified Matching Contributions) under this Plan on
behalf of the Eligible Participant for the Plan Year. Such
Contribution Percentage Amounts shall not include Matching
Contributions that are forfeited either to correct Excess
Aggregate Contributions or because the Contributions to which
they relate are Excess Elective Deferrals, Excess
Contributions or Excess Aggregate Contributions. Under such
rules as the Secretary of the Treasury shall prescribe in Code
Section 401(k)(3)(D), the Employer may elect to include
Qualified Nonelective Contributions and Qualified Matching
Contributions under this Plan which were not used in computing
the Actual Deferral Percentage in computing the Contribution
Percentage. The Employer may also elect to use Elective
Deferral Contributions in computing the Contribution
Percentage so long as the Average Actual Deferral Percentage
test is met before the Elective Deferral Contributions are
used in the Average Contribution Percentage test and continues
to be met following the exclusion of those Elective Deferral
Contributions that are used to meet the Average Contribution
Percentage test.
Elective Deferral Contributions means employer contributions
made on behalf of a participant pursuant to an election to
defer under any qualified cash or deferred arrangement as
described in Code Section 401(k), any simplified employee
pension cash or deferred arrangement as described in Code
Section 402(h)(1)(B), any eligible deferred compensation plan
under Code Section 457, any plan as described under Code
Section 501(c)(18), and any employer contributions made on
behalf of a participant for the purchase of an annuity
contract under Code Section 403(b) pursuant to a salary
reduction agreement. Elective Deferral Contributions shall
not include any deferrals properly distributed as excess
Annual Additions.
Eligible Participant means, for purposes of the Actual
Deferral Percentage, any Employee who is eligible to make an
Elective Deferral Contribution, and shall include the
following: any Employee who would be a plan participant if he
chose to make required contributions; any Employee who can
make Elective Deferral Contributions but who has changed the
amount of his Elective Deferral Contribution to 0%, or whose
eligibility to make an Elective Deferral Contribution is
suspended because of a loan, distribution or hardship
withdrawal; and, any Employee who is not able to make an
Elective Deferral Contribution because of Code Section
415(c)(1) - Annual Additions limits. The Actual Deferral
Percentage for any such included Employee is zero.
Eligible Participant means, for purposes of the Average
Contribution Percentage, any Employee who is eligible to make
a Participant Contribution or to receive a Matching
Contribution, and shall include the following: any Employee
who would be a plan participant if he chose to make required
contributions; any Employee who can make a Participant
Contribution or receive a matching contribution but who has
made an election not to participate in the Plan; and any
Employee who is not able to make a Participant Contribution or
receive a matching contribution because of Code Section
415(c)(1) or 415(e) limits. The Average Contribution
Percentage for any such included Employee is zero.
Excess Aggregate Contributions means, with respect to any Plan
Year, the excess of:
(1) The aggregate Contributions taken into account in
computing the numerator of the Contribution
Percentage actually made on behalf of Highly
Compensated Employees for such Plan Year, over
(2) The maximum amount of such Contributions permitted by
the Average Contribution
ARTICLE III 33
<PAGE> 33
Percentage test (determined by reducing Contributions
made on behalf of Highly Compensated Employees in
order of their Contribution Percentages beginning
with the highest of such percentages).
Such determination shall be made after first determining
Excess Elective Deferrals and then determining Excess
Contributions.
Excess Contributions means, with respect to any Plan Year, the
excess of:
(1) The aggregate amount of Contributions actually taken
into account in computing the Actual Deferral
Percentage of Highly Compensated Employees for such
Plan Year, over
(2) The maximum amount of such Contributions permitted by
the Actual Deferral Percentage test (determined by
reducing Contributions made on behalf of Highly
Compensated Employees in order of the Actual Deferral
Percentages, beginning with the highest of such
percentages).
A Participant's Excess Contributions for a Plan Year will be
reduced by the amount of Excess Elective Deferrals, if any,
previously distributed to the Participant for the taxable year
ending in that Plan Year.
Excess Elective Deferrals means those Elective Deferral
Contributions that are includible in a Participant's gross
income under Code Section 402(g) to the extent such
Participant's Elective Deferral Contributions for a taxable
year exceed the dollar limitation under such Code section.
Excess Elective Deferrals shall be treated as Annual
Additions, as defined in the CONTRIBUTION LIMITATION SECTION
of Article III, under the Plan, unless such amounts are
distributed no later than the first April 15 following the
close of the Participant's taxable year.
Matching Contributions means employer contributions made to
this or any other defined contribution plan, or to a contract
described in Code Section 403(b), on behalf of a participant
on account of a Participant Contribution made by such
participant, or on account of a participant's Elective
Deferral Contributions, under a plan maintained by the
employer.
Participant Contributions means contributions made to any plan
by or on behalf of a participant that are included in the
participant's gross income in the year in which made and that
are maintained under a separate account to which earnings and
losses are allocated.
Qualified Matching Contributions means Matching Contributions
which are subject to the distribution and nonforfeitability
requirements under Code Section 401(k) when made.
Qualified Nonelective Contributions means any employer
contributions (other than Matching Contributions) which an
employee may not elect to have paid to him in cash instead of
being contributed to the plan and which are subject to the
distribution and nonforfeitability requirements under Code
Section 401(k).
(b) A Participant may assign to this Plan any Excess Elective
Deferrals made during a taxable year by notifying the Plan
Administrator in writing on or before the first following
March 1 of the amount of the Excess Elective Deferrals to be
assigned to the Plan. A Participant is deemed to notify the
Plan Administrator of any Excess Elective Deferrals that arise
by taking into account only those Elective Deferral
Contributions made to this Plan and any other plans of the
Employer or a Controlled Group member and reducing such Excess
Elective Deferrals by the amount of Excess Contributions, if
any, previously distributed for the Plan Year beginning in
that taxable year. The Participant's claim for Excess
Elective Deferrals shall be accompanied by the Participant's
written statement that if such
ARTICLE III 34
<PAGE> 34
amounts are not distributed, such Excess Elective Deferrals,
when added to amounts deferred under other plans or
arrangements described in Code Sections 401(k), 408(k) or
403(b), will exceed the limit imposed on the Participant by
Code Section 402(g) for the year in which the deferral
occurred. The Excess Elective Deferrals assigned to this Plan
can not exceed the Elective Deferral Contributions allocated
under this Plan for such taxable year.
Notwithstanding any other provisions of the Plan, Elective
Deferral Contributions in an amount equal to the Excess
Elective Deferrals assigned to this Plan, plus any income and
minus any loss allocable thereto, shall be distributed no
later than April 15 to any Participant to whose Account Excess
Elective Deferrals were assigned for the preceding year and
who claims Excess Elective Deferrals for such taxable year.
The income or loss allocable to such Excess Elective Deferrals
shall be equal to the income or loss allocable to the
Participant's Elective Deferral Contributions for the taxable
year in which the excess occurred multiplied by a fraction.
The numerator of the fraction is the Excess Elective
Deferrals. The denominator of the fraction is the closing
balance without regard to any income or loss occurring during
such taxable year (as of the end of such taxable year) of the
Participant's Account resulting from Elective Deferral
Contributions.
Any Matching Contributions which were based on the Elective
Deferral Contributions which are distributed as Excess
Elective Deferrals, plus any income and minus any loss
allocable thereto, shall be forfeited. These Forfeitures
shall be used to offset the earliest Employer Contribution due
after the Forfeiture arises.
(c) As of the end of each Plan Year after Excess Elective
Deferrals have been determined, one of the following tests
must be met:
(1) The Average Actual Deferral Percentage for Eligible
Participants who are Highly Compensated Employees for
the Plan Year is not more than the Average Actual
Deferral Percentage for Eligible Participants who are
Nonhighly Compensated Employees for the Plan Year
multiplied by 1.25.
(2) The Average Actual Deferral Percentage for Eligible
Participants who are Highly Compensated Employees for
the Plan Year is not more than the Average Actual
Deferral Percentage for Eligible Participants who are
Nonhighly Compensated Employees for the Plan Year
multiplied by 2 and the difference between the
Average Actual Deferral Percentages is not more than
2.
The Actual Deferral Percentage for any Eligible Participant
who is a Highly Compensated Employee for the Plan Year and who
is eligible to have Elective Deferral Contributions (and
Qualified
ARTICLE III 35
<PAGE> 35
Nonelective Contributions or Qualified Matching
Contributions, or both, if used in computing the Actual
Deferral Percentage) allocated to his account under two or
more plans or arrangements described in Code Section 401(k)
that are maintained by the Employer or a Controlled Group
member shall be determined as if all such Elective Deferral
Contributions (and, if applicable, such Qualified Nonelective
Contributions or Qualified Matching Contributions, or both)
were made under a single arrangement. If a Highly Compensated
Employee participates in two or more cash or deferred
arrangements that have different Plan Years, all cash or
deferred arrangements ending with or within the same calendar
year shall be treated as a single arrangement.
Notwithstanding the foregoing, certain plans shall be treated
as separate if mandatorily disaggregated under the regulations
under Code Section 401(k).
In the event that this Plan satisfies the requirements of Code
Sections 401(k), 401(a)(4), or 410(b) only if aggregated with
one or more other plans, or if one or more other plans satisfy
the requirements of such Code sections only if aggregated with
this Plan, then this section shall be applied by determining
the Actual Deferral Percentage of employees as if all such
plans were a single plan. Plans may be aggregated in order to
satisfy Code Section 401(k) only if they have the same Plan
Year.
For purposes of determining the Actual Deferral Percentage of
an Eligible Participant who is a five-percent owner or one of
the ten most highly-paid Highly Compensated Employees, the
Elective Deferral Contributions (and Qualified Nonelective
Contributions or Qualified Matching Contributions, or both, if
used in computing the Actual Deferral Percentage) and
Compensation of such Eligible Participant include the Elective
Deferral Contributions (and, if applicable, Qualified
Nonelective Contributions or Qualified Matching Contributions,
or both) and Compensation for the Plan Year of Family Members.
Family Members, with respect to such Highly Compensated
Employees, shall be disregarded as separate employees in
determining the Actual Deferral Percentage both for
Participants who are Nonhighly Compensated Employees and for
Participants who are Highly Compensated Employees.
For purposes of determining the Actual Deferral Percentage,
Elective Deferral Contributions, Qualified Nonelective
Contributions and Qualified Matching Contributions must be
made before the last day of the 12-month period immediately
following the Plan Year to which contributions relate.
The Employer shall maintain records sufficient to demonstrate
satisfaction of the Average Actual Deferral Percentage test
and the amount of Qualified Nonelective Contributions or
Qualified Matching Contributions, or both, used in such test.
The determination and treatment of the Contributions used in
computing the Actual Deferral Percentage shall satisfy such
other requirements as may be prescribed by the Secretary of
the Treasury.
If the Plan Administrator should determine during the Plan
Year that neither of the above tests is being met, the Plan
Administrator may adjust the amount of future Elective
Deferral Contributions of the Highly Compensated Employees.
Notwithstanding any other provisions of this Plan, Excess
Contributions, plus any income and minus any loss allocable
thereto, shall be distributed no later than the last day of
each Plan Year to Participants to whose Accounts such Excess
Contributions were allocated for the preceding Plan
ARTICLE III 36
<PAGE> 36
Year. If such excess amounts are distributed more than 2 1/2
months after the last day of the Plan Year in which such
excess amounts arose, a ten (10) percent excise tax will be
imposed on the employer maintaining the plan with respect to
such amounts. Such distributions shall be made beginning with
the Highly Compensated Employee(s) who has the greatest Actual
Deferral Percentage, reducing his Actual Deferral Percentage
to the next highest Actual Deferral Percentage level. Then,
if necessary, reducing the Actual Deferral Percentage of the
Highly Compensated Employees at the next highest level, and
continuing in this manner until the average Actual Deferral
Percentage of the Highly Compensated Group satisfies the
Actual Deferral Percentage test. Excess Contributions of
Participants who are subject to the family member aggregation
rules shall be allocated among the Family Members in
proportion to the Elective Deferral Contributions (and amounts
treated as Elective Deferral Contributions) of each Family
Member that is combined to determine the combined Actual
Deferral Percentage.
Excess Contributions shall be treated as Annual Additions, as
defined in the CONTRIBUTION LIMITATION SECTION of Article III,
under the Plan.
The Excess Contributions shall be adjusted for income or loss.
The income or loss allocable to such Excess Contributions
shall be equal to the income or loss allocable to the
Participant's Elective Deferral Contributions (and, if
applicable, Qualified Nonelective Contributions or Qualified
Matching Contributions, or both) for the Plan Year in which
the excess occurred multiplied by a fraction. The numerator
of the fraction is the Excess Contributions. The denominator
of the fraction is the closing balance without regard to any
income or loss occurring during such Plan Year (as of the end
of such Plan Year) of the Participant's Account resulting from
Elective Deferral Contributions (and Qualified Nonelective
Contributions or Qualified Matching Contributions, or both, if
used in computing the Actual Deferral Percentage).
Excess Contributions shall be distributed from the
Participant's Account resulting from Elective Deferral
Contributions. If such Excess Contributions exceed the
balance in the Participant's Account resulting from Elective
Deferral Contributions, the balance shall be distributed from
the Participant's Account resulting from Qualified Matching
Contributions (if applicable) and Qualified Nonelective
Contributions, respectively.
Any Matching Contributions which were based on the Elective
Deferral Contributions which are distributed as Excess
Contributions, plus any income and minus any loss allocable
thereto, shall be forfeited. These Forfeitures shall be used
to offset the earliest Employer Contribution due after the
Forfeiture arises.
(d) As of the end of each Plan Year, one of the following tests
must be met:
(1) The Average Contribution Percentage for Eligible
Participants who are Highly Compensated Employees for
the Plan Year is not more than the Average
Contribution Percentage for Eligible Participants who
are Nonhighly Compensated Employees for the Plan Year
multiplied by 1.25.
(2) The Average Contribution Percentage for Eligible
Participants who are Highly Compensated Employees for
the Plan Year is not more than the Average
Contribution Percentage for Eligible Participants who
are Nonhighly Compensated Employees for the Plan Year
multiplied by 2 and the difference between the
Average Contribution Percentages is not more than 2.
If one or more Highly Compensated Employees participate in
both a cash or deferred arrangement and a plan subject to the
Average Contribution Percentage test maintained by the
Employer or a Controlled Group member and the sum of the
Average Actual Deferral Percentage and Average
ARTICLE III 37
<PAGE> 37
Contribution Percentage of those Highly Compensated Employees
subject to either or both tests exceeds the Aggregate Limit,
then the Contribution Percentage of those Highly Compensated
Employees who also participate in a cash or deferred
arrangement will be reduced (beginning with such Highly
Compensated Employees whose Contribution Percentage is the
highest) so that the limit is not exceeded. The amount by
which each Highly Compensated Employee's Contribution
Percentage is reduced shall be treated as an Excess Aggregate
Contribution. The Average Actual Deferral Percentage and
Average Contribution Percentage of the Highly Compensated
Employees are determined after any corrections required to
meet the Average Actual Deferral Percentage and Average
Contribution Percentage tests. Multiple use does not occur if
either the Average Actual Deferral Percentage or Average
Contribution Percentage of the Highly Compensated Employees
does not exceed 1.25 multiplied by the Average Actual Deferral
Percentage and Average Contribution Percentage of the
Nonhighly Compensated Employees.
The Contribution Percentage for any Eligible Participant who
is a Highly Compensated Employee for the Plan Year and who is
eligible to have Contribution Percentage Amounts allocated to
his account under two or more plans described in Code Section
401(a) or arrangements described in Code Section 401(k) that
are maintained by the Employer or a Controlled Group member
shall be determined as if the total of such Contribution
Percentage Amounts was made under each plan. If a Highly
Compensated Employee participates in two or more cash or
deferred arrangements that have different Plan Years, all cash
or deferred arrangements ending with or within the same
calendar year shall be treated as a single arrangement.
Notwithstanding the foregoing, certain plans shall be treated
as separate if mandatorily disaggregated under the regulations
under Code Section 401(m) or permissibly disaggregated as
provided.
In the event that this Plan satisfies the requirements of Code
Sections 401(m), 401(a)(4), or 410(b) only if aggregated with
one or more other plans, or if one or more other plans satisfy
the requirements of Code sections only if aggregated with this
Plan, then this section shall be applied by determining the
Contribution Percentages of Eligible Participants as if all
such plans were a single plan. Plans may be aggregated in
order to satisfy Code Section 401(m) only if they have the
same Plan Year.
For purposes of determining the Contribution Percentage of an
Eligible Participant who is a five-percent owner or one of the
ten most highly-paid Highly Compensated Employees, the
Contribution Percentage Amounts and Compensation of such
Participant shall include Contribution Percentage Amounts and
Compensation for the Plan Year of Family Members. Family
Members, with respect to Highly Compensated Employees, shall
be disregarded as separate employees in determining the
Contribution Percentage both for employees who are Nonhighly
Compensated Employees and for employees who are Highly
Compensated Employees.
For purposes of determining the Contribution Percentage,
Participant Contributions are considered to have been made in
the Plan Year in which contributed to the Plan. Matching
Contributions and Qualified Nonelective Contributions will be
considered made for a Plan Year if made no later than the end
of the 12-month period beginning on the day after the close of
the Plan Year.
ARTICLE III 38
<PAGE> 38
The Employer shall maintain records sufficient to demonstrate
satisfaction of the Average Contribution Percentage test and
the amount of Qualified Nonelective Contributions or Qualified
Matching Contributions, or both, used in such test.
The determination and treatment of the Contribution Percentage
of any Participant shall satisfy such other requirements as
may be prescribed by the Secretary of the Treasury.
Notwithstanding any other provisions of this Plan, Excess
Aggregate Contributions, plus any income and minus any loss
allocable thereto, shall be forfeited, if not vested, or
distributed, if vested, no later than the last day of each
Plan Year to Participants to whose Accounts such Excess
Aggregate Contributions were allocated for the preceding Plan
Year. If such Excess Aggregate Contributions are distributed
more than 2 1/2 months after the last day of the Plan Year in
which such excess amounts arose, a ten (10) percent excise tax
will be imposed on the employer maintaining the plan with
respect to those amounts. Excess Aggregate Contributions will
be distributed beginning with the Highly Compensated
Employee(s) who has the greatest Contribution Percentage,
reducing his contribution percentage to the next highest
level. Then, if necessary, reducing the Contribution
Percentage of the Highly Compensated Employee at the next
highest level, and continuing in this manner until the Actual
Contribution Percentage of the Highly Compensated Group
satisfies the Actual Contribution Percentage Test. Excess
Aggregate Contributions of Participants who are subject to the
family member aggregation rules shall be allocated among the
Family Members in proportion to the Employee and Matching
Contributions (or amounts treated as Matching Contributions)
of each Family Member that is combined to determine the
combined Contribution Percentage. Excess Aggregate
Contributions shall be treated as Annual Additions, as defined
in the CONTRIBUTION LIMITATION SECTION of Article III, under
the Plan.
The Excess Aggregate Contributions shall be adjusted for
income or loss. The income or loss allocable to such Excess
Aggregate Contributions shall be equal to the income or loss
allocable to the Participant's Contribution Percentage Amounts
for the Plan Year in which the excess occurred multiplied by a
fraction. The numerator of the fraction is the Excess
Aggregate Contributions. The denominator of the fraction is
the closing balance without regard to any income or loss
occurring during such Plan Year (as of the end of such Plan
Year) of the Participant's Account resulting from Contribution
Percentage Amounts.
Excess Aggregate Contributions shall be distributed from the
Participant's Account resulting from Participant Contributions
that are not required as a condition of employment or
participation or for obtaining additional benefits from
Employer Contributions. If such Excess Aggregate
Contributions exceed the balance in the Participant's Account
resulting from such Participant Contributions, the balance
shall be forfeited, if not vested, or distributed, if vested,
on a pro-rata basis from the Participant's Account resulting
from Contribution Percentage Amounts. These Forfeitures shall
be used to offset the earliest Employer Contribution due after
the Forfeiture arises.
ARTICLE III 39
<PAGE> 39
ARTICLE IV
INVESTMENT OF CONTRIBUTIONS
SECTION 4.01--INVESTMENT OF CONTRIBUTIONS.
All Contributions are forwarded by the Employer to the Trustee to be
deposited in the Trust Fund.
Investment of Contributions is governed by the provisions of the
Trust, the Group Contract and any other funding arrangement in which the Trust
Fund is or may be invested. To the extent permitted by the Trust, Group
Contract or other funding arrangement, the parties named below shall direct the
Contributions to any of the accounts available under the Trust or Group
Contract and may request the transfer of assets resulting from those
Contributions between such accounts. A Participant may not direct the Trustee
to invest the Participant's Account in collectibles. Collectibles means any
work of art, rug or antique, metal or gem, stamp or coin, alcoholic beverage or
other tangible personal property specified by the Secretary of Treasury. To
the extent that a Participant does not direct the investment of his Account,
such Account shall be invested ratably in the accounts available under the
Trust or Group Contract in the same manner as the undirected Accounts of all
other Participants. The Vested Accounts of all Inactive Participants may be
segregated and invested separately from the Accounts of all other Participants.
The Trust Fund shall be valued at current fair market value as of the
last day of the last calendar month ending in the Plan Year and, at the
discretion of the Trustee, may be valued more frequently. The valuation shall
take into consideration investment earnings credited, expenses charged,
payments made and changes in the value of the assets held in the Trust Fund.
The Account of a Participant shall be credited with its share of the gains and
losses of the Trust Fund. That part of a Participant's Account invested in a
funding arrangement which establishes an account or accounts for such
Participant thereunder shall be credited with the gain or loss from such
account or accounts. That part of a Participant's Account which is invested in
other funding arrangements shall be credited with a proportionate share of the
gain or loss of such investments. The share shall be determined by multiplying
the gain or loss of the investment by the ratio of the part of the
Participant's Account invested in such funding arrangement to the total of the
Trust Fund invested in such funding arrangement.
At least annually, the Named Fiduciary shall review all pertinent
Employee information and Plan data in order to establish the funding policy of
the Plan and to determine appropriate methods of carrying out the Plan's
objectives. The Named Fiduciary shall inform the Trustee and any Investment
Manager of the Plan's short-term and long-term financial needs so the
investment policy can be coordinated with the Plan's financial requirements.
(a) Employer Contributions other than Elective Deferral
Contributions: The Participant shall direct the investment of
such Employer Contributions and transfer of assets resulting
from those Contributions.
(b) Elective Deferral Contributions: The Participant shall direct
the investment of Elective Deferral Contributions and transfer
of assets resulting from those Contributions.
(c) Rollover Contributions: The Participant shall direct the
investment of Rollover Contributions and transfer of assets
resulting from those Contributions.
ARTICLE IV 40
<PAGE> 40
However, the Named Fiduciary may delegate to the Investment Manager
investment discretion for Contributions and Plan assets which are not subject
to Participant direction.
SECTION 4.01A--INVESTMENT IN QUALIFYING EMPLOYER SECURITIES.
Participants in the Plan shall be entitled to invest all or any
portion of their Elective Deferral Contributions in Qualifying Employer
Securities.
Once investment in Qualifying Employer Securities is made available to
Eligible Employees, then it shall continue to be available unless the Plan and
Trust is amended to disallow such available investment. In the absence of such
election, such Eligible Employees shall be deemed to have elected to have their
Accounts invested wholly in the Investment Funds. Once an election is made, it
shall be considered to continue until a new election is made.
Any dividends payable on the Qualifying Employer Securities shall
unless otherwise directed by the Participant be invested in additional shares
of Qualifying Employer Securities hereunder.
If the securities of the Employer are not publicly traded and if no
market or an extremely thin market exists for the Qualifying Employer
Securities, so that a reasonable valuation may not be obtained from the market
place, then such Qualifying Employer Securities must be valued at least
annually by an independent appraiser who is not associated with the Employer,
the Plan Administrator, the Trustee, or any person related to any fiduciary
under the Plan. The independent appraiser may be associated with a person who
is merely a contract administrator with respect to the Plan, but who exercises
no discretionary authority and is not a Plan fiduciary.
If there is a public market for Qualifying Employer Securities of the
type held by the Plan, then the Plan Administrator may use as the value of the
shares the price at which such shares traded in such market, or an average of
the bid and asked prices for such shares in such market, provided that such
value is representative of the fair market value of such shares in the opinion
of the Plan Administrator. If the Qualifying Employer Securities do not trade
on the annual valuation date or if the market is very thin on such date, then
the Plan Administrator may use the average of trade prices for a period of time
ending on such date, provided that such value is representative of the fair
market value of such shares in the opinion of the Plan Administrator. The
value of a Participant's Qualifying Employer Securities Account may be
expressed in units.
For purposes of determining the annual valuation of the Plan and for
reporting to Participants and regulatory authorities, the assets of the Plan
shall be valued at least annually on the Valuation Date which corresponds to
the last day of the Plan Year. The fair market value of Qualifying Employer
Securities shall be determined on such a Valuation Date. The average of the
bid and asked prices of Qualifying Employer Securities as of the date of the
transaction shall apply for purposes of valuing distributions and other
transactions of the Plan to the extent such value is representative of the fair
market value of such shares in the opinion of the Plan Administrator.
All purchases of Qualifying Employer Securities shall be made at a
price, or prices, which, in the judgment of the Plan Administrator, do not
exceed the fair market value of such Qualifying Employer Securities.
In the event that the Trustee acquires shares of Qualifying Employer
Securities by purchase from a "disqualified person" as defined in Code Section
4975(e)(2), in exchange for cash or other assets of the Trust, the terms of
such purchase shall contain the provision that in the event that there is a
final determination by the Internal Revenue Service or court of competent
jurisdiction that a fair market value of such shares of Qualifying
ARTICLE IV 41
<PAGE> 41
Employer Securities, as of the date of purchase was less than the purchase
price paid by the Trustee, then the seller shall pay or transfer, as the case
may be, to the Trustee, an amount of cash, shares of Qualifying Employer
Securities, or any combination thereof equal in value to the difference between
the purchase price and said fair market value for all such shares. In the
event that cash and/or shares of Qualifying Employer Securities are paid and/or
transferred to the Trustee under this provision, shares of Qualifying Employer
Securities shall be valued at their fair market value as of the date of said
purchase, and interest at a reasonable rate from the date of purchase to the
date of payment shall be paid by the seller on the amount of cash paid.
The Plan Administrator may direct the Trustee to sell, resell or
otherwise dispose of Qualifying Employer Securities to any person, including
the Employer, provided that any such sales to any disqualified person,
including the Employer, will be made at not less than the fair market value and
no commission is charged. Any such sale shall be made in conformance with
Section 408(e) of ERISA.
In the event the Plan Administrator directs the Trustee to dispose of
any Qualifying Employer Securities held as Trust Assets under circumstances
which require registration and/or qualification of the securities under
applicable Federal or state securities laws, then the Employer, at its own
expense, will take or cause to be taken any and all such action as may be
necessary or appropriate to effect such registration and/or qualification.
The Plan Administrator may exercise the right to vote with respect to
Qualifying Employer Securities or may pass-through such vote to participants in
a manner determined by the Plan Administrator in its sole discretion. As of
the date hereof, the Plan Administrator shall exercise all voting rights with
respect to Qualifying Employer Securities.
SECTION 4.01B -- LIMITATION OF INVESTMENT IN QUALIFYING
EMPLOYER SECURITIES BY SOME PARTICIPANTS.
Participants who are directors, officers, 10% stockholders of the
Employer, and other persons subject to Section 16 of the Securities Exchange
Act of 1934 (the "1934 Act") will be permitted to change the level of
investment in the Qualifying Employer Securities Account only once every six
months. Additionally, Participants who are directors, officers, 10%
stockholders of the Employer, and other persons subject to Section 16 of the
1934 Act who cease participation in the Qualifying Employer Securities Account,
or who reduce their participation in such account to a nominal level, may not
participate (e.g., direct that investments be made on their behalf) under the
Qualifying Employer Securities Account again for at least six months.
Intra-plan transfers by such Participants between the Qualifying Employer
Securities Account and the other investment accounts available under the Plan
may only be made pursuant to an investment election made during the period
beginning on the third business day following the date of release of annual or
quarterly financial information by the Employer and ending on the twelfth
business day following such date. Subject to certain limited exceptions,
Participants who are directors, officers, 10% stockholders of the Employer, and
other persons subject to Section 16 of the 1934 Act making withdrawals of
investments under the Qualifying Employer Securities Account must cease further
purchases/investment under the Qualifying Employer Securities Account for six
months.
With respect to Participants who are directors, officers, 10%
stockholders of the Employer, and other persons subject to the 1934 Act,
transactions under this Plan are intended to comply with all applicable
conditions of Rule 16b- 3 or its successors under the 1934 Act. To the extent
any provisions of the Plan or action by the Plan Administrator fails to so
comply, it shall be deemed null and void, to the extent permitted by law and
deemed advisable by the Plan Administrator.
ARTICLE IV 42
<PAGE> 42
ARTICLE V
BENEFITS
SECTION 5.01--RETIREMENT BENEFITS.
On a Participant's Retirement Date, his Vested Account shall be
distributed to him according to the distribution of benefits provisions of
Article VI and the provisions of the SMALL AMOUNTS SECTION of Article IX.
SECTION 5.02--DEATH BENEFITS.
If a Participant dies before his Annuity Starting Date, his Vested
Account shall be distributed according to the distribution of benefits
provisions of Article VI and the provisions of the SMALL AMOUNTS SECTION of
Article IX.
SECTION 5.03--VESTED BENEFITS.
A Participant may receive a distribution of his Vested Account at any
time after he ceases to be an Employee, provided he has not again become an
Employee. If such amount is not payable under the provisions of the SMALL
AMOUNTS SECTION of Article IX, it will be distributed only if the Participant
so elects.
If a Participant does not receive an earlier distribution according to
the provisions of this section or the SMALL AMOUNTS SECTION of Article IX, upon
his Retirement Date or death, his Vested Account shall be applied according to
the provisions of the RETIREMENT BENEFITS SECTION or the DEATH BENEFITS SECTION
of Article V.
The Nonvested Account of a Participant who has ceased to be an
Employee shall remain a part of his Account until it becomes a Forfeiture;
provided, however, if the Participant again becomes an Employee so that his
Vesting Percentage can increase, the Nonvested Account may become a part of his
Vested Account.
SECTION 5.04--WHEN BENEFITS START.
Benefits under the Plan begin when a Participant retires, dies or
ceases to be an Employee, whichever applies, as provided in the preceding
sections of this article. Benefits which begin before Normal Retirement Date
for a Participant who became Totally and Permanently Disabled when he was an
Employee shall be deemed to begin because he is Totally and Permanently
Disabled. The start of benefits is subject to the qualified election
procedures of Article VI.
Unless otherwise elected, benefits shall begin before the sixtieth day
following the close of the Plan Year in which the latest date below occurs:
(a) The date the Participant attains age 65 (Normal Retirement
Age, if earlier).
(b) The tenth anniversary of the Participant's Entry Date.
(c) The date the Participant ceases to be an Employee.
ARTICLE V 43
<PAGE> 43
Notwithstanding the foregoing, the failure of a Participant and spouse
to consent to a distribution while a benefit is immediately distributable,
within the meaning of the ELECTION PROCEDURES SECTION of Article VI, shall be
deemed to be an election to defer commencement of payment of any benefit
sufficient to satisfy this section.
The Participant may elect to have his benefits begin after the latest
date for beginning benefits described above, subject to the provisions of this
section. The Participant shall make the election in writing and deliver the
signed statement of election to the Plan Administrator before Normal Retirement
Date or the date he ceases to be an Employee, if later. The election must
describe the form of distribution and the date the benefits will begin. The
Participant shall not elect a date for beginning benefits or a form of
distribution that would result in a benefit payable when he dies which would be
more than incidental within the meaning of governmental regulations.
Benefits shall begin by the Participant's required beginning date, as
defined in the FORM OF DISTRIBUTION SECTION of Article VI.
Contributions which are used to compute the Actual Deferral
Percentage, as defined in the EXCESS AMOUNTS SECTION of Article III, may be
distributed upon disposition by the Employer of substantially all of the assets
(within the meaning of Code Section 409(d)(2)) used by the Employer in a trade
or business or disposition by the Employer of the Employer's interest in a
subsidiary (within the meaning of Code Section 409(d)(3)) if the transferee
corporation is not a Controlled Group member, the Employee continues employment
with the transferee corporation and the transferor corporation continues to
maintain the Plan. Such distributions made after March 31, 1988, must be made
in a single sum.
SECTION 5.05--WITHDRAWAL PRIVILEGES.
A Participant who has attained age 59 1/2 may withdraw all or any
portion of his Vested Account which results from the following Contributions:
Elective Deferral Contributions
Matching Contributions
Qualified Nonelective Contributions
Discretionary Contributions
Rollover Contributions
No distribution from the Participant's Account shall occur prior to
100% vesting.
A Participant may make such a withdrawal at any time.
A Participant may withdraw all or any portion of his Vested Account
which results from the following Contributions
Elective Deferral Contributions
in the event of hardship due to an immediate and heavy financial need.
Withdrawals from the Participant's Account resulting from Elective Deferral
Contributions shall be limited to the amount of the Participant's Elective
Deferral Contributions. Immediate and heavy financial need shall be limited
to: (i) expenses incurred or necessary for medical care, described in Code
Section 213(d), of the Participant, the Participant's spouse, or any
ARTICLE V 44
<PAGE> 44
dependents of the Participant (as defined in Code Section 152); (ii) purchase
(excluding mortgage payments) of a principal residence for the Participant;
(iii) payment of tuition and related educational fees for the next 12 months of
post-secondary education for the Participant, his spouse, children or
dependents; (iv) the need to prevent the eviction of the Participant from his
principal residence or foreclosure on the mortgage of the Participant's
principal residence; or (v) any other distribution which is deemed by the
Commissioner of Internal Revenue to be made on account of immediate and heavy
financial need as provided in Treasury regulations. The Participant's request
for a withdrawal shall include his written statement that an immediate and
heavy financial need exists and explain its nature.
No withdrawal shall be allowed which is not necessary to satisfy such
immediate and heavy financial need. Such withdrawal shall be deemed necessary
only if all of the following requirements are met: (i) the distribution is not
in excess of the amount of the immediate and heavy financial need of the
Participant (including amounts necessary to pay any Federal, state or local
income taxes or penalties reasonably anticipated to result from the
distribution); (ii) the Participant has obtained all distributions, other than
hardship distributions, and all nontaxable loans currently available under all
plans maintained by the Employer; (iii) the Plan, and all other plans
maintained by the Employer, provide that the Participant's elective
contributions and employee contributions will be suspended for at least 12
months after receipt of the hardship distribution; and (iv) the Plan, and all
other plans maintained by the Employer, provide that the Participant may not
make elective contributions for the Participant's taxable year immediately
following the taxable year of the hardship distribution in excess of the
applicable limit under Code Section 402(g) for such next taxable year less the
amount of such Participant's elective contributions for the taxable year of the
hardship distribution. The Plan will suspend elective contributions and
employee contributions for 12 months and limit elective deferrals as provided
in the preceding sentence. A Participant shall not cease to be an Eligible
Participant, as defined in the EXCESS AMOUNTS SECTION of Article III, merely
because his elective contributions or employee contributions are suspended.
A request for withdrawal shall be in writing on a form furnished for
that purpose and delivered to the Plan Administrator before the withdrawal is
to occur.
A forfeiture shall not occur solely as a result of a withdrawal.
SECTION 5.06--LOANS TO PARTICIPANTS.
Loans shall be made available to all Participants on a reasonably
equivalent basis. For purposes of this section, Participant means any
Participant or Beneficiary who is a party-in-interest, within the meaning of
Section 3(14) of the Employee Retirement Income Security Act of 1974. Loans
shall not be made to highly compensated employees, as defined in Code Section
414(q), in an amount greater than the amount made available to other
Participants.
No loans will be made to any shareholder-employee or owner-employee.
For purposes of this requirement, a shareholder-employee means an employee or
officer of an electing small business (Subchapter S) corporation who owns (or
is considered as owning within the meaning of Code Section 318(a)(1)), on any
day during the taxable year of such corporation, more than 5% of the
outstanding stock of the corporation.
ARTICLE V 45
<PAGE> 45
A loan to a Participant shall be a Participant-directed investment of
his Account. No Account other than the borrowing Participant's Account shall
share in the interest paid on the loan or bear any expense or loss incurred
because of the loan.
The number of outstanding loans shall be limited to one. No more than
one loan will be approved for any Participant in any 12-month period. The
minimum amount of any loan shall be $1,000.
Loans must be adequately secured and bear a reasonable rate of
interest.
The amount of the loan shall not exceed the maximum amount that may be
treated as a loan under Code Section 72(p) (rather than a distribution) to the
Participant and shall be equal to the lesser of (a) or (b) below:
(a) $50,000 reduced by the highest outstanding loan balance of
loans during the one-year period ending on the day before the
new loan is made.
(b) The greater of (1) or (2), reduced by (3) below:
(1) One-half of the Participant's Vested Account.
(2) $10,000.
(3) Any outstanding loan balance on the date the new loan
is made.
For purposes of this maximum, a Participant's Vested Account does not include
any accumulated deductible employee contributions, as defined in Code Section
72(o)(5)(B), and all qualified employer plans, as defined in Code Section
72(p)(4), of the Employer and any Controlled Group member shall be treated as
one plan.
The foregoing notwithstanding, the amount of such loan shall not
exceed 50% of the amount of the Participant's Vested Account. For purposes of
this maximum, a Participant's Vested Account does not include any accumulated
deductible employee contributions, as defined in Code Section 72(o)(5)(B). No
collateral other than a portion of the Participant's Vested Account (as limited
above) shall be accepted. The Loan Administrator shall determine if the
collateral is adequate for the amount of the loan requested.
Notwithstanding any other provision of this Plan, the portion of the
Participant's Vested Account used as a security interest held by the Plan by
reason of a loan outstanding to the Participant shall be taken into account for
purposes of determining the amount of the Vested Account payable at the time of
death or distribution, but only if the reduction is used as repayment of the
loan.
Each loan shall bear a reasonable fixed rate of interest to be
determined by the Loan Administrator. In determining the interest rate, the
Loan Administrator shall take into consideration fixed interest rates currently
being charged by commercial lenders for loans of comparable risk on similar
terms and for similar durations, so
ARTICLE V 46
<PAGE> 46
that the interest will provide for a return commensurate with rates currently
charged by commercial lenders for loans made under similar circumstances. The
Loan Administrator shall not discriminate among Participants in the matter of
interest rates; but loans granted at different times may bear different
interest rates in accordance with the current appropriate standards.
The loan shall by its terms require that repayment (principal and
interest) be amortized in level payments, not less frequently than quarterly,
over a period not extending beyond five years from the date of the loan. A
loan is not subject to this five-year repayment requirement if it is used to
buy any dwelling unit, which within a reasonable time, is to be used as the
principal residence of the Participant. The "reasonable time" will be
determined at the time the loan is made. The period of repayment for any loan
shall be arrived at by mutual agreement between the Loan Administrator and the
Participant.
The Participant shall make a written application for a loan from the
Plan on forms provided by the Loan Administrator. The application must specify
the amount and duration requested. No loan will be approved unless the
Participant is creditworthy. The Participant must grant authority to the Loan
Administrator to investigate the Participant's creditworthiness so that the
loan application may be properly considered.
Information contained in the application for the loan concerning the
income, liabilities, and assets of the Participant will be evaluated to
determine whether there is a reasonable expectation that the Participant will
be able to satisfy payments on the loan as due. Additionally, the Loan
Administrator will pursue any appropriate further investigations concerning the
creditworthiness and/or credit history of the Participant to determine whether
a loan should be approved.
Each loan shall be fully documented in the form of a promissory note
signed by the Participant for the face amount of the loan, together with
interest determined as specified above.
There will be an assignment of collateral to the Plan executed at the
time the loan is made.
In those cases where repayment through payroll deduction by the
Employer is available, installments are so payable, and a payroll deduction
agreement will be executed by the Participant at the time of making the loan.
Where payroll deduction is not available, payments are to be timely
made.
Any payment that is not by payroll deduction shall be made payable to
the Employer or Trustee, as specified in the promissory note, and delivered to
the Loan Administrator, including prepayments, service fees and penalties, if
any, and other amounts due under the note.
The promissory note may provide for reasonable late payment penalties
and/or service fees. Any penalties or service fees shall be applied to all
Participants in a nondiscriminatory manner. If the promissory note so
provides, such amounts may be assessed and collected from the Account of the
Participant as part of the loan balance.
Each loan may be paid prior to maturity, in part or in full, without
penalty or service fee, except as may be set out in the promissory note.
If any amount remains unpaid for more than 31 days after due, a
default is deemed to occur.
ARTICLE V 47
<PAGE> 47
Upon default, the Plan has the right to pursue any remedy available by
law to satisfy the amount due, along with accrued interest, including the right
to enforce its claim against the security pledged and execute upon the
collateral as allowed by law.
If any payment of principal or interest or any other amount due under
the promissory note, or any portion thereof, is not made for a period of 90
days after due, the entire principal balance whether or not otherwise then due,
shall become immediately due and payable without demand or notice, and subject
to collection or satisfaction by any lawful means, including specifically but
not limited to the right to enforce the claim against the security pledged and
to execute upon the collateral as allowed by law.
In the event of default, foreclosure on the note and attachment of
security or use of amounts pledged to satisfy the amount then due, will not
occur until a distributable event occurs in accordance with the Plan, and will
not occur to an extent greater than the amount then available upon any
distributable event which has occurred under the Plan.
All reasonable costs and expenses, including but not limited to
attorney's fees, incurred by the Plan in connection with any default or in any
proceeding to enforce any provision of a promissory note or instrument by which
a promissory note for a Participant loan is secured, shall be assessed and
collected from the Account of the Participant as part of the loan balance.
If payroll deduction is being utilized, in the event that a
Participant's available payroll deduction amounts in any given month are
insufficient to satisfy the total amount due, there will be an increase in the
amount taken subsequently, sufficient to make up the amount that is then due.
If the subsequent deduction is also insufficient to satisfy the amount due
within 31 days, a default is deemed to occur as above. If any amount remains
past due more than 90 days, the entire principal amount, whether or not
otherwise then due, along with interest then accrued and any other amount then
due under the promissory note, shall become due and payable, as above.
If the Participant ceases to be a party-in-interest (as defined in
this section), the balance of the outstanding loan becomes due and payable, and
the Participant's Vested Account will be used as available for distribution(s)
to pay the outstanding loan. The Participant's Vested Account will not be used
to pay any amount due under the outstanding loan before the date which is 31
days after the date he ceased to be an Employee, and the Participant may elect
to repay the outstanding loan with interest on the day of repayment. If no
distributable event has occurred under the Plan at the time that the
Participant's Vested Account would otherwise be used under this provision to
pay any amount due under the outstanding loan, this will not occur until the
time, or in excess of the extent to which, a distributable event occurs under
the Plan.
ARTICLE V 48
<PAGE> 48
ARTICLE VI
DISTRIBUTION OF BENEFITS
SECTION 6.01--FORM OF DISTRIBUTION.
The form of benefit payable to or on behalf of a Participant is a
single sum payment. The entire interest of a Participant must be distributed no
later than the Participant's required beginning date. The Participant's
required beginning date is the first day of April of the calendar year
following the calendar year in which the Participant attains age 70 1/2, unless
otherwise provided in (a), (b) or (c) below:
(a) The required beginning date for a Participant who attains age
70 1/2 before January 1, 1988, and who is not a 5-percent
owner is the first day of April of the calendar year following
the calendar year in which the later of retirement or
attainment of age 70 1/2 occurs.
(b) The required beginning date for a Participant who attains age
70 1/2 before January 1, 1988, and who is a 5-percent owner is
the first day of April of the calendar year following the
later of
(1) the calendar year in which the Participant attains
age 70 1/2, or
(2) the earlier of the calendar year with or within which
ends the Plan Year in which the Participant becomes a
5-percent owner, or the calendar year in which the
Participant retires.
(c) The required beginning date of a Participant who is not a
5-percent owner and who attains age 70 1/2 during 1988 and who
has not retired as of January 1, 1989, is April 1. 1990.
A Participant is treated as a 5-percent owner for purposes of this section if
such Participant is a 5-percent owner as defined in Code Section 416(i)
(determined in accordance with Code Section 416 but without regard to whether
the Plan is top-heavy) at any time during the Plan Year ending with or within
the calendar year in which such owner attains age 66 1/2 or any subsequent Plan
Year.
SECTION 6.02--ELECTION PROCEDURES.
The Participant shall make any election under this section in writing.
The Plan Administrator may require such individual to complete and sign any
necessary documents as to the provisions to be made. Any election permitted
under (a) below shall be subject to the qualified election provisions of (b)
below.
(a) Death Benefits. A Participant may elect his Beneficiary.
(b) Qualified Election. The Participant may make an election at
any time during the election period. The Participant revoke
the election made (or make a new election) at any time and any
number of times during the election period. An election is
effective only if it meets the consent requirements below.
A Participant may make an election as to death benefits at any
time before he dies.
ARTICLE VI 49
<PAGE> 49
If the Participant's Vested Account has at any time exceeded
$3,500, any benefit which is immediately distributable
requires the consent of the Participant. The consent of the
Participant to a benefit which is immediately distributable
must not be made before the date the Participant is provided
with the notice of the ability to defer the distribution. Such
consent shall be made in writing. The consent shall not be
made more than 90 days before the Annuity Starting Date. The
consent of the Participant shall not be required to the extent
that a distribution is required to satisfy Code Section
401(a)(9) or Code Section 415. In addition, upon termination
of this Plan if the Plan does not offer an annuity option
(purchased from a commercial provider), the Participant's
Account balance may, without the Participant's consent, be
distributed to the Participant or transferred to another
defined contribution plan (other than an employee stock
ownership plan as defined in Code Section 4975(e)(7)) within
the same Controlled Group. A benefit is immediately
distributable if any part of the benefit could be distributed
to the Participant before the Participant attains the older of
Normal Retirement Age or age 62. Spousal consent is needed to
name a Beneficiary other than the spouse. If the Participant
names a Beneficiary other than his spouse, the spouse has the
right to limit consent only to a specific Beneficiary. The
spouse can relinquish such right. Such consent shall be made
in writing. The spouse's consent shall be witnessed by a plan
representative or notary public. The spouse's consent must
acknowledge the effect of the election, including that the
spouse had the right to limit consent only to a specific
Beneficiary and that the relinquishment of such right was
voluntary. Unless the consent of the spouse expressly permits
designations by the Participant without a requirement of
further consent by the spouse, the spouse's consent must be
limited to the Beneficiary, class of Beneficiaries, or
contingent Beneficiary named in the election. Spousal consent
is not required, however, if the Participant establishes to
the satisfaction of the plan representative that the consent
of the spouse cannot be obtained because there is no spouse or
the spouse cannot be located. A spouse's consent under this
paragraph shall not be valid with respect to any other spouse.
A Participant may revoke a prior election without the consent
of the spouse. Any new election will require a new spousal
consent, unless the consent of the spouse expressly permits
such election by the Participant without further consent by
the spouse. A spouse's consent may be revoked at any time
within the Participant's election period.
SECTION 6.03--NOTICE REQUIREMENTS.
The Plan Administrator shall furnish to the Participant a written
explanation of the right of the Participant to defer distribution until the
benefit is no longer immediately distributable. The Plan Administrator shall
furnish the written explanation by a method reasonably calculated to reach the
attention of the Participant no less than 30 days and no more than 90 days
before the Annuity Starting Date.
SECTION 6.04--DISTRIBUTIONS UNDER QUALIFIED DOMESTIC RELATIONS ORDERS.
The Plan specifically permits distributions to an Alternate Payee
under a qualified domestic relations order as defined in Code Section 414(p),
at any time, irrespective of whether the Participant has attained his earliest
retirement age as defined in Code Section 414(p), under the Plan. A
distribution to an Alternate Payee before the Participant's attainment of
earliest retirement age, as defined in Code Section 414(p), is available only
if:
a) the order specifies distributions at that time or permits an
agreement between the Plan and the Alternate Payee to
authorize an earlier distribution; and
ARTICLE VI 50
<PAGE> 50
b) if the present value of the Alternate Payee's benefits under
the Plan exceeds $3,500, and the order requires, the Alternate
Payee consents to any distribution occurring before the
Participant's attainment of earliest retirement age, as
defined in Code Section 414(p).
Nothing in this section shall permit a Participant a right to receive
a distribution at a time otherwise not permitted under the Plan nor shall it
permit the Alternate Payee to receive a form of payment not permitted under the
Plan.
The Plan Administrator shall establish reasonable procedures to
determine the qualified status of a domestic relations order. Upon receiving a
domestic relations order, the Plan Administrator promptly shall notify the
Participant and an Alternate Payee named in the order, in writing, of the
receipt of the order and the Plan's procedures for determining the qualified
status of the order. Within a reasonable period of time after receiving the
domestic relations order, the Plan Administrator shall determine the qualified
status of the order and shall notify the Participant and each Alternate Payee,
in writing, of its determination. The Plan Administrator shall provide notice
under this paragraph by mailing to the individual's address specified in the
domestic relations order, or in a manner consistent with Department of Labor
regulations. The Plan Administrator may treat as qualified any domestic
relations order entered before January 1, 1985, irrespective of whether it
satisfies all the requirements described in Code Section 414(p).
If any portion of the Participant's Vested Account is payable during
the period the Plan Administrator is making its determination of the qualified
status of the domestic relations order, a separate accounting shall be made of
the amount payable. If the Plan Administrator determines the order is a
qualified domestic relations order within 18 months of the date amounts are
first payable following receipt of the order, the payable amount shall be
distributed in accordance with the order. If the Plan Administrator does not
make its determination of the qualified status of the order within the 18 month
determination period, the payable amounts shall be distributed in the manner
the Plan would distribute if the order did not exist and the order shall apply
prospectively if the Plan Administrator later determines the order is a
qualified domestic relations order.
The Plan shall make payments or distributions required under this
section by separate benefit checks or other separate distribution to the
Alternate Payee(s).
ARTICLE VI 51
<PAGE> 51
ARTICLE VII
TERMINATION OF PLAN
The Employer expects to continue the Plan indefinitely but reserves
the right to terminate the Plan in whole or in part at any time upon giving
written notice to all parties concerned. Complete discontinuance of
Contributions under the Plan constitutes complete termination of Plan.
The Account of each Participant shall be fully (100%) vested and
nonforfeitable as of the effective date of complete termination of Plan. The
Account of each Participant who is included in the group of Participants deemed
to be affected by the partial termination of the Plan shall be fully (100%)
vested and nonforfeitable as of the effective date of the partial Plan
termination. The Participant's Account shall continue to participate in the
earnings credited, expenses charged and any appreciation or depreciation of the
Investment Fund until the Vested Account is distributed. A distribution under
this article will be a retirement benefit and shall be distributed to the
Participant according to the provisions of Article VI.
A Participant's Account which does not result from Contributions which
are used to compute the Actual Deferral Percentage, as defined in the EXCESS
AMOUNTS SECTION of Article III, may be distributed to the Participant after the
effective date of the complete or partial Plan termination. A Participant's
Account resulting from Contributions which are used to compute such percentage
may be distributed upon termination of the Plan without the establishment or
maintenance of another defined contribution plan, other than an employee stock
ownership plan (as defined in Code Section 4975(e) or Code Section 409) or a
simplified employee pension plan (as defined in Code Section 408(k)). Such a
distribution made after March 31, 1988, must be in a single sum.
Upon complete termination of Plan, no more Employees shall become
Participants and no more Contributions shall be made.
The assets of this Plan shall not be paid to the Employer at any time,
except that, after the satisfaction of all liabilities under the Plan, any
assets remaining may be paid to the Employer. The payment may not be made if
it would contravene any provision of law.
ARTICLE VII 52
<PAGE> 52
ARTICLE VIII
ADMINISTRATION OF PLAN
SECTION 8.01--ADMINISTRATION.
Subject to the provisions of this article, the Plan Administrator has
complete control of the administration of the Plan. The Plan Administrator has
all the powers necessary for it to properly carry out its administrative
duties. Not in limitation, but in amplification of the foregoing, the Plan
Administrator has the power to construe the Plan, including ambiguous
provisions, and to determine all questions that may arise under the Plan,
including all questions relating to the eligibility of Employees to participate
in the Plan and the amount of benefit to which any Participant or Beneficiary
may become entitled. The Plan Administrator's decisions upon all matters
within the scope of its authority shall be final.
Unless otherwise set out in the Plan or Group Contract, the Plan
Administrator may delegate recordkeeping and other duties which are necessary
for the administration of the Plan to any person or firm which agrees to accept
such duties. The Plan Administrator shall be entitled to rely upon all tables,
valuations, certificates and reports furnished by the consultant or actuary
appointed by the Plan Administrator and upon all opinions given by any counsel
selected or approved by the Plan Administrator.
The Plan Administrator shall receive all claims for benefits by
Participants, former Participants and Beneficiaries. The Plan Administrator
shall determine all facts necessary to establish the right of any Claimant to
benefits and the amount of those benefits under the provisions of the Plan.
The Plan Administrator may establish rules and procedures to be followed by
Claimants in filing claims for benefits, in furnishing and verifying proofs
necessary to determine age, and in any other matters required to administer the
Plan.
The Plan Administrator shall direct the Trustee as to the exercise of
all voting powers over any shares of Qualifying Employer Securities.
SECTION 8.02--RECORDS.
All acts and determinations of the Plan Administrator shall be duly
recorded. All these records, together with other documents necessary for the
administration of the Plan, shall be preserved in the Plan Administrator's
custody.
Writing (handwriting, typing, printing), photostating, photographing,
microfilming, magnetic impulse, mechanical or electrical recording or other
forms of data compilation shall be acceptable means of keeping records.
SECTION 8.03--INFORMATION AVAILABLE.
Any Participant in the Plan or any Beneficiary may examine copies of
the Plan description, latest annual report, any bargaining agreement, this
Plan, the Group Contract or any other instrument under which the Plan was
established or is operated. The Plan Administrator shall maintain all of the
items listed in this section in its office, or in such other place or places as
it may designate in order to comply with governmental regulations. These items
may be examined during reasonable business hours. Upon the written request of
a Participant or
ARTICLE VIII 53
<PAGE> 53
Beneficiary receiving benefits under the Plan, the Plan Administrator will
furnish him with a copy of any of these items. The Plan Administrator may make
a reasonable charge to the requesting person for the copy.
SECTION 8.04--CLAIM AND APPEAL PROCEDURES.
A Claimant must submit any required forms and pertinent information
when making a claim for benefits under the Plan.
If a claim for benefits under the Plan is denied, the Plan
Administrator shall provide adequate written notice to the Claimant whose claim
for benefits under the Plan has been denied. The notice must be furnished
within 90 days of the date that the claim is received by the Plan
Administrator. The Claimant shall be notified in writing within this initial
90-day period if special circumstances require an extension of time needed to
process the claim and the date by which the Plan Administrator's decision is
expected to be rendered. The written notice shall be furnished no later than
180 days after the date the claim was received by the Plan Administrator.
The Plan Administrator's notice to the Claimant shall specify the
reason for the denial; specify references to pertinent Plan provisions on which
denial is based; describe any additional material and information needed for
the Claimant to perfect his claim for benefits; explain why the material and
information is needed; inform the Claimant that any appeal he wishes to make
must be in writing to the Plan Administrator within 60 days after receipt of
the Plan Administrator's notice of denial of benefits and that failure to make
the written appeal within such 60-day period shall render the Plan
Administrator's determination of such denial final, binding and conclusive.
If the Claimant appeals to the Plan Administrator, the Claimant, or
his authorized representative, may submit in writing whatever issues and
comments the Claimant, or his representative, feels are pertinent. The
Claimant, or his authorized representative may review pertinent Plan documents.
The Plan Administrator shall reexamine all facts related to the appeal and make
a final determination as to whether the denial of benefits is justified under
the circumstances. The Plan Administrator shall advise the Claimant of its
decision within 60 days of his written request for review, unless special
circumstances (such as a hearing) would make rendering a decision within the
60-day limit unfeasible. The Claimant must be notified within the 60-day limit
if an extension is necessary. The Plan Administrator shall render a decision
on a claim for benefits no later than 120 days after the request for review is
received.
SECTION 8.05--UNCLAIMED VESTED ACCOUNT PROCEDURE.
At the time the Participant's Vested Account is distributable to the
Participant, spouse or Beneficiary without his consent according to the
provisions of Article VI or Article IX, the Plan Administrator, by certified or
registered mail addressed to his last known address and in accordance with the
notice requirements of Article VI, will notify him of his entitlement to a
benefit. If the Participant, spouse or Beneficiary fails to claim the Vested
Account or make his whereabouts known in writing within six months from the
date of mailing the notice, the Plan Administrator may treat such unclaimed
Vested Account as a forfeiture and apply it according to the forfeiture
provisions of Article III. If Article III contains no forfeiture provisions,
such amount will be applied to reduce the earliest Employer Contributions due
after the forfeiture arises.
If a Participant's Vested Account is forfeited according to the
provisions of the above paragraph and the Participant, his spouse or his
Beneficiary at any time make a claim for benefits, the forfeited Vested Account
shall be reinstated, unadjusted for any gains or losses occurring after the
date it was forfeited. The reinstated Vested Account shall then be distributed
to the Participant, spouse or Beneficiary according to the preceding provisions
of the Plan.
SECTION 8.06--DELEGATION OF AUTHORITY.
All or any part of the administrative duties and responsibilities
under this article may be delegated by the Plan Administrator to a retirement
committee. The duties and responsibilities of the retirement committee shall
be set out in a separate written agreement.
ARTICLE VIII 54
<PAGE> 54
ARTICLE IX
GENERAL PROVISIONS
SECTION 9.01--AMENDMENTS.
The Employer may amend this Plan at any time, including any remedial
retroactive changes (within the specified period of time as may be determined
by Internal Revenue Service regulations) to comply with the requirements of any
law or regulation issued by any governmental agency to which the Employer is
subject. An amendment may not diminish or adversely affect any accrued
interest or benefit of Participants or their Beneficiaries or eliminate an
optional form of distribution with respect to benefits attributable to service
before the amendment nor allow reversion or diversion of Plan assets to the
Employer at any time, except as may be necessary to comply with the
requirements of any law or regulation issued by any governmental agency to
which the Employer is subject. No amendment to this Plan shall be effective to
the extent that it has the effect of decreasing a Participant's accrued
benefit. However, a Participant's Account may be reduced to the extent
permitted under Code Section 412(c)(8). For purposes of this paragraph, a Plan
amendment which has the effect of decreasing a Participant's Account or
eliminating an optional form of benefit, with respect to benefits attributable
to service before the amendment shall be treated as reducing an accrued
benefit. Furthermore, if the vesting schedule of the Plan is amended, in the
case of an Employee who is a Participant as of the later of the date such
amendment is adopted or the date it becomes effective, the nonforfeitable
percentage (determined as of such date) of such Employee's employer-derived
accrued benefit will not be less than his percentage computed under the Plan
without regard to such amendment.
An amendment shall not decrease a Participant's vested interest in the
Plan. If an amendment to the Plan, or a deemed amendment in the case of a
change in top-heavy status of the Plan as provided in the MODIFICATION OF
VESTING REQUIREMENTS SECTION of Article X, changes the computation of the
percentage used to determine that portion of a Participant's Account
attributable to Employer Contributions which is nonforfeitable (whether
directly or indirectly), each Participant or former Participant
(a) who has completed at least three Years of Service on the date
the election period described below ends (five Years of
Service if the Participant does not have at least one
Hour-of-Service in a Plan Year beginning after December 31,
1988) and
(b) whose nonforfeitable percentage will be determined on any date
after the date of the change
may elect, during the election period, to have the nonforfeitable percentage of
his Account that results from Employer Contributions determined without regard
to the amendment. This election may not be revoked. An election does not need
to be provided for any Participant or former Participant whose nonforfeitable
percentage, determined according to the Plan provisions as changed, cannot at
any time be less than the percentage determined without regard to such change.
The election period shall begin no later than the date the Plan amendment is
adopted, or deemed adopted in the case of a change in the top-heavy status of
the Plan, and end no earlier than the sixtieth day after the latest of the date
the amendment is adopted (deemed adopted) or becomes effective, or the date the
Participant is issued written notice of the amendment (deemed amendment) by the
Employer or the Plan Administrator.
SECTION 9.02--DIRECT ROLLOVERS.
This section applies to distributions made on or after January 1,
1993. Notwithstanding any provision of the Plan to the contrary that would
otherwise limit a Distributee's election under this section, a Distributee may
elect, at the time and in the manner prescribed by the Plan Administrator, to
have any portion of an Eligible Rollover Distribution paid directly to an
Eligible Retirement Plan, specified by the Distributee, in a Direct Rollover.
ARTICLE IX 55
<PAGE> 55
SECTION 9.03--MERGERS AND DIRECT TRANSFERS.
The Plan may not be merged or consolidated with, nor have its assets
or liabilities transferred to, any other retirement plan, unless each
Participant in the plan would (if the plan then terminated) receive a benefit
immediately after the merger, consolidation or transfer which is equal to or
greater than the benefit the Participant would have been entitled to receive
immediately before the merger, consolidation or transfer (if this Plan had then
terminated). The Employer may enter into merger agreements or direct transfer
of assets agreements with the employers under other retirement plans which are
qualifiable under Code Section 401(a), including an elective transfer, and may
accept the direct transfer of plan assets, or may transfer plan assets, as a
party to any such agreement. The Employer shall not consent to, or be a party
to a merger, consolidation or transfer of assets with a defined benefit plan if
such action would result in a defined benefit feature being maintained under
this Plan. The Employer shall not consent to, or be a party to a merger,
consolidation or transfer of assets with a plan which is subject tot he
survivor annuity requirements of Code Section 401(a)(11) if such action would
result in a survivor annuity feature being maintained under the Plan.
The Plan may accept a direct transfer of plan assets on behalf of an
Eligible Employee. If the Eligible Employee is not an Active Participant when
the transfer is made, the Eligible Employee shall be deemed to be an Active
Participant only for the purpose of investment and distribution of the
transferred assets. Employer Contributions shall not be made for or allocated
to the Eligible Employee, until the time he meets all of the requirements to
become an Active Participant.
The Plan shall hold, administer and distribute the transferred assets
as a part of the Plan. The Plan shall maintain a separate account for the
benefit of the Employee on whose behalf the Plan accepted the transfer in order
to reflect the value of the transferred assets.
This Plan shall not accept any direct or indirect transfers (as that
term is defined and interpreted under Code Section 401(a)(11) and the
Regulations thereunder) from a defined benefit plan, money purchase plan
(including a target benefit plan), stock bonus or profit sharing plan which
would otherwise have provided for a life annuity form of payment to the
Participant.
SECTION 9.04 -- PROVISIONS RELATING TO THE INSURER
AND OTHER PARTIES.
The obligations of an Insurer shall be governed solely by the
provisions of the Group Contract. The Insurer shall not be required to perform
any act not provided in or contrary to the provisions of the Group Contract.
See the CONSTRUCTION SECTION of this article.
Any issuer or distributor of investment contracts or securities is
governed solely by the terms of its policies, written investment contract,
prospectuses, security instruments, and any other written agreements entered
into with the Trustee.
ARTICLE IX 56
<PAGE> 56
Such Insurer, issuer or distributor is not a party to the Plan, nor
bound in any way by the Plan provisions. Such parties shall not be required to
look to the terms of this Plan, nor to determine whether the Employer, the Plan
Administrator, the Trustee, or the Named Fiduciary have the authority to act in
any particular manner or to make any contract or agreement.
Until notice of any amendment or termination of this Plan or a change
in Trustee has been received by the Insurer at its home office or an issuer or
distributor at their principal address, they are and shall be fully protected
in assuming that the Plan has not been amended or terminated and in dealing
with any party acting as Trustee according to the latest information which they
have received at their home office or principal address.
SECTION 9.05--EMPLOYMENT STATUS.
Nothing contained in this Plan gives an Employee the right to be
retained in the Employer's employ or to interfere with the Employer's right to
discharge any Employee.
SECTION 9.06--RIGHTS TO PLAN ASSETS.
No Employee shall have any right to or interest in any assets of the
Plan upon termination of his employment or otherwise except as specifically
provided under this Plan, and then only to the extent of the benefits payable
to such Employee in accordance with Plan provisions.
Any final payment or distribution to a Participant or his legal
representative or to any Beneficiaries, of such Participant under the Plan
provisions shall be in full satisfaction of all claims against the Plan, the
Named Fiduciary, the Plan Administrator, the Trustee, the Insurer, and the
Employer arising under or by virtue of the Plan.
SECTION 9.07--BENEFICIARY.
Each Participant may name a Beneficiary to receive any death benefit
that may arise out of his participation in the Plan. The Participant may
change his Beneficiary from time to time. Unless a qualified election has been
made, for purposes of distributing any death benefits before Retirement Date,
the Beneficiary of a Participant who has a spouse shall be the Participant's
spouse. The Participant's Beneficiary designation and any change of
Beneficiary shall be subject to the provisions of the ELECTION PROCEDURES
SECTION of Article VI. It is the responsibility of the Participant to give
written notice to the Insurer of the name of the Beneficiary on a form
furnished for that purpose.
With the Employer's consent, the Plan Administrator may maintain
records of Beneficiary designations for Participants before their Retirement
Dates. In that event, the written designations made by Participants shall be
filed with the Plan Administrator. If a Participant dies before his Retirement
Date, the Plan Administrator shall certify to the Insurer the Beneficiary
designation on its records for the Participant.
If, at the death of a Participant, there is no Beneficiary named or
surviving, any death benefit under the Group Contract shall be paid under the
applicable provisions of the Group Contract.
SECTION 9.08--NONALIENATION OF BENEFITS.
Benefits payable under the Plan are not subject to the claims of any
creditor of any Participant, Beneficiary, or spouse. A Participant,
Beneficiary or spouse does not have any rights to alienate, anticipate,
commute, pledge, encumber or assign any of such benefits, except in the case of
a loan as provided in the LOANS TO PARTICIPANTS SECTION of Article V. The
preceding sentences shall also apply to the creation, assignment, or
recognition of a right to any benefit payable with respect to a Participant
according to a domestic relations order, unless such order is determined by the
Plan Administrator to be a qualified domestic relations order, as defined in
Code Section 414(p), or any domestic relations order entered before January 1,
1985.
ARTICLE IX 57
<PAGE> 57
SECTION 9.09--CONSTRUCTION.
The validity of the Plan or any of its provisions is determined under
and construed according to Federal law and, to the extent permissible,
according to the laws of the state in which the Employer has its principal
office. In case any provision of this Plan is held illegal or invalid for any
reason, such determination shall not affect the remaining provisions of this
Plan, and the Plan shall be construed and enforced as if the illegal or invalid
provision had never been included.
In the event of any conflict between the provisions of the Plan and
the terms of any contract or policy issued hereunder, the provisions of the
Plan control the operation and administration of the Plan.
SECTION 9.10--LEGAL ACTIONS.
The Plan, the Plan Administrator, the Trustee and the Named Fiduciary
are the necessary parties to any action or proceeding involving the assets held
with respect to the Plan or administration of the Plan or Trust. No person
employed by the Employer, no Participant, former Participant or their
Beneficiaries or any other person having or claiming to have an interest in the
Plan is entitled to any notice of process. A final judgment entered in any
such action or proceeding shall be binding and conclusive on all persons having
or claiming to have an interest in the Plan.
SECTION 9.11--SMALL AMOUNTS.
If the Vested Account of a Participant has never exceeded $3,500
($5,000 for Plan Years beginning after December 31, 1997), the entire Vested
Account shall be payable in a single sum as of the earliest of his Retirement
Date, the date he dies, or the date he ceases to be an Employee for any other
reason. This is a small amounts payment. If a small amount is payable as of
the date the Participant dies, the small amounts payment shall be made to the
Participant's Beneficiary. If a small amount is payable while the Participant
is living, the small amounts payment shall be made to the Participant. The
small amounts payment is in full settlement of all benefits otherwise payable.
No other small amounts payments shall be made.
SECTION 9.12--WORD USAGE.
The masculine gender, where used in this Plan, shall include the
feminine gender and the singular words as used in this Plan may include the
plural, unless the context indicates otherwise.
SECTION 9.13--TRANSFERS BETWEEN PLANS.
If an Employee previously participated in another plan of the Employer
which credited service under the elapsed time method for any purpose which
under this Plan is determined using the hours method, then the Employee's
service shall be equal to the sum of (a), (b) and (c) below:
(a) The number of whole years of service credited to him under the
other plan as of the date he became an Eligible Employee under
this Plan.
(b) One year or a part of a year of service for the applicable
service period in which he became an Eligible Employee if he
is credited with the required number of Hours-of-Service. If
the Employer does not have sufficient records to determine the
Employee's actual Hours-of-Service in that part of the service
period before the date he became an Eligible Employee, the
Hours-of-Service shall be determined using an equivalency.
For any month in which he would be required to be credited
with one Hour-of-Service, the Employee shall be deemed for
purposes of this section to be credited with 190
ARTICLE IX 58
<PAGE> 58
Hours-of-Service.
(c) The Employee's service determined under this Plan using the
hours method after the end of the applicable service period in
which he became an Eligible Employee.
If an Employee previously participated in another plan of the Employer
which credited service under the hours method for any purpose which under this
Plan is determined using the elapsed time method, then the Employee's service
shall be equal to the sum of (d), (e) and (f) below:
(d) The number of whole years of service credited to him under the
other plan as of the beginning of the applicable service
period under that plan in which he became an Eligible Employee
under this Plan.
(e) The greater of (1) the service that would be credited to him
for that entire service period using the elapsed time method
or (2) the service credited to him under the other plan as of
the date he became an Eligible Employee under this Plan.
(f) The Employee's service determined under this Plan using the
elapsed time method after the end of the applicable service
period under the other plan in which he became an Eligible
Employee.
Any modification of service contained in this Plan shall be applicable
to the service determined pursuant to this section.
If the Employee previously participated in the plan of a Controlled
Group member which credited service under a different method than is used in
this Plan, for purposes of determining eligibility and vesting the provisions
above shall apply as though the plan of the Controlled Group member were a plan
of the Employer.
ARTICLE IX 59
<PAGE> 59
ARTICLE X
TOP-HEAVY PLAN REQUIREMENTS
SECTION 10.01--APPLICATION.
The provisions of this article shall supersede all other provisions in
the Plan to the contrary.
For the purpose of applying the Top-heavy Plan requirements of this
article, all members of the Controlled Group shall be treated as one Employer.
The term Employer as used in this article shall be deemed to include all
members of the Controlled Group unless the term as used clearly indicates only
the Employer is meant.
The accrued benefit or account of a participant which results from
deductible voluntary contributions shall not be included for any purpose under
this article.
The minimum vesting and contribution provisions of the MODIFICATION OF
VESTING REQUIREMENTS and MODIFICATION OF CONTRIBUTIONS SECTIONS of Article X
shall not apply to any Employee who is included in a group of Employees covered
by a collective bargaining agreement which the Secretary of Labor finds to be a
collective bargaining agreement between employee representatives and one or
more employers, including the Employer, if there is evidence that retirement
benefits were the subject of good faith bargaining between such
representatives. For this purpose, the term "employee representatives" does
not include any organization more than half of whose members are employees who
are owners, officers, or executives.
SECTION 10.02--DEFINITIONS.
The following terms are defined for purposes of this article.
Aggregation Group means
(a) each of the Employer's retirement plans in which a Key
Employee is a participant during the Year containing the
Determination Date or one of the four preceding Years,
(b) each of the Employer's other retirement plans which allows the
plan(s) described in (a) above to meet the nondiscrimination
requirement of Code Section 401(a)(4) or the minimum coverage
requirement of Code Section 410, and
(c) any of the Employer's other retirement plans not included in
(a) or (b) above which the Employer desires to include as part
of the Aggregation Group. Such a retirement plan shall be
included only if the Aggregation Group would continue to
satisfy the requirements of Code Section 401(a)(4) and Code
Section 410.
The plans in (a) and (b) above constitute the "required" Aggregation
Group. The plans in (a), (b) and (c) above constitute the
"permissive" Aggregation Group.
Compensation means, as to an Employee for any period, compensation as
defined in the CONTRIBUTION LIMITATION SECTION of Article III. For
purposes of determining who is a Key Employee, Compensation shall
include, in addition to compensation as defined in the CONTRIBUTION
LIMITATION SECTION of
ARTICLE IX 60
<PAGE> 60
Article III, elective contributions. Elective contributions are
amounts excludable from the Employee's gross income under Code
Sections 125, 402(e)(3), 402(h) or 403(b), and contributed by the
Employer, at the Employee's election, to a Code Section 401(k)
arrangement, a simplified employee pension, cafeteria plan or
tax-sheltered annuity.
For purposes of Compensation as defined in this section, Compensation
shall be limited in the same manner and in the same time as the
Compensation defined in the DEFINITION SECTION of Article I.
Determination Date means as to this Plan for any Year, the last day of
the preceding Year. However, if there is no preceding Year, the
Determination Date is the last day of such Year.
Key Employee means any Employee or former Employee (including
Beneficiaries of deceased Employees) who at any time during the
determination period was
(a) one of the Employer's officers (subject to the maximum below)
whose Compensation (as defined in this section) for the Year
exceeds 50 percent of the dollar limitation under Code Section
415(b)(1)(A),
(b) one of the ten Employees who owns (or is considered to own,
under Code Section 318) more than a half percent ownership
interest and one of the largest interests in the Employer
during any Year of the determination period if such person's
Compensation (as defined in this section) for the Year exceeds
the dollar limitation under Code Section 415(c)(1)(A),
(c) a five-percent owner of the Employer, or
(d) a one-percent owner of the Employer whose Compensation (as
defined in this section) for the Year is more than $150,000.
Each member of the Controlled Group shall be treated as a separate
employer for purposes of determining ownership in the Employer.
The determination period is the Year containing the Determination Date
and the four preceding Years. If the Employer has fewer than 30
Employees, no more than three Employees shall be treated as Key
Employees because they are officers. If the Employer has between 30
and 500 Employees, no more than ten percent of the Employer's
Employees (if not an integer, increased to the next integer) shall be
treated as Key Employees because they are officers. In no event will
more than 50 Employees be treated as Key Employees because they are
officers if the Employer has 500 or more Employees. The number of
Employees for any Plan Year is the greatest number of Employees during
the determination period. Officers who are employees described in
Code Section 414(q)(8) shall be excluded. If the Employer has more
than the maximum number of officers to be treated as Key Employees,
the officers shall be ranked by amount of annual Compensation (as
defined in this section), and those with the greater amount of annual
Compensation during the determination period shall be treated as Key
Employees. To determine the ten Employees owning the largest
interests in the Employer, if more than one Employee has the same
ownership interest, the Employee(s) having the greater annual
Compensation shall be treated as owning the larger interest(s). The
determination of who is a Key Employee shall be made according to Code
Section 416(i)(1) and the regulations thereunder.
ARTICLE IX 61
<PAGE> 61
Non-key Employee means a person who is a non-key employee within the
meaning of Code Section 416 and regulations thereunder.
Present Value means the present value of a participant's accrued
benefit under a defined benefit plan as of his normal retirement age
(attained age if later) or, if the plan provides non-proportional
subsidies, the age at which the benefit is most valuable. The accrued
benefit of any Employee (other than a Key Employee) shall be
determined under the method which is used for accrual purposes for all
plans of the Employer or if there is no one method which is used for
accrual purposes for all plans of the Employer, as if such benefit
accrued not more rapidly than the slowest accrual rate permitted under
Code Section 411(b)(1)(C). For purposes of establishing Present
Value, any benefit shall be discounted only for 7.5% interest and
mortality according to the 1971 Group Annuity Table (Male) without the
7% margin but with projection by Scale E from 1971 to the later of (a)
1974, or (b) the year determined by adding the age to 1920, and
wherein for females the male age six years younger is used. If the
Present Value of accrued benefits is determined for a participant
under more than one defined benefit plan included in the Aggregation
Group, all such plans shall use the same actuarial assumptions to
determine the Present Value.
Top-heavy Plan means a plan which is a top-heavy plan for any plan
year beginning after December 31, 1983. This Plan shall be a
Top-heavy Plan if
(a) the Top-heavy Ratio for this Plan alone exceeds 60 percent and
this Plan is not part of any required Aggregation Group or
permissive Aggregation Group.
(b) this Plan is a part of a required Aggregation Group, but not
part of a permissive Aggregation Group, and the Top-heavy
Ratio for the required Aggregation Group exceeds 60 percent.
(c) this Plan is a part of a required Aggregation Group and part
of a permissive Aggregation Group and the Top-heavy Ratio for
the permissive Aggregation Group exceeds 60 percent.
Top-heavy Ratio means the ratio calculated below for this Plan or for
the Aggregation Group.
(a) If the Employer maintains one or more defined contribution
plans (including any simplified employee pension plan) and the
Employer has not maintained any defined benefit plan which
during the five-year period ending on the determination date
has or has had accrued benefits, the Top-heavy Ratio for this
Plan alone or for the required or permissive Aggregation Group
as appropriate is a fraction, the numerator of which is the
sum of the account balances of all Key Employees as of the
determination date and the denominator of which is the sum of
all account balances of all employees as of the determination
date. Both the numerator and denominator of the Top-heavy
Ratio are adjusted for any distribution of an account balance
(including those made from terminated plan(s) of the Employer
which would have been part of the required Aggregation Group
had such plan(s) not been terminated) made in the five-year
period ending on the determination date. Both the numerator
and denominator of the Top-heavy Ratio are increased to
reflect any contribution not actually made as of the
Determination Date, but which is required to be taken into
account on that date under Code Section 416 and the
regulations thereunder.
(b) If the Employer maintains one or more defined contribution
plans (including any simplified employee pension plan) and the
Employer maintains or has maintained one or more defined
benefit plans which during the five-year period ending on the
determination date has or has had accrued benefits,
ARTICLE IX 62
<PAGE> 62
the Top-heavy Ratio for any required or permissive Aggregation
Group as appropriate is a fraction, the numerator of which is
the sum of the account balances under the defined contribution
plan(s) of all Key Employees and the Present Value of accrued
benefits under the defined benefit plan(s) for all Key
Employees, and the denominator of which is the sum of the
account balances under the defined contribution plan(s) for
all employees and the Present Value of accrued benefits under
the defined benefit plans for all employees. Both the
numerator and denominator of the Top-heavy Ratio are adjusted
for any distribution of an account balance or an accrued
benefit (including those made from terminated plan(s) of the
Employer which would have been part of the required
Aggregation Group had such plan(s) not been terminated) made
in the five-year period ending on the determination date.
(c) For purposes of (a) and (b) above, the value of account
balances and the Present Value of accrued benefits will be
determined as of the most recent valuation date that falls
within or ends with the 12-month period ending on the
determination date, except as provided in Code Section 416 and
the regulations thereunder for the first and second plan years
of a defined benefit plan. The account balances and accrued
benefits of an employee who is not a Key Employee but who was
a Key Employee in a prior year will be disregarded. The
calculation of the Top-heavy Ratio and the extent to which
distributions, rollovers and transfers during the five-year
period ending on the determination date are to be taken into
account, shall be determined according to the provisions of
Code Section 416 and regulations thereunder. The account
balances and accrued benefits of an individual who has
performed no service for the Employer during the five-year
period ending on the determination date shall be excluded from
the Top-heavy Ratio until the time the individual again
performs service for the Employer. Deductible employee
contributions will not be taken into account for purposes of
computing the Top-heavy Ratio. When aggregating plans, the
value of account balances and accrued benefits will be
calculated with reference to the determination dates that fall
within the same calendar year.
Account, as used in this definition, means the value of an employee's
account under one of the Employer's retirement plans on the latest
valuation date. In the case of a money purchase plan or target
benefit plan, such value shall be adjusted to include any
contributions made for or by the employee after the valuation date and
on or before such determination date or due to be made as of such
determination date but not yet forwarded to the insurer or trustee.
In the case of a profit sharing plan, such value shall be adjusted to
include any contributions made for or by the employee after the
valuation date and on or before such determination date. During the
first Year of any profit sharing plan such adjustment in value shall
include contributions made after such determination date that are
allocated as of a date in such Year. The nondeductible employee
contributions which an employee makes under a defined benefit plan of
the Employer shall be treated as if they were contributions under a
separate defined contribution plan.
Valuation Date means, as to this Plan, the last day of the last
calendar month ending in a Year.
Year means the Plan Year unless another year is specified by the
Employer in a separate written resolution in accordance with
regulations issued by the Secretary of the Treasury or his delegate.
SECTION 10.03--MODIFICATION OF VESTING REQUIREMENTS.
If a Participant's Vesting Percentage determined under Article I is
not at least as great as his Vesting Percentage would be if it were determined
under a schedule permitted in Code Section 416, the following shall
ARTICLE IX 63
<PAGE> 63
apply. During any Year in which the Plan is a Top-heavy Plan, the
Participant's Vesting Percentage shall be the greater of the Vesting Percentage
determined under Article I or the schedule below.
<TABLE>
<CAPTION>
------------------------------------------
VESTING SERVICE NONFORFEITABLE
------------------------------------------
<S> <C>
Less than 2 0
------------------------------------------
2 20
------------------------------------------
3 40
------------------------------------------
4 60
------------------------------------------
5 80
------------------------------------------
6 or more 100
------------------------------------------
</TABLE>
The schedule above shall not apply to Participants who are not
credited with an Hour-of-Service after the Plan first becomes a Top-heavy Plan.
The Vesting Percentage determined above applies to all of the Participant's
Account resulting from Employer Contributions, including Contributions the
Employer makes before the TEFRA Compliance Date or when the Plan is not a
Top-heavy Plan.
If, in a later Year, this Plan is not a Top-heavy Plan, a
Participant's Vesting Percentage shall be determined under Article I. A
Participant's Vesting Percentage determined under either Article I or the
schedule above shall never be reduced and the election procedures of the
AMENDMENTS SECTION of Article IX shall apply when changing to or from the
schedule as though the automatic change were the result of an amendment.
The part of the Participant's Vested Account resulting from the
minimum contributions required pursuant to the MODIFICATION OF CONTRIBUTIONS
SECTION of Article X shall not be forfeited because of a period of reemployment
after benefit payments have begun.
SECTION 10.04--MODIFICATION OF CONTRIBUTIONS.
During any Year in which this Plan is a Top-heavy Plan, the Employer
shall make a minimum contribution or allocation on the last day of the Year for
each person who is a Non-key Employee on that day and who either was or could
have been an Active Participant during the Year. A Non-key Employee is not
required to have a minimum number of hours-of-service or minimum amount of
Compensation, or to have had any Elective Deferral Contributions made for him
in order to be entitled to this minimum. The minimum contribution or
allocation for such person shall be equal to the lesser of (a) or (b) below:
(a) Three percent of such person's Compensation (as defined in this
article).
(b) The "highest percentage" of Compensation (as defined in this
article) for such Year at which the Employer's contributions
are made for or allocated to any Key Employee. The highest
percentage shall be determined by dividing the Employer
Contributions made for or allocated to each Key Employee
during such Year by the amount of his Compensation (as defined
in this article), which is not more than the maximum set out
above, and selecting the greatest quotient (expressed as a
percentage). To determine the highest percentage, all of the
Employer's defined contribution plans within the Aggregation
Group shall be treated as one plan. The provisions of this
paragraph shall not apply if this Plan and a defined benefit
plan of the Employer are required to be included in the
Aggregation Group and this Plan enables the defined benefit
plan to meet the requirements of Code Section 401(a)(4) or
Code Section 410.
If the Employer's contributions and allocations otherwise required
under the defined contribution plan(s) are at
ARTICLE IX 64
<PAGE> 64
least equal to the minimum above, no additional contribution or reallocation
shall be required. If the Employer's contributions and allocations are less
than the minimum above and Employer Contributions under this Plan are allocated
to Participants, any Employer Contributions (other than those which are
allocated on the basis of the amount made for such person) shall be reallocated
to provide the minimum. The remaining Contributions shall be allocated as
provided in the preceding articles of this Plan taking into account any amount
which was reallocated to provide the minimum. If the Employer's total
contributions and allocations are less than the minimum above after any
reallocation provided above, the Employer shall contribute the difference for
the Year.
The minimum contribution or allocation applies to all of the
Employer's defined contribution plans in the aggregate which are Top-heavy
Plans. If an additional contribution or allocation is required to meet the
minimum above, it shall be provided in this Plan.
A minimum allocation under a profit sharing plan shall be made without
regard to whether or not the Employer has profits.
If a person who is otherwise entitled to a minimum contribution or
allocation above is also covered under a defined benefit plan of the Employer's
which is a Top-heavy Plan during that same Year, the minimum benefits for him
shall not be duplicated. The defined benefit plan shall provide an annual
benefit for him on, or adjusted to, a straight life basis of the lesser of (c)
two percent of his average pay multiplied by his years of service or (d) twenty
percent of his average pay. Average pay and years of service shall have the
meaning set forth in such defined benefit plan for this purpose.
For purposes of this section, any employer contribution made according
to a salary reduction or similar arrangement shall not apply before the first
Yearly Date in 1985. On and after the first Yearly Date in 1989, any such
employer contributions and employer contributions which are matching
contributions, as defined in Code Section 401(m), shall not apply in
determining if the minimum contribution requirement has been met, but shall
apply in determining the minimum contribution required. Forfeitures credited
to a Participant's Account are treated as employer contributions.
The requirements of this section shall be met without regard to
contributions under Chapter 2 of the Code (relating to tax on self-employment),
Chapter 21 of the Code (relating to Federal Insurance Contributions Act), Title
II of the Social Security Act or any other Federal or state law.
SECTION 10.05--MODIFICATION OF CONTRIBUTION LIMITATION.
If the provisions of subsection (e) of the CONTRIBUTION LIMITATION
SECTION of Article III are applicable for any Limitation Year during which this
Plan is a Top-heavy Plan, the benefit limitations shall be modified. The
definitions of Defined Benefit Plan Fraction and Defined Contribution Plan
Fraction in the CONTRIBUTION LIMITATION SECTION of Article III shall be
modified by substituting "1.0" in lieu of "1.25." The optional denominator for
determining the Defined Contribution Plan Fraction shall be modified by
substituting "$41,500" in lieu of "$51,875." In addition, an adjustment shall
be made to the numerator of the Defined Contribution Plan Fraction. The
adjustment is a reduction of that numerator similar to the modification of the
Defined Contribution Plan Fraction described in the CONTRIBUTION LIMITATION
SECTION of Article III, and shall be made with respect to the last Plan Year
beginning before January 1, 1984.
The modifications in the paragraph above shall not apply with respect
to a Participant so long as employer contributions, forfeitures or
nondeductible employee contributions are not credited to his account under this
or any
ARTICLE IX 65
<PAGE> 65
of the Employer's other defined contribution plans and benefits do not accrue
for such Participant under the Employer's defined benefit plan(s), until the
sum of his Defined Contribution and Defined Benefit Plan Fractions is less than
1.0.
ARTICLE IX 66
<PAGE> 66
By executing this Plan, the Primary Employer acknowledges having
counseled to the extent necessary with selected legal and tax advisors
regarding the Plan's legal and tax implications.
Executed this 30th day of December, 1997.
CRESCENT REAL ESTATE EQUITIES, LTD.
By: /s/ BRUCE A. PICKER
-------------------------------
Vice-President and Treasurer
-----------------------------------
Title
PLAN EXECUTION 67
<PAGE> 67
FIRST AMENDMENT TO CRESCENT REAL ESTATE
EQUITIES, LTD. FIRST AMENDED AND RESTATED
401(k) PLAN
(ADOPTED AT A SPECIAL MEETING OF THE BOARD OF
TRUST MANAGERS HELD ON SEPTEMBER 1, 1998)
Page 22 of the Crescent Real Estate Equities, Ltd. First Amended and
Restated 401(k) Plan is hereby deleted and replaced with the following:
* * * * *
ARTICLE III
CONTRIBUTIONS
SECTION 3.01 - EMPLOYER CONTRIBUTIONS
Employer Contributions for Plan Years which end on or after march 17,
1997, may be made without regard to current or accumulated net income, earnings,
or profits of the Employer. Notwithstanding the foregoing, the Plan shall
continue to be designed to qualify as a profit sharing plan for purposes of Code
Sections 401(a), 402, 412, and 417. Such Contributions will be equal to the
Employer Contributions as described below:
(a) The amount of each Elective Deferral Contribution for a
participant shall be equal to any percentage (not less than 1%
nor more than 25%) of his Compensation for the pay period as
elected in his elective deferral agreement. An Employee who is
eligible to participate in the Plan may file an elective
deferral agreement with the Employer. The elective deferral
agreement to start Elective Deferral Contributions may be
effective on a Participant's Entry Date (Reentry Date, if
applicable) or any following Quarterly Date. The Participant
shall make any change or terminate the elective deferral
agreement by filing a new elective deferral agreement. A
participant's elective deferral agreement making a change may
be effective on any date an elective deferral agreement to
start Elective Deferral Contributions could be effective. A
participant's elective deferral agreement to stop Elective
Deferral Contributions may be effective on any date. The
elective deferral agreement must be in writing and effective
before the beginning of the pay period in which Elective
Deferral Contributions are to start, change or stop.
Elective Deferral Contributions are fully (100%) vested and
nonforfeitable.
(b) The amount of each Matching Contribution for a Participant,
shall be equal to the percentage shown in the schedule below
based on his Years of Service and based on the amount of the
Elective Deferral Contributions made for him for the calendar
quarter, disregarding any Elective Deferral Contributions in
excess of 7% of his Compensation for the calendar quarter.
<TABLE>
<CAPTION>
Years of Percentage
Service Matched
<S> <C>
Less than 1 year 0%
1 25%
2 50%
3 75%
4 or more 100%
</TABLE>
Matching Contributions are subject to the Vesting Percentage.
(c) The amount of each Qualified Nonelective Contribution shall be
determined by the Employer. A Qualified Nonelective
Contribution shall be made for a Participant only if he is a
Nonhighly Compensated Employee or a Non-key Employee (as
defined in Article X).
Qualified Nonelective Contributions are fully (100%) vested
and nonforfeitable.
(d) The amount of each Discretionary Contribution shall be
determined by the Employer.
Discretionary Contributions are subject to the Vesting
Percentage.
No participant shall be permitted to have Elective Deferral
Contributions, as defined in the EXCESS AMOUNTS SECTION of Article III, made
under this Plan, or any other qualified plan maintained by the Employer,
ARTICLE III 22
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND STATEMENT OF OPERATIONS FOUND ON PAGE 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 STATEMENT
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> SEP-30-1998
<CASH> 90,052
<SECURITIES> 0
<RECEIVABLES> 88,311
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,058,085
<PP&E> 4,102,206
<DEPRECIATION> (356,675)
<TOTAL-ASSETS> 4,981,979
<CURRENT-LIABILITIES> 265,833
<BONDS> 2,273,554
0
425,000
<COMMON> 1,095
<OTHER-SE> 1,860,825
<TOTAL-LIABILITY-AND-EQUITY> 4,981,979
<SALES> 0
<TOTAL-REVENUES> 510,046
<CGS> 0
<TOTAL-COSTS> 291,759
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 111,275
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 107,105
<EPS-PRIMARY> 0.90
<EPS-DILUTED> 0.85
</TABLE>
