<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 MARCH 31, 1999
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 May 11, 1999.
Preferred Shares, par value $.01 per share: 8,000,000
Common Shares, par value $.01 per share: 126,820,055
----------------------------------------------------------------
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
Item 1. Financial Statements
<S> <C>
Consolidated Balance Sheets as of March 31, 1999 (Unaudited) and
December 31, 1998 (audited)........................................... 3
Consolidated Statements of Operations for the three months ended
March 31, 1999 and 1998 (Unaudited)................................... 4
Consolidated Statement of Shareholders' Equity for the three months
ended March 31, 1999 (Unaudited)...................................... 5
Consolidated Statements of Cash Flows for the three months ended
March 31, 1999 and 1998 (Unaudited)................................... 6
Notes to Financial Statements......................................... 7
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations..................................... 18
Item 3. Quantitative and Qualitative Disclosures about Market Risk............ 41
PART II: OTHER INFORMATION
Item 1. Legal Proceedings..................................................... 42
Item 2. Changes in Securities................................................. 42
Item 3. Defaults Upon Senior Securities....................................... 42
Item 4. Submission of Matters to a Vote of Security Holders................... 42
Item 5. Other Information..................................................... 42
Item 6. Exhibits and Reports on Form 8-K...................................... 42
</TABLE>
2
<PAGE> 3
CRESCENT REAL ESTATE EQUITIES COMPANY
CONSOLIDATED BALANCE SHEETS
(DOLLARS IN THOUSANDS)
(NOTES 1 AND 2)
<TABLE>
<CAPTION>
MARCH 31, DECEMBER 31,
1999 1998
----------- -----------
(UNAUDITED) (AUDITED)
<S> <C> <C>
ASSETS:
Investments in real estate:
Land $ 396,491 $ 400,690
Land held for development or sale 95,282 95,282
Building and improvements 3,585,847 3,569,774
Furniture, fixtures and equipment 66,465 63,626
Less - accumulated depreciation (418,434) (387,457)
----------- -----------
Net investment in real estate 3,725,651 3,741,915
Cash and cash equivalents 76,612 110,292
Restricted cash and cash equivalents 35,870 46,841
Accounts receivable, net 27,703 32,730
Deferred rent receivable 81,164 73,635
Investments in real estate mortgages and equity
of unconsolidated companies 742,698 743,516
Notes receivable, net 182,382 183,974
Other assets, net 123,725 110,544
----------- -----------
Total assets $ 4,995,805 $ 5,043,447
=========== ===========
LIABILITIES:
Borrowings under Credit Facility $ 634,480 $ 660,000
Notes payable 1,717,792 1,658,156
Accounts payable, accrued expenses and other liabilities 109,556 149,444
----------- -----------
Total liabilities 2,461,828 2,467,600
----------- -----------
COMMITMENTS AND CONTINGENCIES:
MINORITY INTERESTS:
Operating partnership, 6,503,431 and 6,545,528 units,
respectively 121,451 126,575
Investment joint ventures 26,209 26,727
----------- -----------
Total minority interests 147,660 153,302
----------- -----------
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 March 31, 1999 200,000 200,000
Common shares, $.01 par value, authorized 250,000,000 shares,
124,710,139 and 124,555,447 shares issued and outstanding
at March 31, 1999 and December 31, 1998, respectively 1,247 1,245
Additional paid-in capital 2,339,014 2,336,621
Deferred compensation on restricted shares (88) (88)
Retained deficit (146,141) (110,196)
Accumulated other comprehensive income (7,715) (5,037)
----------- -----------
Total shareholders' equity 2,386,317 2,422,545
----------- -----------
Total liabilities and shareholders' equity $ 4,995,805 $ 5,043,447
=========== ===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE> 4
CRESCENT REAL ESTATE EQUITIES COMPANY
CONSOLIDATED STATEMENT OF OPERATIONS
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA)
(NOTE 1 AND 3)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
--------------------------
(UNAUDITED)
1999 1998
--------- ---------
<S> <C> <C>
REVENUES:
Office and retail properties $ 150,022 $ 126,428
Hotel properties 15,404 12,874
Behavioral healthcare properties 13,823 13,823
Interest and other income 6,498 8,024
--------- ---------
Total revenues 185,747 161,149
--------- ---------
EXPENSES:
Real estate taxes 20,746 16,097
Repairs and maintenance 11,024 8,700
Other rental property operating 32,612 29,891
Corporate general and administrative 4,114 3,147
Interest expense 42,481 34,283
Amortization of deferred financing costs 3,069 1,140
Depreciation and amortization 33,647 26,582
Settlement of merger dispute 15,000 --
--------- ---------
Total expenses 162,693 119,840
--------- ---------
Operating income 23,054 41,309
OTHER INCOME:
Equity in net income of unconsolidated
companies 16,606 5,845
--------- ---------
INCOME BEFORE MINORITY INTERESTS 39,660 47,154
Minority interests (3,649) (4,746)
--------- ---------
NET INCOME 36,011 42,408
PREFERRED SHARE DIVIDENDS (3,375) (1,575)
FORWARD SHARE PURCHASE AGREEMENT
RETURN (2,152) --
--------- ---------
NET INCOME AVAILABLE TO COMMON
SHAREHOLDERS $ 30,484 $ 40,833
========= =========
PER COMMON SHARE DATA:
Net Income-Basic $ 0.24 $ 0.35
========= =========
Net Income-Diluted $ 0.24 $ 0.33
========= =========
</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 AND 9)
(UNAUDITED)
<TABLE>
<CAPTION>
Preferred Shares Common Shares Additional
--------------------------- ----------------------------- Paid-in
Shares Net Value Shares Par Value Capital
--------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
SHAREHOLDERS' EQUITY, December 31,1998 8,000,000 $ 200,000 124,555,447 $ 1,245 $ 2,336,621
Issuance of Common Shares -- -- 870 -- 20
Exercise of Common Share Options -- -- 57,272 1 971
Issuance of Common Shares in Exchange for
Operating Partnership Units -- -- 84,194 1 1,402
Preferred Share Conversion Adjustment -- -- 12,356 -- --
Dividends Paid -- -- -- -- --
Net Income -- -- -- -- --
Accumulated Other Comprehensive Income -- -- -- -- --
--------- ----------- ----------- ----------- -----------
SHAREHOLDERS' EQUITY, March 31,1999 8,000,000 $ 200,000 124,710,139 $ 1,247 $ 2,339,014
========= =========== =========== =========== ===========
</TABLE>
<TABLE>
<CAPTION>
Deferred Accumulated
Compensation Retained Other
on Restricted Earnings Comprehensive
Shares (Deficit) Income Total
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
SHAREHOLDERS' EQUITY, December 31,1998 $ (88) $ (110,196) $ (5,037) $ 2,422,545
Issuance of Common Shares -- -- -- 20
Exercise of Common Share Options -- -- -- 972
Issuance of Common Shares in Exchange for
Operating Partnership Units -- -- -- 1,403
Preferred Share Conversion Adjustment -- -- -- --
Dividends Paid -- (68,581) -- (68,581)
Net Income -- 32,636 -- 32,636
Accumulated Other Comprehensive Income -- -- (2,678) (2,678)
----------- ----------- ----------- -----------
SHAREHOLDERS' EQUITY, March 31,1999 $ (88) $ (146,141) $ (7,715) $ 2,386,317
=========== =========== =========== ===========
</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 THREE MONTHS
ENDED MARCH 31,
------------------------------
(UNAUDITED)
1999 1998
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income 36,011 42,408
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 36,716 27,722
Minority interests 3,649 4,746
Non-cash compensation 20 24
Distributions received in excess of equity in earnings
from unconsolidated companies -- 6,905
Equity in earnings in excess of distributions received
from unconsolidated companies (9,019) --
Decrease in accounts receivable 5,027 6,132
Increase in deferred rent receivable (7,529) (8,809)
Decrease (increase) in other assets 2,931 (18,623)
Decrease in restricted cash and cash equivalents 12,485 11,140
Decrease in accounts payable, accrued
expenses and other liabilities (39,888) (48,036)
----------- -----------
Net cash provided by operating activities 40,403 23,609
----------- -----------
CASH FLOWS FROM INVESTING ACTIVITIES:
Acquisition of investment properties -- (421,354)
Development of investment properties (2,471) (5,416)
Capital expenditures - rental properties (3,267) (8,481)
Tenant improvement and leasing costs - rental properties (14,744) (14,241)
(Increase) decrease in restricted cash and cash equivalents (1,514) 3,869
Investment in unconsolidated companies (7,421) (2,289)
Investment in residential development companies 13,980 13,892
Escrow deposits - acquisition of investment properties -- (80)
Decrease in notes receivable 1,592 8,194
----------- -----------
Net cash used in investing activities (13,845) (425,906)
----------- -----------
CASH FLOWS FROM FINANCING ACTIVITIES:
Debt financing costs (741) 127
Forward Share Purchase Agreement (14,740) --
Borrowings under Credit Facility 26,400 335,050
Payments under Credit Facility (51,920) (228,050)
Debt proceeds 60,000 158,100
Debt payments (364) (297)
Capital distributions - joint venture partner (763) (763)
Proceeds from exercise of stock options 972 78
Net proceeds from Preferred Offering -- 191,250
Preferred dividends (3,375) (1,575)
Dividends and unitholder distributions (75,707) (49,697)
----------- -----------
Net cash (used in) provided by financing activities (60,238) 404,223
----------- -----------
(DECREASE) INCREASE IN CASH AND
CASH EQUIVALENTS (33,680) 1,926
CASH AND CASH EQUIVALENTS,
Beginning of period 110,292 66,622
----------- -----------
CASH AND CASH EQUIVALENTS,
End of period 76,612 68,548
=========== ===========
</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, provides management, leasing and
development services with respect to certain of its properties. 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 March 31, 1999, the Company directly or indirectly owned a
portfolio of real estate assets (the "Properties"). The Properties include 89
office properties (collectively referred to as the "Office Properties") located
primarily in 17 metropolitan submarkets in Texas with an aggregate of
approximately 31.8 million net rentable square feet, seven retail properties
(collectively referred to as the "Retail Properties") with an aggregate of
approximately 0.8 million net rentable square feet, seven full-service hotels
with a total of 2,247 rooms and two destination health and fitness resorts that
can accommodate up to 462 guests daily (collectively referred to as the "Hotel
Properties"), real estate mortgages and non-voting common stock representing
interests ranging from 40% to 95% in five unconsolidated residential
development corporations (collectively referred to "Residential Development
Corporations"), which in turn, through joint venture or partnership
arrangements, own interests in 13 residential development properties
(collectively referred to as the "Residential Development Properties"), and 88
behavioral healthcare properties (collectively referred to as the "Behavioral
Healthcare Properties"). As of March 31, 1999, the Company, through two
subsidiaries (the "Crescent Subsidiaries"), owned an indirect 39.6% interest in
three partnerships (collectively referred to as the "Refrigerated Storage
Partnerships") each of which owned one or more corporations or limited
liability companies (collectively referred to as the "Refrigerated Storage
Corporations") which directly or indirectly owned 92 refrigerated storage
properties (collectively referred to as the "Refrigerated Storage Properties")
with an aggregate of approximately 463.4 million cubic feet (19.2 million
square feet). 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.
7
<PAGE> 8
The following table sets forth, by subsidiary, the Properties such
subsidiaries own as of March 31, 1999:
Operating Partnership: 62 Office Properties, six Hotel Properties
and five Retail Properties
Crescent Real Estate The Aberdeen, The Avallon, Caltex House, The
Funding I, L.P.: Citadel, The Crescent Atrium, The Crescent
("Funding I") Office Towers, Regency Plaza One, UPR Plaza
and Waterside Commons
Crescent Real Estate Albuquerque Plaza, Barton Oaks Plaza One,
Funding II, L.P.: Briargate Office and Research Center, Hyatt
("Funding II") Regency Albuquerque, Hyatt Regency Beaver
Creek, Las Colinas Plaza, 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")
- ---------------------------------------
(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, 1998.
Certain reclassifications have been made to previously reported
amounts to conform with the current presentation.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
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 would have
had no material impact on the Company's financial statements for the quarter
ended March 31, 1999.
3. EARNINGS PER SHARE
SFAS No. 128 specifies the computation, presentation and disclosure
requirements for earnings per share. Basic EPS excludes all dilution, while
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.
8
<PAGE> 9
<TABLE>
<CAPTION>
For the three months ended March 31,
-----------------------------------------------------------------------------
1999 1998
-------- --------
Wtd. Avg. Per Share 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 ....... $30,484 124,688 $ 0.24 $40,833 118,380 $ 0.35
======= =======
Effect of dilutive securities:
Share and unit options ....... -- 2,142 -- 4,688
-----------------------------------------------------------------------------
Diluted EPS -
Net income available
to common shareholders ....... $30,484 126,830 $ 0.24 $40,833 123,068 $ 0.33
======= ======= ======= ======= ======= =======
</TABLE>
4. SUPPLEMENTAL DISCLOSURES TO STATEMENTS OF CASH FLOWS:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
ENDED MARCH 31,
-------------------------
1999 1998
----------- ---------
<S> <C> <C>
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Interest paid ........................................................ $ 48,793 $ 39,854
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND
FINANCING ACTIVITIES:
Conversion of operating partnership units to common shares
with resulting reduction in minority interest and increases
in common shares and additional paid-in capital ................... 1,403 3,352
Issuance of operating partnership units in conjunction with
settlement of an obligation ....................................... -- 8,522
Unrealized loss on available-for-sale securities ..................... 2,678 --
Forward Share Purchase Agreement Return .............................. 2,152 --
</TABLE>
5. SEGMENT REPORTING:
Beginning with the year ended December 31, 1998, the Company adopted
SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information." The Company currently has five major operating segments: the
Office and Retail Segment; the Hospitality Segment; the Refrigerated Storage
Segment; the Residential Development Segment and the Behavioral Healthcare
Segment. Therefore, operating segments for SFAS No. 131 were determined on the
same basis. Management organizes the segments within the Company based on
property type for making operating decisions and assessing performance.
The Company uses Funds from Operations ("FFO") as the measure of
segment profit or loss. FFO, based on the definition adopted by the Board of
Governors of the National Association of Real Estate Investment Trusts
("NAREIT") and as used herein, means net income (loss) (determined in
accordance with Generally Accepted Accounting Principles, "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. NAREIT developed FFO 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, and therefore for the operating
segments contained therein. However, the Company's measure of FFO may not be
comparable to similarly titled measures of other REITs because these REITs may
not apply the definition of FFO in the same manner as the Company.
9
<PAGE> 10
Selected financial information related to each segment for the three
months ended March 31, 1999 and 1998 is presented below.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
1999 1998
------------ ------------
<S> <C> <C>
REVENUES:
Office and Retail Segment $ 150,022 $ 126,428
Hospitality Segment 15,404 12,874
Behavioral Healthcare Segment 13,823 13,823
Refrigerated Storage Segment -- --
Residential Development Segment -- --
Corporate and other 6,498 8,024
------------ ------------
TOTAL CONSOLIDATED REVENUE $ 185,747 $ 161,149
============ ============
FUNDS FROM OPERATIONS:
Office and Retail Segment $ 89,107 $ 74,046
Hospitality Segment 15,198 12,625
Behavioral Healthcare Segment 13,823 13,823
Refrigerated Storage Segment 8,280 5,962
Residential Development Segment 13,300 9,554
Corporate and other adjustments:
Interest expense (42,481) (34,283)
Preferred stock dividends (3,375) (1,575)
Other 3,179 6,539
Corporate G & A (4,114) (3,147)
------------ ------------
TOTAL FUNDS FROM OPERATIONS $ 92,917 $ 83,544
------------ ------------
ADJUSTMENTS TO RECONCILE FUNDS FROM OPERATIONS TO
CONSOLIDATED NET INCOME BEFORE MINORITY INTEREST:
Depreciation and amortization of real estate assets $ (32,877) $ (26,051)
Settlement of merger dispute (15,000) --
Minority interests in joint ventures 245 400
Adjustment for investments in real estate
mortgages and equity of unconsolidated companies:
Office and Retail Segment (1,732) (1,425)
Refrigerated Storage Segment (2,571) (5,893)
Residential Development Segment (4,671) (4,979)
Corporate and other (26) (17)
Preferred stock dividends 3,375 1,575
------------ ------------
CONSOLIDATED NET INCOME BEFORE MINORITY INTEREST $ 39,660 $ 47,154
============ ============
EQUITY IN NET INCOME OF UNCONSOLIDATED COMPANIES:
Office and Retail Segment $ 1,961 $ 1,201
Hospitality Segment -- --
Behavioral Healthcare Segment -- --
Refrigerated Storage Segment 5,709 69
Residential Development Segment 8,629 4,575
Corporate and other 307 --
------------ ------------
TOTAL EQUITY IN NET INCOME OF UNCONSOLIDATED
COMPANIES $ 16,606 $ 5,845
============ ============
IDENTIFIABLE ASSETS:
Office and Retail Segment $ 3,212,881 $ 3,019,977
Hospitality Segment 452,362 411,861
Behavioral Healthcare Segment 383,389 384,870
Refrigerated Storage Segment 281,436 155,012
Residential Development Segment 275,720 298,821
Corporate and other 390,017 321,187
------------ ------------
TOTAL IDENTIFIABLE ASSETS $ 4,995,805 $ 4,591,728
============ ============
</TABLE>
10
<PAGE> 11
Crescent Operating, Inc. and its subsidiaries ("COI") and Charter
Behavioral Health Systems, LLC ("CBHS") are the largest single lessees of the
Company in terms of total rental revenues derived through their leases. Total
rental revenues from each of COI and CBHS for the quarter ended March 31, 1999
were approximately 8% of the Company's total rental revenues. COI was the
primary lessee of the Hotel Properties for the quarter ended March 31, 1999, and
CBHS was the sole lessee of the Behavioral Healthcare Properties during that
period.
6. 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 MARCH 31, 1999
- ---------------------------------------- ------------------------------------- -----------------------------------
<S> <C> <C>
Desert Mountain Development Corporation Residential Development Corporation 95%(1)
Houston Area Development Corp. Residential Development Corporation 94%(1)
The Woodlands Land 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 Subsidiary 99%(2)
Crescent CS Holdings II Corp. Crescent Subsidiary 99%(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>
- ---------------------
(1) See Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations and the Residential Development Properties Table
included in that section for the Residential Development Corporation's
ownership interest in the Residential Development Properties.
(2) The Crescent Subsidiaries have a 40% interest in three partnerships each
of which owns one or more corporations or limited liability companies.
Accordingly, each of the Crescent Subsidiaries has an indirect 40%
interest in the Refrigerated Storage Properties. This percentage reflects
the restructuring, effective March 12, 1999, of the Company's investment in
the Refrigerated Storage Properties, as described in Note 10.
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 aggregate
basis and classified under the captions "Residential Development Corporations,"
"Refrigerated Storage Corporations," and "Other," as applicable, as of March
31, 1999.
11
<PAGE> 12
<TABLE>
<CAPTION>
BALANCE SHEETS AT MARCH 31, 1999:
RESIDENTIAL REFRIGERATED
DEVELOPMENT STORAGE
CORPORATIONS CORPORATIONS OTHER
------------ ------------ ----------
<S> <C> <C> <C>
Real estate, net ............................... $ 633,113 $1,275,459 $ 472,264
Cash ........................................... 17,573 -- 28,661
Other assets ................................... 162,179 138,964 62,691
---------- ---------- ----------
Total Assets ............................... $ 812,865 $1,414,423 $ 563,616
========== ========== ==========
Notes payable .................................. $ 321,121 $ 602,298 $ 273,291
Notes payable to the Company ................... 157,335 -- 15,668
Other liabilities............................... 116,444 154,539 14,940
Equity ......................................... 217,965 657,586 259,717
---------- ---------- ----------
Total Liabilities and Equity .............. $ 812,865 $1,414,423 $ 563,616
========== ========== ==========
Company's investments in real estate
mortgages and equity of uncon-
solidated companies .......................... $ 275,720 $ 281,436 $ 185,542
========== ========== ==========
</TABLE>
SUMMARY STATEMENTS OF OPERATIONS:
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
MARCH 31, 1999
----------------------------------------------
RESIDENTIAL REFRIGERATED
DEVELOPMENT STORAGE
CORPORATIONS CORPORATIONS OTHER
------------ ------------ -----------
<S> <C> <C> <C>
Total revenues ............................ $ 90,213 $ 140,454 $ 25,289
Expenses:
Operating expense ...................... 69,887 99,632 9,719
Interest expense ....................... 711 11,335 4,431
Depreciation & Amortization ............ 2,424 15,178 4,216
Taxes .................................. 5,254 419 (12)
---------- ---------- ----------
Total expenses ........................... 78,276 126,564 18,354
---------- ---------- ----------
Net income ................................ $ 11,937 $ 13,890 $ 6,935
========== ========== ==========
Company's equity in net income
of unconsolidated companies ............ $ 7,608 $ 5,709 $ 3,289
========== ========== ==========
</TABLE>
7. NOTES PAYABLE AND BORROWINGS UNDER CREDIT FACILITY:
<TABLE>
<CAPTION>
BALANCE AT
The following is a summary of the Company's debt financing at March 31, 1999: MARCH 31,
1999
-----------
SECURED DEBT
<S> <C>
BankBoston Term Note due October 30, 2001, bears interest at the Eurodollar
rate plus 325 basis points or the Base Rate (as defined in the Note) plus 100
basis points (at March 31, 1999, the rate was 8.19% based on the Eurodollar
rate) with a three-year interest-only term secured by Greenway I and IA, BP
Plaza, Washington Harbour, Bank One Tower, Frost Bank Plaza, Central Park
Plaza, 3333 Lee Parkway, The Addison and Reverchon Plaza Office Properties................. $320,000
</TABLE>
12
<PAGE> 13
<TABLE>
<CAPTION>
BALANCE AT
MARCH 31,
1999
---------------
<S> <C>
LaSalle Note I bears interest at 7.83% with an initial seven-year interest-only
term (through August 2002), followed by principal amortization based on a
25-year amortization schedule through maturity in August 2027(1), secured by
the Funding I Properties....................................................... 239,000
Merrill Lynch Promissory Note due September 14, 1999, bears interest at an
initial rate of 30-day LIBOR plus 200 basis points (at March 31, 1999, the rate
was 6.94%) with an interest-only term, secured by the Houston Center mixed-use
Property complex and the Four Seasons Hotel - Houston.......................... 184,299
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(2),
secured by the Funding II Properties........................................... 161,000
LaSalle Note III due July 1999, bears interest at 30-day LIBOR plus a weighted
average rate of 2.135% (at March 31, 1999 the rate was 7.07%), 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 March 31, 1999, the rate was 6.69%) with an
interest-only term, secured by the 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....................................................................... 44,183
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..................................................................... 11,692
Nomura Funding VI Note bears interest at 10.07% with monthly principal and
interest payments based on a 25-year amortization schedule through maturity in
July 2020(3), secured by the Funding VI
Property....................................................................... 8,567
Metropolitan Life Note IV due December 1999, bears interest at 7.11% with
monthly principal and interest payments based on a 15-year amortization
schedule, secured by the Datran Center Office
Property....................................................................... 6,681
Rigney Note due June 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........................................................................ 747
</TABLE>
13
<PAGE> 14
<TABLE>
<CAPTION>
BALANCE AT
MARCH 31,
1999
--------------
UNSECURED DEBT
<S> <C>
Line of Credit with BankBoston, N.A. ("BankBoston") ("Credit Facility") (see
description of Credit Facility
below)......................................................................... 634,480
2007 Notes bear interest at a fixed rate of 7.50% with a ten-year interest-only
term, due September
2007(4)........................................................................ 250,000
2002 Notes bear interest at a fixed rate of 7.00% with a five-year
interest-only term, due September
2002(4)....................................................................... 150,000
----------
Total Notes Payable....................................................... $2,352,272
==========
</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) In March 2006, the interest rate increases, and the Company is required to
remit, in addition to the monthly debt service payment, excess property
cash flow, as defined, to be applied first against principal until the
note is paid in full and thereafter, against accrued excess interest, as
defined. It is the Company's intention to repay the note in full at such
time (March 2006) by making a final payment of approximately $154,000.
(3) The Company has the option to defease the note, by purchasing Treasury
obligations in an amount sufficient to pay the note, without penalty. In
July 2010, the interest rate due under the note will change to a 10-year
Treasury yield plus 500 basis points or, if the Company so elects, it may
repay the note without penalty.
(4) The notes were issued in an offering registered with the Securities and
Exchange Commission ("SEC").
The combined aggregate principal amounts, either at maturity or in the
form of scheduled principal installments due pursuant to borrowings under the
Credit Facility and other indebtedness of the Company, are as follows:
<TABLE>
<CAPTION>
(In Thousands)
<S> <C>
1999 ........................................ $ 346,928
2000 ........................................ 635,839
2001 ........................................ 429,181
2002 ........................................ 215,655
2003 ........................................ 72,201
Thereafter .................................. 652,468
----------
$2,352,272
==========
</TABLE>
14
<PAGE> 15
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 137 basis points. As of March 31, 1999,
the interest rate was 6.31%. The Credit Facility is unsecured and expires in
June 2000. In connection with the refinancing of a BankBoston term note, the
Company used $90,000 of the net proceeds of the refinancing to purchase a 12%
participation interest from BankBoston in the Credit Facility. As a result, the
Company's borrowing capacity under the Credit Facility is currently limited to
$660,000. 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,
limitations on additional investments and the incurrence of additional liens,
restrictions on real estate development activity and a minimum net worth
requirement. As of March 31, 1999, the Company was in compliance with all
covenants.
8. MINORITY INTEREST:
Minority interest represents (i) the limited partnership interests
owned by limited partners in the Operating Partnership ("units"), and (ii)
joint venture interests held by third parties. 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, Crescent Equities' percentage interest in the
Operating Partnership increases. During the three months ended March 31, 1999,
there were 42,097 units exchanged for 84,194 common shares of Crescent
Equities.
9. SHAREHOLDERS' EQUITY:
COMMON SHARE ISSUANCE
On March 25, 1999, the Company issued an additional 12,356 common
shares to the former holder of the Series B Preferred Shares in settlement of a
dispute regarding the calculation of the conversion rate used in the
conversion, on November 30, 1998, of the Series B Preferred Shares into the
Company's common shares.
FORWARD SHARE PURCHASE AGREEMENT
On August 12, 1997, the Company entered into two transactions with
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 (the "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.
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 the Company received from the original issuance of
common shares to UBS, plus a forward accretion component equal to 90-day 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 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
15
<PAGE> 16
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. On November 20, 1998, the Company
issued 1,852,162 additional common shares to UBS under the Forward Share
Purchase Agreement as a result of the decline in the market price of the
Company's common shares.
On February 18, 1999, the Company delivered cash collateral of
approximately $14,700 in lieu of the issuance of additional common shares, as
permitted under the Forward Share Purchase Agreement, as a result of a decline
in the market price of the common shares. (See Note 12, Subsequent Events).
At March 31, 1999, this instrument was anti-dilutive using both the
Company's average share price for the quarter and the closing price on March
31, 1999. Therefore, no additional common shares were included in the
calculation of diluted earnings per share for the three months ended March 31,
1999.
To the extent that the Company is obligated, as a result of a further
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 result in a reduction of the Company's net income per common
share and net book value per common share.
DISTRIBUTIONS
Common Shares
On February 17, 1999, the Company paid a cash dividend on its common
shares and unitholder distribution of $75,707, or $.55 per share and equivalent
unit to shareholders and equivalent unitholders of record on January 27, 1999.
The dividend represented an annualized dividend of $2.20 per share and
equivalent unit.
Preferred Shares
On February 16, 1999, the Company paid a cash dividend on its Series A
Preferred Shares of $3,375, or $.422 per share, to shareholders of record on
January 29, 1999. The dividend represented an annualized dividend of $1.69
share.
10. INVESTMENTS
Effective March 12, 1999, the Company, Vornado Realty Trust
("Vornado"), the Refrigerated Storage Partnerships, the Refrigerated Storage
Corporations (including all affiliated entities that owned any portion of the
business operations of the Refrigerated Storage Properties at that time) and
COI restructured their investment in the Refrigerated Storage Properties (the
"Restructuring"). In the Restructuring, the Refrigerated Storage Corporations
(including all affiliated entities that owned any portion of the business
operations of the Refrigerated Storage Properties) sold their ownership of the
business operations to a newly formed partnership (the "Refrigerated Storage
Operating Partnership") owned 60% by Vornado Operating L.P. and 40% by a newly
formed subsidiary of COI, in consideration of the payment of $48,700 by the
Refrigerated Storage Operating Partnership. The Refrigerated Storage Operating
Partnership, as lessee, entered into triple-net master leases of the
Refrigerated Storage Properties with certain of the Refrigerated Storage
Corporations. Each of the Refrigerated Storage Properties is subject to one or
more of the leases, each of which has an initial term of 15 years, subject to
two, five-year renewal options. The leases provide for an aggregate annual base
rental rate of $123,000 for the first through fifth lease years, $126,000 for
the sixth through 10th lease years and $130,500 for the 11th through 15th lease
years, plus percentage rent based on the gross revenues received from customers
at the Refrigerated Storage Properties above a specified amount.
16
<PAGE> 17
As a result of the Restructuring, the Refrigerated Storage
Partnerships and the Refrigerated Storage Corporations directly or indirectly
own the real estate assets associated with the Refrigerated Storage Properties.
The business operations associated with the Refrigerated Storage Properties are
owned by the Refrigerated Storage Operating Partnership, in which the Company
has no interest.
In addition, in connection with the Restructuring and also effective
in March 1999, the Company purchased from COI an additional 4% nonvoting
interest in each of the Crescent Subsidiaries for an aggregate purchase price
of $13,200. As a result, the Company holds an indirect 39.6% interest in the
Refrigerated Storage Partnerships and COI holds an indirect .4% interest in the
Refrigerated Storage Partnerships. The Company also granted COI an option to
require the Company to purchase COI's remaining 1% interest in each of the
Crescent Subsidiaries at such time as the purchase would not, in the opinion of
counsel to the Company, adversely affect the status of Crescent Equities as a
REIT, for an aggregate price, payable by the Company, of approximately $3,300.
In connection with these transactions, the Company established a new
line of credit in the principal amount of $19,500 available to COI at an
interest rate of 9% per annum.
11. PENDING INVESTMENT
On December 8, 1998, Tower Realty Trust ("Tower"), Reckson Associates
Realty Corporation ("Reckson"), and Metropolitan Partners, LLC ("Metropolitan")
entered into a revised agreement and plan of merger that superseded the merger
agreement to which the Company was a party at that time, under which
Metropolitan has agreed to acquire Tower for a combination of cash and Reckson
exchangeable Class B common shares. The Company, Reckson and Metropolitan have
agreed that the Company's investment in Metropolitan will be an $85,000
preferred member interest in Metropolitan. The investment will have a cash flow
preference of 7.5% for a two-year period and may be redeemed by Metropolitan
within the two-year period for $85,000, plus an amount sufficient to provide a
9.5% internal rate of return to the Company. If Metropolitan does not redeem
the preferred interest upon expiration of the two-year period, the Company may
convert the interest either into (i) a common equity interest in Metropolitan
or (ii) shares of common stock of Reckson at a conversion price of $24.61.
In connection with the revised agreement, the Company contributed
$10,000 of the $85,000 required capital contribution to Metropolitan in
December 1998 and agreed to make the additional $75,000 capital contribution to
Metropolitan when all of the conditions to the funding have been met, which is
expected to occur in the second quarter of 1999.
12. SUBSEQUENT EVENTS:
DISTRIBUTIONS
Common Shares
On April 5, 1999, the Company declared a cash dividend on its commons
shares and unitholder distribution of $76,494, or $.55 per share and equivalent
unit to shareholders and equivalent unitholders of record on April 27, 1999.
The dividend represents an annualized dividend of $2.20 per share and
equivalent unit and is payable on May 18, 1999.
Preferred Shares
On April 15, 1999, the Company declared a cash dividend on its Series
A Preferred Shares of $3,376 or $.422 per share to shareholders of record on
April 30, 1999. The dividend represents an annualized dividend of $1.69 per
share and is payable on May 14, 1999.
STATION CASINOS, INC. ("STATION")
On April 14, 1999, the Company and Station entered into an agreement
(the "Settlement Agreement") for the mutual settlement and release of all claims
between the Company and Station arising out of the Agreement
17
<PAGE> 18
and Plan of Merger between the Company and Station, which the Company
terminated in August 1998. As part of the Settlement Agreement, the Company
paid $15,000 to Station on April 22, 1999, which had been accrued by the Company
at March 31, 1999.
FORWARD SHARE PURCHASE AGREEMENT
On April 29, 1999, the Company issued 747,598 common shares to UBS, in
substitution for the $14,700 cash collateral which the Company delivered on
February 18, 1999 in lieu of common shares.
INVESTMENTS IN REAL ESTATE MORTGAGES AND EQUITY OF UNCONSOLIDATED COMPANIES
On April 29, 1999, a partnership in which Crescent Development
Management Corp. ("CDMC") has a 64% economic interest, finalized the purchase of
"The Commons", a master planned residential development on 23 acres in the
Central Platte Valley near downtown Denver, Colorado. Currently, it is
contemplated that the project will include both sale and rental units at
multiple price points. An adjacent 28 acres is expected to be commercially
developed by another firm, thus providing a major mixed-use community adjacent
to the lower downtown area of Denver. The acreage connects with several major
entertainment and recreational facilities including Coors Field (home to the
major League Baseball's Colorado Rockies), Elitch Gardens (an amusement park)
and the new Pepsi Center (home to the National Hockey League's Colorado
Avalanche and the National Basketball Association's Denver Nuggets).
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
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, 1998.
Capitalized terms used but not otherwise defined herein, shall have the
meanings ascribed to those terms in the footnotes to the financial statements.
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. These statements generally are
characterized by the use of terms such as "believe", "expect" and "may".
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 May 14, 1999. Among the factors that might cause such a
difference are the following: changes in real estate conditions (including
rental rates and competing properties); changes in industries in which the
Company's principal tenants compete; changes in the financial condition of
existing tenants; 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 line of credit held by
BankBoston ("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; the existence of complex regulations relating to the
Company's status as a REIT and the adverse consequences of the failure to
qualify as such; changes in general economic conditions; the Company's
inability to control its tenants and the management and operation of its
Residential Development Properties and the Refrigerated Storage Properties; and
other risks detailed from time to time in the Company's filings with the
Securities and Exchange Commission ("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.
18
<PAGE> 19
OFFICE AND RETAIL SEGMENT
Office Property net operating income increased by approximately 10%
for the three months ended March 31, 1999, compared to the three months ended
March 31, 1998, for the 27.1 million square feet of office properties owned as
of January 1, 1998. For these properties, the weighted average occupancy for
the three months ended March 31, 1999 was approximately 92%, and the weighted
average occupancy for the three months ended March 31, 1998 was approximately
89%.
For the three months ended March 31, 1999, leases were executed (all
of which have commenced or will commence during the next twelve months)
renewing or re-leasing 665,000 net rentable square feet of office space at a
weighted average full-service rental rate (including expense recoveries) and a
funds from operations ("FFO") annual net effective rate (calculated as weighted
average full-service rental rate minus Company-paid operating expenses) of
$22.61 and $14.07 per square foot, respectively, compared to expiring leases
with a weighted average full-service rental rate and an FFO annual net
effective rate of $18.79 and $10.29 per square foot, a 20% and 37% increase,
respectively. Weighted average full-service rental rates represent base rent
after giving effect to free rent and scheduled rent increases that would be
taken into account under GAAP and including adjustments for the tenant's share
of expenses payable by or reimbursed to the Company ("expense recoveries").
The leases executed for the three months ended March 31, 1999, all of
which have commenced or will commence during the next twelve months, required
tenant improvement and leasing costs of $6.61 and $3.09 per square foot,
respectively, or $1.41 and $.65 per square foot per year, respectively. The
overall office portfolio was approximately 93% leased (based on executed
leases) and 91% leased (based on commenced leases) at March 31, 1999.
HOSPITALITY SEGMENT
Hotel Property rental income, including weighted average base rent and
percentage rent for the three months ended March 31, 1999, increased by
approximately 11% compared to the three months ended March 31, 1998, for the
seven full-service hotel properties and two destination health and fitness
resorts owned as of January 1, 1998 (weighted average base rent includes
scheduled rent increases that would be taken into account under GAAP).
For the three months ended March 31, 1999, weighted average occupancy,
average daily rate and revenue per available room for all Hotel Properties was
79%, $250 and $196, respectively, compared to 76%, $238 and $179, respectively,
for the same period of 1998.
RESIDENTIAL DEVELOPMENT SEGMENT
The Company owns economic interests in five Residential Development
Corporations through the residential development property mortgages and the
non-voting common stock of these Residential Development Corporations. The
Residential Development Corporations in turn, through joint ventures or
partnership arrangements, own interests in 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. Management plans to maintain the Residential
Development Segment at its current investment level and reinvest returned
capital into residential development projects that it expects to achieve
comparable rates of return.
The Woodlands Land Company, Inc. The Woodlands, Texas. For the three
months ended March 31, 1999, 511 lots with an average sales price of $49,393
per lot and 8.2 acres of commercial land were sold, compared to 417 lots with
an average sales price of $51,569 per lot and 80.4 acres of commercial land,
for the same period of 1998.
19
<PAGE> 20
Desert Mountain Development Corporation ("Desert Mountain"),
Scottsdale, Arizona. For the three months ended March 31, 1999, Desert Mountain
sold 36 lots with an average sales price of $435,000 per lot (including club
memberships), compared to 52 lots with an average sales price of $329,000 per
lot (including club memberships), for the same period of 1998. In the first
quarter of 1999, Desert Mountain opened three new villages in Saguaro Forest, an
exclusive enclave of approximately 380 residential lots, 105 lots of which were
available for sale at an average asking price of $847,000. Currently, there are
51 lot reservations for which contracts are being processed. Approximately 50%
of these lots are expected to be sold during the second quarter of 1999.
Crescent Development Management Corp. ("CDMC"), Beaver Creek,
Colorado. For the three months ended March 31, 1999, CDMC's sales from its five
active projects were six residential lots, 13 townhomes, two single-family
homes, and 4.4 time share units, compared to sales from its one active project
of three residential lots for the same period of 1998.
On April 29, 1999, a partnership in which CDMC has a 64% economic
interest, finalized the purchase of "The Commons", a master planned residential
development on 23 acres in the Central Platte Valley near downtown Denver,
Colorado. Currently, it is contemplated that the project will include both sale
and rental units at multiple price points. An adjacent 28 acres is expected to
be commercially developed by another firm, thus providing a major mixed-use
community adjacent to the lower downtown area of Denver. The acreage connects
with several major entertainment and recreational facilities including Coors
Field (home to the major League Baseball's Colorado Rockies), Elitch Gardens (an
amusement park) and the new Pepsi Center (home to the National Hockey League's
Colorado Avalanche and the National Basketball Association's Denver Nuggets).
Mira Vista Development Corp. ("Mira Vista"), Fort Worth, Texas. For
the three months ended March 31, 1999, Mira Vista sold eight lots with an
average sales price of $132,000 per lot, compared to 11 lots with an average
sales price of $93,000 per lot, for the same period of 1998.
Houston Area Development Corp. ("Houston Area Development"), Houston,
Texas. For the three months ended March 31, 1999, Houston Area Development sold
46 lots with an average sales price of $27,000 per lot, compared to 24 lots
with an average sales price of $28,000 per lot, for the same period of 1998.
REFRIGERATED STORAGE SEGMENT
Earnings before interest, taxes, depreciation and amortization
("EBITDA") for the Refrigerated Storage Corporations for the three months ended
March 31, 1999, increased approximately 1% compared to the same period of 1998
for the 459.0 million cubic feet (19.0 million square feet) of comparable
properties. Effective March 12, 1999, pursuant to the Restructuring, the
Company ceased to own any interest in the business operations associated with
the Refrigerated Storage Properties, although the Company continues to own the
related real estate assets directly or indirectly. See Note 10 to the Financial
Statements included in Item 1. In connection with the Restructuring, the
Company purchased an additional 4% nonvoting interest in each of the Crescent
Subsidiaries for an aggregate purchase price of $13.2 million. Management
believes that in addition to cash flows and net income, EBITDA is a useful
financial performance measurement for assessing the operating performance of
the Refrigerated Storage Properties. EBITDA does not represent net income or
cash flows from operating, financing and investing activities as defined by
GAAP.
BEHAVIORAL HEALTHCARE SEGMENT
For the three months ended March 31,1999, the Company received rental
payments of $11.0 million from CBHS as required under its lease with CBHS. The
Company recognizes rent on a straight-line basis, resulting in a deferred rent
receivable balance due from CBHS of approximately $22.7 million at March 31,
1999. Management will continue to evaluate the business, financial condition
and results of operations of CBHS in connection with the collectibility of the
deferred rent receivable balance.
20
<PAGE> 21
ADOPTION OF NEW ACCOUNTING PRONOUNCEMENTS
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities," which provided 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 should be measured at fair value. This pronouncement will be
effective for all fiscal quarters of fiscal years beginning after June 15,
1999, and would have had no material impact on the Company's financial
statements for the quarter ended March 31, 1999.
21
<PAGE> 22
RESULTS OF OPERATIONS
The following table sets forth the Company's financial data as a
percent of total revenues for the three months ended March 31, 1999 and 1998.
See Item 1. Financial Statements, Note 5 to the Company's Consolidated
Financial Statements for financial information about industry segments.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
--------------------------------------------
1999 1998
------- -------
<S> <C> <C>
REVENUES
Office and retail properties 80.8% 78.5%
Hotel properties 8.3% 8.0%
Behavioral healthcare properties 7.4% 8.5%
Interest and other income 3.5% 5.0%
------- -------
TOTAL REVENUES 100.0% 100.0%
------- -------
EXPENSES
Operating expenses 34.7% 33.9%
Corporate general and administrative 2.2% 2.0%
Interest expense 22.9% 21.3%
Amortization of deferred financing costs 1.7% 0.7%
Depreciation and amortization 18.1% 16.5%
Settlement of merger dispute 8.0% --
------- -------
TOTAL EXPENSES 87.6% 74.4%
------- -------
Operating income 12.4% 25.6%
OTHER INCOME
Equity in net income of unconsolidated
companies:
Refrigerated storage corporations 3.1% 0.2%
Residential development corporations 4.1% 2.8%
Other 1.8% 0.7%
------- -------
TOTAL OTHER INCOME 9.0% 3.7%
------- -------
INCOME BEFORE MINORITY INTERESTS 21.4% 29.3%
Minority interests (2.0%) (3.0%)
------- -------
NET INCOME 19.4% 26.3%
PREFERRED SHARE DIVIDENDS (1.8%) (1.0%)
FORWARD SHARE PURCHASE
AGREEMENT RETURN (1.2%) --
------- -------
NET INCOME AVAILABLE TO COMMON
SHAREHOLDERS 16.4% 25.3%
======= =======
</TABLE>
22
<PAGE> 23
COMPARISON OF THE THREE MONTHS ENDED MARCH 31, 1999 TO THE THREE MONTHS ENDED
MARCH 31, 1998
REVENUES
Total revenues increased $24.6 million, or 15.3%, to $185.7 million
for the three months ended March 31, 1999, as compared to $161.1 million for
the three months ended March 31, 1998.
The increase in Office and Retail Property revenues of $23.6 million,
or 18.7%, compared to the three months ended March 31, 1998, is attributable
to:
o the acquisition of three Office Properties subsequent to
March 31, 1998, resulting in $5.4 million of incremental
revenues;
o the acquisition of six Office Properties during the first
quarter of 1998, which contributed revenues for a full
quarter in 1999, as compared to a partial quarter in 1998,
resulting in $6.2 million in incremental revenues; and
o increased revenues of $12.0 million from the 80 Office and
Retail Properties acquired prior to January 1, 1998,
primarily as a result of rental rate and occupancy increases
at these Properties.
The increase in Hotel Property revenues of $2.5 million, or 19.4%,
compared to the three months ended March 31, 1998, is attributable to:
o the acquisition of one golf course affiliated with one of the
Hotel Properties subsequent to March 31, 1998, resulting in
$0.5 million of incremental revenues;
o the acquisition of one Hotel Property during the first
quarter of 1998, which contributed revenues for a full
quarter in 1999, as compared to a partial quarter in 1998,
resulting in $0.6 million in incremental revenues; and
o increased revenues of $1.4 million from the eight Hotel
Properties acquired prior to January 1, 1998, primarily as a
result of an increase in base rents of $.6 million pursuant to
lease amendments entered into in connection with contributions
made by the Company for capital improvements at some of the
Hotel Properties and an increase in percentage rent of $.8
million.
The decrease in interest and other income of $1.5 million, or 18.8%,
compared to the three months ended March 31, 1998, is primarily attributable to
the sale of marketable securities in the first quarter of 1998. No such sales
were made during the three months ended March 31, 1999.
EXPENSES
Total expenses increased $42.9 million, or 35.8%, to $162.7 million
for the three months ended March 31, 1999, as compared to $119.8 million for
the three months ended March 31, 1998.
The increase in rental property operating expenses of $9.7 million, or
17.8%, compared to the three months ended March 31, 1998, is attributable to:
o the acquisition of three Office Properties subsequent to
March 31, 1998, resulting in $2.3 million of incremental
expenses;
o the acquisition of six Office Properties during the first
quarter of 1998, which incurred expenses for a full quarter
in 1999, as compared to a partial quarter in 1998, resulting
in $2.2 million of incremental expenses; and
o increased expenses of $5.2 million from the 80 Office and
Retail Properties acquired prior to January 1, 1998,
primarily as a result of occupancy increases at these
Properties.
The increase in depreciation and amortization expense of $7.0 million,
or 26.3%, compared to the three months ended March 31, 1998, is primarily
attributable to the acquisition during 1998 of nine Office Properties.
23
<PAGE> 24
The increase in interest expense of $8.2 million, or 23.9%, compared
to the three months ended March 31, 1998, is primarily attributable to:
o $0.9 million of interest payable under the Metropolitan Life
Notes III and IV, which were assumed in connection with the
acquisition of the Datran Center Office Property in May 1998;
o $3.2 million of interest payable under the promissory note
payable to Merrill Lynch International issued in conjunction
with the termination of the equity swap agreement with
Merrill Lynch International on September 30, 1998; and
o $3.5 million of incremental interest payable due to draws
under the Credit Facility and term loans with BankBoston
(average balance outstanding on the Credit Facility for the
three months ended March 31, 1999 and 1998 was $642.1 million
and $439.8 million, respectively).
All of these financing arrangements were used to fund investments and
provide working capital.
An additional increase in expenses of $15.0 million is attributable to
non-recurring costs associated with the settlement of litigation relating to
the merger agreement entered into in January 1998 between the Company and
Station.
EQUITY IN NET INCOME OF UNCONSOLIDATED COMPANIES
Equity in net income of unconsolidated companies increased $10.8
million, or 186.2%, to $16.6 million for the three months ended March 31, 1999,
as compared to $5.8 million for the three months ended March 31, 1998.
The increase is primarily attributable to:
o an increase in equity in net income of the Refrigerated
Storage Corporations of $5.6 million, or 100%, compared to
1998, primarily as a result of the acquisitions by one of the
Refrigerated Storage Partnerships of 9 and 5 Refrigerated
Storage Properties and the associated operations in June 1998
and July 1998, respectively.
o an increase in equity in net income of the Residential
Development Corporations of $3.0 million, or 66.3%, compared
to the three months ended March 31, 1998, primarily as a
result of the increased sales activity at CDMC, which
resulted in $2.2 million of incremental equity in net income
to the Company; and
o an increase in equity in net income of other unconsolidated
companies of $2.1 million, or 173.8%, compared to 1998,
primarily as a result of the increased operating income at
The Woodlands Commercial Properties Company, L.P. ("Woodlands
CPC"), which resulted in $1.5 million of incremental equity
in net income to the Company. The Woodlands CPC operating
income is primarily attributable to a sale of land assets and
an increase in operating income attributable to the
acquisition of one office building and development of one
office building subsequent to March 31, 1998.
LIQUIDITY AND CAPITAL RESOURCES
Cash and cash equivalents were $76.6 million and $110.3 million at
March 31, 1999 and December 31, 1998, respectively. This 30.6% decrease is
attributable to $60.2 million and $13.8 million used in financing and investing
activities, respectively, partially offset by $40.4 million of cash provided by
operating activities.
FINANCING ACTIVITIES
The Company's use of cash for financing activities of $60.2 million is
primarily attributable to:
o net payments under the Credit Facility of $25.5 million;
o distributions paid to common shareholders and unitholders of
$75.7 million;
o distributions paid to preferred shareholders of $3.4 million;
and
o posting of cash collateral in connection with the Forward
Share Purchase Agreement of $14.7 million.
24
<PAGE> 25
The use of cash for financing activities is partially offset by:
o net borrowings under short-term facilities of $59.6 million.
INVESTING ACTIVITIES
The Company's use of cash for investing activities of $13.8 million is
primarily attributable to:
o $14.7 million for recurring and non-recurring tenant
improvement and leasing costs for the Office and Retail
Properties;
o $3.3 million for capital expenditures on rental properties,
primarily attributable to non-recoverable building
improvements for the Office and Retail Properties, and
replacement of furniture, fixtures and equipment for the
Hotel Properties;
o $2.5 million for the development of investment properties;
o $7.4 million for increased investments in unconsolidated
companies; and
o $1.5 million attributable to increased restricted cash and
cash equivalents.
The use of cash for investing activities is partially offset by:
o $14.0 million in return of investment received from the
Residential Development Corporations and
o $1.6 million inflow from a decrease in notes receivable
primarily due to payment of principal on notes receivable
from COI.
OPERATING ACTIVITIES
The Company's cash provided by operating activities of $40.4 million
is primarily attributable to:
o $70.2 million from Property operations;
o $3.6 million from minority interests;
o $12.5 million from a decrease in restricted cash and cash
equivalents; and
o $2.9 million from a decrease in other assets.
The cash provided by operating activities is partially offset by:
o $39.8 million from decreases in accounts payable, accrued
liabilities and other liabilities and
o $9.0 from equity in earnings in excess of distributions
received from unconsolidated companies.
SHELF REGISTRATION STATEMENT
On October 29, 1997, the Company filed a shelf registration statement
(the "Shelf Registration Statement") with the SEC for an aggregate of $1.5
billion of common shares, preferred shares and warrants exercisable for common
shares. Management believes the Shelf Registration Statement will provide the
Company with more efficient and immediate access to capital markets at such
time as it is considered appropriate. As of March 31, 1999, approximately
$782.7 million was available under the Shelf Registration Statement for the
issuance of securities.
COMMON SHARE ISSUANCE
On March 25, 1999, the Company issued an additional 12,356 common
shares to the former holder of the Series B Preferred Shares in settlement of a
dispute regarding the calculation of the conversion rate used in the conversion
on November 30, 1998, of the Series B Preferred Shares into the Company's
common shares.
25
<PAGE> 26
FORWARD SHARE PURCHASE AGREEMENT
On August 12, 1997, the Company entered into two transactions with
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 (the "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. The Forward
Share Purchase Agreement with UBS is not considered a debt instrument.
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 that the Company received from the original
issuance of common shares to UBS, plus a forward accretion component equal to
90-day 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.
The Company currently intends to fulfill its settlement obligations in
cash, which will decrease the Company's liquidity and result in an increase in
the Company's net income per common share and net book value per common share.
The Company has signed a loan application commitment with a group of lenders
that provides for the refinancing of the Greenway Plaza office complex. The
Company intends to use the excess proceeds of this refinancing to settle the
Agreement prior to the expiration date on August 12, 1999. The Company,
however, will continue to evaluate its sources of capital and the potential
uses of its capital until the time that settlement is required under the
Forward Share Purchase Agreement or until 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 additional common shares to UBS. On November 20, 1998, the Company
issued 1,852,162 additional common shares to UBS under the Forward Share
Purchase Agreement, as a result of the decline in the market price of the
Company's common shares.
On February 18, 1999, the Company delivered cash collateral of $14.7
million in lieu of the issuance of additional common shares, as permitted under
the Forward Share Purchase Agreement as a result of a decline in the market
price of the common shares. On April 29, 1999, the Company issued 747,598
common shares to UBS in substitution of the $14.7 million cash collateral.
At March 31, 1999, the Company had a contingent obligation to issue
approximately 804,443 common shares. The Company calculated this number of
common shares using the Company's average share price for the quarter ended
March 31, 1999 of $21.30. According to the terms of the Forward Share Purchase
Agreement, had the Forward Share Purchase Agreement been settled and the
closing share price of $21.50 on March 31, 1999 been used, the Company would
have had a contingent liability to issue approximately 778,457 common shares.
In that
26
<PAGE> 27
event, the Company's net income - diluted per common share would have been
$0.24 for the three months ended March 31, 1999 and the net book value per
common share outstanding at March 31, 1999 would have been $17.42.
To the extent that the Company is obligated, as a result of a further
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 result in a reduction of the Company's net income per common
share and net book value per common share.
STATION CASINOS, INC.
On April 14, 1999, the Company and Station entered into the Settlement
Agreement providing for the mutual settlement and release of all claims between
the Company and Station arising out of the merger agreement between the Company
and Station, which the Company terminated in August 1998. As part of the
Settlement Agreement, the Company paid $15 million to Station on April 22,
1999.
CAPITAL COMMITMENT
As of December 8, 1998, Tower, Reckson and Metropolitan entered into a
revised agreement and plan of merger that superseded the merger agreement to
which the Company was a party at that time. In connection with the revised
agreement, the Company made a $10 million capital contribution to Metropolitan
in December 1998 and agreed to make an additional $75 million capital
contribution to Metropolitan in exchange for an $85 million preferred member
interest in Metropolitan. The investment will have a cash flow preference of
7.5% for a two-year period and may be redeemed by Metropolitan within the
two-year period for $85 million, plus an amount sufficient to provide a 9.5%
internal rate of return to the Company. If Metropolitan does not redeem the
preferred interest upon expiration of the two-year period, the Company may
convert the interest either into (i) a common equity interest in Metropolitan
or (ii) shares of common stock of Reckson at a conversion price of $24.61.
The funding by the Company of the additional $75 million capital
contribution to Metropolitan and the merger of Tower with Metropolitan are
expected to occur in the second quarter of 1999. The Company expects to fund
this obligation through cash flow provided by operating activities and
additional borrowings.
LIQUIDITY REQUIREMENTS
The Company has approximately $347 million of secured debt expiring in
1999, consisting primarily of two components. The first component is the $115
million LaSalle Note III maturing in July 1999, which is secured by the
Greenway Plaza office complex. The Company has signed a loan application
commitment with a group of lenders that provides for the refinancing of
Greenway Plaza pursuant to a $280 million, 10-year loan with a fixed interest
rate of 7.53%. Based on these terms, the refinancing would permit the Company
to repay the existing debt and result in additional loan proceeds of
approximately $165 million. The Company currently intends to use the net
proceeds to settle the Forward Share Purchase Agreement with UBS. The second
component is the $184 million Merrill Lynch Note maturing in September 1999,
which is secured by the Houston Center mixed-use Property complex and the Four
Seasons Hotel - Houston. The Company is currently in negotiations with lenders
to refinance the Merrill Lynch Note pursuant to a loan of $200 million to $240
million, which will result in net proceeds to the Company, after repayment of
the Merrill Lynch Note, of between $15 and $55 million. Closing of this loan is
expected to occur in approximately 90 days In addition, the Metropolitan Life
Notes III and IV, in the aggregate principal amount of approximately $47
million, mature in December 1999. The Company intends to refinance these Notes
prior to maturity but does not currently expect to obtain additional loan
proceeds in connection with the refinancing.
The Company expects to meet its other 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, regular debt service
requirements (including debt service relating to additional and replacement
debt), 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 that the Company's cash flow from operating activities is not sufficient
27
<PAGE> 28
to finance non-recurring capital expenditures, the Company expects to finance
such activities with available cash reserves or, as described above, additional
debt financing. The Company also anticipates that it will fund any investments
during 1999 primarily with 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 March 31, 1999, 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 Operating Partnership units or common and/or
preferred shares to existing holders or in exchange for contributions of
investment properties.
REIT QUALIFICATION
The Company intends to maintain its qualifications as a REIT under
Section 856(c) of 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 REIT taxable income to
its shareholders.
DEBT FINANCING ARRANGEMENTS
The significant terms of the Company's primary debt financing
arrangements are shown below (dollars in thousands):
<TABLE>
<CAPTION>
BALANCE
MAXIMUM INTEREST RATE EXPIRATION OUTSTANDING AT
DESCRIPTION BORROWINGS AT MARCH 31, 1999 DATE MARCH 31, 1999
- --------------------------------------------- ------------- ----------------- ------------ --------------
<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 11,692 8.88 September 2001 11,692
Metropolitan Life Note II 44,183 6.93 December 2002 44,183
Metropolitan Life Note III 40,000 7.74 December 1999 40,000
Metropolitan Life Note IV 6,681 7.11 December 1999 6,681
Northwestern Life Note 26,000 7.65 January 2003 26,000
Nomura Funding VI Note 8,567 10.07 July 2020(3) 8,567
Rigney Promissory Note 747 8.50 June 2012 747
---------- ------ ----------
Subtotal/Weighted Average $ 601,370 7.75% $ 601,370
---------- ------ ----------
SECURED CAPPED VARIABLE RATE DEBT(4):
LaSalle Note III $ 115,000 7.07% July 1999 $ 115,000
---------- ------ ----------
SECURED VARIABLE RATE DEBT(4):
BankBoston Note $ 320,000 8.19% October 2001 $ 320,000
Merrill Lynch Note 184,299 6.94 September 1999 184,299
Chase Manhattan Note 97,123 6.69 September 2001 97,123
---------- ------ ----------
Subtotal/Weighted Average $ 601,422 7.56% $ 601,422
---------- ------ ----------
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:
Credit Facility(6) $ 660,000 6.31% June 2000 $ 634,480
---------- ------ ----------
TOTAL/WEIGHTED AVERAGE $2,377,792 7.21% $2,352,272
========== ====== ==========
</TABLE>
28
<PAGE> 29
- -----------------------------------------
(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 in an amount sufficient 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) For the method of calculation of the interest rate for the Company's
variable rate debt (other than the Credit Facility), see Note 7 of Item 1.
Financial Statements.
(5) The notes were issued in an offering registered with the SEC.
(6) The Credit Facility is unsecured with an interest rate of the Eurodollar
rate plus 137 basis points. In connection with the refinancing of a
BankBoston term note, the Company used $90 million of the net proceeds of
the refinancing to purchase a 12% participation interest from BankBoston
in the $750 million Credit Facility. As a result, the Company's borrowing
capacity under the Credit Facility is currently limited to $660 million.
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, limitations on additional investments and the incurrence of
additional liens, restrictions on real estate development activity and a
minimum net worth requirement.
The combined aggregate principal amounts, either at maturity or in the
form of scheduled principal installments due pursuant to borrowings under the
Credit Facility and other indebtedness of the Company, are as follows:
<TABLE>
<CAPTION>
(In Thousands)
<S> <C>
1999 .................................................. $ 346,928
2000 .................................................. 635,839
2001 .................................................. 429,181
2002 .................................................. 215,655
2003 .................................................. 72,201
Thereafter ............................................ 652,468
----------
$2,352,272
==========
</TABLE>
The Company's policy with regard to the incurrence and maintenance of
debt is based on a review and analysis of investment opportunities for which
capital is required and the cost of debt in relation to such investment
opportunities, the type of debt available (secured or unsecured), the effect of
additional debt on existing coverage ratios and the maturity of the proposed
debt in relation to maturities of existing debt.
The Company's debt service coverage ratio for both the three months
ended March 31, 1999 and the three months ended March 31, 1998 was
approximately 3.2. Debt service coverage for a 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 arrangements and calculated as described above is 1.5. In
addition, the Company's Credit Facility requires a debt service coverage ratio
(which is calculated in a different manner) of 2.5. Under the calculation
required by the Credit Facility, the Company's debt service coverage ratio is
3.5.
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 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. NAREIT
developed FFO 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
29
<PAGE> 30
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 cash distributions
paid to shareholders and unitholders for the three months ended March 31, 1999
and 1998 were $75.7 and $49.7 million, respectively. An increase in FFO does
not necessarily result in an increase in aggregate distributions because the
Company's Board of Trust Managers is not required to increase distributions on
a quarterly basis unless necessary in order to enable the Company to maintain
REIT status. However, the Company must distribute 95% of its REIT taxable
income (as defined in the Code). Therefore, 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
REITs because these REITs may not apply the definition of FFO in the same
manner as the Company.
STATEMENTS OF FUNDS FROM OPERATIONS
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
------------------------------------
1999 1998
---------------- ----------------
<S> <C> <C>
Income before minority interest ........................................... $ 39,660 $ 47,154
Adjustments:
Depreciation and amortization of real estate assets ................... 32,877 26,051
Settlement of merger dispute .......................................... 15,000 --
Adjustment for investments in real estate mortgages
and equity of unconsolidated companies ............................. 9,000 12,314
Minority interest in joint ventures ................................... (245) (400)
Preferred stock dividends ............................................. (3,375) (1,575)
-------- --------
Funds from operations ..................................................... $ 92,917 $ 83,544
======== ========
Investment Segments:
Office and Retail Segment ............................................. $ 89,107 $ 74,046
Hospitality Segment ................................................... 15,198 12,625
Behavioral Healthcare Segment ......................................... 13,823 13,823
Refrigerated Storage Segment .......................................... 8,280 5,962
Residential Development Segment ....................................... 13,300 9,554
Corporate general & administrative .................................... (4,114) (3,147)
Interest expense ...................................................... (42,481) (34,283)
Preferred stock dividends ............................................. (3,375) (1,575)
Other(1) .............................................................. 3,179 6,539
-------- --------
Funds from operations ..................................................... $ 92,917 $ 83,544
======== ========
</TABLE>
- --------------------------
(1) Includes interest and other income less depreciation and amortization of
non-real assets and amortization of deferred financing costs.
30
<PAGE> 31
RECONCILIATION OF FUNDS FROM OPERATIONS TO NET CASH PROVIDED
BY OPERATING ACTIVITIES
(DOLLARS IN THOUSANDS)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
-----------------------------
1999 1998
----------- -----------
<S> <C> <C>
Funds from operations ..................................................... $ 92,917 $ 83,544
Adjustments:
Depreciation and amortization of non-real estate assets ............. 556 345
Settlement of merger dispute ........................................ (15,000) --
Amortization of deferred financing costs ............................ 3,069 1,140
Minority interest in joint ventures profit and depreciation
and amortization ................................................ 459 586
Adjustment for investments in real estate mortgages
and equity of unconsolidated companies .......................... (9,000) (12,314)
Change in deferred rent receivable .................................. (7,529) (8,809)
Change in current assets and liabilities ............................ (19,445) (49,387)
Equity in earnings in excess of distributions received from
unconsolidated companies ........................................ (9,019) --
Distributions received in excess of equity in earnings from
unconsolidated companies ........................................ -- 6,905
Preferred share dividends ........................................... 3,375 1,575
Non-cash compensation ............................................... 20 24
-------- --------
Net cash provided by operating activities ................................. $ 40,403 $ 23,609
======== ========
</TABLE>
OFFICE AND RETAIL PROPERTIES
The Company's Office Properties are located primarily in Dallas/Fort
Worth and Houston, Texas. As of March 31, 1999, the Company's Office Properties
in Dallas/Fort Worth and Houston represent an aggregate of approximately 72% of
its office portfolio based on total net rentable square feet (39% for
Dallas/Fort Worth and 33% for Houston).
OFFICE PROPERTIES TABLES
The following table sets forth, as of March 31, 1999, certain
information about the Company's Office Properties.
31
<PAGE> 32
<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 78% $ 22.33
The Crescent Office Towers ........... 1 Uptown/Turtle Creek 1985 1,204,720 99 30.13
Fountain Place ....................... 1 CBD 1986 1,200,266 89(5) 19.51
Trammell Crow Center(3) .............. 1 CBD 1984 1,128,331 94(5) 26.22
Stemmons Place ....................... 1 Stemmons Freeway 1983 634,381 90 15.12
Spectrum Center(4) ................... 1 Far North Dallas 1983 598,250 83(5) 23.19
Waterside Commons .................... 1 Las Colinas 1986 458,739 100 18.78
Caltex House ......................... 1 Las Colinas 1982 445,993 97 29.13
Reverchon Plaza ...................... 1 Uptown/Turtle Creek 1985 374,165 93 18.77
The Aberdeen ......................... 1 Far North Dallas 1986 320,629 100 19.27
MacArthur Center I & II .............. 1 Las Colinas 1982/1986 294,069 98 20.39
Stanford Corporate Centre ............ 1 Far North Dallas 1985 265,507 97 19.21
The Amberton ......................... 1 Central Expressway 1982 255,052 86 13.13
Concourse Office Park ................ 1 LBJ Freeway 1972-1986 244,879 90(5) 14.75
12404 Park Central ................... 1 LBJ Freeway 1987 239,103 100 21.67
Palisades Central II ................. 1 Richardson/Plano 1985 237,731 64 17.13
3333 Lee Parkway ..................... 1 Uptown/Turtle Creek 1983 233,769 85(5) 20.85
Liberty Plaza I & II ................. 1 Far North Dallas 1981/1986 218,813 98 15.62
The Addison .......................... 1 Far North Dallas 1981 215,016 100 18.41
The Meridian ......................... 1 LBJ Freeway 1984 213,915 91 16.54
Palisades Central I .................. 1 Richardson/Plano 1980 180,503 83 16.21
Walnut Green ......................... 1 Central Expressway 1986 158,669 66(5) 16.00
Greenway II .......................... 1 Richardson/Plano 1985 154,329 100 20.39
Addison Tower ........................ 1 Far North Dallas 1987 145,886 84(5) 14.89
Greenway I & IA ...................... 2 Richardson/Plano 1983 146,704 100 23.41
5050 Quorum .......................... 1 Far North Dallas 1981 133,594 88 16.86
Cedar Springs Plaza .................. 1 Uptown/Turtle Creek 1982 110,923 90(5) 17.98
Valley Centre ........................ 1 Las Colinas 1985 74,861 92 16.96
One Preston Park ..................... 1 Far North Dallas 1980 40,525 85(5) 16.68
-- ---------- -- ---------
Subtotal/Weighted Average .......... 30 11,460,279 90% $ 21.55
-- ---------- -- ---------
FORT WORTH
UPR Plaza ............................ 1 CBD 1982 954,895 98% $ 16.67
-- ---------- -- ---------
HOUSTON
Greenway Plaza Office Portfolio ....... 10 Richmond-Buffalo 1969-1982 4,286,277 91% $ 16.77
Speedway
Houston Center ........................ 3 CBD 1974-1983 2,764,418 96 15.99
Post Oak Central ...................... 3 West Loop/Galleria 1974-1981 1,277,516 93 16.89
The Woodlands Office Properties(6) .... 12 The Woodlands 1980-1996 810,630 93 15.94
BP Plaza .............................. 1 Katy Freeway 1992 561,065 100 18.26
Three Westlake Park(7) ................ 1 Katy Freeway 1983 414,251 99 14.05
1800 West Loop South .................. 1 West Loop/Galleria 1982 399,777 68 16.98
-- ---------- -- ---------
Subtotal/Weighted Average .......... 31 10,513,934 93% $ 16.48
-- ---------- -- ---------
AUSTIN
Frost Bank Plaza ..................... 1 CBD 1984 433,024 86%(5) $ 20.10
301 Congress Avenue(8) ............... 1 CBD 1986 418,338 91 22.25
Bank One Tower ....................... 1 CBD 1974 389,503 94 17.98
Austin Centre ........................ 1 CBD 1986 343,665 97 21.27
The Avallon .......................... 1 Northwest 1993/1997 232,301 93(5) 21.04
Barton Oaks Plaza One ................ 1 Southwest 1986 99,895 98 21.28
-- ---------- -- ---------
Subtotal/Weighted Average ........ 6 1,916,726 92% $ 20.51
-- ---------- -- ---------
</TABLE>
32
<PAGE> 33
<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% $ 18.21
Ptarmigan Place .................... 1 Cherry Creek 1984 418,630 97 17.69
Regency Plaza One .................. 1 DTC 1985 309,862 98 22.82
AT&T Building ...................... 1 CBD 1982 184,581 82 15.05
The Citadel ........................ 1 Cherry Creek 1987 130,652 96 21.30
55 Madison ......................... 1 Cherry Creek 1982 137,176 81 17.89
44 Cook ............................ 1 Cherry Creek 1984 124,174 57(5) 18.19
-- --------- --- ---------
Subtotal/Weighted Average ...... 7 1,855,882 92% $ 18.84
-- --------- --- ---------
COLORADO SPRINGS
Briargate Office and Research Center 1 Colorado Springs 1988 252,857 89%(5) $ 16.55
-- --------- --- ---------
LOUISIANA
NEW ORLEANS
Energy Centre ...................... 1 CBD 1984 761,500 79% $ 15.36
1615 Poydras ....................... 1 CBD 1984 508,741 79 15.75
-- --------- --- ---------
Subtotal/Weighted Average ...... 2 1,270,241 79% $ 15.52
-- --------- --- ---------
FLORIDA
MIAMI
Miami Center ....................... 1 CBD 1983 782,686 82% $ 24.39
Datran Center ...................... 2 South Dade/Kendall 1986/1988 472,236 96 23.48
-- --------- --- ---------
Subtotal/Weighted Average ........ 3 1,254,922 87% $ 24.01
-- --------- --- ---------
ARIZONA
PHOENIX
Two Renaissance Square ............. 1 Downtown/CBD 1990 476,373 92%(5) $ 23.84
6225 North 24th Street ............. 1 Camelback Corridor 1981 86,451 83 21.77
-- --------- --- ---------
Subtotal/Weighted Average ...... 2 562,824 91% $ 23.55
-- --------- --- ---------
WASHINGTON, D.C .......................
WASHINGTON, D.C .....................
Washington Harbour ............... 2 Georgetown 1986 536,206 91%(5) $ 35.62
-- --------- --- ---------
NEBRASKA
OMAHA
Central Park Plaza ................. 1 CBD 1982 409,850 92% $ 15.53
-- --------- --- ---------
NEW MEXICO
ALBUQUERQUE
Albuquerque Plaza .................. 1 CBD 1990 366,236 95% $ 18.88
-- --------- --- ---------
CALIFORNIA
SAN FRANCISCO
160 Spear Street .................... 1 South of Market/CBD 1984 276,420 100% $ 25.71
-- --------- --- ---------
SAN DIEGO
Chancellor Park(9) ................. 1 UTC 1988 195,733 81% $ 21.09
-- --------- --- ---------
TOTAL/WEIGHTED AVERAGE ................ 89 31,827,005 91%(5) $ 19.51(10)
== ========== === =========
</TABLE>
- -------------------------------------------
(1) Calculated based on base rent payable as of March 31, 1999, without giving
effect to free rent or scheduled rent increases that would be taken into
account under GAAP and including adjustments for expenses payable by or
reimbursable from tenants.
(2) The Company has a 49.5% limited partner interest and a .5% general partner
interest in the partnership that owns Bank One Center.
(3) The Company owns the principal economic interest in Trammell Crow Center
through its ownership of fee simple title to the Property (subject to a
ground lease and a leasehold estate regarding the building) and two
mortgage notes encumbering the leasehold interests in the land and
building.
(4) The Company owns the principal economic interest in Spectrum Center
through an interest in Spectrum Mortgage Associates L.P., which owns both
a mortgage note secured by Spectrum Center and the ground lessor's
interest in the land underlying the office building.
33
<PAGE> 34
(5) Leases have been executed at certain Office Properties but had not
commenced as of March 31, 1999. If such leases had commenced as of March
31, 1999, the percent leased for Office Properties would have been 93%.
The total percent leased for such Properties would have been as follows:
Fountain Place - 92%; Trammell Crow - 97%; Spectrum Center - 86%;
Concourse Office Park - 93%; 3333 Lee Parkway - 91%; Walnut Green - 80%;
Addison Tower - 98%; Cedar Springs Plaza - 96%; One Preston Park - 88%;
Frost Bank Plaza - 96%; The Avallon - 100%; 44 Cook - 67%; Briargate
Office and Research Center - 100%; Two Renaissance Square - 96%; and
Washington Harbour - 94%.
(6) The Company has a 75% limited partner interest and an approximate 10%
indirect 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) 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.
(10) The weighted average full-service rental rate per square foot calculated
based on base rent payable for Company Office Properties as of March 31,
1999, giving effect to free rent and scheduled rent increases that would
be taken into consideration under GAAP and including adjustments for
expenses payable by or reimbursed from tenants is $20.05 .
AGGREGATE LEASE EXPIRATIONS OF OFFICE PROPERTIES
The following tables set forth schedules of lease expirations for
leases in place as of March 31, 1999 at the Company's total Office Properties
and for Dallas and Houston, Texas individually, for each of the ten years
beginning with the remainder of 1999, assuming that none of the tenants
exercise or have exercised renewal options and excluding an aggregate 2,692,898
square feet of unleased space and 449,868 square feet of leased space for which
the leases have not yet commenced.
TOTAL OFFICE PROPERTIES
<TABLE>
<CAPTION>
NET RENTABLE
NUMBER OF AREA
TENANTS WITH REPRESENTED PERCENTAGE OF LEASED NET
YEAR OF LEASE EXPIRING BY EXPIRING LEASES RENTABLE AREA REPRESENTED
EXPIRATION LEASES (SQUARE FEET) BY EXPIRING LEASES
- ---------------------- ------------ ------------------ -------------------------
<S> <C> <C> <C>
1999.................. 505 2,856,532(2) 10.0%
2000.................. 407 3,350,233 11.7
2001 ................. 408 3,928,862 13.7
2002.................. 331 3,632,218 12.7
2003.................. 289 2,775,751 9.7
2004.................. 151 3,255,566 11.3
2005.................. 80 2,306,574 8.0
2006.................. 31 730,521 2.5
2007.................. 32 1,280,927 4.5
2008.................. 30 1,077,330 3.8
2009 and thereafter... 35 3,489,725 12.1
<CAPTION>
PERCENTAGE
OF TOTAL ANNUAL
ANNUAL ANNUAL FULL-SERVICE RENT
FULL-SERVICE FULL-SERVICE RENT PER SQUARE
RENT UNDER REPRESENTED FOOT OF NET
YEAR OF LEASE EXPIRING BY EXPIRING RENTABLE AREA
EXPIRATION LEASES(1) LEASES EXPIRING(1)
- ---------------------- -------------- ----------------- -----------------
<S> <C> <C> <C>
1999.................. $ 52,883,375 8.8% $18.51
2000.................. 66,558,575 11.1 19.87
2001 ................. 73,588,293 12.3 18.73
2002.................. 76,094,827 12.7 20.95
2003.................. 54,309,794 9.1 19.57
2004.................. 67,996,807 11.4 20.89
2005.................. 50,762,020 8.5 22.01
2006.................. 15,750,386 2.6 21.56
2007.................. 29,395,884 4.9 22.95
2008.................. 26,922,437 4.5 24.99
2009 and thereafter... 84,636,598 14.1 24.25
</TABLE>
- ---------------------
(1) Calculated based on base rent payable under 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 GAAP and including
adjustments for expenses payable by or reimbursable from tenants based on
current levels.
(2) As of March 31, 1999, leases have been signed for approximately 1,463,000
net rentable square feet (including renewed leases and leases of
previously unleased space) commencing after March 31, 1999.
34
<PAGE> 35
DALLAS OFFICE PROPERTIES
<TABLE>
<CAPTION>
PERCENTAGE
NET RENTABLE OF TOTAL
AREA PERCENTAGE OF ANNUAL ANNUAL ANNUAL FULL-SERVICE
NUMBER OF REPRESENTED LEASED NET FULL-SERVICE FULL-SERVICE RENT RENT PER SQUARE
TENANTS WITH BY EXPIRING RENTABLE AREA RENT UNDER REPRESENTED FOOT OF NET
YEAR OF LEASE EXPIRING LEASES REPRESENTED BY EXPIRING BY EXPIRING RENTABLE AREA
EXPIRATION LEASES (SQUARE FEET) EXPIRING LEASES LEASES(1) LEASES EXPIRING(1)
- ------------------------ ------------ ------------- --------------- -------------- ----------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
1999 .................. 173 967,690(2) 9.4% $ 21,361,573 9.2% $ 22.07
2000 .................. 155 1,775,413 17.3 37,977,321 16.4 21.39
2001 .................. 141 1,170,748 11.4 25,043,404 10.8 21.39
2002 .................. 93 965,870 9.4 23,668,889 10.2 24.51
2003 .................. 91 1,187,946 11.6 23,544,230 10.2 19.82
2004 .................. 42 594,216 5.8 15,165,194 6.5 25.52
2005 .................. 18 1,140,886 11.1 24,299,233 10.5 21.30
2006 .................. 11 211,122 2.1 5,318,970 2.3 25.19
2007 .................. 12 535,353 5.2 13,157,913 5.7 24.58
2008 .................. 10 555,065 5.4 13,945,404 6.0 25.12
2009 and thereafter.... 10 1,158,756 11.3 28,477,615 12.2 24.58
</TABLE>
- -----------------------
(1) Calculated based on base rent payable under 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 GAAP and including
adjustments for expenses payable by or reimbursable from tenants based on
current levels.
(2) As of March 31, 1999, leases have been signed for approximately 482,000
net rentable square feet (including renewed leases and leases of
previously unleased space) commencing after March 31, 1999.
HOUSTON OFFICE PROPERTIES
<TABLE>
<CAPTION>
PERCENTAGE
NET RENTABLE OF TOTAL
AREA PERCENTAGE OF ANNUAL ANNUAL ANNUAL FULL-SERVICE
NUMBER OF REPRESENTED LEASED NET FULL-SERVICE FULL-SERVICE RENT RENT PER SQUARE
TENANTS WITH BY EXPIRING RENTABLE AREA RENT UNDER REPRESENTED FOOT OF NET
YEAR OF LEASE EXPIRING LEASES REPRESENTED BY EXPIRING BY EXPIRING RENTABLE AREA
EXPIRATION LEASES (SQUARE FEET) EXPIRING LEASES LEASES(1) LEASES EXPIRING(1)
- ------------------------ ------------ ------------- --------------- -------------- ----------------- -------------------
<S> <C> <C> <C> <C> <C> <C>
1999.............. 165 1,186,797(2) 12.2% $ 17,941,438 10.1% $ 15.12
2000.............. 130 769,349 7.9 12,029,954 6.8 15.64
2001 ............. 130 1,852,755 19.1 30,223,852 17.0 16.31
2002.............. 132 1,066,222 11.0 19,108,982 10.7 17.92
2003.............. 95 811,119 8.3 14,579,420 8.2 17.97
2004.............. 53 1,474,034 15.2 26,884,496 15.1 18.24
2005.............. 16 190,368 2.0 3,638,975 2.0 19.12
2006.............. 9 270,067 2.8 4,849,270 2.7 17.96
2007.............. 5 474,024 4.9 9,329,736 5.2 19.68
2008.............. 7 183,719 1.9 3,223,821 1.8 17.55
2009 and thereafter 10 1,437,952 14.7 36,132,887 20.4 25.13
</TABLE>
- ---------------------
(1) Calculated based on base rent payable under 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 GAAP and including
adjustments for expenses payable by or reimbursable from tenants based on
current levels.
(2) As of March 31, 1999, leases have been signed for approximately 627,000
net rentable square feet (including renewed leases and leases of
previously unleased space) commencing after March 31, 1999.
35
<PAGE> 36
RETAIL PROPERTIES
The Company owns seven Retail Properties, which in the aggregate
contain approximately 777,000 net rentable square feet. Four of the Retail
Properties, The Woodlands Retail Properties, with an aggregate of approximately
356,000 net rentable square feet, are located in The Woodlands, a
master-planned development located 27 miles north of downtown Houston, Texas.
The Company has a 75% limited partner interest and an approximately 10%
indirect general partner interest in the partnership that owns The Woodlands
Retail Properties. Two of the Retail Properties, Las Colinas Plaza, with
approximately 135,000 net rentable square feet, and The Crescent Atrium with
approximately 95,000 net rentable square feet, are located in submarkets of
Dallas, Texas. The remaining Retail Property, The Park Shops at Houston Center,
with an aggregate of approximately 191,000 net rentable square feet, is located
in the CBD submarket of Houston, Texas. As of March 31, 1999, the Retail
Properties were 93% leased.
HOTEL PROPERTIES
HOTEL PROPERTIES TABLES
The following table sets forth certain information for the three
months ended March 31, 1999 and 1998, about the Company's Hotel Properties. 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 their performance based on available guest nights.
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED MARCH 31,
------------------------------------------------
AVERAGE AVERAGE REVENUE PER
YEAR OCCUPANCY DAILY AVAILABLE
COMPLETED/ RATE RATE ROOM
-------------- ---------------- ----------------
HOTEL PROPERTY(1) LOCATION RENOVATED ROOMS 1999 1998 1999 1998 1999 1998
- ----------------- -------- --------- ----- ---- ---- ---- ---- ---- ----
FULL-SERVICE/LUXURY HOTELS:
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Denver Marriott City Center Denver, CO 1982/1994 613 79% 81% $ 121 $ 114 $ 96 $ 92
Four Seasons Hotel-Houston Houston, TX 1982 399 68 69 193 179 131 123
Hyatt Regency Albuquerque Albuquerque, NM 1990 395 68 64 107 102 73 65
Omni Austin Hotel Austin, TX 1986 324(2) 85 79 130 119 111 94
Hyatt Regency Beaver Creek Avon, CO 1989 276 82 78 399 377 327 296
Sonoma Mission Inn & Spa Sonoma, CA 1927/1987/1997 178(3) 75 72 174 190 131 137
Ventana Country Inn Big Sur, CA 1975/1982/1988 62 81 28(4) 297 270 242 77(4)
------ --- --- ----- ----- ----- -----
TOTAL/WEIGHTED AVERAGE 2,247 76% 73% $ 179 $ 169 $ 136 $ 124
====== === === ===== ===== ===== =====
</TABLE>
<TABLE>
<CAPTION>
DESTINATION HEALTH & GUEST NIGHTS
FITNESS RESORTS: ------------
<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 92%(6) 90%(6) $ 543(7) $ 518(7) $ 483(8) $ 455(8)
==== === === ===== ===== ===== =====
</TABLE>
- --------------------------------------
(1) Because of the Company's status as a REIT for federal income tax purposes,
it does not operate the Hotel Properties and has leased all of the Hotel
Properties, except the Omni Austin Hotel, to COI pursuant to long term
leases. As of January 1, 1999, the Omni Austin Hotel is leased pursuant to
a separate long term lease to HCD Austin Corporation, an unrelated third
party. (2) As of March 31, 1999, 20 condominiums have been converted to
hotel suites and 10 of the parlor rooms have been taken out of commission
to be renovated. (3) In February 1999, 20 rooms were taken out of
commission during construction of the spa. (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.
36
<PAGE> 37
REFRIGERATED STORAGE PROPERTIES
REFRIGERATED STORAGE PROPERTIES TABLE
The following table shows the number and aggregate size of
Refrigerated Storage Properties by state as of March 31, 1999:
<TABLE>
<CAPTION>
TOTAL CUBIC TOTAL TOTAL CUBIC TOTAL
NUMBER OF FOOTAGE SQUARE FEET NUMBER OF FOOTAGE SQUARE FEET
STATE PROPERTIES(1) (IN MILLIONS) (IN MILLIONS) STATE PROPERTIES(1) (IN MILLIONS) (IN MILLIONS)
----- ------------- ------------- ------------- ----- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
Alabama 5 9.5 0.4 Mississippi 1 4.7 0.2
Arizona 1 2.9 0.1 Missouri(2) 2 37.9 2.2
Arkansas 6 33.1 1.0 Nebraska 2 4.4 0.2
California 11 32.7 1.2 New York 1 11.8 0.4
Colorado 2 3.4 0.1 North Carolina 3 8.5 0.3
Florida 5 7.5 0.3 Oklahoma 2 2.1 0.1
Georgia 7 44.5 1.6 Oregon 6 40.4 1.7
Idaho 2 18.7 0.8 Pennsylvania 2 27.4 0.9
Illinois 2 11.6 0.4 South Carolina 1 1.6 0.1
Indiana 1 9.1 0.3 South Dakota 1 2.9 0.1
Iowa 2 12.5 0.5 Tennessee 3 10.6 0.4
Kansas(2) 3 40.2 2.4 Texas 2 6.6 0.2
Kentucky 1 2.7 0.1 Utah 1 8.6 0.4
Maine 1 1.8 0.2 Virginia 1 1.9 0.1
Massachusetts 6 15.2 0.7 Washington 6 28.7 1.1
Minnesota 1 5.9 0.2 Wisconsin 2 14.0 0.5
--- ------ -----
TOTAL 92 463.4 19.2
=== ====== =====
</TABLE>
- -----------------------------
(1) The Company has an indirect 39.6% interest in the Refrigerated Storage
Partnerships, each of which owns one or more of the Refrigerated Storage
Corporations which, as of March 31, 1999, directly or indirectly owned 92
Refrigerated Storage Properties with an aggregate of approximately 463.4
million cubic feet (19.2 million square feet). The remaining interest in
the Refrigerated Storage Partnerships is owned by Vornado (60% of each
Refrigerated Storage Partnership) and COI (.4% indirect interest of each
Refrigerated Storage Partnership). As a result of the Restructuring,
effective March 12, 1999, the Refrigerated Storage Corporations own, but
no longer operate, the Refrigerated Storage Properties.
(2) Both Kansas and Missouri have one underground storage facility. These
underground facilities in Kansas and Missouri approximate 35.2 million and
33.1 million cubic feet (2.2 million and 2.1 million square feet),
respectively. It is anticipated that the underground facility in Kansas
will be closed in 1999.
37
<PAGE> 38
RESIDENTIAL DEVELOPMENT PROPERTIES
RESIDENTIAL DEVELOPMENT PROPERTIES TABLE
The following table sets forth certain information as of March 31,
1999, 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 YPE OF CORPORATION'S UNITS SINCE SINCE
CORPORATION(1) (RDP) RDP(2) LOCATION OWNERSHIP % PLANNED INCEPTION INCEPTION
--------------- ----- ------ -------- ----------- ------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
Desert Mountain Desert Mountain SF Scottsdale, AZ 93.0% 2,486 2,163 1,813
Development
Corp.
The Woodlands The Woodlands SF The Woodlands, TX 42.5% 37,000 20,428 19,241
Land Company
Inc.
Crescent The Reserve at
Development Frisco SF Frisco, CO 60.0% 134 134 134
Management Villa Montane
Corp. Townhomes TH Avon, CO 30.0% 27 27 21
Villa Montane
Club TS Avon, CO 30.0% 38(5) 38 36
Villas at Beaver
Creek TH Avon, CO 30.0% 10 10 9
Deer Trail SFH Avon, CO 60.0% 16(5) 2 2
Buckhorn
Townhomes TH Avon, CO 60.0% 24(5) 8 8
Bear Paw Lodge CO Avon, CO 60.0% 53(5) -- --
------ ------ ------
TOTAL CRESCENT DEVELOPMENT MANAGEMENT CORP. 302 219 210
------ ------ ------
Mira Vista Mira Vista SF Fort Worth, TX 100.00% 710 677 567
Development The Highlands SF Breckenridge, CO 12.25% 750 292 256
Corp. ------ ------ ------
TOTAL MIRA VISTA DEVELOPMENT CORP. 1,460 969 823
------ ------ ------
Houston Area Falcon Point SF Houston, TX 100.0% 1,205 556 408
Development Spring Lakes SF Houston, TX 100.0% 536 93 48
Corp. ------ ------ ------
TOTAL HOUSTON AREA DEVELOPMENT CORP. 1,741 649 456
------ ------ ------
TOTAL 42,989 24,428 22,543
====== ====== ======
<CAPTION>
AVERAGE
RESIDENTIAL CLOSED RANGE OF
RESIDENTIAL DEVELOPMENT SALE PRICE PROPOSED
DEVELOPMENT PROPERTIES PER LOT/ UNIT SALE PRICES
CORPORATION(1) (RDP) ($)(3) PER LOT/UNIT ($)(4)
--------------- ----- ------ -------------------
<S> <C> <C> <C>
Desert Mountain Desert Mountain 431,000 275,000 - 2,775,000
Development
Corp.
The Woodlands The Woodlands 50,000 14,700 - 500,000
Land Company
Inc.
Crescent The Reserve at
Development Frisco 95,000 --
Management Villa Montane
Corp. Townhomes 905,000 515,000 - 1,700,000
Villa Montane
Club 60,000 18,000 - 150,000
Villas at Beaver
Creek 2,070,000 2,995,000
Deer Trail 2,845,000 2,560,000 - 3,325,000
Buckhorn
Townhomes 1,088,000 945,000 - 1,850,000
Bear Paw Lodge N/A 1,495,000 - 1,895,000
TOTAL CRESCENT DEVELOPMENT MANAGEMENT CORP.
Mira Vista Mira Vista 97,000 50,000 - 265,000
Development The Highlands 138,000 55,000 - 250,000
Corp.
TOTAL MIRA VISTA DEVELOPMENT CORP.
Houston Area Falcon Point 31,000 22,000 - 60,000
Development Spring Lakes 31,000 22,000 - 33,000
Corp.
TOTAL HOUSTON AREA DEVELOPMENT CORP.
TOTAL
</TABLE>
- -----------------------------------------
(1) The Company has an approximately 94%, 94%, 90%, 95% and 95% ownership
interest in Mira Vista Development Corp., Houston Area Development Corp.,
Crescent Development Management Corp., The Woodlands Land Company, Inc.,
and Desert Mountain Development Corporation, 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 Lots/Units closed during the Company's ownership period.
(4) Based on existing inventory of developed lots and lots to be developed.
(5) As of March 31, 1999, 1 unit was under contract at Villa Montane Club
representing $0.7 million in sales, 9 units were under contract at Deer
Trail representing $26.9 million in sales, 13 units were under contract at
Buckhorn Townhomes representing $20.7 million in sales, and 25 units were
under contract at Bear Paw Lodge representing $34.7 million in sales.
38
<PAGE> 39
BEHAVIORAL HEALTHCARE PROPERTIES
BEHAVIORAL HEALTHCARE PROPERTIES TABLE
The following table shows the number of properties and beds by state of
the 88 Behavioral Healthcare Properties as of March 31, 1999:
<TABLE>
<CAPTION>
NUMBER OF NUMBER OF NUMBER OF NUMBER OF
STATE PROPERTIES(1) BEDS STATE PROPERTIES(1) 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 Pennsylvania 1 169
Georgia 15 986 South Carolina 3 248
Indiana 7 517 Tennessee 1 204
Kansas 2 160 Texas 9 816
Kentucky 3 251 Utah 2 196
Louisiana 1 0 Virginia 3 285
Maryland 1 0 Wisconsin 2 160
Minnesota 1 40 --- ------
Missouri 1 96
TOTAL 88 6,807
=== =====
</TABLE>
- -------------------
(1) The Behavioral Healthcare Properties include 88 properties in 26 states
that are leased to CBHS. One property was sold in January 1999. CBHS was
formed to operate the Behavioral Healthcare Properties and is owned 50% by
a subsidiary of Magellan and 50% by COI.
YEAR 2000 COMPLIANCE
OVERVIEW
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.
YEAR 2000 READINESS DISCLOSURE
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 75% 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, the Company has not identified any significant problem areas and it
believes that the mission-critical systems, AS/400 and accounting system, local
network servers, WAN equipment and the majority of desktop PC's are compliant,
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 has identified substantially all of the
non-IT systems and
39
<PAGE> 40
has retained an outside specialist company to assist in identifying any year
2000 exposure relating to these systems. As of May 10, 1999, approximately 60%
of the systems for which manufacturer's statements are available are deemed
compliant. The balance of the systems are being reviewed to determine whether,
and to what extent, upgrades or remediation are required. This process is
currently ongoing, therefore, these estimates will change as more information
is received. It is expected that the assessment and remediation plan should 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.
The Company believes that the greatest exposure lies with third
parties, such as its tenants, vendors, financial institutions and the Company's
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 full extent of any year 2000 exposure has not been finalized and
the total cost to specifically remediate IT and non-IT systems 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 given current vendor estimates for
complete remediation for non-IT systems.
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 on or before October 31, 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, at this time, the Company does not foresee
significant risks associated with the Company's year 2000 compliance.
Management does not believe that the year 2000 issue will pose significant
problems in its IT or non-IT systems, or that 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, a year 2000 problem that is experienced at one
Property generally should have no effect on the other Company Properties. In
addition, management believes that the Company has sufficient time to correct
those system problems within its control before the year 2000. Because the
Company's major source of income is rental payments under long-term leases, a
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.
40
<PAGE> 41
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Since December 31, 1998, there have been no material changes in the
information regarding market risk that was provided in the Company's Form 10-K
for the year ended December 31, 1998.
41
<PAGE> 42
PART II
OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
As of April 14, 1999, the Company and Station Casinos, Inc.
("Station") entered into an agreement (the "Settlement Agreement") relating to
certain litigation arising out of a merger agreement entered into between the
Company and Station in January 1998.
As discussed in the Registrant's Form 10-K for the year ended December
31, 1998, Station had filed and subsequently amended a complaint in Clark County
District Court, State of Nevada seeking, primarily, declaratory relief against,
and damages from, the Company, and the Company had filed a complaint in the
United States District Court, Northern District of Texas, seeking damages from,
and declaratory relief against, Station. In addition, the Company had sought to
have the dispute tried in federal court either in Texas or Nevada, while Station
had sought to maintain the action in state court in Nevada. Although the Nevada
federal district court had remanded the case to Nevada state court and the Texas
federal court had followed suit, the Company had filed an appeal in the Fifth
Circuit Court of Appeals.
The Settlement Agreement provides for the mutual settlement and
release of all claims between the Company and Station arising out of the merger
agreement and the dismissal with prejudice of the litigation described above as
to all claims and counterclaims in connection therewith. The Settlement
Agreement also provides that each party will be responsible for the payment of
its own attorney's fees and costs of litigation, including attorney's fees and
costs associated with the dismissal. As part of the Settlement Agreement, the
Company paid $15 million to Station on April 22, 1999.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits Description
3.01 Restated Declaration of Trust of Crescent Real
Estate Equities Company (filed as Exhibit No. 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 Crescent Real Estate
Equities Company, as amended (filed as Exhibit No.
3.02 to the Registrant's Quarterly Report on Form
10-Q for the fiscal quarter ended September 30, 1998
(the "1998 3Q 10-Q") and incorporated herein by
reference)
4.01 Form of Common Share Certificate (filed as Exhibit
No. 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 Crescent
Real Estate Equities Company (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 Crescent Real Estate
Equities Company (filed as Exhibit No. 4 to the
Registrant's Registration Statement on Form 8-A/A
filed on February 18, 1998 and incorporated by
reference)
4.04 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 No. 4.01 to the Registration
Statement on Form S-4 (File No. 333-42293) of
Crescent Real Estate Equities Limited Partnership
(the "Form S-4") and incorporated herein by
reference)
4.05 6-5/8% Note due 2002 (filed as Exhibit No. 4.07 to
the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1998 (the "1998 2Q 10-Q")
and incorporated herein by reference)
4.06 7-1/8% Note due 2007 (filed as Exhibit No. 4.08 to
the 1998 2Q 10-Q and incorporated herein by
reference)
4.07 Purchase Agreement, dated as of August 11, 1997,
between Crescent Real Estate Equities Company, UBS
Securities (Portfolio), LLC, and Union Bank of
Switzerland, London Branch (filed as Exhibit No.
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 (filed herewith)
10.02 Noncompetition of Richard E. Rainwater, as assigned
to Crescent Real Estate Equities Limited Partnership
on May 5, 1994 (filed as Exhibit 10.02 to the 1997
10-K and incorporated herein by reference)
10.03 Noncompetition Agreement of John C. Goff, as
assigned to Crescent Real Estate Equities Limited
Partnership on May 5, 1994 (filed as Exhibit 10.03
to the 1997 10-K and incorporated herein by
reference)
10.04 Noncompetition Agreement of Gerald W. Haddock, as
assigned to Crescent Real Estate Equities Limited
Partnership on May 5, 1994 (filed as Exhibit 10.04
to the 1997 10-K and incorporated herein by
reference)
10.05 Employment Agreement with John C. Goff, as assigned
to Crescent Real Estate Equities Limited Partnership
on May 5, 1994, and as further amended (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
Form S-4 and incorporated herein by reference)
10.07 Employment Agreement of Gerald W. Haddock, as
assigned to Crescent Real Estate Equities Limited
Partnership on May 5, 1994, and as further amended
(filed as Exhibit 10.06 to the 1997 10-K and
incorporated herein by reference)
10.08 Amendment No. 5 to the Haddock Employment Agreement,
dated March 1, 1999 (filed as Exhibit No. 10.09 to
the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1998 (the "1998 10-K") 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 No. 10.07 to
the Form S-4 and incorporated herein by reference)
10.10 Crescent Real Estate Equities Company 1994 Stock
Incentive Plan (filed as Exhibit No. 10.07 to the
Registrant's Registration Statement on Form S-11
(File No. 33-75188) (the "Form S-11") and
incorporated herein by reference)
10.11 Crescent Real Estate Equities, Ltd. First Amended
and Restated 401(k) Plan, as amended (filed as
Exhibit No. 10.12 to the 1998 10-K and incorporated
herein by reference)
10.12 Second Amended and Restated 1995 Crescent Real
Estate Equities Company Stock Incentive Plan (filed
as Exhibit 10.12 to the Form S-4 and incorporated
herein by reference)
10.13 Amended and Restated 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 Limited Partnership, BankBoston, N.A. and the
other banks named therein (filed as Exhibit 10.17 to
the 1998 2Q 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 Form
S-11 and incorporated herein by reference)
27.01 Financial Data Schedule (filed herewith)
(b) Reports on Form 8-K.
None
42
<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: May 14, 1999 -------------------------------------
------------------ Gerald W. Haddock, President and Chief
Executive Officer
/s/ Jack I. Tompkins
Date: May 14, 1999 ---------------------------------------
------------------ Jack I. Tompkins, Executive Vice
President and Chief
Financial Officer (Principal Financial
and Accounting Officer)
<PAGE> 44
INDEX TO EXHIBIT
<TABLE>
<CAPTION>
EXHIBITS
NUMBER DESCRIPTION
-------- -----------
<S> <C>
3.01 Restated Declaration of Trust of Crescent Real
Estate Equities Company (filed as Exhibit No. 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 Crescent Real Estate
Equities Company, as amended (filed as Exhibit No.
3.02 to the Registrant's Quarterly Report on Form
10-Q for the fiscal quarter ended September 30, 1998
(the "1998 3Q 10-Q") and incorporated herein by
reference)
4.01 Form of Common Share Certificate (filed as Exhibit
No. 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 Crescent
Real Estate Equities Company (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 Crescent Real Estate
Equities Company (filed as Exhibit No. 4 to the
Registrant's Registration Statement on Form 8-A/A
filed on February 18, 1998 and incorporated by
reference)
4.04 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 No. 4.01 to the Registration
Statement on Form S-4 (File No. 333-42293) of
Crescent Real Estate Equities Limited Partnership
(the "Form S-4") and incorporated herein by
reference)
4.05 6-5/8% Note due 2002 (filed as Exhibit No. 4.07 to
the Registrant's Quarterly Report on Form 10-Q for
the quarter ended June 30, 1998 (the "1998 2Q 10-Q")
and incorporated herein by reference)
4.06 7-1/8% Note due 2007 (filed as Exhibit No. 4.08 to
the 1998 2Q 10-Q and incorporated herein by
reference)
4.07 Purchase Agreement, dated as of August 11, 1997,
between Crescent Real Estate Equities Company, UBS
Securities (Portfolio), LLC, and Union Bank of
Switzerland, London Branch (filed as Exhibit No.
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 (filed herewith)
10.02 Noncompetition of Richard E. Rainwater, as assigned
to Crescent Real Estate Equities Limited Partnership
on May 5, 1994 (filed as Exhibit 10.02 to the 1997
10-K and incorporated herein by reference)
10.03 Noncompetition Agreement of John C. Goff, as
assigned to Crescent Real Estate Equities Limited
Partnership on May 5, 1994 (filed as Exhibit 10.03
to the 1997 10-K and incorporated herein by
reference)
10.04 Noncompetition Agreement of Gerald W. Haddock, as
assigned to Crescent Real Estate Equities Limited
Partnership on May 5, 1994 (filed as Exhibit 10.04
to the 1997 10-K and incorporated herein by
reference)
10.05 Employment Agreement with John C. Goff, as assigned
to Crescent Real Estate Equities Limited Partnership
on May 5, 1994, and as further amended (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
Form S-4 and incorporated herein by reference)
10.07 Employment Agreement of Gerald W. Haddock, as
assigned to Crescent Real Estate Equities Limited
Partnership on May 5, 1994, and as further amended
(filed as Exhibit 10.06 to the 1997 10-K and
incorporated herein by reference)
10.08 Amendment No. 5 to the Haddock Employment Agreement,
dated March 1, 1999 (filed as Exhibit No. 10.09 to
the Registrant's Annual Report on Form 10-K for the
year ended December 31, 1998 (the "1998 10-K") 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 No. 10.07 to
the Form S-4 and incorporated herein by reference)
10.10 Crescent Real Estate Equities Company 1994 Stock
Incentive Plan (filed as Exhibit No. 10.07 to the
Registrant's Registration Statement on Form S-11
(File No. 33-75188) (the "Form S-11") and
incorporated herein by reference)
10.11 Crescent Real Estate Equities, Ltd. First Amended
and Restated 401(k) Plan, as amended (filed as
Exhibit No. 10.12 to the 1998 10-K and incorporated
herein by reference)
10.12 Second Amended and Restated 1995 Crescent Real
Estate Equities Company Stock Incentive Plan (filed
as Exhibit 10.13 to the Form S-4 and incorporated
herein by reference)
10.13 Amended and Restated 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 Limited Partnership, BankBoston, N.A. and the
other banks named therein (filed as Exhibit 10.17 to
the 1998 2Q 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 Form
S-11 and incorporated herein by reference)
27.01 Financial Data Schedule (filed herewith)
</TABLE>
(b) Reports on Form 8-K.
None
<PAGE> 1
EXHIBIT 10.01
------------------------------------
SECOND AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP
OF
CRESCENT REAL ESTATE EQUITIES LIMITED
PARTNERSHIP
------------------------------------
Dated as of November 1, 1997
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
ARTICLE I DEFINED TERMS .................................................................. 2
ARTICLE II ORGANIZATIONAL MATTERS ........................................................ 17
Section 2.1 Continuation of Partnership ............................................. 17
Section 2.2 Name .................................................................... 17
Section 2.3 Principal Office and Registered Agent ................................... 17
Section 2.4 Power of Attorney ....................................................... 17
Section 2.5 Term .................................................................... 19
ARTICLE III PURPOSE ...................................................................... 19
Section 3.1 Purpose and Business .................................................... 19
Section 3.2 Powers .................................................................. 19
ARTICLE IV CAPITAL CONTRIBUTIONS ......................................................... 20
Section 4.1 Capital Contributions of the Partners ................................... 20
Section 4.2 Additional Funding ...................................................... 21
Section 4.3 Issuance of Additional Partnership Interests ............................ 23
Section 4.4 No Preemptive Rights .................................................... 25
Section 4.5 No Interest on Capital .................................................. 26
Section 4.6 Stock Incentive Plans ................................................... 26
Section 4.7 Other Equity Compensation Plans ......................................... 27
ARTICLE V DISTRIBUTIONS .................................................................. 28
Section 5.1 Initial Partnership Distributions ....................................... 28
Section 5.2 Requirement and Characterization of Distributions ....................... 28
Section 5.3 Amounts Withheld ........................................................ 28
Section 5.4 Distributions in Kind ................................................... 29
Section 5.5 Distributions Upon Liquidation .......................................... 29
ARTICLE VI ALLOCATIONS ................................................................... 29
Section 6.1 Allocations For Capital Account Purposes ................................ 29
Section 6.2 Allocation of Nonrecourse Debt .......................................... 30
ARTICLE VII MANAGEMENT AND OPERATIONS OF BUSINESS ........................................ 30
Section 7.1 Management .............................................................. 30
Section 7.2 Certificate of Limited Partnership ...................................... 34
Section 7.3 Restrictions on General Partner's Authority ............................. 34
</TABLE>
(i)
<PAGE> 3
<TABLE>
<S> <C>
Section 7.4 Reimbursement of the Crescent Group ..................................... 35
Section 7.5 Outside Activities of the Crescent Group ................................ 35
Section 7.6 Contracts with Affiliates ............................................... 36
Section 7.7 Indemnification ......................................................... 36
Section 7.8 Liability of the General Partner ........................................ 39
Section 7.9 Other Matters Concerning the General Partner ............................ 39
Section 7.10 Title to Partnership Assets ............................................ 40
Section 7.11 Reliance by Third Parties .............................................. 40
Section 7.12 Limited Partner Representatives ........................................ 41
ARTICLE VIII RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS .................................. 41
Section 8.1 Limitation of Liability ................................................. 41
Section 8.2 Management of Business .................................................. 41
Section 8.3 Outside Activities of Limited Partners .................................. 42
Section 8.4 Return of Capital ....................................................... 42
Section 8.5 Rights of Limited Partners Relating to the Partnership .................. 42
Section 8.6 Exchange Rights ......................................................... 43
Section 8.7 Covenants Relating to the Exchange Rights ............................... 44
Section 8.8 Other Matters Relating to the Exchange Rights ........................... 45
ARTICLE IX BOOKS, RECORDS, ACCOUNTING AND REPORTS ........................................ 45
Section 9.1 Records and Accounting .................................................. 45
Section 9.2 Fiscal Year ............................................................. 46
Section 9.3 Reports ................................................................. 46
ARTICLE X TAX MATTERS .................................................................... 46
Section 10.1 Preparation of Tax Returns ............................................. 46
Section 10.2 Tax Elections .......................................................... 46
Section 10.3 Tax Matters Partner .................................................... 47
Section 10.4 Organizational Expenses ................................................ 48
Section 10.5 Withholding ............................................................ 48
ARTICLE XI TRANSFERS AND WITHDRAWALS ..................................................... 49
Section 11.1 Transfer ............................................................... 49
Section 11.2 Transfer of Partnership Interests of the General Partner ............... 49
Section 11.3 Transfer of Partnership Interests of Limited Partners Other Than
Crescent Equities ................................................................. 50
</TABLE>
(ii)
<PAGE> 4
<TABLE>
<S> <C>
Section 11.4 Substituted Limited Partners ........................................... 51
Section 11.5 Assignees .............................................................. 52
Section 11.6 General Provisions ..................................................... 52
Section 11.7 Acquisition of Partnership Interest by Partnership ..................... 53
ARTICLE XII ADMISSION OF PARTNERS ........................................................ 53
Section 12.1 Admission of Substituted General Partner ............................... 53
Section 12.2 Admission of Additional or Employee Limited Partners ................... 54
Section 12.3 Amendment of Agreement and Certificate of Limited Partnership .......... 55
ARTICLE XIII DISSOLUTION AND LIQUIDATION ................................................. 55
Section 13.1 Dissolution ............................................................ 55
Section 13.2 Winding Up ............................................................. 56
Section 13.3 Compliance with Timing Requirements of Regulations ..................... 57
Section 13.4 Deemed Distribution and Recontribution ................................. 58
Section 13.5 Rights of Limited Partners ............................................. 58
Section 13.6 Documentation of Liquidation ........................................... 58
Section 13.7 Reasonable Time for Winding-Up ......................................... 58
Section 13.8 Liability of the Liquidator ............................................ 59
Section 13.9 Waiver of Partition .................................................... 59
ARTICLE XIV AMENDMENT OF AGREEMENT ....................................................... 59
Section 14.1 Amendments ............................................................. 59
ARTICLE XV PARTNER REPRESENTATIONS AND WARRANTIES ........................................ 60
Section 15.1 Representations and Warranties ......................................... 60
ARTICLE XVI ARBITRATION OF DISPUTES ...................................................... 62
Section 16.1 Arbitration ............................................................ 62
Section 16.2 Procedures ............................................................. 62
Section 16.3 Binding Character ...................................................... 63
Section 16.4 Exclusivity ............................................................ 63
Section 16.5 No Alteration of Agreement ............................................. 63
ARTICLE XVII GENERAL PROVISIONS .......................................................... 63
Section 17.1 Addresses and Notice ................................................... 63
Section 17.2 Titles and Captions .................................................... 64
Section 17.3 Pronouns and Plurals ................................................... 64
Section 17.4 Further Action ......................................................... 64
</TABLE>
(iii)
<PAGE> 5
<TABLE>
<S> <C>
Section 17.5 Binding Effect ......................................................... 64
Section 17.6 Creditors .............................................................. 64
Section 17.7 Waiver ................................................................. 64
Section 17.8 No Agency .............................................................. 65
Section 17.9 Entire Understanding ................................................... 65
Section 17.10 Counterparts .......................................................... 65
Section 17.11 Applicable Law ........................................................ 65
Section 17.12 Invalidity of Provisions .............................................. 65
Section 17.13 Guaranty by Crescent Equities ......................................... 65
Section 17.14 Restriction on Sale of Sonoma Property ................................ 66
</TABLE>
Exhibit A -- Partners, Partnership Units and Partnership Interests
Exhibit B -- Capital Account Maintenance
Exhibit C -- Special Tax Allocation Rules
Exhibit D -- Notice of Exchange
Exhibit E -- Listing of Approved Substituted Limited Partners
(iv)
<PAGE> 6
SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP
OF
CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
THIS SECOND AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP,
dated as of November 1, 1997, is entered into by and among Crescent Real
Estate Equities, Ltd., a Delaware corporation, as general partner (the "General
Partner"), and those parties who are Limited Partners as listed on Exhibit A
hereto or who are admitted from time to time as Limited Partners as herein
provided.
W I T N E S S E T H:
WHEREAS, Crescent Real Estate Equities Limited Partnership, a Delaware
limited partnership (the "Partnership"), was formed pursuant to that certain
Certificate of Limited Partnership dated February 9, 1994 and filed on February
9, 1994 in the office of the Secretary of State of Delaware, and that certain
Agreement of Limited Partnership dated as of February 9, 1994 (the "Initial
Agreement");
WHEREAS, the Initial Agreement was amended and restated in its entirety
by that certain First Amended and Restated Agreement of Limited Partnership of
Crescent Real Estate Equities Limited Partnership, dated as of May 5, 1994, as
amended by the First Amendment to the First Amended and Restated Agreement of
Limited Partnership of Crescent Real Estate Equities Limited Partnership, dated
as of May 16, 1994, the Second Amendment to the First Amended and Restated
Agreement of Limited Partnership of Crescent Real Estate Equities Limited
Partnership, dated as of April 11, 1995, the Third Amendment to the First
Amended and Restated Agreement of Limited Partnership of Crescent Real Estate
Equities Limited Partnership, dated as of April 11, 1995, the Fourth Amendment
to the First Amended and Restated Agreement of Limited Partnership of Crescent
Real Estate Equities Limited Partnership, dated as of May 3, 1995, the Fifth
Amendment to the First Amended and Restated Agreement of Limited Partnership of
Crescent Real Estate Equities Limited Partnership, dated as of May 31, 1995, the
Sixth Amendment to the First Amended and Restated Agreement of Limited
Partnership of Crescent Real Estate Equities Limited Partnership, dated as of
June 1, 1995, the Seventh Amendment to the First Amended and Restated Agreement
of Limited Partnership of Crescent Real Estate Equities Limited Partnership,
dated as of August 23, 1995, the Eighth Amendment to the First Amended and
Restated Agreement of Limited Partnership of Crescent Real Estate Equities
Limited Partnership, dated as of December 31, 1995, the Restatement of Ninth
Amendment to the First Amended and Restated Agreement of Limited Partnership of
Crescent Real Estate Equities Limited Partnership, dated as of February 16,
1996, the Supplemental Amendment to the Restatement of Ninth Amendment to the
First Amended and Restated Agreement of Limited Partnership of Crescent Real
Estate Equities Limited Partnership, dated as of June 30, 1996, the Tenth
Amendment to the First Amended and Restated Agreement of Limited Partnership of
Crescent Real Estate Equities Limited Partnership, dated as of July 26, 1996,
the Eleventh Amendment to the First Amended and Restated
<PAGE> 7
Agreement of Limited Partnership of Crescent Real Estate Equities Limited
Partnership, dated as of November 4, 1996, the Twelfth Amendment to the First
Amended and Restated Agreement of Limited Partnership, dated as of December 31,
1996, the Thirteenth Amendment to the First Amended and Restated Agreement of
Limited Partnership, dated as of April 29, 1997 and the Fourteenth Amendment to
the First Amended and Restated Agreement of Limited Partnership, dated as of
April 30, 1997 (hereinafter referred to collectively as the "First Amended
Agreement");
WHEREAS, the General Partner desires to amend and restate in its
entirety the First Amended Agreement pursuant to its authority under Sections
2.4 and 14.1.B of the First Amended Agreement and the powers of attorney granted
to the General Partner by the Limited Partners in order to (i) combine all of
the provisions of the First Amended Agreement into one document, and (ii) make
changes to provisions of the First Amended Agreement in accordance with Section
14.1.B(3) of the First Amended Agreement;
WHEREAS, the General Partner desires to correct the Capital
Contribution amounts set forth in Paragraph 1 of the Thirteenth Amendment to
the First Amended and Restated Agreement of Limited Partnership, dated as of
April 29, 1997, to the following amounts: (i) $134,100 as of February 11, 1997,
in connection with the exercise of David M. Dean's options to purchase 2,400
REIT Shares; (ii) $420,000 as of February 21, 1997, in connection with the
exercise of Dallas E. Lucas' option to purchase 7,500 REIT Shares;
(iii) $58,625 as of March 5, 1997, in connection with the exercise of James E.
Wassel's option to purchase 1,000 REIT Shares; (iv) $59,000 as of March 6,
1997, in connection with the exercise of Jeffrey L. Fitzgerald's option to
purchase 1,000 REIT Shares; (v) $15,375 as of March 11, 1997, in connection
with the exercise of Charlene J. McNeil's option to purchase 250 REIT Shares;
(vi) $24,250 as of March 14, 1997, in connection with the exercise of John P.
Pittman's option to purchase 400 REIT Shares; and (vii) $72,750 as of March 14,
1997, in connection with the exercise of Alan C. Powers' option to purchase
1,200 REIT Shares;
WHEREAS, the General Partner desires to correct the description of the
March 15, 1997 assignment by FW-Irving Partners, Ltd. set forth in the Recitals
to the Fourteenth Amendment to the First Amended Agreement, dated as of April
30, 1997, to read as follows: FW-Irving Partners, Ltd. assigned legal title to
its entire 1.176019% Limited Partnership Interest (including 635,668
Partnership Units) to its partners as follows: (i) a .001177% Limited
Partnership Interest, including 636 Partnership Units, to Rainwater, Inc.,
(ii) a .704906% Limited Partnership Interest, including 381,020 Partnership
Units, to John C. Goff, and (iii) a .469936% Limited Partnership Interest,
including 254,012 Partnership Units, to Gerald W. Haddock;
WHEREAS, on May 4, 1997, Joseph W. Autem exercised his Exchange Right
with respect to 1,805 Partnership Units;
WHEREAS, the individuals set forth in the following table exercised
options to purchase REIT Shares for the respective number of shares, on the
respective date, pursuant to the respective stock option plan and for which
Crescent Equities shall receive credit for the respective Capital Contribution
to the Partnership indicated opposite each such individual's name;
<TABLE>
<CAPTION>
Number of REIT Capital
Individual Exercise Date Shares Purchased Plan Contribution
- ---------- ------------- ---------------- ---- ------------
<S> <C> <C> <C> <C>
Charlene J. McNeil 5/12/97 300 1994 Plan $7,837.50
Charlene J. McNeil 5/12/97 800 1995 Plan $20,900.00
Paul E. Rowsey, III 6/10/97 30,000 1994 Plan $795,000.00
6/10/97 2,800 First Amended and $74,200.00
Restated 1995 Plan
Jennifer L. Miller 6/16/97 400 1995 Plan $11,500.00
John M. Walker, Jr. 6/16/97 6,000 1995 Plan $172,500.00
Suzanne Stevens 7/11/97 800 1995 Plan $25,350.00
Carlton Jordan 7/17/97 200 1995 Plan $6,600.00
Kurtis D. Adams 7/17/97 200 1995 Plan $6,600.00
Michael A. Howell 7/17/97 200 1995 Plan $6,600.00
Henry L. Cosby 7/17/97 200 1995 Plan $6,600.00
John R. Leathers 7/17/97 200 1995 Plan $6,600.00
Ramon Cortez 7/17/97 200 1995 Plan $6,600.00
Becky Rainwater 7/17/97 200 1995 Plan $6,600.00
J. Mike Williams 7/17/97 200 1995 Plan $6,600.00
</TABLE>
-2-
<PAGE> 8
<TABLE>
<CAPTION>
Number of REIT Capital
Individual Exercise Date Shares Purchased Plan Contribution
- ---------- ------------- ---------------- ---- ------------
<S> <C> <C> <C> <C>
Elizabeth M. Frankowski 7/17/97 200 1995 Plan $6,600.00
Daniel Thompson 7/18/97 200 1995 Plan $6,537.50
Mark Stanfield 7/22/97 1,200 1995 Plan $39,150.00
Angela Petrucci 7/22/97 200 1995 Plan $6,525.00
Michael Musack 7/22/97 200 1995 Plan $6,525.00
Sidney Schneider 7/22/97 200 1995 Plan $6,525.00
Rodney Leach 7/22/97 200 1995 Plan $6,525.00
Vicki Rowell 7/22/97 200 1995 Plan $6,525.00
Debbie Hall 7/24/97 200 1995 Plan $6,600.00
Christopher Crisman 7/24/97 200 1995 Plan $6,600.00
Debra Garrison 7/24/97 100 First Amended and $3,300.00
Restated 1995 Plan
Teresa Shiller 7/31/97 200 First Amended and $6,250.00
Restated 1995 Plan
Nelda Casbon 7/31/97 200 First Amended and $6,250.00
Restated 1995 Plan
William Garcia 8/4/97 200 First Amended and $6,137.50
Restated 1995 Plan
Raymond Cuellar 8/6/97 200 First Amended and $6,575.00
Restated 1995 Plan
Jerry Crenshaw 8/14/97 1,600 1994 Plan $53,000.00
Jerry Crenshaw 8/14/97 1,800 1995 Plan $59,625.00
Priscilla Nunez 8/18/97 200 First Amended and $6,475.00
Restated 1995 Plan
David Hagar 8/18/97 192 First Amended and $6,216.00
Restated 1995 Plan
Richard Flusche 8/18/97 200 First Amended and $6,475.00
Restated 1995 Plan
Charles Lucabaugh 8/18/97 200 First Amended and $6,475.00
Restated 1995 Plan
James Dockal II 8/18/97 800 1995 Plan $25,900.00
James Dockal II 8/18/97 440 First Amended and $14,245.00
Restated 1995 Plan
</TABLE>
-3-
<PAGE> 9
<TABLE>
<CAPTION>
Number of REIT Capital
Individual Exercise Date Shares Purchased Plan Contribution
- ---------- ------------- ---------------- ---- ------------
<S> <C> <C> <C> <C>
Willie E. Hollie, Jr. 9/4/97 200 First Amended and $6,225.00
Restated 1995 Plan
Amelia K. Davis 9/4/97 200 First Amended and $6,225.00
Restated 1995 Plan
Anthony Tillman 9/5/97 200 First Amended and $6,250.00
Restated 1995 Plan
Cheryl Dillon 9/10/97 200 First Amended and $6,800.00
Restated 1995 Plan
L. Blair Tillery 9/10/97 160 First Amended and $5,440.00
Restated 1995 Plan
Eric Painter 9/10/97 200 First Amended and $6,800.00
Restated 1995 Plan
Elizabeth Hays 9/11/97 200 First Amended and $7,200.00
Restated 1995 Plan
Jeff Fitzgerald 9/12/97 6,000 1995 Plan $216,750.00
David M. Dean 9/15/97 400 1994 Plan $14,500.00
Joseph D. Ambrose, III 9/16/97 2,000 1994 Plan $70,375.00
Joseph D. Ambrose, III 9/16/97 8,000 1995 Plan $281,500.00
Philip Webster 9/18/97 200 First Amended and $7,087.50
Restated 1995 Plan
Brad Russell 9/18/97 200 First Amended and $7,087.50
Restated 1995 Plan
Johnny Jarrin 10/9/97 200 First Amended and $7,800.00
Restated 1995 Plan
Alan Connelly 10/9/97 200 First Amended and $7,800.00
Restated 1995 Plan
Sharon Simmons 10/22/97 500 1995 Plan $18,781.25
Jim Petrie 10/22/97 200 First Amended and $7,512.50
Restated 1995 Plan
</TABLE>
WHEREAS, on May 14, 1997, Crescent Equities issued 500,000 REIT Shares
in a public stock offering at a cash price of $25.875 per share, which cash
proceeds were contributed to the Partnership by Crescent Equities pursuant to
Section 4.2 of the First Amended Agreement;
-4-
<PAGE> 10
WHEREAS, on June 30, 1997, (i) the Partnership issued 1,046 Partnership
Units valued at $66,421 to Texas Greenbrier Associates, Inc. ("Greenbrier")
pursuant to a Consultant Unit Agreement dated August 15, 1995 between Greenbrier
and the Partnership; and (ii) Greenbrier immediately exercised its Exchange
Right with respect to such 1,046 Partnership Units;
WHEREAS, on July 8, 1997, Crescent Equities issued 217 REIT Shares to
each of Morton H. Meyerson, William F. Quinn and Paul E. Rowsey, III in payment
of trust managers' fees and, in connection therewith, Crescent Equities shall
receive credit for an aggregate Capital Contribution to the Partnership
of $20,018.25;
Whereas, On July 25, 1997, Crescent Equities issued 351,185 REIT Shares
in a public offering at a cash price of $28.475 per share, which cash proceeds
were contributed to the Partnership by Crescent Equities pursuant to Section 4.2
of the First Amended Agreement;
WHEREAS, on August 12, 1997, Crescent Equities issued 4,700,000 REIT
Shares to UBS Securities (Portfolio) LLC at a price of $31.5625 per share,
pursuant to that certain Purchase Agreement, dated as of August 11, 1997, by and
among Crescent Equities, UBS Securities (Portfolio) LLC and Union Bank of
Switzerland, London Branch, acting through its agent UBS Securities LLC, which
cash proceeds were contributed to the Partnership by Crescent Equities pursuant
to Section 4.2 of the First Amended Agreement;
WHEREAS, effective August 29, 1997, Crescent Equities granted (i) 33
REIT Shares to Tommy Ellis; (ii) 33 REIT Shares to Alan Friedman; (iii) 34 REIT
Shares to Shannon Gilbert; (iv) 34 REIT Shares to Jana Irwin; (v) 33 REIT Shares
to John Walker; and (vi) 33 REIT Shares to John Zogg, in accordance with
resolutions of the Board of Trust Managers of Crescent Equities, dated as of
August 29, 1997 and, in connection therewith, Crescent Equities shall receive
credit for an aggregate Capital Contribution to the Partnership of $6,325.00;
WHEREAS, on August 31, 1997, Crescent Equities rescinded 177,604
Partnership Units held by Canyon Ranch, Inc. pursuant to Article II of that
certain Contribution Agreement dated July 26, 1996 between the Partnership and
Canyon Ranch, Inc.
WHEREAS, on September 8, 1997, Gerald W. Haddock exercised his Exchange
Right with respect to 8,900 Partnership Units;
WHEREAS, on September 22, 1997, Crescent Equities issued 307,831 REIT
Shares in a public offering at a cash price of $32.485 per share, which cash
proceeds were contributed to the Partnership by Crescent Equities pursuant to
Section 4.2 of the First Amended Agreement;
WHEREAS, on October 1, 1997, Greenbrier exercised options to
purchase 25,500 REIT Shares pursuant to the 1994 stock option plan of Crescent
Equities and, in connection therewith, Crescent Equities shall receive credit
for a Capital Contribution to the Partnership of $1,012,031.25;
WHEREAS, on October 7, 1997, Crescent Equities issued 138 REIT Shares
to each of Morton H. Meyerson, William F. Quinn and Paul E. Rowsey, III in
payment of trust managers' fees and, in connection therewith, Crescent Equities
shall receive credit for an aggregate Capital Contribution to the Partnership of
$16,767;
WHEREAS, on October 8, 1997, Crescent Equities issued 10,000,000 REIT
Shares in a public stock offering at a cash price of $39.00 per share, which
cash proceeds were contributed to the Partnership by Crescent Equities pursuant
to Section 4.2 of the First Amended Agreement;
-5-
<PAGE> 11
WHEREAS, on October 23, 1997, Christopher J. O'Brien exercised his
Exchange Right with respect to 18,155 Partnership Units;
WHEREAS, on October 24, 1997, Peter M. Joost exercised his Exchange
Right with respect to 25,000 Partnership Units; and
WHEREAS, the General Partner desires to amend Exhibit A to reflect the
transactions described above.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt,
adequacy and sufficiency of which are hereby acknowledged, the parties hereto,
intending legally to be bound, hereby agree as follows:
ARTICAL I
DEFINED TERMS
Except as otherwise herein expressly provided, the following terms and
phrases shall have the meanings set forth below:
"Act" means the Delaware Revised Uniform Limited Partnership Act, as it
may be amended from time to time, and any successor to such statute.
"Additional Funds" has the meaning set forth in Section 4.2.A hereof.
"Additional Limited Partner" has the meaning set forth in Section 4.3
hereof.
"Adjusted Capital Account" means the Capital Account maintained for
each Partner as of the end of each fiscal year (i) increased by any amounts
which such Partner is obligated to restore pursuant to any provision of this
Agreement or is treated as being obligated to restore pursuant to Regulations
Section 1.704-1(b)(2)(ii)(c) or is deemed to be obligated to restore pursuant to
the penultimate sentences of Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5) and (ii) decreased by the items described in Regulations Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account is intended to comply with
the provisions of Regulations Section 1.704-1(b)(2)(ii)(d) and shall be
interpreted consistently therewith.
"Adjusted Capital Account Deficit" means, with respect to any Partner,
the deficit balance, if any, in such Partner's Adjusted Capital Account as of
the end of the relevant fiscal year.
"Adjusted Property" means any property the Carrying Value of which has
been adjusted pursuant to Section 1.D of Exhibit B hereof. Once an Adjusted
Property is deemed distributed by, and recontributed to, the Partnership for
federal income tax purposes upon a termination thereof pursuant to Section 708
of the Code, such property shall thereafter constitute a
-6-
<PAGE> 12
Contributed Property until the Carrying Value of such property is further
adjusted pursuant to Section 1.D of Exhibit B hereof.
"Adjustment Date" has the meaning set forth in Section 4.2.A(2) hereof.
"Affiliate" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by or under common control with such Person.
"Agreement" means this Second Amended and Restated Agreement of Limited
Partnership, as it may be amended, supplemented or restated from time to time.
"Amstar" means Amstar Continental Plaza Limited Partnership, a Colorado
limited partnership.
"Amstar Required Cash Payment" means the "Required Cash Payment" as
defined in Article III of that certain Contribution Agreement dated February 8,
1994 between Amstar and the Partnership.
"Assignee" means a Person to whom a Limited Partnership Interest has
been transferred in a manner permitted under this Agreement, but who has not
become a Substituted Limited Partner, and who has the rights set forth in
Sections 8.6, 11.3.A and 11.5.
"Available Cash" means, with respect to any period for which such
calculation is being made, (i) the sum of:
A. the Partnership's Net Income or Net Loss, as the case may be,
for such period (without regard to adjustments resulting from
allocations described in Section 1.A-E of Exhibit C),
B. Depreciation and all other noncash charges deducted in
determining Net Income or Net Loss for such period,
C. the amount of any reduction in reserves of the Partnership
referred to in clause (ii)(f) below (including, without limitation,
reductions resulting because the General Partner determines such
amounts are no longer necessary),
D. the excess of proceeds from the sale, exchange, disposition,
or refinancing of Partnership property during such period over the gain
(or loss, as the case may be) recognized from such sale, exchange,
disposition, or refinancing during such period (excluding Terminating
Capital Transactions) as such items of gain or loss are determined in
accordance with Section 1.B of Exhibit B, and
E. all other cash received by the Partnership for such period,
including cash contributions and loan proceeds (other than refinancing
proceeds described in (d) above), that was not included in determining
Net Income or Net Loss for such period;
-7-
<PAGE> 13
(ii) less the sum of:
(a) all principal debt payments made during such period by
the Partnership,
(b) capital expenditures made by the Partnership during such
period,
(c) investments in any entity (including loans made thereto)
to the extent that such investments are not otherwise described in
clauses (ii)(a) or (b),
(d) all other expenditures and payments not deducted in
determining Net Income or Net Loss for such period,
(e) any amount included in determining Net Income or Net Loss
for such period that was not received by the Partnership during such
period, and
(f) the amount of any increase in reserves (including,
without limitation, working capital accounts or other cash or similar
balances) established during such period which the General Partner
determines are necessary or appropriate in its sole and absolute
discretion.
Notwithstanding the foregoing, Available Cash shall not include any
cash received or reductions in reserves, or take into account any disbursements
made or reserves established, after commencement of the dissolution and
liquidation of the Partnership.
"Bankruptcy" of a Person shall be deemed to have occurred when (a) the
Person commences a voluntary proceeding seeking liquidation, reorganization or
other relief under any bankruptcy, insolvency or other similar law now or
hereafter in effect, (b) the Person is adjudged as bankrupt or insolvent, or a
final and nonappealable order for relief under any bankruptcy, insolvency or
similar law now or hereafter in effect has been entered against the Person, (c)
the Person executes and delivers a general assignment for the benefit of the
Person's creditors, (d) the Person files an answer or other pleading admitting
or failing to contest the material allegations of a petition filed against the
Person in any proceeding of the nature described in clause (b) above, (e) the
Person seeks, consents to or acquiesces in the appointment of a trustee,
receiver or liquidator for the Person or for all or any substantial part of the
Person's properties, (f) any proceeding seeking liquidation, reorganization or
other relief under any bankruptcy, insolvency or other similar law now or
hereafter in effect has not been dismissed within one hundred twenty (120) days
after the commencement thereof, (g) the appointment without the Person's consent
or acquiescence of a trustee, receiver or liquidator has not been vacated or
stayed within ninety (90) days of such appointment, or (h) an appointment
referred to in clause (g) is not vacated within ninety (90) days after the
expiration of any such stay.
-8-
<PAGE> 14
"Book-Tax Disparities" means, with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or Adjusted
Property and the adjusted basis thereof for federal income tax purposes as of
such date. A Partner's share of the Partnership's Book-Tax Disparities in all of
its Contributed Property and Adjusted Property will be reflected by the
difference between such Partner's Capital Account balance as maintained pursuant
to Exhibit B and the hypothetical balance of such Partner's Capital Account
computed as if it had been maintained strictly in accordance with federal income
tax accounting principles.
"Business Day" means any day except a Saturday, Sunday or other day on
which banking institutions in the State of New York are authorized or obligated
by law or executive order to close.
"Canyon Contribution Agreement" means that certain Contribution
Agreement, dated July 26, 1996, by and between the Partnership and Canyon Ranch.
"Canyon Ranch" means Canyon Ranch, Inc. an Arizona corporation.
"Canyon Ranch Property" means the property and assets specified in the
Canyon Contribution Agreement.
"Capital Account" means the Capital Account maintained for a Partner
pursuant to Exhibit B hereof.
"Capital Contribution" means, with respect to any Partner, any cash,
cash equivalents or the Net Asset Value of Contributed Property which such
Partner contributes to the Partnership.
"Carrying Value" means (i) with respect to a Contributed Property or
Adjusted Property, the Gross Asset Value of such property reduced (but not below
zero) by all Depreciation with respect to such property charged to the Partners'
Capital Accounts and (ii) with respect to any other Partnership property, the
adjusted basis of such property for federal income tax purposes, all as of the
time of determination. The Carrying Value of any property shall be adjusted from
time to time in accordance with Exhibit B hereof, and to reflect changes,
additions or other adjustments to the Carrying Value for improvements and
dispositions and acquisitions of Partnership properties, as deemed appropriate
by the General Partner.
"Cash Amount" means an amount of cash equal to the Value, as of the
date of receipt by Crescent Equities of a Notice of Exchange, of the REIT Shares
Amount. Notwithstanding the foregoing, if the Crescent Group raises the Cash
Amount through an offering of securities, borrowings or otherwise, the Cash
Amount shall be reduced by an amount equal to the expenses incurred by the
Crescent Group in connection with raising such funds (to the extent that such
expenses are allocable to funds used to pay the Cash Amount); provided, however,
that the total reduction of the Cash Amount for such expenses shall not exceed
five percent (5%) of the total Cash Amount as determined prior to reduction for
such expenses.
-9-
<PAGE> 15
"Certificate" means the Certificate of Limited Partnership of the
Partnership filed in the office of the Secretary of State of Delaware, as
amended from time to time in accordance with the terms hereof and the Act.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, as interpreted by the applicable regulations
thereunder. Any reference herein to a specific section or sections of the Code
shall be deemed to include a reference to any corresponding provision of future
law.
"Consultant Unit Agreement" means that certain Consultant Unit
Agreement, dated August 15, 1995, by and between Greenbrier and the Partnership.
"Contributed Funds" has the meaning set forth in Section 4.2.A(2)
hereof.
"Contributed Property" means each property or other asset (but
excluding cash), in such form as may be permitted by the Act, contributed to the
Partnership or deemed contributed to the Partnership on termination and
reconstitution thereof pursuant to Section 708 of the Code. Once the Carrying
Value of a Contributed Property is adjusted pursuant to Section 1.D of Exhibit B
hereof, such property shall no longer constitute a Contributed Property for
purposes of Exhibit B hereof, but shall be deemed an Adjusted Property for such
purposes.
"Contribution Date" has the meaning set forth in Section 4.3 hereof.
"Crescent Equities" means Crescent Real Estate Equities Company, a
Texas real estate investment trust.
"Crescent Group" means Crescent Equities, the General Partner, and any
wholly owned subsidiaries of Crescent Equities or the General Partner.
"Crescent Loan" has the meaning set forth in Section 4.2.A(1) hereof.
"Declaration of Trust" means the Declaration of Trust of Crescent
Equities, as it may be amended, supplemented or restated from time to time.
"Deemed Partnership Interest Value" as of any date shall mean, with
respect to a Partner, the product of (i) the Deemed Value of the Partnership as
of such date, multiplied by (ii) such Partner's Partnership Interest as of such
date.
"Deemed Value of the Partnership" as of any date shall mean the
quotient of the following amounts:
(i) the product of (a) the Value of a REIT Share as of such date,
multiplied by (b) the total number of REIT Shares issued and
outstanding as of the close of business on such date
(excluding treasury shares and, for purposes of Section 4.2
hereof, excluding any REIT Shares issued in exchange for
Contributed Funds to be
-10-
<PAGE> 16
contributed to the Partnership by Crescent Equities on the
Adjustment Date for which the calculation is being made),
divided by
(ii) the aggregate Partnership Interest of Crescent Equities and
the General Partner as of such date.
"Demand Notice" has the meaning set forth in Section 16.2 hereof.
"Depreciation" means, for each fiscal year, an amount equal to the
federal income tax depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such year, except that if the Carrying
Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such year or other period, Depreciation shall be an
amount which bears the same ratio to such beginning Carrying Value as the
federal income tax depreciation, amortization, or other cost recovery deduction
for such year bears to such beginning adjusted tax basis; provided, however,
that if the federal income tax depreciation, amortization, or other cost
recovery deduction for such year is zero, Depreciation shall be determined with
reference to such beginning Carrying Value using any reasonable method selected
by the General Partner.
"Employee Limited Partner" has the meaning set forth in Section 4.7.C
hereof.
"Exchange Act" means the Securities Exchange Act of 1934, as amended,
or any successor statute.
"Exchange Factor" means 1.0, provided that in the event that Crescent
Equities (i) pays a dividend on its outstanding REIT Shares in REIT Shares or
makes a distribution to all holders of its outstanding REIT Shares in REIT
Shares, (ii) subdivides its outstanding REIT Shares, or (iii) combines its
outstanding REIT Shares into a smaller number of REIT Shares, the Exchange
Factor shall be adjusted by multiplying the Exchange Factor by a fraction, the
numerator of which shall be the number of REIT Shares that would be issued and
outstanding on the record date for such event if such dividend, distribution,
subdivision or combination had occurred as of such date, and the denominator of
which shall be the actual number of REIT Shares issued and outstanding on the
record date for such dividend, distribution, subdivision or combination. Any
adjustment of the Exchange Factor shall become effective immediately after the
effective date of such event retroactive to the record date for such event;
provided, however, that if Crescent Equities receives a Notice of Exchange after
the record date, but prior to the effective date, of any such event, the
Exchange Factor shall be determined as if Crescent Equities had received the
Notice of Exchange immediately prior to the record date for such event.
"Exchange Right" has the meaning set forth in Section 8.6 hereof.
"Exchanging Person" has the meaning set forth in Section 8.6.A hereof.
"Falcon Point Property" means the Falcon Point single family
residential development located in Houston, Texas.
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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.
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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]
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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;
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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.
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<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
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<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
--------------------------------
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<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]
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<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
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<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.
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<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.]
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<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
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<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> 100
SEVENTH AMENDMENT
TO THE SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
THIS SEVENTH AMENDMENT TO THE SECOND AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP, dated
as of September 30, 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 (other than Crescent Real Estate Equities Company
("Crescent Equities"), a Texas real estate investment trust) 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 Restated
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, and the 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 (hereinafter
referred to as the "Effective Agreement") and Crescent Equities.
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, 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 (the "First Amended Agreement");
WHEREAS, the First Amended Agreement, as previously amended, was
amended and restated in its entirety by the Effective Agreement;
<PAGE> 101
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 Capital
Individual Exercise Date Shares Purchased Option Plan Contribution
- ---------- ------------- ---------------- ----------- ------------
<S> <C> <C> <C> <C>
Cheryl Dillon 7/16/98 200 First Amended and $6,700.00
Restated 1995 Plan
Cheryl Dillon 7/16/98 100 Second Amended and $3,350.00
Restated 1995 Plan
Kurtis Adams 7/16/98 200 First Amended and $6,700.00
Restated 1995 Plan
Kurtis Adams 7/16/98 100 Second Amended and $3,350.00
Restated 1995 Plan
Bobby Vann 7/16/98 200 First Amended and $6,700.00
Restated 1995 Plan
John Leathers 7/16/98 200 First Amended and $6,700.00
Restated 1995 Plan
John Leathers 7/16/98 100 Second Amended and $3,350.00
Restated 1995 Plan
Carlton Jordan 7/16/98 200 First Amended and $6,700.00
Restated 1995 Plan
Carlton Jordan 7/16/98 100 Second Amended and $3,350.00
Restated 1995 Plan
Mike Howell 7/16/98 200 First Amended and $6,700.00
Restated 1995 Plan
Mike Howell 7/16/98 100 Second Amended and $3,350.00
Restated 1995 Plan
</TABLE>
-2-
<PAGE> 102
<TABLE>
<CAPTION>
Number of REIT Stock Capital
Individual Exercise Date Shares Purchased Option Plan Contribution
- ---------- ------------- ---------------- ----------- ------------
<S> <C> <C> <C> <C>
Henry Cosby 7/16/98 200 First Amended and $ 6,700.00
Restated 1995 Plan
Henry Cosby 7/16/98 100 Second Amended and $ 3,350.00
Restated 1995 Plan
Ramon Cortez 7/16/98 200 First Amended and $ 6,700.00
Restated 1995 Plan
Ramon Cortez 7/16/98 100 Second Amended and $ 3,350.00
Restated 1995 Plan
Fred Hoekstra 7/16/98 200 First Amended and $ 6,700.00
Restated 1995 Plan
Mike Williams 7/20/98 200 First Amended and $ 6,725.00
Restated 1995 Plan
John Walker 7/22/98 1,700 1995 Plan $55,356.25
Carlos Gonzalez 7/22/98 400 First Amended and $13,025.00
Restated 1995 Plan
Carlos Gonzalez 7/22/98 100 Second Amended and $ 3,256.25
Restated 1995 Plan
Bret Angle 8/3/98 200 First Amended and $ 5,750.00
Restated 1995 Plan
Steve Jones 8/6/98 110 First Amended and $ 3,121.25
Restated 1995 Plan
Jim Eidson 8/12/98 1,000 1995 Plan $30,125.00
Jim Eidson 8/12/98 1,000 First Amended and $30,125.00
Restated 1995 Plan
Jim Eidson 8/12/98 1,000 First Amended and $30,125.00
Restated 1995 Plan
</TABLE>
-3-
<PAGE> 103
<TABLE>
<CAPTION>
Number of REIT Stock Capital
Individual Exercise Date Shares Purchased Option Plan Contribution
- ---------- ------------- ---------------- ----------- ------------
<S> <C> <C> <C> <C>
Michael Pugh 8/12/98 400 First Amended and $ 12,050.00
Restated 1995 Plan
Jim Eidson 8/14/98 300 1995 Plan $ 8,850.00
Jim Eidson 8/14/98 300 First Amended and $ 8,850.00
Restated 1995 Plan
Jim Eidson 8/14/98 300 First Amended and $ 8,850.00
Restated 1995 Plan
Daniel Thompson 8/21/98 200 First Amended and $ 5,350.00
Restated 1995 Plan
Robert Kowalski 9/30/98 200 First Amended and $ 5,050.00
Restated 1995 Plan
Joseph Ambrose 9/30/98 8,000 1995 Plan $202,000.00
</TABLE>
WHEREAS, effective April 14, 1998, Morton H. Meyerson conveyed his
entire Limited Partnership Interest (including 18,989 Partnership Units) to Big
Bend III Investments, L.P.;
WHEREAS, on August 6, 1998, Tower Holdings, Inc. and 777 Main Street
Partners assigned 5,035 Partnership Units and 16,648 Partnership Units,
respectively, to Rainwater, Inc., and Rainwater, Inc. immediately assigned such
Partnership Units to Office Towers LLC;
WHEREAS, on August 6, 1998, Richard E. Rainwater assigned 219
Partnership Units to Office Towers LLC;
WHEREAS, on August 14, 1998, Crescent Equities cancelled 6,638
restricted REIT Shares valued at $29.50 per share belonging to Dallas Lucas;
WHEREAS, on September 15, 1998, John H. Anderson exercised his Exchange
Rights with respect to 27,222 Partnership Units;
WHEREAS, as of December 12, 1997, Crescent Equities and Merrill Lynch
International ("MLI"), acting through Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch"), entered into that certain Swap Agreement (the
"Swap Agreement") relating to certain REIT Shares;
-4-
<PAGE> 104
WHEREAS, as of December 12, 1997, Crescent Equities, the Partnership,
MLI, and Merrill Lynch entered into that certain Purchase Agreement relating,
among other matters, to the purchase of REIT Shares by MLI (the "Purchase
Agreement");
WHEREAS, effective as of December 12, 1997, the Partnership executed
and delivered, in favor of MLI, that certain Guarantee pursuant to which the
Partnership agreed to guarantee certain obligations of Crescent Equities (the
"Guarantee");
WHEREAS, effective as of September 30, 1998, pursuant to that certain
Agreement of Termination, Release and Receipt (the "Termination Agreement"), the
Partnership, Crescent Equities, MLI, and Merrill Lynch agreed to settle the Swap
Agreement and terminate each of the Swap Agreement, the Purchase Agreement and
the Guarantee (the Swap Agreement, the Purchase Agreement and the Guarantee are
hereinafter referred to collectively as the "Prior Agreements");
WHEREAS, pursuant to the Termination Agreement, Crescent Equities
agreed to deliver to Merrill Lynch Mortgage Capital Inc. ("MLMC") a promissory
note of the Partnership in the principal amount of $209,299,016.33 (the "Note"),
secured by a deed of trust (with security agreement and assignment of rents)
which encumbers certain real property owned by the Partnership in Houston, Texas
(the "Deed of Trust") in exchange for the delivery by MLI and Merrill Lynch to
Crescent Equities of 6,659,254 REIT Shares and in settlement of the 1,629,826
additional REIT Shares otherwise due to MLI and Merrill Lynch under the Prior
Agreements;
WHEREAS, pursuant to Section 8.7.E of the Effective Agreement, the
General Partner desires to cause the Partnership to purchase from Crescent
Equities a portion of its Partnership Interest on the same terms under which
Crescent Equities is purchasing REIT Shares from MLI and Merrill Lynch;
WHEREAS, in connection with the Partnership's purchase from Crescent
Equities of a portion of its Partnership Interest, the Partnership has agreed
deliver to MLMC the Note, secured by the Deed of Trust;
WHEREAS, the General Partner desires to correct the description of the
exercise of options by Bret Angle and Timothy McCoy set forth in the recitals to
the Sixth Amendment to the Second Amended Agreement to indicate that Bret Angle
exercised options pursuant to the Second Amended and Restated 1995 Plan to
purchase 100 REIT Shares and Timothy McCoy exercised options pursuant to the
Second Amended and Restated 1995 Plan to purchase 70 REIT Shares on July 16,
1998 (rather than on July 13, 1998, and July 10, 1998, respectively);
WHEREAS, Section 14.1.A of the Effective Agreement incorrectly
references Percentage Interests rather than Partnership Interests;
WHEREAS, the General Partner desires to correct the reference contained
in Section 14.1.A of the Effective Agreement to refer to Partnership Interests
rather than Percentage Interests;
-5-
<PAGE> 105
WHEREAS, paragraph 14 of the Twelfth Amendment to the First Amended
Agreement deleted Section 11.2.B of the First Amended Agreement, and paragraph
15 of such Twelfth Amendment renumbered the existing Section 11.2.C as Section
11.2.B and provided that all references to Section 11.2.C in the First Amended
Agreement were to be renumbered accordingly;
WHEREAS, in connection with the preparation of the Effective Agreement,
the reference in Section 14.1.C of the Effective Agreement to Section 11.2.C was
inadvertently not renumbered to Section 11.2.B;
WHEREAS, the General Partner desires to correct the reference contained
in Section 14.1.C of the Effective Agreement to refer to Section 11.2.B rather
than Section 11.2.C; 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 $512,358 in connection with the exercise
of options to purchase REIT Shares by Bret Angle, Cheryl Dillon, Kurtis
Adams, Bobby Vann, John Leathers, Carlton Jordan, Mike Howell, Henry
Cosby, Ramon Cortez, Fred Hoekstra, Mike Williams, John Walker, Carlos
Gonzalez, Steve Jones, Jim Eidson, Michael Pugh, Daniel Thompson,
Robert Kowalski, and Joseph Ambrose, as more fully set forth above,
(ii) the exercise by John H. Anderson of his Exchange Rights with
respect to 27,222 Partnership Units, (iii) the conveyance by Morton H.
Meyerson of his entire Limited Partnership Interest (including 18,989
Partnership Units) to Big Bend III Investments, L.P.; (iv) the
assignment by Tower Holdings, Inc. of 5,035 Partnership Units to
Rainwater, Inc., (v) the assignment by 777 Main Street Partners of
16,648 Partnership Units to Rainwater, Inc., (vi) the assignment by
Rainwater, Inc. of 21,683 Partnership Units to Office Towers LLC, (vii)
the assignment by Richard E. Rainwater of 219 Partnership Units to
Office Towers LLC, (viii) the cancellation by Crescent Equities of
6,638 restricted REIT Shares belonging to Dallas Lucas, and (ix) the
purchase by the Partnership of a portion of the Partnership Interest of
Crescent Equities for the Note, secured by the Deed of Trust, Exhibit A
to the Effective Agreement is hereby deleted in its entirety and
replaced with the Exhibit A attached to this Seventh Amendment and made
a part hereof.
2. The last sentence of Section 14.1.A of the Effective
Agreement is hereby deleted in its entirety and replaced with the
following:
Except as provided in Section 14.1.B or 14.1.C, a proposed
amendment shall be adopted and be effective as an amendment
hereto if it is approved by the General Partner and Limited
Partners owning a majority-in-interest of the total
Partnership Interests of the Limited Partners.
-6-
<PAGE> 106
3. Clause (iv) of Section 14.1.C of the Effective Agreement is
hereby deleted in its entirety and replaced with the following:
(iv) alter or modify the Exchange Rights set forth in Section
8.6, or the right set forth in section 11.2.B
4. Except as the context may otherwise require, any terms used
in this Seventh Amendment which are defined in the Effective Agreement
shall have the same meaning for purposes of this Seventh 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.
-7-
<PAGE> 107
IN WITNESS WHEREOF, the undersigned have executed this Seventh
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
(other than Crescent
Equities)
By: /s/ David M. Dean
Name: David M. Dean
Title: Senior Vice President, Law
LIMITED PARTNER:
CRESCENT REAL ESTATE EQUITIES
COMPANY, a Texas real estate
investment trust
By: /s/ David M. Dean
Name: David M. Dean
Title: Senior Vice President, Law
NEW LIMITED PARTNER:
BIG BEND III INVESTMENTS, L.P.
By: 2M COMPANIES, INC.,
its general partner
By: /s/ Richard W. Slaven
Name: Richard W. Slaven
Title: Vice President
-8-
[EXHIBITS OMITTED]
<PAGE> 108
EIGHTH AMENDMENT
TO THE SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
THIS EIGHTH AMENDMENT TO THE SECOND AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP, dated
as of January 31, 1999, 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 (the "Second Amended
Agreement"), 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 Restated
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, and the 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, and the
Seventh Amendment to the Second Amended and Restated Agreement of Limited
Partnership of Crescent Real Estate Equities Limited Partnership, dated as of
September 30, 1998, (hereinafter referred to as the "Effective Agreement"),
Courtney E. Hunley, R. Todd Rainwater, and Matthew J. Rainwater.
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, 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 (the "First Amended Agreement");
WHEREAS, the First Amended Agreement, as previously amended, was
amended and restated in its entirety by the Effective Agreement;
<PAGE> 109
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 Capital
Individual Exercise Date Shares Purchased Option Plan Contribution
- ---------- ------------- ---------------- ----------- ------------
<S> <C> <C> <C> <C>
James Wassel 10/6/98 2,000 1994 Plan $ 49,125.00
Barry Gruebbel 11/16/98 2,000 1994 Plan $ 46,125.00
John M. Walker, Jr. 11/24/98 1,600 1995 Plan $ 41,400.00
Bobby Moore 12/11/98 200 First Amended and $ 4,525.00
Restated 1995 Plan
Debra Spears 12/14/98 1,600 1995 Plan $ 37,300.00
Dale B. Herl 12/15/98 400 First Amended and $ 9,450.00
Restated 1995 Plan
Gerald Haddock 1/5/99 50,000 1994 Plan $1,187,500.00
John Zogg 1/20/99 3,000 1994 Plan $ 68,250.00
Murphy Yates 1/29/99 2,000 1994 Plan $ 42,500.00
</TABLE>
WHEREAS, on October 7, 1998, Crescent Equities issued 231 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 of the Partnership of
$16,675.31;
WHEREAS, on November 4, 1998, James Telling exercised his Exchange
Rights with respect to 100 Partnership Units and Ross Bowker exercised his
Exchange Rights with respect to 4,001 Partnership Units;
WHEREAS, on November 20, 1998, Crescent Equities issued 1,852,162 REIT
shares to Warburg Dillon Read LLC, as agent for UBS Securities, LLC, at a cash
price of $0.01 per share, pursuant to that certain Forward Stock Purchase dated
August 12, 1997, by and between Crescent Equities and Union Bank of Switzerland,
London Branch, which cash proceeds aggregating $18,521.62 were contributed to
the Partnership by Crescent Equities pursuant to Section 4.2 of the Agreement;
WHEREAS, on November 30, 1998, Prudential Insurance Company of America
converted all of its Series B Convertible Preferred Shares ("Series B Preferred
Shares") into 8,400,582 REIT Shares;
-2-
<PAGE> 110
WHEREAS, pursuant to Section 1(e) of the Fifth Amendment to the Second
Amended Agreement, in connection with the conversion of the Series B Preferred
Shares, Crescent Equities shall be deemed to have contributed $199,881,347.96to
the Partnership pursuant to Section 4.2 of the Amendment, and all of the
6,948,734 Series B Preferred Partnership Units shall be retired.
WHEREAS, on December 17, 1998, Richard E. Rainwater assigned 3,436
Partnership Units to Darla Moore;
WHEREAS, on January 1, 1999, the Courtney E. Rainwater Trust UA 4/15/82
assigned 21,098 Partnership Units to Courtney E. Hunley;
WHEREAS, on January 1, 1999, the Richard Todd Rainwater Trust UA
4/15/82 assigned 21,098 Partnership Units to R. Todd Rainwater;
WHEREAS, on January 1, 1999, the Matthew J. Rainwater Trust UA 4/15/82
assigned 21,098 Partnership Units to Matthew J. Rainwater;
WHEREAS, on January 4, 1999, Peter H. Henry exercised his Exchange
Rights with respect to 15,000 Partnership Units;
WHEREAS, on January 6, 1999, Harry H. Frampton, III exercised his
Exchange Rights with respect to 22,753 Partnership Units;
WHEREAS, on January 11, 1999, Crescent Equities issued 290 REIT shares
to each of Morton H. Meyerson, William F. Quinn, and Paul E. Ramsey, III in
payment of trust managers' fees and, in connection therewith, Crescent Equities
shall receive credit for an aggregate Capital Contribution of the Partnership of
$20,064.38;
WHEREAS, on January 20, 1999, Darla D. Moore assigned 1,086 Partnership
Units to each of the Scott Irrevocable Asset Trust and the Pridemore Irrevocable
Asset Trust;
WHEREAS, on January 20, 1999, Richard E. Rainwater assigned 1,086
Partnership Units to each of the Scott Irrevocable Asset Trust and the Pridemore
Irrevocable Asset Trust;
WHEREAS, on January 20, 1999, the Scott Irrevocable Asset Trust
exercised its Exchange Rights with respect to 2,172 Partnership Units;
WHEREAS, on January 20, 1999, the Pridemore Irrevocable Asset Trust
exercised its Exchange Rights with respect to 2,172 Partnership Units;
WHEREAS, the Seventh Amendment to the Second Amended Agreement
reflected a purchase of REIT Shares effective as of September 30, 1998 by
Crescent Equities from "MLI" and "Merrill Lynch" pursuant to a "Termination
Agreement" for a "Note" in the amount of $209,299,016.33 (all terms in quotes
are as defined in the Seventh Amendment to the Second Amended Agreement), and a
related purchase by the Partnership from Crescent Equities of a portion of its
Partnership Interest on the same terms pursuant to Section 8.7.E of the
Effective Agreement;
-3-
<PAGE> 111
WHEREAS, the General Partner desires to correct Exhibit A to the
Effective Agreement, effective as of September 30, 1998, to reflect that the
aforementioned $209,299,016.33 purchase price of the REIT Shares by Crescent
Equities (and the related purchase price of a portion of Crescent Equities'
Partnership Interest by the Partnership) was offset by $697,682.17 in cash paid
by Merrill Lynch International to Crescent Equities (and in turn contributed by
Crescent Equities to the Partnership), resulting in a net purchase price of
$208,601.334.16; 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 $1,486,172 in connection with the
exercise of options to purchase REIT Shares by James Wassel, Barry
Gruebbel, John M. Walker, Jr., Bobby Moore, Debra Spears, Dale B. Herl,
Gerald Haddock, Murphy Yates, and John Zogg, as more fully set forth
above, (ii) the exercise by James Telling, Ross Bowker, Peter G. Henry,
Harry H. Frampton, III, the Scott Irrevocable Asset Trust, and the
Pridemore Irrevocable Asset Trust of their Exchange Rights with respect
to Partnership Units, as more fully set forth above, (iii) the Capital
Contribution by Crescent Equities on October 7, 1998 of $16,687 in
connection with the issuance of 231 REIT Shares to each of Morton H.
Meyerson, William F. Quinn, and Paul E. Rowsey, III, in payment of
trust managers' fees, (iv) the Capital Contribution by Crescent
Equities on November 20, 1998, of $18,521.62 in connection with the
issuance to UBS Securities, LLC of 1,852,162 REIT Shares at $0.01 per
share, (v) the assignment by Richard E. Rainwater of 3,436 Partnership
Units to Darla Moore, (vi) the assignment by the Courtney E. Rainwater
Trust UA 4/15/82 of 21,098 Partnership Units to Courtney E. Hunley,
(vii) the assignment by the Richard Todd Rainwater Trust UA 4/15/82 of
21,098 Partnership Units to R. Todd Rainwater, (viii) the assignment by
the Matthew J. Rainwater Trust UA 4/15/82 of 21,098 Partnership Units
to Matthew J. Rainwater, (ix) the Capital Contribution by Crescent
Equities on January 11, 1999, of $20,062.20 in connection with the
issuance of 290 REIT Shares to each of Morton H. Meyerson, William F.
Quinn, and Paul E. Rowsey, III, in payment of trust managers' fees, (x)
the assignment by Darla D. Moore of 1,086 Partnership Units to each of
the Scott Irrevocable Asset Trust and the Pridemore Irrevocable Asset
Trust; (xi) the assignment by Richard E. Rainwater of 1,086 Partnership
Units to each of the Scott Irrevocable Asset Trust and the Pridemore
Irrevocable Asset Trust; (xii) the Capital Contribution of Crescent
Equities on November 30, 1998, of $199,881,347.96 in connection with
the conversion of the Series B Preferred Shares to REIT Shares; (xiii)
the retirement of the
-4-
<PAGE> 112
Series B Preferred Units on November 30, 1998, in connection with the
conversion of the Series B Preferred Shares to REIT Shares, and (xii)
the adjusted purchase price of $208,601.334.16 for the September 30,
1998, purchase of a portion of Crescent Equities' Partnership Interest,
Exhibit A to the Effective Agreement is hereby deleted in its entirety
and replaced with the Exhibit A attached to this Eighth Amendment and
made a part hereof.
2. Each of Courtney E. Hunley, R. Todd Rainwater, and Matthew
J. Rainwater hereby acknowledges his or her 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.
3. The General Partner hereby admits each of Courtney E.
Hunley, R. Todd Rainwater, and Matthew J. Rainwater as a Substituted
Limited Partner effective as of January 1, 1999, pursuant to Article 11
of the Effective Agreement, with each of Courtney E. Hunley, R. Todd
Rainwater, and Matthew J. Rainwater having the Partnership Interest and
number of Partnership Units set forth on Exhibit A hereto opposite his
or her name. The Partnership Units of each of Courtney E. Hunley, R.
Todd Rainwater, and Matthew J. Rainwater shall have the Exchange Rights
set forth in Section 8.6 of the Effective Agreement.
4. Except as the context may otherwise require, any terms used
in this Eighth Amendment which are defined in the Effective Agreement
shall have the same meaning for purposes of this Eighth 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 have executed this Eighth 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 (other than Crescent Equities)
By: /s/ David M. Dean
Name: David M. Dean
Title: Senior Vice President, Law
-5-
<PAGE> 113
SUBSTITUTED LIMITED PARTNERS:
/s/ Courtney E. Hunley
---------------------------------------
Courtney E. Hunley
/s/ R. Todd Rainwater
---------------------------------------
R. Todd Rainwater
/s/ Matthew J. Rainwater
---------------------------------------
Matthew J. Rainwater
-6-
[EXHIBITS OMITTED]
<PAGE> 114
NINth AMENDMENT
TO THE SECOND AMENDED AND RESTATED
AGREEMENT OF LIMITED PARTNERSHIP
OF
CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
THIS NINTH AMENDMENT TO THE SECOND AMENDED AND RESTATED AGREEMENT OF
LIMITED PARTNERSHIP OF CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP, dated
as of April 15, 1999, 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 (the "Second Amended
Agreement"), 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 Restated
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, and the 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, and the
Seventh Amendment to the Second Amended and Restated Agreement of Limited
Partnership of Crescent Real Estate Equities Limited Partnership, dated as of
September 30, 1998, and the Eighth Amendment to the Second Amended and Restated
Agreement of Limited Partnership of Crescent Real Estate Equities Limited
Partnership, dated as of January 31, 1999 (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, 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 (the "First Amended Agreement");
<PAGE> 115
WHEREAS, the First Amended Agreement, as previously amended, 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 Capital
Individual Exercise Date Shares Purchased Option Plan Contribution
- ---------- ------------- ---------------- ----------- ------------
<S> <C> <C> <C> <C>
Chris Crisman 2/24/99 200 First Amended and $ 4,487.50
Restated 1995 Plan
David Dean 3/5/99 272 1994 Plan $ 5,746.00
Alan Powers 3/15/99 600 1994 Plan $ 12,975.00
Alan Powers 3/15/99 1,200 1995 Plan $ 25,950.00
</TABLE>
WHEREAS, effective as of April 15, 1999, Crescent Equities issued
164,564 REIT Shares to certain former partners of Spectrum Dallas Associates,
L.P. ("SDA") in satisfaction of certain obligations of the Partnership to SDA,
and, in connection therewith, Crescent Equities shall receive credit for a
Capital Contribution to the Partnership of $3,681,132.12;
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 $49,158.50 in connection with the
exercise of options to purchase REIT Shares by Chris Crisman, David
Dean, and Alan Powers, as more fully set forth above, and (ii) the
Capital Contribution by Crescent Equities on April 15, 1999, of
$3,681,132.12 in connection with the issuance of 164,564 REIT Shares to
SDA in satisfaction of certain obligations of the Partnership to SDA,
Exhibit A to the Effective Agreement is hereby deleted in its entirety
and replaced with the Exhibit A attached to this Ninth Amendment and
made a part hereof.
2. Except as the context may otherwise require, any terms used
in this Ninth Amendment which are defined in the Effective Agreement
shall have the same meaning for purposes of this Ninth Amendment as in
the Effective Agreement.
-2-
<PAGE> 116
3. 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 Ninth 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 (other than Crescent
Equities)
By: /s/ DAVID M. DEAN
Name: David M. Dean
Title: Senior Vice President, Law
-3-
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND STATEMENTS OF OPERATIONS FOUND ON PAGES 3 AND 4
OF THE COMPANY'S FORM 10-Q FOR THE THREE MONTHS ENDED, AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 76,612
<SECURITIES> 0
<RECEIVABLES> 108,867
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,084,675
<PP&E> 4,144,085
<DEPRECIATION> (418,434)
<TOTAL-ASSETS> 4,995,805
<CURRENT-LIABILITIES> 109,556
<BONDS> 2,352,272
0
200,000
<COMMON> 1,247
<OTHER-SE> 2,332,730
<TOTAL-LIABILITY-AND-EQUITY> 4,995,805
<SALES> 0
<TOTAL-REVENUES> 185,747
<CGS> 0
<TOTAL-COSTS> 120,212
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 42,481
<INCOME-PRETAX> 30,484
<INCOME-TAX> 0
<INCOME-CONTINUING> 30,484
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 30,484
<EPS-PRIMARY> 0.24
<EPS-DILUTED> 0.24
</TABLE>
