<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
SCHEDULE 14A
(RULE 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(a) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
<TABLE>
<S> <C>
[ ] Preliminary Proxy Statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[ ] Definitive Additional Materials
[ ] Soliciting Material Pursuant to Rule 14a-12
</TABLE>
Crescent Real Estate Equities Company
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
-----------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
-----------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (set forth the amount on which the
filing fee is calculated and state how it was determined):
-----------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
-----------------------------------------------------------------------
(5) Total fee paid:
-----------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
-----------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
-----------------------------------------------------------------------
(3) Filing Party:
-----------------------------------------------------------------------
(4) Date Filed:
-----------------------------------------------------------------------
<PAGE> 2
CRESCENT REAL ESTATE EQUITIES COMPANY
777 Main Street, Suite 2100
Fort Worth, Texas 76102
---------------
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To be held June 12, 2000
The Annual Meeting of Shareholders (the "Meeting") of Crescent Real Estate
Equities Company, a Texas real estate investment trust (the "Company"), will be
held at The Crescent Court Hotel, 400 Crescent Court, Dallas, Texas, on June 12,
2000, at 10:00 a.m., Central Daylight Savings Time, for the following purposes:
1. To elect three trust managers of the Company to serve three-year terms,
or until their respective successors are elected and qualify.
2. To approve the appointment of Arthur Andersen LLP as the independent
auditors of the Company for the fiscal year ending December 31, 2000.
3. To transact such other business as may properly come before the Meeting
or any adjournment thereof.
The foregoing items of business are more fully described in the Proxy Statement,
which is attached and made a part of this Notice.
The Board of Trust Managers has fixed the close of business on April 17,
2000, as the record date for determining the shareholders entitled to notice of
and to vote at the Meeting and any adjournment or postponement thereof.
Shareholders are cordially invited to attend the Meeting in person.
WHETHER OR NOT YOU EXPECT TO ATTEND THE MEETING IN PERSON, YOU ARE URGED TO
MARK, SIGN, DATE AND RETURN THE ENCLOSED PROXY CARD AS PROMPTLY AS POSSIBLE IN
THE POSTAGE-PREPAID ENVELOPE PROVIDED TO ENSURE YOUR REPRESENTATION AND THE
PRESENCE OF A QUORUM AT THE MEETING. IF YOU SEND IN YOUR PROXY CARD OR VOTE BY
TELEPHONE AND THEN DECIDE TO ATTEND THE MEETING TO VOTE YOUR SHARES IN PERSON,
YOU MAY STILL DO SO. YOUR PROXY IS REVOCABLE IN ACCORDANCE WITH THE PROCEDURES
SET FORTH IN THE PROXY STATEMENT. ALTERNATIVELY, YOU MAY VOTE BY TELEPHONE AT
1-877-PRX-VOTE (1-877-779-8683) AND BY INTERNET AT
http://www.eproxyvote.com/cei. INSTRUCTIONS REGARDING TELEPHONE AND INTERNET
VOTING ARE INCLUDED ON THE ENCLOSED PROXY CARD.
By Order of the Board of Trust Managers,
May 1, 2000 David M. Dean
Fort Worth, Texas Secretary
<PAGE> 3
CRESCENT REAL ESTATE EQUITIES COMPANY
777 Main Street, Suite 2100
Fort Worth, Texas 76102
---------------
PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS
To Be Held On June 12, 2000
This Proxy Statement is furnished to shareholders of Crescent Real Estate
Equities Company, a Texas real estate investment trust (the "Company"), in
connection with the solicitation of proxies by the board of trust managers of
the Company (the "Board of Trust Managers") for use at the 2000 Annual Meeting
of Shareholders of the Company (the "Meeting") to be held on Monday, June 12,
2000, at 10:00 a.m., Central Daylight Savings Time, for the purposes set forth
in the Notice of Annual Meeting. This Proxy Statement and the accompanying form
of proxy are first being sent or given to shareholders on or about May 2, 2000.
The Company owns its assets and conducts its operations through Crescent
Real Estate Equities Limited Partnership (the "Operating Partnership"), a
Delaware limited partnership, and its other subsidiaries. The sole general
partner of the Operating Partnership is Crescent Real Estate Equities, Ltd. (the
"General Partner"), a Delaware corporation, which is a wholly owned subsidiary
of the Company.
RECORD DATE AND OUTSTANDING CAPITAL SHARES
The record date for determination of the shareholders entitled to notice of
and to vote at the Meeting is the close of business on April 17, 2000 (the
"Record Date"). At the close of business on the Record Date, the Company had
117,016,670 common shares of beneficial interest, par value $.01 per share (the
"Common Shares"), issued, outstanding and entitled to vote at the Meeting.
PROCEDURAL MATTERS
Any proxy, if received in time, properly signed and not revoked, will be
voted at the Meeting in accordance with the directions of the shareholder. If no
directions are specified, the proxy will be voted FOR each of the proposals set
forth in this Proxy Statement. If any other matter or business is brought before
the Meeting or any adjournment thereof, the proxy holders may vote the proxy in
their discretion. The Board of Trust Managers does not know of any such matter
or business to be presented for consideration.
A proxy may be revoked by (i) delivering a written statement to the
Secretary of the Company stating that the proxy is revoked, (ii) presenting at
the Meeting a subsequent proxy executed by the person executing the prior proxy,
or (iii) attending the Meeting and voting in person.
QUORUM AND VOTING
The presence, in person or by proxy, of the holders of a majority of the
Common Shares outstanding as of the Record Date is necessary to constitute a
quorum for the transaction of business at the Meeting. In deciding all
-1-
<PAGE> 4
questions, a holder of Common Shares is entitled to one vote, in person or by
proxy, for each Common Share held in his or her name on the Record Date.
REQUIRED AFFIRMATIVE VOTE AND VOTING PROCEDURES
The vote required to elect the nominees as trust managers is a majority of
the votes cast at the Meeting by the holders of Common Shares entitled to vote
in the election of trust managers. The vote required to ratify appointment of
independent auditors is the affirmative vote of the holders of a majority of the
votes cast by the holders of Common Shares entitled to vote on the matter.
Common Shares held by shareholders present at the Meeting in person who do not
vote and ballots marked "abstain" or "withhold authority" will be counted as
present at the Meeting for quorum purposes. Under the Company's Declaration of
Trust, Amended and Restated Bylaws, as amended (the "Bylaws") and applicable
law, abstentions and broker non-votes with respect to the election of trust
managers or the ratification of the appointment of independent auditors will not
constitute votes cast and, as a result, will have no effect on the outcome of
the vote on the two items.
COSTS OF PROXY SOLICITATION
The Company will bear the cost of preparing, assembling and mailing the
proxy material. In an effort to have as large a representation at the Meeting as
possible, special solicitation of proxies may, in certain instances, be made
personally, or by telephone, telegraph, or mail by one or more employees of the
General Partner, who will not receive any additional compensation in connection
therewith. The Company will also reimburse brokers, banks, nominees and other
fiduciaries for postage and reasonable clerical expenses of forwarding the proxy
materials to their principals, the beneficial owners of the Common Shares.
PROPOSAL NUMBER 1
ELECTION OF TRUST MANAGERS
BOARD OF TRUST MANAGERS
The trust managers of the Company are divided into three classes, with the
shareholders electing a portion of the trust managers annually. The trust
managers whose terms will expire at the Meeting are Richard E. Rainwater,
Anthony M. Frank and William F. Quinn. Messrs. Rainwater, Frank and Quinn have
been nominated and have agreed to stand for election at the Meeting as trust
managers to hold office until the Annual Meeting of Shareholders in 2003, or
until their successors are elected and qualify.
The nominees who receive a majority of the votes cast by shareholders who
are present in person or represented by proxy at the Meeting and entitled to
vote on the election of trust managers, will be elected as trust managers of the
Company.
THE BOARD OF TRUST MANAGERS OF THE COMPANY RECOMMENDS A VOTE FOR RICHARD E.
RAINWATER, ANTHONY M. FRANK AND WILLIAM F. QUINN AS TRUST MANAGERS TO HOLD
OFFICE UNTIL THE ANNUAL MEETING OF SHAREHOLDERS IN 2003, OR UNTIL THEIR
SUCCESSORS ARE ELECTED AND QUALIFY.
If one or more of the nominees for trust manager becomes unable to serve
for any reason, the Board of Trust Managers may designate substitute nominees,
in which event the persons named in the enclosed proxy will vote for the
election of such substitute nominee or nominees, or may reduce the number of
trust managers on the Board of Trust Managers.
Set forth below is information with respect to the current six trust
managers of the Company, including the nominees, all of whom joined the Company
as directors in 1994 and the executive officers of the Company and the General
Partner.
-2-
<PAGE> 5
<TABLE>
<CAPTION>
NAME TERM EXPIRES AGE POSITION
---- ------------ --- --------
<S> <C> <C> <C>
Richard E. Rainwater................. 2000 55 Chairman of the Board of Trust Managers of
the Company
John C. Goff......................... 2002 44 Vice Chairman of the Board of Trust
Managers of the Company, Chief Executive
Officer of the Company and the General
Partner, and Sole Director of the General
Partner
Anthony M. Frank..................... 2000 68 Trust Manager of the Company
Morton H. Meyerson................... 2001 61 Trust Manager of the Company
William F. Quinn..................... 2000 52 Trust Manager of the Company
Paul E. Rowsey, III.................. 2002 45 Trust Manager of the Company
Dennis H. Alberts.................... N/A 51 President and Chief Operating Officer of
the Company and the General Partner
Jerry R. Crenshaw, Jr................ N/A 36 Senior Vice President, Chief Financial and
Accounting Officer of the Company and
Senior Vice President and Chief Financial
Officer of the General Partner
David M. Dean........................ N/A 39 Senior Vice President, Law and
Administration, and Secretary of the
Company and the General Partner
Alan D. Friedman..................... N/A 46 President of Acquisitions/Development and
Private Equity of the General Partner
William D. Miller.................... N/A 41 Senior Vice President, Office Asset
Management of the General Partner
Bruce A. Picker...................... N/A 35 Senior Vice President and Chief Investment
Officer of the General Partner
Jason E. Anderson.................... N/A 30 Vice President, Business Development of the
General Partner
Theresa E. Black..................... N/A 36 Vice President, Tax of the General Partner
Barry L. Gruebbel.................... N/A 45 Vice President, Property Management,
Southwest Region of the General Partner
Howard W. Lovett..................... N/A 43 Vice President, New Business Opportunities
of the General Partner
Keira B. Moody....................... N/A 29 Vice President, Investor Relations of the
General Partner
Jane B. Page......................... N/A 39 Vice President, Asset Management, Houston
Region of the General Partner
Christopher T. Porter................ N/A 34 Vice President and Treasurer of the Company
and the General Partner
Thomas Shaw, Jr...................... N/A 38 Vice President, Human Resources and
Administration of the General Partner
</TABLE>
-3-
<PAGE> 6
<TABLE>
<CAPTION>
NAME TERM EXPIRES AGE POSITION
---- ------------ --- --------
<S> <C> <C> <C>
Suzanne M. Stevens................... N/A 31 Vice President, Controller of the General
Partner
John L. Zogg, Jr..................... N/A 36 Vice President, Leasing/Marketing,
Southwest Region, of the General Partner
</TABLE>
TRUST MANAGERS AND EXECUTIVE OFFICERS
The Board of Trust Managers currently consists of six members, divided into
three classes serving staggered three-year terms. The following is a summary of
the experience of the current and proposed trust managers and the current
executive officers.
Richard E. Rainwater has been an independent investor since 1986. From 1970
to 1986, he served as the chief investment advisor to the Bass family, whose
overall wealth increased dramatically during his tenure. During that time, Mr.
Rainwater was principally responsible for numerous major corporate and real
estate acquisitions and dispositions. Immediately after beginning his
independent investment activities, he founded ENSCO International Incorporated
("ENSCO"), an oil field service and offshore drilling company, in 1986.
Additionally, in 1987 he co-founded Columbia Hospital Corporation, and in 1989
participated in a management-led buy out of HCA-Hospital Corporation of America.
In 1992, Mr. Rainwater co-founded Mid Ocean Limited, a provider of casualty
re-insurance. In February 1994, he assisted in the merger of Columbia Hospital
Corporation and HCA-Hospital Corporation of America that created Columbia/HCA
Healthcare Corporation. Mr. Rainwater serves as a director of Pioneer Natural
Resources ("Pioneer"), one of the largest oil and gas companies in the United
States. In 1996, Mr. Rainwater led a recapitalization of Mesa, Inc. (Pioneer's
predecessor), and a partnership that Mr. Rainwater controls became a major
shareholder in July 1996. Mr. Rainwater also serves as chairman of the board of
directors of Crescent Operating, Inc. ("COI"). Mr. Rainwater is a graduate of
the University of Texas at Austin and the Graduate School of Business at
Stanford University. Mr. Rainwater has served as the Chairman of the Board of
Trust Managers since the Company's inception in 1994.
John C. Goff currently is the managing director of Goff Moore Strategic
Partners, L.P., a private investment partnership that serves as the primary
investment vehicle for its principals, including Mr. Rainwater and his family.
Mr. Goff joined Mr. Rainwater shortly after he began Rainwater, Inc. as an
independent investor in 1986. From 1987 to 1994, Mr. Goff was vice president of
Rainwater, Inc., serving as a senior investment advisor and principal. Mr. Goff
is on the board of Gainsco, Inc., a publicly traded property and casualty
insurance company; The Staubach Company, one of the nation's largest tenant
representation firms; and Texas Capital Bancshares, Inc., a national bank. Mr.
Goff served as chairman of Charter Behavioral Healthcare Systems, L.L.C.
("CBHS") from 1997 to 1998, and he has served as vice chairman of the board of
directors of COI since its inception in June 1997. From 1981 to 1987, Mr. Goff
worked for KPMG Peat Marwick, and prior to that Mr. Goff worked for Century
Development Corporation, a major office developer and property management
company. Mr. Goff is a graduate of the University of Texas and is a Certified
Public Accountant. Mr. Goff served as Chief Executive Officer and as a trust
manager from the Company's inception in 1994 through December 19, 1996, when he
became Vice Chairman of the Board of Trust Managers. In June 1999, Mr. Goff
became President and Chief Executive Officer of the Company and the General
Partner, and sole director of the General Partner. In April 2000, Mr. Goff
resigned as President of the Company and the General Partner and is currently
the Vice Chairman of the Board of Trust Managers, Chief Executive Officer of the
Company and the General Partner, and the sole director of the General Partner.
Anthony M. Frank serves as chairman of Belvedere Capital Partners, general
partner of the California Community Financial Institutions Fund LP. He served as
Postmaster General of the United States from 1988 to 1992. Prior to that time,
Mr. Frank served as chairman and chief executive officer of First Nationwide
Bank, chairman of the Federal Home Loan Bank of San Francisco, chairman of the
California Housing Finance Agency and chairman of the Federal Home Loan Mortgage
Corporation Advisory Board. From 1992 until 1993, he served as the founding
chairman of Independent Bancorp of Arizona. Mr. Frank also serves as a director
of Charles Schwab & Co., one of the nation's largest discount brokerages; Temple
Inland, Inc., a manufacturer of paper and
-4-
<PAGE> 7
timber products; Bedford Property Investors, Inc., an office and commercial
property REIT investing primarily on the West Coast; General American Investors
Company, Inc., a closed-end investment company; Financial Security Assurance, a
company providing credit enhancement for municipal bond issuers; Cotelligent,
Inc., a provider of temporary office support services; and COI. Mr. Frank
received a Bachelor of Arts degree from Dartmouth College and a Master of
Business Administration degree from the Amos Tuck School of Business at
Dartmouth.
Morton H. Meyerson is chairman and chief executive officer of 2M Companies,
Inc., a private investment firm. Before beginning his career, he served as a
lieutenant in the United States Army on active duty from 1961 to 1963. Mr.
Meyerson joined Bell Helicopter in 1964 and later joined EDS as a systems
engineer trainee in 1966. He subsequently served as systems engineer, senior
systems engineer, project manager, group manager and vice president. Mr.
Meyerson took a leave of absence from EDS to become president and later chairman
of the Wall Street firm Dupont Glore, Forgan, Inc. He returned to EDS in 1975.
In 1979, he assumed the office of president of EDS and in May of 1986, became
vice chairman of the board. In December of 1986, Mr. Meyerson retired from EDS
to become a private investor. In 1992, he began serving as chairman and chief
executive officer of Perot Systems Corporation until his retirement in December
1997. He is a director of ENSCO and TeleTech Holdings, Inc. Mr. Meyerson holds
Bachelor of Arts degrees in economics and philosophy from the University of
Texas at Austin.
William F. Quinn currently serves as president of AMR Investment Services,
Inc., the investment services affiliate of American Airlines, with
responsibility for the management of pension and short-term fixed income assets.
In addition, Mr. Quinn is chairman of the board of American Airlines Employees
Federal Credit Union, president and a trustee of the American Advantage Mutual
Funds and serves on the advisory board for Southern Methodist University's
Endowment Fund. Prior to being named to his current position in 1986, Mr. Quinn
held several management positions with American Airlines and its subsidiaries.
Before joining American Airlines in 1974, Mr. Quinn was employed with the
accounting firm of Arthur Young & Company. He holds a Bachelor of Science degree
in accounting from Fordham University and is a Certified Public Accountant.
Paul E. Rowsey, III is president of Eiger, Inc., a private real estate
investment firm, and the manager of Eiger Fund I, L.P., a real estate equity
investment fund. Mr. Rowsey was formerly president and a member of the board of
directors of Rosewood Property Company, a real estate investment company, a
position he held from 1990 until 1998. Mr. Rowsey is also a member of the board
of directors of ENSCO and COI. Mr. Rowsey began his career in 1980 as an
attorney specializing in commercial real estate. Mr. Rowsey holds a Bachelor of
Arts degree from Duke University and a Juris Doctor degree from Southern
Methodist University School of Law.
Dennis H. Alberts, prior to joining the Company, served as President and
Chief Executive Officer of Pacific Realty Trust, a privately held retail
shopping center REIT, which he founded in 1993. While at Pacific Realty Trust,
Mr. Alberts directed all aspects of the company, including acquisition,
development and operational activities. Prior to founding Pacific Realty Trust,
Mr. Alberts served as President and Chief Operating Officer of First Union Real
Estate Investments, a publicly held retail, multi-family and office REIT. From
1987 to 1991, Mr. Alberts served as President and Chief Executive Officer of
Rosewood Property Company where he focused on asset management and leasing of
Rosewood's office portfolio. Before joining Rosewood Property Company, he served
as President and Managing Partner of Trammell Crow Residential Companies of
Dallas from 1984 to 1987. From 1973 to 1984, Mr. Alberts served as Executive
Vice President of Interfirst Bank of Dallas where he was responsible for real
estate lending. Mr. Alberts holds a Bachelor of Science degree and Master of
Business Administration degree from the University of Missouri. Mr. Alberts
joined the Company in April 2000 as President and Chief Operating Officer.
Jerry R. Crenshaw, Jr., prior to joining the Company, was the controller of
Carrington Laboratories, Inc., a pharmaceutical and medical device company, from
1991 until February 1994. From 1986 until 1991, Mr. Crenshaw was an audit senior
in the real estate services group of Arthur Andersen LLP. Mr. Crenshaw holds a
Bachelor of Business Administration degree in accounting from Baylor University
and is a Certified Public Accountant. Mr. Crenshaw served as Controller from the
Company's inception in 1994 to March 1997 when he became Vice President and
served as Vice President, Controller until September 1999. In addition, Mr.
Crenshaw served as Interim
-5-
<PAGE> 8
Co-Chief Financial Officer from August 1998 until April 1999. Since September
1999, Mr. Crenshaw has served as Senior Vice President and Chief Financial
Officer.
David M. Dean, prior to joining the Company, was an attorney for Burlington
Northern Railroad Company from 1992 to 1994, and he served as Assistant General
Counsel in 1994. At Burlington Northern, he was responsible for the majority of
that company's transactional and general corporate legal work. Mr. Dean was
previously engaged in the private practice of law from 1986 to 1990 with Kelly,
Hart & Hallman, and from 1990 to 1992 with Jackson & Walker, L.L.P., where he
worked primarily on acquisition, financing and venture capital transactions for
Mr. Rainwater and related investor groups. Mr. Dean graduated with honors from
Texas A&M University with Bachelor of Arts degrees in English and philosophy in
1983. He also holds a Juris Doctor degree and a Master of Laws degree in
taxation from Southern Methodist University School of Law. Mr. Dean served as
Senior Vice President, Law, and Secretary from the time he joined the Company in
August 1994 to September 1999 when he became Senior Vice President, Law and
Administration and Secretary. Mr. Dean is Ms. Black's spouse.
Alan D. Friedman has more than twenty years of development and acquisition
experience in the commercial real estate business. Since 1990, Mr. Friedman has
owned an advisory company, Trisept, Inc. through which he provides acquisition
and development services for commercial properties to clients, which has
previously included the Company. From 1980 to 1990, Mr. Friedman was an
operating partner at Lincoln Property, where he had direct responsibility for
developing, financing, marketing and managing more than three million square
feet of projects in Dallas/Fort Worth. Mr. Friedman is a member of ULI, serves
on the North Texas Board of the NAIOP and is a trustee at Texas Christian
University. A graduate of the University of Texas with a degree in finance, Mr.
Friedman served as President of Development and Private Equity from the time he
joined the Company in July 1998 to September 1999 when he became President of
Acquisitions/Development and Private Equity.
William D. Miller, prior to joining the Company, served as vice president,
legal affairs of the Texas Rangers major league baseball club, beginning in
March 1994. Mr. Miller was also a member of the senior management of the Rangers
and certain partnerships affiliated with the Rangers. In addition, Mr. Miller
functioned as the primary lawyer responsible for the Rangers' interest in the
development of The Ballpark in Arlington project. Prior to joining the Rangers,
Mr. Miller practiced law at Jackson & Walker, L.L.P. from September 1986, was
the lead real estate lawyer for Mr. Rainwater and Rainwater, Inc., and was
instrumental in the formation transactions of the Company. Mr. Miller received
his Bachelor of Science degree with first honors in commerce and engineering
sciences from Drexel University, and he received his Juris Doctor degree with
honors from the University of Texas School of Law. Mr. Miller served as Senior
Vice President, Administration from the time he joined the Company in May 1997
to November 1998, when he became Senior Vice President, Asset Management. Since
September 1999, Mr. Miller has served as Senior Vice President, Office Asset
Management.
Bruce A. Picker, prior to joining the Company, worked for Rainwater, Inc.
from 1990 to 1994 as the partnership controller of its first major real estate
acquisition. Previously, Mr. Picker was a senior accountant for Arthur Andersen
LLP in its audit department from 1986 to 1989. Mr. Picker holds a Bachelor of
Business Administration degree in accounting from Harding University and is a
Certified Public Accountant. Mr. Picker served as the Treasurer of the Company
from July 1994 to June 1996 when he became a Vice President and served as Vice
President and Treasurer until September 1999. In addition, Mr. Picker served as
Interim Co-Chief Financial Officer from August 1998 until April 1999. Since
September 1999, Mr. Picker has served as Senior Vice President and Chief
Investment Officer.
Jason E. Anderson, prior to joining the Company, served as an audit senior
for Arthur Andersen LLP in the audit department from 1992 to 1994. Mr. Anderson
holds a Bachelor of Business Administration degree in accounting from Texas
Christian University and is a Certified Public Accountant. Mr. Anderson served
as a financial analyst for the Company from August 1994 to August 1995 and then
as a financial manager until January 1998 when he became Treasury Manager, a
position he held until September 1999. Since September 1999, Mr. Anderson has
served as Vice President, Business Development.
Theresa E. Black, prior to joining the Company, served as a tax senior
manager in the real estate services group of Ernst & Young, LLP, from 1987 until
April 1994. Ms. Black holds a Bachelor of Business Administration
-6-
<PAGE> 9
degree in accounting and a Master of Professional Accounting in taxation from
The University of Texas at Austin and is a Certified Public Accountant. Ms.
Black served as Tax Director from the time she joined the Company in April 1995
to September 1999, when she became Vice President, Tax. Ms. Black is Mr. Dean's
spouse.
Barry L. Gruebbel, prior to joining the Company, was involved with the
property and asset management of more than 10 million square feet of Class A
office, retail, industrial and multi-family real estate in Texas and New Mexico
as the vice president of property management with Hines Industrial from 1982 to
1986, as the vice president of property management with Southland Investment
Properties from 1986 to 1990, and most recently as the director of property
management at The Crescent for Rosewood Property Company from 1990 until
formation of the Company. Mr. Gruebbel is a Certified Property Manager and is
currently active in the real estate organizations of the Institute of Real
Estate Management and Building Owners and Managers Association. Mr. Gruebbel
received a Bachelor of Business Administration degree in real estate from the
University of Texas at Arlington. Mr. Gruebbel has been with the Company since
its inception and served as Vice President, Property Management from February
1997 to September 1999 when he became Vice President, Property Management,
Southwest Region.
Howard W. Lovett, prior to joining the Company, was president of The
Gaineswood Company, a private investment company specializing in real estate and
venture capital investments, from January 1989 to August 1995. Previously, Mr.
Lovett was vice president of Morgan & Company, a Houston-based real estate
development company, where he was responsible for income property acquisitions
and the acquisition, development and management of Wildcat Ranch, an exclusive
residential development outside Aspen, Colorado. Mr. Lovett graduated from
Carleton College with a Bachelor of Arts degree in English. He also holds a
Master of Business Administration degree from Harvard University. Mr. Lovett
served as Vice President, Corporate Leasing from June 1996 to September 1999
when he became Vice President, New Business Opportunities.
Keira B. Moody, prior to joining the Company served as a senior auditor for
Coopers & Lybrand in Fort Worth from August 1992 to May 1994. Ms. Moody holds a
Bachelor of Business Administration degree in accounting from Texas Christian
University and is a Certified Public Accountant. Ms. Moody served as a financial
analyst for the Company from May 1994 to September 1995 and then as a financial
manager until March 1999 when she became Regional Property Controller. Ms. Moody
served as Regional Property Controller until December 1999 when she became Vice
President, Investor Relations.
Jane B. Page, prior to joining the Company, was employed by Metropolitan
Life Real Estate Investments and held positions of director of corporate
property management and regional asset manager, responsible for managing and
leasing a 12-million square foot, high-grade institutional portfolio in Houston,
Austin and New Orleans. Ms. Page's fourteen-year tenure at MetLife also included
membership on MetLife's Investment Committee, which reviewed and approved all
significant transactions on a national basis. Ms. Page serves on the boards of
the Greater Houston Partnership, Central Houston, Inc. and the Downtown Houston
Management District. Ms. Page graduated with a Bachelor of Arts degree from
Point Loma College in San Diego and with a Master of Business Administration
degree from the University of San Francisco. She also holds CCIM and CPM
designations. Ms. Page served as Director of Asset Management, Houston Region
from the time she joined the Company in January 1998 to December 1998, when she
became Vice President, Houston Region Asset Management and served in that
capacity until September 1999. Since September 1999, Ms. Page has served as Vice
President, Asset Management, Houston Region.
Christopher T. Porter, prior to joining the Company, held the office of
Senior Vice President, Investor Relations, for Associates First Capital
Corporation, a leading financial services firm, from January 1999 through
October 1999. Prior to 1999, Mr. Porter served as Vice President and as
Assistant Treasurer in banking relations and cash management at Associates First
Capital Corporation from 1991 through 1998. Mr. Porter received a Bachelor of
Science degree in economics from the University of Texas at Austin, a Master of
Business Administration degree in finance from the University of North Texas and
is a certified cash manager. Mr. Porter has served as Vice President and
Treasurer since December 1999.
-7-
<PAGE> 10
Thomas Shaw, Jr., prior to joining the Company, was employed by Associates
First Capital Corporation from December 1985 to January 2000. While at
Associates First Capital Corporation, Mr. Shaw held multiple human resources
senior executive positions, supporting both corporate and operational units. Mr.
Shaw graduated with a Bachelor of Business Administration degree in management
from the University of Texas at Austin and is certified as a Senior Human
Resources Professional. Mr. Shaw has served as Vice President, Human Resources
and Administration since February 2000.
Suzanne M. Stevens, prior to joining the Company, served as a senior
auditor for Arthur Andersen LLP from August 1992 to August 1994. Ms. Stevens
holds a Bachelor of Business Administration degree in accounting and finance
from Texas Christian University and is a Certified Public Accountant. Ms.
Stevens served as a financial analyst for the Company from August 1994 to
September 1995 and then as a financial manager until January 1998, when she
became Assistant Controller. Ms. Stevens served as Assistant Controller until
September 1999 when she became Vice President, Controller.
John L. Zogg, Jr. served as vice president of the commercial real estate
group of Rosewood Property Company, responsible for marketing and leasing office
space in the Dallas and Denver areas from January 1989 to May 1994. For three
years prior to joining Rosewood Property Company, Mr. Zogg worked as marketing
manager of Gerald D. Hines Interests, responsible for office leasing in the
Dallas metropolitan area. He graduated from the University of Texas at Austin
with a Bachelor of Arts degree in economics and holds a Master of Business
Administration degree from the University of Dallas. Mr. Zogg joined the Company
as a Vice President in May 1994 and served as Vice President, Leasing and
Marketing, from June 1997 to September 1999 when he became Vice President,
Leasing/Marketing, Southwest Region.
TRUST MANAGER COMPENSATION
Each trust manager who is not also an officer of the Company receives an
annual fee of $20,000 (payable in cash or, at the election of the trust manager,
in Common Shares in an amount determined by dividing the fees otherwise payable
by 90% of the fair market value of the Common Shares), a meeting fee of $1,000
for each Board of Trust Managers (but not committee) meeting attended (in person
or by telephone) and reimbursement of expenses incurred in attending meetings.
Trust managers who are also officers receive no separate compensation for their
service as trust managers.
COMMITTEES OF THE BOARD OF TRUST MANAGERS
Audit Committee. The Audit Committee consists of Anthony M. Frank,
Chairman, and William F. Quinn and Paul E. Rowsey, III. The Audit Committee,
which held three meetings in 1999, makes recommendations concerning the
engagement of independent public accountants, reviews with the independent
public accountants the plans and results of the audit engagement, approves
professional services that the independent public accountants provide, reviews
the independence of the public accountants, considers the range of audit and
non-audit fees and reviews the adequacy of the Company's internal accounting
controls. From January 1, 1999 through October 19, 1999, the Audit Committee
consisted of Anthony M. Frank, as Chairman, and William F. Quinn. On October 20,
2000, the Board of Trust Managers authorized and approved the expansion of the
Audit Committee to three members and appointed Paul E. Rowsey, III as the
additional member of the Audit Committee.
Executive Compensation Committee. The Executive Compensation Committee
consists of Morton H. Meyerson, Chairman, and Paul E. Rowsey, III. The Executive
Compensation Committee, which held one meeting in 1999, determines compensation
for the Company's executive officers and administers the stock incentive and
other compensation plans that the Company adopts. The Executive Compensation
Committee also nominates persons to serve as members of the Board of Trust
Managers. The Executive Compensation Committee will consider nominees that
management, shareholders and others recommend, and these recommendations may be
delivered in writing to the attention of the Executive Compensation Committee in
care of the Company Secretary at the Company's principal executive offices.
-8-
<PAGE> 11
Intercompany Evaluation Committee. The Intercompany Evaluation Committee
consists of Morton H. Meyerson and William F. Quinn. The Board of Trust Managers
appointed the Intercompany Evaluation Committee to review, confirm and ratify,
in the Company's capacity as sole stockholder of the General Partner, all
determinations and acts of the Operating Partnership and the General Partner
relating to the Intercompany Agreement between the Operating Partnership and
COI, dated June 3, 1997 (the "Intercompany Agreement"), and any other
transactions with COI or its affiliates that the General Partner presents to the
Company from time to time. The Intercompany Evaluation Committee did not hold
any meetings in 1999.
During the last fiscal year, the Board of Trust Managers held five
meetings, and no trust manager attended fewer than 75% of the aggregate of all
meetings of the Board of Trust Managers and the committees, if any, upon which
such trust manager served and which were held during the period of time that
such person served on the Board of Trust Managers or such committee.
PROPOSAL NUMBER 2
RATIFICATION OF APPOINTMENT OF INDEPENDENT AUDITORS
Arthur Andersen LLP has served as the Company's independent auditors from
inception through the fiscal year ended December 31, 1999, and has been
appointed by the Board of Trust Managers to continue as the Company's
independent auditors for the fiscal year ending December 31, 2000. In the event
that ratification of this appointment of auditors is not approved by the
affirmative vote of a majority of the votes cast on the matter by shareholders
present in person or represented by proxy at the Meeting and entitled to vote on
the matter, then the Board of Trust Managers will reconsider its appointment of
independent auditors.
A representative of Arthur Andersen LLP is expected to be present at the
Meeting. The representative will have an opportunity to make a statement and
will be able to respond to appropriate questions.
THE BOARD OF TRUST MANAGERS RECOMMENDS A VOTE FOR RATIFICATION OF THE
APPOINTMENT OF ARTHUR ANDERSEN LLP AS THE COMPANY'S INDEPENDENT AUDITORS FOR THE
YEAR ENDING DECEMBER 31, 2000.
VOTING SECURITIES AND PRINCIPAL SHAREHOLDERS
The following table sets forth the beneficial ownership of Common Shares
for (i) each shareholder of the Company who beneficially owns more than 5% of
the Common Shares, (ii) each trust manager and executive officer of the Company
or the General Partner, and (iii) the trust managers and executive officers of
the Company or the General Partner as a group. Unless otherwise indicated in the
footnotes, the listed beneficial owner directly owns all Common Shares.
-9-
<PAGE> 12
BENEFICIAL OWNERSHIP (1)
<TABLE>
<CAPTION>
NUMBER OF PERCENT OF
NAME AND ADDRESS OF BENEFICIAL OWNER(2) COMMON SHARES (3)(4)(5) COMMON SHARES (6)
- --------------------------------------- ----------------------- -----------------
<S> <C> <C>
Richard E. Rainwater ......................... 12,825,938(7) 10.4%
John C. Goff ................................. 2,897,029(8) 2.5%
Anthony M. Frank ............................. 50,000 *
Morton H. Meyerson ........................... 278,490(9) *
William F. Quinn ............................. 50,885 *
Paul E. Rowsey, III .......................... 62,285 *
Alan D. Friedman ............................. 124,810(10) *
David M. Dean ................................ 79,073(11) *
Jerry R. Crenshaw, Jr. ....................... 65,239 *
William D. Miller ............................ 86,238 *
The Prudential Insurance Company of America .. 17,849,573(12) 15.3%
751 Broad Street
Newark, New Jersey 07102-3777
FMR Corp. .................................... 5,855,500(13) 5.0%
82 Devonshire Street
Boston, Massachusetts 07102-377
Franklin Resources, Inc. ..................... 6,042,817(14) 5.2%
777 Mariners Island Boulevard
San Mateo, California 94404
Trust Managers and Executive Officers as a
Group (21 persons) .......................... 16,754,758(7)(8)(9)(10)(11) 13.3%
</TABLE>
- ----------
* Less than 1%
(1) All information is as of the Record Date, unless otherwise indicated.
The number of Common Shares beneficially owned is reported on the
basis of regulations of the Securities and Exchange Commission (the
"Commission") governing the determination of beneficial ownership of
securities. Accordingly, the number of Common Shares a person
beneficially owns includes (i) the number of Common Shares that such
person has the right to acquire within 60 days of the Record Date upon
the exercise of options to purchase Common Shares ("Stock Options")
granted pursuant to the 1994 Crescent Real Estate Equities, Inc. Stock
Incentive Plan (the "1994 Plan") or the 1995 Crescent Real Estate
Equities, Inc. Stock Incentive Plan (as amended, the "1995 Plan"),
(ii) the number of Common Shares that may be issued upon exchange of
partnership units of the Operating Partnership ("Units") that such
person owns for Common Shares, with such exchange made on the basis of
two Common Shares for each Unit exchanged (assuming the Company elects
to issue Common Shares rather than pay cash upon such exchange), and
(iii) the number of Common Shares that may be issued upon exercise of
options (the "Unit Options") granted under the 1996 Crescent Real
Estate Equities Limited Partnership Unit Incentive Plan (the "Unit
Plan"), as amended, to purchase Units and the subsequent exchange of
such Units for Common Shares, with such exchange made on the basis of
two Common Shares for each Unit exchanged (assuming the Company elects
to issue Common Shares rather than pay cash upon such exchange). In
addition, the number of Common Shares a person beneficially owns is
deemed to include the number of Common Shares issuable upon exchange
of the Company's 6 3/4% Series A Convertible Cumulative Preferred
Shares, each of which is currently convertible into .6119 Common
Shares (the "Preferred Shares"). As of the Record Date, none of the
persons listed in the Beneficial Ownership table, other than FMR
Corp., and no executive officer not listed in the table, beneficially
owned any Preferred Shares.
(2) Unless otherwise indicated, the address of each beneficial owner is
777 Main Street, Suite 2100, Fort Worth, Texas 76102.
(3) The number of Common Shares the following persons beneficially own
includes the number of Common Shares indicated due to the vesting of
unexercised Stock Options, as follows: Anthony M. Frank -- 16,800;
Morton H. Meyerson -- 16,800 (see footnote 9); William F. Quinn --
43,000; Paul E. Rowsey, III -- 25,200 Jerry R. Crenshaw -- 51,600;
David M. Dean -- 56,500; Alan D. Friedman -- 62,500; William D. Miller
-- 85,000; and Trust Managers and Executive Officers as a Group --
531,350.
(4) The number of Common Shares the following persons beneficially own
includes the number of Common Shares owned indirectly through
participation in the General Partner's 401(k) Plan as of March 31,
2000, as follows: John C. Goff -- 3,625; Jerry R. Crenshaw -- 2,578;
David M. Dean -- 4,452; William D. Miller -- 891; and Trust Managers
and Executive Officers as a Group -- 17,074.
(5) The number of Common Shares the following persons beneficially own
includes the number of Common Shares that may be issued upon exchange
of Units that such person owns, as follows: Richard E. Rainwater --
6,676,106; John C. Goff -- 770,114; Alan D. Friedman -- 54,300; Morton
H. Meyerson -- 54,858; and Trust Managers and Executive Officers as a
Group -- 7,681,966.
-10-
<PAGE> 13
(6) The percentage of Common Shares that a person listed in the Beneficial
Ownership table beneficially owns assumes that (i) as to that person,
all Units are exchanged for Common Shares, all Preferred Shares are
exchanged for Common Shares, all Stock Options exercisable within 60
days of the Record Date are exercised and all Unit Options exercisable
within 60 days of the Record Date are exercised and the Units so
acquired are subsequently exchanged for Common Shares, and (ii) as to
all other persons, no Units are exchanged for Common Shares, no
Preferred Shares are exchanged for Common Shares, and no Stock Options
or Unit Options are exercised.
(7) The number of Common Shares that Mr. Rainwater beneficially owns
includes 743,920 Common Shares and 4,368 Common Shares that may be
issued upon exchange of Units that Darla Moore, Mr. Rainwater's
spouse, owns. Mr. Rainwater disclaims beneficial ownership of these
Common Shares. In addition, the number of Common Shares that Mr.
Rainwater beneficially owns includes 2,206,374 Common Shares and
6,335,564 Common Shares that may be issued upon exchange of Units that
Mr. Rainwater owns indirectly, including (i) 12,346 Common Shares and
49,506 Common Shares that may be issued upon exchange of Units owned
by Rainwater, Inc., a Texas corporation, of which Mr. Rainwater is a
director and the sole owner, (ii) 2,425,836 Common Shares that may be
issued upon exchange of Units owned by Rainwater Investor Partners,
Ltd., a Texas limited partnership, of which Rainwater, Inc. is the
sole general partner, (iii) 555,424 Common Shares that may be issued
upon exchange of Units owned by Rainwater RainAm Investors, L.P., a
Texas limited partnership, of which Rainwater, Inc. is the sole
general partner, (iv) 3,304,798 Common Shares that may be issued upon
exchange of Units owned by Office Towers LLC, a Nevada limited
liability company, of which Mr. Rainwater and Rainwater, Inc. own an
aggregate 100% interest, and (v) 2,194,028 Common Shares owned by the
Richard E. Rainwater 1995 Charitable Remainder Unitrust No. 1, of
which Mr. Rainwater is the settlor and has the power to remove the
trustee and designate a successor, including himself.
(8) The number of Units that Mr. Goff beneficially owns includes (i)
152,560 Common Shares that may be issued upon exchange of Units that
the Goff Family, L.P., a Delaware limited partnership, owns. Mr. Goff
disclaims beneficial ownership of the Common Shares that may be issued
upon exchange of Units that the Goff Family, L.P. owns in excess of
his pecuniary interest in such Units.
(9) The number of Common Shares that Mr. Meyerson beneficially owns
includes (i) 80,000 Common Shares that trusts established for the
benefit of Mr. Meyerson's children (the "Meyerson Trusts") own, (ii)
5,000 Common Shares that Mr. Meyerson's son's estate owns, (iii)
11,200 Common Shares owned by Big Bend III Investments, L.P. ("Big
Bend"), in which Mr. Meyerson owns a 49.5% limited partner interest,
and a corporation of which Mr. Meyerson is the sole shareholder owns a
1% general partner interest and (iv) 8,400 Common Shares due to the
vesting of Stock Options that were originally granted to Mr. Meyerson
and then transferred to Big Bend. The number of Common Shares that Mr.
Meyerson beneficially owns also includes (i) 16,880 Common Shares that
may be issued upon exchange of Units that the Meyerson Trusts own, and
(ii) 37,978 Common Shares that may be issued upon exchange of Units
that Big Bend owns. Mr. Meyerson disclaims beneficial ownership of all
Common Shares and Common Shares that may be issued upon exchange of
Units that the Meyerson Trusts and his son's estate own. Mr. Meyerson
also disclaims beneficial ownership of the Common Shares and the
Common Shares that may be issued upon exchange of Units that Big Bend
owns in excess of Mr. Meyerson's beneficial interest in Big Bend.
(10) The number of Common Shares that Mr. Friedman beneficially owns
includes 10 Common Shares that Mr. Friedman holds for his son, a
minor.
(11) The number of Common Shares that Mr. Dean beneficially owns includes
7,493 Common Shares, 12,600 Common Shares that may be issued upon
exercise of Stock Options and 2,625 Common Shares of the General
Partner's 401(k) Plan that Theresa E. Black, Mr. Dean's spouse, owns.
Mr. Dean disclaims beneficial ownership of these Common Shares. In
addition, the number of Common Shares that Mr. Dean beneficially owns
includes 664 Restricted Shares, which will vest (i.e., the
restrictions will lapse) in June 2000. Mr. Dean has sole voting power
with respect to these Restricted Shares.
(12) The Prudential Insurance Company of America ("Prudential") filed a
Schedule 13G/A ("Prudential Schedule 13G/A"), dated January 31, 2000,
reporting that Prudential beneficially owns 17,849,573 Common Shares.
Prudential holds 4,774,564 of the 17,849,573 Common Shares for the
benefit of its general account and has sole voting and dispositive
power as to such Common Shares. Prudential holds 13,075,009 of the
17,849,573 Common Shares for its own benefit or for the benefit of its
clients by its separate accounts, externally managed accounts,
registered investment companies, subsidiaries and/or other affiliates
and has shared voting and dispositive power as to such Common Shares.
All information presented above relating to Prudential is based solely
on the Prudential Schedule 13G/A.
(13) FMR Corp. filed a Schedule 13G/A ("FMR Schedule 13G/A") dated February
11, 2000, reporting that Fidelity Management & Research Company
("Fidelity"), a registered investment adviser and a wholly owned
subsidiary of FMR Corp., beneficially owns 5,063,800 Common Shares,
none of which it has the power to vote. In addition to such 5,063,800
Common Shares, Fidelity Management Trust Company ("Fidelity
Management"), a wholly owned subsidiary of FMR Corp., beneficially
owns 791,700 Common Shares, none of which it has the power to vote.
Fidelity beneficially owns 5,063,800 Common Shares as a result of
serving as investment adviser to various registered investment
companies (the "Funds"). Each of (i) Edward C. Johnson III, chairman
of FMR Corp., (ii) FMR Corp., through its control of Fidelity, and
(iii) the Funds, has sole power to dispose of such 5,063,800 Common
Shares that the Funds own. Neither FMR Corp. nor Edward C. Johnson III
has the sole power to vote or direct the voting of the Common Shares
that the Funds own, which power resides with the Funds' boards of
trustees. Fidelity carries out voting of the Common Shares under
written guidelines that the Funds' boards of trustees establish.
Fidelity Management beneficially owns 791,700 Common Shares as a
result of its serving as investment manager of certain institutional
accounts. Each of Edward C. Johnson III and FMR Corp., through its
control of Fidelity Management, has sole dispositive power over such
791,700 Common Shares, sole voting power over 746,000 Common Shares
and no voting power over 45,700 Common Shares that the institutional
accounts own. All information presented herein relating to FMR Corp.,
Fidelity and Fidelity Management is based solely on the FMR Schedule
13G/A.
-11-
<PAGE> 14
(14) Franklin Resources, Inc. ("Franklin") filed a Schedule 13G ("Franklin
Schedule 13G") dated January 20, 2000, reporting that Franklin
beneficially owns 6,042,817 Common Shares. Franklin does not have the
power to vote or dispose of any of these Common Shares. According to
the Franklin Schedule 13G, the 6,042,817 Common Shares are
beneficially owned by one or more open-end or closed-end investment
companies and other managed accounts. These investment companies and
managed accounts are advised by direct and indirect advisory
subsidiaries (the "Adviser Subsidiaries") of Franklin. Under the
advisory contracts, the Adviser Subsidiaries hold all voting and
dispositive power with regard to these Common Shares and, therefore,
according to the Franklin 13G, may be deemed to have beneficial
ownership of the securities. Each of Charles P. Johnson and Rupert H.
Johnson, Jr. own in excess of 10% of the outstanding common stock of
Franklin and are the principal stockholders of Franklin and may be
deemed to be the beneficial ownership of the shares. Each of Franklin,
the Advisor Subsidiaries, Charles Johnson and Rupert Johnson disclaim
beneficial ownership of the securities. All information presented
above relating to Franklin is based solely on the Franklin Schedule
13G.
(15) The number of shares that the trust managers and executive officers as
a group beneficially own includes 862 Restricted Shares that one
executive officer other than Mr. Dean holds. These Restricted Shares
will vest (i.e., the restrictions will lapse) in March 2002. Such
executive officer has sole voting power with respect to his Restricted
Shares.
EXECUTIVE COMPENSATION
EXECUTIVE COMPENSATION TABLES
The following table sets forth the annual and long-term compensation paid
or awarded for the years ended December 31, 1999, 1998 and 1997, to the
Company's current Chief Executive Officer, to the four most highly compensated
executive officers of the Company and the General Partner other than the Chief
Executive Officer and to the Company's former Chief Executive Officer who
resigned on June 11, 1999. As a result of the Company's UPREIT structure, the
General Partner, rather than the Company, compensates all employees. The Company
did not grant any stock appreciation rights ("SARs") during this period.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
----------------------------------------------------
OTHER
ANNUAL
NAME AND PRINCIPAL POSITION YEAR SALARY ($) BONUS ($) COMPENSATION ($)
- --------------------------- ---- ---------- --------- ----------------
<S> <C> <C> <C> <C>
John C. Goff 1999 315,429 200,000 --
President and Chief Executive Officer 1998 99,452 -- --
1997 230,772 -- 50,203(2)
Alan B. Friedman 1999 261,375 195,000(4) --
President, Acquisitions/Development 1998 108,329 417,000 --
And Private Equity 1997 -- -- --
David M. Dean 1999 204,339 165,000(4) --
Senior Vice President, Law and 1998 182,067 80,000 --
Administration, and Secretary 1997 169,375 150,000 --
Jerry R. Crenshaw Jr 1999 197,433 165,000(4) --
Senior Vice President, Chief Financial 1998 117,895 68,250 --
And Accounting Officer 1997 95,673 30,000 --
William D. Miller 1999 198,508 150,000(4) --
Senior Vice President, Office Asset 1998 182,067 80,000 --
Management 1997 112,404(6) 69,300 --
Gerald W. Haddock(8) 1999 525,475 -- 173,268(2)
Former President and Chief Executive 1998 416,153 300,000 58,535(2)
Officer 1997 380,772 500,000 56,553(2)
</TABLE>
<TABLE>
<CAPTION>
LONG-TERM COMPENSATION
--------------------------------------------
AWARDS PAYOUTS
------------------------- -------
RESTRICTED SECURITIES ALL OTHER
STOCK UNDERLYING LTIP COMPENSATION
AWARDS ($) OPTIONS (#) PAYOUTS ($) (1)
---------- ----------- ------- ------------
<S> <C> <C> <C> <C>
John C. Goff -- 600,000(3) -- 919
President and Chief Executive Officer -- -- -- --
-- -- -- 1,600
Alan B. Friedman --(4) 350,000 -- --
President, Acquisitions/Development -- 250,000 -- --
And Private Equity -- -- -- --
David M. Dean --(4) 240,000 -- 3,414
Senior Vice President, Law and -- 79,500 -- 1,211
Administration, and Secretary -- 80,000(5) -- 1,600
Jerry R. Crenshaw Jr --(4) 275,000 -- 2,031
Senior Vice President, Chief Financial -- 125,000 -- 957
And Accounting Officer -- 30,000(5) -- 1,129
William D. Miller --(4) 240,000 -- 3,364
Senior Vice President, Office Asset -- 12,500 -- 1,628
Management -- 140,000(7) -- 1,600
Gerald W. Haddock(8) -- -- -- 1,750
Former President and Chief Executive -- 2,000,000(9) -- 1,690
Officer -- 1,000,000(9) -- 1,600
</TABLE>
- ----------
(1) All amounts in this column represent matching contributions that the
General Partner made to the individual's Crescent Real Estate
Equities, Ltd. 401(k) Plan account.
-12-
<PAGE> 15
(2) Amount represents salaries and benefits for personal accountants for
Messrs. Goff and Haddock and for an executive assistant for Mr.
Haddock during 1999.
(3) Amount includes 200,000 Common Shares which represents the number of
Common Shares that may be issued following (i) exercise of Unit
Options for Units on a one-for-one basis, and (ii) exchange of Units
for Common Shares on the basis of two Common Shares for each Unit.
(4) The Bonus amounts for each of Messrs. Friedman, Dean, Crenshaw and
Miller includes an amount for restricted stock to be acquired by the
General Partner as part of the Company's on-going share repurchase
program and transferred to each of such officers by grant during the
second quarter of 2000 ($55,000, $45,000, $45,000 and $40,000,
respectively).
(5) Amount represents Common Shares underlying Stock Options granted in
March 1998 based on the individual's performance in 1997.
(6) This amount represents salary paid to Mr. Miller for the period
between May 1, 1997, the date he joined the Company, until the end of
1997. Mr. Miller's annualized salary for 1997 was $175,000.
(7) Amount includes 20,000 Common Shares underlying Stock Options granted
in March 1998 based on Mr. Miller's performance in 1997.
(8) On June 11, 1999, Mr. Haddock resigned as a trust manager of the
Company, as President and Chief Executive Officer of the Company and
the General Partner, and as sole director of the General Partner. As
part of the terms of Mr. Haddock's resignation, the Operating
Partnership agreed to continue Mr. Haddock's salary of $500,000 and
his benefits through June 30, 2000.
(9) As part of the terms of Mr. Haddock's resignation, the Company and the
Operating Partnership agreed that (i) 214,286 unvested unit options
(exercisable for 214,286 units which are exchangeable for 428,572
Common Shares or, in the discretion of the Company, cash) which would
have been forfeited upon Mr. Haddock's resignation would continue to
vest, one-half on July 16, 1999 and the remaining one-half on July 16,
2000 and (ii) 200,000 unvested Stock Options which would have been
forfeited upon Mr. Haddock's resignation would vest on June 12, 1999.
The remaining 321,429 unit options (exercisable for 321,429 unit
options which were exchangeable for 642,858 Common Shares or, in the
discretion of the Company, cash) and the remaining 800,000 Stock
Options were forfeited.
The following table provides certain information regarding Stock Options
granted to the named executive officers for the year ended December 31, 1999.
The Company did not grant any SARs during this period.
OPTION GRANTS FOR THE YEAR ENDED DECEMBER 31, 1999
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
--------------------------------------------------------------- POTENTIAL
REALIZABLE VALUE AT
ASSUMED ANNUAL
% OF TOTAL RATES OF STOCK
SECURITIES OPTIONS PRICE APPRECIATION
UNDERLYING GRANTED TO EXERCISE FOR OPTION TERM($)(1)
OPTIONS EMPLOYEES IN OR BASE EXPIRATION -----------------------
NAME GRANTED (#) FISCAL YEAR PRICE ($/SH.) DATE 5% 10%
- --------------------- ---------- ------------- ------------- ------------- ------- -----
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
John C. Goff ................... 600,000(2) 16.22% 15.8125 November 2009 5,967 15,121
Alan D. Friedman ............... 350,000(3) 9.46% 15.8125 November 2009 3,481 8,820
David M. Dean .................. 240,000(3) 6.49% 15.8125 November 2009 2,387 6,048
Jerry R. Crenshaw, Jr. ......... 275,000(3) 7.43% 15.8125 November 2009 2,735 6,930
William D. Miller .............. 240,000(3) 6.49% 15.8125 November 2009 2,387 6,048
Gerald W. Haddock(4) ........... -- -- -- -- -- --
</TABLE>
- -------------
(1) Potential Realizable Value is the value of the granted options, based
on the assumed annual growth rates of the share price shown during
their 10-year option term. For example, a 5% growth rate, compounded
annually, for Mr. Goff's grant results in a share price of $25.76] per
share, and a 10% growth rate, compounded annually, results in a share
price of $41.01 per share. These potential realizable values are
listed to comply with the regulations of the Commission, and the
Company cannot predict whether these values will be achieved. Actual
gains, if any, on Stock Option exercises are dependent on the future
performance of the Common Shares.
(2) Amount includes 200,000 Common Shares which represents the number of
Common Shares that may be issued following (i) exercise of Unit
Options for Units on a one-for-one basis, and (ii) exchange of Units
for Common Shares on the basis of two Common Shares for each Unit. The
Unit Options have an expiration date of December 2099 and vests in
equal one-half installments on November 5, 2002 and 2004.
-13-
<PAGE> 16
(3) Amount vests in equal one-fifth installments on November 5, 2000,
2001, 2002, 2003 and 2004.
(4) On June 11, 1999, Mr. Haddock resigned as a trust manager of the
Company and President and Chief Executive Officer of the Company and
the General Partner, and as sole director of the General Partner.
The following table provides information about Stock Options that the named
executive officers exercised during the year ended December 31, 1999 and Stock
Options that each of them held at December 31, 1999. The Company did not grant
any SARs during this period.
AGGREGATED OPTION EXERCISES DURING 1999
AND OPTION VALUES AT DECEMBER 31, 1999
<TABLE>
<CAPTION>
SECURITIES
UNDERLYING UNEXERCISED VALUE OF UNEXERCISED
OPTIONS AT IN-THE-MONEY OPTIONS
SHARES FISCAL YEAR END (#) AT FISCAL YEAR END ($)(1)
------------ ---------------------------- ----------------------------
ACQUIRED ON VALUE
NAME EXERCISE(#) REALIZED($) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- --------------------- ------------ ----------- ----------- ------------- ----------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
John C. Goff 1,588,060(2) 596,550 -- 1,457,144(3) -- 2,241,215
Alan D. Friedman -- -- 62,500 537,500 -- 898,625
David M. Dean 2,500 7,031 27,950 340,600 -- 642,510
Jerry R. Crenshaw, Jr. 5,200 4,800 43,000 411,400 -- 718,410
William D. Miller -- -- 54,500 338,000 -- 616,200
Gerald W. Haddock(4) -- -- -- -- -- --
</TABLE>
- ---------
(1) Market value of securities underlying in-the-money options is based on
the closing price of the Common Shares on December 31, 1999 (the last
trading day of the fiscal year) on the New York Stock Exchange of
$18.38, minus the exercise price. As of December 31, 1999, all
exercisable options were out-of-the-money options. Out-of-the-money
options are options with exercise prices above the market price of the
Common Shares on December 31, 1999.
(2) Amount includes 1,142,856 Common Shares which represents the number of
Common Shares that were issued upon the exercise of Unit Options for
Units on a one-for-one basis, and the such Units may be exchanged for
Common Shares on the basis of two Common Shares for each Unit or, in
the discretion of the Company, cash.
(3) The number of securities underlying unexercisable and unexercised
options includes 1,457,144 Common Shares that may be issued following
(i) vesting of Unit Options, (ii) exercise of Units Options for Units
on a one-for-one basis, and (iii) exchange of Units for Common Shares
on the basis of two Common Shares for each Unit or, in the discretion
of the Company, cash.
(4) On June 11, 1999, Mr. Haddock resigned as a trust manager of the
Company, as President and Chief Executive Officer of the Company and
the General Partner, and as sole director of the General Partner.
EMPLOYMENT AGREEMENTS
As part of the transactions in connection with formation of the Company,
the Operating Partnership assumed Employment Agreements between Rainwater, Inc.
and each of John C. Goff and Gerald W. Haddock. The Operating Partnership takes
action through the General Partner; Mr. Goff serves as the sole member of the
board of directors of the General Partner. As of January 1, 1999, Mr. Goff
served as Vice Chairman of the Board of Trust Managers and was entitled to an
annual salary of $105,000, and Mr. Haddock served as President and Chief
Executive Officer of the Company and the General Partner and was entitled to an
annual salary of $420,000. On March 1, 1999, the Operating Partnership increased
the salary for Mr. Haddock to $500,000 per annum.
On June 11, 1999, Mr. Haddock resigned as a trust manager of the Company
and President and Chief Executive Officer of the Company and the General Partner
and as sole director of the General Partner, and Mr. Goff was appointed as
President and Chief Executive Officer of the Company and the General Partner.
Pursuant to the terms of an agreement entered into with Mr. Haddock on June 11,
1999, which provided for compensation as described above in the Summary
Compensation Table, the Employment Agreement of Mr. Haddock was terminated. In
connection with Mr. Goff's appointment as President and Chief Executive Officer
of the Company and the General
-14-
<PAGE> 17
Partner, on June 11, 1999, the Operating Partnership increased the salary for
Mr. Goff to $500,000 per annum. On September 28, 1999, the Operating Partnership
increased the salary for Mr. Goff to $650,000 per annum. The term of the
Employment Agreement with Mr. Goff expires on April 14, 2001, subject to
automatic renewal for one-year terms unless terminated by the Operating
Partnership or Mr. Goff.
The Operating Partnership has also entered into an Employment Agreement
with Jerry R. Crenshaw. The Employment Agreement for Mr. Crenshaw initially
provided for Mr. Crenshaw to receive annual compensation of $180,000 per annum.
On September 28, 1999, the Operating Partnership increased the salary for Mr.
Crenshaw to $250,000 per annum. Pursuant to the Employment Agreement, Mr.
Crenshaw also was granted an option to purchase 125,000 common shares at
exercise prices of between $22.00 and $28.00 per share. The options vest 20% per
year. The Employment Agreement also provides that such options, together with
the other options held by Mr. Crenshaw on the effective date of the Employment
Agreement will vest immediately if, among other things, Mr. Crenshaw's
employment is terminated other than for cause. The term of the Employment
Agreement with Mr. Crenshaw expires on April 30, 2002, subject to automatic
renewal for an additional one-year term unless terminated by the Operating
Partnership or Mr. Crenshaw.
The salaries under the Employment Agreements, which are not subject to a
cap, may be increased at the discretion of the Operating Partnership, although
at its request, the Executive Compensation Committee of the Company has reviewed
and ratified all such increases in salaries. The Operating Partnership similarly
determines bonuses under the Employment Agreements, although at its request, the
Executive Compensation Committee has reviewed and ratified all such bonuses.
AGREEMENTS NOT TO COMPETE
The Company and the Operating Partnership are dependent on the services of
Richard E. Rainwater and John C. Goff. Mr. Rainwater serves as Chairman of the
Board of Trust Managers but has no employment agreement with the Company and,
therefore, is not obligated to remain with the Company for any specified term.
In connection with the initial public offering of the Company's Common Shares in
May 1994 (the "Initial Offering"), each of Messrs. Rainwater, Goff and Haddock
entered into a Noncompetition Agreement with the Company that restricts him from
engaging in certain real estate related activities during specified periods of
time.
In connection with Mr. Haddock's resignation as President and Chief
Executive Officer of the Company and the General Partner, the term of Mr.
Haddock's Noncompetition Agreement was amended to provide that the restrictions
that the Noncompetition Agreement imposes would terminate on October 11, 1999.
Therefore, the term of Mr. Haddock's Noncompetition Agreement has expired.
The restrictions that Mr. Rainwater's Noncompetition Agreement imposes will
terminate one year after the later to occur of (i) the date on which Mr.
Rainwater ceases to serve as a trust manager of the Company, and (ii) the date
on which Mr. Rainwater's beneficial ownership of the Company (including Common
Shares and Units) first represents less than a 2.5% ownership interest in the
Company. The restrictions that Mr. Goff's Noncompetition Agreement imposes will
terminate one year after Mr. Goff first ceases to be a trust manager or an
executive officer of the Company. The Noncompetition Agreements do not, among
other things, prohibit Messrs. Rainwater and Goff from engaging in certain
activities in which they were engaged at the time of formation of the Company in
1994 or from making certain passive real estate investments.
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act of 1934, as amended (the "Exchange Act")
requires the Company's officers, trust managers and persons who own more than
10% of the Common Shares or the Company's preferred shares of beneficial
interest, par value $.01 per share to file reports of ownership on Form 3 and
changes in ownership on Forms 4 and 5 with the Commission and the New York Stock
Exchange. The Commission rules also require such officers, trust managers and
10% holders to furnish the Company with copies of all Section 16(a) forms that
they file.
-15-
<PAGE> 18
Based solely on its review of copies of such reports received or written
representations from certain reporting persons, the Company believes that all
Section 16(a) filing requirements applicable to its officers, trust managers and
10% shareholders were complied with for the fiscal year ended December 31, 1999,
except that (i) Mr. Porter filed an amended Form 3 reporting a grant of Stock
Options that was omitted from his Form 3 that was timely filed, (ii) Mr. Shaw
filed an amended Form 3 reporting a grant of Stock Options that was omitted from
his Form 3 that was timely filed, and (iii) Jack I. Tompkins, who was an officer
of the Company during a portion of 1999, filed an amended Form 3 reporting a
grant of Stock Options that was omitted from his Form 3, which also was not
filed on a timely basis.
Notwithstanding anything to the contrary set forth in any of the Company's
previous filings under the Securities Act of 1933, as amended, or the Exchange
Act that might incorporate future filings, including this Proxy Statement, in
whole or in part, the following report and the Performance Graph shall not be
incorporated by reference into any such filings.
REPORT OF THE EXECUTIVE COMPENSATION COMMITTEE
The Executive Compensation Committee (the "Executive Compensation
Committee") is composed of Messrs. Meyerson and Rowsey. A majority of the full
Board of Trust Managers select members of the Executive Compensation Committee.
Compensation Philosophy and Objectives. The Executive Compensation
Committee determines the compensation for the Company's executive officers and
administers the stock incentive and other compensation plans that the Company
adopts. In addition, the Executive Compensation Committee, acting for the
Company in its capacity as the sole stockholder of the General Partner, reviews
and ratifies, where appropriate, decisions of the sole director of the General
Partner with respect to the compensation of the executive officers of the
General Partner. For purposes of the following discussion, the term "Company"
includes, unless the context otherwise requires, the Operating Partnership and
the other subsidiaries of the Company and the Operating Partnership, in addition
to the Company.
The philosophy of the Company's compensation program is to employ, retain
and reward executives capable of leading the Company in achieving its business
objectives. These objectives include enhancing shareholder value, maximizing
financial performance, preserving a strong financial posture, increasing the
Company's assets and positioning its assets and business in geographic markets
offering long-term growth opportunities. The accomplishment of these objectives
is measured against the conditions characterizing the industry within which the
Company and the Operating Partnership operate. In implementing the Company's
compensation program, it generally is the policy of the Executive Compensation
Committee to seek to qualify executive compensation for deductibility by the
Company for purposes of Section 162(m) of the Internal Revenue Code to the
extent that such policy is consistent with the Company's overall objectives and
executive compensation policy.
Recommendations of Compensation Consultant. In the third quarter of 1999,
FPL Associates was hired to perform an analysis of compensation of the executive
officers of the Company. In consultation with the Executive Compensation
Committee, it was determined that, based on the report of FPL dated October 25,
1999 (the "FPL Report"), the General Partner should increase the base salaries
of its officers in order to place them between the median and 75th percentile of
current competitive practices for a peer group of real estate companies and the
Operating Partnership should adopt an Annual Incentive Plan ("Bonus Plan") and a
Dividend Incentive Unit Plan ("DIU Plan") to provide appropriate incentives and
rewards for services rendered by executive officers and other key employees to
the Company and the Operating Partnership. Upon receiving the report, because
Mr. Goff, the sole director of the General Partner, would be a potential
recipient of compensation under the Bonus Plan and DIU Plan, the General Partner
sought review, confirmation and ratification by the Executive Compensation
Committee and the Board of Trust Managers of the Company of the determination
with respect to adoption of the Bonus Plan and DIU Plan and of the terms and
conditions of such plans. On March 5 and 6, 2000, the Executive Compensation
Committee and the Board of Trust Managers of the Company reviewed, confirmed and
ratified the adoption of the Bonus Plan and DIU Plan, and the terms and
conditions of such plans. The Bonus Plan and the DIU Plan will be used by the
Compensation Committee of the General Partner in determining executive
compensation for 2000. The Compensation Committee of the General Partner (the
"Committee") is also composed of Messrs. Meyerson- and Rowsey and is appointed
by the Board of Directors of the General Partner.
Before the beginning of each year, the Committee will (1) designate the
positions covered by the Bonus Plan, (2) the minimum and maximum annual
incentive opportunity or bonus (expressed as a percentage of base salary) that
the individual holding each position is eligible to earn for that year, and (3)
the performance score (expressed in any way the Committee decides, e.g., as a
number from 0-100) necessary to earn each level of bonus. Before the beginning
of each year, the Committee also will decide on (1) the aspects or "dimensions"
of
-16-
<PAGE> 19
performance to be taken into account in calculating each participant's
performance, and (2) the relative weights to give to performance within each
dimension. Performance dimensions generally will include (a) one or more
measures of overall company performance, (b) one or more measures of function or
unit performance, and (iii) one or more measures of individual performance.
Before the beginning of each year, the Committee also will decide on the best
way to measure performance within each dimension. Performance measures for
function or unit performance may include any measurable criteria that (1) are
related to the Company's business objectives and (2) reflect outcomes or results
that the Participant can directly influence. Performance measures for individual
performance may include any other criteria relevant to the Participant's
performance in furthering the Company's business objectives as the Committee in
consultation with the Participant's supervisor might consider appropriate. As
soon as possible after the end of each year, the Committee will determine each
participant's performance within each performance dimension and use it to
determine the participant's has earned the minimum, intermediate and maximum
annual incentive opportunity or bonus for his or her position. Incentive Award
will be distributed within 120 days after the close of the year in one lump sum.
If a participant leaves employment for any reason other than death, disability
or retirement before the end of a year, the participant will not receive any
award under the Bonus Plan for that year. If the participant leaves employment
before the end of a year because of death, disability or retirement, the
Committee may grant the participant a pro rata portion of the award that the
participant would have earned for the year. If an employee becomes a participant
during a year, any award under the Bonus Plan to the employee will be
appropriately prorated from the time that the employee entered the Bonus Plan to
the end of the year.
Before the beginning of each year, the Committee will designate the
employees to whom dividend incentive units will be granted for the year, and the
number of the dividend incentive units that each will be granted. Each
Participant will have an account, consisting of an entry on the books of the
Company, to which their benefits will be credited under the DIU Plan. Before the
beginning of each year, the Committee will adopt one or more objective
performance target for the Company for the year and a performance multiple
(expressed as a percentage of the annual dividend for the Company) for each
target. As soon as possible after the end of the year, the Committee will
determine the degree to which the targets were achieved or surpassed. As soon as
possible after the end of the year, the Committee will credit to the account of
each participant who is employed by the Company on the last day of the year an
amount equal to (1) the amount of dividends that the participant would have
received during the year if the participant had held one share of stock in the
Company, (2) multiplied by the number of dividend incentive units that the
participant held throughout the year, and (3) further multiplied by the
performance multiple. At least quarterly, each participant's account will be
credited with interest at a rate selected by the Committee (or, if the Committee
does not select a rate of interest, Moody's average corporate bond yield). If a
participant leaves employment before the end of a year because of death,
disability or retirement, the Committee may grant the participant a pro rata
portion of the award that the participant would have earned for the year. If an
employee becomes a participant during a year, any award under the DIU Plan to
the employee will be appropriately prorated from the time that the employee
entered the DIU Plan to the end of the year. If a participant leaves employment
less than four years after the year for which a dividend incentive unit was
granted for any reason other than death, disability or retirement, the
participant will forfeit the entire amount in his or her account that is
attributable to that unit. If a participant is still employed on the last day of
the fourth year after the year for which a dividend incentive unit was granted,
the entire amount in his or her account that is attributable to that unit will
be distributed to him or her as soon as possible in one lump sum.
Executive Officer Compensation. In addition to their regular salary, the
executive officers of the Company may be compensated in the form of (i) cash
bonus awards, which may or may not be issued under the Bonus Plan, (ii)
restricted stock grants either under the 1995 Plan or as a result of open market
purchases by the General Partner, (iii) Stock Options under the 1995 Plan and
(iv) dividend incentive units under the DIU Plan. Executive officers of the
General Partner are eligible to participate, on the same basis as other
employees, in the employer matching provision of the profit sharing plan that
the General Partner established, whereby employees may save for their future
retirement on a tax-deferred basis through the Section 401(k) savings feature of
the plan, with the General Partner contributing an additional percentage of the
amount each employee saves. Such executive officers are also eligible to
participate in the other employee benefit and welfare plans that the General
Partner maintains on the same terms as non-executive personnel who meet
applicable eligibility criteria, subject to any legal limitations on the amounts
that may be contributed or the benefits that may be payable under such plans.
The recommendations of FPL in the FPL Report and the performance of the
Company and the Operating Partnership in light of conditions characterizing the
REIT industry generally were both key considerations in the deliberations of the
Committee regarding executive compensation
-17-
<PAGE> 20
for 1999. The Committee recognizes that share price is one measure of
performance, but also that other factors, including industry business conditions
and the Company's success in achieving short-term and long-term goals and
objectives, must be evaluated in arriving at a meaningful analysis of
performance. Accordingly, the Committee also gave consideration to the Company's
achievement of specified business objectives when reviewing 1999 executive
officer compensation. An additional objective of the Committee has been to
reward executive officers with equity compensation in addition to salary, in
keeping with the Company's overall compensation philosophy of placing equity in
the hands of its executive officers in an effort to further instill shareholder
considerations and values in the actions of management.
Base Salary. The 1999 base annual salaries of Mr. Goff and Mr. Haddock were
based upon employment agreements between such officers and the Operating
Partnership. As of January 1, 1999, Mr. Goff served as Vice Chairman of the
Board of Trust Managers and was entitled to an annual salary of $105,000, and
Mr. Haddock served as President and Chief Executive Officer of the Company and
the General Partner and was entitled to an annual salary of $420,000. On March
1, 1999, the General Partner approved, and the Committee ratified, an increase
in the annual salary for Mr. Haddock to $500,000.
On June 11, 1999, Mr. Haddock resigned as President and Chief Executive
Officer of the Company and the General Partner and Mr. Goff was appointed as
President and Chief Executive Officer of the Company and the General Partner.
Pursuant to the terms of an agreement entered into with Mr. Haddock on June 11,
1999, the employment agreement of Mr. Haddock was terminated. Pursuant to the
agreement, the Company agreed to pay Mr. Haddock an amount equal to his annual
salary of $500,000 through June 30, 2000.
In connection with Mr. Goff's appointment as President and Chief Executive
Officer of the Company and the General Partner, on June 11, 1999, the Committee
authorized an increase in the salary for Mr. Goff to $500,000 per annum, which
was equal to the salary of Mr. Haddock at the time of his resignation. On
September 28, 1999, the Committee also approved an increase in the salary for
Mr. Goff to $650,000 per annum. The term of the employment agreement with Mr.
Goff expires on April 14, 2000, subject to automatic renewal for one-year terms
unless terminated by the Operating Partnership or Mr. Goff.
A portion of the 1999 base annual salary of Mr. Crenshaw also was based on
an employment agreement. The employment agreement for Mr. Crenshaw initially
provided that Mr. Crenshaw receive annual compensation of $180,000 per annum. On
September 28, 1999, based on the FPL Report, the Committee approved an increase
in the salary for Mr. Crenshaw to $250,000 per annum. The term of the Employment
Agreement with Mr. Crenshaw expires on April 30, 2002, subject to automatic
renewal for an additional one-year term unless terminated by the Company or Mr.
Crenshaw.
The employment agreements for Mr. Goff and Mr. Crenshaw also provide for
bonuses to be determined by the Board of the General Partner.
The 1999 compensation paid to the other executive officers of the General
Partner and the Company was based upon a salary structure administered for
consistency for each position relative to its authority and responsibility and
in comparison to industry peers.
Annual Incentive. The General Partner paid cash bonuses to its executive
officers and other key personnel in recognition of the Company's and Operating
Partnership's strong performance within the industry and long-term return to
shareholders, as well as the substantial personal contributions of the executive
officers and other key personnel to the Company and Operating Partnership's
strategies. For a discussion of the bonus paid to Mr. Goff, see "Compensation of
the Chief Executive Officer" below. Bonuses aggregating $675,000 were paid to
other named officers. The bonus amounts for each of these officers includes an
aggregate amount of $185,000 for restricted stock to be acquired by the General
Partner as part of the Company's on-going share repurchase program and
transferred by grant to each of them during the second quarter of 2000.
Long-Term Incentive. Stock Options were used in 1999 to reward and
incentivize executive officers and other key personnel and to retain them
through the potential of capital gains and equity buildup in the Company. The
Executive Compensation Committee determined the number of Stock Options granted
based upon its evaluation of performance criteria mentioned above, along with
the Executive Compensation Committee's subjective evaluation of each executive's
ability to influence the
-18-
<PAGE> 21
Company's long-term growth and profitability. All Stock Options were issued
at a price not less than the market price of the Common Shares on the date of
grant. The Executive Compensation Committee anticipates that the officers other
than the CEO receiving Stock Option grants with respect to 1999 performance will
not be granted any further Stock Options with respect to performance in 2000 and
2001. Because the value of the Stock Option should, over time, bear a direct
relationship to the Company's share price, the Executive Compensation Committee
believes the award of Stock Options represents an effective incentive to create
value for the shareholders. During 1999, the Executive Compensation Committee
granted Stock Options to purchase 2,680,000 Common Shares to 15 persons who
currently serve as executive officers of the Company, the General Partner, or
both.
In connection with cash bonuses aggregating $675,000 paid to named officers
other than the Chief Executive Officer, an aggregate of $185,000 of these
bonuses was required to be used by the officers to purchase restricted Common
Shares.
Compensation of the Chief Executive Officer. On June 11, 1999, Mr. Goff was
appointed as the Company's President and Chief Executive Officer, replacing
Gerald W. Haddock, the former President and Chief Executive Officer. At that
time, Mr. Goff was entitled to annual compensation of $105,000 pursuant to his
employment agreement, which was increased on June 11, 1999 to $500,000 and to
$650,000 on September 28, 1999, as discussed under "Base Salaries."
On March 5, 2000, the Executive Compensation Committee and the Board of
Trust Managers approved and ratified the authorization by the General Partner of
a cash bonus in the amount of $200,000 to Mr. Goff. In taking such action, the
Executive Compensation Committee gave substantial weight to the critical
contributions that Mr. Goff had made to the Company's performance and
operations, to his reevaluation, development and implementation of the Company's
new strategic plan and to his efforts in re-focusing the direction and
positioning of the Company in light of changing market conditions. The General
Partner and the Executive Compensation Committee also relied on advice received
from FPL as to competitive compensation levels and considered the amount and
nature of compensation paid to similarly situated executives at other major
office REITs and at other companies in the Dallas-Fort Worth area.
On November 5, 1999, the Executive Compensation Committee granted Mr. Goff
400,000 Stock Options under the 1995 Plan, at a price of $15.8125 per Stock
Option. These Stock Options vest 50% on the third anniversary and 50% on the
fifth anniversary of the grant, provided that Mr. Goff continue to serve as an
officer of the Company or the General Partner. Also effective November 5, 1999,
the Unit Plan adopted in 1996 was amended by the Committee to provide for an
additional grant of 100,000 options to acquire units, at a price of $31.625 per
unit (representing the fair market value of the units on the date of grant) to
Mr. Goff. The unit options are exercisable for 100,000 units which are
exchangeable for 200,000 Common Shares or, in the discretion of the Company,
cash. These unit options vest 50% on the third anniversary and 50% on the fifth
anniversary of the grant, provided that Mr. Goff continue to serve as an officer
of the Company or the General Partner. The Executive Compensation Committee and
the Compensation Committee of the General Partner believes that the exercise
price, vesting provisions and other terms of the Unit Options and the Stock
Options provide a strong link between the future value of such options and the
long-term value of the Common Shares, which will provide further incentives for
Mr. Goff to establish financial and operational objectives designed to further
increase the value of the Company and the Operating Partnership.
In June 1999, Mr. Haddock resigned his positions as a trust manager of the
Company and as President and Chief Executive Officer of the Company and the
General Partner. Prior to his resignation, Mr. Haddock's annual salary was
$500,000. The amount of his salary was based on his contributions to the
Company's historical performance. The Committee also took into account the
historical performance of the Company, which included an increase in the price
of a Common Share from $12.50 at the time of the Company's initial public
offering to $21.375 at the time of approval of this compensation and a $300,000
cash bonus on March 1, 1999.
-19-
<PAGE> 22
In June 1999, Mr. Haddock forfeited 321,429 unit options (exercisable for
321,429 units which were exchangeable into 642,858 Common Shares or, in the
discretion of the Company, cash) and 800,000 Stock Options. Pursuant to the
Company's and the Operating Partnership's agreement with Mr. Haddock, of the
remaining 214,286 unvested unit options (exercisable for 214,286 units which are
exchangeable into 428,572 Common Shares or, in the discretion of the Company,
cash), one-half vested on July 16, 1999 and the remaining one-half will vest on
July 16, 2000. In addition, the remaining 200,000 unvested Stock Options vested
on June 12, 1999.
EXECUTIVE COMPENSATION COMMITTEE
Morton H. Meyerson
Paul E. Rowsey, III
PERFORMANCE GRAPH
The following line graph sets forth a comparison of the percentage change
in the cumulative total shareholder return on the Common Shares compared to the
cumulative total return of the NAREIT Equity REIT Return Index, the S&P 500
Index and SNL Securities LP Office REITs Index for the period December 31, 1994,
the date on which trading of the Common Shares commenced, through December 31,
1999. The graph depicts the actual increase in the market value of the Common
Shares relative to an initial investment of $100 on December 31, 1994, assuming
a reinvestment of cash distributions.
<TABLE>
<CAPTION>
CRESCENT NAREIT SNL SECURITIES
REAL ESTATE EQUITY REITS LP OFFICE
MEASUREMENT PERIOD EQUITIES RETURN S&P 500 REITS
(FISCAL YEAR COVERED) COMPANY($) INDEX($) INDEX($) INDEX($)
- --------------------- ----------- ------------ --------- ---------------
<S> <C> <C> <C> <C>
12/31/94 100.00 100.00 100.00 100.00
12/31/95 134.98 115.27 137.58 138.49
12/31/96 222.10 155.92 169.03 209.43
12/31/97 349.62 187.51 225.44 272.04
12/31/98 216.06 154.69 289.79 217.47
12/31/99 191.63 147.54 350.78 218.58
</TABLE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Messrs. Meyerson and Rowsey, who are the sole members of the Executive
Compensation Committee of the Board of Trust Managers, have borrowed certain
funds from the Operating Partnership in connection with the exercise of Stock
Options, as described in "Certain Relationships and Related Transactions" below.
-20-
<PAGE> 23
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
For purposes of the following discussion, the term "Company" includes,
unless the context otherwise requires, the Operating Partnership and the other
subsidiaries of the Company and the Operating Partnership, in addition to the
Company.
In July 1996, in connection with the acquisition of Canyon Ranch-Tucson,
the Operating Partnership obtained from Mr. Zuckerman, who subsequently became a
trust manager of the Company, and served as a trust manager from November 1996
until June 1999, and Jerrold Cohen an option (the "Option") to acquire, in three
equal installments, up to 30% of a management company formed by Messrs.
Zuckerman and Cohen for the licensing and use of the "Canyon Ranch" name in
locations and for services and products beyond Canyon Ranch-Tucson and Canyon
Ranch-Lenox. In July, 1998, the Operating Partnership assigned the Option to CRL
Investments, Inc. ("CRL"), a company owned 95% by the Operating Partnership and
5% (representing 100% of the voting securities of CRL) by COI. CRL has exercised
the first two installments of the Option by paying $3 million to obtain a 20%
economic interest in CR License, LLC ("CR License"), the management company that
Messrs. Zuckerman and Cohen formed. CRL has the opportunity 2000 year to pay an
additional $3 million to obtain the remaining 10% interest in CR License.
Contemporaneously, CRL acquired a 50% interest in CR Las Vegas LLC, an entity
that operates and is the lessee of a Canyon Ranch day spa in the Venetian Hotel
in Las Vegas; CR License owns the remaining 50% interest in CR Las Vegas LLC.
Through CRL and CR License, the Operating Partnership has an effective 52.25%
economic interest in the Canyon Ranch day spa project. To enable CRL to exercise
future options with respect to CR License and to fund its obligations to CR Las
Vegas as well as other obligations, the Operating Partnership extended to CRL a
$7 million credit facility ("CRL Facility"), which bears interest at 12% per
annum and matures in August 2003. The Operating Partnership has committed to
invest $8 million in equity in CRL. Through the first quarter of 2000, the
Operating Partnership and COI have made equity contributions in CRL, on a pro
rata basis, in the amount of $-5.66 million, and CRL has borrowed $5.66 million
from the Operating Partnership under the CRL Facility. Substantially all of
these amounts have been contributed to CR Las Vegas. As of April 23, 2000, the
total amount outstanding under the CRL Facility was $5.6 million.
Effective March 14, 1996, March 14, 1997 and March 30, 1998, the Company
loaned to Mr. Meyerson, an independent trust manager of the Company, $187,425,
$45,311 and $45,297, respectively, on a recourse basis, pursuant to the 1994
Plan and the 1995 Plan. Mr. Meyerson used the proceeds of the first loan, with
$75.00 in cash, to acquire 15,000 Common Shares pursuant to the exercise of
15,000 Stock Options that were granted to him on May 5, 1994 under the 1994
Plan. Mr. Meyerson used the proceeds of the second loan, together with $14.00 in
cash, to acquire 2,800 Common Shares pursuant to the exercise of 2,800 Stock
Options that were granted to him on March 14, 1996 under the 1995 Plan. Mr.
Meyerson used the proceeds of the third loan, together with $28.00 in cash, to
acquire 2,800 Common Shares pursuant to the exercise of 2,800 Stock Options that
were granted to him on March 14, 1996 under the 1995 Plan. In April 1999, Mr.
Meyerson assigned, pursuant to a divorce decree, his three loans, together with
7,500 Units and 5,600 Common Shares securing these loans, to Big Bend III
Investments L.P. ("Big Bend"), of which Mr. Meyerson is a 49.5% limited partner,
and of which a corporation that Mr. Meyerson wholly owns is a 1% general
partner. Effective March 6, 2000 and March 14, 2000, the Company loaned to Big
Bend $45,297 and $45,297, respectively, on a recourse basis, pursuant to the
1995 Plan. Big Bend used the proceeds of the March 6, 2000 loan, together with
$28.00 in cash, to acquire 2,800 Common Shares pursuant to the exercise of 2,800
Stock Options that were granted to Mr. Meyerson on March 14, 1996 under the 1995
Plan. Big Bend used the proceeds of the March 14, 2000 loan, together with
$28.00 in cash, to acquire 2,800 Common Shares pursuant to the exercise of 2,800
Stock Options that were granted to Mr. Meyerson on March 14, 1996 under the 1995
Plan. The Stock Options were transferred by Mr. Meyerson to Big Bend pursuant to
a divorce decree.
Effective July 17, 1996, February 2, 1998, June 12, 1998 and November 26,
1999, the Company loaned to Mr. Frank, an independent trust manager of the
Company, $187,425, $45,298, $120,869 and $45,297 respectively, on a recourse
basis, pursuant to the 1994 Plan and the 1995 Plan. Mr. Frank used the proceeds
of the first loan, together with $75.00 in cash, to acquire 15,000 Common Shares
pursuant to the exercise of 15,000 Stock Options that were granted to him on May
5, 1994 under the 1994 Plan. Mr. Frank used the proceeds of his second loan,
together with $28.00 in cash, to acquire 2,800 Common Shares pursuant to the
exercise of 2,800 Stock Options that were granted to him on March 14, 1996 under
the 1995 Plan. Mr. Frank used the proceeds of the third loan, together with
$56.00
-21-
<PAGE> 24
in cash, to acquire 5,600 Common Shares pursuant to the exercise of 2,800 Stock
Options that were granted to him on March 14, 1996 under the 1995 Plan and 2,800
Stock Options that were granted to him on June 9, 1997 under the 1995 Plan. Mr.
Frank used the proceeds of the Fourth loan, together with $28.00 in cash, to
acquire 2,800 Common Shares pursuant to the exercise of 2,800 Stock Options that
were granted to him on March 14, 1996 under the 1995 Plan.
Effective June 10, 1997, the Company loaned to Mr. Rowsey, an independent
trust manager of the Company, $419,997 on a recourse basis, pursuant to the 1994
Plan and the 1995 Plan. Mr. Rowsey used the proceeds of his loan, together with
$328.00 in cash, to acquire 30,000 Common Shares pursuant to the exercise of
30,000 Stock Options that were granted to him on May 5, 1994 under the 1994
Plan, and 2,800 Common Shares pursuant to the exercise of 2,800 Stock Options
that were granted to him on March 14, 1996 under the 1995 Plan.
Effective November 4, 1999, the Company loaned to John C. Goff,
$26,272,631.46, on a recourse basis, pursuant to the 1994 Plan, 1995 Plan and
the 1996 Unit Option Plan. Mr. Goff used the proceeds of the loan, together with
$4,452.04 in cash, to acquire 195,204 Common Shares pursuant to the exercise of
195,204 Stock Options that were granted to him on April 27, 1994 under the 1994
Plan, 250,000 Common Shares pursuant to the exercise of 250,000 Stock Options
that were granted to him on June 12, 1995 under the 1995 Plan and 571,428
Operating Partnership Units pursuant to the exercise of 571,428 Unit Options
that were granted to him on July 16, 1996 pursuant to the 1996 Unit Option Plan.
Effective November 5, 1999, February 6, 2000 and March 14, 2000, the Company
loaned to David M. Dean, $32,475.00, $10,242.00 and $97,065.00, respectively, on
a recourse basis, pursuant to the 1994 Plan and the 1995 Plan. Mr. Dean used the
proceeds of the first loan, together with $25.00 in cash, to acquire 2,500
Common Shares pursuant to the exercise of 2,500 Stock Options that were granted
to him on July 27, 1994 under the 1994 Plan. Mr. Dean used the proceeds of the
second loan, together with $8.00 in cash, to acquire 800 Common Shares pursuant
to the exercise of 800 Stock Options that were granted to him on February 6,
1995 under the 1994 Plan. Mr. Dean used the proceeds of the third loan, together
with $60.00 in cash, to acquire 6,000 Common Shares pursuant to the exercise of
6,000 Stock Options that were granted to him on March 14, 1996 under the 1995
Plan.
Effective November 5, 1999, the Company loaned to Jerry R. Crenshaw, Jr.
$78,723.00, on a recourse basis, pursuant to the 1994 Plan and the 1995 Plan.
Mr. Crenshaw used the proceeds of the loan, together with $52.00 in cash, to
acquire 1,600 Common Shares pursuant to the exercise of 1,600 Stock Options that
were granted to him on February 6, 1995 under the 1994 Plan and 3,600 Shares
pursuant to the exercise of 3,600 Stock Options that were granted to him on
March 14, 1996 under the 1995 Plan.
Effective November 5, 1999 and March 14, 2000, the Company loaned to Theresa
E. Black, $87,358.50 and $29,119.50, respectively, on a recourse basis, pursuant
to the 1995 Plan. Ms. Black used the proceeds of the first loan, together with
$54.00 in cash, to acquire 5,400 Common Shares pursuant to the exercise of 5,400
Stock Options that were granted to her on March 14, 1996 under the 1995 Plan.
Ms. Black used the proceeds of the second loan, together with $18.00 in cash, to
acquire 1,800 Common Shares pursuant to the exercise of 1,800 Stock Options that
were granted to her on March 14, 1996 under the 1995 Plan.
Effective January 24, 2000, the Company loaned to John L. Zogg, Jr.
$637,090.00 on a recourse basis, pursuant to the 1994 Plan and the 1995 Plan.
Mr. Zogg used the proceeds of the loan, together with $410.00 in cash, to
acquire 1,000 Common Shares pursuant to the exercise of 1,000 Stock Options that
were granted to him on April 27, 1994 under the 1994 Plan, 16,000 Common Shares
pursuant to the exercise of 16,000 Stock Options that were granted to him on
August 1, 1995 under the 1995 Plan and 24,000 Common Shares pursuant to the
exercise of 24,000 Stock Options that were granted to him on March 14, 1996
under the 1995 Plan.
Each of the loans to Messrs. Meyerson, Frank and Rowsey bears interest at a
fixed annual rate equal to the distribution yield on the Common Shares as of
March 14, 1996, March 14, 1997 and March 30, 1998 (for the respective loans
originally made to Mr. Meyerson), July 17, 1996, February 2, 1998 and June 12,
1998 (for Mr. Frank's respective loans), and June 10, 1997 (for Mr. Rowsey's
loan), in each case, the effective date of the applicable loan. Each loan is
payable, interest only, on a quarterly basis from distributions paid with
respect to such
-22-
<PAGE> 25
Common Shares, with a final payment of all accrued and unpaid interest, plus the
entire original principal balance, due on March 14, 2001, March 14, 2002 and
March 30, 2003 (for the respective loans originally made to Mr. Meyerson), on
July 17, 2001, February 2, 2003 and June 12, 2003 (for Mr. Frank's respective
loans), and on June 10, 2002 (for Mr. Rowsey's loan). The first three loans
originally made to Mr. Meyerson are secured by 7,500 Units, 2,800 Common Shares
and 2,800 Common Shares, respectively, that Big Bend owns; Mr. Frank's loans are
secured by 15,000 Common Shares, 2,800 Common Shares and 5,600 Common Shares,
respectively, that Mr. Frank owns; and Mr. Rowsey's loan is secured by 32,800
Common Shares that Mr. Rowsey owns. As of December 31, 1999, accrued interest in
the aggregate amount of $12,384 was outstanding on the loans originally made to
Mr. Meyerson, accrued interest in the aggregate amount of $14,752.33 was
outstanding on Mr. Frank's loans, and accrued interest in the amount of
$14,524.02 was outstanding on Mr. Rowsey's loan.
The loans made in 1999 and 2000 to Big Bend, Mr. Frank, Mr. Goff, Mr. Dean,
Mr. Crenshaw, Ms. Black and Mr. Zogg, each bears interest at a fixed annual rate
based on the weighted average interest rate of the Company at the end of the
preceding quarter plus 50 basis points as of March 6, 2000 and March 14, 2000
(for the respective loans made to Big Bend), as of November 4, 1999 (for the
loan made to Mr. Goff), as of November 5, 1999, February 6, 2000 and March 14,
2000 (for the respective loans made to Mr. Dean), as of November 5, 1999 (for
the loan made to Mr. Crenshaw), as of November 5, 1999 and March 14, 2000 (for
the respective loans made to Ms. Black), and as of January 24, 2000 (for the
loan made to Mr. Zogg). The March 6, 2000 loan to Big Bend is secured by 2,800
Common Shares that Big Bend owns and the March 14, 2000 loan is secured by 2,800
Common Shares that Big Bend owns. Mr. Goff's loan is secured by 400,000 Common
Shares that Mr. Goff owns. Mr. Dean's loans are secured by 2,500 Common Shares,
800 Common Shares and 6,000 Common Shares that Mr. Dean owns. Mr. Crenshaw's
loan is secured by 1,600 Common Shares and 3,600 Common Shares that Mr. Crenshaw
owns. Ms. Black's loans are secured by 5,400 Common Shares and 1,800 Common
Shares that Ms. Black owns. Mr. Zogg's loan is secured by 1,000 Common Shares,
16,000 Common Shares and 24,0000 Common Shares that Mr. Zogg owns.
On May 5, 1994, the Company made a loan to Houston Area Development Corp.
("HADC") and to Mira Vista Development Corp. ("MVDC"), each in the original
principal amount of $14.4 million, bearing interest at a rate of 12.5% per annum
and maturing in May 2001. The outstanding balances of those two loans as of
December 31, 1999 were, respectively, $16.5 million and $0. On January 16, 1997,
the Company entered into a Revolving Development Loan Agreement ("Revolver")
with HADC, pursuant to which the Company agreed to loan the amount of $5.0
million to HADC, bearing interest at a rate of 14% per annum; no amounts were
outstanding balance under this Revolver as of December 31, 1999. In June 1999,
Messrs. Goff and Haddock each contributed their shares of the voting stock of
HADC and MVDC (representing approximately 2% of the outstanding stock) to DBL
Holdings as a capital contribution. A valuation analysis of the contributed
interests was obtained from an independent third entity. The Operating
Partnership made proportionate cash capital contributions to DBL Holdings. In
July 1999, DBL Holdings repurchased Mr. Haddock's interest for $1.1 million,
which was loaned to DBL Holdings by the Operating Partnership. The Operating
Partnership owns 93.99% of the outstanding stock (all of which is nonvoting) of
HADC and MVDC. Mr. Goff is a director of HADC and MVDC.
In April 1997, the Company established COI to be the lessee and operator of
certain assets to be acquired by the Company and to perform the Intercompany
Agreement, pursuant to which each party agreed to provide the other with rights
to participate in certain transactions. Messrs. Rainwater and Goff are,
respectively, the Chairman of the Board and the Vice Chairman of the Board of
both the Company and COI. In addition, Mr. Goff serves as the Chief Executive
Officer of the Company, COI and the General Partner and as the sole director of
the General Partner. Messrs. Frank and Rowsey are members of the Board of the
Company and of COI. As of April 17, 2000, Messrs. Rainwater and Goff
beneficially owned an aggregate of approximately 13.9% of the outstanding common
stock of COI through their aggregate ownership of 1,607,122 shares of COI common
stock, including shares underlying vested Stock Options. In addition, Mr. Goff
indirectly own shares of the common stock of COI through his ownership
interest in COPI Colorado, as described below.
In connection with the formation and capitalization of COI, the Company
contributed $14.1 million to COI and loaned approximately $35.9 million to COI
pursuant to a five-year loan (the "COI Term Loan"), which bears interest at 12%
per annum, is collateralized by a lien on certain assets that COI now owns or
may acquire in the
-23-
<PAGE> 26
future and matures in May 2002. Also in connection with COI's formation, the
Company established a $20.4 million line of credit (the "Line of Credit"), which
bears interest at 12% per annum. The Line of Credit was amended in August 1998,
and again in March 1999 which ultimately resulted in the decrease in the amount
available to $17.2 million. The Line of Credit is cross-defaulted and
cross-collateralized with the COI Term Loan and matures no later than June 2007.
As of December 31, 1999, the outstanding principal balance on the COI Term Loan
was approximately $13.8 million, and accrued interest was approximately
$280,000. As of December 31, 1999, the outstanding principal balance on the Line
of Credit was $17.2 million, with accrued interest of approximately $350,000.
In connection with the acquisition by COI, effective July 31, 1997, of the
companies that leased certain Company-owned hotel properties, COI acquired 100%
of an entity that had outstanding debt under notes in the original principal
amounts of approximately $2.4 million and $650,000 (collectively, the "CR
Notes") payable to the Company in connection with acquisition of Canyon
Ranch-Tucson. The CR Notes bear interest at a rate of 10.75% per annum, are
secured by deeds of trust for certain real and personal property and mature in
August 2003. The aggregate outstanding balance at December 31, 1998 on the CR
Notes was approximately $ 1.8 million. In addition, in connection with this
transaction, COI acquired 100% of an entity that has outstanding debt under a
promissory note of approximately $190,000 (the "Sonoma Note") payable to the
Company in connection with acquisition of Sonoma Mission Inn & Spa. The Sonoma
Note bears interest at a rate of 7.5% per annum and matures in November 2006.
The outstanding balance of the Sonoma Note at December 31, 1999 was
approximately $190,000.
In connection with COI's acquisition on September 22, 1997 of a two-thirds
interest in the joint venture that owns the Houston Center Athletic Club and a
$5.0 million note receivable from the joint venture, the Company made loans to
COI of $1MM (which was repaid in 1998) and $800,000, which was repaid during the
first quarter of 2000, upon the sale of the asset.
Until September 1998, Messrs. Haddock and Goff owned, collectively, 66.67%
of the voting securities (representing approximately 6.67% of the outstanding
stock) of Crescent Development Management Corp., a Delaware corporation
("CDMC"), and they, together with Harry Frampton (collectively, the "CDMC
Capital Contributors"), comprised CDMC's board of directors. The Operating
Partnership owns 90% of the outstanding stock (all of which is non-voting) of
CDMC. Effective September 11, 1998, the CDMC Capital Contributors entered into a
partnership agreement (the "Partnership Agreement") with COI to form COPI
Colorado, L.P., a Delaware limited partnership ("COPI Colorado"). As of
September 22, 1998, each CDMC Capital Contributor contributed to COPI Colorado
all of his shares of CDMC voting stock (collectively, the "CDMC Shares") in
exchange for an approximately 16.67% limited partner interest in COPI Colorado.
COPI Colorado also owns 1,102,530 shares of COI stock. COI contributed to COPI
Colorado $9.0 million in cash in exchange for a 50% general partner interest in
COPI Colorado. As a result, COI owned a 50% managing interest in COPI Colorado,
and the CDMC Capital Contributors owned collectively a 50% investment interest
in COPI Colorado. In January 2000, COPI Colorado paid Mr. Haddock a lump sum
payment in the amount of approximately $2.6 million to redeem his interest,
based upon an independent appraisal of the value of COPI Colorado; Mr. Haddock
has reserved the right to challenge the valuation performed by the independent
appraiser. COI funded its contribution to COPI Colorado using the proceeds from
a $9 million term loan from the Operating Partnership ("COPI Colorado Note").
The COPI Colorado Note bears interest at 12% per annum, with interest payable
quarterly, and matures in May 2002. The COPI Colorado Note is secured by COI's
general partner interest in COPI Colorado and is cross-collateralized and
cross-defaulted with COI's other borrowings from the Operating Partnership. As
of December 31, 1999, the COPI Colorado Note had an outstanding principal
balance of $9 million and accrued interest of $183,000.
As of December 31, 1999, four credit facilities that the Operating
Partnership extended to CDMC were outstanding: (i) a $56.2 million line of
credit that matures August 2004 and bearing interest at the rate of 11.5% per
annum ("CDMC Credit Facility"), (ii) a note payable to the Operating Partnership
in the original principal amount of $3.1 million, maturing June 2005 and bearing
interest at the rate of 11.5% per annum; (iii) a $22.9 million credit facility
due January 2003 and bearing interest at 12% per annum; and (iv) a $40 million
line of credit that matures December 2006 and bears interest at the rate of
11.5% per annum. The aggregate outstanding balance of those facilities as of
December 31, 1998 is $82 million, and they are cross-defaulted and
cross-collateralized with
-24-
<PAGE> 27
CDMC's interests in the real estate development companies and resort management
company in which the loan proceeds have been invested. During the first quarter
of 2000, the $22.9 million facility was effectively converted into a term loan
of $16.4 million, and the Operating Partnership made a term loan of $5.6 million
to East-West Resorts, LLC, in which CDMC holds a majority interest. Both of
these loans bear interest at an annual rate of 12%, although the loan to
East-West Resort, LLC bears interest at annual rate of 15% of the first six
weeks. Effective December 20, 1999, the Operating Partnership and CDMC entered
into a modification of the $40 million CDMC Credit Facility, increasing the size
of the credit facility from $48.2 million to $56.2 million, and further
restricted the use of advances to specified existing real estate development
projects. Additionally, the Operating Partnership guarantees approximately $3
million of mortgage loan indebtedness of a general partnership in which CDMC's
wholly-owned subsidiary holds a nonmanaging minority interest; the Operating
Partnership made that guaranty in consideration, in part, for an option from
CDMC's subsidiary to purchase its interest in that partnership.
Mr. Goff owns approximately 2.56% economic interest (representing all of the
voting common stock) in DBL Holdings, Inc. ("DBL"), and the Company owns all of
the non voting common stock (representing an approximately 7.44% economic
interest) in DBL. In connection with DBL's purchase of a 12.39% limited partner
interest (the "Mavericks Interest") in the partnership that owns the Dallas
Mavericks, the Operating Partnership loaned $10.08 million to DBL pursuant to a
loan agreement and related term note (the "DBL Mavericks Loan"). In November
1999, the Mavericks interest was sold and the DBL Mavericks Loan was repaid in
full.
On March 31, 1999, DBL-CBO, a wholly-owned subsidiary of DBL Holdings
acquired a $5.97 million aggregate principal amount of Class C-1 Notes issued by
Juniper CBO 1999-1 Ltd., a Cayman Islands limited liability company (the
"Juniper Notes"). DBL-CBO obtained the funds to purchase the Juniper Notes by
selling all of the equity interest in DBL-CBO (the "Equity Interest") to DBL for
$6 million. DBL, in turn, obtained the purchase price for the Equity Interest
pursuant to a $6 million loan agreement and related term note (the "DBL Juniper
Loan") from the Operating Partnership that is secured by the Equity Interest.
The DBL Juniper Loan matures in April 2011 and accrues interest at the rate of
12% per annum. Generally, interest under the DBL Juniper Loan is payable
quarterly to the extent of cash flow derived from DBL-CBO. Under the DBL Juniper
Loan agreement, DBL has agreed (i) to prepay the DBL Juniper Loan to the extent
of any prepayment of the Juniper Notes, (ii) to cause DBL-CBO to distribute to
DBL, in its capacity as DBL-CBO's sole shareholder, substantially all of the
interest payments that DBL-CBO receives on the Juniper Notes, and (iii) to cause
DBL-CBO not to engage in any business activity other than acquiring and holding
the Juniper Notes
In June 1999, the Company loaned DBL $2.7 million dollars, and provided
$14.4 million in equity. These funds were used to make an equity contribution to
DBL-ABC, Inc., a wholly-owned subsidiary, which committed to purchase $25
million (approximately 68% of which was contributed initially and the balance of
which DBL-ABC, Inc. is committed to contribute upon demand of the General
Partner) in limited partnership interests (representing an approximately 12.5%
interest) in G2 Opportunity Fund LP, a limited partnership newly formed
principally to invest in noninvestment grade commercial mortgage-backed
securities and other commercial real estate investments. The sole general
partner, G2 Opportunity GP, LLC, is owned by GMAC Commercial Mortgage
Corporation and Goff Moore Strategic Partners, L.P., and also serves as the
asset managers of the partnership, and in such capacity is entitled to a fee
initially equal to 1% annually of the portfolio acquisition cost. Additionally,
the general partner has a carried interest. Goff Moore Strategic Partners, L.P.
is the primary ongoing investment partnership for Mr. Rainwater, his family
(including his wife, Darla D. Moore) and certain long-time business associates
of Mr. Rainwater, including Mr. Goff. The loan bears interest at the rate of
12.0% and matures in November 2004. As of December 31, 1999 the outstanding
balance under this loan was $7.8 million and had accrued interest of
approximately $333,000.
In 1997, COI and Magellan Health Services, Inc. ("Magellan") formed CBHS to
operate behavioral healthcare facilities (the "Behavioral Healthcare
Facilities") that the Company acquired in 1997 from a subsidiary of Magellan.
Until November 1998, Mr. Goff served as chairman of the CBHS governing board.
Mr. Rainwater owns 2,457,578 shares of the common stock of Magellan
(representing approximately 7.7% of the outstanding common stock of Magellan).
Mr. Goff and the Company also own, directly or indirectly, shares or warrants to
acquire shares of Magellan common stock. From June 1997 until September 1999,
COI and Magellan each owned a 50% interest in CBHS. In September 1999, the
investment of COI and Magellan in CBHS was restructured. As part of that
restructuring, COI's direct and indirect ownership interest in CBHS was
increased to 90%, and Magellan's
-25-
<PAGE> 28
ownership interest in CBHS was decreased to 10%. In addition, the Company
purchased two Behavioral Healthcare Facilities from Magellan for an aggregate
purchase price of approximately $7.1 million. CBHS leases the Behavioral
Healthcare Facilities from the Company pursuant to a lease. During 1999 and the
first quarter of 2000, the lease was restructured. CBHS has ceased operations at
51 of the Behavioral Healthcare Facilities and is continuing operations at the
remaining 37 Behavioral Healthcare Facilities. As a result of the lease
restructuring, the Company received aggregate rent of approximately $35.3
million during 1999. On February 16, 2000 CBHS and all of its subsidiaries that
are subject to the lease filed voluntary Chapter 11 bankruptcy petitions in the
United States Bankruptcy Court for the District of Delaware. The Company is not
able to predict the amount of rent, if any, that it may receive from CBHS during
2000.
Darla D. Moore is married to Mr. Rainwater and is a director of Magellan. As
part of the arrangements pursuant to which Mr. Rainwater acquired securities of
Magellan, an affiliate of Mr. Rainwater has the right to designate a nominee
acceptable to Magellan for election as a director of Magellan for so long as Mr.
Rainwater and his affiliates continue to beneficially own a specified minimum
number of shares of Magellan common stock. Mr. Rainwater's affiliate proposed
Ms. Moore as its nominee for director, and the Magellan board elected Ms. Moore
as director on February 22, 1996.
Effective March 12, 1999, the Company, Vornado Realty Trust ("Vornado"),
affiliated entities that owned or operated approximately 101
temperature-controlled logistics properties (the "Temperature - Controlled
Logistics Properties") and COI restructured their investment in the
Temperature-Controlled Logistics Properties (the "Restructuring"). In the
Restructuring, the affiliated entities that owned any portion of the business
Americold Logistics operations of the Temperature-Controlled Logistics
Properties sold their ownership to a newly formed partnership, of which Vornado
Operating L.P. owns 60% and a newly formed subsidiary of COI owns 40%, in
consideration of the payment of $48.7 million by Americold Logistics. Americold
Logistics, as lessee, entered into triple-net master leases of the
Temperature-Controlled Logistics Properties. Each of the Temperature-Controlled
Logistics 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. For the
period of March 12, 1999 through December 31, 1999, base rent and percentage
rent was approximately $135.8 million, of which base rent represented
approximately 80%. Americold Logistics has the right to defer a portion of the
rent for up to three years beginning on March 12, 1999 to the extent that
available cash, as defined in the leases, is insufficient to pay the rent.
Pursuant to this provision, rent was deferred as of December 31, 1999, with the
Company's share of the deferred rent equal to approximately $2.1 million.
In addition, in connection with the Restructuring, and also effective March
12, 1999, the Company purchased from COI an additional 4% non voting interest in
the two subsidiaries of the Company that have an indirect interest in the
Refrigerated Storage Properties for an aggregate purchase price of $13.2
million. As a result, the economic interest of the Company in each of the two
subsidiaries increased from 95% to 99%, which increased the Company's indirect
ownership interest in the Refrigerated Storage Properties from 38% to 39.6%, and
the economic interest of COI in the two subsidiaries decreased from 5% to 1%,
which decreased COI's indirect ownership interest in the Refrigerated Storage
Properties from 2% to 0.4%. The Company also granted COI an option to require
the Company to purchase COI's remaining 1% interest in both or either of the two
subsidiaries at such time as the purchase would not, in the opinion of counsel
to the Company, adversely affect the status of the Company as a REIT for an
aggregate price, payable by the Company, of approximately $3.4 million. In
connection with the Restructuring, the Company established a new line of credit
in the principal amount of $19.5 million available to COI at an interest rate of
9% per annum, all of which was outstanding as of December 31, 1999.
As of December 31, 1999, the Company owned ten hotel and resort properties
(collectively, the "Hotel Properties") nine of which the Company leased to
subsidiaries of COI (the "Hotel Lessees") pursuant to nine separate leases
("Hotel Leases"). Under the Hotel Leases, each having an initial term of ten
years, the Hotel Lessees assumed the rights and obligations of the property
owner under any related management agreement with the hotel operators, as well
as the obligation to pay all property taxes and other charges against the
property. Each of the
-26-
<PAGE> 29
Hotel Leases provides for the respective Hotel Lessee to pay (i) base rent, with
periodic rent increases, if applicable, and (ii) percentage rent based on a
percentage of gross revenues, room revenues, food and beverage revenues, or a
combination thereof, if applicable, above a specified amount. The Hotel Lessees
paid an aggregate of approximately $64.5 million in base and percentage rent
under the Hotel Leases to the Company for the year ended December 31, 1999. The
Hotel Leases entitle the Company to receive an aggregate amount of $44 million
for base rent, in addition to amounts for percentage rent, from the Hotel
Lessees during 2000.
During 1999, one of the Hotel Lessees provided limited asset management
services for the Omni Austin Hotel, the Hotel Property that was leased to a
third party rather than to one of the Hotel Lessees, in exchange for
compensation in the amount of $50,000. The agreement pursuant to which that
Hotel Lessee provided these services was terminated in 2000 by mutual agreement
of the parties.
COI executed a Master Guaranty and other guaranties pursuant to which COI
unconditionally guarantees payment and performance under the Hotel Leases by the
Hotel Lessee solely from COI's hotel and resort related assets and income
streams.
In early 1998, Mr. Rainwater proposed to purchase an undeveloped residential
lot located at Canyon Ranch-Tucson (the "Lot") from the Operating Partnership at
a price equal to the fair market value of the Lot. Arthur Andersen LLP appraised
the Lot and determined its market value to be $275,000. Mr. Rainwater closed on
the purchase of the Lot on March 8, 1999, and paid $275,000 for the Lot. The
Audit Committee confirmed and ratified this transaction.
In February 2000, the Company entered into an agreement with Sanjay Varma, a
former senior executive officer of the Company, to form an investment
partnership which will seek luxury spa resorts and hotels to acquire and manage
under the "Sonoma Spa Resorts" brand and concept. The Company and Mr. Varma
acquired a 93% and 7% interest, respectively, in this new partnership. Mr. Varma
has also established a new management company, which has contracted with COI to
manage either the property or assets of the Company's existing portfolio of
Hotel Properties (excluding the Canyon Ranch resorts and the Hyatt Regency
Beaver Creek), in addition to new properties the investment partnership
acquires. The Company currently holds a 30% non-voting interest in this
management company. The management company is entitled to receive from the
appropriate Hotel Lessee a fee of 0.85% of gross revenues plus an incentive fee
of 50% of actual net income in excess of budgeted net income for each of the
four Hotel Properties for which it provides asset management services and a base
fee of 2.0% of gross revenues plus an incentive fee of 20% of net operating
income to the extent that such income exceeds a 12% annual return on the
Company's investment in each of the three Hotel Properties for which the
management company provides property management services. Payment of these fees
is guaranteed by COI.
On June 11, 1999, Gerald W. Haddock resigned as a trust manager of the
Company and as President and Chief Executive Officer of the Company and the
General Partner, and as the sole director of the General Partner. In connection
with Mr. Haddock's resignation, the Company agreed to provide compensation to
Mr. Haddock on the terms set forth above in the Summary Compensation Table.
Management believes that the foregoing transactions are on terms no less
favorable than those that could have been obtained in comparable transactions
with unaffiliated parties.
-27-
<PAGE> 30
SHAREHOLDER PROPOSALS FOR THE COMPANY'S 2001
ANNUAL MEETING OF SHAREHOLDERS
Shareholders who intend to submit proposals for consideration at the
Company's 2001 annual meeting of shareholders must submit such proposals to the
Company no later than January 3, 2001, in order to be considered for inclusion
in the proxy statement and form of proxy that the Board of Trust Managers will
distribute in connection with that meeting. Shareholder proposals should be
submitted to David M. Dean, Senior Vice President, Law and Administration, and
Secretary, at 777 Main Street, Suite 2100, Fort Worth, Texas 76102.
Under the Bylaws, a shareholder must comply with certain procedures to
nominate persons for election to the Board of Trust Managers or to propose other
business to be considered at an annual meeting of shareholders. These procedures
provide that shareholders desiring to make nominations for trust managers and/or
to bring a proper subject before a meeting must do so by notice timely delivered
to the Secretary of the Company. The Secretary of the Company generally must
receive notice of any such proposal not less than seventy days nor more than
ninety days prior to the anniversary of the preceding year's annual meeting of
shareholders. In the case of proposals for the 2000 annual meeting of
shareholders, the Secretary of the Company must receive notice of any such
proposal no earlier than March 14, 2001, and no later than April 3, 2001 (other
than proposals intended to be included in the proxy statement and form of proxy,
which, as noted above, the Company must receive by January 3, 2001). Generally,
such shareholder notice must set forth (i) as to each nominee for trust manager,
all information relating to such nominee that is required to be disclosed in
solicitations of proxies for election of trust managers under the proxy rules of
the Commission; (ii) as to any other business, a brief description of the
business desired to be brought before the meeting, the reasons for conducting
such business at the meeting and any material interest in that business of such
shareholder; and (iii) as to the shareholder, (a) the name and address of the
shareholder, (b) the class or series and number of shares of beneficial interest
of the Company that the shareholder owns beneficially and of record, and (c) the
date(s) upon which the shareholder acquired ownership of such shares. The
chairman of the annual meeting shall have the power to declare that any proposal
not meeting these and any other applicable requirements that the Bylaws impose
shall be disregarded. A copy of the Bylaws may be obtained, without charge, upon
written request to David M. Dean, Senior Vice President, Law and Administration,
and Secretary, at 777 Main Street, Suite 2100, Fort Worth, Texas 76102.
In addition, the form of proxy that the Board of Trust Managers will solicit
in connection with the Company's 2000 annual meeting of shareholders will confer
discretionary authority to vote on any proposal, unless the Secretary of the
Company receives notice of that proposal no earlier than March 14, 2001, and no
later than April 3, 2001, and the notice complies with the other requirements
described in the preceding paragraph.
-28-
<PAGE> 31
CRE16B DETACH HERE
PROXY
CRESCENT REAL ESTATE EQUITIES COMPANY
PROXY FOR ANNUAL MEETING OF SHAREHOLDERS
JUNE 12, 2000
THIS PROXY IS SOLICITED BY THE BOARD OF TRUST MANAGERS
The undersigned hereby appoints John C. Goff and David M. Dean, and each of
them, as proxies, with full power of substitution in each, to vote all common
shares of beneficial interest of Crescent Real Estate Equities Company (the
"Company") which the undersigned is entitled to vote, at the Annual Meeting of
Shareholders of the Company to be held on June 12, 2000, at 10:00 a.m., Central
Daylight Savings Time, and any adjournment thereof, on all matters set forth on
the Notice of Annual Meeting and Proxy Statement, dated May 1, 2000, a copy of
which has been received by the undersigned, as follows on the reverse side.
SEE REVERSE CONTINUED AND TO BE SIGNED ON REVERSE SIDE SEE REVERSE
SIDE SIDE
<PAGE> 32
<TABLE>
<S> <C>
VOTE BY TELEPHONE VOTE BY INTERNET
It's fast, convenient, and immediate! It's fast, convenient, and your vote is immediately
Call Toll-Free on a Touch-Tone Phone confirmed and posted.
1-877-PRX-VOTE (1-877-779-8683).
FOLLOW THESE FOUR EASY STEPS: FOLLOW THESE FOUR EASY STEPS:
1. READ THE ACCOMPANYING ANNUAL REPORT, PROXY 1. READ THE ACCOMPANYING ANNUAL REPORT, PROXY
STATEMENT AND PROXY CARD. STATEMENT AND PROXY CARD.
2. CALL THE TOLL-FREE NUMBER 2. GO TO THE WEBSITE http://www.eproxyvote.com/cei
1-877-PRX-VOTE (1-877-779-8683).
3. ENTER YOUR 14-DIGIT VOTER CONTROL NUMBER 3. ENTER YOUR 14-DIGIT VOTER CONTROL NUMBER
LOCATED ON YOUR PROXY CARD ABOVE YOUR NAME. LOCATED ON YOUR PROXY CARD ABOVE YOUR NAME.
4. FOLLOW THE RECORDED INSTRUCTIONS. 4. FOLLOW THE INSTRUCTIONS PROVIDED.
YOUR VOTE IS IMPORTANT! YOUR VOTE IS IMPORTANT!
Call 1-877-PRX-VOTE anytime! Go to http://www.eproxyvote.com/cei anytime!
</TABLE>
DO NOT RETURN YOUR PROXY CARD IF YOU ARE VOTING BY TELEPHONE OR INTERNET
CRE16A DETACH HERE
PLEASE MARK
[X] VOTES AS IN
THIS EXAMPLE.
THIS PROXY WILL BE VOTED AS DIRECTED OR, IF NO DIRECTION IS GIVEN, WILL BE VOTED
"FOR" THE MATTERS STATED.
1. To elect three Trust Managers to serve three-year terms.
NOMINEES: (01) Richard E. Rainwater, (02) Anthony M. Frank,
(03) William F. Quinn
GRANT WITHHOLD
AUTHORITY AUTHORITY
FOR ALL [ ] [ ] FROM ALL
NOMINEES NOMINEES
[ ]
-----------------------------------------------------------------------------
INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided above.
2. To approve the appointment of Arthur Andersen LLP as the independent auditors
of the Company for the fiscal year ending December 31, 2000.
FOR AGAINST ABSTAIN
[ ] [ ] [ ]
3. Other Matters.
In the discretion of the proxies, upon such other matters as may come before
the Meeting as they determine to be in the best interest of the Company.
MARK HERE FOR ADDRESS CHANGE AND NOTE AT LEFT [ ]
IMPORTANT: Please mark this Proxy, date it, sign it exactly as your name(s)
appear(s) and return it in the enclosed postage paid envelope. Joint owners
should each sign personally. Trustees and others signing in a representative or
fiduciary capacity should indicate their full titles in such capacity.
Signature: Date: Signature: Date:
--------------- --------- --------------- --------
