-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SjS0R1Hqx8RI2oPelwScdUM1e47y1VpYiEPcvXNmcvuogDqHQ6evnpzFNfutxcvD IZyCw32eqqW4/wqKrWqwOA== 0000950129-98-000482.txt : 19980209 0000950129-98-000482.hdr.sgml : 19980209 ACCESSION NUMBER: 0000950129-98-000482 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980206 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CAMDEN PROPERTY TRUST CENTRAL INDEX KEY: 0000906345 STANDARD INDUSTRIAL CLASSIFICATION: REAL ESTATE INVESTMENT TRUSTS [6798] IRS NUMBER: 766088377 STATE OF INCORPORATION: TX FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-12110 FILM NUMBER: 98524315 BUSINESS ADDRESS: STREET 1: 3200 SOUTHWEST FRWY STREET 2: STE 1500 CITY: HOUSTON STATE: TX ZIP: 77027 BUSINESS PHONE: 7139643555 MAIL ADDRESS: STREET 1: 3200 SOUTHWEST FREEWAY STREET 2: SUITE 1500 CITY: HOUSTON STATE: TX ZIP: 77027 10-K 1 CAMDEN PROPERTY TRUST - DATED 12/31/97 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 -------------------------------------------------------------- FORM 10-K FOR ANNUAL AND TRANSITION REPORTS PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _________ Commission file number: 1-12110 CAMDEN PROPERTY TRUST (Exact Name of Registrant as Specified in Its Charter) TEXAS 76-6088377 (State or Other Jurisdiction of (I.R.S. Employer Incorporation or Organization) Identification No.) 3200 SOUTHWEST FREEWAY, SUITE 1500 HOUSTON, TEXAS 77027 (Address of Principal Executive Offices) (Zip Code) Registrant's telephone number, including area code: (713) 964-3555 Securities registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which registered ------------------- ----------------------------------------- COMMON SHARES OF BENEFICIAL INTEREST, $.01 PAR VALUE NEW YORK STOCK EXCHANGE 7.33% CONVERTIBLE SUBORDINATED DEBENTURES DUE 2001 NEW YORK STOCK EXCHANGE
Securities registered pursuant to Section 12(g) of the Act: NONE Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] The aggregate market value of voting shares of beneficial interest held by non-affiliates of the registrant was $924,578,038 at January 23, 1998. The number of common shares of beneficial interest outstanding at January 23, 1998 was 31,714,881. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's Joint Proxy Statement/Prospectus in connection with its Special Meeting in lieu of the Annual Meeting of Shareholders to be held in April 1998 are incorporated by reference in Part III. 2 PART I ITEM 1. BUSINESS INTRODUCTION Camden Property Trust, a Houston-based real estate investment trust ("REIT"), and its subsidiaries ("Camden" or the "Company") report as a single business segment with activities related to the ownership, development, acquisition, management, marketing and disposition of multifamily apartment communities in the Southwest, Southeast and Midwest regions of the United States. As of December 31, 1997, the Company owned interests in and operated 100 multifamily properties (the "Operating Properties") containing 34,669 units located in Texas, Florida, Missouri, North Carolina, Arizona and Kentucky. These properties had a weighted average occupancy rate of 94.0% for the year ended December 31, 1997. Six of the Company's multifamily properties containing 2,343 apartment units were under development (the "Development Properties") at December 31, 1997. The Company has several additional sites which it intends to develop into multifamily apartment communities (collectively with the Operating Properties and the Development Properties, the "Camden Properties"). Additionally, the Company managed 4,163 apartment units in 14 properties for third-parties and non-consolidated affiliates at December 31, 1997. On April 15, 1997, the Company acquired through a tax-free merger Paragon Group, Inc. ("Paragon"), a Dallas-based multifamily REIT. The acquisition increased the size of the Company's portfolio from 53 to 103 multifamily properties (after combining the operations of seven of the acquired properties with adjacent properties), and from 19,389 to 35,364 apartment units at the date of acquisition (the "Paragon Acquisition"). As provided in the Plan of Merger dated December 16, 1996, each share of Paragon common stock outstanding on April 15, 1997 was exchanged for 0.64 shares of the Company's common shares (based on a share price of $17.75 per share of Paragon common stock and $27.75 per share of Camden common shares). The Company issued 9,466,346 shares in exchange for all of the outstanding shares of Paragon common stock. Subsequent to the Paragon Acquisition, 2,352,161 limited partnership units ("OP Units") in Camden Operating, L.P. (the "Operating Partnership") were outstanding. Approximately $296 million of Paragon debt, at fair value, was assumed in the Paragon Acquisition. On December 16, 1997, the Company announced the execution of a definitive merger agreement pursuant to which Oasis Residential, Inc. ("Oasis") would be merged with and into a wholly-owned subsidiary of Camden. Upon consummation of the merger, the Company will own interests in 52,469 apartment units (including 2,683 apartment units currently under development) with approximately $2.3 billion in total assets. Each share of Oasis common stock will be exchanged for 0.759 shares of Camden. Each share of Oasis Series A cumulative convertible preferred stock (the "Oasis Preferred Stock") outstanding will be reissued as Camden Series A cumulative convertible preferred shares with comparable terms and conditions as previously existed with respect to the Oasis Preferred Stock. Oasis is a fully integrated REIT headquartered in Las Vegas, Nevada whose business is the operation and development of multifamily apartment communities in Las Vegas, Denver and Southern California. Oasis is a self-administered and self-managed REIT that, as of December 31, 1997, owned interests in 52 completed multifamily properties, with one additional multifamily property under construction. The merger with Oasis has been structured as a tax-free transaction and will be treated as a purchase for accounting purposes. The merger is subject to the approval of both companies' shareholders, customary regulatory approvals and other conditions. It is anticipated that the meetings to consider the transaction and the completion of the merger will both take place during the second quarter of 1998. Following the closing of the merger with Oasis, the Company intends to spin-off approximately 5,000 of the Las Vegas apartment units into a new private entity in which Camden will hold a minority interest. Camden expects to continue to provide property management services for these assets following the spin-off. There can be no assurance, however, as to the terms and conditions of the spin-off or that the transaction will ultimately be consummated. At December 31, 1997, the Company employed 1,180 persons approximately 105 of whom were located at the Company's headquarters and 1,075 of whom were "on-site" or in regional operating offices. The Company's headquarters are located at 3200 Southwest Freeway, Suite 1500, Houston, Texas 77027 and its telephone number is (713) 964-3555. 2 3 OPERATING STRATEGY Management believes that producing consistent earnings growth and developing a strategy for selective investment in favorable markets are crucial factors to Camden's success. Camden relies heavily on its sophisticated property management capabilities and innovative operating strategies in its efforts to produce consistent earnings growth. Sophisticated Property Management. Management believes the depth of its organization enables Camden to deliver quality services, thereby promoting resident satisfaction and improving resident retention, which reduces operating expenses. Camden manages the Camden Properties utilizing its staff of professionals and support personnel, including certified property managers, experienced apartment managers and leasing agents, and trained apartment maintenance technicians. All on-site personnel are trained to deliver high quality services to their residents. Camden attempts to motivate on-site employees through incentive compensation arrangements based upon the net operating income produced at their property, as well as rental rate increases and the level of lease renewals achieved. Innovative Operating Strategies. Management believes an intense focus on operations is necessary to realize consistent, sustained earnings growth. Ensuring resident satisfaction, increasing rents as market conditions allow, maximizing rent collections, maintaining property occupancy at optimal levels and controlling operating costs comprise Camden's principal strategies to maximize property net operating income. Lease terms are generally staggered based on vacancy exposure by apartment type so that lease expirations are better matched to each property's seasonal rental patterns. Camden offers leases ranging from six to thirteen months, with individual property marketing plans structured to respond to local market conditions. In addition, Camden conducts ongoing customer service surveys to ensure timely responsiveness to changing resident needs and the highest level of resident satisfaction. Acquisitions and Dispositions. Camden believes it is well positioned in its markets with the expertise to take advantage of both acquisition and development opportunities. This dual capability, combined with what management believes is a conservative financial structure, affords Camden the ability to concentrate its growth efforts towards selective acquisition opportunities and development alternatives. Several of Camden's core markets are targeted by Camden for continued acquisitions during 1998. Camden plans to continue diversification of its investments within its core markets, both geographically and in terms of the number of units and selection of amenities offered. Camden's portfolio consists primarily of properties which are 10 to 15 years old. Camden's Operating Properties have an average age of ten years (calculated on a basis of investment dollars). Camden believes its demonstrated ability to make physical improvements to acquired properties, such as new or enhanced landscaping design, new or upgraded amenities and redesigned building structures, coupled with a strong focus on property management and marketing, has resulted in attractive yields on the acquired Camden Properties. To generate consistent earnings growth, Camden seeks to selectively dispose of properties and redeploy capital if management determines a property cannot meet long-term earnings growth expectations. In December 1997, Camden disposed of five properties containing 1,592 units. The net proceeds of $36.0 million from the property dispositions were reinvested in developments and used to retire debt. New Development. Selective development of new apartment properties in Camden's core markets will continue to be important to the growth of Camden's portfolio for the next several years. Camden uses experienced on-site construction superintendents, operating under the supervision of project managers and senior management, to control the construction process. All development decisions are made from the corporate office. Risks inherent to developing real estate include zoning changes and environmental matters. There is also the risk that certain assumptions concerning economic conditions may change during the development process. Management believes that it understands and effectively manages the risks associated with development and that the risks of new development are justified by higher potential yields. Environmental Matters. Under various federal, state, and local environmental laws, regulations and ordinances, a current or previous owner or operator of real estate may be required to investigate and clean up hazardous or toxic substances, petroleum product releases or ACMs at such property and may be held liable to a governmental entity or to third parties for property damage and for investigation and cleanup costs incurred by such parties in connection with the contamination. The costs of investigation, remediation or removal of such substances may be substantial, and the presence of such substances, or the failure to properly remediate the contamination on such property, may adversely affect the owner's ability to sell or 3 4 rent such property or to borrow using such property as collateral. Persons who arrange for the disposal or treatment of hazardous or toxic substances at a disposal or treatment facility also may be liable for the costs of remediation or removal of a release of hazardous or toxic substances at or from such facility whether or not such facility is owned or operated by such person. In addition, some environmental laws create a lien on the contaminated site in favor of the government for damages and costs it incurs in connection with the contamination. Finally, the owner of a site may be subject to common law claims by third parties based on damages and costs resulting from environmental contamination emanating from a site. In connection with its acquisitions of properties, the Company's practice is to obtain Phase I and, if necessary, Phase II environmental assessments. These Phase I assessments have been carried out in accordance with accepted industry practices. The Company has also conducted limited subsurface investigations and tested for radon and lead-based paint where such procedures have been recommended by the consultants. Insurance. The Company carries comprehensive liability, fire, extended coverage and rental loss insurance with respect to all of its properties, with policy specifications, insured limits and deductibles customarily carried for similar properties, and carries similar insurance with respect to any undeveloped parcels (with such exceptions as are appropriate given the undeveloped nature of such properties). FINANCIAL STRATEGY Financial Structure. The Company intends to continue maintaining what management believes to be a conservative capital structure by: (i) targeting a ratio of total debt to total market capitalization of less than 50%; (ii) extending and sequencing the maturity dates of its debt where possible; (iii) managing interest rate exposure using fixed rate debt and hedging, where appropriate; (iv) borrowing on an unsecured basis; (v) maintaining a substantial number of unencumbered assets; and (vi) maintaining a conservative debt service coverage ratio. On July 21, 1997, the Company completed the public sale and issuance of 4,830,000 common shares, including 630,000 shares issued to the underwriters to satisfy over-allotments (the "July 1997 Equity Offering"), at a price of $31 per share. The shares were issued from the Company's recently filed $500 million universal shelf registration statement discussed in "Liquidity" below. Net proceeds from the July 1997 Equity Offering were used to retire certain secured indebtedness assumed in the Paragon Acquisition and to reduce amounts outstanding under the $150 million unsecured line of credit (the "Unsecured Credit Facility") which had been advanced to fund recent property developments, acquisitions and other working capital requirements. Camden has maintained on a quarterly basis a financial structure with no more than 40% total debt to total market capitalization since its initial public offering (the "Camden IPO") in July 1993. At December 31, 1997, the Company's ratio of total debt to total market capitalization was approximately 31.0% (based on the closing price of $31 per common share of the Company on the New York Stock Exchange composite tape on December 31, 1997). This ratio represents total consolidated debt of the Company as a percentage of the market value of the Company's common shares (including common shares issuable upon conversion of convertible securities and OP Units, but excluding common shares issuable upon exercise of outstanding options) plus total consolidated debt (excluding the convertible securities). The interest coverage ratio was 4.0 times for the fourth quarter of 1997 and 3.6 times and 3.2 times for the twelve months ended December 31, 1997 and 1996, respectively. At December 31, 1997 and 1996, 78.9% and 84.3%, respectively, of the Company's properties (based on invested capital) were unencumbered. Liquidity. The Company intends to meet its short-term liquidity requirements through cash flows provided by operations, the Unsecured Credit Facility and other short-term borrowings. The Company uses equity capital and senior unsecured debt to refinance maturing secured debt and borrowings under its Unsecured Credit Facility and other short-term borrowings. As of December 31, 1997, the Company had $107 million available under the Unsecured Credit Facility. The Company filed a universal shelf registration statement in April 1997 providing for the issuance of up to $500 million in equity, debt, preferred or convertible securities, of which, over $275 million remains unused. Additionally, in March 1997 the Company implemented a $196 million medium-term note program used to provide intermediate and long-term, unsecured publicly-traded debt financing, of which $171 million remains unused. Finally, the Company has significant unencumbered real estate assets which could be sold or used as collateral for financing purposes should other sources of capital not be available. The Company considers its ability to generate cash to be sufficient, and expects to be able to meet future operating cash requirements and to pay distributions to shareholders and holders of OP Units. 4 5 On January 16, 1998, the Company paid a distribution of $0.49 per share for the fourth quarter of 1997 to all holders of record of Camden's common shares as of December 24, 1997, and paid an equivalent amount per unit to holders of OP Units. Total distributions to common shareholders for the year ended December 31, 1997 were $1.96 per share. Total distributions to holders of OP Units from the date of the Paragon Acquisition through December 31, 1997 were $1.47 per unit. The Company determines the amount of cash available for distribution from the Operating Partnership in accordance with the partnership agreement and has distributed and intends to continue to make distributions to the holders of OP Units in amounts equivalent to the per share dividends paid to holders of common shares. The Company intends to continue shareholder distributions in accordance with REIT qualification requirements under the federal tax code while maintaining what management believes to be a conservative payout ratio, and expects to continue reducing the payout ratio by raising the dividends at a rate which is less than the funds from operations ("FFO") growth rate. Financial Flexibility. The Company concentrates its growth efforts toward selective development and acquisition opportunities in its core markets, and through the acquisition of existing operating portfolios and development properties in selected new markets. During 1997, the Company incurred $91.2 million in development costs and $45.8 million in acquisition costs. In addition, Camden issued 9.5 million common shares and assumed $296 million of indebtedness, at fair value, to purchase Paragon. The Company has announced plans to develop six additional properties at an aggregate cost of approximately $142 million. The Company funds its developments and acquisitions through a combination of equity capital, OP Units, debt securities, the Unsecured Credit Facility and other short-term borrowing arrangements, and previously has used construction and other mortgage loans. The Company also seeks to selectively dispose of assets that are not in core markets, have a lower projected net operating income growth rate than the overall portfolio, or no longer conform to the Company's operating and investment strategies. The $36.0 million in net proceeds received from these asset disposals during 1997 were reinvested in developments and used to retire debt. The Company's Unsecured Credit Facility matures July 28, 2000. One year prior to maturity, this note becomes a term loan, unless it is extended, renegotiated or repaid. The scheduled interest rate on the loan is currently based on LIBOR plus 105 basis points or Prime plus 25 basis points. This scheduled rate is subject to change as the Company's credit ratings change. Advances under the Unsecured Credit Facility may be priced at the scheduled rate, or the Company may enter into bid rate loans ("Bid Rate Loans") with participating banks at rates below the scheduled rate. These Bid Rate Loans have terms of six months or less and may not exceed the lesser of $75 million or the remaining amount available under the Unsecured Credit Facility. The Unsecured Credit Facility is subject to customary financial covenants and limitations. As an alternative to its Unsecured Credit Facility, the Company from time to time borrows using competitively bid unsecured short-term notes with lenders who may or may not be a part of the Unsecured Credit Facility bank group. Such borrowings vary in term and pricing and are typically priced at interest rates below those available under the Unsecured Credit Facility. On May 9, 1997, the Company issued from its recently filed $500 million universal shelf registration statement an aggregate principal amount of $75 million of its unsecured reset notes maturing May 2002 (the "Reset Notes"). During the one-year period ending May 11, 1998, the interest rate on the Reset Notes, which will be reset quarterly, will equal 90-day LIBOR plus 32 basis points and interest will be payable on a quarterly basis. After the one-year period, the mode and duration of the interest rate on the Reset Notes will be reset by the Company and a remarketing underwriter as either fixed or floating and for durations of six months to four years. The Reset Notes are direct, senior unsecured obligations of the Company and rank equally with all other unsecured and unsubordinated indebtedness of the Company. The Reset Notes are redeemable after May 11, 1998 at the option of the Company at par value. The net proceeds to the Company from the sale of the Reset Notes were $74.8 million. The Company used the net proceeds to reduce indebtedness incurred under the Unsecured Credit Facility which had been used to liquidate portions of the debt assumed in the Paragon Acquisition. On June 20, 1997, the Company issued $25 million aggregate principal amount of senior unsecured notes from its $196 million medium-term note shelf registration. These fixed rate notes, due in June 2004, bear interest at the annual rate of 7.172%, payable semiannually on March 15 and September 15. The net proceeds were used to reduce indebtedness outstanding under short-term unsecured notes. On July 21, 1997, Camden retired $66.7 million in mortgage loans using a portion of the proceeds of the July 1997 Equity Offering. Including the debt retirements made in conjunction with the July 1997 Equity Offering, the Company has retired $160.8 million of the $296 million of debt assumed in the Paragon Acquisition. 5 6 At December 31, 1997, the Company maintained a $25 million interest rate hedging agreement which is scheduled to mature in July 2000. The issuing bank has an option to extend this agreement to July 2002. The LIBOR rate is fixed at 6.1%, resulting in a fixed rate equal to 6.1% plus the actual LIBOR spread on the related indebtedness. This swap continues to be used as a hedge to manage the risk of interest rate fluctuations on the Unsecured Credit Facility and other floating rate indebtedness. MARKETS AND COMPETITION Camden's portfolio consists of middle to upper market apartment properties. Camden has expanded its portfolio since the Camden IPO through targeted acquisitions and developments in selected high-growth markets. By combining acquisition, renovation and development capabilities, management believes it is able to better respond to changing conditions in each market, thereby reducing market risk and allowing Camden to take advantage of opportunities as they arise. At December 31, 1997, 51% of Camden's real estate assets were located in Texas. Since the Camden IPO, the Company has diversified into other markets in the Southwest region and into the Southeast and Midwest regions of the United States. At the time of the Camden IPO, approximately 77% of the Camden Properties (based on the number of units) were located in Houston. At December 31, 1997, after giving effect to the anticipated completion of the Development Properties, 21% of the Camden Properties were located in Houston. The Company intends to further diversify geographically into the Western region of the United States through its planned merger with Oasis. There are numerous housing alternatives that compete with Camden's Properties in attracting residents. Camden's Properties compete directly with other multifamily properties and single family homes that are available for rent in the markets in which Camden's Properties are located. Camden's Properties also compete for residents with the new and existing owned-home market. The demand for rental housing is driven by economic and demographic trends. Recent trends in the economics of renting versus home ownership indicate an increasing demand for rental housing in certain markets, despite relatively low residential mortgage interest rates. Rental demand should be strong in areas anticipated to experience in-migration, due to the younger ages that characterize movers as well as the relatively high cost of home ownership in higher growth areas. In addition, management believes that the accelerating growth in the formation of non-traditional households, which tend to rent, should increase the demand for apartments. DISCLOSURE REGARDING FORWARD LOOKING STATEMENTS The statements contained in Item 1 of this report that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Actual results may differ materially from those included in the forward-looking statements. These forward-looking statements involve risks and uncertainties including, but not limited to, the following: the proposed merger with Oasis, changes in general economic conditions in the markets that could impact demand for the Company's product, and changes in financial markets and interest rates impacting the Company's ability to meet its financing needs and obligations. 6 7 ITEM 2. PROPERTIES THE PROPERTIES The Camden Properties typically consist of two- and three-story buildings in a landscaped setting and provide residents with a variety of amenities. Most of the Camden Properties have, or are expected to have, one or more swimming pools and a clubhouse and many have whirlpool spas, tennis courts and controlled-access gates. Many of the units offer additional features such as fireplaces, vaulted ceilings, microwave ovens, covered parking, icemakers, washers and dryers and ceiling fans. The Operating Properties' units average 798 square feet of living area. OPERATING PROPERTIES For the year ended December 31, 1997, no single Operating Property accounted for greater than 3.1% of the Company's total revenues. The Operating Properties had an average occupancy rate of 94.0% in both 1997 and 1996. Resident lease terms generally range from six to thirteen months and usually require security deposits. Eighty-eight of the Operating Properties have in excess of 200 units, with the largest having 832 units. Twenty of the Operating Properties were constructed by the Company or its predecessors and placed in service since 1992. Seven were placed in service between 1988 and 1992, 43 were placed in service between 1983 and 1987, 18 were placed in service between 1978 and 1982, seven were placed in service between 1973 and 1977 and five were placed in service between 1967 and 1972. The following table sets forth information with respect to the Company's Operating Properties, excluding properties currently in lease-up, as of December 31, 1997: 7 8 OPERATING PROPERTIES - --------------------------------------------------------------------------------
DECEMBER 1997 AVG. MO. RENTAL RATES NUMBER YEAR PLACED AVERAGE UNIT 1997 AVERAGE ---------------------- PROPERTY AND LOCATION OF UNITS IN SERVICE SIZE (SQ. FT) OCCUPANCY (1) PER UNIT PER SQ. FT. - ------------------------------------------------------------------------------------------------------------------------ ARIZONA PHOENIX/SCOTTSDALE Arrowhead Springs, The Park at 288 1997 925 93% $ 740 $ 0.80 Longmore Estates (3) 357 1986 923 92 678 0.73 Scottsdale Legacy 428 1996 1,067 93 876 0.82 TUCSON Eastridge 456 1984 559 92 428 0.77 Oracle Villa 365 1974 1,026 92 675 0.66 FLORIDA ORLANDO Grove 232 1973 677 96 503 0.74 Landtree Crossing 220 1983 748 95 566 0.76 Renaissance Pointe (2) 272 1996 940 97 770 0.82 Reserve 146 1991 893 97 699 0.78 Riverwalk I & II 552 1984/1986 747 91 524 0.70 Vineyard 380 1990 798 98 623 0.78 TAMPA/ST. PETERSBURG Broadmoor 384 1986 651 93 481 0.74 Chase Crossing (3) 444 1986 1,223 93 760 0.62 Chasewood 247 1985 704 95 521 0.74 Dolphin Pointe 832 1987/1989 748 93 611 0.82 Greenhouse 324 1982 694 94 471 0.68 Heron Pointe 276 1996 942 97 798 0.85 Island Club I & II 484 1983/1985 722 96 496 0.69 Mallard Pointe I & II 688 1982/1983 728 94 558 0.77 Parsons Run 228 1986 728 98 547 0.75 Schooner Bay 278 1986 728 96 611 0.84 Summerset Bend (5) 368 1984/1986 771 96 568 0.74 KENTUCKY LOUISVILLE Copper Creek 224 1987 732 94 616 0.84 Deerfield 400 1987/1990 746 91 607 0.81 Glenridge 138 1990 916 94 710 0.78 Post Oak 126 1981 847 90 578 0.68 Sundance 254 1975 682 94 516 0.76 MISSOURI KANSAS CITY Camden Passage I & II (2) (6) 596 1989/1997 832 92 667 0.80 ST. LOUIS Cove at Westgate 276 1990 828 97 826 1.00 Knolls 112 1973 1,493 92 798 0.53 Knollwood I & II 608 1981/1985 722 94 514 0.71 Pear Tree 134 1967 723 95 500 0.69 Spanish Trace (4) 372 1972 1,158 87 691 0.60 Sunswept 334 1971 805 91 525 0.65 Tempo 304 1975 676 95 478 0.71 Westchase Park 160 1986 945 90 841 0.89 Westgate I & II (4) 591 1973/1980 947 84 760 0.80 NORTH CAROLINA CHARLOTTE Copper Creek 208 1989 703 94 577 0.82 Eastchase 220 1986 698 93 557 0.80 Falls 352 1984 706 93 592 0.84 Habersham Pointe 240 1986 773 95 612 0.79 Overlook (7) 220 1985 754 93 653 0.87 Park Commons (2) 232 1997 859 94 690 0.80 Pinehurst 407 1967 1,147 93 737 0.64 GREENSBORO Brassfield Park (2) (7) 336 1997 889 92 668 0.75 Glen 304 1980 662 93 520 0.79 River Oaks 216 1985 795 92 608 0.76
(1) Represents average physical occupancy for the year ended. (2) Development property - average occupancy calculated from date at which occupancy exceeded 90% through year end. (3) Acquisition property - average occupancy calculated from acquisition date through year end. (4) These properties were under major renovation during 1997, which affected occupancy levels during this period. 8 9 OPERATING PROPERTIES (CONTINUED) - --------------------------------------------------------------------------------
DECEMBER 1997 AVG. MO. RENTAL RATES ------------------ NUMBER YEAR PLACED AVERAGE UNIT 1997 AVERAGE PROPERTY AND LOCATION OF UNITS IN SERVICE SIZE (SQ. FT) OCCUPANCY (1) PER UNIT PER SQ. FT. - ------------------------------------------------------------------------------------------------------------------------ TEXAS AUSTIN Autumn Woods 283 1984 644 94% $ 553 $ 0.86 Calibre Crossing 183 1986 705 95 587 0.83 Huntingdon 398 1995 903 94 760 0.84 Quail Ridge 167 1984 859 93 640 0.74 Ridgecrest 284 1995 851 92 732 0.86 South Oaks 430 1980 705 94 578 0.81 CORPUS CHRISTI Breakers 288 1996 861 95 754 0.88 Miramar (8) 244 1994/1995 722 89 744 1.03 Potters Mill 344 1986 775 93 588 0.76 Waterford 580 1976/1980 767 91 521 0.68 DALLAS/FORT WORTH Addison, The Park at 456 1996 942 94 866 0.92 Chesapeake 128 1982 912 95 713 0.78 Cottonwood Ridge 208 1985 829 97 547 0.66 Emerald Valley 516 1986 743 96 636 0.86 Emerald Village 304 1987 713 94 597 0.84 Glen Arbor 320 1980 666 96 481 0.72 Glen Lakes 424 1979 877 92 719 0.82 Highland Trace 160 1985 816 95 634 0.78 Highpoint (7) 708 1985 835 94 610 0.73 Ivory Canyon 602 1986 548 93 523 0.96 Los Rios 286 1992 772 96 760 0.99 Nob Hill 486 1986 642 95 503 0.78 North Dallas Crossing 446 1985 730 93 607 0.83 Oakland Hills 476 1985 853 95 581 0.68 Pineapple Place 256 1983 652 96 571 0.88 Randol Mill Terrace 340 1984 848 95 559 0.66 Shadowlake 264 1984 733 94 558 0.76 Stone Creek 240 1995 831 95 782 0.94 Stone Gate (2) 276 1996 871 94 800 0.92 Towne Centre Village 188 1983 735 97 550 0.75 Towne Crossing, The Place at 442 1984 772 95 550 0.71 Valley Creek Village 380 1984 855 97 612 0.72 Valley Ridge 408 1987 773 95 593 0.77 Westview 335 1983 697 95 579 0.83 EL PASO La Plaza 129 1969 997 97 572 0.57 HOUSTON Brighton Place 282 1978 749 94 522 0.70 Cambridge Place 336 1979 771 95 533 0.69 Crossing, The 366 1982 762 95 542 0.71 Driscoll Place 488 1983 708 93 446 0.63 Eagle Creek 456 1984 639 98 532 0.83 Jones Crossing 290 1982 748 97 536 0.72 Roseland Place 671 1982 726 95 518 0.71 Southpoint 244 1981 730 92 557 0.76 Stonebridge 204 1993 845 97 742 0.88 Sugar Grove, The Park at 380 1997 917 96 790 0.86 Vanderbilt I, The Park at 516 1996 963 96 1,020 1.06 Wallingford 462 1980 787 95 549 0.70 Wilshire Place 536 1982 761 95 533 0.70 Woodland Park 288 1995 866 97 766 0.89 Wyndham Park 448 1978/1981 797 96 490 0.61 ------ --- --- -------- ------ 33,559 798 94% $ 616 $ 0.78 === === ======== ====== Properties Under Lease-Up 1,110 ------ TOTAL 34,669 ======
(5) Phase II of Summerset Bend was acquired in June 1997, increasing the total number of units at this property from 272 to 368. (6) Phase II of Camden Passage was completed in 1997 and stabilized during the third quarter of 1997. (7) Properties owned through investment in joint venture. (8) Miramar is a student housing project for Texas A&M at Corpus Christi. Average occupancy includes summer which is normally subject to high vacancies. 9 10 OPERATING PROPERTIES UNDER LEASE-UP The following table sets forth information regarding the Operating Properties under lease-up at December 31, 1997:
% Leased Estimated Number at Date of Date of Property and Location of Units 1/28/98 Completion Stabilization - --------------------------------------- ------------ ---------- ------------- -------------- The Park at Vanderbilt, Phase II Houston, TX........................... 378 89% 3Q97 1Q98 The Park at Centreport Dallas, TX............................ 268 65 4Q97 3Q98 The Park at Buckingham Dallas, TX............................ 464 57 4Q97 3Q98 ----- Total............................... 1,110 =====
DEVELOPMENT PROPERTIES The total budgeted cost of the Development Properties is approximately $141.8 million, with a remaining cost to complete, as of December 31, 1997, of approximately $113.5 million. There can be no assurance that the Company's budget, leasing or occupancy estimates will be attained for the Development Properties or that their performance will be comparable to that of the Company's existing portfolio. The following table sets forth information regarding the Development Properties:
Number Estimated Estimated Estimated of Cost Date of Date of Property and Location Units ($ millions) Completion Stabilization - --------------------------------- ----------- ------------- ----------- ------------- The Park at Towne Center Glendale, AZ.................. 240 $13.4 4Q98 2Q99 Renaissance Pointe II Orlando, FL................... 306 17.3 4Q98 3Q99 The Park at Goose Creek Baytown, TX................... 272 11.8 1Q99 3Q99 The Park at Midtown Houston, TX................... 337 21.5 2Q99 4Q99 The Park at Oxmoor Louisville, KY................ 432 22.1 2Q99 4Q99 The Park at Greenway Houston, TX................... 756 55.7 1Q00 4Q00 ----- ------ Total.................... 2,343 $141.8 ===== ======
Management believes that the Company possesses the development capabilities and experience to provide a continuing source of portfolio growth. In making development decisions, management considers a number of factors, including the size of the property, the season in which leasing activity will occur and the extent to which delivery of the completed units will coincide with leasing and occupancy of such units (which is dependent upon local market conditions). In order to pursue a development opportunity, the Company currently requires a minimum initial stabilized target return of 10%-10.5%. This minimum target return is based on current market rents and projected stabilized expenses, considering the market and the nature of the prospective development. 10 11 ITEM 3. LEGAL PROCEEDINGS Neither the Company nor the Camden Properties are presently subject to any material litigation nor, to the Company's knowledge, is any material litigation threatened against the Company or the Camden Properties, other than routine litigation arising in the ordinary course of business and which is expected to be covered by liability insurance. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS No matter was submitted during the fourth quarter of the fiscal year covered by this report to a vote of security holders, through the solicitation of proxies or otherwise. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The number of holders of record of the Company's common shares, $0.01 par value, as of January 23, 1998 was 698. The high and low sales prices per share of the Company's common shares, as reported on the New York Stock Exchange composite tape, and distributions per share declared for the quarters indicated were as follows:
High Low Distributions -------- -------- ------------- 1997: First..................................................................... $28 3/4 $26 3/4 $0.490 Second.................................................................... 31 5/8 26 1/2 0.490 Third..................................................................... 31 5/8 28 5/8 0.490 Fourth.................................................................... 33 3/16 29 1/4 0.490 1996: First..................................................................... $24 3/4 $22 3/4 $0.475 Second.................................................................... 25 21 3/4 0.475 Third..................................................................... 26 1/2 22 3/4 0.475 Fourth.................................................................... 29 1/4 25 5/8 0.475
11 12 Item 6. SELECTED FINANCIAL DATA CAMDEN PROPERTY TRUST COMPARATIVE SUMMARY OF SELECTED FINANCIAL AND PROPERTY DATA (In thousands, except per share amounts)
Camden Camden Property Trust Predecessors ----------------------------------------------------------------- ------------ July 29 January 1 Years Ended December 31, to to ---------------------------------------------------- December July 1997* 1996 1995 1994 31, 1993 28, 1993 ----------- --------- --------- ---------- --------- ------------ OPERATING DATA Revenues: Rental income ............................ $ 187,928 $ 105,785 $ 92,275 $ 71,468 $ 16,785 $ 16,721 Other property income .................... 9,510 4,453 3,617 2,811 539 590 ---------- --------- --------- --------- --------- -------- Total property income .......... 197,438 110,238 95,892 74,279 17,324 17,311 Equity in income of joint ventures ...... 1,141 Fee and asset management ................ 743 949 1,029 721 Other income ............................ 467 419 353 456 243 310 ---------- --------- --------- --------- --------- -------- Total revenues ................. 199,789 111,606 97,274 75,456 17,567 17,621 ---------- --------- --------- --------- --------- -------- Expenses: Property operating and maintenance ....... 70,595 40,604 37,093 29,352 6,907 7,380 Real estate taxes ........................ 21,028 13,192 11,481 8,962 1,910 1,989 General and administrative ............... 4,473 2,631 2,263 2,574 291 343 Interest ................................. 28,537 17,336 13,843 8,807 1,340 4,364 Depreciation and amortization ............ 44,836 23,894 20,264 16,239 3,572 3,045 ---------- --------- --------- --------- --------- -------- Total expenses ................. 169,469 97,657 84,944 65,934 14,020 17,121 ---------- --------- --------- --------- --------- -------- Income before gain on sales of properties, losses related to early retirement of debt and minority interest ............... 30,320 13,949 12,330 9,522 3,547 500 Gain on sales of properties ................. 10,170 115 Losses related to early retirement of debt .. (397) (5,351) ---------- --------- --------- --------- --------- -------- Income before minority interest ............. 40,093 8,713 12,330 9,522 3,547 500 Minority interest in Operating Partnership .. (1,655) ---------- --------- --------- --------- --------- -------- Net income .................................. 38,438 8,713 12,330 9,522 3,547 $ 500 ======== Preferred share dividends ................... (4) (39) (20) ---------- --------- --------- --------- --------- Net income to common shareholders ........... $ 38,438 $ 8,709 $ 12,291 $ 9,502 $ 3,547 ========== ========= ========= ========= ========= Basic earnings per share .................... $ 1.46 $ 0.59 $ 0.86 $ 0.78 $ 0.39 Diluted earnings per share .................. $ 1.41 $ 0.58 $ 0.86 $ 0.77 $ 0.39 Distributions per common share .............. $ 1.96 $ 1.90 $ 1.84 $ 1.76 $ 0.68 Weighted average number of common shares outstanding .............................. 26,257 14,849 14,325 12,188 9,069 Weighted average number of common shares outstanding plus dilutive potential common shares............................. 28,356 14,979 14,414 12,310 9,114 BALANCE SHEET DATA (AT END OF PERIOD) Real estate assets .......................... $1,397,138 $ 646,545 $ 607,598 $ 510,324 $ 296,545 Accumulated depreciation .................... (94,665) (56,369) (36,800) (17,731) (3,388) Total assets ................................ 1,323,620 603,510 582,352 504,284 304,345 Notes payable ............................... 480,754 244,182 235,459 149,547 111,513 Minority interest in Operating Partnership .. 63,325 Convertible subordinated debentures ......... 6,025 27,702 44,050 47,800 Series A Preferred Shares ................... 1,950 1,950 1,950 Shareholders'/Partners' Equity .............. 710,564 295,428 267,829 277,604 175,984 Common shares outstanding ................... 31,694 16,521 14,514 14,273 9,162
12 13 CAMDEN PROPERTY TRUST COMPARATIVE SUMMARY OF SELECTED FINANCIAL AND PROPERTY DATA (CONTINUED) (In thousands, except property data amounts)
Camden Camden Property Trust Predecessors ---------------------------------------------------------------- ------------ July 29 January 1 Years Ended December 31, to to --------------------------------------------------- December July 1997* 1996 1995 1994 31, 1993 28, 1993 ---------- ---------- ---------- ------------- --------- ------------ OTHER DATA Cash flows provided by (used in) Operating activities.................. $ 65,974 $ 41,267 $ 37,594 $ 33,560 $ 16,554 $ 1,942 Investing activities.................. (73,709) (41,697) (97,003) (198,087) (237,346) (4,297) Financing activities.................. 11,837 2,560 59,404 159,388 226,171 1,073 Funds from operations **................. 75,753 39,999 35,260 28,604 7,119 3,545 PROPERTY DATA Number of operating properties (at end of period).................... 100 48 50 48 32 17 Number of operating units (at end of period).................... 34,669 17,611 16,742 15,783 11,064 6,040 Number of operating units (weighted average).................... 29,280 17,362 16,412 13,694 7,935 5,996 Weighted average monthly total property income per unit....................... $ 562 $ 529 $ 487 $ 452 $ 420 $ 414 Properties under development (at end of period).................... 6 6 9 8 3
* Effective April 1, 1997 the Company acquired Paragon. ** Management considers FFO to be an appropriate measure of the performance of an equity REIT. The National Association of Real Estate Investment Trusts ("NAREIT") currently defines FFO as net income (computed in accordance with generally accepted accounting principles), excluding gains (or losses) from debt restructuring and sales of property, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. In addition, extraordinary or unusual items, along with significant non-recurring events that materially distort the comparative measure of FFO are typically disregarded in its calculation. Prior to March 1995 the NAREIT definition of FFO required the add back of non-real estate depreciation and amortization, such as loan cost amortization. Camden adopted the new FFO definition prescribed by NAREIT during 1995. The Company's definition of FFO also assumes conversion at the beginning of the period of all convertible securities including minority interests which are convertible into common equity. The Company believes that in order to facilitate a clear understanding of the consolidated historical operating results of the Company, FFO should be examined in conjunction with net income as presented in the consolidated financial statements and data included elsewhere in this report. FFO is not defined by generally accepted accounting principles. FFO should not be considered as an alternative to net income as an indication of the Company's operating performance or to net cash provided by operating activities as a measure of the Company's liquidity. Further, FFO as disclosed by other REITs may not be comparable to the Company's calculation. 13 14 ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following discussion should be read in conjunction with the "Comparative Summary of Selected Financial and Property Data" and the consolidated financial statements and notes thereto appearing elsewhere in this report. Historical results and trends which might appear should not be taken as indicative of future operations. The statements contained in this report that are not historical facts are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Actual results may differ materially from those included in the forward-looking statements. These forward-looking statements involve risks and uncertainties including, but not limited to, the following: the proposed merger with Oasis Residential, Inc. ("Oasis"), changes in general economic conditions in the markets that could impact demand for the Company's product, and changes in financial markets and interest rates impacting the Company's ability to meet its financing needs and obligations. BUSINESS Camden Property Trust, a Houston-based real estate investment trust ("REIT"), and its subsidiaries ("Camden" or the "Company") report as a single business segment, with activities related to the ownership, development, acquisition, management, marketing and disposition of multifamily apartment communities in the Southwest, Southeast and Midwest regions of the United States. As of December 31, 1997, the Company owned interests in, operated or was developing 106 multifamily properties containing 37,012 units located in Texas, Florida, Missouri, North Carolina, Arizona and Kentucky. These properties had a weighted average occupancy rate of 94.0% for the year ended December 31, 1997. Six of the Company's multifamily properties containing 2,343 units were under development at December 31, 1997. The Company has several additional sites which it intends to develop into multifamily apartment communities. Additionally, the Company managed 4,163 apartment units in 14 properties for third-parties and non-consolidated affiliates at December 31, 1997. On April 15, 1997, the Company acquired through a tax-free merger Paragon Group, Inc. ("Paragon"), a Dallas-based multifamily REIT. The acquisition increased the size of the Company's portfolio from 53 to 103 multifamily properties (after combining the operations of seven of the acquired properties with adjacent properties), and from 19,389 to 35,364 apartment units at the date of acquisition (the "Paragon Acquisition"). As provided in the Plan of Merger dated December 16, 1996, each share of Paragon common stock outstanding on April 15, 1997 was exchanged for 0.64 shares of the Company's common shares (based on a share price of $17.75 per share of Paragon common stock and $27.75 per share of Camden common shares). The Company issued 9,466,346 shares in exchange for all of the outstanding shares of Paragon common stock. Subsequent to the Paragon Acquisition, 2,352,161 limited partnership units ("OP Units") in Camden Operating, L.P. (the "Operating Partnership") were outstanding. Approximately $296 million of Paragon debt, at fair value, was assumed in the Paragon Acquisition. On December 16, 1997, the Company announced the execution of a definitive merger agreement pursuant to which Oasis would be merged with and into a wholly-owned subsidiary of Camden. The merger will create the third largest multifamily REIT with interests in 52,469 apartment units (including 2,683 apartment units currently under development) with approximately $2.3 billion in total assets. Each share of Oasis common stock will be exchanged for 0.759 shares of Camden. Each share of Oasis Series A cumulative convertible preferred stock (the "Oasis Preferred Stock") outstanding will be reissued as Camden Series A cumulative convertible preferred shares with comparable terms and conditions as previously existed with respect to the Oasis Preferred Stock. Oasis is a fully integrated REIT headquartered in Las Vegas, Nevada whose business is the operation and development of multifamily apartment communities in Las Vegas, Denver and Southern California. Oasis is a self-administered and self-managed REIT that, as of December 31, 1997, owned interests in 52 completed multifamily properties, with one additional multifamily property under construction. The merger with Oasis has been structured as a tax-free transaction and will be treated as a purchase for accounting purposes. The merger is subject to the approval of both companies' shareholders, customary regulatory approvals and other conditions. It is anticipated that the meetings to consider the transaction and the completion of the merger will both take place during the second quarter of 1998. Following the closing of the merger with Oasis, the Company intends to spin-off approximately 5,000 of the Las Vegas apartment units into a new private entity in which Camden will hold a minority interest. Camden expects to continue to provide property management services for these assets following the spin-off. There can be no assurance, however, as to the terms and conditions of the spin-off or that the transaction will ultimately be consummated. 14 15 The Company's multifamily property portfolio, excluding land held for future development, at December 31, 1997, 1996 and 1995 is summarized as follows:
1997** 1996 1995 --------------------------- ------------------------- -------------------------- Units Properties %* Units Properties %* Units Properties %* -------- ------------ ----- ------ ---------- ---- -------- ---------- ---- OPERATING PROPERTIES Texas Houston................................ 6,345 16 17% 6,987 18 36% 6,598 20 33 % Dallas................................. 9,381 26 26 6,045 16 31 6,065 17 30 Austin................................. 1,745 6 5 1,745 6 9 1,745 6 9 Other.................................. 1,585 5 4 1,585 5 8 1,513 5 8 -------- ------- ----- ------ ------ ----- -------- ------ ---- Total Texas Operating Properties..... 19,056 53 52 16,362 45 84 15,921 48 80 Arizona................................... 1,894 5 5 1,249 3 7 821 2 4 Florida................................... 6,355 17 17 Kentucky.................................. 1,142 5 3 Missouri.................................. 3,487 10 10 North Carolina............................ 2,735 10 7 -------- ------- ----- ------ ------ ----- -------- ------ ---- Total Operating Properties........... 34,669 100 94 17,611 48 91 16,742 50 84 -------- ------- ----- ------ ------ ----- -------- ------ ---- PROPERTIES UNDER DEVELOPMENT Texas Houston................................ 1,365 3 4 758 2 4 1,226 3 6 Dallas................................. 732 2 4 920 2 5 Other.................................. 288 1 1 -------- ------- ----- ------ ------ ----- -------- ------ ---- Total Texas Development Properties... 1,365 3 4 1,490 4 8 2,434 6 12 Arizona................................... 240 1 288 1 1 716 2 4 Florida................................... 306 1 1 Kentucky.................................. 432 1 1 -------- ------- ----- ------ ------ ----- -------- ------ ---- Total Properties Under Development... 2,343 6 6 1,778 5 9 3,150 8 16 -------- ------- ----- ------ ------ ----- -------- ------ ---- Total Properties..................... 37,012 106 100% 19,389 53 100% 19,892 58 100% ======== ======= ===== ====== ====== ===== ======== ====== ====
* Based on number of units. ** Includes three operating properties containing 1,264 units owned in joint ventures. At December 31, 1997, the Company had three properties under lease-up as follows:
% Leased Estimated Number at Date of Date of Property and Location of Units 1/28/98 Completion Stabilization - --------------------- -------- -------- ----------- -------------- The Park at Vanderbilt, Phase II Houston, TX ....................... 378 89% 3Q97 1Q98 The Park at Centreport Dallas, TX ........................ 268 65 4Q97 3Q98 The Park at Buckingham Dallas, TX ........................ 464 57 4Q97 3Q98 ----- Total ..................... 1,110 =====
15 16 At December 31, 1997, the Company had six development properties in various stages of construction as follows:
Number Estimated Estimated Estimated of Cost Date of Date of Property and Location Units ($ millions) Completion Stabilization - --------------------------------- ----------- ------------- --------------- --------------- The Park at Towne Center Glendale, AZ.................. 240 $ 13.4 4Q98 2Q99 Renaissance Pointe II Orlando, FL................... 306 17.3 4Q98 3Q99 The Park at Goose Creek Baytown, TX................... 272 11.8 1Q99 3Q99 The Park at Midtown Houston, TX................... 337 21.5 2Q99 4Q99 The Park at Oxmoor Louisville, KY................ 432 22.1 2Q99 4Q99 The Park at Greenway Houston, TX................... 756 55.7 1Q00 4Q00 ----- ------ Total.................... 2,343 $141.8 ===== ======
At December 31, 1997, 51% of Camden's real estate assets were located in Texas. Since the Company's initial public offering in July 1993 (the "Camden IPO"), Camden has diversified into other markets in the Southwest region and into the Southeast and Midwest regions of the United States. At December 31, 1997 and 1996, the Company's investment in the various geographic areas was as follows: (Dollars in thousands)
1997 1996 --------------------- -------------------- Texas Houston..................................................... $ 265,404 19% $ 243,575 38% Dallas...................................................... 321,101 23 207,628 32 Austin...................................................... 66,365 5 65,677 10 Other....................................................... 53,462 4 52,578 8 -------------- ----- ------------ ------ Total Texas Properties................................... 706,332 51 569,458 88 -------------- ----- ------------ ------ Arizona......................................................... 102,520 8 74,355 12 Florida......................................................... 240,008 17 Kentucky........................................................ 55,210 4 Missouri........................................................ 173,939 13 North Carolina.................................................. 100,957 7 Other........................................................... 3,083 2,732 -------------- ----- ------------ ------ Total Properties....................................... $ 1,382,049 100% $ 646,545 100% ============== ===== ============ ======
The Company intends to further diversify geographically into the Western region of the United States through its planned merger with Oasis. LIQUIDITY AND CAPITAL RESOURCES Financial Structure. The Company intends to continue maintaining what management believes to be a conservative capital structure by: (i) targeting a ratio of total debt to total market capitalization of less than 50%; (ii) extending and sequencing the maturity dates of its debt where possible; (iii) managing interest rate exposure using fixed rate debt and hedging, where appropriate; (iv) borrowing on an unsecured basis; (v) maintaining a substantial number of unencumbered assets; and (vi) maintaining a conservative debt service coverage ratio. 16 17 On July 21, 1997, the Company completed the public sale and issuance of 4,830,000 common shares, including 630,000 shares issued to the underwriters to satisfy over-allotments (the "July 1997 Equity Offering"), at a price of $31 per share. The shares were issued from the Company's recently filed $500 million universal shelf registration statement discussed in "Liquidity" below. Net proceeds from the July 1997 Equity Offering were used to retire certain secured indebtedness assumed in the Paragon Acquisition and to reduce amounts outstanding under the $150 million unsecured line of credit (the "Unsecured Credit Facility") which had been advanced to fund recent property developments, acquisitions and other working capital requirements. Camden has maintained on a quarterly basis a financial structure with no more than 40% total debt to total market capitalization since the Camden IPO in July 1993. At December 31, 1997, the Company's ratio of total debt to total market capitalization was approximately 31.0% (based on the closing price of $31 per common share of the Company on the New York Stock Exchange composite tape on December 31, 1997). This ratio represents total consolidated debt of the Company as a percentage of the market value of the Company's common shares (including common shares issuable upon conversion of convertible securities and OP Units, but excluding common shares issuable upon exercise of outstanding options) plus total consolidated debt (excluding the convertible securities). The interest coverage ratio was 4.0 times for the fourth quarter of 1997 and 3.6 times and 3.2 times for the twelve months ended December 31, 1997 and 1996, respectively. At December 31, 1997 and 1996, 78.9% and 84.3%, respectively, of the Company's properties (based on invested capital) were unencumbered. Liquidity. The Company intends to meet its short-term liquidity requirements through cash flows provided by operations, the Unsecured Credit Facility and other short-term borrowings. The Company uses equity capital and senior unsecured debt to refinance maturing secured debt and borrowings under its Unsecured Credit Facility and other short-term borrowings. As of December 31, 1997, the Company had $107 million available under the Unsecured Credit Facility. The Company filed a universal shelf registration statement in April 1997 providing for the issuance of up to $500 million in equity, debt, preferred or convertible securities, of which, over $275 million remains unused. Additionally, in March 1997 the Company implemented a $196 million medium-term note program used to provide intermediate and long-term, unsecured publicly-traded debt financing, of which $171 million remains unused. Finally, the Company has significant unencumbered real estate assets which could be sold or used as collateral for financing purposes should other sources of capital not be available. The Company considers its ability to generate cash to be sufficient, and expects to be able to meet future operating cash requirements and to pay distributions to shareholders and holders of OP Units. On January 16, 1998, the Company paid a distribution of $0.49 per share for the fourth quarter of 1997 to all holders of record of Camden's common shares as of December 24, 1997, and paid an equivalent amount per unit to holders of OP Units. Total distributions to common shareholders for the year ended December 31, 1997 were $1.96 per share. Total distributions to holders of OP Units from the date of the Paragon Acquisition through December 31, 1997 were $1.47 per unit. The Company determines the amount of cash available for distribution from the Operating Partnership in accordance with the partnership agreement and has distributed and intends to continue to make distributions to the holders of OP Units in amounts equivalent to the per share dividends paid to holders of common shares. The Company intends to continue shareholder distributions in accordance with REIT qualification requirements under the federal tax code while maintaining what management believes to be a conservative payout ratio, and expects to continue reducing the payout ratio by raising the dividends at a rate which is less than the funds from operations ("FFO") growth rate. Financial Flexibility. The Company concentrates its growth efforts toward selective development and acquisition opportunities in its core markets, and through the acquisition of existing operating portfolios and development properties in selected new markets. During 1997, the Company incurred $91.2 million in development costs and $45.8 million in acquisition costs. In addition, Camden issued 9.5 million common shares and assumed $296 million of indebtedness, at fair value, to purchase Paragon. The Company has announced plans to develop six additional properties at an aggregate cost of approximately $142 million. The Company funds its developments and acquisitions through a combination of equity capital, OP Units, debt securities, the Unsecured Credit Facility and other short-term borrowing arrangements, and previously has used construction and other mortgage loans. The Company also seeks to selectively dispose of assets that are not in core markets, have a lower projected net operating income growth rate than the overall portfolio, or no longer conform to the Company's operating and investment strategies. The $36.0 million in net proceeds received from these asset disposals during 1997 were reinvested in developments and used to retire debt. 17 18 The Company's Unsecured Credit Facility matures July 28, 2000. One year prior to maturity, this note becomes a term loan, unless it is extended, renegotiated or repaid. The scheduled interest rate on the loan is currently based on LIBOR plus 105 basis points or Prime plus 25 basis points. This scheduled rate is subject to change as the Company's credit ratings change. Advances under the Unsecured Credit Facility may be priced at the scheduled rate, or the Company may enter into bid rate loans ("Bid Rate Loans") with participating banks at rates below the scheduled rate. These Bid Rate Loans have terms of six months or less and may not exceed the lesser of $75 million or the remaining amount available under the Unsecured Credit Facility. The Unsecured Credit Facility is subject to customary financial covenants and limitations. As an alternative to its Unsecured Credit Facility, the Company from time to time borrows using competitively bid unsecured short-term notes with lenders who may or may not be a part of the Unsecured Credit Facility bank group. Such borrowings vary in term and pricing and are typically priced at interest rates below those available under the Unsecured Credit Facility. On May 9, 1997, the Company issued from its recently filed $500 million universal shelf registration statement an aggregate principal amount of $75 million of its unsecured reset notes maturing May 2002 (the "Reset Notes"). During the one-year period ending May 11, 1998, the interest rate on the Reset Notes, which will be reset quarterly, will equal 90-day LIBOR plus 32 basis points and interest will be payable on a quarterly basis. After the one-year period, the mode and duration of the interest rate on the Reset Notes will be reset by the Company and a remarketing underwriter as either fixed or floating and for durations of six months to four years. The Reset Notes are direct, senior unsecured obligations of the Company and rank equally with all other unsecured and unsubordinated indebtedness of the Company. The Reset Notes are redeemable after May 11, 1998 at the option of the Company at par value. The net proceeds to the Company from the sale of the Reset Notes were $74.8 million. The Company used the net proceeds to reduce indebtedness incurred under the Unsecured Credit Facility which had been used to liquidate portions of the debt assumed in the Paragon Acquisition. On June 20, 1997, the Company issued $25 million aggregate principal amount of senior unsecured notes from its $196 million medium-term note shelf registration. These fixed rate notes, due in June 2004, bear interest at the annual rate of 7.172%, payable semiannually on March 15 and September 15. The net proceeds were used to reduce indebtedness outstanding under short-term unsecured notes. On July 21, 1997, Camden retired $66.7 million in mortgage loans using a portion of the proceeds of the July 1997 Equity Offering. Including the debt retirements made in conjunction with the July 1997 Equity Offering, the Company has retired $160.8 million of the $296 million of debt assumed in the Paragon Acquisition. At December 31, 1997, the Company maintained a $25 million interest rate hedging agreement which is scheduled to mature in July 2000. The issuing bank has an option to extend this agreement to July 2002. The LIBOR rate is fixed at 6.1%, resulting in a fixed rate equal to 6.1% plus the actual LIBOR spread on the related indebtedness. This swap continues to be used as a hedge to manage the risk of interest rate fluctuations on the Unsecured Credit Facility and other floating rate indebtedness. FUNDS FROM OPERATIONS Management considers FFO an appropriate measure of performance of an equity REIT. The National Association of Real Estate Investment Trusts ("NAREIT") currently defines FFO as net income (computed in accordance with generally accepted accounting principles), excluding gains (or losses) from debt restructuring and sales of property, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. In addition, extraordinary or unusual items, along with significant non-recurring events that materially distort the comparative measure of FFO are typically disregarded in its calculation. The Company's definition of FFO also assumes conversion at the beginning of the period of all convertible securities including minority interests which are convertible into common equity. 18 19 The Company believes that in order to facilitate a clear understanding of the consolidated historical operating results of the Company, FFO should be examined in conjunction with net income as presented in the consolidated financial statements and data included elsewhere in this report. FFO is not defined by generally accepted accounting principles. FFO should not be considered as an alternative to net income as an indication of the Company's operating performance or to net cash provided by operating activities as a measure of the Company's liquidity. Further, FFO as disclosed by other REITs may not be comparable to the Company's calculation. Camden's FFO for the year ended December 31,1997 increased $35.8 million over 1996 primarily due to the Paragon Acquisition, property acquisitions, developments and improvements in the performance of the stabilized properties in the portfolio. The calculation of FFO for the two years ended December 31, 1997 follows: (In thousands)
1997 1996 --------- ---------- Net income to common shareholders............................................... $ 38,438 $ 8,709 Real estate depreciation........................................................ 43,769 22,946 Minority interest in Operating Partnership...................................... 1,655 Real estate depreciation from unconsolidated ventures........................... 906 Interest on convertible subordinated debentures................................. 670 2,809 Amortization of deferred costs on convertible debentures........................ 88 295 Gain on sales of properties..................................................... (10,170) (115) Losses related to early retirement of debt...................................... 397 5,351 Preferred share dividends....................................................... 4 -------- -------- Funds from operations....................................................... $ 75,753 $ 39,999 ======== ======== Weighted average number of common and common equivalent shares outstanding.............................................................. 28,882 16,682
RESULTS OF OPERATIONS Changes in revenues and expenses related to the operating properties from period to period are primarily due to the Paragon Acquisition, property acquisitions, developments, dispositions and improvements in the performance of the stabilized properties in the portfolio. Where appropriate, comparisons are made on a dollars-per-weighted-average-units basis in order to adjust for such changes in the number of units owned during each period. Selected weighted average revenues and expenses per operating unit for the three years ended December 31, 1997 are as follows:
1997 1996 1995 ----------- ---------- ----------- Rental income per unit per month................................................. $ 535 $ 508 $ 469 Property operating and maintenance per unit per year............................. $ 2,411 $ 2,339 $ 2,260 Real estate taxes per unit per year.............................................. $ 718 $ 760 $ 700 Weighted average number of operating units....................................... 29,280 17,362 16,412
1997 COMPARED TO 1996 The changes in operating results from 1996 to 1997 are primarily due to the Paragon Acquisition, development of ten properties aggregating 3,823 units, and an increase in net operating income generated by the stabilized portfolio. The weighted average number of units increased by 11,918 units, or 68.6%, from 17,362 to 29,280 for the years ended December 31, 1996 and 1997, respectively. Total operating properties were 48 and 97 at December 31, 1996 and 1997, respectively. The 29,280 weighted average units and the 97 operating properties exclude the impact of the Company's ownership interest in 1,264 units on three properties owned in joint ventures. The average rental income per unit increased $27, or 5.3%, from $508 to $535 for the years ended December 31, 1996 and 1997, respectively. The increase was primarily due to increased revenue growth from the stabilized real estate portfolio, higher average rental rates on properties added to the portfolio through the Paragon Acquisition and completion of new development properties. 19 20 Other property income increased $5.1 million from $4.5 million to $9.5 million for the years ended December 31, 1996 and 1997, respectively. This increase was due to a larger number of units owned and in operation and a $2.2 million increase from new revenue sources such as telephone, cable and water. Property operating and maintenance expenses and real estate taxes increased $37.8 million, from $53.8 million to $91.6 million for the years ended December 31, 1996 and 1997, respectively, which represented an annual increase of $30 per unit. The Company's operating expense ratios decreased from the prior year primarily as a result of operating efficiencies resulting from a larger portfolio together with savings in utilities and other costs. Real estate taxes increased as a result of the Paragon Acquisition, increases in valuations of renovated and developed properties and increases in property tax rates. Real estate taxes per unit have decreased due to lower property taxes in the Camden portfolio outside of Texas. General and administrative expenses increased from $2.6 million in 1996 to $4.5 million in 1997, and decreased slightly as a percent of revenues from 2.4% to 2.2%. Interest expense increased from $17.3 million in 1996 to $28.5 million in 1997 due to increased indebtedness related to the Paragon Acquisition, completed developments and renovations. This increase was partially offset by reductions in average interest rates on the Company's debt and the July 1997 Equity Offering discussed in the Liquidity and Capital Resources section. Interest capitalized was $3.3 million and $4.1 million for the years ended December 31, 1997 and 1996, respectively. Depreciation and amortization increased from $23.9 million to $44.8 million primarily due to the Paragon Acquisition, developments and renovations. Gain on sales of properties increased $10.2 million due to the December 1997 disposition of five properties containing 1,592 units. 1996 COMPARED TO 1995 The changes in operating results from 1995 to 1996 are due to completion of the development of four properties aggregating 1,688 units, the acquisition of an adjoining property containing 400 units, the disposition of five properties containing 1,219 units and an increase in revenues generated by the stabilized portfolio. The weighted average number of units increased by 950 units, or 5.8%, from 16,412 to 17,362 for the years ended December 31, 1995 and 1996, respectively. Total units owned and operating were 16,742 and 17,611 at December 31, 1995 and 1996, respectively. The average rental income increased $39 per unit per month, or 8.3%, from $469 to $508 for the years ended December 31, 1995 and 1996, respectively. The increase was primarily due to an increase in revenue growth from the stabilized real estate portfolio, higher than average rental rates achieved on properties added to the portfolio, and overall increases in average occupancy from 93.3% in 1995 to 94.0% in 1996. Other property income increased $800,000 from $3.6 million to $4.5 million for the years ended December 31, 1995 and 1996, respectively. This 23.1% increase was due to a larger number of units owned and in operation. Property operating and maintenance expenses and real estate taxes increased $5.2 million, from $48.6 million to $53.8 million for the years ended December 31, 1995 and 1996 respectively, which represented an annual increase of $139 per unit. The Company's operating expense ratios decreased from the prior year primarily as a result of the change in the property mix due to development and property dispositions. Real estate taxes increased as a result of increases in valuation of renovated and developed properties and increases in property tax rates. General and administrative expenses increased from $2.3 million in 1995 to $2.6 million in 1996, a rate consistent with the overall increase in revenues. 20 21 Interest expense increased from $13.8 million in 1995 to $17.3 million in 1996 due to increased indebtedness related to a property acquisition, completed developments and renovations, partially offset by reductions in interest rates, reductions in debt as a result of an equity offering in October 1996, the conversion of convertible debentures and proceeds from dispositions. Interest capitalized was $5.3 million and $4.1 million for the years ended December 31, 1995 and 1996, respectively. Depreciation and amortization increased from $20.3 million to $23.9 million primarily due to developments and renovations partially offset by property dispositions. During 1996, the Company utilized proceeds from the 6-5/8% and 7% notes primarily to reduce indebtedness under its Unsecured Credit Facility. In connection with such reductions, the Company also early settled certain hedging agreements and recorded a loss of $5.4 million. INFLATION The Company leases apartments under lease terms generally ranging from six to thirteen months. Management believes that such short-term lease contracts lessen the impact of inflation due to the ability to adjust rental rates to market levels as leases expire. YEAR 2000 CONVERSION Camden has recognized the need to ensure that its systems, equipment and operations will not be adversely impacted by the change to the calendar year 2000. As such, the Company has taken steps to identify potential areas of risk and has begun addressing these in its planning, purchasing and daily operations. The total cost of converting all internal systems, equipment and operations to the year 2000 has not been fully quantified, but it is not expected to be a material cost to Camden. However, no estimates can be made as to the potential adverse impact resulting from the failure of third party service providers and vendors to prepare for the year 2000. Camden is attempting to identify those risks as well as to receive compliance certificates from all third parties that have a material impact on Camden's operations. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA The financial statements of the Company are listed under Item 14(a) and are filed as a part of this report on the pages indicated. The supplementary data is included in Note 11 to the Consolidated Financial Statements. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE None. 21 22 PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information with respect to this item is incorporated by reference from the Company's Joint Proxy Statement/Prospectus to be filed before March 31, 1998 in connection with the Special Meeting in lieu of the Annual Meeting of Shareholders to be held in April 1998. ITEM 11. EXECUTIVE COMPENSATION Information with respect to this item is incorporated by reference from the Company's Joint Proxy Statement/Prospectus to be filed before March 31, 1998 in connection with the Special Meeting in lieu of the Annual Meeting of Shareholders to be held in April 1998. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information with respect to this item is incorporated by reference from the Company's Joint Proxy Statement/Prospectus to be filed before March 31, 1998 in connection with the Special Meeting in lieu of the Annual Meeting of Shareholders to be held in April 1998. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information with respect to this item is incorporated by reference from the Company's Joint Proxy Statement/Prospectus to be filed before March 31, 1998 in connection with the Special Meeting in lieu of the Annual Meeting of Shareholders to be held in April 1998. 22 23 PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K 14(a)(1) and (2) Financial Statements and Schedule Index to Financial Statements and Schedule The following Consolidated Financial Statements and Schedule of the Registrant and its subsidiaries and Independent Auditors' Report thereon are filed as part of this report on the pages indicated.
Page ---- Financial Statements Independent Auditors' Report . . . . . . . . . . . . . . . . . . . 27 Consolidated Balance Sheets as of December 31, 1997 and 1996 . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Consolidated Statements of Operations for the Years Ended December 31, 1997, 1996 and 1995 . . . . . . . . . . . . . . 29 Consolidated Statements of Shareholders' Equity for the Years Ended December 31, 1997, 1996 and 1995 . . . . . . . . . . . 30 Consolidated Statements of Cash Flows for the Years Ended December 31, 1997, 1996 and 1995 . . . . . . . . . . . . . . 31 Notes to Consolidated Financial Statements . . . . . . . . . . . . 32 Schedule III -- Real Estate and Accumulated Depreciation . . . . . . S-1
14(a)(3) Index to Exhibits:
NUMBER TITLE ------ ----- 2.1 Agreement and Plan of Merger, dated as of December 16, 1996, among the Registrant, Camden Subsidiary, Inc. and Paragon Group, Inc. Incorporated by reference from Exhibit 99.2 to the Registrant's Form 8-K filed December 18, 1996 (File No. 1-12110). 2.2 Agreement and Plan of Merger, dated December 16, 1997, among the Registrant, Camden Subsidiary II, Inc. and Oasis Residential, Inc. Incorporated by reference from Exhibit 2.1 to the Registrant's Form 8-K filed December 17, 1997 (File No. 1-12110). 3.1 Amended and Restated Declaration of Trust of the Registrant. Incorporated by reference from Exhibit 3.1 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1993 (File No. 1- 12110). 3.2 Amendment to the Amended and Restated Declaration of Trust of the Registrant. Incorporated by reference from Exhibit 3.1 to the Registrant's Form 10-Q filed August 14, 1997 (File No. 1-12110). 3.3* Second Amended and Restated Bylaws of the Registrant. 4.1 Specimen certificate for Common Shares of beneficial interest. Incorporated by reference from Exhibit 4.1 to the Registrant's Registration Statement on Form S-11 filed September 15, 1993 (File No. 33- 68736). 4.2 Indenture dated as of April 1, 1994 by and between the Registrant and The First National Bank of Boston, as Trustee. Incorporated by reference from Exhibit 4.3 to the Registrant's Statement on Form S- 11 filed April 12, 1994 (File No. 33-76244). 4.3 Form of Convertible Subordinated Debenture Due 2001. Incorporated by reference from Exhibit 4.3 to the Registrant's Statement on Form S-11 filed April 12, 1994 (File No. 33-76244).
23 24 4.4 Indenture dated as of February 15, 1996 between the Company and the U.S. Trust Company of Texas, N.A., as Trustee. Incorporated by reference from Exhibit 4.1 to the Registrant's Form 8-K filed February 15, 1996 (File No. 1-12110). 4.5 First Supplemental Indenture dated as of February 15, 1996 between the Company and U.S. Trust Company of Texas N.A., as trustee. Incorporated by reference from Exhibit 4.2 to the Registrant's Form 8-K filed February 15, 1996 (File No. 1-12110). 4.6 Form of Camden Property Trust 6 5/8% Note due 2001. Incorporated by reference from Exhibit 4.3 to the Registrant's Form 8-K filed February 15, 1996 (File No. 1-12110). 4.7 Form of Camden Property Trust 7% Note due 2006. Incorporated by reference from Exhibit 4.3 to the Registrant's Form 8-K filed December 2, 1996 (File No. 1-12110). 4.8 Form of Camden Property Trust Remarketed Reset Note due May 9, 2002. Incorporated by reference from Exhibit 4.3 to the Registrant's Form 8-K filed May 21, 1997 (File No. 1-12110). 10.1 Form of Indemnification Agreement by and between the Registrant and certain of its trust managers and executive officers. Incorporated by reference from Exhibit 10.18 to Amendment No. 1 of the Registrant's Registration Statement on Form S-11 filed July 9, 1993 (File No. 33-63588). 10.2 Letter Agreement dated July 18, 1993 among Richard J. Campo, G. Steven Dawson, the Registrant and Apartment Connection, Inc. Incorporated by reference from Exhibit 10.25 to the Registrant's Registration Statement on Form S-11 filed September 15, 1993 (File No. 33-68736). 10.3 Amendment and Restatement of the 1993 Share Option Plan of Camden Property Trust. Incorporated by reference from Exhibit 10.7 to the Registrant's Form 10-K filed March 28, 1996 (File No. 1-12110). 10.4 Employment Agreement dated July 22, 1996 by and between the Registrant and Richard J. Campo. Incorporated by reference from Exhibit 10.1 to the Registrant's Form 8-K filed October 11, 1996 (File No. 1-12110). 10.5 Employment Agreement dated July 22, 1996 by and between the Registrant and D. Keith Oden. Incorporated by reference from Exhibit 10.2 to the Registrant's Form 8-K filed October 11, 1996 (File No. 1-12110). 10.6 Stock Purchase Agreement, dated December 16, 1996, between Apartment Connection, Inc. and Texas Paragon Management Partners L.P. Incorporated by reference from Exhibit 10.9 to the Registrant's Registration Statement on Form S-4 filed February 26, 1997 (File No. 333-22411). 10.7 Form of Employment Agreement by and between the Registrant and certain senior executive officers. Incorporated by reference from Exhibit 10.13 to the Registrant's Form 10-K filed March 28, 1997 (File No. 1-12110). 10.8 Camden Property Trust Key Employee Share Option Plan. Incorporated by reference from Exhibit 10.14 to the Registrant's Form 10-K filed March 28, 1997 (File No. 1-12110). 10.9 Distribution Agreement dated March 20, 1997 among the Registrant and the Agents listed therein relating to the issuance of Medium Term Notes. Incorporated by reference from Exhibit 1.1 to the Registrant's Form 8-K filed March 21, 1997 (File No. 1-12110). 10.10 Registration Rights Agreement dated April 15, 1997 among the Company, the Operating Partnership and certain investors set forth therein. Incorporated by reference from Exhibit 99.1 to the Registrant's Registration Statement on Form S-3 filed with the Commission on April 22, 1997 (File No. 333-25637). 10.11 Underwriting Agreement dated May 6, 1997 between the Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated. Incorporated by reference from Exhibit 1.1 to the Registrant's Form 8-K filed May 21, 1997 (File No. 1-12110).
24 25 10.12 Remarketing Agreement dated May 6, 1997 between the Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated. Incorporated by reference from Exhibit 1.2 to the Registrant's Form 8-K filed May 21, 1997 (File No. 1-12110). 10.13 Camden Development, Inc. 1997 Non-Qualified Employee Stock Purchase Plan. Incorporated by reference from Exhibit 10.3 to the Registrant's Form 10-Q filed August 14, 1997 (File No. 1-12110). 10.14 Company Voting Agreement, dated December 16, 1997, among the Registrant and certain stockholders of Oasis Residential, Inc. Incorporated by reference from Exhibit 99.1 to the Registrant's Form 8-K filed December 17, 1997 (File No. 1-12110). 10.15 Camden Voting Agreement, dated December 16, 1997, among Oasis Residential, Inc. and certain shareholders of the Registrant. Incorporated by reference from Exhibit 99.2 to the Registrant's Form 8-K filed December 17, 1997 (File No. 1-12110). 10.16* Form of Master Exchange Agreement by and between the Registrant and certain key employees. 10.17* Restatement and Amendment of Loan Agreement dated November 25, 1997 between Registrant and NationsBank of Texas, N.A. 11.1* Statement re Computation of Per Share Earnings. 21.1* Subsidiaries of the Registrant. 23.1* Consent of Deloitte & Touche LLP. 24.1* Powers of Attorney for Richard J. Campo, D. Keith Oden, G. Steven Dawson, William R. Cooper, George A. Hrdlicka, Lewis A. Levey, F. Gardner Parker and Steven A. Webster. 27.1* Financial Data Schedule (filed only electronically with the SEC).
- ------------------------------ *Filed herewith. 14(b) Reports on Form 8-K Current Report on Form 8-K dated December 16, 1997 was filed which contained information under Item 5 (Other Events) and Item 7 (Financial Statements, Pro Forma Financial Information and Exhibits). 25 26 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. February 2, 1998 CAMDEN PROPERTY TRUST By: /S/ ----------------------------- G. Steven Dawson Senior Vice President - Finance Chief Financial Officer and Treasurer Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
Name Title Date ---- ----- ---- * Chairman of the Board of Trust Managers and February 2, 1998 - ----------------------------------- Chief Executive Officer Richard J. Campo (Principal Executive Officer) * President, Chief Operating Officer and February 2, 1998 - ----------------------------------- Trust Manager D. Keith Oden /S/ Senior Vice President - Finance, Chief February 2, 1998 - ----------------------------------- Financial Officer and Treasurer G. Steven Dawson (Principal Financial and Accounting Officer) * Trust Manager February 2, 1998 - ----------------------------------- William R. Cooper * Trust Manager February 2, 1998 - ----------------------------------- George A. Hrdlicka Trust Manager February 2, 1998 * - ----------------------------------- Lewis A. Levey * Trust Manager February 2, 1998 - ----------------------------------- F. Gardner Parker * Trust Manager February 2, 1998 - ----------------------------------- Steven A. Webster *By: /S/ ------------------------------- G. Steven Dawson Attorney-in-Fact
26 27 INDEPENDENT AUDITORS' REPORT To the Shareholders of Camden Property Trust We have audited the accompanying consolidated balance sheets of Camden Property Trust as of December 31, 1997 and 1996, and related consolidated statements of operations, shareholders' equity and cash flows for each of the three years in the period ended December 31, 1997. Our audits also included the financial statement schedule listed in the Index at Item 14. These financial statements and financial statement schedule are the responsibility of the management of Camden Property Trust. Our responsibility is to express an opinion on the financial statements and financial statement schedule based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, such consolidated financial statements present fairly, in all material respects, the financial position of Camden Property Trust at December 31, 1997 and 1996, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 1997 in conformity with generally accepted accounting principles. Also, in our opinion, such financial statement schedule, when considered in relation to the basic consolidated financial statements taken as a whole, presents fairly in all material respects the information set forth therein. DELOITTE & TOUCHE LLP Houston, Texas January 16, 1998 27 28 CAMDEN PROPERTY TRUST CONSOLIDATED BALANCE SHEETS (In thousands, except per share amounts)
December 31, -------------------------- 1997 1996 ------------ ---------- ASSETS Real estate assets, at cost Land . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 182,909 $ 86,673 Buildings and improvements . . . . . . . . . . . . . . . . . . . . . . . . . 1,155,335 523,325 ------------ ---------- 1,338,244 609,998 Less: accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . (94,665) (56,369) ------------ ---------- Net operating real estate assets . . . . . . . . . . . . . . . . 1,243,579 553,629 Projects under development, including land . . . . . . . . . . . . . . . . 43,805 36,547 Investment in joint ventures . . . . . . . . . . . . . . . . . . . . . . . . 15,089 ------------ ---------- 1,302,473 590,176 Accounts receivable -- affiliates . . . . . . . . . . . . . . . . . . . . . . . 950 148 Notes receivable -- affiliates . . . . . . . . . . . . . . . . . . . . . . . . 1,796 3,550 Deferred financing and other assets, net . . . . . . . . . . . . . . . . . . . 7,885 4,847 Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . 6,468 2,366 Restricted cash -- escrow deposits . . . . . . . . . . . . . . . . . . . . . . 4,048 2,423 ------------ ---------- Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,323,620 $ 603,510 ============ ========== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities Notes payable Unsecured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 316,941 $ 185,800 Secured . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 163,813 58,382 Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13,698 7,512 Accrued real estate taxes . . . . . . . . . . . . . . . . . . . . . . . . . 16,568 13,246 Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . 15,881 7,675 Distributions payable . . . . . . . . . . . . . . . . . . . . . . . . . . . 16,805 7,765 ------------ ---------- Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . 543,706 280,380 Minority Interest in Operating Partnership . . . . . . . . . . . . . . . . . . 63,325 7.33% Convertible Subordinated Debentures . . . . . . . . . . . . . . . . . . . 6,025 27,702 Shareholders' Equity Preferred shares of beneficial interest; $0.01 par value per share; 10,000 shares authorized . . . . . . . . . . . . . . . . . . . . . . . . Common shares of beneficial interest; $0.01 par value per share; 100,000 shares authorized; 31,954 and 16,521 issued at December 31, 1997 and 1996, respectively . . . . . . . . . . . . . . . . . 317 165 Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . 780,738 348,339 Distributions in excess of net income . . . . . . . . . . . . . . . . . . . (63,526) (49,515) Unearned restricted share awards . . . . . . . . . . . . . . . . . . . . . . (6,965) (3,561) ------------ ---------- Total shareholders' equity . . . . . . . . . . . . . . . . . . . . . . . 710,564 295,428 ------------ ---------- Total liabilities and shareholders' equity . . . . . . . . . . . . . $ 1,323,620 $ 603,510 ============ ==========
See Notes to Consolidated Financial Statements. 28 29 CAMDEN PROPERTY TRUST CONSOLIDATED STATEMENTS OF OPERATIONS (In thousands, except per share amounts)
Year Ended December 31, ------------------------------------ 1997 1996 1995 --------- --------- -------- REVENUES Rental income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 187,928 $ 105,785 $ 92,275 Other property income . . . . . . . . . . . . . . . . . . . . . . . . . 9,510 4,453 3,617 --------- --------- -------- Total property income . . . . . . . . . . . . . . . . . . . . . . . 197,438 110,238 95,892 Equity in income of joint ventures . . . . . . . . . . . . . . . . . . 1,141 Fee and asset management . . . . . . . . . . . . . . . . . . . . . . . 743 949 1,029 Other income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 467 419 353 --------- --------- -------- Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . 199,789 111,606 97,274 --------- --------- -------- EXPENSES Property operating and maintenance . . . . . . . . . . . . . . . . . . 70,595 40,604 37,093 Real estate taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . 21,028 13,192 11,481 General and administrative . . . . . . . . . . . . . . . . . . . . . . 4,473 2,631 2,263 Interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28,537 17,336 13,843 Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . 44,836 23,894 20,264 --------- --------- -------- Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . 169,469 97,657 84,944 --------- --------- -------- INCOME BEFORE GAIN ON SALES OF PROPERTIES, LOSSES RELATED TO EARLY RETIREMENT OF DEBT AND MINORITY INTEREST . . . . . . . . . . . . . . . . 30,320 13,949 12,330 GAIN ON SALES OF PROPERTIES . . . . . . . . . . . . . . . . . . . . . . . . 10,170 115 LOSSES RELATED TO EARLY RETIREMENT OF DEBT . . . . . . . . . . . . . . . . (397) (5,351) --------- --------- -------- INCOME BEFORE MINORITY INTEREST . . . . . . . . . . . . . . . . . . . . . . 40,093 8,713 12,330 MINORITY INTEREST IN OPERATING PARTNERSHIP . . . . . . . . . . . . . . . . (1,655) --------- --------- -------- NET INCOME . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38,438 8,713 12,330 PREFERRED SHARE DIVIDENDS . . . . . . . . . . . . . . . . . . . . . . . . . (4) (39) --------- --------- -------- NET INCOME TO COMMON SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . $ 38,438 $ 8,709 $ 12,291 ========= ========= ======== BASIC EARNINGS PER SHARE . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.46 $ 0.59 $ 0.86 DILUTED EARNINGS PER SHARE . . . . . . . . . . . . . . . . . . . . . . . . $ 1.41 $ 0.58 $ 0.86 DISTRIBUTIONS DECLARED PER COMMON SHARE . . . . . . . . . . . . . . . . . . $ 1.96 $ 1.90 $ 1.84 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING . . . . . . . . . . . 26,257 14,849 14,325 WEIGHTED AVERAGE NUMBER OF COMMON SHARES OUTSTANDING PLUS DILUTIVE POTENTIAL COMMON SHARES . . . . . . . . . . . . . . . . . . 28,356 14,979 14,414
See Notes to Consolidated Financial Statements. 29 30 CAMDEN PROPERTY TRUST CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (In thousands, except per share amounts)
Common Unearned Shares of Additional Distributions in Restricted Beneficial Paid-in Excess of Net Share Interest Capital Income Awards ---------- ---------- ---------------- ---------- SHAREHOLDERS' EQUITY, JANUARY 1, 1995 . . . . . . . . . . . . . $ 143 $ 294,097 $ (15,502) $ (1,134) Net income to common shareholders . . . . . . . . . . . . 12,291 Common shares issued under dividend reinvestment plan . . . 28 Conversion of debentures . . . . . . . . . . . . . . . . . 1 3,588 Restricted shares issued under benefit plan (83 shares) . . 1 2,095 (1,365) Cash distributions ($1.84 per share) . . . . . . . . . . . (26,414) ------- ---------- ------------- ---------- SHAREHOLDERS' EQUITY, DECEMBER 31, 1995 . . . . . . . . . . . . 145 299,808 (29,625) (2,499) ------- ---------- ------------- ---------- Net income to common shareholders . . . . . . . . . . . . . 8,709 Public offering of 1,090 common shares. . . . . . . . . . . 11 27,580 Common shares issued under dividend reinvestment plan . . . 31 Conversion of debentures . . . . . . . . . . . . . . . . . 6 15,814 Restricted shares issued under benefit plan (82 shares) . . 1 2,074 (1,062) Common share options exercised (71 shares) . . . . . . . . 1 1,272 Conversion of preferred shares . . . . . . . . . . . . . . 1 1,952 Other . . . . . . . . . . . . . . . . . . . . . . . . . . (192) Cash distributions ($1.90 per share) . . . . . . . . . . . (28,599) ------- ---------- ------------- ---------- SHAREHOLDERS' EQUITY, DECEMBER 31, 1996 . . . . . . . . . . . . 165 348,339 (49,515) (3,561) ------- ---------- ------------- ---------- Net income to common shareholders . . . . . . . . . . . . 38,438 Common shares issued in Paragon Acquisition (9,466 shares) . . . . . . . . . . . . . . . . . . . . . . . 95 262,275 Public offering of 4,830 common shares . . . . . . . . . . 48 142,579 Common shares issued under dividend reinvestment plan . . 38 Conversion of debentures . . . . . . . . . . . . . . . . . 9 21,061 Restricted shares issued under benefit plan (194 shares). . 2 5,519 (3,407) Restricted shares placed into Rabbi Trust (261 shares) (3) 3 Common share options exercised (33 shares) . . . . . . . . 1 773 Conversion of Operating Partnership units . . . . . . . . 154 Cash distributions ($1.96 per share) . . . . . . . . . . . (52,449) ------- ---------- ------------- ---------- SHAREHOLDERS' EQUITY, DECEMBER 31, 1997 . . . . . . . . . . . . $ 317 $ 780,738 $ (63,526) $ (6,965) ======= ========== ============= ==========
See Notes to Consolidated Financial Statements. 30 31 CAMDEN PROPERTY TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS (In thousands)
Year Ended December 31, ------------------------------------ 1997 1996 1995 ---------- ---------- ---------- CASH FLOW FROM OPERATING ACTIVITIES Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 38,438 $ 8,713 $ 12,330 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization . . . . . . . . . . . . . . . . . . . 44,836 23,894 20,264 Equity in income of joint ventures, net of cash received . . . . . . 929 Gain on sales of properties . . . . . . . . . . . . . . . . . . . . (10,170) (115) Losses related to early retirement of debt . . . . . . . . . . . . . 397 5,351 Minority interest in Operating Partnership . . . . . . . . . . . . . 1,655 Accretion of discount on unsecured notes payable . . . . . . . . . . 142 72 Net change in operating accounts . . . . . . . . . . . . . . . . . . (10,253) 3,352 5,000 ---------- ---------- ---------- Net cash provided by operating activities . . . . . . . . . . . 65,974 41,267 37,594 CASH FLOW FROM INVESTING ACTIVITIES Cash of Paragon at acquisition . . . . . . . . . . . . . . . . . . . 9,847 Increase in real estate assets . . . . . . . . . . . . . . . . . . . (133,206) (71,288) (96,183) Proceeds from sales of properties . . . . . . . . . . . . . . . . . . 37,826 29,794 Decrease (increase) in affiliate notes receivable . . . . . . . . . . 7,749 (73) (833) Decrease in investment in joint ventures. . . . . . . . . . . . . . . 4,624 Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (549) (130) 13 ---------- ---------- ---------- Net cash used in investing activities . . . . . . . . . . . . . (73,709) (41,697) (97,003) CASH FLOW FROM FINANCING ACTIVITIES Proceeds from issuance of common shares . . . . . . . . . . . . . . . 142,627 27,591 Net increase (decrease) in credit facility and short term notes . . . 31,000 (110,783) 50,759 Proceeds from notes payable . . . . . . . . . . . . . . . . . . . . . 100,000 181,048 39,860 Losses related to early retirement of debt . . . . . . . . . . . . . (397) (5,351) Repayment of notes payable . . . . . . . . . . . . . . . . . . . . . (45,323) (61,614) (4,707) Repayment of Paragon debt, including line of credit . . . . . . . . . (160,774) Distributions to common shareholders and minority interests . . . . . (55,514) (27,457) (26,071) Payment of loan costs . . . . . . . . . . . . . . . . . . . . . . . . (988) (2,253) (634) Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1,206 1,379 197 ---------- ---------- ---------- Net cash provided by financing activities . . . . . . . . . . . 11,837 2,560 59,404 ---------- ---------- ---------- Net increase (decrease) in cash and cash equivalents . . . . . . 4,102 2,130 (5) CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD . . . . . . . . . . . . . 2,366 236 241 ---------- ---------- ---------- CASH AND CASH EQUIVALENTS, END OF PERIOD . . . . . . . . . . . . . . . . $ 6,468 $ 2,366 $ 236 ========== ========== ========== SUPPLEMENTAL INFORMATION Cash paid for interest, net of interest capitalized . . . . . . . . . $ 27,155 $ 15,585 $ 13,189 Interest capitalized . . . . . . . . . . . . . . . . . . . . . . . . $ 3,338 $ 4,129 $ 5,321 SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES Acquisition of Paragon, net of cash acquired: Fair value of assets acquired . . . . . . . . . . . . . . . . $ 650,634 Liabilities assumed . . . . . . . . . . . . . . . . . . . . . 332,839 Common shares issued . . . . . . . . . . . . . . . . . . . . . 262,370 Fair value of minority interest . . . . . . . . . . . . . . . 65,272 Conversion of 7.33% subordinated debentures to common shares, net . . $ 21,070 $ 15,820 $ 3,589 Value of shares issued under benefit plans, net . . . . . . . . . . . $ 5,372 $ 2,449 $ 2,096 Notes payable assumed upon purchase of a property . . . . . . . . . . $ 16,022 Conversion of preferred shares and dividends . . . . . . . . . . . . $ 1,953
See Notes to Consolidated Financial Statements. 31 32 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. BUSINESS Camden Property Trust ("Camden" or the "Company") is a Houston-based self-administered and self-managed real estate investment trust ("REIT") organized on May 25, 1993. Camden and its subsidiaries report as a single business segment, with activities related to the ownership, development, acquisition, management, marketing and disposition of multifamily apartment communities in the Southwest, Southeast and Midwest regions of the United States. As of December 31, 1997, the Company owned interests in, operated or was developing 106 multifamily properties containing 37,012 units located in Texas, Florida, Missouri, North Carolina, Arizona and Kentucky. Six of the Company's multifamily properties containing 2,343 units were under construction at December 31, 1997. The Company has several additional sites which it intends to develop into multifamily apartment communities. Additionally, the Company managed 4,163 apartment units in 14 properties for third-parties and non-consolidated affiliates at December 31, 1997. Acquisition of Paragon Group, Inc. On April 15, 1997, the Company acquired through a tax-free merger Paragon Group, Inc. ("Paragon"), a Dallas-based multifamily REIT. The acquisition increased the size of the Company's portfolio from 53 to 103 multifamily properties (after combining the operations of seven of the acquired properties with adjacent properties), and from 19,389 to 35,364 apartment units at the date of acquisition (the "Paragon Acquisition"). As provided in the Plan of Merger dated December 16, 1996, each share of Paragon common stock outstanding on April 15, 1997 was exchanged for 0.64 shares of the Company's common shares (based on a share price of $17.75 per share of Paragon common stock and $27.75 per share of Camden common shares). The Company issued 9,466,346 shares in exchange for all of the outstanding shares of Paragon common stock. Subsequent to the Paragon Acquisition, 2,352,161 limited partnership units ("OP Units") in Camden Operating, L.P. (the "Operating Partnership") were outstanding. Approximately $296 million of Paragon debt, at fair value, was assumed in the Paragon acquisition. The Paragon Acquisition has been recorded under the purchase method of accounting. In accordance with generally accepted accounting principles, the purchase price was allocated to the net assets acquired based on their estimated fair values. No goodwill was recorded in this transaction. The accompanying consolidated statements of operations include the operating results of Paragon since April 1, 1997, the effective date of the Paragon Acquisition for accounting purposes. Pro forma unaudited consolidated operating results of the Company for the years ended December 31, 1997 and 1996, assuming that the Paragon Acquisition had been made as of January 1, 1996, are summarized below (in thousands, except per share amounts):
Year Ended December 31, --------------------------------- 1997 1996 ---------------- --------------- Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . $ 223,197 $ 211,580 Net income to common shareholders . . . . . . . . . . . . . . . . . 36,626 17,729 Basic earnings per share . . . . . . . . . . . . . . . . . . . . . 1.28 0.73 Diluted earnings per share . . . . . . . . . . . . . . . . . . . . 1.21 0.73
The non-residential operations of Paragon Group Property Services, Inc., a Paragon affiliate which was sold on June 30, 1996, and the related gain from the sale have been adjusted out of the 1996 pro forma amounts. These pro forma results have been prepared for informational purposes only and do not purport to be indicative of the results of operations which actually would have resulted had the Paragon Acquisition been completed on the date indicated, nor are they necessarily indicative of future operations. Acquisition of Oasis Residential, Inc. On December 16, 1997, the Company announced the execution of a definitive merger agreement pursuant to which Oasis Residential, Inc. ("Oasis") would be merged with and into a wholly-owned subsidiary of Camden expanding the Company's geographic focus in 1998 to include the Western region of the United States. Each share of Oasis will be exchanged for 0.759 shares of Camden. Each share of Oasis Series A cumulative convertible preferred stock (the "Oasis Preferred Stock") outstanding will be reissued as Camden Series A cumulative convertible preferred shares with comparable terms and conditions as previously existed with respect to the Oasis Preferred Stock. The merger has been structured as a tax-free transaction and will be treated as a purchase for accounting purposes. The merger is subject to the approval of both companies' shareholders, customary regulatory 32 33 approvals and other conditions. It is anticipated that the meetings to consider the transaction and the completion of the merger will both take place during the second quarter of 1998. Following the closing of the merger with Oasis, the Company intends to spin-off approximately 5,000 of the Las Vegas apartment units into a new private entity in which Camden will hold a minority interest. Camden expects to continue to provide property management services for these assets following the spin-off. There can be no assurance, however, as to the terms and conditions of the spin-off or that the transaction will ultimately be consummated. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Principles of Consolidation. The consolidated financial statements of Camden include the assets, liabilities, and operations of the parent company and its wholly-owned subsidiaries and partnerships in which its aggregate ownership is greater than 50%. Those owned less than 50% are accounted for using the equity method. All significant intercompany accounts and transactions have been eliminated in consolidation. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, results of operations during the reporting periods and related disclosures. Actual results could differ from those estimates. Operating Partnership. Camden owns the assets acquired from Paragon, comprising approximately 45.0% of Camden's multifamily apartment units at December 31, 1997, in the Operating Partnership in which Camden holds 79.1% of the OP Units, and the sole 1% general partner interest. The remaining 19.9% of the Operating Partnership interests are held by former officers, directors and investors in Paragon, who collectively owned 2,346,640 OP Units at December 31, 1997. Minority interests in the accompanying consolidated financial statements relate to holders of these OP Units. Each OP Unit is redeemable for one common share of Camden or cash at the election of the Company. Holders of OP Units are not entitled to rights as shareholders of the Company prior to redemption of their OP Units. No member of the Company's management team owns OP Units and only two of the seven Trust Managers of the Company own OP Units. Cash and Cash Equivalents. All cash and investments in money market accounts and other securities with a maturity of three months or less, at the time of purchase, are considered to be cash and cash equivalents. Restricted Cash. Restricted cash mainly consists of escrow deposits held by lenders for property taxes, insurance and replacement reserves. Substantially all restricted cash is invested in short-term securities. Real Estate Assets, at Cost. Real estate assets are carried at cost plus capitalized carrying charges. Expenditures directly related to the development, acquisition, and improvement of real estate assets are capitalized at cost as land, buildings and improvements. All construction and carrying costs are capitalized and reported on the balance sheet in "Projects under development, including land" until such units are completed. Upon completion of each building of the project, the total cost of that building and the associated land is transferred to "Land" and "Buildings and improvements" and the assets are depreciated over their estimated useful lives using the straight-line method of depreciation. Upon achieving 90% occupancy, or one year from opening the leasing office, whichever occurs first, all units are considered operating and the Company begins expensing all items that were previously considered as carrying costs. The Company expenses recurring capital expenditures for items such as carpets, appliances and HVAC units as these items are replaced in their normal course. During a renovation, many of these items may be capitalized, particularly to the extent that an inordinate number of such items are replaced. Non-recurring capital expenditures for such items as roof replacements are capitalized. The Company capitalized $13.3 million in 1997 and $9.6 million in 1996 of non- recurring renovations and improvements to extend the economic lives and enhance its multifamily properties. Carrying charges, principally interest and ad valorem taxes, of land under development and buildings under construction are capitalized as part of projects under development and buildings and improvements to the extent that such charges do not cause the carrying value of the asset to exceed its net realizable value. Capitalized interest was $3.3 million in 1997, $4.1 million in 1996 and $5.3 million in 1995. Capitalized ad valorem taxes were $557,000 in 1997, $617,000 in 1996 and $551,000 in 1995. 33 34 All buildings and improvements are depreciated over their remaining estimated useful lives of 10 to 35 years using the straight line method. Subsequent expenditures for furnishings, equipment and other normal recurring items are expensed as incurred. Capital improvements subsequent to the initial renovation period are depreciated over their expected useful lives of 3 to 15 years using the straight line method. Deferred Financing and Other Assets, Net. Deferred financing and other assets are amortized ($881,000 in 1997, $838,000 in 1996, and $871,000 in 1995) over the terms of the related debt or lives of the asset on the straight line method. Leasehold improvements and equipment are depreciated on the straight line method over the shorter of the expected useful lives or the lease terms which range from 3 to 10 years. Accumulated depreciation and amortization was $2.9 million in 1997 and $1.8 million in 1996 for deferred financing, other assets, leasehold improvements and equipment. Interest Rate Swap Agreements. The differential to be paid or received on interest rate swap agreements is accrued as interest rates change and is recognized over the life of the agreements as an increase or decrease in interest expense. The Company does not use these instruments for trading purposes, rather it uses them to hedge the impact of interest rate fluctuations on floating rate debt. Income Recognition. Rental, other property income, interest and all other sources of income are recognized as earned. Rental Operations. Camden owns and operates garden style multifamily apartment units that are rented to residents on lease terms ranging from six to thirteen months, with monthly payments due in advance. None of the properties are subject to rent control or rent stabilization. Operations of apartment properties acquired are recorded from the date of acquisition in accordance with the purchase method of accounting. All operating expenses, excluding depreciation, associated with occupied units for properties in the development and leasing phase are expensed against revenues generated by those units as they become occupied. In management's opinion, due to the number of tenants, the type and diversity of submarkets in which the properties operate, and the collection terms, there is no concentration of credit risk. Income Taxes and Distributions. Camden intends to maintain its election as a REIT under the Internal Revenue Code of 1986, as amended. As a result, the Company generally will not be subject to federal taxation to the extent it distributes 95% of its REIT taxable income to its shareholders and satisfies certain other requirements. Accordingly, no provision for federal income taxes has been included in the accompanying consolidated financial statements. Taxable income differs from net income for financial reporting purposes principally due to the timing of the recognition of depreciation. Such differences are primarily due to differences in the book/tax basis of the real estate assets of $14.5 million and differences in methods of depreciation and lives of the real estate assets. As a result of these differences, the book basis of the Company's net real estate assets exceeds its tax basis by $85.0 million at December 31, 1997. At December 31, 1996, the tax basis exceeded the book basis by $37.1 million. Shareholders are taxed on distributions declared and must report such distributions as either ordinary income, short-term gains, long-term gains, or as return of capital. A schedule of per share distributions paid by the Company is set forth in the following table:
Year Ended December 31, ---------------------------- 1997 1996 1995 ------ ------ ------- Ordinary income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.30 $ 1.03 $ 1.37 20% Long-term capital gain . . . . . . . . . . . . . . . . . . . . . . . 0.12 25% Sec. 1250 capital gain . . . . . . . . . . . . . . . . . . . . . . . 0.08 Return of capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.46 0.87 0.47 ------ ------ ------- Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1.96 $ 1.90 $ 1.84 ====== ====== ======= Percentage of distributions representing tax preference items . . . . . . 17.013% 24.769% 20.119%
34 35 A schedule of 1997 per share distributions paid by Paragon to Paragon shareholders prior to the Paragon Acquisition is set forth in the following table:
1997 ------- Ordinary income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.13 28% Mid-term capital gain . . . . . . . . . . . . . . . . . . . . . . . . 0.18 Return of capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.47 ------- Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 0.78 =======
Property Operating and Maintenance Expenses. Property operating and maintenance expenses included normal repairs and maintenance totaling $14.6 million in 1997, $8.3 million in 1996 and $7.3 million in 1995. In addition, amounts incurred subsequent to the initial renovation and rehabilitation periods for recurring expenditures such as carpets, appliances, and furnishings and equipment which might otherwise be capitalized, totaled $5.5 million in 1997, $3.5 million in 1996 and $2.8 million in 1995 and were included in expense. Earnings Per Share. Basic earnings per share has been computed by dividing net income to common shareholders by the weighted average number of common shares outstanding. Diluted earnings per share has been computed by dividing net income to common shareholders (as adjusted) by the weighted average number of common shares outstanding plus dilutive potential common shares. The following table presents information necessary to calculate basic and diluted earnings per share for the periods indicated, with 1996 and 1995 being restated to conform with the requirements of the Statement of Financial Accounting Standards No. 128, Earnings Per Share, described below (in thousands, except per share amounts):
For the Year Ended December 31, ---------------------------------------- 1997 1996 1995 ---------- --------- ---------- BASIC EARNINGS PER SHARE Weighted Average Common Shares Outstanding . . . . . . . . . . 26,257 14,849 14,325 ========== ========= ========== Basic Earnings Per Share . . . . . . . . . . . . . . $ 1.46 $ 0.59 $ 0.86 ========== ========= ========== DILUTED EARNINGS PER SHARE Weighted Average Common Shares Outstanding . . . . . . . . . . 26,257 14,849 14,325 Shares Issuable from Assumed Conversion of: Common Share Options and Awards Granted . . . . . . . . . . 330 130 4 Convertible Preferred Shares . . . . . . . . . . . . . . . Operating Partnership Units . . . . . . . . . . . . . . . 1,769 85 ---------- --------- ---------- Weighted Average Common Shares Outstanding, as Adjusted . . . 28,356 14,979 14,414 ========== ========= ========== Diluted Earnings Per Share . . . . . . . . . . . . . $ 1.41 $ 0.58 $ 0.86 ========== ========= ========== EARNINGS FOR BASIC AND DILUTED COMPUTATION: Net Income . . . . . . . . . . . . . . . . . . . . . . . . . . $ 38,438 $ 8,713 $ 12,330 Preferred Share Dividends . . . . . . . . . . . . . . . . . . (4) (39) ---------- --------- ---------- Net Income to Common Shareholders (Basic Earnings Per Share Computation) . . . . . . . . . . . . . . . . . . . . . . . 38,438 8,709 12,291 Preferred Share Dividends . . . . . . . . . . . . . . . . . . 4 39 Minority Interest in Operating Partnership . . . . . . . . . . 1,655 ---------- --------- ---------- Net Income to Common Shareholders, as Adjusted (Diluted Earnings Per Share Computation) . . . . . . . . . $ 40,093 $ 8,713 $ 12,330 ========== ========= ==========
Reclassifications. Certain reclassifications have been made to amounts in prior year financial statements to conform with current year presentations. Specifically, certain components of revenues have now been reported separately. 35 36 New Accounting Pronouncements. In February 1997, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 128, Earnings Per Share. SFAS No. 128, which was effective for periods ending after December 15, 1997, specifies the computation, presentation and disclosure requirements of earnings per share and supercedes Accounting Principles Board Opinion No. 15. SFAS No. 128 requires a dual presentation of basic and diluted earnings per share. Basic earnings per share, which excludes the impact of common share equivalents, replaces primary earnings per share. Diluted earnings per share, which utilizes the average market price per share as opposed to the greater of the average market price per share or ending market price per share when applying the treasury stock method in determining common share equivalents, replaces fully diluted earnings per share. In February 1997, the FASB also issued SFAS No. 129, Disclosure of Information about Capital Structure, which establishes standards for disclosing information about an entity's capital structure. SFAS No. 129 was effective for periods ending after December 15, 1997. The adoption of SFAS No. 129 did not impact the Company's capital structure disclosures as the Company was already in compliance with this SFAS. In June 1997, the FASB issued SFAS No. 130, Reporting Comprehensive Income, and SFAS No. 131, Disclosures About Segments of an Enterprise and Related Information. SFAS No. 130 establishes standards for reporting and displaying comprehensive income and its components. SFAS No. 131 establishes standards for the way that public business enterprises report information about operating segments and related information in interim and annual financial statements. SFAS No. 131 will not impact the Company's financial statements as it reports as a single segment. SFAS Nos. 130 and 131 are effective for periods beginning after December 15, 1997. Management is evaluating what, if any, additional disclosures may be required upon the implementation of SFAS No. 130. 3. NOTES PAYABLE The following is a summary of the Company's indebtedness:
(In millions) December 31, ------------------- 1997 1996 ------- ------- Senior Unsecured Notes: 6 5/8% Notes, due 2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 99.7 $ 99.6 Reset Notes, due 2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75.0 7% Notes, due 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74.3 74.2 7.172% Medium Term Notes, due 2004 . . . . . . . . . . . . . . . . . . . . . . . . 25.0 Credit facility . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43.0 12.0 ------- ------- 317.0 185.8 Secured Notes - Mortgage loans (5 3/4% - 8 1/2%) . . . . . . . . . . . . . . . . . . 163.8 58.4 ------- ------- Total notes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 480.8 $ 244.2 ======= ======= Floating rate debt included in notes payable, net of hedging agreement . . . . . . . . $ 93.0 $ -- ======= =======
The Company has a revolving $150 million unsecured line of credit (the "Unsecured Credit Facility") which matures July 28, 2000. One year prior to maturity, this note becomes a term loan, unless it is extended, renegotiated or repaid. The scheduled interest rate on the loan is currently based on LIBOR plus 105 basis points or Prime plus 25 basis points. This scheduled rate is subject to change as the Company's credit ratings change. Advances under the Unsecured Credit Facility may be priced at the scheduled rate, or the Company may enter into bid rate loans ("Bid Rate Loans") with participating banks at rates below the scheduled rate. These Bid Rate Loans have terms of six months or less and may not exceed the lesser of $75 million or the remaining amount available under the Unsecured Credit Facility. The Unsecured Credit Facility is subject to customary financial covenants and limitations. As of December 31, 1997, the Company had $107 million available under its Unsecured Credit Facility. The weighted average balance outstanding on the Unsecured Credit Facility during the year ended December 31, 1997 was $31.1 million with a maximum outstanding balance of $119.5 million. 36 37 During 1996, the Company utilized proceeds from the 6-5/8% and 7% notes primarily to reduce indebtedness under its Unsecured Credit Facility. In connection with such reductions, the Company also early settled certain hedging agreements and recorded a loss of $5.4 million. As an alternative to its Unsecured Credit Facility, the Company from time to time borrows using competitively bid unsecured short-term notes with lenders who may or may not be a part of the Unsecured Credit Facility bank group. Such borrowings vary in term and pricing and are typically priced at interest rates below those available under the Unsecured Credit Facility. On May 9, 1997, the Company issued from its recently filed $500 million universal shelf registration statement an aggregate principal amount of $75 million of its unsecured reset notes maturing May 2002 (the "Reset Notes"). During the one-year period ending May 11, 1998, the interest rate on the Reset Notes, which will be reset quarterly, will equal 90-day LIBOR plus 32 basis points and interest will be payable on a quarterly basis. After the one-year period, the mode and duration of the interest rate on the Reset Notes will be reset by the Company and a remarketing underwriter as either fixed or floating and for durations of six months to four years. The Reset Notes are direct, senior unsecured obligations of the Company and rank equally with all other unsecured and unsubordinated indebtedness of the Company. The Reset Notes are redeemable after May 11, 1998 at the option of the Company at par value. The net proceeds to the Company from the sale of the Reset Notes were $74.8 million. The Company used the net proceeds to reduce indebtedness incurred under the Unsecured Credit Facility which had been used to liquidate portions of the debt assumed in the Paragon Acquisition. On June 20, 1997, the Company issued $25 million aggregate principal amount of senior unsecured notes from its $196 million medium-term note shelf registration. These fixed rate notes, due in June 2004, bear interest at the annual rate of 7.172%, payable semiannually on March 15 and September 15. The net proceeds were used to reduce indebtedness outstanding under short-term unsecured notes. On July 21, 1997, the Company completed the public sale and issuance of 4,830,000 common shares, including 630,000 shares issued to the underwriters to satisfy over-allotments (the "July 1997 Equity Offering"), at a price of $31 per share. The shares were issued from the Company's recently filed $500 million universal shelf registration statement. Net proceeds from the July 1997 Equity Offering were used to retire certain secured indebtedness assumed in the Paragon Acquisition and to reduce amounts outstanding under the Unsecured Credit Facility which had been advanced to fund recent property developments, acquisitions and other working capital requirements. Had the July 1997 Equity Offering been completed on the effective date of the Paragon Acquisition, the interest expense on a pro forma basis would have been $21.3 million for the nine months ended December 31, 1997. Net income to common shareholders on a pro forma basis would have been $37.4 million for the nine months ended December 31, 1997. Basic and diluted earnings per share for the nine months ended December 31, 1997 would have been $1.20 per share and $1.16 per share, respectively. On July 21, 1997, Camden retired $66.7 million in mortgage loans using a portion of the proceeds of the July 1997 Equity Offering. Including the debt retirements made in conjunction with the July 1997 Equity Offering, the Company has retired $160.8 million of the $296 million of debt assumed in the Paragon Acquisition. At December 31, 1997, the Company maintained a $25 million interest rate hedging agreement which is scheduled to mature in July 2000. The issuing bank has an option to extend this agreement to July 2002. The LIBOR rate is fixed at 6.1%, resulting in a fixed rate equal to 6.1% plus the actual LIBOR spread on the related indebtedness. This swap continues to be used as a hedge to manage the risk of interest rate fluctuations on the Unsecured Credit Facility and other floating rate indebtedness. At December 31, 1997, the weighted average interest rate on total notes payable was 7.0%. Scheduled principal repayments on all loans outstanding at December 31, 1997 over the next five years are $4.7 million in 1998, $15.7 million in 1999, $51.4 million in 2000, $102.3 million in 2001, $77.5 million in 2002 and $229.1 million thereafter. 4. CONVERTIBLE SUBORDINATED DEBENTURES In April 1994, the Company issued $86.3 million aggregate principal amount of 7.33% Convertible Subordinated Debentures due 2001 (the "Debentures"). The Debentures are convertible at any time prior to maturity into common shares of beneficial interest, $0.01 par value, of the Company at a conversion price of $24 per share, subject to adjustment under certain circumstances. The Debentures will not be 37 38 redeemable by the Company prior to maturity, except in certain circumstances intended to maintain the Company's status as a REIT. Interest on the Debentures is payable on April 1 and October 1 of each year. The Debentures are unsecured and subordinated to present and future senior debt and will be effectively subordinated to all debt and other liabilities of the Company. As of December 31, 1997, $80.2 million in principal amount of the Debentures had been converted to 3.3 million common shares. For the converted Debentures, the earned but unpaid interest was forfeited by the Debenture holders in accordance with the Indenture and the unpaid interest payable was credited to additional paid-in-capital. In addition, $3.2 million of unamortized Debenture issue costs have been reclassified to additional paid-in-capital. Had all these converted Debentures converted as of the beginning of the period, basic earnings per share would have been $1.46, $0.62 and $0.86 per share for the years ended December 31, 1997, 1996 and 1995, respectively. Diluted earnings per share would have been $1.41, $0.62 and $0.86 per share for the years ended December 31, 1997, 1996 and 1995, respectively. Deferred Debenture issue costs of $142,000 and $855,000 remained outstanding at December 31, 1997 and 1996, respectively, and are being amortized over the life of the Debentures. 5. INCENTIVE AND BENEFIT PLANS Incentive Plan. The Company has a non-compensatory option plan (the "Plan") which was amended in the second quarter of 1997 by the Company's shareholders and trust managers. This amendment resulted in an increase in the maximum number of common shares available for issuance under the Plan to 10% of the common shares outstanding at any time. Compensation awards that can be granted under the Plan include various forms of incentive awards including incentive share options, non-qualified share options and restricted share awards ("Incentive Awards"). The class of eligible persons that can receive grants of Incentive Awards under the Plan consists of non-employee trust managers, key employees, consultants, and directors of subsidiaries as determined by a committee of the Board of Trust Managers (the "Committee") of the Company. No Incentive Award may be granted after May 27, 2003. Following is a summary of the activity of the Plan for the three years ended December 31, 1997:
Shares Available for Issuance Options and Restricted Shares ------- ---------------------------------------------------------------- Weighted Weighted Weighted Average Average Average 1997 1997 1997 Price 1996 1996 Price 1995 1995 Price ------- ------- ---------- ------- ---------- ------- ---------- Balance at January 1 . . . . . . . 535,190 843,360 $ 23.34 870,835 $ 23.12 834,900 $ 23.18 Additional Shares Available Due to Plan Amendment . . . . . . . . . 1,713,234 Options Granted . . . . . . . . . . . . (310,050) 310,050 26.99 Exercised . . . . . . . . . . . (33,042) 23.39 (71,450) 22.35 Forfeited . . . . . . . . . . . 4,333 (4,333) 24.00 (54,650) 23.71 (47,175) 24.00 --------- --------- -------- -------- -------- -------- -------- Net Options . . . . . . . . (305,717) 272,675 27.47 (126,100) 22.94 (47,175) 24.00 --------- --------- -------- -------- -------- -------- -------- Restricted Shares Granted . . . . . . . . . . . . (193,724) 193,724 28.42 124,341 24.73 90,956 23.24 Forfeited . . . . . . . . . . . (5,910) 26.39 (25,716) 24.37 (7,846) 25.50 --------- --------- -------- -------- -------- -------- -------- Net Restricted Shares . . . (193,724) 187,814 28.48 98,625 24.83 83,110 23.03 --------- --------- -------- -------- -------- -------- -------- Balance at December 31 . . . . . . 1,748,983 1,303,849 $ 24.94 843,360 $ 23.34 870,835 $ 23.12 ========= ========= ======== ======== ======== ======== ======== Exercisable options at December 31 565,600 $ 22.95 533,617 $ 22.86 406,008 $ 22.78 Vested restricted shares at December 31 123,341 $ 24.46 56,781 $ 23.96 22,806 $ 24.30
Options are exercisable, subject to the terms and conditions of the Plan, in increments of 33.33% per year on each of the first three anniversaries of the date of grant. The Plan provides that the exercise price 38 39 of an option (other than non-employee trust manager options) will be determined by the Committee on the day of grant and to date all options have been granted at an exercise price which equals the fair market value on the date of grant. Options exercised during 1997 were exercised at prices ranging from $22.00 to $24.00 per share. At December 31,1997, options outstanding were at prices ranging from $22.00 to $27.00 per share. Such options have a weighted average remaining contractual life of seven years. In October 1995, the FASB issued SFAS No. 123, Accounting for Stock-Based Compensation. SFAS No. 123 prescribes a fair value-based method of determining compensation expense related to stock-based awards granted to employees or associates. The recognition provisions of SFAS No. 123 are optional; however, entities electing not to adopt SFAS No. 123 are required to disclose in annual financial statements issued for fiscal years beginning after December 15, 1995 pro forma net income and earnings per share as if SFAS No. 123 had been applied. The Company elected not to adopt the recognition provisions of SFAS No. 123, however, required disclosures are included below. The fair value of each option grant is estimated on the date of grant utilizing the Black-Scholes option pricing model with the following weighted average assumptions used for grants in 1997: risk-free interest rates ranging from 6.3% to 6.9%, expected life of ten years, dividend yield of 6.3% and expected share price volatility of 14.4%. The weighted average fair value of options granted in 1997 was $2.63 per share. If the Company applied the recognition provisions of SFAS No. 123 to its option grants, the Company's net income to common shareholders would have decreased $57,000 in 1997 and both basic and diluted earnings per share would have remained the same. The recognition provisions of SFAS No. 123 did not impact the Company in 1995 and 1996 due to the fact that the Company did not grant any option awards from January 1, 1995 through December 31, 1996. Furthermore, the effects of applying SFAS No. 123 in this pro forma disclosure are not indicative of future amounts. Restricted shares have vesting periods of up to five years. The compensation cost for restricted shares has been appropriately recognized at fair market value of the Company's shares in 1995, 1996 and 1997. Rabbi Trust. In February 1997 the Company established a rabbi trust (the "Rabbi Trust"), in which salary and bonus amounts awarded to certain officers under the recently established Key Employee Share Option Plan and restricted shares awarded to certain officers may be deposited. The Company accounts for the Rabbi Trust similar to a compensatory stock option plan. At December 31, 1997, approximately 261,000 restricted shares were held in the Rabbi Trust. 401(k) Savings Plan. The Company has a 401(k) savings plan (the "Savings Plan") which is a voluntary defined contribution plan. Under the Savings Plan, every employee is eligible to participate beginning on the earlier of January 1 or July 1 following the date the employee has completed six months of continuous service with the Company. Each participant may make contributions to the Savings Plan by means of a pre-tax salary deferral which may not be less than 1% nor more than 15% of the participant's compensation. The federal tax code limits the annual amount of salary deferrals that may be made by any participant. The Company may make matching contributions on the participant's behalf. A participant's salary deferral contribution will always be 100% vested and nonforfeitable. A participant will become vested in the Company's matching contributions 33.33% after one year of service, 66.67% after two years of service and 100% after three or more years of service. Expenses under the Savings Plan were not material. Employee Stock Purchase Plan. In July 1997, the Company established and commenced an Employee Stock Purchase Plan ("ESPP") for all active employees, officers, and trust managers who have completed one month of continuous service. Participants may elect to purchase Camden common shares through payroll or director fee deductions and/or through quarterly contributions. At the end of each six-month offering period, each participant's account balance is applied to acquire common shares on the open market at 85% of the market value, as defined, on the first or last day of the offering period, whichever price is lower. A participant may not purchase more than $25,000 in value of shares during any Plan Year, as defined. On January 6, 1998, 17,143 shares were purchased under the ESPP for the 1997 Plan Year. 6. RELATED PARTY TRANSACTIONS Camden Connection, Inc. ("CCI") (formerly Apartment Connection, Inc.) is a nonqualified-REIT subsidiary. CCI was established to act as a leasing agent providing tenants for apartment owners in Houston, including properties owned by the Company. Locator fees paid by the Company to CCI were $79,000, $136,000, and $195,000 for the years ended 1997, 1996, and 1995, respectively. The Company made an unsecured working capital revolving line of credit available to CCI, which was renewable annually. The loan had a maximum commitment of $1.2 million and earned interest at a fixed rate of 7.5% per annum. During 1997, the operations of CCI were sold and the loan was paid off. The loan's outstanding balance was $1.2 million at December 31, 1996. 39 40 Two of the executive officers ("Executives") have loans totaling $1.8 million with one of the Company's nonqualified-REIT subsidiaries. The Executives utilized amounts received from these loans to purchase common shares of the Company. The loans mature in 1999 and bear interest at the fixed rate of 7.0%. These loans are non-recourse, but are secured by a pledge of such common shares, and do not require any prepayments of principal until maturity. During 1995, the Company formed TeleServe, Inc. (formerly Camden Communications One, Inc.) doing business as CamTel ("CamTel"). CamTel is a nonqualified-REIT subsidiary that was established to provide fiber optic, central office switched telecommunications service to residents in the Company's properties and third parties. CamTel entered into operating agreements with third parties during the fourth quarter of 1997 to provide continuing services to CamTel's customers. The Company had made a 7.0% unsecured revolving line of credit available to CamTel, which had an outstanding balance of $0 and $585,000 at December 31, 1997 and 1996, respectively. In connection with the April 15, 1997 merger with Paragon, the Company through one of the Company's affiliates, Camden Residential Services, Inc., began performing residential services for owners of 15 affiliated properties. Management fees earned on the properties amounted to $279,000 for the year ended December 31, 1997. Although the management agreements were not the result of arm's length negotiations, the Company believes that they were no more favorable to the owners than the fees that would have been paid to unaffiliated third parties under similar circumstances. Prior to 1997, the Company had management agreements in which the Executives had 1% economic interests with respect to four properties. Fees earned amounted to $428,000 and $441,000 for the years ended 1996 and 1995, respectively. Although the management agreements were not the result of arm's length negotiations, the Company believes that they were no more favorable to the owners than the fees that would have been paid to unaffiliated third parties under similar circumstances. 7. FAIR VALUE DISCLOSURE OF FINANCIAL INSTRUMENTS Statement of Financial Accounting Standards No. 107 requires disclosure about fair value for all financial instruments, whether or not recognized, for financial statement purposes. Disclosure about fair value of financial instruments is based on pertinent information available to management as of December 31, 1997 and December 31, 1996. Considerable judgment is necessary to interpret market data and develop estimated fair values. Accordingly, the estimates presented herein are not necessarily indicative of the amounts the Company could obtain on disposition of the financial instruments. The use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. As of December 31, 1997 and 1996, management estimates that the fair value of (i) cash and cash equivalents, receivables, accounts payable, accrued expenses and other liabilities and distributions payable are carried at amounts which reasonably approximate their fair value; and (ii) based upon the Company's effective borrowing rate for issuance of debt with similar terms and remaining maturities, the carrying amounts of debt and related interest rate swap agreements approximate fair value. The Company is exposed to credit risk in the event of nonperformance by counterparties to its interest rate swap agreements, but has no off-balance sheet risk of loss. The Company anticipates that its counterparties will fully perform their obligations under the agreements. 8. NET CHANGE IN OPERATING ACCOUNTS The effect of changes in the operating accounts on cash flows from operating activities is as follows:
(In thousands) Year Ended December 31, ----------------------------------- 1997 1996 1995 --------- -------- -------- Decrease (increase) in assets: Restricted cash - escrow deposits . . . . . . . . . . . . . . . . . $ 853 $ 210 $ (68) Accounts receivable - affiliates . . . . . . . . . . . . . . . . . . 2,046 221 65 Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,733) 929 (335) Increase (decrease) in liabilities: Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . 434 (788) 3,143 Accrued real estate taxes . . . . . . . . . . . . . . . . . . . . . 842 1,381 1,552 Accrued expenses and other liabilities . . . . . . . . . . . . . . . (12,695) 1,399 643 --------- -------- ------- Net change in operating accounts . . . . . . . . . . . . . . . . . . $ (10,253) $ 3,352 $ 5,000 ========= ======== =======
40 41 9. COMMITMENTS AND CONTINGENCIES Construction Contracts. As of December 31, 1997, the Company was obligated for approximately $19.8 million of additional expenditures (a substantial amount of which is to be provided by debt). Lease Commitments. At December 31, 1997, Camden had long-term leases covering certain land, office facilities and equipment. Rental expense totaled $783,000 in 1997, $475,000 in 1996 and $476,000 in 1995. Minimum annual rental commitments for the years ending December 31, 1998 through 2002 are $414,000, $176,000, $173,000, $162,000 and $160,000, respectively, and $6 million in the aggregate thereafter. Employment Agreements. The Company has employment agreements with six of its senior officers, the terms of which expire at various times through August 20, 1999. Such agreements provide for minimum salary levels as well as various incentive compensation arrangements, which are payable based on the attainment of specific goals. The agreements also provide for severance payments in the event certain situations occur such as termination without cause or a change of control. The severance payments vary based on the officer's position and amount to one times the current salary base for four of the officers and 2.99 times the average annual compensation over the previous three fiscal years for the two remaining officers. Contingencies. Camden is subject to various legal proceedings and claims that arise in the ordinary course of business. These matters are generally covered by insurance. While the resolution of these matters cannot be predicted with certainty, management believes that the final outcome of such matters will not have a material adverse effect on the consolidated financial statements of Camden. 10. SUBSEQUENT EVENTS In the ordinary course of its business, the Company issues letters of intent indicating a willingness to negotiate for the purchase or sale of multifamily properties or development land. In accordance with local real estate market practice, such letters of intent are non-binding, and neither party to the letter of intent is obligated to pursue negotiations unless and until a definitive contract is entered into by the parties. Even if definitive contracts are entered into, the letters of intent and resulting contracts contemplate that such contracts will provide the purchaser with periods varying from 25 to 180 days during which it will evaluate the properties and conduct its due diligence and during which periods the purchaser will have the ability to terminate the contracts without penalty or forfeiture of any deposit or earnest money. There can be no assurance that definitive contracts will be entered into with respect to any properties covered by letters of intent or that the Company will acquire or sell any property as to which the Company may have entered into a definitive contract. Further, due diligence periods are frequently extended as needed. An acquisition or sale becomes probable at the time that the due diligence period expires and the definitive contract has not been terminated. The Company is then at risk under an acquisition contract, but only to the extent of any earnest money deposits associated with the contract, and is obligated to sell under a sales contract. The Company is currently in the due diligence period for the purchase of land for development and the acquisition of properties. No assurance can be made that the Company will be able to complete the negotiations or become satisfied with the outcome of the due diligence. The Company seeks to selectively dispose of assets that are not in core markets, have a lower projected net operating income growth rate than the overall portfolio, or no longer conform to the Company's operating and investment strategies. The proceeds from these sales may be reinvested in acquisitions or developments or used to retire debt. 41 42 11. QUARTERLY FINANCIAL DATA (UNAUDITED) Summarized quarterly financial data for the years ended December 31, 1997 and 1996 are as follows: (In thousands, except per share amounts)
First Second Third Fourth Total -------- ------- -------- -------- ----------- 1997: Revenues . . . . . . . . . . . . . . . . . . . . . $ 29,472 $54,072 $ 56,939 $ 59,306 $ 199,789 Net income to common shareholders . . . . . . . . 4,064 6,429 8,260 19,685* 38,438 Basic earnings per share . . . . . . . . . . . . . 0.25 0.24 0.27 0.62* 1.46 Diluted earnings per share . . . . . . . . . . . . 0.24 0.24 0.27 0.59* 1.41 1996: Revenues . . . . . . . . . . . . . . . . . . . . . $ 26,590 $27,231 $ 28,768 $ 29,017 $ 111,606 Net income (loss) to common shareholders . . . . . (1,750)** 3,498 2,801 4,160 8,709 Basic earnings per share . . . . . . . . . . . . . (0.12)** 0.24 0.19 0.26 0.59 Diluted earnings per share. . . . . . . . . . . . . (0.12)** 0.24 0.19 0.26 0.58
* Includes a $10,170 or $0.32 basic earnings and $0.29 diluted earnings per share impact related to gain on sales of properties. ** Includes a $(5,351) or $(0.37) basic and diluted earnings per share impact from losses related to early retirement of debt. 42 43 SCHEDULE III CAMDEN PROPERTY TRUST REAL ESTATE AND ACCUMULATED DEPRECIATION DECEMBER 31, 1997 (In thousands)
COST CAPITALIZED SUBSEQUENT TO ACQUISITION INITIAL COST TO OR GROSS AMOUNT AT WHICH DESCRIPTION ENCUMBRANCES CAMDEN PROPERTY TRUST DEVELOPMENT CARRIED AT DECEMBER 31, 1997 (a) ----------------------------- ------------ -------------------------- ----------- --------------------------------------- BUILDING AND PROPERTY NAME LOCATION LAND IMPROVEMENTS LAND BUILDING TOTAL -------------- -------- --------- ------------- --------- ----------- ----------- Apartments TX $ 34,100 $ 98,814 $ 540,738 $ 33,366 $ 98,814 $ 574,104 $ 672,918 Apartments AZ 11,300 84,833 2,054 11,300 86,887 98,187 Apartments FL 33,793 28,907 206,877 1,574 28,907 208,451 237,358 Apartments KY 22,500 6,034 48,597 257 6,034 48,854 54,885 Apartments MO 49,960 24,017 146,624 3,295 24,017 149,919 173,939 Apartments NC 23,460 13,837 85,387 1,733 13,837 87,120 100,957 Projects under Development TX 29,139 4,275 29,139 4,275 33,414 Projects under Development AZ 3,378 955 3,378 955 4,333 Projects under Development FL 2,067 583 2,067 583 2,650 Projects under Development KY 325 325 325 Projects under Development CO 2,047 1,036 2,047 1,036 3,083 --------- --------- ----------- -------- --------- ----------- ----------- Total $ 163,813 $ 219,540 $ 1,120,230 $ 42,279 $ 219,540 $ 1,162,509 $ 1,382,049 ========= ========= =========== ======== ========= =========== ===========
DATE DEPRECIABLE ACCUMULATED CONSTRUCTED LIFE DESCRIPTION DEPRECIATION OR ACQUIRED (YEARS) ----------------------------- ------------ ----------- ----------- PROPERTY NAME LOCATION -------------- -------- Apartments TX $ 70,932 1993-1997 3-35 Apartments AZ 7,813 1994-1997 3-35 Apartments FL 4,568 1997 3-35 Apartments KY 1,357 1997 3-35 Apartments MO 5,831 1997 3-35 Apartments NC 4,164 1997 3-35 Projects under Development TX 1995-1997 Projects under Development AZ 1997 Projects under Development FL 1996 Projects under Development KY 1997 Projects under Development CO 1994 -------- Total $ 94,665 ========
(a) The aggregate cost for federal income tax purposes at December 31,1997 was $1,368 million. The changes in total real estate assets for the years ended December 31, 1997, 1996 and 1995 are as follows:
1997 1996 1995 ------------ ---------- ---------- Balance, beginning of the period $ 646,545 $ 607,598 $ 510,324 Additions during period: Acquisition - Paragon 618,292 Acquisitions - Other 45,830 6,294 Development 91,203 56,132 91,237 Improvements 13,308 9,578 8,409 Deductions during period: Cost of real estate sold (33,129) (33,057) (2,372) ------------ ---------- ---------- Balance, end of period $ 1,382,049 $ 646,545 $ 607,598 ============ ========== ==========
The changes in accumulated depreciation for the years ended December 31, 1997, 1996 and 1995 are as follows:
1997 1996 1995 --------- --------- --------- Balance, beginning of the period $ 56,369 $ 36,800 $ 17,731 Depreciation 43,769 22,946 19,299 Real estate sold (5,473) (3,377) (230) --------- --------- --------- Balance, end of period $ 94,665 $ 56,369 $ 36,800 ========= ========= =========
S-1 44 INDEX TO EXHIBITS
NUMBER TITLE ------ ----- 2.1 Agreement and Plan of Merger, dated as of December 16, 1996, among the Registrant, Camden Subsidiary, Inc. and Paragon Group, Inc. Incorporated by reference from Exhibit 99.2 to the Registrant's Form 8-K filed December 18, 1996 (File No. 1-12110). 2.2 Agreement and Plan of Merger, dated December 16, 1997, among the Registrant, Camden Subsidiary II, Inc. and Oasis Residential, Inc. Incorporated by reference from Exhibit 2.1 to the Registrant's Form 8-K filed December 17, 1997 (File No. 1-12110). 3.1 Amended and Restated Declaration of Trust of the Registrant. Incorporated by reference from Exhibit 3.1 to the Registrant's Annual Report on Form 10-K for the year ended December 31, 1993 (File No. 1- 12110). 3.2 Amendment to the Amended and Restated Declaration of Trust of the Registrant. Incorporated by reference from Exhibit 3.1 to the Registrant's Form 10-Q filed August 14, 1997 (File No. 1-12110). 3.3* Second Amended and Restated Bylaws of the Registrant. 4.1 Specimen certificate for Common Shares of beneficial interest. Incorporated by reference from Exhibit 4.1 to the Registrant's Registration Statement on Form S-11 filed September 15, 1993 (File No. 33- 68736). 4.2 Indenture dated as of April 1, 1994 by and between the Registrant and The First National Bank of Boston, as Trustee. Incorporated by reference from Exhibit 4.3 to the Registrant's Statement on Form S- 11 filed April 12, 1994 (File No. 33-76244). 4.3 Form of Convertible Subordinated Debenture Due 2001. Incorporated by reference from Exhibit 4.3 to the Registrant's Statement on Form S-11 filed April 12, 1994 (File No. 33-76244). 4.4 Indenture dated as of February 15, 1996 between the Company and the U.S. Trust Company of Texas, N.A., as Trustee. Incorporated by reference from Exhibit 4.1 to the Registrant's Form 8-K filed February 15, 1996 (File No. 1-12110). 4.5 First Supplemental Indenture dated as of February 15, 1996 between the Company and U.S. Trust Company of Texas N.A., as trustee. Incorporated by reference from Exhibit 4.2 to the Registrant's Form 8-K filed February 15, 1996 (File No. 1-12110). 4.6 Form of Camden Property Trust 6 5/8% Note due 2001. Incorporated by reference from Exhibit 4.3 to the Registrant's Form 8-K filed February 15, 1996 (File No. 1-12110). 4.7 Form of Camden Property Trust 7% Note due 2006. Incorporated by reference from Exhibit 4.3 to the Registrant's Form 8-K filed December 2, 1996 (File No. 1-12110). 4.8 Form of Camden Property Trust Remarketed Reset Note due May 9, 2002. Incorporated by reference from Exhibit 4.3 to the Registrant's Form 8-K filed May 21, 1997 (File No. 1-12110). 10.1 Form of Indemnification Agreement by and between the Registrant and certain of its trust managers and executive officers. Incorporated by reference from Exhibit 10.18 to Amendment No. 1 of the Registrant's Registration Statement on Form S-11 filed July 9, 1993 (File No. 33-63588). 10.2 Letter Agreement dated July 18, 1993 among Richard J. Campo, G. Steven Dawson, the Registrant and Apartment Connection, Inc. Incorporated by reference from Exhibit 10.25 to the Registrant's Registration Statement on Form S-11 filed September 15, 1993 (File No. 33-68736). 10.3 Amendment and Restatement of the 1993 Share Option Plan of Camden Property Trust. Incorporated by reference from Exhibit 10.7 to the Registrant's Form 10-K filed March 28, 1996 (File No. 1-12110).
45 10.4 Employment Agreement dated July 22, 1996 by and between the Registrant and Richard J. Campo. Incorporated by reference from Exhibit 10.1 to the Registrant's Form 8-K filed October 11, 1996 (File No. 1-12110). 10.5 Employment Agreement dated July 22, 1996 by and between the Registrant and D. Keith Oden. Incorporated by reference from Exhibit 10.2 to the Registrant's Form 8-K filed October 11, 1996 (File No. 1-12110). 10.6 Stock Purchase Agreement, dated December 16, 1996, between Apartment Connection, Inc. and Texas Paragon Management Partners L.P. Incorporated by reference from Exhibit 10.9 to the Registrant's Registration Statement on Form S-4 filed February 26, 1997 (File No. 333-22411). 10.7 Form of Employment Agreement by and between the Registrant and certain senior executive officers. Incorporated by reference from Exhibit 10.13 to the Registrant's Form 10-K filed March 28, 1997 (File No. 1-12110). 10.8 Camden Property Trust Key Employee Share Option Plan. Incorporated by reference from Exhibit 10.14 to the Registrant's Form 10-K filed March 28, 1997 (File No. 1-12110). 10.9 Distribution Agreement dated March 20, 1997 among the Registrant and the Agents listed therein relating to the issuance of Medium Term Notes. Incorporated by reference from Exhibit 1.1 to the Registrant's Form 8-K filed March 21, 1997 (File No. 1-12110). 10.10 Registration Rights Agreement dated April 15, 1997 among the Company, the Operating Partnership and certain investors set forth therein. Incorporated by reference from Exhibit 99.1 to the Registrant's Registration Statement on Form S-3 filed with the Commission on April 22, 1997 (File No. 333-25637). 10.11 Underwriting Agreement dated May 6, 1997 between the Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated. Incorporated by reference from Exhibit 1.1 to the Registrant's Form 8-K filed May 21, 1997 (File No. 1-12110). 10.12 Remarketing Agreement dated May 6, 1997 between the Company and Merrill Lynch, Pierce, Fenner & Smith Incorporated. Incorporated by reference from Exhibit 1.2 to the Registrant's Form 8-K filed May 21, 1997 (File No. 1-12110). 10.13 Camden Development, Inc. 1997 Non-Qualified Employee Stock Purchase Plan. Incorporated by reference from Exhibit 10.3 to the Registrant's Form 10-Q filed August 14, 1997 (File No. 1-12110). 10.14 Company Voting Agreement, dated December 16, 1997, among the Registrant and certain stockholders of Oasis Residential, Inc. Incorporated by reference from Exhibit 99.1 to the Registrant's Form 8-K filed December 17, 1997 (File No. 1-12110). 10.15 Camden Voting Agreement, dated December 16, 1997, among Oasis Residential, Inc. and certain shareholders of the Registrant. Incorporated by reference from Exhibit 99.2 to the Registrant's Form 8-K filed December 17, 1997 (File No. 1-12110). 10.16* Form of Master Exchange Agreement by and between the Registrant and certain key employees. 10.17* Restatement and Amendment of Loan Agreement dated November 25, 1997 between Registrant and NationsBank of Texas, N.A. 11.1* Statement re Computation of Per Share Earnings. 21.1* Subsidiaries of the Registrant. 23.1* Consent of Deloitte & Touche LLP. 24.1* Powers of Attorney for Richard J. Campo, D. Keith Oden, G. Steven Dawson, William R. Cooper, George A. Hrdlicka, Lewis A. Levey, F. Gardner Parker and Steven A. Webster. 27.1* Financial Data Schedule (filed only electronically with the SEC).
- ------------------------------ *Filed herewith. EX-3.3 2 2ND AMENDED & RESTATED BYLAWS 1 EXHIBIT 3.3 SECOND AMENDED AND RESTATED BYLAWS OF CAMDEN PROPERTY TRUST ____________, 1998 2 INDEX
PAGE ---- ARTICLE I OFFICERS Section 1.1 Principal Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 1.2 Other Office . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ARTICLE II MEETINGS OF SHAREHOLDERS Section 2.1 Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 2.2 Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Section 2.3 Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2.4 Notice of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2.5 Business at Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Section 2.6 Voting Lists . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 2.7 Quorum. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 Section 2.8 Organization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 2.9 Proxies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 Section 2.10 Voting of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 Section 2.11 Voting of Shares by Certain Holders . . . . . . . . . . . . . . . . . . . . . . 7 Section 2.12 Election of Trust Managers . . . . . . . . . . . . . . . . . . . . . . . . . . 7 Section 2.13 Telephone Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 2.14 Action Without Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 Section 2.15 Inspectors and Voting Procedures . . . . . . . . . . . . . . . . . . . . . . . 8 ARTICLE III TRUST MANAGERS Section 3.1 Powers and Responsibilities . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 3.2 Number and Qualification . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Section 3.3 Election and Term of Office . . . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 3.4 Nomination of Trust Managers . . . . . . . . . . . . . . . . . . . . . . . . . 10 Section 3.5 Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 3.6 Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 Section 3.7 Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 3.8 Bond Not Required; Time Commitment . . . . . . . . . . . . . . . . . . . . . . 13 Section 3.9 Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Section 3.10 Execution of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 ARTICLE IV MEETINGS OF THE TRUST MANAGERS Section 4.1 Place of Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 4.2 Annual Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 4.3 Regular Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 4.4 Special Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 4.5 Quorum and Action . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Section 4.6 Presumption of Assent to Action . . . . . . . . . . . . . . . . . . . . . . . . 15
-i- 3
PAGE ---- Section 4.7 Telephone Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 4.8 Action Without Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 4.9 Minutes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 Section 4.10 Interest of Trust Managers . . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 4.11 Right of Trust Managers and Officers to Own Shares or Other Property and to Engage in Other Business . . . . . . . . . . . . . . . . . . . . . . . . 16 Section 4.12 Transactions Between Trust Managers and the Trust . . . . . . . . . . . . . . 16 Section 4.13 Persons Dealing with Trust Managers or Officers . . . . . . . . . . . . . . . 17 Section 4.14 Reliance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Section 4.15 Liability of Trust Managers . . . . . . . . . . . . . . . . . . . . . . . . . 18 ARTICLE V COMMITTEES OF THE TRUST MANAGERS Section 5.1 Membership and Authorities . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 5.2 Minutes and Rules of Procedure . . . . . . . . . . . . . . . . . . . . . . . 18 Section 5.3 Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18 Section 5.4 Telephone Meetings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 5.5 Action Without Meeting . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 ARTICLE VI OFFICERS Section 6.1 Number. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 6.2 Election, Term of Office and Qualification . . . . . . . . . . . . . . . . . 19 Section 6.3 Subordinate Officers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Section 6.4 Resignation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Section 6.5 Removal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Section 6.6 Vacancies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Section 6.7 The Chairman of the Board . . . . . . . . . . . . . . . . . . . . . . . . . . 20 Section 6.8 The President . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Section 6.9 The Vice Presidents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Section 6.10 The Secretary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Section 6.11 Assistant Secretaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 6.12 The Treasurer . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 6.13 Assistant Treasurers . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22 Section 6.14 Treasurer's Bond . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Section 6.15 Salaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Section 6.16 Execution of Documents . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 ARTICLE VII TRUST SHARES Section 7.1 Share Certificates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23 Section 7.2 Lost Certificates, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
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PAGE ---- Section 7.3 Transfer of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Section 7.4 Ownership of Shares . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 7.5 Closing of Transfer Books . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 7.6 Dividends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Section 7.7 Reserves . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 ARTICLE VIII INDEMNIFICATION Section 8.1 Definitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Section 8.2 Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Section 8.3 Successful Defense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 8.4 Determinations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28 Section 8.5 Advancement of Expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 8.6 Employee Benefit Plans . . . . . . . . . . . . . . . . . . . . . . . . . . . 29 Section 8.7 Other Indemnification and Insurance . . . . . . . . . . . . . . . . . . . . . 30 Section 8.8 Notice. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 8.9 Construction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 Section 8.10 Continuing Offer, Reliance, etc. . . . . . . . . . . . . . . . . . . . . . . 30 Section 8.11 Effect of Amendment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 ARTICLE IX GENERAL PROVISIONS Section 9.1 General Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31 Section 9.2 Limited Liability of Shareholders . . . . . . . . . . . . . . . . . . . . . . 31 Section 9.3 Waiver of Notice . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Section 9.4 Seal. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Section 9.5 Fiscal Year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Section 9.6 Checks, Notes, etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 32 Section 9.7 Examination of Books and Records . . . . . . . . . . . . . . . . . . . . . . 32 Section 9.8 Voting Upon Shares Held by the Trust . . . . . . . . . . . . . . . . . . . . 33 Section 9.9 Number, Gender, Etc. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 ARTICLE X AMENDMENTS Section 10.1 Amendment of Bylaws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33 ARTICLE XI SUBJECT TO ALL LAWS Section 11.1 Subject to All Laws . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
-iii- 5 CAMDEN PROPERTY TRUST BYLAWS ARTICLE I OFFICES SECTION 1.1 PRINCIPAL OFFICE. The principal office of the Trust shall be in the City of Houston, Harris County, Texas, or at such other location as the Trust Managers may from time to time determine. SECTION 1.2 OTHER OFFICES. The Trust may also have offices at such other places, both within and without the State of Texas, as the Trust Managers may from time to time determine or the business of the Trust may require. ARTICLE II MEETINGS OF SHAREHOLDERS SECTION 2.1 PLACE OF MEETINGS. The Trust Managers may designate any place, either within or without the State of Texas, as the place of meeting for any annual meeting or for any special meeting called by the Trust Managers. A waiver of notice signed by all shareholders entitled to vote at a meeting may designate any place, either within or without the State of Texas, as the place for the holding of such meeting. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be the principal office of the Trust. SECTION 2.2 ANNUAL MEETING. The annual meeting of shareholders shall be held at such time, on such day and at such place as may be designated by the Trust Managers. At the annual meeting, the Shareholders shall, subject to Section 2.5 and Section 3.3 of these Bylaws, elect Trust Managers and transact 1 6 such other business as may properly be brought before the meeting. Failure to hold the annual meeting at the designated time shall not cause the dissolution of the Trust. SECTION 2.3 SPECIAL MEETINGS. Special meetings of the shareholders for any purpose or purposes, unless otherwise prescribed by law or by the Declaration of Trust, may be called by the Trust Managers, any officer of the trust or the holders of at least ten percent (10%) of all of the shares entitled to vote at the meetings. Business transacted at all special meetings shall be confined to the purpose or purposes stated in the call. SECTION 2.4 NOTICE OF MEETINGS. Written or printed notice of all meetings of shareholders stating the place, day and hour thereof, and in the case of a special meeting the purpose or purposes for which the meeting is called, shall be personally delivered or mailed, not less than ten (10) days nor more than fifty (50) days prior to the date of the meeting, to the shareholders of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States Mail addressed to the shareholder at his address as it appears on the share transfer books of the Trust and the postage shall be prepaid. Personal delivery of any such notice to any officer of a corporation or association, or to any member of a partnership, shall constitute delivery of such notice to such corporation, association or partnership. SECTION 2.5 BUSINESS AT ANNUAL MEETING. No business may be transacted at an annual meeting of shareholders, other than business that is either (a) specified in the notice of meeting (or any supplement thereto) given by or at the direction of the Trust Managers (or any duly authorized committee thereof), (b) otherwise properly brought before the annual meeting by or at the direction of the Trust Managers (or any duly authorized committee thereof) or (c) otherwise properly brought before the annual meeting by any shareholder of the Trust (i) who is a shareholder of record on the date of the giving of the notice provided for in this Section 2.5 and on the record date for the determination of shareholders entitled to vote at such annual meeting, and (ii) who complies with the notice procedures set forth in this Section 2.5. 2 7 In addition to any other applicable requirements, for business to be properly brought before an annual meeting by a shareholder, such shareholder must have given timely notice thereof in proper written form to the Secretary of the Trust. To be timely, a shareholder's notice to the Secretary must be delivered to or mailed and received at the principal office of the Trust not less than sixty (60) days nor more than ninety (90) days prior to the date of the applicable annual meeting of shareholders, provided, however, that in the event that less than seventy (70) days' notice or prior public disclosure of the date of the meeting be given or made, notice by the shareholder to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which such notice of the date of the applicable annual meeting was mailed or such public disclosure of the date of such annual meeting was made, whichever first occurs. For purposes of this Section 2.5, the date of a public disclosure shall include, but not be limited to, the date on which such disclosure is made in a press release reported by the Dow Jones News Services, the Associated Press or any comparable news service or in a document publicly filed by the Trust with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) (or the rules and regulations promulgated thereunder) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"). To be in proper written form, a shareholder's notice to the Secretary must set forth as to each matter such shareholder proposes to bring before the annual meeting (i) a brief description of the business desired to be brought before the annual meeting and the reasons for conducting such business at the annual meeting, (ii) the name and record address of such shareholder, (iii) the number of shares of the Trust that are owned beneficially or of record by such shareholder, (iv) a description of all arrangements or understandings between such shareholder and any other person or persons (including their names) in connection with the proposal of such business by such shareholder and any material interest of such shareholder in such business, and (v) a representation that such shareholder intends to appear in person or by proxy at the annual meeting to bring such business before the meeting. 3 8 No business shall be conducted at the annual meeting of shareholders except business brought before the annual meeting in accordance with the procedures set forth in this Section 2.5; provided, however, that, once business has been properly brought before the annual meeting in accordance with such procedures, nothing in this Section 2.5 shall be deemed to preclude discussion by any shareholder of any such business. If the presiding officer of an annual meeting determines that business was not properly brought before the annual meeting in accordance with the foregoing procedures, the presiding officer shall declare to the meeting that the business was not properly brought before the meeting and such business shall not be transacted. SECTION 2.6 VOTING LISTS. The officer or agent having charge of the share transfer books for shares of the Trust shall make, at least ten (10) days before each meeting of the shareholders, a complete list of shareholders entitled to vote at such meeting or any adjournment thereof, arranged in alphabetical order, with the address of each and the number of shares held by each, which list, for a period of ten (10) days prior to such meeting, shall be kept on file at the registered office of the Trust and shall be subject to inspection by any shareholders at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder for the duration of the meeting. The original share transfer books shall be prima facie evidence as to who are the shareholders entitled to examine such list or transfer books or to vote at any meeting of shareholders. Failure to comply with this Section 2.6 with respect to any meeting of shareholders shall not affect the validity of any action taken at such meeting. SECTION 2.7 QUORUM. The holders of a majority of the shares entitled to vote, present in person or represented by proxy, shall constitute a quorum at all meetings of the shareholders for the transaction of business, except as otherwise provided by law or by the Declaration of Trust. If, however, such quorum shall not be present or represented at any meeting of the shareholders, the shareholders entitled to vote at such meeting, present in person or represented by proxy, shall have the power to adjourn the meeting from time to 4 9 time without notice other than announcement at the meeting until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally convened. The shareholders present at a duly organized meeting at which a quorum was present may continue to transact business until adjournment notwithstanding the withdrawal of enough shareholders to leave less than a quorum present, provided that there remain at such meeting the holder or holders of at least one-third (1/3) of the shares issued and outstanding and entitled to vote thereof, present in person or represented in the manner specified above. A holder of a share shall be treated as being present at a meeting if the holder of such share is (i) present in person at the meeting, or (ii) represented at the meeting by a valid proxy, whether the instrument granting such proxy is marked as casting a vote or abstaining, is left blank or does not empower such proxy to vote with respect to some or all matters to be voted upon at the meeting. SECTION 2.8 ORGANIZATION. (a) The Chairman of the Board, if one shall be elected, shall preside at all meetings of the shareholders. In the absence of the Chairman of the Board or should one not be elected, the following officers shall preside in order of priority: President, Chief Executive Officer, Chief Operating Officer, Chief Financial Officer, Vice President-Legal, or Secretary. If no such officer is available, the meeting shall be adjourned until such an officer is available to preside over the meeting. The presiding officer shall set the agenda for the meeting, shall conduct all aspects of the meeting and shall establish and interpret the rules of order for the conduct of the meeting. (b) The Secretary of the Trust shall act as secretary at all meetings of the shareholders. In his absence an Assistant Secretary shall so act and in the absence of all of these officers the presiding officer may appoint any person to act as secretary of the meeting. SECTION 2.9 PROXIES. (a) At any meeting of the shareholders every shareholder entitled to vote at such meeting shall be entitled to vote in person or by proxy executed in writing by such shareholder or by 5 10 his duly authorized attorney-in-fact. Proxies shall be filed with the Secretary or Trust Managers immediately after the meeting has been called to order. (b) No proxy shall be valid after eleven (11) months from the date of its execution unless such proxy otherwise provides. (c) A proxy shall be revocable unless the proxy form conspicuously states that the proxy is irrevocable and the proxy is coupled with an interest but in no event shall it remain irrevocable for a period of more than eleven (11) months. A proxy which is revocable as aforesaid may be revoked at any time by filing with the Secretary an instrument revoking it or a duly executed proxy bearing a later date. Any revocable proxy which is not so revoked shall, subject to paragraph (b) above, continue in full force and effect. (d) In the event that any instrument in writing shall designate two (2) or more persons to act as proxies, a majority of such persons present at the meeting or, if only one shall be present, then that one, shall have and may exercise all of the powers conferred by such written instrument upon all the persons so designated unless the instrument shall otherwise provide. SECTION 2.10 VOTING OF SHARES. Except as otherwise provided by law, the Declaration of Trust or these Bylaws, each shareholder shall be entitled at each meeting of shareholders to one (1) vote on each matter submitted to a vote at such meeting for each share having voting rights registered in his name on the books of the Trust at the time of the closing of the share transfer books (or at the record date) for such meeting. When a quorum is present at any meeting (and notwithstanding the subsequent withdrawal of enough shareholders to leave less than a quorum present) in accordance with Section 2.7 of these Bylaws, the votes of holders of a majority of the shares entitled to vote, present in person or represented by proxy, shall decide any matter submitted to such meeting, unless the matter is one upon which by law or by express provision of the Declaration of Trust or of these Bylaws the vote of a greater number is required, in which case the vote of such greater number shall govern and control the decision of such matter. In determining the number of shares entitled to vote, shares abstaining from voting or not voted on a matter (including elections) will not be treated 6 11 as entitled to vote. The provisions of this Section 2.10 will govern with respect to all votes of shareholders except as otherwise provided for in these Bylaws or in the Declaration of Trust or by some specific statutory provision superseding the provisions contained in these Bylaws or the Declaration of Trust. SECTION 2.11 VOTING OF SHARES BY CERTAIN HOLDERS. (a) Shares standing in the name of another business organization may be voted by such officer, agent or proxy as the organizational documents of such organization may authorize or, in the absence of such authorization, as may be determined by the governing body of such organization. (b) Shares held by an administrator, executor, guardian or conservator may be voted by him, either in person or by proxy, without a transfer of such shares into his name so long as such shares forming a part of an estate are in the possession and form a part of the estate being served by him. Shares standing in the name of a trustee may be voted by him, either in person or by proxy, but no trustee shall be entitled to vote shares held by him without a transfer of such shares into his name as trustee. (c) Shares standing in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his name if authority to do so is contained in an appropriate order of the court by which such receiver was appointed. (d) A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. SECTION 2.12 ELECTION OF TRUST MANAGERS. At each election for Trust Managers, each shareholder entitled to vote at such election shall, unless otherwise provided by the Declaration of Trust or by applicable law, have the right to vote the number of shares owned by him for as many persons as there are to be elected and for whose election he has a right to vote. Unless otherwise provided by the Declaration of Trust, no shareholder shall have the right or be permitted to cumulate his votes on any basis. 7 12 SECTION 2.13 TELEPHONE MEETINGS. Shareholders may participate in and hold a meeting of the shareholders by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this Section shall constitute presence in person at such meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. SECTION 2.14 ACTION WITHOUT MEETING. Any action required by any provision of law or of the Declaration of Trust or these Bylaws to be taken at a meeting of the shareholders or any action which may be taken at a meeting of the shareholders may be taken without a meeting if a consent in writing, setting forth the action so taken, shall be signed by all of the shareholders entitled to vote with respect to the subject matter thereof, and such consent shall have the same force and effect as a unanimous vote of the shareholders. SECTION 2.15 INSPECTORS AND VOTING PROCEDURES. (a) The Trust shall, in advance of any meeting of shareholders, appoint one or more inspectors to act at the meeting and make a written report thereof. The Trust may designate one or more persons as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate is able to act at a meeting of shareholders, the person presiding at the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his ability. (b) The inspectors shall (i) ascertain the number of shares outstanding and the voting power of each, (ii) determine the shares represented at a meeting and the validity of proxies and ballots, (iii) count all votes and ballots, (iv) determine and retain for a reasonable period a record of the disposition of any challenges made to any determination by the inspectors, and (v) certify their determination of the number of shares represented at the meeting, and their count of all votes and ballots. The inspectors may appoint or retain other persons or entities to assist the inspectors in the performance of the duties of the inspectors. 8 13 (c) The date and time of the opening and closing of the polls for each matter upon which the shareholders will vote at a meeting shall be announced at the meeting. No ballots, proxies or votes, nor any revocations thereof or changes thereto, shall be accepted by the inspectors after the closing of the polls unless a court of appropriate jurisdiction, upon application by a shareholder, shall determine otherwise. (d) In determining the validity and counting of proxies and ballots, the inspectors may examine and consider such records or factors as allowed by the Texas Real Estate Investment Trust Act (the "Texas REIT Act"). ARTICLE III TRUST MANAGERS SECTION 3.1 POWERS AND RESPONSIBILITIES. The business and affairs of the Trust shall be managed under the direction of its Trust Managers who may exercise all such powers of the Trust and do all such lawful acts and things as are not by statute, the Declaration of Trust or these Bylaws directed or required to be exercised or done by the shareholders. The enumeration of any specific power or authority herein shall not be construed as limiting the aforesaid powers or the general powers or authority or any other specified power or authority conferred herein upon the Trust Managers. Among other things, the Trust Managers shall be responsible for (a) supervising the Trust's relations with the managers of the Trust's properties, (b) evaluating the capability and performance of the managers of the Trust's properties, (c) reviewing the Trust's investment policies, (d) determining that the fees and expenses of the Trust are reasonable, (e) reviewing the aggregate borrowings of the Trust, (f) authorizing the issuance of the capital stock of the Trust, (g) approving the acquisition and disposition of real property and interests therein, (h) ratifying the appointments of independent accountants for the Trust, and (i) establishing and reviewing guidelines for leasing and management of the Trust's properties. SECTION 3.2 NUMBER AND QUALIFICATION. There shall at all times be no less than two (2) nor more than ten (10) Trust Managers who shall be elected annually by the shareholders. Subject to any limitations 9 14 specified by law or in the Declaration of Trust, the number of Trust Managers may be fixed from time to time by resolution adopted by a majority of the Trust Managers. No decrease in the number of Trust Managers shall have the effect of shortening the term of any incumbent Trust Manager. A majority of the Trust Managers shall be natural persons. Trust Managers need not be shareholders, must be at least eighteen (18) years of age, must not be subject to any legal disability and, except as provided in the immediately preceding sentence, need not be residents of the State of Texas. SECTION 3.3 ELECTION AND TERM OF OFFICE. The Trust Manager nominees who have not been previously elected as Trust Managers by the shareholders of the Trust shall be elected at the annual meeting of the shareholders (except as provided in Section 3.7) by the affirmative vote of the holders of two-thirds (2/3) of the outstanding shares of the Trust. Trust Managers who have been previously elected as Trust Managers by the shareholders of the Trust shall be re- elected at the annual meeting of the shareholders by the affirmative vote of the holders of a majority of the shares of the Trust present in person or represented by proxy at such meeting; provided, however, that any Trust Manager that has been previously elected as a Trust Manager by the shareholders who is not re-elected by such majority vote at a subsequent annual meeting shall nevertheless remain in office until his successor is elected and qualified. Each Trust Manager shall hold office until his successor is elected and qualified, or until his death, resignation or removal in the manner provided in these Bylaws. SECTION 3.4 NOMINATION OF TRUST MANAGERS. Only persons who are nominated in accordance with the following procedures shall be eligible for election as Trust Managers of the Trust. Nominations of persons for election as Trust Managers may be made at any annual meeting of shareholders (a) by or at the direction of the Trust Managers (or any duly authorized committee thereof) or (b) by any shareholder of the Trust (i) who is a shareholder of record on the date of the giving of the notice provided for in this Section 3.4 and on the record date for the determination of shareholders entitled to vote at such annual meeting, and (ii) who complies with the notice procedures set forth in this Section 3.4. 10 15 In addition to any other applicable requirements, for a nomination to be made by a shareholder, such shareholder must have given timely notice thereof in proper written form to the Secretary of the Trust. To be timely, a shareholder's notice to the Secretary must be delivered to or mailed and received at the principal offices of the Trust not less than sixty (60) days nor more than ninety (90) days prior to the date of the applicable annual meeting of shareholders; provided, however, that in the event that less than seventy (70) days' notice or prior public disclosure of the date of the meeting is given or made, notice by the shareholder to be timely must be so received not later than the close of business on the tenth (10th) day following the day on which such notice of the date of the applicable annual meeting was mailed or such public disclosure of the date of such annual meeting was made, whichever first occurs. For purposes of this Section 3.4, the date of a public disclosure shall include, but not be limited to, the date on which such disclosure is made in a press release reported by the Dow Jones News Services, the Associated Press or any comparable national news service or in a document publicly filed by the Trust with the Securities and Exchange Commission pursuant to Sections 13, 14 or 15(d) (or the rules and regulations promulgated thereunder) of the Exchange Act. To be in proper written form, a shareholder's notice to the Secretary must set forth (a) as to each person whom the shareholder proposes to nominate for election as a Trust Manager (i) the name, age, business address and residence address of the person, (ii) the principal occupation or employment of the person, (iii) the number of shares of the Trust that are owned beneficially or of record by the person, and (iv) any other information relating to the person that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitation of proxies for election of Trust Managers pursuant to Section 14 of the Exchange Act, and (b) as to the shareholder giving the notice (i) the name and record address of such shareholder, (ii) the number of shares of the Trust that are owned beneficially or of record by such shareholder, (iii) a description of all arrangements or understandings between such shareholder and each proposed nominee and any other person or persons (including their names) pursuant to which the nomination(s) are to be made by such shareholders, (iv) a representation that such shareholder intends to appear in person or by proxy at the 11 16 meeting to nominate the persons named in the notice, and (v) any other information relating to such shareholder that would be required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for election of Trust Managers pursuant to Section 14 of the Exchange Act and the rules and regulations promulgated thereunder. Such notice must be accompanied by a written consent of each proposed nominee to being named as a nominee and to serve as a Trust Manager if elected. No person shall be eligible for election as a Trust Manager of the Trust unless nominated in accordance with the procedures set forth in this Section 3.4. If the presiding officer of the meeting determines that a nomination was not made in accordance with the foregoing procedures, the presiding officer shall declare to the meeting that the nomination was defective and such defective nomination shall be disregarded. SECTION 3.5 RESIGNATION. Any Trust Manager may resign at any time by giving written notice to the remaining Trust Managers. Such resignation shall take effect at the time specified therein, and unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. A Trust Manager judged incompetent or for whom a guardian or conservator has been appointed, shall be deemed to have resigned as of the date of such adjudication or appointment. SECTION 3.6 REMOVAL. A Trust Manager may be removed at any time with or without cause by the vote of holders of shares representing two-thirds (2/3) of the total votes authorized to be cast by shares then outstanding and entitled to vote thereon. Upon the resignation or removal of any Trust Manager, or his otherwise ceasing to be a Trust Manager, he shall execute and deliver such documents as the remaining Trust Managers shall require for the conveyance of any Trust property held in his name, shall account to the remaining Trust Managers as they require for all property which he holds as Trust Manager and shall thereupon be discharged as Trust Manager. Upon the incapacity or death of any Trust Manager, his legal representative shall perform the acts set forth in the preceding sentence and the discharge mentioned therein 12 17 shall run to such legal representative and to the incapacitated Trust Manager or the estate of the deceased Trust Manager, as the case may be. SECTION 3.7 VACANCIES. If any or all of the Trust Managers cease to be Trust Managers hereunder, whether by reason of resignation, removal, incapacity, death or otherwise, such event shall not terminate the Trust or affect its continuity. Until vacancies are filled, the remaining Trust Manager or Trust Managers (even though fewer than three) may exercise the powers of the Trust Managers hereunder. Vacancies may be filled by successor Trust Managers either appointed by a majority of the remaining Trust Managers or elected by the vote of the holders of at least two- thirds of the outstanding shares at an annual or special meeting of the shareholders. Any Trust Manager elected to fill a vacancy created by the resignation, removal, incapacity or death of a former Trust Manager shall hold office for the unexpired term of such former Trust Manager. The election of a successor Trust Manager shall be considered an amendment to the Declaration of Trust. SECTION 3.8 BOND NOT REQUIRED; TIME COMMITMENT. Unless otherwise required by law, no Trust Manager shall be required to give bond, surety or security in any jurisdiction for the performance of his duties or obligations to the Trust. No Trust Manager shall be required to devote his entire time to the business and affairs of the Trust. SECTION 3.9 COMPENSATION. Trust Managers shall receive compensation for their services to the Trust as may be determined from time to time by the Trust Managers. The Trust Managers may delegate to any committee the power to fix from time to time the compensation of Trust Managers. Officers of the Trust who also serve as Trust Managers shall not receive compensation for their service as Trust Managers. SECTION 3.10 EXECUTION OF DOCUMENTS. Each Trust Manager and any one of them is authorized to execute on behalf of the Trust any document or instrument of any nature whatsoever, provided that the execution by the Trust of any such document or instrument shall have been previously authorized by such action of the Trust Managers as may be required by statute, the Declaration of Trust or these Bylaws. 13 18 ARTICLE IV MEETINGS OF THE TRUST MANAGERS SECTION 4.1 PLACE OF MEETINGS. The Trust Managers of the Trust may hold their meetings, both regular and special, either within or without the State of Texas. SECTION 4.2 ANNUAL MEETING. The annual meeting of the Trust Managers shall be held immediately following the adjournment of the annual meeting of the shareholders and no notice of such meeting shall be necessary to the Trust Managers in order to legally constitute the meeting, provided a quorum shall be present, or they may meet at such time and place as shall be fixed by the consent in writing of all of the Trust Managers. SECTION 4.3 REGULAR MEETINGS. Regular meetings of the Trust Managers, in addition to the annual meetings referred to in Section 4.2, may be held without notice at such time and place as shall from time to time be determined by the Trust Managers. SECTION 4.4 SPECIAL MEETINGS. Special meetings of the Trust Managers may be called by the Chairman of the Board, if one shall be elected, or by the President, if a Chairman of the Board is not elected, on one (1) day's notice (oral or written) to each Trust Manager. Special meetings shall be called by the Chairman of the Board (if one shall be elected), the President or the Secretary on like notice on the written request of any Trust Manager. Neither the purpose of, nor the business to be transacted at, any special meeting of the Trust Managers need be specified in the notice or waiver of notice of such meeting. Attendance of a Trust Manager at a meeting shall constitute a waiver of notice of such meeting except where a Trust Manager attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the grounds that the meeting is not lawfully called or convened. SECTION 4.5 QUORUM AND ACTION. At all meetings of the Trust Managers, the presence of a majority of the Trust Managers shall be necessary and sufficient to constitute a quorum for the transaction of business and the act of a majority of the Trust Managers at any meeting at which a quorum is present shall be 14 19 the act of the Trust Managers unless the act of a greater number is required by law, the Declaration of Trust or these Bylaws. If a quorum shall not be present at any meeting of Trust Managers, the Trust Managers present may adjourn the meeting from time to time without notice other than announcement at the meeting until a quorum shall be present. SECTION 4.6 PRESUMPTION OF ASSENT TO ACTION. A Trust Manager who is present at a meeting of the Trust Managers at which action on any Trust matter is taken shall be presumed to have assented to the action taken unless his dissent shall be entered in the minutes of the meeting or unless he shall file his written dissent to such action with the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered mail to the Secretary of the Trust immediately after the adjournment of the meeting. Such right to dissent shall not apply to a Trust Manager who voted in favor of such action. SECTION 4.7 TELEPHONE MEETINGS. Trust Managers may participate in and hold a meeting of the Trust Managers by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation in a meeting pursuant to this Section shall constitute presence in person at such meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the ground that the meeting is not lawfully called or convened. SECTION 4.8 ACTION WITHOUT MEETING. Any action required or permitted to be taken at a meeting of the Trust Managers may be taken without a meeting if a consent in writing, setting forth the action so taken, is signed by all the Trust Managers, and such consent shall have the same force and effect as a unanimous vote at a meeting. SECTION 4.9 MINUTES. The Trust Managers shall keep regular minutes of their proceedings. The minutes shall be placed in the minute book of the Trust. 15 20 SECTION 4.10 INTEREST OF TRUST MANAGERS. With respect to the actions of the Trust Managers, Trust Managers who have any direct or indirect interest in connection with any matter being acted upon may be counted for all quorum purposes under this Article IV. SECTION 4.11 RIGHT OF TRUST MANAGERS AND OFFICERS TO OWN SHARES OR OTHER PROPERTY AND TO ENGAGE IN OTHER BUSINESS. Any Trust Manager or officer of the Trust may acquire, own, hold and dispose of shares of the Trust for his individual account, and may exercise all rights of a shareholder to the same extent and in the same manner as if he were not a Trust Manager or officer of the Trust. Except as provided specifically to the contrary in a written agreement with the Trust, any Trust Manager or officer of the Trust may, in a capacity other than that of Trust Manager or officer of the Trust, have business interests and engage in business activities similar to or in addition to those relating to the Trust, which interests and activities may be similar to and competitive with those of the Trust and may include the acquisition, syndication, holding, management, development, operation or disposition, for his own account or for the account of others, of interests in mortgages, interests in real property, or interests in entities engaged in the real estate business. Except as provided specifically to the contrary in a written agreement with the Trust, each Trust Manager and officer of the Trust shall be free of any obligation to present to the Trust any investment opportunity which comes to him in any capacity other than solely as Trust Manager or agent of the Trust, even if such opportunity is of a character which, if presented to the Trust, could be exploited by the Trust. Subject to the provisions of Article III hereof, any Trust Manager or officer of the Trust may be a trustee, officer, director, shareholder, partner, member, advisor or employee of, or otherwise have a direct or indirect interest in any person who may be engaged to render advice or services to the Trust, and may receive compensation from such person as well as compensation as Trust Manager or officer or otherwise hereunder. SECTION 4.12 TRANSACTIONS BETWEEN TRUST MANAGERS AND THE TRUST. Except as otherwise provided by the Declaration of Trust or these Bylaws, and in the absence of fraud, a contract, act or other transaction, between the Trust and any other person, or in which the Trust is interested, shall be valid and no 16 21 Trust Manager or officer of the Trust shall have any liability as a result of entering into any such contract, act or transaction, even though (a) one or more of the Trust Managers, directly or indirectly is interested in or connected with, or is a trustee, partner, director, shareholder, member, employee, officer or agent of such other person, or (b) one or more of the Trust Managers, individually or jointly with others, is a part to, or directly or indirectly is interested in, or connected with, such contract, act or transaction, provided that (i) such interest or connection is disclosed in reasonable detail or known to the Trust Managers and thereafter the Trust Managers authorize or ratify such contract, act or other transaction by affirmative vote of a majority of the Trust Managers who are not interested in the transaction or (ii) such interest or connection is disclosed in reasonable detail or known to the shareholders, and thereafter such contract, act or transaction is approved by shareholders holding a majority of the shares then outstanding and entitled to vote thereon. SECTION 4.13 PERSONS DEALING WITH TRUST MANAGERS OR OFFICERS. Any act of the Trust Managers or officers of the Trust purporting to be done in their capacity as such shall, as to any person dealing with such Trust Managers or officers, conclusively be deemed to be within the purposes of the Trust and within the powers of the Trust Managers or officers. No person dealing with the Trust Managers or any of them or with the officers of the Trust or any of them, shall be bound to see to the application of any funds or property passing into their hands or control. The receipt of the Trust Managers or any of the officers of the Trust of moneys or other consideration shall be binding upon the Trust. SECTION 4.14 RELIANCE. Trust Managers and officers of the Trust shall not be liable for any claims or damages that may result from their acts in the discharge of any duty imposed or power conferred upon them by the Trust, if, in the exercise of ordinary care, they acted in good faith and in reliance upon the written opinion of an attorney for the Trust. In discharging their duties, Trust Managers and officers of the Trust, when acting in good faith and exercising ordinary care, may rely upon financial statements of the Trust, stated in a written report by an independent certified public accountant, to fairly present the financial position of the 17 22 Trust. The Trust Managers and officers of the Trust may rely upon any instrument or other document believed by them to be genuine. SECTION 4.15 LIABILITY OF TRUST MANAGERS. No Trust Manager of the Trust shall be liable to the Trust for any act, omission, loss, damage or expense arising from the performance of his duty under the Trust, except to the extent specifically required by statute, the Declaration of Trust or these Bylaws. ARTICLE V COMMITTEES OF THE TRUST MANAGERS SECTION 5.1 MEMBERSHIP AND AUTHORITIES. The Trust Managers, by resolution adopted by a majority of the Trust Managers, may designate one (1) or more Trust Managers to constitute an Executive Committee and such other committees as the Trust Managers may determine, each of which committees to the extent provided in such resolution shall have and may exercise all of the authority of the Trust Managers in the business and affairs of the Trust, except in those cases where the authority of the Trust Managers is specifically denied to the Executive Committee or such other committee or committees by the Trust Managers, applicable law, the Declaration of Trust or these Bylaws. Neither the Executive Committee, nor any other such committee shall have the power to alter or to repeal any resolution adopted by the Trust Managers. The designation of an Executive Committee or other committee and the delegation thereto of authority shall not operate to relieve the Trust Managers, or any member thereof, of any responsibility imposed upon him by law. The members of each such committee shall serve at the pleasure of the Trust Managers. SECTION 5.2 MINUTES AND RULES OF PROCEDURE. Each committee designated by the Trust Managers shall keep regular minutes of its proceedings and report the same to the Trust Managers when required. Subject to the provisions of these Bylaws, the members of any committee may fix such committee's own rules of procedure. SECTION 5.3 VACANCIES. The Trust Managers shall have the power at any time to fill vacancies in, to change the membership of, or to dissolve, any committee. 18 23 SECTION 5.4 TELEPHONE MEETINGS. Members of any committee designated by the Trust Managers may participate in or hold a meeting by use of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other. Participation in a meeting pursuant to this Section shall constitute presence in person at such meeting, except where a person participates in the meeting for the express purpose of objecting to the transaction of any business on the grounds that the meeting is not lawfully called or convened. SECTION 5.5 ACTION WITHOUT MEETING. Any action required or permitted to be taken at a meeting of any committee designated by the Trust Managers may be taken without a meeting if a consent in writing, setting forth the action so taken, is signed by all the members of the committee, and such consent shall have the same force and effect as a unanimous vote at a meeting. ARTICLE VI OFFICERS SECTION 6.1 NUMBER. The officers of the Trust shall include a President and a Secretary. The Trust Managers may also elect a Chairman of the Board, one (1) or more Vice Presidents, a Treasurer, one (1) or more Assistant Secretaries and one (1) or more Assistant Treasurers. One (1) person may hold any two (2) or more of these offices. SECTION 6.2 ELECTION, TERM OF OFFICE AND QUALIFICATION. The Trust Managers shall elect officers, none of whom need be a Trust Manager, except for the Chairman of the Board, if one shall be elected, at any time and from time to time as they deem necessary. Each officer so elected shall hold office until his successor shall have been duly elected and qualified or until his death, resignation or removal in the manner hereinafter provided. SECTION 6.3 SUBORDINATE OFFICERS. The Trust Managers may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms, have such authority and perform such duties as the Trust Managers may from time to time determine. The Trust Managers may delegate to any 19 24 committee or officer the power to appoint any such subordinate officer or agent. No subordinate officer appointed by any committee or superior officer as aforesaid shall be considered as an officer of the Trust, the officers of the Trust being limited to the officers elected or appointed as such by the Trust Managers. SECTION 6.4 RESIGNATION. Any officer may resign at any time by giving written notice thereof to the Trust Managers or to the President or Secretary of the Trust. Any such resignation shall take effect at the time specified therein and, unless otherwise specified therein, the acceptance of such resignation shall not be necessary to make it effective. SECTION 6.5 REMOVAL. Any officer elected or appointed by the Trust Managers may be removed by the Trust Managers at any time with or without cause by majority vote of the entire Board of Trust Managers. Any other officer may be removed at any time with or without cause by the Trust Managers or by any committee or superior officer upon whom such power of removal may be conferred by the Trust Managers. The removal of any officer shall be without prejudice to the contract rights, if any, of the person so removed. Election or appointment of an officer or agent shall not of itself create any contract rights. SECTION 6.6 VACANCIES. A vacancy in any office shall be filled for the unexpired portion of the term by the Trust Managers, but in case of a vacancy occurring in an office filled by a committee or superior officer in accordance with the provisions of Section 6.3, such vacancy may be filled by such committee or superior officer. SECTION 6.7 THE CHAIRMAN OF THE BOARD. The Chairman of the Board, if one shall be elected, shall be the chief executive officer of the Trust, shall preside at all meetings of the shareholders and Trust Managers, shall be ex officio a member of all standing committees, shall have general and active management of the business of the Trust, shall have the general supervision and direction of all other officers of the Trust with full power to see that their duties are properly performed and shall see that all orders and resolutions of the Trust Managers are carried into effect. He may sign, with any other proper officer, certificates for shares of the Trust and any deeds, bonds, mortgages, contracts and other documents which the Trust Managers have 20 25 authorized to be executed, except where required by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Trust Managers or these Bylaws, to some other officer or agent of the Trust. In addition, the Chairman of the Board shall perform whatever duties and shall exercise all powers that are given to him by the Trust Managers. SECTION 6.8 THE PRESIDENT. If no Chairman of the Board shall be elected, the President shall be the chief executive officer of the Trust and shall have the powers and duties of the Chairman of the Board as set forth in Section 6.7. In the absence of the Chairman of the Board, if one shall be elected, the President shall preside at all meetings of the shareholders and Trust Managers. He may sign, with any other proper officer, certificates for shares of the Trust and any deeds, bonds, mortgages, contracts and other documents which the Trust Managers have authorized to be executed, except where required by law to be otherwise signed and executed and except where the signing and execution thereof shall be expressly delegated by the Trust Managers or these Bylaws to some other officer or agent of the Trust. In addition, the President shall perform whatever duties and shall exercise whatever powers given to him by the Trust Managers or by the Chairman of the Board, if one shall be elected. SECTION 6.9 THE VICE PRESIDENTS. The Vice Presidents shall perform such duties as are given to them by these Bylaws and as may from time to time be assigned to them by the Trust Managers, by the Chairman of the Board, if one shall be elected, or by the President, if a Chairman of the Board is not elected, and may sign, with any other proper officer, certificates for shares of the Trust. At the request of the President, or in his absence or disability, the Vice President designated by the President (or in the absence of such designation, the senior Vice President), shall perform the duties and exercise the powers of the President. SECTION 6.10 THE SECRETARY. The Secretary, when available, shall attend all meetings of the Trust Managers and all meetings of the shareholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose and shall perform like duties for the Executive Committee and standing committees when required. The Secretary shall give, or cause to be given, notice of all meetings of the 21 26 shareholders and special meetings of the Trust Managers as required by law or these Bylaws, be custodian of the Trust records and have general charge of the share books of the Trust and shall perform such other duties as may be prescribed by the Trust Managers, by the Chairman of the Board, if one shall be elected, or by the President, if a Chairman of the Board is not elected, under whose supervision he shall be. The Secretary may sign, with any other proper officer, certificates for shares of the Trust and shall keep in safe custody the seal of the Corporation, and, when authorized by the Trust Managers, affix the same to any instrument requiring it and, when so affixed, it shall be attested by his signature or by the signature of the Treasurer or an Assistant Secretary. SECTION 6.11 ASSISTANT SECRETARIES. The Assistant Secretaries shall perform such duties as are given to them by these Bylaws or as may from time to time be assigned to them by the Trust Managers or by the Secretary. At the request of the Secretary, or in his absence or disability, the Assistant Secretary designated by the Secretary (or in the absence of such designation the senior Assistant Secretary), shall perform the duties and exercise the powers of the Secretary. SECTION 6.12 THE TREASURER. The Treasurer shall have the custody and be responsible for all Trust funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Trust and shall deposit all monies and other valuable effects in the name and to the credit of the Trust in such depositories as may be designated by the Trust Managers. The Treasurer shall disburse the funds of the Trust as may be ordered by the Trust Managers, taking proper vouchers for such disbursements, and shall render to the Chairman of the Board, if one shall be elected, the President and the Trust Managers, at the regular meetings of the Trust Managers, or whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the Trust. The Treasurer may sign, with any other proper officer, certificates for shares of the Trust. SECTION 6.13 ASSISTANT TREASURERS. The Assistant Treasurers shall perform such duties as are given to them by these Bylaws or as may from time to time be assigned to them by the Trust Managers or by 22 27 the Treasurer. At the request of the Treasurer, or in his absence or disability, the Assistant Treasurer designated by the Treasurer (or in the absence of such designation, the senior Assistant Treasurer), shall perform the duties and exercise the powers of the Treasurer. SECTION 6.14 TREASURER'S BOND. If required by the Trust Managers, the Treasurer and any Assistant Treasurer shall give the Trust a bond in such sum and with such surety or sureties as shall be satisfactory to the Trust Managers for the faithful performance of the duties of his office and for the restoration to the Trust, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Trust. SECTION 6.15 SALARIES. The salary or other compensation of officers shall be fixed from time to time by the Trust Managers. The Trust Managers may delegate to any committee or officer the power to fix from time to time the salary or other compensation of subordinate officers and agents appointed in accordance with the provisions of Section 6.3. SECTION 6.16 EXECUTION OF DOCUMENTS. Each officer of the Trust and any one of them is authorized to execute on behalf of the Trust any document or instrument of any nature whatsoever, provided that the execution by the Trust of any such document or instrument shall have been previously authorized by such action of the Trust Managers as may be required by statute, the Declaration of Trust or these Bylaws. ARTICLE VII TRUST SHARES SECTION 7.1 SHARE CERTIFICATES. (a) The certificates representing shares of beneficial interests of the Trust shall be in such form, not inconsistent with statutory provisions and the Declaration of Trust, as shall be approved by the Trust Managers. The certificates shall be signed by the Chairman of the Board, if one shall be elected, the President or a Vice President and a Secretary or Assistant Secretary, or such other or additional officers as may be prescribed from time to time by the Trust Managers. The signatures of such officer or officers upon a certificate may be facsimiles if the certificate is countersigned by a transfer agent or registered 23 28 by a registrar, either of which is other than the Trust itself or an employee of the Trust. In case any officer who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer before such certificate is issued, it may be issued with the same effect as if he were such officer at the date of its issuance. (b) In the event the Trust has, by its Declaration of Trust, limited or denied the preemptive right of shareholders, there shall be set forth on the face or back of the certificates, which the Trust shall issue to represent beneficial interests, such legends or statements, if any, as shall be required by applicable law or the Declaration of Trust or as may be approved by the Trust Managers. (c) All certificates shall be consecutively numbered and the name of the person owning the shares represented thereby, with the number of such shares and the date of issue, shall be entered on the Trust's books. (d) All certificates surrendered to the Trust shall be cancelled, and, except as provided in Section 7.2 with respect to lost, destroyed or mutilated certificates, no new certificate shall be issued until the former certificate for the same number of shares has been surrendered and cancelled. SECTION 7.2 LOST CERTIFICATES, ETC. The Trust Managers may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Trust alleged to have been lost or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost or destroyed. In authorizing such issue of a new certificate or certificates, the Trust Managers may, in their discretion and as a condition precedent to the issue thereof, require the owner of such lost or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as the Trust Managers shall require and/or indemnify the Trust as the Trust Managers may prescribe. SECTION 7.3 TRANSFER OF SHARES. Subject to any restrictions upon transfer, upon surrender to the Trust or the transfer agent of the Trust of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer and satisfaction of the Trust that the requested transfer complies with the provisions of applicable state and federal laws and regulations, the Declaration of 24 29 Trust and any agreements to which the Trust is a party, the Trust shall issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. SECTION 7.4 OWNERSHIP OF SHARES. The Trust shall be entitled to treat and recognize the holder of record of any share or shares as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of the State of Texas. SECTION 7.5 CLOSING OF TRANSFER BOOKS. For the purpose of determining shareholders entitled to notice of or to vote at any meeting of shareholders or any adjournment thereof, or entitled to receive a distribution by the Trust (other than a distribution involving a purchase or redemption by the Trust of its own shares) or a share dividend, or in order to make a determination of shareholders for any other proper purpose, the Trust Managers may provide that the share transfer books shall be closed for a stated period but not to exceed, in any case, sixty (60) days. If the share transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall be closed for at least ten (10) days immediately preceding such meeting. In lieu of closing the share transfer books, the Trust Managers may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than sixty (60) days and, in case of a meeting of shareholders, not less than ten (10) days prior to the date on which the particular action requiring such determination of shareholders is to be taken, and the determination of shareholders on such record date shall apply with respect to the particular action requiring the same notwithstanding any transfer of shares on the books of the Trust after such record date. SECTION 7.6 DIVIDENDS. The Trust Managers may, from time to time, declare, and the Trust may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by the Declaration of Trust and by law, such dividends to be paid in cash or in property or in shares of beneficial interests of the Trust, except no dividends shall be paid when the Trust is insolvent or when the payment thereof would render the Trust insolvent. 25 30 SECTION 7.7 RESERVES. By resolution the Trust Managers may create such reserve or reserves of the Trust as the Trust Managers from time to time, in their absolute discretion, determine to be proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Trust, or for such other purpose as the Trust Managers shall determine to be beneficial to the interest of the Trust. The Trust Managers may modify or abolish any such reserve in the manner in which it was created. ARTICLE VIII INDEMNIFICATION SECTION 8.1 DEFINITIONS. In this Article: (a) "Indemnitee" means (i) any present or former Trust Manager or officer of the Trust, (ii) any person who while serving in any of the capacities referred to in clause (i) hereof served at the Trust's request as a director, officer, partner, venturer, proprietor, trustee, employee, agent or similar functionary of another real estate investment trust or foreign or domestic corporation, partnership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise, and (iii) any person nominated or designated by (or pursuant to authority granted by) the Trust Managers or any committee thereof to serve in any of the capacities referred to in clauses (i) or (ii) hereof. (b) "Official Capacity" means (i) when used with respect to a Trust Manager, the office of Trust Manager of the Trust and (ii) when used with respect to a person other than a Trust Manager, the elective or appointive office of the Trust held by such person or the employment or agency relationship undertaken by such person on behalf of the Trust, but in each case does not include service for any other real estate investment trust or foreign or domestic corporation or any partnership, joint venture, sole proprietorship, trust, employee benefit plan or other enterprise. 26 31 (c) "Proceeding" means any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative, arbitrative or investigative, any appeal in such an action, suit or proceeding, and any inquiry or investigation that could lead to such an action, suit or proceeding. SECTION 8.2 INDEMNIFICATION. The Trust shall indemnify every Indemnitee against all judgments, penalties (including excise and similar taxes), fines, amounts paid in settlement and reasonable expenses actually incurred by the Indemnitee in connection with any Proceeding in which he was, is or is threatened to be named defendant or respondent, or in which he was or is a witness without being named a defendant or respondent, by reason, in whole or in part, of his serving or having served, or having been nominated or designated to serve, in any of the capacities referred to in Section 8.1(a), if it is determined in accordance with Section 8.4 that the Indemnitee (a) conducted himself in good faith, (b) reasonably believed, in the case of conduct in his Official Capacity, that his conduct was in the Trust's best interests and, in all other cases, that his conduct was at least not opposed to the Trust's best interests, and (c) in the case of any criminal proceeding, had no reasonable cause to believe that his conduct was unlawful; provided, however, that in the event that an Indemnitee is found liable to the Trust or is found liable on the basis that personal benefit was improperly received by the Indemnitee the indemnification (i) is limited to reasonable expenses actually incurred by the Indemnitee in connection with the Proceeding and (ii) shall not be made in respect of any Proceeding in which the Indemnitee shall have been found liable for willful or intentional misconduct in the performance of his duty to the Trust. Except as provided in the immediately preceding proviso to the first sentence of this Section 8.2, no indemnification shall be made under this Section 8.2 in respect of any Proceeding in which such Indemnitee shall have been (x) found liable on the basis that personal benefit was improperly received by him, whether or not the benefit resulted from an action taken in the Indemnitee's Official Capacity, or (y) found liable to the Trust. The termination of any Proceeding by judgment, order, settlement or conviction, or on a plea of nolo contendere or its equivalent, is not of itself determinative that the Indemnitee did not meet the requirements set forth in clauses (a), (b) or (c) in the first sentence of this Section 8.2. An Indemnitee shall be deemed to 27 32 have been found liable in respect of any claim, issue or matter only after the Indemnitee shall have been so adjudged by a court of competent jurisdiction after exhaustion of all appeals therefrom. Reasonable expenses shall include, without limitation, all court costs and all fees and disbursements of attorneys for the Indemnitee. SECTION 8.3 SUCCESSFUL DEFENSE. Without limitation of Section 8.2 and in addition to the indemnification provided for in Section 8.2, the Trust shall indemnify every Indemnitee against reasonable expenses incurred by such person in connection with any Proceeding in which he is a witness or a named defendant or respondent because he served in any of the capacities referred to in Section 8.1(a), if such person has been wholly successful, on the merits or otherwise, in defense of the Proceeding. SECTION 8.4 DETERMINATIONS. Any indemnification under Section 8.2 (unless ordered by a court of competent jurisdiction) shall be made by the Trust only upon a determination that indemnification of the Indemnitee is proper in the circumstances because he has met the applicable standard of conduct. Such determination shall be made (a) by the Trust Managers by a majority vote of a quorum consisting of Trust Managers who, at the time of such vote, are not named defendants or respondents in the Proceeding; (b) if such a quorum cannot be obtained, then by a majority vote of a committee of the Trust Managers, duly designated to act in the matter by a majority vote of all Trust Managers (in which designation Trust Managers who are named defendants or respondents in the Proceeding may participate), such committee to consist solely of two (2) or more Trust Managers who, at the time of the committee vote, are not named defendants or respondents in the Proceeding; (c) by special legal counsel selected by the Trust Managers or a committee thereof by vote as set forth in clauses (a) or (b) of this Section 8.4 or, if the requisite quorum of all of the Trust Managers cannot be obtained and such committee cannot be established, by a majority vote of all of the Trust Managers (in which Trust Managers who are named defendants or respondents in the Proceeding may participate); or (d) by the shareholders in a vote that excludes the shares held by Trust Managers that are named defendants or respondents in the Proceeding. Determination as to reasonableness of expenses shall be made in the same manner as the determination that 28 33 indemnification is permissible, except that if the determination that indemnification is permissible is made by special legal counsel, determination as to reasonableness of expenses must be made in the manner specified in clause (c) of the preceding sentence for the selection of special legal counsel. In the event a determination is made under this Section 8.4 that the Indemnitee has met the applicable standard of conduct as to some matters but not as to others, amounts to be indemnified may be reasonably prorated. SECTION 8.5 ADVANCEMENT OF EXPENSES. Reasonable expenses (including court costs and attorneys' fees) incurred by an Indemnitee who was or is a witness or was, is or is threatened to be made a named defendant or respondent in a Proceeding shall be paid or reimbursed by the Trust at reasonable intervals in advance of the final disposition of such Proceeding, and without making any of the determinations specified in Section 8.4, after receipt by the Trust of (a) a written affirmation by such Indemnitee of his good faith belief that he has met the standard of conduct necessary for indemnification by the Trust under this Article VIII and (b) a written undertaking by or on behalf of such Indemnitee to repay the amount paid or reimbursed by the Trust if it shall ultimately be determined that he is not entitled to be indemnified by the Trust as authorized in this Article VIII. Such written undertaking shall be an unlimited obligation of the Indemnitee but need not be secured and it may be accepted without reference to financial ability to make repayment. Notwithstanding any other provision of this Article VIII, the Trust may pay or reimburse expenses incurred by an Indemnitee in connection with his appearance as a witness or other participation in a Proceeding at a time when he is not named a defendant or respondent in the Proceeding. SECTION 8.6 EMPLOYEE BENEFIT PLANS. For purposes of this Article VIII, the Trust shall be deemed to have requested an Indemnitee to serve an employee benefit plan whenever the performance by him of his duties to the Trust also imposed or imposes duties on or otherwise involved or involves services by him to the plan or participants or beneficiaries of the plan. Excise taxes assessed on an Indemnitee with respect to an employee benefit plan pursuant to applicable law shall be deemed fines. Action taken or omitted by an Indemnitee with respect to an employee benefit plan in the performance of his duties for a purpose reasonably 29 34 believed by him to be in the interest of the participants and beneficiaries of the plan shall be deemed to be for a purpose which is not opposed to the best interests of the Trust. SECTION 8.7 OTHER INDEMNIFICATION AND INSURANCE. The indemnification provided by this Article VIII shall (a) not be deemed exclusive of, or to preclude, any other rights to which those seeking indemnification may at any time be entitled under the Trust's Declaration of Trust, any law, agreement or vote of shareholders or disinterested Trust Managers, or otherwise, or under any policy or policies of insurance purchased and maintained by the Trust on behalf of any Indemnitee, both as to action in his Official Capacity and as to action in any other capacity, (b) continue as to a person who has ceased to be in the capacity by reason of which he was an Indemnitee with respect to matters arising during the period he was in such capacity, and (c) inure to the benefit of the heirs, executors and administrators of such a person. SECTION 8.8 NOTICE. Any indemnification of or advance of expenses to an Indemnitee in accordance with this Article VIII shall be reported in writing to the shareholders of the Trust with or before the notice or waiver of notice of the next shareholders' meeting or with or before the next submission to shareholders of a consent to action without a meeting and, in any case, within the twelve-month period immediately following the date of the indemnification or advance. SECTION 8.9 CONSTRUCTION. The indemnification provided by this Article VIII shall be subject to all valid and applicable laws, including, without limitation, the Texas Real Estate Investment Trust Act, and, in the event this Article VIII or any of the provisions hereof or the indemnification contemplated hereby are found to be inconsistent with or contrary to any such valid laws, the latter shall be deemed to control and this Article VIII shall be regarded as modified accordingly, and, as so modified, shall continue in full force and effect. SECTION 8.10 CONTINUING OFFER, RELIANCE, ETC. The provisions of this Article VIII (a) are for the benefit of, and may be enforced by, each Indemnitee of the Trust, the same as if set forth in their entirety in a written instrument duly executed and delivered by the Trust and such Indemnitee and (b) constitute a 30 35 continuing offer to all present and future Indemnitees. The Trust, by its adoption of these Bylaws, (x) acknowledges and agrees that each Indemnitee of the Trust has relied upon and will continue to rely upon the provisions of this Article VIII in becoming, and serving in any of the capacities referred to in Section 8.1 hereof, (y) waives reliance upon, and all notices of acceptance of, such provisions by such Indemnitees and (z) acknowledges and agrees that no present or future Indemnitee shall be prejudiced in his right to enforce the provisions of this Article VIII in accordance with their terms by any act or failure to act on the part of the Trust. SECTION 8.11 EFFECT OF AMENDMENT. No amendment, modification or repeal of this Article VIII or any provision of this Article VIII shall in any manner terminate, reduce or impair the right of any past, present or future Indemnitees to be indemnified by the Trust, nor the obligation of the Trust to indemnify any such Indemnitees, under and in accordance with the provisions of this Article VIII as in effect immediately prior to such amendment, modification or repeal with respect to claims arising from or relating to matters occurring, in whole or in part, prior to such amendment, modification or repeal, regardless of when such claims may be asserted. ARTICLE IX GENERAL PROVISIONS SECTION 9.1 GENERAL POLICIES. The Trust intends to make investments that are consistent with the applicable requirements of the Internal Revenue Code of 1986, as amended, and the Texas Real Estate Investment Trust Act, as amended, and related regulations with respect to the composition of the Trust's investments and the derivation of its income. SECTION 9.2 LIMITED LIABILITY OF SHAREHOLDERS. A shareholder shall not be personally or individually liable in any manner whatsoever for any debt, act, omission or obligation incurred by the Trust or the Trust Managers. A shareholder shall be under no obligation to the Trust or to its creditors with respect to such shares other than the obligation to pay to the Trust the full amount of the consideration for which such 31 36 shares were issued or to be issued. Upon the payment of such consideration, such shares shall be fully paid and non- assessable by the Trust. SECTION 9.3 WAIVER OF NOTICE. (a) Whenever, under the provisions of applicable law or of the Declaration of Trust or of these Bylaws, any notice is required to be given to any shareholder or Trust Manager, a waiver thereof in writing signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be equivalent to the giving of such notice. (b) Attendance of a Trust Manager at a meeting shall constitute a waiver of notice of such meeting except where a Trust Manager attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business on the grounds that the meeting is not lawfully called or convened. SECTION 9.4 SEAL. If one be adopted, the Trust seal shall have inscribed thereon the name of the Trust and shall be in such form as may be approved by the Trust Managers. Said seal shall be kept in the custody of the Secretary and may be used by causing it or a facsimile of it to be impressed or affixed or in any manner reproduced. SECTION 9.5 FISCAL YEAR. The fiscal year of the Trust shall be fixed by resolution of the Trust Managers. SECTION 9.6 CHECKS, NOTES, ETC. All checks or demands for money and notes of the Trust shall be signed by such officer or officers or such other person or persons as the Trust Managers may from time to time designate. The Trust Managers may authorize any officer or officers or such other person or persons to enter into any contract or execute and deliver any instrument in the name of and on behalf of the Trust, and such authority may be general or confined to specific instances. SECTION 9.7 EXAMINATION OF BOOKS AND RECORDS. The Trust Managers shall determine from time to time whether, and if allowed, when and under what conditions and regulations the accounts and books of the Trust (except such as may by statute be specifically opened to inspection) or any of them shall be open to 32 37 inspection by the shareholders, and the shareholders' rights in this respect are and shall be restricted and limited accordingly. SECTION 9.8 VOTING UPON SHARES HELD BY THE TRUST. Unless otherwise ordered by the Trust Managers, the President, acting on behalf of the Trust, shall have full power and authority to attend and to act and to vote at any meeting of shareholders of any corporation in which the Trust may hold shares and at any such meeting, shall possess and may exercise any and all of the rights and powers incident to the ownership of such shares which, as the owner thereof, the Trust might have possessed and exercised, if present. The Trust Managers by resolution from time to time may confer like powers upon any other person or persons. SECTION 9.9 NUMBER, GENDER, ETC. Whenever the singular number is used in these Bylaws and when required by the context, the same shall include the plural, and the masculine gender shall include the feminine and neuter genders. The term "person," as used herein and as the context requires shall mean and include individuals, corporations, limited partnerships, general partnerships, joint stock companies or associations, joint ventures, associations, companies, trusts, banks, trust companies, land trusts, business trusts, or other entities and governments and agencies and political subdivisions thereof. ARTICLE X AMENDMENTS SECTION 10.1 AMENDMENT OF BYLAWS. Except as otherwise provided by applicable law or the Declaration of Trust, the power to alter, amend or repeal these Bylaws or to adopt new Bylaws shall be vested in the Trust Managers and (to the extent not inconsistent with the Texas REIT Act and the Declaration of Trust and specified in the notice of the meeting) the shareholders. Such action to amend the Bylaws may be taken (i) with respect to all Bylaw provisions, by the affirmative vote of a majority of the Trust Managers, or (ii)(a) with respect to Section 2.5, Section 3.3, Section 3.4, Section 3.6, Section 3.7 or Article X of these Bylaws, by the affirmative vote of the holders of two-thirds (2/3) of the Trust's outstanding shares, or (b) with respect to all other Bylaws, by the affirmative vote of the holders of a majority of the Trust's outstanding shares. 33 38 ARTICLE XI SUBJECT TO ALL LAWS SECTION 11.1 SUBJECT TO ALL LAWS. The provisions of these Bylaws shall be subject to all valid and applicable laws, including, without limitation, the Texas Real Estate Investment Trust Act as now or hereafter amended, and in the event that any of the provisions of these Bylaws are found to be inconsistent with or contrary to any such valid laws, the latter shall be deemed to control and these Bylaws shall be deemed modified accordingly, and, as so modified, shall continue in full force and effect. 34 EX-10.16 3 FORM OF MASTER EXCHANGE AGREEMENT 1 EXHIBIT 10.16 MASTER EXCHANGE AGREEMENT This Agreement is entered into this 7th day of November 1997 by and between _____________ ("Recipient") and Camden Property Trust (the "Company") and modifies the Master Exchange Agreement dated 31 January 1997. WHEREAS, pursuant to the 1993 Share Incentive Plan of Camden Property Trust (the "Plan"), the Recipient has and will receive awards of Restricted Shares as shown in Exchange Supplement A attached hereto which shall vest over time in accordance with the terms of the Plan and outlined on Exchange Supplement B; WHEREAS, Recipient desires to exchange his right to receive the unvested Restricted Shares upon vesting and all other rights appurtenant thereto for the Rights to Repurchase (as defined below); WHEREAS, the Company desires to exchange the Rights to Repurchase for the return of the Recipient's unvested Restricted Shares; NOW, THEREFORE, in consideration of the mutual promises contained herein, and other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto hereby agree as follows: 1. Recipient hereby agrees to exchange Recipient's unvested Restricted Shares (including the right to receive dividends thereon and the right to vote such shares) for the Rights to Repurchase as described below. 2. Upon the execution of this Agreement, the Company shall deposit Recipient's Restricted Shares into a rabbi trust (the "Trust") established for the benefit of the Company. The Trust shall be administered by an independent trustee who shall be selected by the Company. Unless otherwise agreed by Recipient and Company, the Company agrees, whenever any dividend is declared on common shares of beneficial interest of the Company, $.01 par value per share (the "Common Shares"), to pay to the Recipient an amount per Restricted Share held hereunder as of such date(s) by the Trust equal to the amount per Common Share paid to the holders of record of Common Shares of the Company (the "Dividend Equivalents"). The Company and Recipient may agree that any Dividend Equivalents payable on account of dividends declared on the Common Shares shall be paid to the Trust instead of the Recipient. Such agreement to pay Dividend Equivalents to the Trust shall be applicable with respect to Dividend Equivalents payable on account of dividends declared on the Common Shares during the following calendar year, and shall be irrevocable for those Dividend Equivalents during that year. The Dividend Equivalents payable under this Section 2 shall be distributed directly to the Recipient or Trust, as the case may be, as soon as administratively feasible. 2 If any dividend is declared on the Common Shares after the date on which Recipient ceases employment with the Company, such Dividend Equivalents shall be paid by the Company to the Trust. Any Dividend Equivalents paid to the Trust shall accumulate in the Trust and the Trustee shall invest such Dividend Equivalents in Marketable securities other than the Company's securities. The trustee shall have the right to substitute, from time to time, other marketable securities of equal value for the marketable securities of equal value for the marketable securities originally purchased by the trustee. 3. Upon vesting of the Restricted Shares under the terms of the relevant award agreement, Recipient shall have the right to purchase all or part of the Restricted Shares that Recipient exchanged with the Trust together with any securities that were purchased with the accumulated Dividend Equivalents received by the Trust on such Restricted Shares (the "Rights to Repurchase"). The Rights to Repurchase may be exercised with regard to vested shares in an amount at least equal to the lesser of 2,000 shares or the number of shares for any portion of an Award separately identified in Exchange Supplement B. Nothing in this Agreement shall be construed as allowing a Recipient to exercise his Rights to Repurchase to purchase either the shares or the Dividend Equivalents but not both; that is, the shares and the related Dividend Equivalents must be purchased together, except as provided in paragraph 6 hereof. 4. The Restricted Shares which are the subject of Rights to Repurchase shall vest according to the terms of the relevant Restricted Share award agreement and are summarized on Exchange Supplement B. The Rights to Repurchase shall be exercisable for a period of 20 years from the applicable vesting date. 5. The exercise price of the Rights to Repurchase shall equal the sum of (i) 10% of the Fair Market Value of the Restricted Shares to be purchased by Recipient, as determined on the date of this Agreement, and (ii) 5% of the amount of Dividend Equivalents paid to the Trust with respect to such Restricted Shares. 6. If Recipient's employment or relationship with the Company or its Affiliates is terminated for any reason before vesting of the Restricted Shares, the Rights to Repurchase such Restricted Shares shall terminate in accordance with the terms and conditions of the relevant Restricted Share agreement or, if not specified otherwise, on the date of death, disability, retirement, or the date notice of termination or resignation is given. Recipient's Rights to Repurchase vested shares shall be exercisable for a period of one year from the date of termination of employment or relationship. Thereafter, the unexercised Rights to Repurchase shall terminate and be of no further force and effect. However, to the extent that any Dividend Equivalents have been paid to the Trust and not yet repurchased from the Trust, recipient shall vest in such Dividend Equivalents (to the extent not previously vested) and be entitled to repurchase such Dividend Equivalents separately from the shares, even though such shares have not vested and the vesting rights in such shares is then expiring. 3 7. All initial capitalized terms not otherwise defined herein shall have the meanings set forth in the Plan. 8. This Agreement shall be construed in accordance with the laws of the State of Texas. 9. To the extent any provision of this Agreement is held to be unenforceable, illegal or invalid under any current or future law, such provision shall be fully separable and this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part thereof, the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance therefrom. In lieu of such illegal, invalid or unenforceable provision, there shall be added automatically as a part of this Agreement, a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible, and the parties hereto request the court or any arbitrator to whom disputes relating to this Agreement are submitted to reform the otherwise illegal, invalid or unenforceable provision in accordance with this Section 9. 10. To the extent any provisions of this Agreement conflict with the provisions of any employment agreement entered into between the Company and Recipient, the terms of the employment agreement shall control. To the extent that any such employment agreement provides for the automatic or accelerated vesting of securities or derivative securities held by the Recipient upon the occurrence of a change of control, business combination or other enumerated event, the Restricted Shares and Rights to Repurchase shall likewise be deemed to be governed by such provisions and shall likewise vest on the terms and conditions set forth in such employment agreement. 11. The Rights to Repurchase granted hereunder, to the extent permitted by law, shall be transferable to Recipient's spouse, children or grandchildren or to a trust created for their benefit. The Rights to Repurchase shall not otherwise be transferable. 12. The Restricted Shares and Rights to Repurchase covered by this Agreement shall be subject to the adjustment provisions contained in the Plan (currently Section 7 of the Plan). IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed as of the date first above written. RECIPIENT --------------------------------------- CAMDEN PROPERTY TRUST By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- 4 EXHIBIT 10.16 DIVIDEND EQUIVALENT ELECTION FORM I hereby irrevocably elect to have any Dividend Equivalents declared to me during the following calendar year, on the Restricted Shares referenced below, to be paid directly to the Trust. Any Dividend Equivalents paid to the Trust shall accumulate in the Trust and the trustee shall invest such Dividend Equivalents in marketable securities other than the Company's securities. If no election is made, any Dividend Equivalents declared during the following calendar year will be paid directly to me by the Company. - --------------------------------- -------------------------------- Date of Election Signature Name: ---------------------------
- ------------------------------------------------------------------------------------------ SUPPLEMENT B NUMBER OF SHARES SUBJECT TO ELECTION REFERENCE YES NO - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ - ------------------------------------------------------------------------------------------ Shares Awarded in Following Calendar Year - ------------------------------------------------------------------------------------------
EX-10.17 4 RESTATEMENT & AMENDMENT OF LOAN AGREEMENT 1 EXHIBIT 10.17 RESTATEMENT AND AMENDMENT OF LOAN AGREEMENT BETWEEN CAMDEN PROPERTY TRUST BORROWER AND NATIONSBANK OF TEXAS, N.A. AGENT AND THE LENDERS NAMED HEREIN LENDERS dated effective as of November 25, 1997 2 TABLE OF CONTENTS
Page ARTICLE 1. - GENERAL INFORMATION..................................................................................1 1.1. Loan............................................................................................1 1.2. Purpose.........................................................................................1 1.3. Loan Documents..................................................................................1 ARTICLE 2 - DEFINITIONS...........................................................................................1 ARTICLE 3 - THE LOAN..............................................................................................6 3.1. Commitment and Advances.........................................................................6 3.2. Direct Advances to Lenders......................................................................6 3.3. Disbursement and Performance by Lenders.........................................................6 3.4. Fees............................................................................................7 3.5. Advance Request.................................................................................7 3.6. Conditions to All Advances......................................................................7 3.7. Bid Rate Loans..................................................................................8 ARTICLE 4 - PAYMENT...............................................................................................9 4.1 Repayment at Maturity; Mandatory Principal Reductions...........................................9 4.2. Interest........................................................................................9 4.3. Payment of Principal and Interest..............................................................11 4.4. Prepayment Premium.............................................................................11 4.5. Past-Due Obligations...........................................................................11 4.6. Application of Payments........................................................................11 4.7. General Provisions.............................................................................12 4.8. Extension of Maturity Date.....................................................................12 ARTICLE 5 - ASSET POOL...........................................................................................12 5.1. Property Pool..................................................................................12 5.2. Negative Pledge Agreements.....................................................................13 ARTICLE 6 - INTERCREDITOR MATTERS................................................................................13 6.1. Intercreditor Agreement........................................................................13 6.2. Successors and Assigns; Participations.........................................................13 ARTICLE 7 - ADDITIONAL REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS................................................................................14 7.1. Financial Statements...........................................................................14 7.2. Litigation.....................................................................................15 7.3. Existence and Rights...........................................................................15 7.4. Authorization, Conflicts, Enforceability.......................................................15 7.5. Title to the Property..........................................................................15 7.6. Legal Requirements.............................................................................15 7.7. Utilities and Access...........................................................................16 7.8. Full Disclosure................................................................................16 7.9. Certain Regulatory Matters.....................................................................16 7.10. Principal Office, Etc..........................................................................16 7.11. Payment and Performance........................................................................16 7.12. Inspection of the Property.....................................................................16 7.13. Estoppel Certificate...........................................................................16 7.14. Maintenance and Use............................................................................16 7.15. Notice to Agent................................................................................17 7.16. Costs and Expenses.............................................................................17 7.17. Further Assurances.............................................................................17 7.18. No Assignment..................................................................................17 7.19. INDEMNIFICATION................................................................................17 7.20. REIT Status....................................................................................18 7.21. Management of Property.........................................................................18 7.22. Minimum Net Worth..............................................................................18 7.23. Liabilities/Assets Ratios......................................................................18 7.24. Notice of Rating Change/Definition Change......................................................18 7.25. Earnings Ratios................................................................................18 7.26. Unencumbered NOI...............................................................................18 7.27. Limitation on Distributions....................................................................19 7.28. Cost of Unimproved Real Estate.................................................................19 7.29. Borrower's Equity Interests....................................................................19 7.30. Non-Apartment Project Assets...................................................................19 7.31. Cost of Development Projects...................................................................19
(i) 3 7.32. Notes Receivable...............................................................................19 7.33. Market Capitalization..........................................................................19 7.34. Additional Covenants Regarding Consolidated Subsidiaries.......................................19 7.35 Additional Agreements Regarding Guaranty.......................................................20 7.36 Additional Covenant Regarding Certain Subsidiaries.............................................21 ARTICLE 8 - DEFAULT AND REMEDIES.................................................................................21 8.1. Default........................................................................................21 8.2. Notice and Cure................................................................................22 8.3. Certain Remedies...............................................................................22 8.4. Rights and Remedies Cumulative.................................................................22 ARTICLE 9 - GENERAL TERMS AND CONDITIONS.........................................................................22 9.1. Loan Documents.................................................................................22 9.2. Waiver.........................................................................................23 9.3. Lenders' Consent or Approval...................................................................23 9.4. Modification or Termination....................................................................23 9.5. Forum..........................................................................................23 9.6. Compliance with Usury Laws.....................................................................23 9.7. Notices........................................................................................24 9.8. No Brokers.....................................................................................24 9.9. Partial Invalidity.............................................................................24 9.10. Interpretation.................................................................................24 9.11. Disclosure of Information......................................................................24 9.12. Binding Effect.................................................................................24 9.13. Conditions for the Benefit of Lenders..........................................................24 9.14. Counterparts...................................................................................25 9.15. No Partnership, etc............................................................................25 9.16. Loan Agreement Governs.........................................................................25 9.17. Time of Essence................................................................................25 9.18. Applicable Law.................................................................................25 9.19. Participation or Sale of Loan..................................................................25 9.20. Survival of Representations, Warranties and Covenants..........................................25 9.21. Payments Set Aside.............................................................................25 9.22. Disclaimer of Financing........................................................................26 9.23. Evidence of Satisfaction.......................................................................26 9.24. Time References................................................................................26 ARTICLE 10 - EXHIBITS............................................................................................26 10.1. Exhibits.......................................................................................26 ARTICLE 11 - MANDATORY ARBITRATION...............................................................................26 11.1. Mandatory Arbitration..........................................................................26 ARTICLE 12 - ENTIRE AGREEMENT....................................................................................27 12.1. Entire Agreement...............................................................................27
EXHIBITS Exhibit "A" - Closing Conditions Exhibit "B" - Affidavit and Advance Request Exhibit "C" - Compliance Certificate Exhibit "D" - Eurodollar Rate Notice Exhibit "E" - Schedule of Parties, Addresses, Commitments and Wiring Instructions Exhibit "F" - Form of Assignment and Acceptance Exhibit "G" - Bid Rate Note Form Exhibit "H" - Bid Loan Request Confirmation Exhibit "I" - Invitation to Bid Exhibit "J" - Confirmation of Bid Exhibit "K" - Notice of Acceptance of Bid Exhibit "L" - Form of Guaranty Exhibit "M" - Advance Note Form -ii- 4 RESTATEMENT AND AMENDMENT OF LOAN AGREEMENT THIS RESTATEMENT AND AMENDMENT OF LOAN AGREEMENT (this "Agreement"), dated effective as of November 25, 1997, is made as a restatement and amendment of the Prior Loan Agreement (defined below) by Lenders (defined below), NATIONSBANK OF TEXAS, N.A., a national banking association, for itself and as Agent for Lenders, and CAMDEN PROPERTY TRUST, a Texas real estate investment trust ("Borrower"), who agree as follows: ARTICLE 1 - GENERAL INFORMATION 1.1. Loan. Pursuant to this Agreement, Lenders have agreed to provide a revolving line of credit to Borrower and Bid Rate Loans (defined below; collectively, the "Loan") in an amount not to exceed an aggregate of ONE HUNDRED FIFTY MILLION AND NO/100 DOLLARS ($150,000,000.00) (the "Committed Sum"); provided that the Loan may, at Lenders' option as hereinafter described, exceed the Committed Sum. 1.2. Purpose. The proceeds of the Loan shall be used by Borrower for any legal purpose, including, without limitation, for Borrower's working capital needs. 1.3. Loan Documents. The Loan Documents evidence the agreements of Borrower and Lenders with respect to the Loan. The Loan Documents include the following (the "Notes"): (a) Promissory Notes in the aggregate principal amount of the Committed Sum, executed by Borrower, each payable to the order of a Lender, evidencing Advances (defined below) other than Bid Rate Loans, and (b) Promissory Notes, each in the amount of $75,000,000.00, executed by Borrower, each payable to the order of a Lender. Borrower shall comply with all Loan Documents. The exhibits attached to this Agreement, which are made a part of herein and are incorporated herein, contain terms, provisions, and conditions applicable to the Loan. ARTICLE 2 - DEFINITIONS As used in this Agreement, the following capitalized terms shall have the respective meanings set forth below: "Additional Commitment Fee" is defined in Section 4.8. "Advance" means a disbursement of any of the proceeds of the Loan by Lenders pursuant to this Agreement. "Advance Note" means each promissory note of Borrower evidencing all Advances other than Bid Rate Loans, in substantially the form of Exhibit AM" hereto, as each such note may be amended, extended, restated, renewed, substituted or replaced from time to time. "Advance Request" is defined in Section 3.5. "Advance Termination Date" means July 28, 1999. "Agent" means NationsBank of Texas, N.A., and its successor or successors as agent for Lenders under this Agreement. "Applicable Rate" means the rate of interest applicable to the Loan or portions thereof pursuant to the provisions of Section 4.2. "Base Rate" means, on any day, a rate per annum equal to the Prime Rate for that day. "Bid Rate Loan" means an Advance the interest rate on which is determined by agreement between Borrower and Lender making such Advance pursuant to Section 3.7. "Bid Rate Note" means each promissory note of Borrower evidencing Bid Rate Loans, in substantially the form of Exhibit AG" hereto, as each such note may be amended, extended, restated, renewed, substituted or replaced from time to time. "Business Day" means a day of the year other than a Saturday or Sunday on which (i) Lenders and any participant in the Loan are open for business and (ii) all major departments of banks in both London, England and Houston, Texas, U.S.A. are open for business. "Closing Date" means the date of this Agreement. "Commitment" means, for a Lender, the amount (which is subject to reduction and cancellation as provided in this Agreement) stated beside such Lender's name on Exhibit "E" attached hereto and made a part hereof for all purposes, as such Exhibit is most recently amended under this Agreement. Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 5 "Commitment Fee" means the sum of (i) the Initial Commitment Fee, as such term is defined in Section 3.4(a), and (ii) the Additional Commitment Fee, as such term is defined in Section 4.8. "Commitment Percentage" means, for any Lender, the proportion (stated as a percentage) that the Commitment bears to the Total Commitment. "Compliance Certificate" is defined in Section 7.1(b). "Consolidated Subsidiary" means any Person in whom Borrower holds an equity or ownership interest and whose financial results would be consolidated under GAAP with the financial results of Borrower on the consolidated financial statements of Borrower. "Current Date" means a date within 30 days prior to the Closing Date. "Debentures" is defined in Section 7.23. "Debtor Relief Laws" means any applicable Laws pertaining to liquidation, conservatorship, bankruptcy, moratorium, rearrangement, insolvency, reorganization, receivership, composition, extension or adjustment of debt, or similar Laws, domestic or foreign, affecting the rights or remedies of creditors generally, in effect from time to time. "Default" is defined in Article 8. "Development Projects" is defined in Article 5. "Distribution" means (i) any dividend or other distribution, direct or indirect, on account of any shares of any class of stock of Borrower now or hereafter outstanding and (ii) any redemption, retirement, purchase or other acquisition for value, direct or indirect, of any shares of any class of stock of Borrower now or hereafter outstanding, or of any warrants, options or other rights to acquire any such shares or stock. "Eurodollar Bid Rate" means a rate per annum equal to the Eurodollar Rate for the term in question plus a margin specified by a Lender. "Eurodollar Bid Rate Loan" means a Bid Rate Loan which bears interest at the Eurodollar Bid Rate. "Eurodollar Rate" means for any applicable Interest Period for any Eurodollar Rate Principal, a simple rate per annum equal to the quotient obtained (rounded upward, if necessary, to the next higher 1/10,000 of 1%) by dividing (i) the applicable Interbank Offered Rate by (ii) 1.00 minus the Eurodollar Reserve Percentage, where "Interbank Offered Rate" means, for any Eurodollar Rate Principal for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/10,000 of 1%) appearing on Telerate Page 3750 (or any successor page) as the London interbank offered rate for deposits in dollars at approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period. If for any reason such rate is not available, the term "Interbank Offered Rate" shall mean, for any Eurodollar Rate Principal for any Interest Period therefor, the rate per annum (rounded upwards, if necessary, to the nearest 1/10,000 of 1%) appearing on Reuters Screen LIBO Page as the London interbank offered rate for deposits in dollars at approximately 11:00 a.m. (London time) two (2) Business Days prior to the first day of such Interest Period for a term comparable to such Interest Period; provided, however, if more than one rate is specified on Reuters Screen LIBO Page, the applicable rate shall be the arithmetic mean of all such rates. "Eurodollar Reserve Percentage" means, with respect to any applicable Interest Period, for any day that percentage (expressed as a decimal) which is in effect on such day, as prescribed by the Board of Governors of the Federal Reserve System (or any successor) for determining the maximum reserve requirement (including basic, supplemental, emergency, special and marginal reserves) generally applicable to financial institutions regulated by the Federal Reserve Board comparable in size and type to Agent, in respect of "Eurocurrency liabilities" (or in respect of any other category of liabilities which includes deposits by reference to which the interest rate on Eurodollar Rate Principal is determined), whether or not Agent has any Eurocurrency liabilities or such requirement otherwise in fact applies to Agent. The Interbank Offered Rate shall be adjusted automatically as of the effective date of each change in the Eurodollar Reserve Percentage. "Eurodollar Rate Principal" means any portion or portions of the outstanding principal balance of the Notes which bears interest at an applicable Eurodollar Rate at the time in question. "Excess Debt" means the amount by which the then outstanding principal balance of the Loan exceeds the Maximum Available Amount as determined on any date during the term of the Notes. "Fixed Bid Rate" means a rate per annum equal to the Base Rate plus or minus a margin specified by a Lender, or such other fixed interest rate specified by a Lender. Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 2 6 "Fixed Bid Rate Loan" means a Bid Rate Loan which bears interest at a Fixed Bid Rate. "Fixed Charges" means the sum of all interest and scheduled principal payments made by Borrower and its Consolidated Subsidiaries in the immediately preceding 12-month period plus annual capital expenditures, including reserves, with capital expenditures being calculated at the greater of (i) actual capital expenditures and reserves or (ii) $175.00 per apartment unit on the Property per year. "Funds from Operations" means the term "Funds from Operations" as such term is defined by the National Association of Real Estate Investment Trusts, or if said association no longer exists or no longer promulgates a definition for such term, then such other meaning as is selected by Agent acting reasonably. "GAAP" is defined in Section 7.1(a). "Ground-Leased Property" means those two (2) certain properties in Nueces County, Texas, subject to ground leases from Texas A&M University, containing 7.494 and 4.841 acres, respectively, and commonly known as Miramar Phase I Apartments and Miramar Phase II Apartments, respectively. "Guaranty" means a guaranty of indebtedness substantially in the form of Exhibit "L" attached hereto. "Improvements" means all improvements now or later to be located on the Lands. "Initial Commitment Fee" is defined in Section 3.4(a). "Intercreditor Agreement" means that certain Intercreditor Agreement, dated of even date herewith, among Agent and Lenders, as modified, amended or supplemented from time to time. "Interest Adjustment Date" means the earlier of either the last day of an Interest Period or the Termination Date. "Interest Period" means, with respect to Eurodollar Rate Principal, a period selected by Borrower of 7 days or 30, 60, 90, 120, 180 or 360 days, commencing on the Effective Date of any Eurodollar Rate Principal. "Lands" means the real estate portion of the Property. "Laws" means all constitutions, treaties, statutes, laws, ordinances, codes, regulations, rules, orders, decisions, writs, injunctions, or decrees of the United States of America or any other Tribunal, now in effect and as hereafter amended, issued, promulgated, or otherwise coming into effect. "Legal Requirements" means all Laws, and all recorded or unrecorded agreements, covenants, restrictions, easements or conditions (including any requirement of any insurance or surety company or any board of fire underwriters), as now in effect and as hereafter amended, issued, promulgated, or otherwise coming into effect. "Lenders" means the financial institutions named on Exhibit "E" or on the most recently amended Exhibit "E", if any, delivered by Agent under this Agreement, and, subject to this Agreement, their respective successors and assigns (but not any participant who is not otherwise a party to this Agreement). "Lenders' Payment Address": 700 Louisiana, 5th Floor Houston, Texas 77002 Attn: Real Estate Administration "Lien" means any lien, mortgage, security interest, pledge, assignment, charge, title retention agreement or encumbrance of any kind and any other substantially similar arrangement for a creditor's claim to be satisfied from assets or proceeds prior to the claims of other creditors or the owners. "Litigation" means any proceeding, claim, suit, action, case or investigation by, before or involving any Tribunal. "Loan Documents" means this Agreement, the Advance Notes, the Bid Rate Notes, each Advance Request, the Guaranties, and all other documents now or hereafter pertaining to the Loan, as renewed, extended, amended, supplemented, increased, modified, or replaced. "Market Capitalization" means the sum of (i) the market value of all issued and outstanding common stock of Borrower based on the average closing price of such stock for the preceding twenty (20) days trading days, (ii) the market value of the Debentures if the Debentures were converted to common stock, (iii) the total liabilities of Borrower and its Consolidated Subsidiaries (as calculated in accordance with GAAP) and (iv) all contingent liabilities and unfunded indebtedness of Borrower and its Consolidated Subsidiaries (other than unfunded indebtedness under this Agreement). "Material Adverse Effect" means an effect resulting from any circumstance or event of whatever nature (including the filing of, or any adverse determination or development in, any Litigation) which does, or could Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 3 7 reasonably be expected to, (i) impair the validity or enforceability of any Loan Document, (ii) materially and adversely affect the condition (financial or otherwise), operations, business, management or assets of Borrower or its Consolidated Subsidiaries, (iii) materially impair the ability of Borrower to fulfill any material Obligation, or (iv) cause a Default or Potential Default. "Maturity Date" means the earlier to occur of (i) July 28, 1999 (or July 28, 2000, if the Option is exercised), or (ii) any earlier maturity resulting from acceleration of the Loan. "Maximum Available Amount" means the maximum aggregate principal balance of the Notes which may be outstanding without resulting in a breach of the requirements set forth in either subsection (a) or (d) of Section 5.1. "Maximum Rate" means the maximum nonusurious interest rate per annum, if any, permitted from time to time under applicable Laws to be contracted for, taken, reserved, charged, or received by Lenders with respect to the Loan. If such maximum nonusurious interest rate shall change after the date hereof, the Maximum Rate shall be automatically increased or decreased, as the case may be, from time to time as of the effective time of each change in such maximum nonusurious interest rate, without notice to Borrower or any other Person; provided, that the Maximum Rate shall decrease only to any extent required by applicable Laws and shall increase only to the extent permitted by applicable Laws. For purposes of determining the Maximum Rate under the applicable Laws of the State of Texas, the applicable rate ceiling shall be the weekly ceiling computed in accordance with Article 5069-1D.001 of the Texas Revised Civil Statutes, as hereafter amended or supplemented; provided that, to the extent permitted by applicable Laws and subject to any notice or other requirements under applicable Laws, Lenders may from time to time change the rate ceiling. "Moody's" means Moody's Investors Service, Inc., or, if Moody's no longer publishes ratings, such other ratings agency acceptable to Agent. "Moody's Rating" means the most recently announced rating from time to time of Moody's assigned to any class of long-term senior, unsecured liability securities issued by Borrower, as to which no letter of credit, guaranty, or third party credit support is in place, regardless of whether all or any part of such liability has been issued at the time such rating was issued. "Note" means any one of the Notes. "Obligations" means (i) the unpaid principal balance of the Loan, together with all accrued unpaid interest thereon, (ii) all other outstanding indebtedness, fees, costs, expenses, charges, covenants, and obligations payable or performable under any Loan Document, and (iii) all renewals, extensions, amendments, modifications, increases and supplements thereof. Borrower acknowledges and agrees that the Obligations may, under the circumstances described in the Loan Documents, exceed the Committed Sum. "Option" is defined in Section 4.8. "Participant" is defined in Section 6.2(b). "Past Due Rate" means, on any day, a rate per annum equal to the sum of the Prime Rate for that day plus four percent (4%). "Permitted Liens" means (i) Liens granted to Agent to secure the Obligations, (ii) pledges or deposits made to secure payment of worker's compensation (or to participate in any fund in connection with worker's compensation insurance), unemployment insurance, pensions or social security programs, (iii) encumbrances consisting of zoning restrictions, easements, or other restrictions on the use of real property, provided that such items do not materially impair the use of such property for the purposes intended and none of which is violated in any material respect by existing or proposed structures or land use, (iv) the following: (A) Liens for taxes not yet due and payable or that are being contested in good faith by appropriate proceedings diligently conducted, and for which reserves in accordance with GAAP or otherwise reasonably acceptable to Agent have been provided; or (B) Liens imposed by mandatory provisions of law such as for materialmen's, mechanic's, warehousemen's and other like Liens arising in the ordinary course of business, securing payment of any Liability whose payment is not yet due, (v) Liens for taxes, assessments and governmental charges or assessments that are being contested in good faith by appropriate proceedings diligently conducted, and for which reserves in accordance with GAAP or otherwise reasonably acceptable to Agent have been provided, (vi) Liens on Property where Borrower is insured against such Liens by title insurance, (vii) Liens securing assessments or charges payable to a property owner association or similar entity, which assessments are not yet due and payable or that are being contested in good faith by appropriate proceedings diligently conducted, and for which reserves in accordance with GAAP or otherwise reasonably acceptable to Agent have been provided, (viii) Liens securing assessment bonds, so long as Borrower is not in default under the terms thereof, or (ix) Liens filed by mechanics and materialmen which are being diligently contested in good faith and which do not exceed the sum of $10,000.00 for any one such Lien or the aggregate sum of $30,000.00 for all such Liens filed for any one apartment project. "Person" means firms, associations, partnerships (including limited partnerships), joint ventures, trusts, corporations and other legal entities, including public or governmental bodies, agencies or instrumentalities, as well as natural persons. Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 4 8 "Pool" means Property owned by Borrower or one of its Consolidated Subsidiaries party to a Guaranty as of any date of determination, that (i) is owned in fee simple or is Ground-Leased Property, and (ii) is not subject to any Liens other than Permitted Liens. "Pool NOI" is defined in Section 5.1. "Potential Default" means any condition or event which after notice and/or lapse of time would constitute a Default. "Prime Rate" means for each Prime Rate Portion, on any day, the rate of interest per annum then most recently established by Agent as its "prime rate," which rate (i) is set by Agent as a general reference rate of interest, taking into account such factors as Agent may deem appropriate, (ii) is not necessarily the lowest or best rate actually charged to any customer or a favored rate, and (iii) may not correspond with future increases or decreases in interest rates charged by other lenders or market rates in general. Agent may make various business or other loans at rates of interest having no relationship to such rate. Without notice to Borrower or any other Person, the Prime Rate shall change automatically from time to time, as and in the amount by which Agent's prime rate changes. Notwithstanding the foregoing, if a Lender then acting as Agent under this Agreement is not a bank organized under the Laws of the United States or any State, then all references in the preceding sentences in this definition to Agent shall be deemed to refer to NationsBank of Texas, N.A. "Prime Rate Portion" means that portion of the Loan which will bear interest computed with reference to the Prime Rate. "Prior Loan Agreement" means that certain Loan Agreement dated effective as of September 27, 1995, between NationsBank of Texas, N.A., as Agent and a Lender, Fleet National Bank, Bank One, Texas, National Association, First Interstate Bank of Texas, N.A., Natwest Bank N.A. and Dresdner Bank AG, New York Branch and Grand Cayman Branch, as amended pursuant to Restatement and Amendment of Loan Agreement dated effective as of March 31, 1996, as restated and amended pursuant to Restatement and Amendment of Loan Agreement dated effective as of April 14, 1997, as restated and amended pursuant to the Letter Agreement Regarding Restatement and Amendment of Loan Agreement dated effective as of April 14, 1997. "Property" means, collectively, the Lands, the Improvements and all other real or personal property owned by Borrower or one of its Consolidated Subsidiaries. "Pro Rata" and "Pro Rata Part" means, when determined for any Lender, the proportion (stated as a percentage) that such Lender's Commitment bears to the Total Commitment, or, if the Total Commitments shall have been terminated, then the proportion (stated as a percentage) that the sum of the principal outstanding on such Lender's Notes bears to the outstanding principal balance on all Notes. "Purchaser" is defined in Section 6.2(c). "Required Lenders" means those Lenders required under the Intercreditor Agreement to modify, amend, or waive any term or condition herein, or to require Agent to take any action hereunder. "S & P" means Standard & Poor's Rating Group, a division of McGraw Hill, Inc., a New York corporation, or if S & P no longer publishes ratings, then such other ratings agency acceptable to Agent. "S & P Rating" means the most recently announced rating from time to time of S & P assigned to any class of long-term senior, unsecured liability securities issued by Borrower, as to which no letter of credit, guaranty, or third party credit support is in place, regardless of whether all or any part of such liability has been issued at the time such rating was issued. "Target Monthly Amortization" is defined in Section 5.1. "Termination Date" means the Maturity Date of the Advance Notes, as such maturity date may be accelerated under the terms of the Loan Documents or otherwise. "Total Assets" means the sum of (i) the undepreciated book value of real estate assets of Borrower and its Consolidated Subsidiaries and (ii) the aggregate book value of all other assets of Borrower and its Consolidated Subsidiaries, after deducting assets classified as intangible assets, all as determined in accordance with GAAP. "Total Commitment" means, at any time, the sum of the Commitments of all of Lenders. "Total Unsecured Debt" means the outstanding principal balance of all indebtedness of Borrower and its Consolidated Subsidiaries that is not secured by Liens, including, without limitation, the aggregate outstanding principal balance of the Notes. "Tribunal" means any state, commonwealth, county, municipal, federal, foreign, territorial or other governmental body, court, administrative department, commission, board, bureau, district, authority, agency, or instrumentality, or any arbitration authority. Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 5 9 "Work" means the furnishing of labor, materials, components, furniture, furnishings, fixtures, appliances, machinery, equipment, tools, power, water, fuel, lubricants, supplies, goods and/or services with respect to the Property. ARTICLE 3 - THE LOAN 3.1. Commitment and Advances. As a condition precedent to the Loan, Borrower shall have satisfied all of the conditions set forth in Exhibit "A" on or before the Closing Date or such other date specified therein. Thereafter, each Lender agrees severally and not jointly to make Advances of the Loan to Borrower in accordance with this Agreement from the Closing Date to the earliest to occur of (a) the Maturity Date; (b) if Agent elects, the date thirty (30) days after the Closing Date if all conditions to the first Advance have not been satisfied on or before such date; (c) the Advance Termination Date; or (d) termination under Article 8. Notwithstanding the foregoing, Lenders shall have no obligation to make any Advance (x) which would cause the unpaid principal amount of the Loan to exceed the lesser of the Committed Sum or the Maximum Available Amount, except to the extent contemplated in Section 3.7(b)(v) with respect to Bid Rate Loans, or (y) to the extent Lenders are relieved from such obligation under provisions of the Loan Documents. Furthermore, except to the extent contemplated in Section 3.7(b)(v) with respect to Bid Rate Loans, no Lender shall have any obligation to make any Advance which would cause the unpaid principal balance of such Lender's Notes to exceed such Lender's Commitment. The Loan is revolving until the Advance Termination Date; prior to the Advance Termination Date any amount repaid may be reborrowed. The Loan is non-revolving on and after the Advance Termination Date. The amount of the Loan set forth on the books and records of Agent maintained in the ordinary course of business shall be presumptive evidence of the principal amount thereof owing and unpaid from time to time, but the failure to record any such amount shall not limit or affect the Obligations. The obligations of Borrower with respect to all Advances other than Bid Rate Loans shall be evidenced by the Advance Notes. The obligations of Borrower with respect to the Bid Rate Loans shall be evidenced by the Bid Rate Notes. Borrower hereby authorizes Lenders to make Advances of the Loan on the Closing Date to pay all amounts outstanding, principal, interest and other sums, under those certain Promissory Notes dated effective as of April 14, 1997, made payable by Borrower to the order of the lenders under the Prior Loan Agreement in the aggregate original principal sum of $150,000,000.00. Borrower further acknowledges that this Agreement restates and amends the Prior Loan Agreement in its entirety. 3.2. Direct Advances to Lenders. Lenders may (but shall have no obligation to) advance, by journal entry or otherwise, Loan funds directly to themselves to pay interest due on the Loan and the Commitment Fee, whether there is any Default or Potential Default. Each such direct Advance shall be added to the principal amount of the Loan, even if in excess of the Committed Sum, and shall be secured by the Loan Documents. Nothing contained in this Agreement shall be construed to permit the deferral of the payment of interest on the Loan beyond the dates due, require Borrower to use Loan funds to pay interest or any such fees, or affect Borrower's absolute obligation to pay the same in accordance with the Loan Documents. 3.3. Disbursement and Performance by Lenders. (a) If Borrower fails to pay or perform any Obligation when due and there exists any Default or Potential Default which is continuing, or Borrower has requested Agent to make an Advance, refrain from making an Advance or take any action, Agent, in Borrower's name or in its own name, shall have the right, but not the obligation, to perform such Obligation including (i) payment to Tribunals of taxes, assessments and other charges with respect to the Property; (ii) payment to insurers to maintain insurance; (iii) payment to the holder of any unpermitted lien or encumbrance against the Property to remove same; (iv) performing any other Obligation including payment to any third party Agent deems necessary or advisable in connection with any Work or expenses incident to the Property or the Loan; and (v) taking any action and paying any amounts Agent deems necessary or advisable to protect and preserve the Property, the title thereto, or any other security for the Obligations. Borrower hereby assigns and pledges the proceeds of the Loan to Agent and Lenders for such purpose. Agent and its representatives shall have the right, but not the obligation, to enter upon the Property at any time for the purposes referred to in this Section. No such action, payment or disbursement, or failure to act, pay or disburse, shall cure or waive any Default or Potential Default, or waive any right or remedy of Agent or Lenders. (b) Any funds of Lenders paid or used for any of the purposes referred to above in this Section shall constitute an Advance of Loan funds and be a part of the Obligations secured by the Loan Documents, even if in excess of the Committed Sum, and Lenders' obligation to make future Advances shall be correspondingly reduced. Agent and Lenders may rely on any statement, invoice, claim or notice without inquiry into the validity or accuracy thereof, and without liability for the sufficiency or adequacy of any such action or payment. Upon making any such payment Lenders shall be subrogated to all rights of the Person receiving such payment. The amount and nature of any such expense or expenditure and the time when paid shall be fully established by the statement of Agent of the amount and nature thereof. (c) All costs, expenses and disbursements incurred by Lenders under this Section, in connection with any Default or Potential Default, to protect or preserve the Property, or which are reimbursable by Borrower under any provision of this Agreement or any Loan Document shall be a part of the Obligations, even if in excess of the Committed Sum, and secured by the Loan Documents. Except as provided otherwise in the Loan Documents, if incurred before the Maturity Date, such costs, expenses and disbursements shall be paid or reimbursed to Lenders Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 6 10 upon demand and shall bear interest until paid (i) from the date incurred or paid until the date ten (10) days after demand, at the per annum rate equal to the lesser of the Maximum Rate or the Base Rate, provided that if at any time the Base Rate would exceed the Maximum Rate then the Base Rate shall be limited to the Maximum Rate, but, to the extent permitted by applicable Laws, any subsequent reductions in the Base Rate shall not reduce the Base Rate below the Maximum Rate until the total amount of interest accrued at the Maximum Rate equals the amount of interest which would have accrued if the Base Rate had not been limited by the Maximum Rate, and (ii) from and after the date ten (10) days after demand, at the per annum rate equal to the lesser of the Maximum Rate or the Past Due Rate. Except as provided otherwise in the Loan Documents, if incurred after the Maturity Date, all such costs and expenses shall be reimbursed to Lenders upon demand by Agent and shall bear interest until paid at the per annum rate equal to the lesser of the Maximum Rate or the Past Due Rate. 3.4. Fees. (a) In consideration of the commitment of Lenders to make the proceeds of the Loan available to Borrower on a revolving basis prior to the Advance Termination Date, prior to the execution hereof, Borrower has paid to Agent, for the benefit of Lenders, the nonrefundable commitment fee in the amount of $187,500.00 (the "Initial Commitment Fee"), being the sum equal to .125% of $150,000,000.00. The Initial Commitment Fee has been earned in full and is a bona fide commitment fee intended as reasonable compensation to Lenders for committing to make the Loan available to Borrower on a revolving basis prior to the Advance Termination Date. (b) Within ten (10) days after the last day of each calendar quarter (or portion thereof in the event the Maturity Date is not the last day of a calendar quarter) during the term of the Loan commencing with the quarter ending December 31, 1997, Borrower shall pay to Agent, for the benefit of each Lender, in arrears an unused fee equal to .15% per annum on each Lender's unused commitment. As used in the preceding sentence, the term "unused commitment" means, with respect to each Lender, an amount equal to the product of such Lender's Commitment Percentage multiplied by the average daily Total Commitment during such quarter, minus an amount equal to the average daily principal amount outstanding during such quarter under all Advances (both for Bid Rate Loans and otherwise) made by such Lender. (c) Borrower shall pay to Agent, solely for its own account, the fees described in that certain letter agreement between Borrower and Agent dated as of April 14, 1997. 3.5. Advance Request. (a) At least two (2) Business Days before the requested date of each Advance (other than Bid Rate Loans), Borrower shall deliver to Agent an Affidavit and Advance Request in the form of Exhibit "B" ("Advance Request"), duly executed on Borrower's behalf, specifying the amount of the Advance, and all supporting documentation required by this Agreement. Lenders shall not be required to make Advances more frequently than twice each week and shall, only upon satisfaction of all conditions of this Agreement, make the requested Advance to Borrower on a Business Day within two (2) Business Days after submission of the Advance Request. Each Advance Request and Borrower's acceptance of any Advance shall be deemed to ratify and confirm that all representations and warranties in the Loan Documents remain true and correct as of the date of the Advance Request and such Advance. (b) Agent shall promptly notify each Lender of its receipt of any Advance Request and its contents. (c) By 11:00 a.m. on the applicable Advance date, each Lender shall remit its Pro Rata Part of each requested Advance by wire transfer to Agent pursuant to Agent's wire transfer instructions on Exhibit "E" (or as otherwise directed by Agent) in funds that are available for immediate use by Agent. (d) Absent contrary written notice from a Lender, Agent may assume that each Lender has made its Pro Rata Part of the requested Advance available to Agent on the applicable Advance date, and Agent may, in reliance upon such assumption (but is not required to), make available to Borrower a corresponding amount. If a Lender fails to make its Pro Rata Part of any requested Advance available to Agent on the applicable Advance date, Agent shall seek to recover the applicable amount on demand (i) from that Lender, together with interest at the overnight rate for federal funds transactions between member banks of the Federal Reserve System, as published by the Federal Reserve Bank of New York, for the period commencing on the date the amount was made available to Borrower by Agent and ending on (but excluding) the date Agent recovers the amount from that Lender, or (ii) if that Lender fails to pay its amount upon demand, then from Borrower, together with interest at an annual interest rate equal to the rate applicable to the requested Advance for the period commencing on the Advance date and ending on (but excluding) the date Agent recovers the amount from Borrower. No Lender is responsible for the failure of any other Lender to make its Pro Rata Part of any Advance. 3.6. Conditions to All Advances. In addition to all other terms of the Loan Documents, as conditions precedent to each Advance: (a) all conditions of the Loan Documents and the Closing Conditions listed in Exhibit "A" must be satisfied; (b) no Default or Potential Default shall exist; (c) all representations and warranties made in the Loan Documents shall be true and correct as of the date of each Advance; Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 7 11 (d) as of the date of making such Advance, no event, circumstance or condition shall exist or shall have occurred and be continuing which has or could have a Material Adverse Effect. 3.7. Bid Rate Loans. (a) Each Lender may, in its sole discretion and on the terms and conditions set forth in this Agreement, make Bid Rate Loans to Borrower from time to time until the Termination Date in an aggregate amount not in excess of the difference between the Total Commitment minus the aggregate outstanding principal amount of all Advances under the Loan; provided, however, at no time shall the sum of (i) the aggregate outstanding principal amount of all Bid Rate Loans made by all Lenders plus (ii) the aggregate principal amount of all outstanding Advances other than Bid Rate Loans exceed the Total Commitment. Bid Rate Loans must have a term not in excess of six (6) months and a maturity date on or prior to the Maturity Date and may not be prepaid without the prior written consent of the Lender making such Bid Rate Loan. The principal amount of each Bid Rate Loan is due and payable on the maturity date for such Bid Rate Loan and shall be in an aggregate principal amount which is at least $10,000,000 and which is an integral multiple of $1,000,000 in excess thereof; each Bid Rate Loan by a Lender shall be in a principal amount which is at least $1,000,000 and which is an integral multiple of $1,000,000 in excess thereof. Notwithstanding anything herein to the contrary, the aggregate principal amount of Bid Rate Loans outstanding at any time may not exceed $75,000,000. Interest on each Bid Rate Loan is due and payable on the maturity date for such Bid Rate Loan, provided, however, that with respect to any Bid Rate Loan having a term of more than thirty-five (35) days, a payment of interest accrued during any calendar month (other than the calendar month during which the maturity date for such Bid Rate Loan occurs) is due and payable on the tenth (10th) day of the following calendar month unless the maturity date of such Bid Rate Loan is prior to such tenth (10th) day, in which case all interest on such Bid Rate Loan is due on the maturity date. No Lender shall have any obligation to make Bid Rate Loans, and Borrower shall have no obligation to accept any offers for Bid Rate Loans. No Lender shall be relieved of its obligation to fund its Commitment Percentage of any Advance notwithstanding the fact that at any time the aggregate outstanding principal amount of all Bid Rate Loans and Advances other than Bid Rate Loans made by such Lender exceeds its Commitment Percentage. (b) With respect to Bid Rate Loans, Borrower shall give Agent prior to 10:00 a.m., utilizing the form attached hereto as Exhibit "H", (i) in the case of Eurodollar Bid Rate Loans, at least four (4) Business Days prior to the proposed borrowing and (ii) in the case of Fixed Bid Rate Loans, at least two (2) Business Days prior to the proposed borrowing, irrevocable written notice of its intention to borrow Bid Rate Loans. Such notice of borrowing shall specify (i) the requested funding date, which shall be a Business Day, (ii) the aggregate amount of the proposed borrowing of Bid Rate Loans (which shall be at least $10,000,000 and which is an integral multiple of $1,000,000 in excess thereof), (iii) the term of the Bid Rate Loans selected by Borrower, provided that such term shall not exceed six (6) months and shall not extend past the Termination Date, (iv) whether the Bid Rate Loans requested are Fixed Bid Rate Loans or Eurodollar Bid Rate Loans, and (v) any other terms applicable thereto. Borrower shall pay a $1,000 non-refundable, administrative fee for the account of Agent for each month during which Borrower submits more than two (2) notices of a proposed borrowing consisting of Bid Rate Loans. Such fee shall be paid to Agent on the date of delivery of Borrower's third notice of intention to borrow Bid Rate Loans within a particular month, and shall not be refunded notwithstanding that the proposed borrowing is canceled by Borrower or no Lender offers to make a Bid Rate Loan. (i) Upon receipt of Borrower's notice, Agent shall promptly give notice to each Lender of Borrower's intention to borrow Bid Rate Loans, in the form attached hereto as Exhibit "I", and each Lender shall, if, in its sole discretion, it elects to do so, irrevocably offer to make one or more Bid Rate Loans to Borrower as part of such proposed borrowing at a rate or rates of interest specified by such Lender in its sole discretion, by delivering a written quote to Agent in the form attached hereto as Exhibit "J", before 10:00 a.m., (A) three (3) Business Days prior to the proposed date of borrowing, in the case of a request for Eurodollar Bid Rate Loans, and (B) one (1) Business Day prior to the proposed date of borrowing, in the case of a request for Fixed Bid Rate Loans, setting forth (A) the minimum amount (which shall be $1,000,000 or an integral multiple in excess thereof) and maximum amount of each Bid Rate Loan which such Lender would be willing to make as part of the proposed borrowing (which amounts may exceed such Lender's Commitment Percentage of the Total Commitment) and (B) the rate or rates of interest therefor. If any Lender shall fail to respond to Agent by such time, such Lender shall be deemed to have elected not to make an offer. (ii) Not later than 11:00 a.m. (A) three (3) Business Days prior to the proposed date of borrowing in the case of Eurodollar Bid Rate Loans and (B) on the date of the proposed borrowing in the case of Fixed Bid Rate Loans, Borrower shall, in turn, either (x) cancel such proposed borrowing by giving Agent notice to that effect, or (y) by delivering to Agent the form attached hereto as Exhibit "K", accept, in accordance with Section 3.7(c) below, one or more of the offers made by any Lender or Lenders pursuant to clause (i) above, in its sole discretion, by giving notice to Agent of the amount of each Bid Rate Loan (which amount shall be equal to or greater than the minimum amount, and equal to or less than the maximum amount, for which notification was given to Borrower by any Lender for such Bid Rate Loan pursuant to clause (i) above) Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 8 12 to be made by each Lender as part of such borrowing, and reject any remaining offers made by Lenders pursuant to clause (i) above by giving Agent notice to that effect. (iii) Agent shall promptly notify each bidding Lender, utilizing the form attached hereto as Exhibit "K", whether or not its Bid Rate Loan has been accepted (which notice to those Lenders whose Bid Rate Loans have been accepted will be given within one hour from the time such bid was accepted by Borrower). After completing the notifications referred to in the immediately preceding sentence, Agent shall notify each bidding Lender (A) the aggregate amount of Bid Rate Loans made in connection with such proposed borrowing, (B) each date on which any Bid Rate Loan shall mature, (C) the principal amount of Bid Rate Loans which shall mature on such date, and (D) the interest rate for each such Bid Rate Loan. (iv) If Agent shall at any time elect to submit a bid for a Bid Rate Loan in its capacity as a Lender, it shall submit such bid directly to Borrower one-half hour earlier than the latest time at which other Lenders are required to submit their bid to Agent pursuant to Section 3.7(b)(i) hereof. (v) If Borrower accepts one or more offers made by any Lender or Lenders pursuant to Section 3.7(c) below, each such Lender shall, unless any applicable condition set forth herein has not been satisfied, make the funds under the Bid Rate Loans promptly available to Borrower by wire transfer to Agent pursuant to Agent's wire transfer instructions on "Exhibit E" (or as otherwise directed by Agent) in funds that are available for immediate use by Agent. (vi) Interest on any Bid Rate Loan shall be calculated on the basis of actual days elapsed but computed as if each calendar year consisted of 360 days. (c) Acceptance by Borrower of offers under Section 3.7(b)(ii)(y) above may only be made on the basis of ascending Eurodollar Bid Rates and Fixed Bid Rates within each term. Notwithstanding the foregoing, if the amount of any Lender's offer is greater than the difference between (1) such Lender's Commitment Percentage of the Total Commitment, and (2) the outstanding principal of all Advances previously made by such Lender (such difference being referred to herein as the "Commitment Differential"), then the Borrower may do any of the following with respect to acceptance of such Lender's offer: (i) Accept the offer of such Lender in the full amount of the Bid Rate Loan offered by such Lender (the "Available Bid Amount"); (ii) Accept the offer of such Lender, but only to the extent of any amount the Borrower chooses, in its sole discretion, which is greater than the Commitment Differential but less than the Available Bid Amount; (iii) Accept the offer of such Lender to the extent of (but not less than) the Commitment Differential. If offers are made by two or more Lenders with the same Eurodollar Bid Rates or Fixed Bid Rates for a greater aggregate principal amount than the amount for which such offers are accepted for the related term, the principal amount of Bid Rate Loans accepted shall be allocated by Borrower among such Lenders as nearly as possible (in multiples not less than $1,000,000) in proportion to the aggregate principal amount of such offers. ARTICLE 4 - PAYMENT 4.1 Repayment at Maturity; Mandatory Principal Reductions. (a) Subject to any provisions of the Loan Documents requiring repayment on any earlier date, the principal amount of the Loan and all accrued and unpaid interest thereon shall be due and payable on the Maturity Date. (b) Borrower shall, immediately upon a determination of the existence of Excess Debt, reduce the outstanding principal balance of the Loan by an amount equal to the Excess Debt. 4.2. Interest. Subject to Section 3.7 regarding Bid Rate Loans and Section 9.6, interest shall be calculated in accordance with the following: (a) (i) Interest on the Loan or any portion thereof shall accrue at a rate per annum equal to the lesser of (A) at Borrower's option, (x) the Base Rate or (y) the Eurodollar Rate plus one and five hundredths percent (1.05%), subject, however, to the provisions of this Section 4.2, or (B) the Maximum Rate, provided, however, that: (1) the definition of Base Rate shall be deemed to be one-quarter percent (.25%) in excess of the Prime Rate and the reference to "one and five hundredths percent (1.05%)" in subsection (y) above shall be deemed to refer to "one and one-half percent (1.5%)" during any period for which both the S&P Rating and the Moody's Rating are less than BBB- and Baa3, respectively; and Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 9 13 (2) the reference to "one and five hundredths percent (1.05%)" in subsection (y) above shall be deemed to refer to the percentage set forth below during any period in which the lower of the S&P Rating or the Moody's Rating is at the corresponding level set forth below:
Debt Rating Rate Spread ----------- ----------- BBB\Baa2 ninety-five hundredths percent (.95%) BBB+\Baa1 eighty-five hundredths percent (.85%) A-\A3 or higher three-quarters percent (.75%)
Interest on any Eurodollar Rate Principal of the Notes shall be calculated on the basis of actual days elapsed but computed as if each calendar year consisted of 360 days; interest on any Prime Rate Portion of the Notes shall be calculated on the basis of the actual days elapsed in a year consisting of 365 or 366 days, as the case may be. (ii) Subject to the conditions provided herein, Borrower may, on any Interest Adjustment Date (other than the Termination Date) convert any Eurodollar Rate Principal into a Prime Rate Portion with interest accruing thereon with reference to the Prime Rate as provided in paragraph (i) above. (iii) Subject to the conditions provided herein, Borrower may, on any Business Day (other than the Termination Date) convert any Prime Rate Portion into a Eurodollar Rate Principal with interest accruing thereon with reference to the Eurodollar Rate as provided in paragraph (i) above, for the Interest Period selected in such notice. (iv) Subject to the conditions provided herein, Borrower may elect for interest to accrue with respect to an Advance with reference to the Eurodollar Rate as provided in paragraph (i) above. (v) To the extent Borrower has not made an effective election under and in accordance with subparagraph (iii) or (iv) above, the Applicable Rate shall be the rate specified pursuant to the provisions contained herein for a Prime Rate Portion. (b) Each notice of Eurodollar Rate Principal election by Borrower, other than in connection with a Bid Rate Loan, must be in the form attached hereto as Exhibit "D", received by Agent by 2:00 p.m. Houston time two (2) Business Days prior to any Advance, conversion or continuation (the "Minimum Notice Period") and shall include the following: (i) Borrower's election of the Eurodollar Rate; (ii) Borrower's choice of an Interest Period during which the Eurodollar Rate will apply; (iii) Borrower's election of the "Effective Date" (herein so called) on which the Interest Period shall begin; (iv) the amount of the Eurodollar Rate Principal; and (v) Borrower's representation that there then exists no Default or Potential Default. (c) Borrower's election to accrue interest at the Eurodollar Rate is subject to the following conditions: (i) no Eurodollar Rate Principal shall be less than $100,000.00; (ii) the Interest Period shall be limited to a period commencing on the Effective Date and ending on a date 7 days or 30, 60, 90, 120, 180 or 360 days later elected by Borrower in its notice to Agent; (iii) Borrower's written notice of an election shall be received by Agent in time to satisfy the Minimum Notice Period; (iv) the last day of the Interest Period will not be subsequent in time to the Termination Date; (v) in the case of a continuation of an Interest Period, the Interest Period applicable after such continuation shall commence on the last day of the preceding Interest Period; (vi) no Eurodollar Rate Principal election shall be made if Agent determines by reason of circumstances affecting the interbank Eurodollar market either adequate or reasonable means do not exist for ascertaining the Eurodollar Rate for any Interest Period, or it becomes impracticable or illegal for Agent, any Lender or any participant in the Loan to obtain funds (by purchasing U.S. dollars in the interbank Eurodollar market) or if Agent or any Lender determines that the Eurodollar Rate will not adequately or fairly reflect the costs to any Lender of maintaining the applicable Eurodollar Rate Principal at such rate; or if as a result of any change in applicable law or regulation, or in the interpretation thereof by any governmental authority charged with the administration thereof (a "Regulatory Change"), it shall become unlawful or impossible for any Lender to maintain any such Eurodollar Rate Principal; (vii) there shall never be more than seven (7) portions of the Loan representing Eurodollar Rate Principal in effect at any one time hereunder (with no more than two (2) of these being for an Interest Period of 7 days); and (viii) there shall then exist no default under any Loan Document nor any event or circumstance which, with the giving of notice or time or both, would constitute a default under any Loan Document. (d) Borrower shall indemnify Agent and Lenders against any loss or expense which Agent or Lenders may, as a consequence of Borrower's failure to make a payment on the date such payment is due hereunder or the payment, prepayment or conversion of any Eurodollar Rate Principal hereunder on a day other than an Interest Adjustment Date, sustain or incur in liquidating or employing deposits from third parties acquired to effect, fund or maintain any such Eurodollar Rate Principal or any part thereof; provided, however, that in no event will Borrower be obligated to pay in connection with the Loan any amount constituting interest under applicable law in excess of the maximum amount permissible under applicable law. Such loss or expense shall include, without limitation, (i) the interest which, but for such failure, payment, prepayment or conversion, Lenders would have earned in respect of such Eurodollar Rate Principal so paid, for the remainder of the Interest Period applicable to such Eurodollar Rate Principal, reduced, if Agent or any Lender is able to redeposit such principal amount so paid for the balance of such Interest Period, by the interest earned by Agent or such Lender as a result of so redepositing such principal amount, plus (ii) any expenses or penalty incurred by Agent or such Lender on redepositing such principal amount. In the Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 10 14 event any such loss or expense is incurred by Agent or any Lender, if requested by Borrower, Agent or such Lender shall furnish Borrower with a certificate detailing the basis upon which such loss or expense is computed. Any such certificate shall establish the amount of such expense or loss for purposes of this paragraph, in the absence of manifest error in calculation, provided, however, that upon the discovery of any error, appropriate adjustments shall be made between such Lender and Borrower. (e) Upon receipt of written notice from Agent on behalf of any such Lender, Borrower shall also indemnify such Lender against and reimburse such Lender for increased costs to such Lender incurred after delivery of such notice, as a result of any Regulatory Change, in the maintaining of any Eurodollar Rate Principal; provided, however, that in no event will Borrower be obligated to pay in connection with the Loan any amount constituting interest under applicable law in excess of the maximum amount permissible under applicable law. All payments made pursuant to this paragraph shall be made free and clear, without reduction for, or account of, any present or future taxes or other levies of any nature, excluding net income and franchise taxes. 4.3. Payment of Principal and Interest. (a) The principal amount of the Loan from time to time outstanding that is not past-due shall bear interest at a varying rate per annum equal to the lesser of the Maximum Rate or the Applicable Rate; provided that if at any time the Applicable Rate would exceed the Maximum Rate then the Applicable Rate shall be limited to the Maximum Rate, but, to the extent permitted by applicable Laws, any subsequent reductions in the Applicable Rate shall not reduce the Applicable Rate below the Maximum Rate until the total amount of interest accrued at the Maximum Rate equals the amount of interest which would have accrued if the Applicable Rate had not been limited by the Maximum Rate. Interest (other than interest on any Bid Rate Loans, as described in Section 3.7(a)) accrued for each calendar month shall be due and payable on the tenth (10th) day of the following calendar month, commencing on the tenth (10th) day of the first calendar month following the Closing Date, and continuing through the Maturity Date. (b) The principal of the Advance Notes shall be due and payable on the Maturity Date (except as set forth in Section 4.8 in the event the Option is exercised). The maturity date of each Bid Rate Note shall be subject to the terms of Section 3.7. 4.4. Prepayment Premium. Borrower may prepay the Prime Rate Portion in full or in part at any time, on any Business Day, without premium or penalty. Borrower may prepay any Eurodollar Rate Principal prior to the expiration of the Applicable Interest Period in full or in part at any time, on any Business Day, provided (a) Borrower gives Agent at least five (5) Business Days prior written notice of Borrower's intent to prepay, of the amount of principal which will be prepaid (the "Prepaid Principal") and of the date (the "Prepayment Date") on which the prepayment will be made and the specific amount of Prepaid Principal to be applied to sums bearing interest at the Eurodollar Rate, (b) the prepayment is in the amount of 100% of the Prepaid Principal plus interest accrued thereon to the Prepayment Date plus any other unpaid sums (other than principal and interest) which are due and owing to Agent and Lenders under the Loan Documents as of the Prepayment Date, and (c) Borrower shall pay the following prepayment privilege fee, which shall in no event be less than zero, with respect to any Eurodollar Rate Principal that is being prepaid prior to the last day of the applicable Interest Period: (i) the applicable Eurodollar Rate minus a rate derived by Agent using the rate of interest per annum equal to the interest settlement rate for U.S. Dollars as published by the British Bankers Association, or to the rate or rates published by Reuters, Ltd. through its Reuter monitor service, or to quotations published by any other recognized market rate source, or to direct market quotations) to be the prevailing rate at which deposits in dollars are (or would be at Agent's request) offered to Agent by major banks in the interbank market for Eurodollar deposits at any time during the Prepayment Date for the approximate principal amount of the Prepaid Principal and for a period comparable to the unexpired portion of the applicable Interest Period, multiplied by (ii) the Prepaid Principal, and then multiplied by (iii) a fraction, the numerator of which is the number of days from the Prepayment Date to the end of the Interest Period and the denominator of which is 360. No Lender shall be obligated actually to reinvest the Prepaid Principal in any manner as a condition to receiving the prepayment privilege fee or otherwise. Notwithstanding anything herein to the contrary, prepayments of Bid Rate Loans are subject to Section 3.7(a). 4.5. Past-Due Obligations. Any Obligation (including, to the extent permitted by applicable law, all accrued unpaid interest on the principal amount of the Loan) that is not paid when due (whether scheduled, accelerated, or otherwise) shall bear interest, payable on demand, from the date due until paid, at a rate per annum equal to the lesser of the Maximum Rate or the Past Due Rate. 4.6. Application of Payments. (a) So long as no Default or Potential Default has occurred and is continuing, all payments (including prepayments) received by Agent or Lenders hereunder from or on behalf of Borrower shall be applied first to pay accrued interest then due and payable, second to repay the principal amount of the Loan (in inverse order of maturity, in the case of partial prepayments), and third to pay any other Obligations in the manner and order determined by Agent in its sole discretion. Notwithstanding the foregoing, so long as no Default or Potential Default has occurred and is continuing and after application of any payment to accrued interest, Agent Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 11 15 shall apply the payment to that portion of the principal amount of the Loan as is designated by Borrower in a written notice delivered to Agent simultaneously with the payment; provided, however, that Agent shall not assist Borrower with any determination of the portion of the principal amount of the Loan to which the payment will be applied. (b) After the occurrence and during the continuance of a Default or Potential Default, all payments (including prepayments) received by Agent or any Lender hereunder from or on behalf of Borrower shall be applied to the Obligations in the manner and order determined by Agent in its sole discretion (subject to the terms and provisions of Article 6 hereof and the Intercreditor Agreement). 4.7. General Provisions. Each payment of principal, interest, and/or other sums due to Lenders under any other Loan Document shall be made by Borrower to Agent before 2:00 p.m. Houston, Texas time on the due date therefor, without setoff or counterclaim, in lawful money of the United States of America in immediately available funds at Lenders' Payment Address, or at such other place as may be from time to time designated by Agent by notice to Borrower. Any payment received after 2:00 p.m. Houston, Texas time shall not be deemed received and therefore shall not be applied until the next Business Day. Should any payment due under the Loan Documents become due and payable on a day other than a Business Day, the date for payment thereof shall be extended to the next succeeding Business Day. If the date for any payment of principal is extended by operation of Law or otherwise, interest thereon shall be payable for the extended time at the Base Rate or at the Maximum Rate as applicable. 4.8. Extension of Maturity Date. Borrower shall have the option (the "Option") to extend the original maturity date of the Notes from July 28, 1999, to July 28, 2000, such Option being exercisable only as provided below, and subject to satisfaction of the following conditions: (a) Agent shall have received written notice of the exercise thereof at least thirty (30) but no more than sixty (60) days before the Advance Termination Date; (b) There shall exist no Default or Potential Default; (c) No event, circumstance or condition shall exist or shall have occurred which constitutes a Material Adverse Effect; (d) Borrower shall have executed and delivered to Agent a modification and extension agreement, and such other agreements, documents or amendments to the Loan Documents as are reasonably requested by Agent to properly document the extension, all in form and content satisfactory to Agent; (e) Borrower shall pay to Agent, for the benefit of Lenders, an additional nonrefundable commitment fee in the amount of $375,000.00 (the "Additional Commitment Fee"; together with the Initial Commitment Fee, the "Commitment Fee"), being .25% of $150,000,000.00, in consideration of the commitment of Lenders to make the proceeds of the Loan available to Borrower on a non-revolving basis after the Advance Termination Date. As of the date of Borrower's delivery of written notice regarding the Option, the Additional Commitment Fee will have been earned in full and be a bona fide commitment fee intended as reasonable compensation to Lenders for commitment to make by the Loan available to Borrower on a non-revolving basis after the Advance Termination Date; and (f) During the extended term, all terms and conditions of the Loan Documents (including but not limited to interest rates and payments) pertaining to the Loan shall continue to apply, provided, however, that the principal shall be due and payable in monthly installments, each equal to the principal portion only of the level payment of principal and interest which would be required if an amount equal to the sum of the outstanding aggregate principal balance of the Notes as of July 28, 1999 were amortized over fifteen (15) years at a per annum interest rate equal to the greater of (i) nine percent (9%), or (ii) two and one-half percent (2.5%) plus the rate of interest per annum on U.S. Treasury Notes having a maturity of seven (7) years in the "this week" column under the heading "Treasury Constant Maturities" of the FEDERAL RESERVE statistical release Form H.15 which has been most recently published, all calculated as of the first (1st) day of the calendar month following the Advance Termination Date. The first of such principal installments shall be due and payable beginning on the tenth (10th) day of the calendar month following the Advance Termination Date and a like principal installment shall be due and payable on the 10th day of each succeeding calendar month thereafter. All references in this Agreement to the exercise of the Option shall be deemed to refer to satisfaction of all conditions set forth above. ARTICLE 5 - ASSET POOL 5.1. Property Pool. As of any date during the term hereof: (a) The Pool must have an aggregate undepreciated book value, as determined in accordance with GAAP, equal to at least one hundred seventy-five percent (175%) of the Total Unsecured Debt; Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 12 16 (b) (i) The Pool must consist of multi-family real estate projects for which Borrower must have received from third party independent environmental consultants, and delivered to Agent upon Agent's request, written assessments that do not disclose any material environmental conditions or risks related to such properties provided, however, that Agent shall have given Borrower thirty (30) days' prior written notice identifying any project Agent determines must be excluded from the Pool due to a material environmental condition before such exclusion shall become effective; (ii) No more than seven and one-half percent (7.5%) of the aggregate undepreciated book value of the Pool (as determined in accordance with GAAP) may consist of multi-family projects under construction ("Development Projects); and (iii) The Pool must have no more than an aggregate of $200,000.00 in Liens described in subsection (ix) of the definition of the term Permitted Liens" set forth in Article 2, provided, however, that in the event the Pool has more than an aggregate of $200,000.00 in said Liens, Borrower shall designate in writing to Agent which project or projects with said Liens shall be excluded from the Pool so that this requirement is once again satisfied, and further provided, that such exclusion shall terminate automatically upon reduction of said Liens below an aggregate of $200,000.00; (c) The Property in the Pool other than the Development Projects must have an aggregate occupancy level based on bona fide tenant leases requiring current rent payments of at least eighty-five percent (85%), where the occupancy level is the average of the occupancy level for each of the immediately preceding three (3) months; and (d) The Total Unsecured Debt must not exceed the maximum hypothetical loan amount on which the Target Monthly Amortization (as such term is hereinafter defined) can be calculated with the result that Pool NOI (as such term is hereinafter defined) for the preceding 90-day period would not be less than one hundred fifty percent (150%) of the aggregate Target Monthly Amortization for such period. As used herein: "Pool NOI" means the net operating income for the Pool, calculated by including in expenses the greater of (i) actual capital expenditures expensed by Borrower and reserves or (ii) $175.00 per apartment unit per year. "Target Monthly Amortization" means the hypothetical monthly payment of principal and interest which would be required for each month if the Total Unsecured Debt, as of the date of determination of the Target Monthly Amortization, were amortized in level payments of principal and interest over twenty-five (25) years at an interest rate per annum equal to the greater of (i) eight and one-quarter (8.25%); or (ii) one and three quarters percent (1.75%) plus the rate of interest per annum on U.S. Treasury Notes having a maturity of seven (7) years in the "this week" column under the heading "Treasury Constant Maturities," of the FEDERAL RESERVE statistical release FORM H.15 which has been most recently published (or, if for any reason that published rate as of a date not more than ten (10) days prior to such date is not available, another rate determined by Agent to be comparable, in its discretion reasonably exercised, shall be used for this purpose). 5.2. Negative Pledge Agreements. Borrower shall not, and shall not permit any of its Consolidated Subsidiaries to, enter into any negative pledge agreements with any other Person such that Borrower shall be prohibited from granting, or causing any Consolidated Subsidiaries to grant, to Agent, for the benefit to Lenders, a first priority lien and security interest in the Pool as security for the Obligations. ARTICLE 6 - INTERCREDITOR MATTERS 6.1. Intercreditor Agreement. Borrower is aware of, and has been furnished a copy of, the Intercreditor Agreement. 6.2. Successors and Assigns; Participations. (a) No Lender may transfer, pledge, assign, sell any participation in, or otherwise encumber its portion of the Obligation, except as specifically permitted under the terms and provisions of the Intercreditor Agreement and in accordance with this Section. (b) In the event that a Lender, as permitted under the Intercreditor Agreement, at any time sells to one or more Persons (each a "Participant") participating interests in its portion of the Obligation, the selling Lender shall remain a "Lender" under this Agreement (and the Participant shall not constitute a "Lender" under this Agreement) and its obligations under this Agreement shall remain unchanged. The selling Lender shall remain solely responsible for the performance of its obligations under the Loan Documents and shall remain the holder of its share of the Loan for all purposes under this Agreement. Borrower and Agent shall continue to deal solely and directly with the selling Lender in connection with that Lender's rights and obligations under the Loan Documents. Participants have no rights under the Loan Documents. Subject to the following, each Lender may obtain (on behalf of its Participants) the benefits of Article 4 with respect to all participations in its part of the Obligation outstanding from time to time so long as Borrower is not obligated to pay any amount in excess of the amount that would be due to that Lender under Article 4 calculated as though no participations have been made. No Lender may sell any participating interest under which the Participant has any rights to approve any amendment, modification or waiver of any Loan Document, except to Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 13 17 the extent the amendment, modification or waiver extends the due date for payment of any principal, interest or fees due under the Loan Documents, reduces the interest rate or the amount of principal or fees applicable to the Obligation (except reductions contemplated by this Agreement), or releases any guaranty or collateral, if any, for the Obligation. However, if a Participant is entitled to the benefits of Article 4 or a Lender grants rights to its Participants to approve amendments to or waivers of the Loan Documents respecting the matters described in the previous sentence, then, unless otherwise consented to by Agent, that Lender must include a voting mechanism in the relevant participation agreement whereby a majority of its portion of the Obligation (whether held by it or participated) shall control the vote for all of that Lender's portion of the Obligation. Except in the case of the sale of a participating interest to another Lender, and unless otherwise consented to by Agent, the relevant participation agreement shall prohibit the Participant from transferring, pledging, assigning, selling participations in, or otherwise encumbering its portion of the Obligation. (c) In each case in which a Lender, as permitted under the Intercreditor Agreement, assigns to any other Person (each a "Purchaser") all or any part of its rights and obligations under the Loan Documents, the Purchaser shall assume those rights and obligations under an assignment agreement substantially in the form of the attached Exhibit "F". Upon (i) delivery of an executed copy of the assignment agreement to Agent and (ii) payment of any fee required under the Intercreditor Agreement from the transferor to Agent, from and after the assignment's effective date (which shall be after the date of delivery), the Purchaser shall for all purposes be a Lender party to this Agreement and shall have all the rights and obligations of a Lender under this Agreement to the same extent as if it were an original party to this Agreement with commitments as set forth in the assignment agreement, and the transferor Lender shall be released from its obligations under this Agreement to a corresponding extent, and, except as provided in the following sentence, no further consent or action by Lenders or Agent shall be required. Upon the consummation of any transfer to a Purchaser under this subsection (c), the then-existing Exhibit "E" shall automatically be deemed to reflect the name, address, and Commitment of such Purchaser, Agent shall deliver to Borrower and Lenders an amended Exhibit "E" reflecting those changes, Borrower shall execute and deliver to each of the transferor Lender and the Purchaser a Note in the face amount of its respective Commitment following transfer, and, upon receipt of its new Note, the transferor Lender shall return to Borrower the Notes previously delivered to it under this Agreement. A Purchaser is subject to all the provisions in this Article as if it were a Lender signatory to this Agreement as of the date of this Agreement. (d) Notwithstanding any contrary provision in this Agreement or the Intercreditor Agreement, a Lender may not sell or participate any of its interests for a purchase price that, directly or indirectly, reflects a discount from face value, without first offering the sale or participation to the other Lenders on a Pro Rata basis (which must be accepted or rejected within five (5) Business Days after the offer). ARTICLE 7 - ADDITIONAL REPRESENTATIONS, WARRANTIES, COVENANTS AND AGREEMENTS Borrower represents, warrants, covenants and agrees as follows: 7.1. Financial Statements. (a) All financial statements and other financial information regarding Borrower and its Consolidated Subsidiaries furnished by or on behalf of Borrower to Agent or Lenders are true, correct, and complete as of the dates specified therein and fully and accurately present the financial condition of Borrower and its Consolidated Subsidiaries as of the dates specified, all financial statements have been prepared in accordance with generally accepted accounting principles and practices recognized from time to time by the Financial Accounting Standards Board (or any generally recognized successor) consistently applied for all periods to properly reflect the financial condition, and the results of operations and changes in financial position, of Borrower (and, on a consolidated basis, of Borrower and its Consolidated Subsidiaries) ("GAAP"). No change has occurred in Borrower's financial condition or the condition of its Consolidated Subsidiaries reflected therein since the date of the financial statement delivered to Agent which constitutes a Material Adverse Effect. Borrower is solvent after giving effect to all borrowings and guaranties contemplated in the Loan Documents. Borrower shall, and shall cause each of its Consolidated Subsidiaries to, keep accurate books and records in accordance with GAAP in which full, true and correct entries shall be promptly made. Borrower shall, and shall cause each of its Consolidated Subsidiaries to, permit Agent, at all reasonable times, to examine and copy the books and records of Borrower and its Consolidated Subsidiaries pertaining to the Loan, Property, and all contracts, statements, invoices, bills, and claims for any Work. (b) Borrower shall furnish or cause to be furnished to Agent the following: (i) within ninety (90) days after the close of each fiscal year of Borrower: (A) a balance sheet of Borrower and its Consolidated Subsidiaries dated as of the close of such fiscal year; (B) an operating statement for such fiscal year; and (C) a fully executed certificate in the form of Exhibit "C" ("Compliance Certificate") dated as of the delivery of such statements; (ii) within forty-five (45) days after the close of each quarter of each fiscal year of Borrower: (A) a balance sheet of Borrower and its Consolidated Subsidiaries dated as of the close of such fiscal quarter; (B) an operating statement for such fiscal quarter; and (C) a fully executed Compliance Certificate dated as of the delivery of such statements; (iii) within forty-five (45) days after the end of each calendar quarter, with respect to the Pool, a consolidating operating statement for such quarter (unless requested more frequently by Agent); and Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 14 18 (iv) from time to time, additional financial statements and financial information as Agent shall reasonably request. Borrower shall simultaneously deliver to each Lender copies of the items referenced in subsections (i)(A) and (B) and (ii)(A) and (B). (c) All financial statements of Borrower and its Consolidated Subsidiaries shall include balance sheets (including disclosure of all contingent liabilities), an income statement, a statement of shareholders' equity and a statement of cash flows for the applicable period, together with such supporting schedules and documentation as Agent requires. The consolidating quarterly operating statements shall include: the project name and location; percentage of ownership interest; leasing status; and net operating income. All balance sheets and operating statements shall be certified by Borrower and the balance sheet and operating statement described in Section 7.1(b)(i) shall be audited by independent certified public accountants of recognized standing, selected by Borrower and acceptable to Agent without any qualification or exception other than those acceptable to Agent. 7.2. Litigation. There is no threatened or pending Litigation involving or affecting the Property or Borrower, its Consolidated Subsidiaries, the validity, enforceability, or priority of any of the Loan Documents, or which constitutes a Material Adverse Effect. If any Litigation is threatened or commenced (a) that seeks to enjoin, prevent, or declare invalid or unlawful Borrower's renovation, occupancy, use or operation of the Improvements; (b) that endangers, questions or attacks the title to any part of the Property or the validity, enforceability, or priority of any Loan Document; (c) that seeks to levy upon or seize any part of the Property; (d) for any condemnation or taking of any part of or interest in the Property; (e) regarding any claimed damage, default, or diminution or offset against Rent; (f) with respect to any claimed personal injury, death or property damage on or about the Property; (g) otherwise purporting to affect the Property; or (h) which constitutes a Material Adverse Effect; then Borrower shall promptly and vigorously contest such Litigation in good faith, resist the entry of any temporary or permanent injunction, and seek the stay of any such injunction that may be entered. After the occurrence and during the continuance of a Default or Potential Default, Agent may (but shall not be obligated to) commence, appear in, or defend any such Litigation, compromise or discharge adverse claims made with respect to the Property, purchase tax titles, remove prior liens or security interests, and pay all necessary expenses, including attorneys' fees, incurred in connection with such Litigation, which Borrower shall reimburse to Agent on demand and which shall be part of the Obligations, even if in excess of the Committed Sum, secured by the Loan Documents. 7.3. Existence and Rights. True, correct and complete copies of the documents governing Borrower's existence and authority have been delivered to Agent. Borrower and each of its Consolidated Subsidiaries is duly organized, validly existing, and in good standing under the Laws of the state of its organization and under Texas Laws; is lawfully doing business in Texas and any other state in which any portion of the Property is located; has full power and authority to own the Property, renovate, lease and operate the Improvements, and enter into and perform the Loan Documents; and has not conveyed, assigned or otherwise transferred (or agreed to do so) any development rights, air rights, utility rights, tap-in, availability, or capacity rights, easement or license rights, or other rights, privileges or attributes with respect to the Property, except for the Permitted Encumbrances. Borrower and each of its Consolidated Subsidiaries shall maintain and preserve its existence under the Laws of its jurisdiction of organization and under Texas Laws; preserve, protect, renew and extend all franchises, permits, licenses, privileges, concessions and other material rights applicable to Borrower, its Consolidated Subsidiaries or the Property; and shall not make any change in its name, identity, or structure without Agent's prior written consent. 7.4. Authorization, Conflicts, Enforceability. The execution, delivery, and performance of the Loan Documents by Borrower and its Consolidated Subsidiaries have been duly authorized by Borrower and its Consolidated Subsidiaries and shall not cause or result in a violation or breach of, or a default (or provide cause for acceleration of indebtedness) under, any organizational document, agreement or other Legal Requirement by which Borrower, its Consolidated Subsidiaries or any of Borrower's property are bound or affected. Neither Borrower nor any of its Consolidated Subsidiaries is in default under any obligation of Borrower, any Legal Requirement applicable to the Property, or any other Legal Requirement which constitutes a Material Adverse Effect. The Loan Documents executed by Borrower constitute the valid and legally binding obligations of Borrower enforceable in accordance with their terms, except as limited by Debtor Relief Laws and except as the availability of certain remedies may be limited by general principles of equity. 7.5. Title to the Property. Except with respect to the Ground-Leased Property, Borrower or one of its Consolidated Subsidiaries owns and holds full legal and equitable title to the Property, in fee simple absolute as to all real property. The execution, delivery, performance and observance of the Loan Documents will not require or result in the creation of any Lien on any of Borrower's Property in the Pool. 7.6. Legal Requirements. Borrower and each of its Consolidated Subsidiaries (a) has complied and will comply, in all material respects as determined by Agent, with all Legal Requirements relating to or affecting the Property, Loan (including all reporting requirements applicable to Lenders) or Borrower or its Consolidated Subsidiaries; (b) has obtained, and delivered true and correct copies to Agent of, all required permits, licenses, approvals and consents from, and has made all filings with, any Tribunal (and the same have not lapsed nor been rescinded or revoked) necessary in connection with the renovation of the Improvements, the execution, delivery or enforcement of any Loan Document, and the performance of the Obligations; and (c) has no knowledge of, and has received no notice of, any violation of any Legal Requirement relating to or affecting the Property, Borrower or any of its Consolidated Subsidiaries. The Property, and the intended use, occupancy, or operation thereof, complies and Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 15 19 will comply with all applicable Legal Requirements. No part of the Property constitutes (or will constitute) a nonconforming use under any zoning Law or similar Legal Requirement. 7.7. Utilities and Access. With respect to the Pool: (a) all utility and municipal services required for the renovation, occupancy, use and operation of the Improvements are available for use and tap-in at the boundaries of the Land and will be available in sufficient amounts for the intended use of the Improvements; (b) all binding agreements, allocations or commitment letters required to ensure the provision of such services have been obtained or will be available from the applicable utility companies and/or Tribunals providing such services; (c) all public and private roads necessary for the intended occupancy, use and operation of the Improvements are completed and available for vehicular ingress to and egress from the Land and have been publicly dedicated and accepted for maintenance by all applicable Tribunals; (d) all necessary or required utility, private roadway, parking, access (including curb cuts), easements, covenants and permits have been granted or issued; and (e) all impact, connection or other requisite fees therefor have been paid. 7.8. Full Disclosure. All plans, budgets, schedules, certificates, confirmations, statements, applications, rent rolls, affidavits, agreements, contracts, reports, studies, tests, opinions, and other materials and factual information furnished to Agent and Lenders by or on behalf of Borrower and its Consolidated Subsidiaries in connection with the Loan are true, accurate and complete in every material respect on the date as of which the information is dated or certified and none is incomplete by omitting to state any material fact necessary to make such information not misleading. There is no material fact or information that Borrower has not disclosed to Agent that could materially adversely affect the Property or the condition (financial, business, or otherwise) of Borrower and its Consolidated Subsidiaries. There has been no material change in any of the foregoing matters from the matters submitted or disclosed to Agent. There has been no circumstance or event that constitutes a Material Adverse Effect. 7.9. Certain Regulatory Matters. The proceeds of the Loan are not being used and shall not be used to purchase or carry any "margin stock" within the meaning of Regulation "U" of the Board of Governors of the Federal Reserve System, nor to extend credit to others for that purpose. Borrower and each of its Consolidated Subsidiaries is in compliance (and will comply) in all material respects with the Employee Retirement Income Security Act of 1974, as amended, and neither Borrower nor any of its Consolidated Subsidiaries has incurred (or will incur) any liability to the Pension Benefit Guaranty Corporation or any Tribunal succeeding to any or all of its functions thereunder. Neither Borrower nor any of its Consolidated Subsidiaries is a "foreign person" within the meaning of the Internal Revenue Code of 1986, Sections 1445 and 7701. 7.10. Principal Office, Etc. The principal office, chief executive office and principal place of business of Borrower, and the place where Borrower maintains its principal records and books, is at Borrower's address for notices as specified in this Agreement. The Loan is solely for business purposes, and is not for personal family, household or agricultural purposes. 7.11. Payment and Performance. No Default or Potential Default exists. Borrower is in compliance with the Loan Documents. Borrower shall perform all the Obligations in accordance with the Loan Documents. 7.12. Inspection of the Property. Agent may enter upon the Property to inspect the Property at all reasonable times. Borrower will cooperate and assist, and will cause its Consolidated Subsidiaries to cooperate and assist, in such inspections, including furnishing all plans, shop drawings and specifications in Borrower's possession or the possession of its Consolidated Subsidiaries relating to the Improvements. 7.13. Estoppel Certificate. Borrower shall at any time furnish within ten (10) days of request by Agent a written statement in such form as may be required by Agent, stating (a) that the Loan Documents are valid, binding and enforceable obligations of Borrower; (b) the outstanding principal balance of the Loan; (c) the date to which interest is paid; (d) that the Loan Documents have not been released, subordinated or modified; (e) that there are no offsets or defenses against the enforcement of the Loan Documents, and (f) any such other matters reasonably requested by Agent. If any of the foregoing statements are untrue, Borrower shall, alternatively, specify the reasons therefor. 7.14. Maintenance and Use. Borrower will keep, and will cause its Consolidated Subsidiaries to keep, the Property in first class order, repair, operating condition and appearance, causing all necessary repairs, renewals, replacements, additions and improvements to be promptly made, and will not allow any of the Property to be misused, abused or wasted or to deteriorate. Borrower will not, and will not allow its Consolidated Subsidiaries to, without the prior written consent of Agent, (a) remove from the Pool any fixtures or personal property covered by the Loan Documents except such as is replaced by Borrower or one of its Consolidated Subsidiaries by an article of equal suitability and value, owned by Borrower or one of its Consolidated Subsidiaries, free and clear of any lien or security interest, except those created by the Loan Documents; (b) make any structural alteration to the Pool after completion of renovation of the Improvements or any other alteration thereto which impairs the value thereof; (c) initiate or permit any zoning reclassification of the Pool, seek any variance under existing zoning ordinances, or use or permit the use of the Pool in a manner that is a nonconforming use under applicable zoning ordinances or other Legal Requirements; (d) impose any easement, restrictive covenant or encumbrance upon the Pool, execute or file any subdivision plat or condominium declaration affecting the Pool, or consent to the annexation of the Pool to any municipality; (e) perform, or consent to, any drilling or exploration for or extraction, removal or production of any mineral, hydrocarbon, gas, natural element, compound or substance (including sand and gravel) from the surface or subsurface of the Land in the Pool, or (f) use or occupy or allow the use or occupancy of the Pool in any manner Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 16 20 which violates any Legal Requirement, constitutes a public or private nuisance, or makes void, voidable or cancelable, or increases the premium of, any insurance. 7.15. Notice to Agent. Borrower shall promptly notify Agent in writing of any of the following events, specifying in each case the action Borrower has taken or proposes to take with respect thereto: (a) the existence of any Default or Potential Default; (b) any material default by Borrower or any of its Consolidated Subsidiaries under any Legal Requirement, or any default by Borrower or any of its Consolidated Subsidiaries in the performance of any obligation which constitutes a Material Adverse Effect; (c) any decline of ten percent (10%) or more in the tangible net worth of Borrower from that shown on the most recent financial statements of Borrower delivered to Agent; (d) any Litigation instituted or threatened against Borrower, any of its Consolidated Subsidiaries or the Property or any material development in any such Litigation; (e) any actual or threatened (but only if such threat is communicated to Borrower in writing) condemnation or other taking of any portion of the Property, any negotiations with respect thereto, or any loss of or substantial damage to any portion of the Property; and (f) any cancellation, adverse alteration or non-renewal of any insurance coverage with respect to the Property. 7.16. Costs and Expenses. Without limitation of any Loan Document and to the extent not prohibited by applicable Laws, (a) Borrower shall pay when due, and reimburse to Agent to the extent paid by Agent on demand, and indemnify Agent from, all out-of-pocket fees, costs and expenses paid or incurred by Agent in connection with the negotiation, preparation and execution of this Agreement and the other Loan Documents (and any amendments, approvals, consents, waivers and releases requested, required, proposed or done from time to time), or in connection with the disbursement, administration or collection of the Loan or the enforcement of the Obligations or the exercise of any right or remedy of Agent, including reasonable fees and expenses of Agent's counsel, and (b) Borrower shall reimburse to Lenders to the extent paid by Lenders on demand, and indemnify Lenders from, all out-of-pocket fees, costs and expenses paid or incurred by Lenders in connection with the collection of the Loan after Default or the enforcement of the Obligations or the exercise of any right or remedy of Lenders, including reasonable fees and expenses of Lenders' counsel. Borrower shall pay all costs and expenses incurred by Agent or Lenders, including attorneys' fees, if the Obligations or any part thereof are sought to be collected by or through an attorney at law, whether or not involving probate, appellate, administrative or bankruptcy proceedings. Borrower shall pay all costs and expenses of complying with the Loan Documents. Borrower's obligations under this Section shall survive the delivery of the Loan Documents, the making of Advances, the payment in full of the Obligations, the release or termination of the Loan Documents, any bankruptcy or other debtor relief proceeding, and any other event whatsoever. Borrower acknowledges that none of the foregoing costs and expenses are included in the Commitment Fee. 7.17. Further Assurances. Borrower will, on request of Agent, (a) promptly correct any defect, error or omission in any Loan Document; (b) execute, acknowledge, deliver, procure, record or file such further instruments and do such further acts deemed necessary, desirable or proper by Agent to carry out the purposes of the Loan Documents; and (c) provide such certificates, documents, reports, information, affidavits and other instruments and do such further acts deemed necessary, desirable or proper by Agent or any Lender to comply with the requirements of any agency having jurisdiction over Agent or any Lender. 7.18. No Assignment. Borrower shall not assign, transfer or encumber its rights or Obligations under any Loan Document or any proceeds of the Loan without the prior written consent of Agent. 7.19. INDEMNIFICATION. BORROWER SHALL, AND SHALL CAUSE EACH OF ITS CONSOLIDATED SUBSIDIARIES TO, JOINTLY AND SEVERALLY, INDEMNIFY AND HOLD HARMLESS AGENT, LENDERS, NATIONSBANK CAPITAL MARKETS, INC. AND THE DIRECTORS, OFFICERS, PARTNERS, EMPLOYEES, AGENTS, HEIRS, REPRESENTATIVES, SUCCESSORS AND ASSIGNS OF AGENT, LENDERS, NATIONSBANK CAPITAL MARKETS, INC., RESPECTIVELY, FROM AND AGAINST, AND REIMBURSE THEM ON DEMAND FOR, ANY AND ALL INDEMNIFIED MATTERS (DEFINED BELOW) BUT ONLY IN THOSE CASES IN WHICH THE FOREGOING INDEMNITEES ARE SEEKING INDEMNIFICATION IN THE CAPACITIES IDENTIFIED AND NOT AS TENANTS OR INVITEES ON THE PROPERTY. WITHOUT LIMITATION, THE FOREGOING INDEMNITIES SHALL APPLY TO EACH INDEMNIFIED PERSON WITH RESPECT TO MATTERS WHICH IN WHOLE OR IN PART ARE CAUSED BY OR ARISE OUT OF THE NEGLIGENCE OF SUCH (AND/OR ANY OTHER) INDEMNIFIED PERSON. HOWEVER, SUCH INDEMNITIES SHALL NOT APPLY TO A PARTICULAR INDEMNIFIED PERSON TO THE EXTENT THAT THE SUBJECT OF THE INDEMNIFICATION IS CAUSED BY OR ARISES OUT OF THE GROSS NEGLIGENCE OR WILLFUL MISCONDUCT OF THAT INDEMNIFIED PERSON. ANY AMOUNT TO BE PAID UNDER THIS SECTION BY BORROWER TO AN INDEMNIFIED PERSON SHALL BE A DEMAND OBLIGATION OWING BY BORROWER (WHICH BORROWER HEREBY PROMISES TO PAY) TO AGENT, PART OF THE OBLIGATIONS, EVEN IF IN EXCESS OF THE COMMITTED SUM, AND SECURED BY THE LOAN DOCUMENTS. NOTHING IN THIS SECTION, ELSEWHERE IN THIS AGREEMENT OR IN ANY OTHER LOAN DOCUMENT SHALL LIMIT OR IMPAIR ANY RIGHTS OR REMEDIES OF AGENT, LENDERS, OR ANY OTHER INDEMNIFIED PERSON (INCLUDING WITHOUT LIMITATION ANY RIGHTS OF CONTRIBUTION OR INDEMNIFICATION) AGAINST BORROWER OR ANY OTHER PERSON UNDER ANY OTHER PROVISION OF THIS AGREEMENT, ANY OTHER LOAN DOCUMENT, ANY OTHER AGREEMENT OR Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 17 21 ANY APPLICABLE LEGAL REQUIREMENT. AS USED HEREIN, THE TERM "INDEMNIFIED MATTERS" MEANS ANY AND ALL CLAIMS, DEMANDS, LIABILITIES (INCLUDING STRICT LIABILITY), LOSSES, DAMAGES (INCLUDING CONSEQUENTIAL DAMAGES), CAUSES OF ACTION, JUDGMENTS, PENALTIES, FINES, COSTS AND EXPENSES (INCLUDING WITHOUT LIMITATION, REASONABLE FEES AND EXPENSES OF ATTORNEYS AND OTHER PROFESSIONAL CONSULTANTS AND EXPERTS, AND OF THE INVESTIGATION AND DEFENSE OF ANY CLAIM, WHETHER OR NOT SUCH CLAIM IS ULTIMATELY DEFEATED, AND THE SETTLEMENT OF ANY CLAIM OR JUDGMENT INCLUDING ALL VALUE PAID OR GIVEN IN SETTLEMENT) OF EVERY KIND, KNOWN OR UNKNOWN, FORESEEABLE OR UNFORESEEABLE, WHICH MAY BE IMPOSED UPON, ASSERTED AGAINST OR INCURRED OR PAID BY AGENT, LENDERS, OR ANY INDEMNIFIED PERSON AT ANY TIME AND FROM TIME TO TIME, WHENEVER IMPOSED, ASSERTED OR INCURRED, BECAUSE OF, RESULTING FROM, IN CONNECTION WITH, OR ARISING OUT OF ANY TRANSACTION, ACT, OMISSION, EVENT OR CIRCUMSTANCE IN ANY WAY CONNECTED WITH THE PROPERTY OR WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT, INCLUDING DISBURSEMENT OF THE LOAN PROCEEDS, THE CONDITION OF THE PROPERTY (INCLUDING THE PRESENCE OF HAZARDOUS SUBSTANCES), ANY BODILY INJURY OR DEATH OR PROPERTY DAMAGE OCCURRING IN OR UPON OR IN THE VICINITY OF THE PROPERTY THROUGH ANY CAUSE WHATSOEVER AT ANY TIME ON OR BEFORE THE RELEASE DATE, ANY ACT PERFORMED OR OMITTED TO BE PERFORMED HEREUNDER OR UNDER ANY OTHER LOAN DOCUMENT, ANY FAILURE BY BORROWER TO PERFORM ITS OBLIGATIONS UNDER ANY CONSTRUCTION CONTRACT, ANY DEFAULT OR POTENTIAL DEFAULT, AND ANY CLAIM UNDER OR WITH RESPECT TO ANY LEASE. THE TERM "RELEASE DATE" AS USED HEREIN MEANS THE DATE ON WHICH THE OBLIGATIONS HAVE BEEN PAID AND PERFORMED IN FULL AND THE LOAN DOCUMENTS HAVE BEEN RELEASED; PROVIDED, THAT IF SUCH PAYMENT, PERFORMANCE OR RELEASE IS CHALLENGED, IN BANKRUPTCY PROCEEDINGS OR OTHERWISE, THE RELEASE DATE SHALL BE DEEMED NOT TO HAVE OCCURRED UNTIL SUCH CHALLENGE IS REJECTED, DISMISSED OR WITHDRAWN WITH PREJUDICE. THE INDEMNITIES IN THIS SECTION SHALL NOT TERMINATE UPON THE RELEASE DATE BUT WILL SURVIVE THE RELEASE DATE, THE PAYMENT OF THE OBLIGATIONS, THE DISCHARGE AND RELEASE OF THE LOAN DOCUMENTS, ANY BANKRUPTCY OR OTHER DEBTOR RELIEF PROCEEDING, AND ANY OTHER EVENT WHATSOEVER. 7.20. REIT Status. Borrower shall maintain its qualification as a real estate investment trust as that term is defined in Section 856 of the Internal Revenue Code of 1986, as amended from time to time, and the regulations of the United States Treasury Department promulgated thereunder. 7.21. Management of Property. Any material change in the day-to-day leasing, management and operation of the Property shall be subject to the prior written consent of Agent. Furthermore, at least two (2) of the three (3) current holders of the positions of (a) Chairman and Chief Executive Officer, (b) President and Chief Operating Officer and (c) Chief Financial Officer of Borrower shall remain actively involved in the management of Borrower; provided, however, that upon the withdrawal of any two (2) of these individuals from active involvement in the management of Borrower (due to death, disability, termination of employment or otherwise and regardless of whether or not such withdrawal is simultaneous), Borrower shall have a period of six (6) months within which to submit replacement personnel for Agent's approval in Agent's sole discretion. 7.22. Minimum Net Worth. The net worth of Borrower and its Consolidated Subsidiaries, as calculated in accordance with GAAP, shall never be less than ninety percent (90%) of Borrower's net worth as reported on Borrower's financial statements dated December 31, 1996, prepared in accordance with GAAP except that net worth shall be grossed up to include the Debentures (as such term is defined in Section 7.23), as (a) adjusted for Borrower's accumulated depreciation after December 31, 1996, (b) adjusted for any completed mergers or acquisitions, and (c) increased by an amount equal to ninety percent (90%) of Borrower's net proceeds from securities issued by Borrower after December 31, 1996, at any fiscal quarter end or fiscal year end of Borrower. 7.23. Liabilities/Assets Ratios. (a) The ratio of total liabilities of Borrower and its Consolidated Subsidiaries, as calculated in accordance with GAAP except that total liabilities shall include contingent liabilities and exclude those certain 7.33% Convertible Subordinated Debentures issued prior to the date of this Agreement to the extent such debentures are fully subordinated to all other debt of Borrower (the "Debentures"), to Total Assets shall never exceed .60 to 1.0. (b) The ratio of liabilities of Borrower and its Consolidated Subsidiaries secured by Liens, calculated in accordance with GAAP, to Total Assets shall never exceed .35 to 1.0. 7.24. Notice of Rating Change/Definition Change. Borrower shall promptly upon the receipt of notice thereof, and in any event within five (5) Business Days after any change in the Moody's Rating or the S & P Rating, notify Agent in writing of such change. Borrower shall promptly upon the receipt of notice thereof, notify Agent of any change in the definition of the term "Funds from Operations" as promulgated by the National Association of Real Estate Investment Trusts. Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 18 22 7.25. Earnings Ratios. (a) The ratio, calculated for the preceding twelve (12) month period, of (i) earnings before interest, taxes, depreciation and amortization expense of Borrower and its Consolidated Subsidiaries to (ii) all interest on debt owed by Borrower and its Consolidated Subsidiaries, shall exceed 1.75 to 1.0. (b) The ratio, calculated for the preceding twelve (12) month period, of (i) earnings before interest, taxes, depreciation and amortization expense of Borrower and its Consolidated Subsidiaries to (ii) Fixed Charges shall exceed 1.75 to 1.0. 7.26. Unencumbered NOI. The ratio of net operating income from Property not subject to Liens to all interest on debt owed by Borrower and its Consolidated Subsidiaries that is not secured by Liens shall exceed 1.75 to 1.0. For purposes of calculating net operating income under this Section 7.26, expenses shall include the greater of (a) actual annual capital expenditures and reserves or (b) $175.00 per apartment unit per year. 7.27. Limitation on Distributions. Unless necessary to comply with Section 7.20 hereof or solely as a result of a conversion of convertible debentures, Borrower shall not, directly or indirectly, declare or pay any Distribution with respect to any class of stock of Borrower unless, immediately after giving effect to such proposed Distribution, the aggregate of all Distributions made during any fiscal year of Borrower would not exceed ninety-five percent (95%) of Borrower's Funds from Operations attributable to such period. 7.28. Cost of Unimproved Real Estate. Borrower shall not, and shall not permit any of its Consolidated Subsidiaries to, purchase or otherwise acquire title to any unimproved real estate (excluding Development Projects) if the cost thereof, when added to the aggregate cost of all unimproved real estate (excluding Development Projects) then owned by Borrower and its Consolidated Subsidiaries, would exceed five percent (5.0%) of Total Assets. For purposes of the foregoing percentage calculation, Borrower may exclude unimproved real estate that Agent determines is in the process of being continuously and diligently developed by Borrower. As used in this Section 7.28, the term "cost" means the aggregate amount of all payments made and obligations incurred by Borrower or its Consolidated Subsidiaries in connection with the acquisition of such unimproved real estate, including, without limitation, purchase price, closing costs, attorneys' fees and other costs and expenses customarily classified as real estate costs. 7.29. Borrower's Equity Interests. Borrower shall not, and shall not permit any of its Consolidated Subsidiaries to, make any investments with the result that: (a) Borrower's ownership interests in partnerships, joint ventures or similar entities accounted for on an equity basis (determined in accordance with GAAP), which are not controlling interests, exceed ten percent (10%) of Total Assets; (b) The cash portion of the purchase price of the stock of any Persons owned by Borrower, which stock holdings are controlling interests in the respective Persons, exceeds ten percent (10%) of Total Assets; or (c) Without the prior written consent of Agent, the aggregate cost of the stock of any Person owned by Borrower, which stock holdings are controlling interests in the respective Persons and which stock is received in exchange for stock or assets of Borrower, exceeds thirty-three and a third percent (33 1/3%) of Total Assets. As used in this Section 7.29, the term "controlling interest" means an ownership interest, direct or indirect, in excess of fifty percent (50%) of the outstanding stock of the subject Person or an interest which provides Borrower the right or power to control the composition of a majority of the board of directors or equivalent governing body of the Person. 7.30. Non-Apartment Project Assets. Borrower shall not, and shall not permit its Consolidated Subsidiaries to, purchase or otherwise acquire title to Properties, which Properties are not multi-family projects, or other assets for which the aggregate undepreciated book value (as determined in accordance with GAAP) exceeds seven and one-half percent (7.5%) of Total Assets, as determined in accordance with GAAP. 7.31. Cost of Development Projects. The ratio of the aggregate cost of the Development Projects to the aggregate undepreciated book value of the Property as determined in accordance with GAAP shall never exceed .15 to 1.0. As used in this Section 7.31, the term "cost" means the sum of (a) the cost (as such term is defined in Section 7.28 above) of a Development Project in its former state as unimproved real estate and (b) all payments made by Borrower or any of its Consolidated Subsidiaries with respect to predevelopment costs, to-date-development costs and construction costs in connection with such Development Project. 7.32. Notes Receivable. Notes receivable of Borrower and its Consolidated Subsidiaries shall not exceed ten percent (10%) of Borrower's net worth, as determined in accordance with GAAP. 7.33. Market Capitalization. The ratio of total liabilities of Borrower and its Consolidated Subsidiaries, as calculated in accordance with GAAP except that total liabilities shall include contingent liabilities and exclude the Debentures, to Market Capitalization shall never exceed .50 to 1.0. 7.34. Additional Covenants Regarding Consolidated Subsidiaries (a) Borrower shall not do any of the following: Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 19 23 (i) enter into any negative pledge agreements with any other Person such that Borrower shall be prohibited from granting to Agent, for the benefit of Lenders, as security for the Obligations, a first priority security interest in the stock or other equity interest of Borrower in any of its Consolidated Subsidiaries or future Consolidated Subsidiaries (the "Equity"); or (ii) grant any Liens, other than Permitted Liens, in the Equity. (b) Without the prior written approval of Agent, Borrower shall not transfer any assets of Borrower, real or personal, to any Consolidated Subsidiary or future Consolidated Subsidiary. (c) At all times, Borrower must have the necessary control of its Consolidated Subsidiaries and its future Consolidated Subsidiaries so that Borrower, without the consent of any other Person, may (i) transfer, by dividend or otherwise, cash and capital from each Consolidated Subsidiary (existing or future) to Borrower and (ii) transfer, sell or convey, or grant a lien or security interest in, the assets, real or personal, of its Consolidated Subsidiaries (existing or future). Borrower shall not, without the prior written consent of Agent, consent to or permit the general partner of Camden Operating, L.P. to consent to any amendment, supplement, or other modification of the Third Amended and Restated Agreement of Limited Partnership of Camden Operating, L.P. dated as of April 15, 1997, that would (i) impair the general partner's ability to fully manage and control the day-to-day operations of such partnership, or (ii) detrimentally alter the general partner's rights or benefits under such partnership agreement. (d) Borrower shall not cause or permit its Consolidated Subsidiaries (existing or future) to, and the Consolidated Subsidiaries (existing or future) shall not, incur additional debt other than: (i) debt owing to a Person other than Borrower, provided that such debt: (A) is nonrecourse to any of Borrower and its Consolidated Subsidiaries (existing or future); (B) consists of trade payables; or (C) constitutes a refinancing, on substantially equivalent terms and amounts, of any existing debt of existing Consolidated Subsidiaries which is secured by a first priority lien covering real property, and related personal property, owned by an existing Consolidated Subsidiary; (ii) debt incurred by a Consolidated Subsidiary to Borrower, whether such debt was originally payable to Borrower or refinanced by Borrower ("Intercompany Debt"). 7.35. Additional Agreements Regarding Guaranty (a) Contemporaneously with the execution of this Agreement, Borrower has caused Camden Subsidiary, Inc. and Camden Operating, L.P. to execute and deliver to Agent for the benefit of Lenders a Guaranty. Borrower will promptly notify Agent of the formation of any new Consolidated Subsidiary; thereafter, Borrower shall cause each newly formed Consolidated Subsidiary, subject to Section 7.35(e) below, to execute and deliver to Agent for the benefit of Lenders a Guaranty. Contemporaneously with the delivery of any Guaranty, Borrower shall cause to be delivered to Agent appropriate certifications, resolutions, incumbency certificates, and other documents deemed necessary and appropriate by Agent to evidence the legal, binding, and enforceable effect of each Guaranty. (b) Notwithstanding anything to the contrary contained in this Agreement or any Guaranty, Agent and Lenders covenant and agree with Borrower that any funds, payments, claims, or distributions actually received by Agent and Lenders as a result of, or pursuant to any Guaranty ("Guaranty Proceeds"), shall be made available for distribution equally and ratably among the holders of the Obligations and the trustee or trustees of any unsecured, non-subordinated Indebtedness of Borrower issued in offerings registered under the Securities Act of 1933 or exempt from registration pursuant to Rule 144A or Section 4 thereof or otherwise (the "Public Debt") which is outstanding on the date Agent and Lenders receive such Guaranty Proceeds. This subsection (b) shall not apply to any payments, funds claims or distributions received by Agent or any Lender directly or indirectly from Borrower or any other Person other than from a Consolidated Subsidiary pursuant to a Guaranty, but shall apply solely to Guaranty Proceeds. Borrower has been supplied a copy of each Guaranty and specifically understands and agrees with Agent and Lenders that, to the extent Guaranty Proceeds are distributed to holders of the Public Debt, each Guarantor has agreed that the Obligation shall not be deemed reduced by any such distribution, and each Guarantor will continue to make payments pursuant to its Guaranty until such time as the Obligation has been paid in full after taking into effect any distributions of Guaranty Proceeds to holders of Public Debt. (c) Nothing herein contained shall be deemed to limit, modify, or alter the rights of Agent and Lenders under any Guaranty. Nothing herein contained shall be deemed to subordinate the Obligations to the Public Debt, nor give to any holder of the Public Debt any rights of subrogation. (d) Nothing contained in this Agreement or any Guaranty shall be deemed for the benefit of any holders of the Public Debt nor shall anything be construed to impose on Agent or Lenders any fiduciary duties, obligations Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 20 24 or responsibilities to the holders of the Public Debt. This Section 7.35 and each Guaranty is for the sole benefit of Agent and Lenders and their respective successors and assigns. (e) On or before December 31, 1997, Borrower shall cause each of its Consolidated Subsidiaries which own title to unencumbered real estate assets that have not executed and delivered a Guaranty contemporaneously with the execution of this Agreement to either (a) merge into or otherwise cause all of its assets be acquired by a Consolidated Subsidiary party to a Guaranty, or (b) execute and deliver a Guaranty to Agent for the benefit of Lenders. 7.36. Additional Covenant Regarding Certain Subsidiaries. Subject to Section 7.35(e) above, Borrower shall cause any Consolidated Subsidiary which does not own title to unencumbered real estate assets as of the date of this Agreement that acquires title to any unencumbered real estate assets after the date hereof to execute and deliver a Guaranty to Agent for the benefit of Lenders within twenty (20) days after such acquisition. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN, (X) NO SUBORDINATED DEBENTURES (OTHER THAN THE DEBENTURES) SHALL BE TREATED AS EQUITY FOR ANY PURPOSE, INCLUDING CALCULATIONS MADE UNDER SECTION 7.23 HEREOF AND (Y) LENDERS HEREBY APPROVE THE MERGER CONTEMPLATED BY THAT CERTAIN LETTER AGREEMENT DATED DECEMBER 16, 1996, FROM THE LENDERS UNDER THE PRIOR LOAN AGREEMENT TO BORROWER. ARTICLE 8 - DEFAULT AND REMEDIES 8.1. Default. Subject to the last grammatical paragraph of this Section 8.1, the occurrence of any of the following shall be a default ("Default"): (a) Failure to Pay Obligations. Borrower fails to pay (i) on the date such sum is due, the principal amount of any Bid Rate Loan, any installment thereof, or any interest thereon, and (ii) within five (5) days after the date such sum is due, the principal amount of any other Advance, any installment thereof, any interest thereon, or any other amount required to be paid to Agent or Lenders under the Loan Documents when due and payable, whether scheduled, accelerated, or otherwise. (b) Nonperformance of Covenants. Borrower (and, if applicable, any of its Consolidated Subsidiaries) fails timely and properly to observe, keep or perform any covenant, agreement or condition required in any Loan Document, other than those covenants, agreements, or conditions addressed as a Default in this Section 8.1. (c) Representations and Warranties. Any statement, representation or warranty by or on behalf of Borrower or any of its Consolidated Subsidiaries in any Loan Documents, or in any financial statement or any other writing heretofore or hereafter delivered to Agent or any Lender in connection with the Obligations is false, fraudulent, misleading or erroneous in any material respect. (d) Bankruptcy or Insolvency. Borrower or any of its Consolidated Subsidiaries: (i) (A) executes an assignment for the benefit of creditors, or takes any action in furtherance thereof; (B) admits in writing its inability to pay, or fails to pay, its debts generally as they become due; (C) as a debtor, files a petition, case, proceeding or other action pursuant to, or voluntarily seeks the benefit of any Debtor Relief Law, or takes any action in furtherance thereof; or (D) seeks the appointment of a receiver, trustee, custodian or liquidator of any part of the Property or of any significant portion of its other property; or (ii) suffers the filing of a petition, case, proceeding or other action against it as a debtor under any Debtor Relief Law or seeking appointment of a receiver, trustee, custodian or liquidator of any part of the Property or of any significant portion of its other property, and (A) admits, acquiesces in or fails to contest diligently the material allegations thereof; (B) the petition, case, proceeding or other action results in entry of any order for relief or order granting relief sought against it; (C) in a proceeding under the Title 11 of the United States Code, the case is converted from one chapter to another; or (D) fails to have the petition, case, proceeding or other action permanently dismissed or discharged on or before the earlier of trial thereon or ninety (90) days next following the date of its filing; or (iii) conceals, removes, or permits to be concealed or removed, any part of its property, with intent to hinder, delay or defraud its creditors or any of them, or makes or suffers a transfer of any of its property which may be fraudulent under any bankruptcy, fraudulent conveyance or similar Law; or suffers or permits, while insolvent, any creditor to obtain a lien (other than as described in subparagraph (iv) below) upon any of its property through legal proceedings which are not vacated and such lien discharged prior to enforcement of such lien and in any event within ninety (90) days from the date thereof; or (iv) fails to have discharged within a period of twenty (20) days any attachment, sequestration, or similar writ levied upon any of its property; or (v) fails to pay any final money judgment against it within twenty (20) days after the entry of such judgment. Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 21 25 (e) Liquidation. The liquidation, termination, dissolution, merger, consolidation or failure to maintain good standing in the State of Texas, or any other state in which any portion of the Property is located, of Borrower or its Consolidated Subsidiaries, other than a merger or consolidation which does not result in the occurrence of any other Potential Default or Default and after which the surviving entity is Borrower. (f) Material Adverse Change. Any circumstance or event of whatever nature (including the filing of, or any adverse determination or development in, any Litigation) occurs which (a) impairs the validity or enforceability of any Loan Document with respect to a material term, (b) materially and adversely affects or changes the condition (financial or otherwise), operations, business, management or assets of Borrower or any of its Consolidated Subsidiaries, or (c) impairs the ability of Borrower to fulfill any material Obligation. (g) Enforceability; Priority. Any Loan Document shall for any reason cease to be in full force and effect, be declared null and void or unenforceable in whole or in part, cease to have the priority required herein, or the validity or enforceability thereof, in whole or in part shall be challenged or denied but, in the case of a challenge by a party other than Borrower or any of its Consolidated Subsidiaries, only if Agent acting reasonably determines such challenge is serious. (h) Certain Investors. The characterization of the assets of Borrower or any of its Consolidated Subsidiaries as assets of an employee benefit plan subject to the Employee Retirement Income Security Act of 1974 if such plan owns stock in Borrower or any of its Consolidated Subsidiaries. (i) Other Loan Documents. A default or event of default occurs under any Loan Document, other than this Agreement, and the same is not remedied within the applicable period of grace (if any) provided in such Loan Document. (j) Other Debt. In respect of any debt (other than the Obligations) of Borrower or any Consolidated Subsidiary individually or collectively of at least $5,000,000, (a) any default or other event or condition occurs or exists beyond the applicable grace or cure period, the effect of which is to cause or to permit any holder of that debt to cause, whether or not it elects to cause, any of that debt to become due before its stated maturity or regularly scheduled payment dates, or (b) any of that debt is declared to be due and payable or required to be prepaid by Borrower or any Consolidated Subsidiary before its stated maturity. NOTWITHSTANDING ANYTHING TO THE CONTRARY CONTAINED HEREIN OR IN ANY OTHER LOAN DOCUMENT, THE OCCURRENCE OF ANY OF THE EVENTS DESCRIBED IN SECTION 8.1 (OTHER THAN THE FAILURE TO PAY ANY SUM REQUIRED UNDER THE LOAN DOCUMENTS, THOSE EVENTS WHICH ARE NOT CURABLE AND THOSE EVENTS WHICH ARE DESCRIBED IN SUBSECTIONS (A) AND (D) OF SECTION 8.1) SHALL CONSTITUTE A DEFAULT FIFTEEN (15) DAYS AFTER DELIVERY OF WRITTEN NOTICE THEREOF BY AGENT TO BORROWER UNLESS THE EVENT IS CURED WITHIN SAID FIFTEEN (15) DAYS. 8.2. Notice and Cure. If any Loan Document provides for Agent to give to Borrower any notice regarding a Default or Potential Default, and if Agent fails to give such notice to Borrower as provided, the sole and exclusive remedy of Borrower for such failure shall be to seek appropriate equitable relief to enforce the agreement to give such notice and to have any acceleration of the maturity of the Obligations postponed or revoked and foreclosure proceedings in connection therewith delayed or terminated pending or upon the curing of such Potential Default to Agent's satisfaction in the manner and during the period of time permitted by such agreement, if any, and Borrower waives any and all right to damages and any other relief. 8.3. Certain Remedies. Any Default under this Agreement shall also constitute a Default under the other Loan Documents. Should a Default occur, Agent may but without any obligation to do so, at its option and at any time, and without presentment, demand, or protest, notice of default, dishonor, demand, non-payment, or protest, notice of intent to accelerate all or any part of the Obligations, notice of acceleration of all or any part of the Obligations, or notice of any other kind, all of which Borrower hereby expressly waives, except for any notice required by applicable statute which cannot be waived (a) declare the Obligations, or any part thereof, immediately due and payable, whereupon the same shall be due and payable; (b) terminate the Total Commitment and any obligation to disburse any other funds hereunder; (c) reduce any claim to judgment; (d) to the maximum extent permitted under applicable Laws, set-off (or request each Lender to, and each Lender is entitled to, set off) and apply any and all deposits (general or special, time or demand, provisional or final), funds, or assets at any time held and any and all other indebtedness at any time owing by Agent (or any Lender) to or for the credit or the account of Borrower against any and all Obligations (and, to the extent permitted by Law, Borrower is deemed directly obligated to each Lender in the full amount of the Obligations for this purpose), whether or not Agent exercises any other right or remedy hereunder and whether or not such Obligations are then matured; and/or (e) exercise any and all rights and remedies afforded by any of the Loan Documents, or by Law or equity or otherwise, as Agent deems appropriate. The aggregate sum of the deposits and funds offset under subsection (d) above shall (i) not exceed the Obligations and (ii) be distributed on a Pro Rata basis among the Lenders. 8.4. Rights and Remedies Cumulative. All rights and remedies provided for in the Loan Documents are cumulative of each other and of any and all other rights and remedies existing at Law or in equity, and Agent and Lenders shall, in addition to the rights and remedies provided in any Loan Document, be entitled to avail themselves of all such other rights and remedies now or hereafter existing at Law or in equity for the collection and enforcement of the Obligations and the foreclosure of the liens and security interests evidenced by the Loan Documents. The resort to Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 22 26 any right or remedy provided for under any Loan Documents or provided for by Law or in equity shall not prevent the concurrent or subsequent employment of any other appropriate right or rights or remedy or remedies. ARTICLE 9 - GENERAL TERMS AND CONDITIONS Borrower and Lenders further covenant and agree as follows: 9.1. Loan Documents. All documents, certificates, insurance policies, and other items required under this Agreement to be executed and/or delivered to Agent or any Lender shall be in form and content satisfactory to Agent. 9.2. Waiver. Agent or Lenders may at any time by a specific writing, waive compliance by Borrower with any covenant in any Loan Document, consent to Borrower's doing any act which in any Loan Document Borrower is prohibited from doing, or to Borrower's failing to do any act which in any Loan Document Borrower is required to do, or release any Person liable for any part of the Obligations without impairing or releasing the liability of any other Person. Agent or Lenders may waive any Default or Potential Default without waiving any other prior or subsequent Default or Potential Default. Agent or Lenders may remedy any Default or Potential Default without waiving the Default or Potential Default remedied. Neither failure by Agent or Lenders to exercise, nor delay by Agent or Lenders in exercising, nor discontinuance of the exercise of any right, power or remedy upon any Default or Potential Default shall be construed as a waiver of such Default or Potential Default or as a waiver of the right to exercise any such right, power or remedy (including the right to accelerate the maturity of the Obligations or any part thereof) at a later date. No single or partial exercise by Agent or Lenders of any right, power or remedy under any Loan Document shall exhaust the same or shall preclude any other or further exercise thereof, and every such right, power or remedy under any Loan Document may be exercised at any time and from time to time. No modification or waiver of any provision of any Loan Document nor consent to any departure by Borrower therefrom shall in any event be effective unless in writing signed by Agent or Lenders and then such waiver or consent shall be effective only in the specific instance, for the purpose for which given and to the extent therein specified. No notice to nor demand on Borrower in any case shall of itself entitle Borrower to any other or further notice or demand in similar or other circumstances. Remittances in payment of any part of the Obligations other than in the required amount in immediately available U.S. funds shall not, regardless of any receipt or credit issued therefor, constitute payment until the required amount is actually received by Agent or Lenders in immediately available U.S. funds and shall be made and accepted subject to the condition that any check or draft may be handled for collection in accordance with the practice of the collecting bank or banks. Acceptance by Agent or Lenders of any payment which is past due or which is in an amount less than the amount then due on any Obligation shall be deemed an acceptance on account only and shall not in any way excuse the existence of a Default or Potential Default, waive, extinguish or impair any of Agent's or Lenders' rights, including the rights to accelerate the maturity of the Obligations or any part thereof, or nullify any prior exercise of any of such rights, constitute a waiver of the requirement of punctual payment and performance, or constitute a novation in any respect. 9.3. Lender's Consent or Approval. Except where otherwise expressly provided in the Loan Documents, in any instance where the approval, consent or the exercise of judgment of Agent or Lenders is required, the granting or denial of such approval or consent and the exercise of such judgment shall be (a) within the sole discretion of Agent or Lenders, as the case may be; and (b) deemed to have been given only by a specific writing intended for the purpose and executed by Agent or Lenders. Each provision for consent, approval, inspection, review, or verification by Agent or Lenders is for Agent's or Lenders' own purposes and benefit only. 9.4. Modification or Termination. The Loan Documents may only be modified, supplemented, or terminated by a written instrument or instruments intended for that purpose and executed by the party against which enforcement of the modification, supplement, or termination is asserted. Any alleged modification, supplement, or termination which is not so documented shall not be effective as to any party. 9.5. Forum. Borrower hereby irrevocably submits generally and unconditionally for itself and in respect of its property and its Consolidated Subsidiaries to the non-exclusive jurisdiction of any Texas state court, or any United States federal court, sitting in the City of Houston, Texas, and to the non-exclusive jurisdiction of any state or United States federal court sitting in the state in which any of the Property is located, over any suit, action or proceeding arising out of or relating to the Loan Documents or the Obligations. 9.6. Compliance with Usury Laws. It is the intent of Borrower and Lenders to conform to and contract in strict compliance with applicable usury Laws from time to time in effect. All agreements between Borrower and Lenders are hereby limited by the provisions of this Section which shall override and control all such agreements, whether now existing or hereafter arising. In no way, nor in any event or contingency (including, but not limited to, prepayment, default, demand for payment, or acceleration of the maturity of any obligation), shall the interest taken, reserved, contacted for, charged or received under any Loan Document, or otherwise, exceed the maximum amount permissible under applicable Laws. If, from any possible construction of any document, interest would otherwise be payable in excess of the maximum lawful amount, any such construction shall be subject to the provisions of this Section and such document shall be automatically reformed and the interest payable shall be automatically reduced to the maximum amount permitted under applicable Laws, without the necessity of execution of any amendment or new document. If Lenders shall ever receive anything of value which is characterized as interest under applicable Laws and which would apart from this provision be in excess of the maximum lawful amount, an amount equal to the amount which would have been excessive interest shall, without penalty, be applied to the reduction of the principal Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 23 27 amount of the Loan in the inverse order of its maturity and not to the payment of interest, or refunded to Borrower or the other payor thereof if and to the extent such amount which would have been excessive exceeds the principal amount of the Loan. The right to accelerate maturity of the Obligations does not include the right to accelerate any interest which has not otherwise accrued on the date of the acceleration, and Lenders do not intend to charge or receive any unearned interest in the event of acceleration. All interest taken, reserved, contracted for, charged or received shall, to the extent permitted by applicable Law, be amortized, prorated, allocated and spread throughout the full stated term (including any renewal or extension) of such indebtedness so that the amount of interest on account of such indebtedness does not exceed the maximum permitted by applicable Laws. As used in this Section, the term "applicable Laws" means the Laws of the State of Texas or the federal Laws of the United States, whichever Laws allow the greater interest, as such Laws now exist or may be changed or amended or come into effect in the future. 9.7. Notices. Unless specifically provided otherwise, any notice for purposes of this Agreement or any other Loan Document shall be given in writing or by telex or by facsimile (fax) transmission and shall be addressed or delivered to the respective addresses set forth on Exhibit "E", or to such other address as may have been previously designated by the intended recipient by notice given in accordance with this Section. If sent by prepaid, registered or certified mail (return receipt requested), the notice shall be deemed effective when the receipt is signed or when the attempted initial delivery is refused or cannot be made because of a change of address of which the sending party has not been notified; if transmitted by telex, the notice shall be effective when transmitted (answerback confirmed); and if transmitted by facsimile or personal delivery, the notice shall be effective when received. No notice of change of address shall be effective except upon actual receipt, and service of a notice required by Texas Property Code Section 51.002, as amended from time to time, shall be considered complete when the requirements of that statute are met. This Section shall not be construed in any way to affect or impair any waiver of notice or demand provided in any Loan Document or to require giving of notice or demand to or upon any Person in any situation or for any reason. 9.8. No Brokers. Borrower indemnifies Agent and Lenders from any liability, claims or losses arising by reason of claims for any such brokerage commission made by any Person claiming to have dealt with Borrower or any affiliate of Borrower. The provisions of this Section shall survive the repayment of the Loan and shall continue in full force and effect so long as the possibility of such liability (including attorneys' fees), claims or losses exists. 9.9. Partial Invalidity. A determination that any provision of any Loan Document is unenforceable or invalid shall not affect the enforceability or validity of any other provision and the determination that the application of any provision of any Loan Document to any Person or circumstance is illegal or unenforceable shall not affect the enforceability or validity of such provision as it may apply to other Persons or circumstances. 9.10. Interpretation. If this Agreement is signed by more than one Person as "Borrower," then the term "Borrower" as used in this Agreement shall refer to all such Persons jointly and severally, and all promises, agreements, covenants, waivers, consents, representations, warranties and other provisions in this Agreement are made by and shall be binding upon each and every such undersigned Person, jointly and severally. The term "Lenders" shall be deemed, subject to this Agreement, to include any subsequent holder(s) of the Notes. Whenever the context of any provisions hereof shall require it, words in the singular shall include the plural, words in the plural shall include the singular, and pronouns of any gender shall include the other genders. Captions and headings in the Loan Documents are for convenience only and shall not affect the construction of the Loan Documents. All references in this Agreement to Schedules, Exhibits, Articles, Sections, Subsections, paragraphs and subparagraphs refer to the respective subdivisions of this Agreement, unless such reference specifically identifies another document. The terms "herein," "hereof," "hereto," "hereunder" and similar terms refer to this Agreement and not to any particular Section or other subdivision of this Agreement. The terms "includes" and "including" shall be interpreted as if followed by the words "without limitation." All references in this Agreement to sums denominated in dollars or with the symbol "$" refer to the lawful currency of the United States of America, unless such reference specifically identifies another currency. 9.11. Disclosure of Information. Agent and any Lender may disclose any information Agent or any Lender may from time to time have regarding the Loan, Borrower, its Consolidated Subsidiaries or the Property to any assignee or participant or prospective assignee or prospective participant, to Agent's affiliates including NationsBanc Capital Markets, Inc., to any regulatory body having jurisdiction over Agent or such Lender and to any agent or attorney of Agent or any Lender and in such other circumstances and to such other parties as necessary or appropriate in Agent's or any Lender's reasonable judgment. 9.12. Binding Effect. This Agreement shall be binding upon the parties hereto and their respective successors and assigns and shall inure only to the benefit of Agent and Lenders and each of their respective successors and permitted assigns and Borrower and Borrower's successors and assigns (and no other Person shall be deemed a benefitted party hereunder under any circumstances), subject to Sections 7.19 and 9.19. 9.13. Conditions for the Benefit of Lenders. All conditions of the obligations of Agent and Lenders hereunder, including the obligation to make Advances, are imposed solely and exclusively for the benefit of Agent and Lenders, and may be freely waived in whole or in part by Agent and Lenders at any time. No other Person is a beneficiary of such conditions, has standing to require satisfaction of such conditions, or is entitled to assume that Agent and Lenders will make Advances or refuse to make Advances in the absence of strict compliance therewith. Notwithstanding any approval, consent, inspection, verification, or receipt and review of information or documents by Agent and Lenders, neither Agent nor Lenders have any obligation or responsibility whatsoever, and assume no duty or obligation, for the Property or its condition, the performance or quality of any Work or workmanship Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 24 28 regarding the Property or the absence therefrom of defects, the financial condition, or the reporting thereof, of Borrower, or the compliance of any of the foregoing with any Legal Requirement. Any inspection or audit of the books and records of Borrower, or the procuring of documents and financial and other information, by or on behalf of Agent or Lenders shall be for Agent and Lenders' protection only, and shall not constitute any assumption of responsibility to Borrower or anyone else with regard to the condition, construction, maintenance or operation of the Property, or relieve Borrower of any of the Obligations. Neither Agent nor Lenders have any duty to supervise or inspect any of the Work, the books and records pertaining to the Property or the financial records of Borrower, or to inform Borrower or any other Person of the existence of any defect, nor shall Agent or Lenders have any liability for the performance or default of Borrower or any other Person, or for any failure to renovate, complete, protect or insure the Improvements, or to pay any costs of the Work, or for the performance of any obligation of Borrower whatsoever. 9.14. Counterparts. This Agreement has been executed in several counterparts, all of which are identical, each of which shall be deemed an original, and all of which counterparts together shall constitute one and the same instrument. 9.15. No Partnership, etc. The relationship between Lenders and Borrower is solely that of lender and borrower. Neither Agent nor Lenders have any fiduciary or other special relationship with or duty to Borrower and none is created hereby. Nothing contained in the Loan Documents, and no action taken pursuant to the Loan Documents, is intended or shall be construed to create any partnership, joint venture, association, or special relationship between Borrower and Agent or Lenders or in any way make Agent or any Lender a co-principal with Borrower with reference to the Property or otherwise. In no event shall Agent's or Lenders' rights and interests under the Loan Documents be construed to give Agent or any Lender the right to control, or be deemed to indicate that Agent or any Lender is in control of, the business, properties, management or operations of Borrower. 9.16. Loan Agreement Governs. In the event of any conflict between the terms of this Agreement and any terms of any other Loan Document, the terms of this Agreement shall govern. All of the Loan Documents are by this reference incorporated into this Agreement. 9.17. Time of Essence. Time shall be of the essence in this Agreement. 9.18. Applicable Law. This Agreement and the other Loan Documents are contracts made in, and under the Laws of, the State of Texas, and the Loan Documents and their validity, enforcement and interpretation, shall for all purposes be governed by Texas law (without regard to any conflict of laws principles), unless a portion of the Property is located in a state other than Texas, in which case the laws of such state shall apply only to the extent necessary for the enforcement of Agent's remedies under the Loan Documents, and applicable United States federal law. Chapter 15 of Subtitle 3, Title 79, of the Revised Civil Statutes of the State of Texas, as in effect on the date hereof and as the same may hereafter be amended or supplemented from time to time, shall not apply to the Loan, any Advance or any Loan Document. 9.19. Participation or Sale of Loan. Subject to the terms and provisions of Article 6 hereof and the Intercreditor Agreement, Agent may, from time to time, sell or offer to sell interests in the Loan to one or more assignees or participants and any Lender shall have the right to sell its interest in the Loan or an undivided ownership or participation interest in the Loan provided NationsBank of Texas, N.A. remains the agent lender (subject to removal for cause under the terms and provisions of any Intercreditor Agreement related to the Loan). Agent and each Lender are hereby authorized to disseminate any information it now has or hereafter obtains pertaining to the Loan including, without limitation, any security for the Loan and any credit or other information on Borrower, its Consolidated Subsidiaries and any of its principals which may be necessary to effectuate any sale or attempted sale of its interest in the Loan or participation therein or attempted participation therein. Borrower shall, and shall cause its Consolidated Subsidiaries to, execute, acknowledge and deliver any and all instruments reasonably requested by Agent and any Lender in connection with the foregoing, including, without limitation, to satisfy such purchaser or participants that the Loan is outstanding in accordance with the terms and provisions contained herein and in the other Loan Documents. To the extent, if any, specified in any assignment or participation, such companies, assignee(s), and participant(s) shall have the rights and benefits with respect to the Loan Documents as such person(s) would have had if such person(s) had been a Lender hereunder. 9.20. Survival of Representations, Warranties and Covenants. The obligations of Borrower and the rights of Agent and Lenders under the Loan Documents shall continue until all Obligations have been paid in full and as provided in Section 9.21. All representations, warranties and covenants (including, without limitation, indemnities) made by Borrower in any Loan Document shall survive the delivery of the Loan Documents to Agent and the Notes to Lenders, the making of Advances, and the termination of the Total Commitment, and, with respect to such indemnities (and any other provisions in any Loan Document specified to survive), shall survive the payment in full of the Obligations and the release or termination of the Loan Documents, any bankruptcy or other debtor relief proceeding, and any other event whatsoever. No investigation at any time made by or on behalf of Agent or Lenders shall diminish Agent's and Lenders' right to rely on all representations and warranties made by Borrower under any Loan Document. 9.21. Payments Set Aside. To the extent that Borrower or any other Person pays the Obligations or any part thereof to Agent or Lenders, or Agent or Lenders enforce any of their rights under any Loan Document, and such payment or enforcement or any part thereof is subsequently invalidated, declared to be fraudulent or preferential, set Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 25 29 aside, and/or required to be repaid to Borrower or such other Person, its estate, a trustee, receiver, or any other Person under any Law, then to the extent of such repayment, the Obligations or part thereof originally intended to be satisfied, together with all Loan Documents (including all the terms thereof and all of Agent's and Lenders' rights thereunder), notwithstanding any prior termination and/or delivery of the Loan Documents to Borrower (it being agreed that the provisions of this Section shall survive any such termination and/or delivery), shall be revived and continued in effect as if such payment had not been made or such enforcement had not occurred. Agent shall be entitled to retain the Loan Documents in its possession for one (1) year after the date on which all Obligations have been paid in full; provided, that such retention or non-retention of such documents after payment in full of all Obligations shall not impair the revival provisions in this Section or the survival provisions in Section 9.20. 9.22. Disclaimer of Financing. Lenders have not made any commitment or agreement, express or implied, to extend the term of the Loan past the Maturity Date or to provide Borrower with any financing except as expressly described in this Agreement. 9.23. Evidence of Satisfaction. As part of satisfying or performing any condition or obligation under the Loan Documents, Borrower shall deliver to Agent evidence of such satisfaction or performance satisfactory to Agent. 9.24. Time References. Unless otherwise specified, in the Loan Documents time references (e.g., 10:00 a.m.) are to time in Houston, Texas. ARTICLE 10 - EXHIBITS 10.1. Exhibits. This Agreement includes the Exhibits listed below which are marked by "X", all of which Exhibits are attached hereto and made a part hereof for all purposes, it being agreed that if any Exhibit contains blanks, the same shall be completed correctly and in accordance with this Agreement prior to or at the time of the execution and deliver hereof. X Exhibit "A" - Closing Conditions --- X Exhibit "B" - Affidavit and Advance Request --- X Exhibit "C" - Compliance Certificate --- X Exhibit "D" - Eurodollar Rate Notice --- X Exhibit "E" - Schedule of Parties, Addresses, --- Commitments and Wiring Information X Exhibit "F" - Form of Assignment and Acceptance --- X Exhibit "G" - Bid Rate Note Form --- X Exhibit "H" - Bid Loan Request Confirmation --- X Exhibit "I" - Invitation to Bid --- X Exhibit "J" - Confirmation of Bid --- X Exhibit "K" - Notice of Acceptance of Bid --- X Exhibit "L" - Form of Guaranty --- X Exhibit "M" - Form of Advance Note --- ARTICLE 11 - MANDATORY ARBITRATION 11.1. Mandatory Arbitration. Any controversy or claim between or among the parties hereto including, but not limited to, those arising out of or relating to this Agreement or any related agreements or instruments, including any claim based on or arising from an alleged tort, shall be determined by binding arbitration in accordance with the Federal Arbitration Act (or if not applicable, the applicable state law), the Rules of Practice and Procedure for the Arbitration of Commercial Disputes of Endispute, Inc. (doing business as J.A.M.S./Endispute), and the "Special Rules" set forth below. In the event of any inconsistency, the Special Rules shall control. Judgment upon any arbitration award may be entered in any court having jurisdiction. Any party to this Agreement may bring an action, including a summary or expedited proceeding, to compel arbitration of any controversy or claim to which this agreement applies in any court having jurisdiction over such action. a. Special Rules. The arbitration shall be conducted in the city of the Borrower's domicile at time of this Agreement's execution and administered by J.A.M.S./Endispute who will appoint an arbitrator; if J.A.M.S./Endispute is unable or legally precluded from administering the arbitration, then the American Arbitration Association will serve. All arbitration hearings will be commenced within 90 days of the demand for arbitration; further, the arbitrator shall only, upon a showing of cause, be permitted to extend the commencement of such hearing for up to an additional 60 days. b. Reservations of Rights. Nothing in this Agreement shall be deemed to (i) limit the applicability of any otherwise applicable statutes of limitation or repose and any waivers contained in this Agreement; or (ii) be a waiver by Agent or Lenders of the protection afforded to it by 12 U.S.C. Sec. 91 or any substantially equivalent state law; or (iii) limit the right of Agent or Lenders (A) to exercise self help remedies such as (but not limited to) setoff, or (B) to foreclose against any real or personal property collateral, or (C) to obtain from a court provisional or ancillary remedies such as (but not limited to) injunctive relief or the appointment of a receiver. Agent and Lenders may exercise such self help rights, foreclose upon such property, or obtain such provisional or ancillary remedies before, during or after the pendency of any arbitration proceeding brought pursuant to this Agreement. At Lenders' option, foreclosure under a deed of trust or mortgage may Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 26 30 be accomplished by any of the following: the exercise of a power of sale under the deed of trust or mortgage, or by judicial sale under the deed of trust or mortgage, or by judicial foreclosure. Neither the exercise of self help remedies nor the institution or maintenance of an action for foreclosure or provisional or ancillary remedies shall constitute a waiver of the right of any party, including the claimant in any such action, to arbitrate the merits of the controversy or claim occasioning resort to such remedies. No provision in the Loan Documents regarding submission to jurisdiction and/or venue in any court is intended or shall be construed to be in derogation of the provisions in any Loan Document for arbitration of any controversy or claim. ARTICLE 12 - ENTIRE AGREEMENT 12.1. Entire Agreement. The Loan Documents constitute the entire understanding and agreement between the parties hereto with respect to the transactions arising in connection with the Loan and supersede all prior understandings and agreements between the parties hereto with respect to the matters addressed in the Loan Documents. Except as incorporated in writing in the Loan Documents, there are not, and were not, and no Persons are or were authorized to make, on behalf of Lenders any representations, understandings, stipulations, agreements or promises with respect to the matters addressed in the Loan Documents. THE WRITTEN LOAN DOCUMENTS REPRESENT THE FINAL AGREEMENT BETWEEN THE PARTIES AND MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL AGREEMENTS BETWEEN THE PARTIES. REMAINDER OF PAGE INTENTIONALLY BLANK. SIGNATURE PAGES FOLLOW. Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 27 31 EXECUTED and DELIVERED as of the date first recited above. BORROWER: BORROWER'S TAX IDENTIFICATION CAMDEN PROPERTY TRUST NO.: 76-6088377 By: --------------------------------- G. Steven Dawson, Senior Vice President of Finance and Chief Financial Officer AGENT: NATIONSBANK OF TEXAS, N.A., as Agent and a Lender By: ---------------------------------- Cynthia C. Sanford, Senior Vice President Signature Page One of Two Pages 32 LENDERS: BANK OF AMERICA NATIONAL TRUST AND SAVINGS ASSOCIATION By: -------------------------------- Name: --------------------------- Its: ---------------------------- FLEET NATIONAL BANK By: -------------------------------- Name: --------------------------- Its: ---------------------------- UNION BANK OF SWITZERLAND By: -------------------------------- Name: --------------------------- Its: ---------------------------- BANK ONE, TEXAS, N.A. By: -------------------------------- Name: --------------------------- Its: ---------------------------- Signature Page Two of Two Pages 33 EXHIBIT "A" CLOSING CONDITIONS 1. Fees and Expenses. Agent shall have received the Initial Commitment Fee and Borrower shall have paid all other fees, costs and expenses then required to be paid pursuant to this Agreement. 2. Financial Statements. Agent shall have received and approved (a) the audited annual financial statements for Borrower dated December 31, 1996, and (b) the unaudited quarterly financial statements of Borrower dated September 30, 1997. 3. Authorization, etc. Agent shall have received and approved such evidence Agent requires of the existence, good standing, authority and capacity of Borrower and its representatives to execute, deliver and perform the Loan Documents including (a) a copy of each document creating it or governing the existence, power or authority of it or its representatives, and (b) all certificates, resolutions, and consents required by Agent. 4. Loan Documents. Borrower and each other Person required by Agent shall have duly executed, acknowledged, sworn to, recorded, filed, and delivered to Agent all Loan Documents then required by Agent, dated the Closing Date, and in form and content satisfactory to Agent, including (a) this Agreement; (b) the Notes, and (c) a Guaranty executed by Camden Subsidiary, Inc. and Camden Operating, L.P. 5. Opinions of Counsel. Agent shall have received the written opinion of counsel for and requested by Borrower and its representatives addressed to Agent and Lenders, dated the Closing Date and satisfactory to Agent in form and content, covering, among other things, the organization, existence, and authorization of Borrower and its representatives, the due execution and delivery of the Loan Documents, the validity and enforceability of the Loan Documents, and such other matters as Agent may request. Borrower's counsel must be satisfactory to Agent. 6. Other Documents. Borrower and its representatives shall have delivered to Agent, in form and content satisfactory to Agent, such other documents and certificates as Agent may reasonably request in connection with the transactions contemplated in this Agreement. Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 30 34 EXHIBIT "B" AFFIDAVIT AND ADVANCE REQUEST TO: NationsBank of Texas, N.A., Agent Date: BORROWER: Camden Property Trust -------------- LOAN: $150,000,000.00 Revolving Line of Credit ADVANCE REQUEST NO.: -------------------------------- REQUESTED DATE OF ADVANCE: AMOUNT: $ -------------------------- ------------
BEFORE ME, the undersigned authority, on this day personally appeared the person executing this affidavit, who, being by me first duly sworn, deposed and said: 1. I am the person and officer of Borrower as indicated on the execution line of this affidavit; I am duly authorized to make this affidavit and to execute and deliver the related request for payment. 2. All reports, statements, and other documentation heretofore or herewith delivered by or on behalf of Borrower to Lenders are substantially true and correct and in all respects what they purport and appear to be. 3. Except for liens of the type and not exceeding the amounts set forth in subsection (ix) of the definition of the term "Permitted Liens" in Article 2, Borrower has not been served with any written notice that a lien will be claimed for any amount unpaid for materials delivered, labor performed, or services provided in connection with the Property, or any part thereof. To Borrower's knowledge, no valid basis exists for the filing of any mechanic's or materialman's liens or claims with respect to all or any part of the Property. 4. All representations and warranties contained in the Loan Agreement and the other Loan Documents are true and accurate in all respects as of the date of this Advance Request, except as follows (if any): 5. No Default or Potential Default exists (or would result from the Advance herein requested), except as follows (if any): 6. No part of the Property has been taken by eminent domain proceedings, and Borrower has not received written notice of any proceedings or negotiations therefor which are pending, except as follows (if any): 7. All conditions precedent to Borrower's right to receive the requested Advance have been met in accordance with the terms of the Loan Documents, except as follows (if any): 8. The outstanding principal balance of the Loan after the funding of this Advance will not exceed the Maximum Available Amount. The Maximum Available Amount as of the date hereof is $_____________. 9. Borrower agrees to notify Agent in writing immediately if the matters certified herein will not be true and correct as of the time of the requested Advance, and the foregoing certifications shall be deemed made and ratified as of the time of the Advance unless Borrower so notifies Agent in writing before that time. 10. As of the date hereof, Borrower has no claims, causes of action, demands against any Lender, or defenses or offsets to payment of the Loan or any other amounts due under the Loan Documents. 11. Agent's acceptance of this Advance Request will in no way operate as a waiver by Lenders of any term, condition, covenant or agreement contained in the Loan Documents, or of Agent's right to enforce any term, condition, covenant or agreement therein. EXECUTED as of the date first written above. AFFIANT: --------------------------------------- of CAMDEN PROPERTY TRUST --------------- Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 31 35 THE STATE OF TEXAS ) ) COUNTY OF HARRIS ) SUBSCRIBED AND SWORN BEFORE ME, on this day of , 199 , by ---- ---------- -- - ---------------------------- ------------------------------------- Notary Public Printed Name: ------------------------ My Commission Expires: --------------- Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 32 36 EXHIBIT "C" COMPLIANCE CERTIFICATE NationsBank of Texas, N.A., as Agent ("Agent") 700 Louisiana, 5th Floor Houston, Texas 77002 Attention: Real Estate Administration RE: Restatement and Amendment of Loan Agreement dated effective as of November 25, 1997, between Agent, the Lenders named therein and Camden Property Trust (the "Loan Agreement") Gentlemen: Pursuant to Section 7.1 of the Loan Agreement, the undersigned hereby certifies and warrants to Lenders that as of ___________________________, 199__: 1. The financial statements attached hereto were prepared in accordance with GAAP and present fairly the financial condition and results of operations __________ of as of, and for the ______________ ended on _______________, 199__: 2. The representations and warranties set forth in the Loan Agreement were true and correct with the same effect as if made on and as of that date, except as follows (if any): 3. Attached as Schedule I hereto is an accurate statement of the data regarding the financial covenants referenced in the sections of the Loan Agreement specified in the left-hand margin of Schedule I. The undersigned had duly performed and complied with each covenant, condition, agreement and other obligation of or applicable to the undersigned under the Loan Agreement and each other "Loan Document" as defined therein, except as follows (if any): 4. Attached as Schedule II hereto is an accurate statement of the data regarding the covenants of Borrower's public debt issue(s), if any. The undersigned had duly performed and complied with each covenant, condition, agreement and other obligation of or applicable to the undersigned under said public debt issue(s), except as follows (if any): 5. Attached as Schedule III hereto is an accurate statement of certain data regarding the specific projects in the Pool. To the knowledge of the undersigned, no Default or Potential Default existed under the Loan Agreement, except as follows (if any): Capitalized terms used and not otherwise defined herein have the meanings given them in the Loan Agreement. In preparing this Compliance Certificate, an authorized officer of the undersigned entity has conducted, or caused to be conducted under his or her supervision, such investigations as in his or her opinion are necessary and satisfactory in scope and substance to determine the facts set forth herein and upon which Lenders and the undersigned entity are justified in relying. WITNESS the due execution of this Compliance Certificate by the undersigned's duly authorized representative on _________, 199__ CAMDEN PROPERTY TRUST By: ----------------------------------- Name: --------------------------------- Title: -------------------------------- Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 33 37 SCHEDULE I
======================================================================================================= SECTION OR SUBSECTION REQUIRED OR PERMITTED - ------------------------------------------------------------------------------------------------------- 5.1(a) Undepreciated book value of 1. Pool - undepreciated book value Pool of at least 175% of Total per GAAP Unsecured Debt a. Unencumbered assets owned $ by Borrower -------- b. Unencumbered assets owned by [____________________] $ -------- [Please list amount of unencumbered assets for each Consolidated Subsidiary] $ -------- c. Total $ -------- 2. Loan balance $ -------- 3. Balance of other unsecured debt $ -------- 4. Sum of 2. and 3. $ -------- 5. Percentage of 4. that 1. equals % -------- 6. 5. equals or exceeds 175% (yes or no) -------- 7. If no, amount of Excess Debt (being amount by which 2. must be reduced so that 5. equals or $ exceeds 175%): --------- - --------------------------------------------------------------------------------------------------------- 5.1(b) Development Projects not exceed 1. Undepreciated book value of Pool $ 7.5% of Pool --------- 2. Undepreciated book value of Development Projects $ --------- 3. [2 divided by 1] = % --------- 4. 7.5% equals or exceeds 3. (yes or no) --------- --- - --------------------------------------------------------------------------------------------------------- 5.1(c) Pool (excluding Development 1. Occupancy Level of Pool Projects) occupancy level of at (excluding Development least 85% Projects) using average occupancy level for each of preceding 3 months % ---------- 2. 1. equals or exceeds 85% (yes or no) ---------- --- - ----------------------------------------------------------------------------------------------------------
Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 34 38 - ---------------------------------------------------------------------------------------------------------- 5.1(d) Total Unsecured Debt not exceed 1. Loan balance $ maximum hypothetical loan ---------- amount for which Target Monthly Amortization ("TMA") can be 2. Balance of other unsecured debt $ calculated so that Pool NOI for ---------- 90 days equals or exceeds 150% of TMA 3. Sum of 1. and 2. $ ---------- 4. Pool NOI for preceding 90 days using greater of actual capital expenditures and reserves or $175/unit/year $ ---------- 5. 150% X [TMA for 90 days calculated using 3. amortized over 25 years at greater of (a) 8.25% or (b) 7-year treasuries plus 1.75%] $ ---------- 6. Maximum hypothetical loan amount for which TMA can be calculated so that 4. equals or exceeds 5. $ ---------- 7. 3. is less than or equal to 6. (yes or no) ---------- --- 8. If yes, amount of Excess Debt (being .6 minus .3) ---------- - ---------------------------------------------------------------------------------------------------------- 7.22 Maintain minimum net worth of 1. Current net worth per GAAP $ at least 90% of 12/31/96 net ---------- worth per GAAP (including 2. 90% of 6/30/97 net worth per Debentures) but adjusted by (a) GAAP (including Debentures) $ post 6/30/97 accumulated ---------- depreciation, (b) completed 3. post - 6/30/97 accumulated mergers or acquisitions and (c) depreciation $ 90% of net proceeds of future ---------- securities 4. completed mergers or acquisitions $ ---------- 5. 90% of net proceeds of securities issued after 6/30/97 $ ---------- 6. 2. as adjusted by 3., 4 and 5. $ ---------- 7. 1. exceeds 6. (yes or no) $ --- ---------- - ---------------------------------------------------------------------------------------------------------- 7.23(a) Total liabilities (per GAAP 1. Total liabilities per GAAP except include contingent except grossed up to reflect liabilities and exclude contingent liabilities and Debentures) to Total Assets not exclude Debentures $ to exceed .60 to 1.0 ---------- 2. Total Assets $ ---------- 3. Ratio of 1. to 2. ---------- 4. .60 to 1.0 equals or exceeds 3. (yes or no) ---------- --- - ---------------------------------------------------------------------------------------------------------- 7.23(b) Secured liabilities (per GAAP) 1. Liabilities secured by Liens to Total Assets not to exceed (per GAAP) $ .35 to 1.0 ---------- 2. Total Assets $ ---------- 3. Ratio of 1. to 2. ---------- 4. .35 to 1.0 equals or exceeds 3. (yes or no) ---------- --- - ----------------------------------------------------------------------------------------------------------
Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 35 39 - ---------------------------------------------------------------------------------------------------------- 7.25(a) EBITDA for preceding 12 months 1. Earnings before interest, to interest to exceed 1.75 to taxes, depreciation and 1.0 amortization expense for preceding 12 months $ ---------- 2. All interest on debt $ ---------- 3. Ratio of 1. to 2. ---------- 4. 3. exceeds 1.75 to 1.0 (yes or no) --- ---------- - ---------------------------------------------------------------------------------------------------------- 7.25(b) EBITDA for preceding 12 months 1. Earnings before interest, to Fixed Charges to exceed 1.75 taxes, depreciation and to 1.0 amortization expense for preceding 12 months $ ---------- 2. Fixed Charges $ ---------- 3. Ratio of 1. to 2. ---------- 4. .3 exceeds 1.75 to 1.0 (yes or no) --- ---------- - ---------------------------------------------------------------------------------------------------------- 7.26 Unencumbered NOI to interest on 1. NOI from Property not subject unsecured debt exceed 1.75 to to Liens using greater of 1.0 actual capital expenditures and reserves or $175/unit/year $ ---------- 2. Debt not secured by Liens $ ---------- 3. Ratio of 1. to 2. ---------- 4. 3. exceeds 1.75 to 1.0 (yes or no) --- ---------- - ---------------------------------------------------------------------------------------------------------- 7.27 Distributions not to exceed 95% 1. Distributions $ of funds from operations ---------- 2. Funds from operations $ ---------- 3. [1. divided by 2.] = % ---------- 4. 3. is less than or equal to 95% (yes or no) ---------- --- - ---------------------------------------------------------------------------------------------------------- 7.28 Cost of unimproved real estate 1. Cost of unimproved real estate $ not to exceed 5% of Total Assets (excluding Development Projects) ---------- $ 2. Total Assets ---------- 3. [1. divided by 2.] = % ---------- 4. 5% equals or exceeds 3. (yes or no) ---------- --- - ---------------------------------------------------------------------------------------------------------- 7.29(a) Non-controlling interests in 1. Non-controlling interests in partnerships, joint ventures partnerships, joint ventures and similar entities not to and similar entities $ exceed 10% of Total Assets ---------- 2. Total Assets $ ---------- 3. [1. divided by 2.] = % ---------- 4. 10% equals or exceeds 3. (yes or no) ---------- --- - ----------------------------------------------------------------------------------------------------------
Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 36 40 - ---------------------------------------------------------------------------------------------------------- 7.29(b) Cash portion of 1. Cash portion of controlling-interest stock controlling-interest stock purchase price not to exceed purchase price $ 10% of Total Assets ---------- 2. Total Assets $ ---------- 3. [1. divided by 2.] = % ---------- 4. 10% equals or exceeds 3. (yes or no) ---------- --- - ---------------------------------------------------------------------------------------------------------- 7.29(c) Non-cash portion of 1. Non-cash portion of controlling-interest stock not controlling-interest stock $ to exceeds 33 1/3% of Total ---------- Assets 2. Total Assets $ ---------- 3. [1. divided by 2.] = % ---------- 4. 33 1/3% equals or exceeds .3 (yes or no) ---------- --- - ---------------------------------------------------------------------------------------------------------- 7.30 Non-apartment projects not to 1. Undepreciated book value of exceed 7.5% of Total Assets non-apartment projects $ ---------- 2. Total Assets $ ---------- 3. [1. divided by 2.] = % ---------- 4. 7.5% equals or exceeds 3. (yes or no) ---------- --- - ---------------------------------------------------------------------------------------------------------- 7.31 Cost of Development Projects to 1. Cost of Development Projects $ undepreciated book value of ---------- Property not to exceed .15 to 2. Undepreciated book value of 1.0 Property $ ---------- 3. Ratio of 1. to 2. % ---------- 4. .15 to 1.00 equals or exceeds 3. (yes or no) ---------- --- - ---------------------------------------------------------------------------------------------------------- 7.32 Notes receivable not to exceed 1. Notes receivable $ 10% of net worth ---------- 2. Net worth per GAAP $ ---------- 3. [1 divided by 2] = % ---------- 4. 10% equals or exceeds 3. (yes or no) ---------- --- - ---------------------------------------------------------------------------------------------------------- 7.33 Total liabilities (per GAAP 1. Total liabilities per GAAP except include contingent except grossed up to reflect liabilities and exclude contingent liabilities and Debentures) to Market exclude Debentures $ Capitalization not to exceed ---------- .50 to 1.0. 2. Market Capitalization $ ---------- 3. Ratio of 1. to 2. ---------- 4. .50 to 1.0 equals or exceeds 3. (yes or no) ---------- --- - ---------------------------------------------------------------------------------------------------------- Debt rating of at least BBB- 1. S&P Rating for S&P and Baa3 for Moody's ---------- 2. Moody's Rating ---------- 3. Duff & Phelps Rating ---------- 4. Fitch Rating ---------- ==========================================================================================================
Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 37 41 SCHEDULE II [TO BE INSERTED-REGARDING ITEM 4 OF COMPLIANCE CERTIFICATE] Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 38 42 SCHEDULE III [TO BE INSERTED-REGARDING ITEM 5 OF COMPLIANCE CERTIFICATE] Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 39 43 EXHIBIT "D" EURODOLLAR RATE NOTICE Re: Promissory Notes Dated effective as of November 25, 1997 Pursuant to the terms and provisions of the Promissory Notes dated effective as of November 25, 1997, executed by CAMDEN PROPERTY TRUST ("Borrower") in connection with the Restatement and Amendment of Loan Agreement (the "Loan Agreement") dated of even date therewith between Borrower, NATIONSBANK OF TEXAS, N.A. ("Agent") and the Lenders named therein, Agent is hereby notified of Borrower's selection of the Eurodollar Rate as the Applicable Rate for calculating interest on the Notes as follows: 1. The Effective Date will be ______________________; 2. The Interest Period will commence on the Effective Date and will expire on ______________________; 3. The Eurodollar Rate Principal will be $_________________; 4. The Applicable Rate is based on the Eurodollar Rate plus one and _______ percent ( %) and will be equal to _______ percent ( %) per annum. Borrower hereby acknowledges and agrees that: (a) it has selected the Eurodollar Rate as set forth above as a basis for calculating the Applicable Rate for the Eurodollar Rate Principal and Interest Period set forth above; (b) the selection of the Eurodollar Rate is subject to the terms and conditions of the Loan Documents; (c) the terms have the same meanings as defined in the Promissory Notes and the Loan Agreement; and (d) Borrower represents and warrants that no Default or Potential Default has occurred and is continuing under the Loan Agreement. Please confirm the above selection by executing and returning the enclosed duplicate of this letter to the address set forth below. Dated: , 199 . ---------------------------- -- BORROWER: ADDRESS: CAMDEN PROPERTY TRUST Camden Property Trust 3200 Southwest Freeway, Suite 1500 Houston, Texas 77027 Attention: G. Steven Dawson By: ------------------------------------ G. Steven Dawson, Senior Vice President of Finance and Chief Financial Officer Agent hereby confirms Borrower's selection of the Eurodollar Rate as set forth above. NATIONSBANK OF TEXAS, N.A., as Agent By: ------------------------------------ Name: ---------------------------------- Title: --------------------------------- Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 40 44 EXHIBIT "E" SCHEDULE OF PARTIES, ADDRESSES, COMMITMENTS AND WIRING INFORMATION
=========================================================================================================== Borrower - ----------------------------------------------------------------------------------------------------------- Camden Property Trust 3200 Southwest Freeway Suite 1500 Houston, Texas 77027 Attention: Mr. G. Steven Dawson Tel No.: (713) 964-3533 Fax No.: (713) 964-3599 - ----------------------------------------------------------------------------------------------------------- Lenders Commitment Commitment % - ----------------------------------------------------------------------------------------------------------- NationsBank of Texas, N.A. $35,000,000 23.33333% 700 Louisiana, 5th Floor Houston, Texas 77002 Attention: Real Estate Administration Tel No.: (713) 247-6900 Fax No.: (713) 247-7321 Wiring Instructions: NationsBank of Texas, N.A. ABA # 111000025 Corporate Loans FTA # 1292000883 Re: Camden Property Trust Attn.: Shelley Coppin (713) 247-6426 - ----------------------------------------------------------------------------------------------------------- Bank of America National Trust and Savings $30,000,000 20.00000% Association 5 Park Plaza, Suite 500 Irvine, California 92614 Attn: Carla Hudson Tel No.: (714) 260-5772 Fax No.: (714) 260-5639 Wiring Instructions: Bank of America NT&SA ABA #121000358 Account No.: 15032-00416 Re: Camden (FF047) Attn: Maria Mora - ----------------------------------------------------------------------------------------------------------- Bank One, Texas, N.A. $25,000,000 16.66667% 910 Travis: 2nd Floor Houston, Texas 77072-5860 Attn: Gloria Martinez Tel No.: (713) 751-3847 Fax No.: (713) 751-3878 Wiring Instructions: Bank One, Texas, N.A. ABA #111000614 Account No.: 0010021350 Attn: Judy Anderson-Real Estate Administration - -----------------------------------------------------------------------------------------------------------
Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 41 45 - ----------------------------------------------------------------------------------------------------------- Fleet National Bank $30,000,000 20.00000% 111 Westminster Street Suite 800 Providence, Rhode Island 02903-2305 Attn: Carol Rooney, Loan Administrator Tel No.: (401) 278-3949 Fax No.: (401) 278-5166 Wiring Instructions: Fleet National Bank Connecticut ABA # 0119900571 Account No.: 1510351-03121 Re: Camden Property Trust Attn: Carol Rooney - ----------------------------------------------------------------------------------------------------------- Union Bank of Switzerland $30,000,000 20.00000% 299 Park Avenue - 41st Floor New York, New York 10171-0026 Attention: Andeline Griffith, Asst. Vice President Tel No.: (212) 821-3412 Fax No.: (212) 821-4138 Wiring Instructions: Union Bank of Switzerland ABA #: 026008439 Account No.: 500038USIMPL7 Re: Camden Property Trust Attn: Loan Administration - John O'Shea =========================================================================================================== Total $150,000,000 100% ===========================================================================================================
Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 42 46 EXHIBIT "F" FORM OF ASSIGNMENT AND ACCEPTANCE This Assignment and Acceptance (the "Assignment and Acceptance") is made as of_________________________, 199__ ,(the "Effective Date"), between ___________________ (the "Assignor") and _____________________ (the "Assignee"). Reference is made to that certain Restatement and Amendment of Loan Agreement dated effective as of November 25, 1997 (the "Loan Agreement") among Camden Property Trust, a Texas real estate investment trust ("Borrower"), NationsBank of Texas, N.A., a national banking association, individually and as agent for the Lenders defined therein (collectively, "Lenders"), and Lenders. This Assignment and Acceptance is executed and delivered pursuant to, and as contemplated in, the Loan Agreement. Capitalized terms used but not defined herein shall have the meanings assigned thereto in the Loan Agreement. The Assignor and the Assignee hereby covenant and agree as follows: 1. The Assignor hereby sells and assigns to the Assignee, and the Assignee hereby purchases and assumes from the Assignor, $________ of the Assignor's Commitment and outstanding principal debt, representing a Pro Rata Part of the Total Commitment of ___% as of the Effective Date. The foregoing interest for all events and circumstances shall be deemed such Assignee's Pro Rata Part (in addition to any other Pro Rata Part of Assignee, if any) in the Total Commitment, the outstanding principal balance of the Loan, the Loan Documents and all payments made to or received from Borrower pursuant to the Loan Documents and is subject to the terms and conditions provided in the Loan Documents. 2. The Assignor (i) hereby represents and warrants to the Assignee that Assignor is the legal and beneficial owner of the Pro Rata Part being assigned by it hereunder and such interest is free and clear of any adverse claim, and (ii) hereby represents and warrants that as of the date hereof the Pro Rata Part in the Total Commitment and the outstanding principal balance of the Loan being assigned hereunder is ___% without giving effect to assignments that are not yet effective. 3. The Assignee hereby confirms and acknowledges that, except as specifically set forth herein, the Assignor: (i) makes no representation or warranty and assumes no responsibility with respect to any statements, warranties or representations made in or in connection with the Loan Documents, or the execution, legality, validity, enforceability, genuineness, sufficiency or value of the Loan Documents or any other instrument or document furnished pursuant thereto; (ii) makes no representation or warranty and assumes no responsibility with respect to the financial condition of Borrower or any other person or entity which is a party to any of the Loan Documents (collectively, "Other Party"); and (iii) makes no representation or warranty and assumes no responsibility with respect to the performance or observance by Borrower or any Other Party of any of its obligations under any of the Loan Documents or any other instrument or document furnished pursuant thereto. 4. The Assignee hereby: (i) confirms that it has received a copy of the Loan Documents, together with such other documents and information as it has deemed appropriate to make its own credit analysis and decision to enter into this Assignment and Acceptance; and (ii) agrees that it will, independently and without reliance upon the Assignor or any other counterparty and based on such documents and information as it shall deem appropriate at the time, continue to make its own credit decisions in taking or not taking action under the Loan Documents. 5. The Assignee hereby: (i) appoints and authorizes Agent under the Loan Documents to take such action as agent on its behalf and to exercise such powers under the Loan Documents as are delegated to Agent by the terms of the Loan Documents; and (ii) agrees with the Assignor for the benefit of Agent and Borrower that it will perform all of the obligations which by the terms of the Loan Documents are required to be performed by it as a counterparty (including, without limitation, the obligation to make payments pursuant to the Loan Documents) and that it shall be liable directly to the Assignor, Agent, Borrower and, as provided in the Loan Agreement, to each Lender for the performance of such obligations. 6. If the Assignee is organized under the laws of a jurisdiction outside the United States, it hereby represents and agrees that it has delivered or will within three (3) days after the date of the execution of this Agreement deliver to the Assignor and Agent completed and signed copies of any forms that may be required by the United States Internal Revenue Service in order to certify the Assignee's exemption from United States withholding taxes with respect to any payment or distributions made or to be made to the Assignee with respect to the Loan Documents. 7. As of the Effective Date, (i) the Assignee shall be a party to the Loan Documents and, to the extent provided in this Assignment and Acceptance, have the rights and obligations of a counterparty thereunder, and (ii) the Assignor shall, to the extent provided in this Assignment and Acceptance, relinquish its rights and be released from its obligations in the Loan Documents with respect to the Pro Rata Part being assigned hereunder. 8. The Assignee hereby represents and warrants as of the Effective Date: Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 43 47 a. The Assignee has all necessary corporate power and authority to purchase and own the interest being assigned to it hereunder, and has all necessary corporate power and authority to perform all its obligations with respect to this Assignment and Acceptance; b. The execution and delivery of this Assignment and Acceptance and all other instruments and documents executed in connection herewith have been duly authorized by all requisite corporate action of the Assignee; and c. No approval, authorization, order, license or consent of, or registration or filing with, any governmental authority or other person is required in connection with this Assignment and Acceptance. 9. THIS ASSIGNMENT AND ACCEPTANCE SHALL BE GOVERNED BY, AND CONSTRUED IN ACCORDANCE WITH, THE LAWS OF THE STATE OF TEXAS, WITHOUT GIVING EFFECT TO THE CONFLICT OF LAWS PRINCIPLES THEREOF. 10. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original but all of which together shall constitute one and the same instrument. 11. Assignee's address for notices and payments under the Loan Agreement and this Assignment and Acceptance are set forth in Schedule 1 attached hereto and made apart hereof. Assignee may by notice in accordance with the Loan Agreement to the Assignor, Agent and Borrower change the address or telex number or facsimile number at which notices, communications and payments are to be given to it. ASSIGNOR: --------------------------------------- By: ------------------------------------ Title: --------------------------------- ASSIGNEE: By: ------------------------------------ Title: --------------------------------- ACCEPTED BY AGENT THIS DAY OF - ----- ----------- AGENT: - ------------------------------------ By: --------------------------------- Title: ------------------------------ Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 44 48 SCHEDULE 1 TO ASSIGNMENT AND ACCEPTANCE ADDRESS FOR NOTICES AND ACCOUNTS FOR PAYMENTS Address: ------------------------------------------- ------------------------------------------- ------------------------------------------- Telecopier: ---------------------- Account for Payments Account No.: --------------------------------------- Attention: ----------------------------------------- ----------------------------------------- Reference: ----------------------------------------- Depositary: ---------------------------------------- Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 45 49 EXHIBIT "G" BID RATE NOTE FORM Effective as of $75,000,000.00 Houston, Texas November 25, 1997 FOR VALUE RECEIVED, the undersigned, CAMDEN PROPERTY TRUST (herein called "Borrower"), hereby promises to pay to the order of _______________, a ___________________ ("Lender"), in immediately available funds in lawful money of the United States of America, at the address of Agent (as such term is defined in the hereinafter referenced Loan Agreement) which is 700 Louisiana, 5th Floor, in the City of Houston, Harris County, Texas 77002, or at such other place as may be from time to time designated by Lender by notice to Borrower, the lesser of SEVENTY-FIVE MILLION DOLLARS ($75,000,000.00) or the unpaid principal amount of the Bid Rate Loans (as defined in the Loan Agreement) made by Lender to Borrower pursuant to the Loan Agreement, payable at such times, and in such amounts, as are agreed to by Lender and Borrower pursuant to Section 3.7 of the Loan Agreement. The books and records of Agent shall be prima facie evidence of all sums due Lender. Borrower promises to pay interest on the unpaid principal amount of the Bid Rate Loans from the date such principal amount is disbursed until such principal amount is paid in full at such interest rates as are agreed to by Lender and Borrower pursuant to Section 3.7 of the Loan Agreement. This Note has been executed and delivered pursuant to the Restatement and Amendment of Loan Agreement (the "Loan Agreement") dated of even effective date herewith between Borrower, NationsBank of Texas, N.A., as Agent and for itself and other "Lenders" described therein. Capitalized terms used and not defined herein are used herein with the meanings given them in the Loan Agreement. This Note is one of the "Bid Rate Notes" referred to in the Loan Agreement. Reference is hereby made to the Loan Agreement for all purposes, including, but not limited to provisions regarding (a) the payment and prepayment hereof and the acceleration of the maturity hereof, certain of which provisions are contained in Section 3.7 and Article 4 of the Loan Agreement, (b) exercise of rights, powers, and remedies, (c) payment of the attorney's fees, court costs, and other costs of collection, and (d) certain waivers by Borrower and other obligors. It is the intent of Lender and Borrower and all other parties to the Loan Documents to conform to and contract in strict compliance with applicable usury Law from time to time in effect. All agreements between Lender or any other holder hereof and Borrower (or any other party liable with respect to any indebtedness under the Loan Documents) are hereby limited by the provisions of this paragraph which shall override and control all such agreements, whether now existing or hereafter arising. In no way, nor in any event or contingency (including but not limited to prepayment, default, demand for payment, or acceleration of maturity of any obligation), shall the interest taken, reserved, contracted for, charged, chargeable or received under this Note or under any of the other Loan Documents, or otherwise, exceed the Maximum Rate. If, from any possible construction of any document, interest would otherwise be payable in excess of the Maximum Rate, any such construction shall be subject to the provisions of this paragraph and such document shall, ipso facto, be automatically reformed and the interest payable shall be automatically reduced to the Maximum Rate, without the necessity of execution of any amendment or new document. If the holder hereof shall ever receive anything of value that is characterized as interest under applicable Law and that would apart from this provision be in excess of the Maximum Rate, an amount equal to the amount that would have been excessive interest shall, without penalty, be applied to the reduction of the principal amount owing on the indebtedness evidenced hereby in the inverse order of its maturity and not to the payment of interest, or refunded to Borrower or the other payor thereof if and to the extent such amount that would have been excessive exceeds such unpaid principal. The right to accelerate maturity of this Note or any other indebtedness does not include the right to accelerate any interest that has not otherwise accrued on the date of such acceleration, and the holder hereof does not intend to charge or receive any unearned interest in the event of acceleration. All interest paid or agreed to be paid to the holder hereof shall, to the extent permitted by applicable Law, be amortized, prorated, allocated and spread throughout the full stated term (including any renewal or extension) of such indebtedness so that the amount of interest on account of such indebtedness does not exceed the Maximum Rate. As used in this paragraph, the term "applicable Law" shall mean the Laws of the State of Texas or the federal Laws of the United States applicable to this transaction, whichever Laws allow the greater interest, as such Laws now exist or may be changed or amended or come into effect in the future. If more than one Person executes this Note as Borrower, all of said Persons shall be jointly and severally liable for payment of the indebtedness evidenced hereby. Borrower and all sureties, endorsers, guarantors and any other Person now or hereafter liable for the payment of this Note in whole or in part, hereby severally (i) waive demand, presentment for payment, notice of dishonor and of nonpayment, protest, notice of protest, notice of intent to accelerate, notice of acceleration and all other notice (except any notices that are specifically required by this Note or any other Loan Document), filing of suit and diligence in collecting this Note or enforcing any of the security herefor; (ii) agree to any substitution, subordination, exchange or release of any such security or the release of any Person primarily or secondarily liable hereon; (iii) agree that the holder hereof shall not be required first to institute suit or exhaust its remedies hereon against Borrower or others liable or to become liable hereon or to enforce its rights against them or any security herefor; (iv) consent to any extension or postponement of time of payment of this Note Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 46 50 for any period or periods of time and to any partial payments, before or after maturity, and to any other indulgences with respect hereto, without notice thereof to any of them; and (v) submit (and waive all rights to object) to non-exclusive personal jurisdiction in the State of Texas, and venue in the county in which payment is to be made as specified on the first page of this Note, for the enforcement of any and all obligations under the Loan Documents. This Note may not be amended except in a writing specifically intended for such purpose and executed by the party against whom enforcement of the amendment is sought. Any alleged amendment which is not so documented shall not be effective as to any parties. THIS NOTE, AND ITS VALIDITY, ENFORCEMENT AND INTERPRETATION, SHALL BE GOVERNED BY TEXAS LAW (WITHOUT REGARD TO ANY CONFLICT OF LAWS PRINCIPLES) AND APPLICABLE UNITED STATES FEDERAL LAW. IN WITNESS WHEREOF, Borrower has duly executed this Note as of the date first above written. BORROWER: CAMDEN PROPERTY TRUST By: ------------------------------------ G. Steven Dawson, Senior Vice President of Finance and Chief Financial Officer Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 47 51 EXHIBIT "H" BID LOAN REQUEST CONFIRMATION [DATE] NationsBank of Texas, N.A. as Agent for the Lenders party to the Restatement and Amendment of Loan Agreement referred to below Attention:_________________________ Dear:______________________________ The undersigned, Camden Property Trust ("Borrower"), refers to the Restatement and Amendment of Loan Agreement dated as of November 25, 1997 (the "Loan Agreement"), among Borrower, the Lenders named therein and NationsBank of Texas, N.A., as Agent. Capitalized terms used and not defined herein have the meanings assigned to them in the Loan Agreement. Borrower hereby confirms that it has, on the date hereof, given you notice pursuant to Section 3.7 of the Loan Agreement that it requests a Bid Rate Loan under the Loan Agreement, and in that connection sets forth below the terms on which such Bid Rate Loan is requested to be made: (A) Type of Bid Rate Loan(1) ---------- (B) Date of Bid Rate Loan ---------- (C) Aggregate Principal Base Eurodollar ---- ---------- Amount of Bid Rate Loan (2) $ $ ---------- ---------- (D) Maturities ---------- ---------- ---------- ---------- ---------- ---------- (E) If applicable, maximum ---------- ---------- amount requested for each maturity ---------- ---------- ---------- ---------- Upon acceptance of any or all of the Bids offered by Lenders in response to this request, Borrower shall be deemed to affirm as of such date the representations and warranties made in the Loan Agreement. BORROWER: CAMDEN PROPERTY TRUST By: ---------------------------------- G. Steven Dawson, Senior Vice President of Finance and Chief Financial Officer - -------------------- 1 Base or Eurodollar. 2 Not less than $10,000,000.00 and in integral multiples of $1,000,000.00. Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 48 52 EXHIBIT "I" INVITATION TO BID [NAME OF LENDER] [ADDRESS] [DATE] Attention: Reference is made to the Restatement and Amendment of Loan Agreement dated as of November 25, 1997 (the "Loan Agreement") among Camden Property Trust ("Borrower"), the Lenders named therein and NationsBank of Texas, N.A., as Agent for Lenders. Capitalized terms used and not defined herein have the meanings assigned to them in the Loan Agreement. Borrower made a Bid Rate Loan Request on ____________, _____ pursuant to Section 3.7 of the Loan Agreement, and in that connection you are invited to submit a Bid by [DATE] Your Bid must comply with Section 3.7 of the Loan Agreement and the terms set forth below on which the Bid Rate Loan Request was made. (A) Type (Base or Eurodollar) ------------------------ (B) Date of Proposed Bid Rate Loan Borrowing ------------------------ Base Eurodollar ---- ---------- (C) Aggregate Principal Amount of Bid Rate Loan $ $ --------- --------- (D) Maturities and maximum amount, if different from (C), for any maturity --------- --------- --------- --------- --------- --------- Very truly yours, NATIONSBANK OF TEXAS, N.A., as Agent By: ---------------------------------- Printed Name: ------------------------ Title: ------------------------------- Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 49 53 EXHIBIT "J" CONFIRMATION OF BID NationsBank of Texas, N.A. [DATE] Agent for Lenders' party to the Restatement and Amendment of Loan Agreement referred to below Attention: The undersigned [NAME OF BANK], refers to the Restatement and Amendment of Loan Agreement dated as of November 25, 1997 (the "Loan Agreement") among Camden Property Trust ("Borrower"), the Lenders named therein and NationsBank of Texas, N.A., as Agent for Lenders. Capitalized terms used and not defined herein have the meanings assigned to them in the Loan Agreement. The undersigned hereby confirms that on the date hereof it has made a Bid pursuant to Section 3.7 of the Loan Agreement, in response to the Bid Rate Loan Request made by Borrower on _______________, 199_, and in that connection sets forth below the terms on which such Bid is made: (A) Type (Fixed or Eurodollar) ------------------ (B) Date of proposed Bid Rate Loan Borrowing: ------------------ (C) Principal Amount Maximum: $ ------------------ Minimum: $ ------------------ (D) Rate Spread over Base ------------------ Spread over Eurodollar ------------------ (E) Maturity (and maximum amount, if applicable ------------------ for any maturity) ------------------ ------------------ Very truly yours, [NAME OF BANK] By: ------------------------------ Printed Name: -------------------- Title: --------------------------- Restatement and Amendment of Loan Agreement 50 Dated as of November 25, 1997 54 EXHIBIT "K" NOTICE OF ACCEPTANCE OF BID [NAME OF BANK] [DATE] [ADDRESS] Attention: Reference is made to the Restatement and Amendment of Loan Agreement dated as of November 25, 1997 (the "Loan Agreement") among Camden Property Trust ("Borrower"), the Lenders named therein and NationsBank of Texas, N.A., as Agent for Lenders. Capitalized terms used and not defined herein have the meanings assigned to them in the Loan Agreement. Borrower made a Bid Rate Loan Request on __________,_______ pursuant to Section 3.7 of the Loan Agreement, and in that connection you have submitted a Bid. Your Bid has been accepted as set forth below. (A) Type of Bid Rate Loan (Fixed or Eurodollar) ------------------------- (B) Date of Bid Rate Loan Borrowing ------------------------- (C) Aggregate principal Principal Amount Maturity Interest Rate amount of each Bid ---------------- --------- ------------- maturity and interest rate $ ---------------- -------------- ------------ ---------------- -------------- ------------ ---------------- -------------- ------------ ---------------- -------------- ------------ In connection with delivery of the Bid Rate Loan Request, Borrower submitted the Advance Request as required pursuant to Section 3.5(a) of the Loan Agreement. Borrower hereby reaffirms all of the representations and warranties made in said Advance Request as of the date hereof. Very truly yours, CAMDEN PROPERTY TRUST By: -------------------------------- G. Steven Dawson, Senior Vice President of Finance and Chief Financial Officer Agreed to: NATIONSBANK OF TEXAS, N.A., as Agent By: --------------------------------------- Printed Name: ----------------------------- Title: ------------------------------------ Restatement and Amendment of Loan Agreement 51 Dated as of November 25, 1997 55 EXHIBIT "L" FORM OF GUARANTY UNCONDITIONAL GUARANTY AGREEMENT THIS GUARANTY AGREEMENT is executed as of November 25, 1997, by the undersigned (each, a "Guarantor" and collectively, "Guarantors") for the benefit of the Loan Parties defined below. W I T N E S S E T H : WHEREAS, Camden Property Trust, a Texas real estate investment trust ("Borrower"), may from time-to-time be indebted to the Loan Parties pursuant to that certain Restatement and Amendment of Loan Agreement dated November 25, 1997 (herein referred to, together with all amendments, modifications, or supplements thereof, as the "Credit Agreement"), by and between Borrower, each of the Lenders that are parties thereto (the "Lenders"), and NationsBank of Texas, N.A., a national banking association (the "Agent"), as Agent for the Lenders (the Lenders and the Agent, together with their respective successors and assigns are herein called the "Loan Parties"); WHEREAS, capitalized terms used herein shall, unless otherwise indicated, have the respective meanings set forth in the Credit Agreement: WHEREAS, the Loan Parties are not willing to make loans under the Credit Agreement or otherwise extend credit to Borrower unless Guarantors jointly, severally, and unconditionally guarantee payment of all present and future indebtedness and obligations of Borrower to the Loan Parties under the Credit Agreement; and WHEREAS, Guarantors will benefit from the Loan Parties' extension of credit to Borrower; NOW, THEREFORE, as an inducement to the Loan Parties to enter into the Credit Agreement and to make loans to Borrower thereunder, and to extend such credit to Borrower as the Loan Parties may from time-to-time agree to extend, and for other good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, each Guarantor hereby jointly and severally guarantees payment of the Guaranteed Debt (hereinafter defined) as more specifically described hereinbelow in Section 1.03 and hereby agrees as follows: ARTICLE I NATURE AND SCOPE OF GUARANTY SECTION 1.01. DEFINITION OF GUARANTEED DEBT. As used herein, the term "Guaranteed Debt" means: (a) All principal, interest, fees, reasonable attorneys' fees, commitment fees, liabilities for costs and expenses, and other indebtedness, obligations, and liabilities of Borrower to the Loan Parties at any time created or arising in connection with the Credit Agreement, or any amendment thereto or substitution therefor, including, but not limited to, all indebtedness, obligations and liabilities of Borrower to the Loan Parties arising under the Notes and under the other Loan Documents; and (b) All costs, expenses and fees, including, but not limited to court costs and reasonable attorneys' fees, arising in connection with the collection of any or all amounts, indebtedness, obligations and liabilities of Borrower to the Loan Parties described in item (a) of this Section 1.01. Each Guarantor has been supplied a copy of the Credit Agreement and, in particular, has been advised of, read, and understood Section 7.35(b). To the extent that Guaranty Proceeds are actually distributed to holders of the Public Debt, Guarantor understands and agrees that the Guaranteed Debt shall not be deemed reduced by any such payment, and each Guarantor will continue to make payments pursuant to this Guaranty until such time as the Guaranteed Debt has been paid in full after taking into effect any distributions of Guaranty Proceeds to holders of the Public Debt. SECTION 1.02. GUARANTEED DEBT NOT REDUCED BY OFFSET. The indebtedness, liabilities, obligations, and other Guaranteed Debt guaranteed hereby, and the liabilities and obligations of Guarantors to the Loan Parties hereunder, shall not be reduced, discharged, or released because or by reason of any existing or future offset, claim, or defense of Borrower, or any other party, against any Loan Party or against payment of the Guaranteed Debt, whether such offset, claim or defense arises in connection with the Guaranteed Debt (or the transactions creating the Guaranteed Debt) or otherwise. Without limiting the foregoing or any Guarantor's liability hereunder, to the extent that any Loan Party advances funds or extends credit to Borrower, and does not receive payments or benefits thereon in the amounts and at the times required or provided by applicable agreements or laws, each Guarantor is absolutely liable to make such payments to (and confer such benefits on) such Loan Party, on a timely basis. SECTION 1.03. GUARANTY OF OBLIGATION. Each Guarantor hereby jointly, severally, irrevocably and unconditionally guarantees to the Loan Parties (a) the due and punctual payment of the Guaranteed Debt, and (b) the timely performance of all other obligations now or hereafter owed by Borrower to the Loan Parties under the Credit Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 52 56 Agreement. Guarantor hereby jointly, severally, irrevocably and unconditionally covenants and agrees that it is liable for the Guaranteed Debt each as primary obligor. SECTION 1.04. NATURE OF GUARANTY. This Guaranty Agreement is intended to be an irrevocable, absolute, continuing guaranty of payment and is not a guaranty of collection. This Guaranty Agreement may not be revoked by any Guarantor; provided, however, if, according to applicable law, it shall ever be determined or held that a guarantor under a continuing guaranty such as this Guaranty Agreement shall have the absolute right, notwithstanding the express agreement of such a guarantor otherwise, to revoke such guaranty as to Guaranteed Debt which has then not yet arisen, then a Guarantor may deliver to the Agent written notice, in addition to giving such notice as provided in Section 5.02 hereof, that such Guarantor will not be liable hereunder for any Guaranteed Debt created, incurred, or arising after the giving of such notice, and such notice will be effective as to such Guarantor from and after (but not before) such times as said written notice is actually delivered to, in addition to giving such notice as provided in Section 5.02 hereof, and received by and receipted for in writing by the Agent; provided that such notice shall not in anywise affect, impair, or limit the liability and responsibility of any other person or entity with respect to any Guaranteed Debt theretofore existing or thereafter existing, arising, renewed, extended, or modified; provided further, that such notice shall not affect, impair, or release the liability and responsibility of such Guarantor with respect to Guaranteed Debt created, incurred, or arising (or in respect of any Guaranteed Debt agreed or contemplated, in any respect, to be created, whether advanced or not and whether committed to by the Loan Parties or not, including, without limitation, any discretionary advances or extensions of credit which may be made by any Loan Party at its option in the future under any type of loan or credit agreement, arrangement or undertaking) prior to the receipt of such notice by the Agent as aforesaid, or in respect of any renewals, extensions, or modifications of such Guaranteed Debt, or in respect of interest or costs of collection thereafter accruing on or with respect to such Guaranteed Debt, or with respect to attorneys' fees thereafter becoming payable hereunder with respect to such Guaranteed Debt, and shall continue to be effective with respect to any Guaranteed Debt arising or created after any attempted revocation by such Guarantor. The fact that at any time or from time-to-time the Guaranteed Debt may be increased, reduced, or paid in full shall not release, discharge, or reduce the obligation of such Guarantor with respect to indebtedness or obligations of Borrower to the Loan Parties thereafter incurred (or other Guaranteed Debt thereafter arising) under the Credit Agreement, the Notes, or otherwise. This Guaranty Agreement may be enforced by the Loan Parties and any subsequent holder of the Guaranteed Debt and shall not be discharged by the assignment or negotiation of all or part of the Guaranteed Debt. SECTION 1.05. PAYMENT BY GUARANTOR. If all or any part of the Guaranteed Debt shall not be punctually paid when due, whether at maturity or earlier by acceleration or otherwise, then Guarantor shall, immediately upon demand by the Agent, and without presentment, protest, notice of protest, notice of nonpayment, notice of intention to accelerate or acceleration, or any other notice whatsoever, pay in lawful money of the United States of America, the amount due on the Guaranteed Debt to the Agent, for the benefit of the Loan Parties, at the Agent's principal office in Dallas, Texas. Such demand(s) may be made at any time coincident with or after the time for payment of all or part of the Guaranteed Debt, and may be made from time-to-time with respect to the same or different items of Guaranteed Debt. Such demand shall be deemed made, given and received in accordance with Section 5.02 hereof. SECTION 1.06. PAYMENT OF EXPENSES. In the event that any Guarantor should breach or fail to timely perform any provisions of this Guaranty Agreement, then each Guarantor shall, immediately upon demand by the Agent, pay to the Agent, for the benefit of the Loan Parties, all costs and expenses (including court costs and reasonable attorneys' fees) incurred by the Loan Parties in the enforcement hereof or the preservation of the Loan Parties' rights hereunder. The covenant contained in this Section 1.06 shall survive the payment of the Guaranteed Debt. SECTION 1.07. NO DUTY TO PURSUE OTHERS. It shall not be necessary for any Loan Party (and each Guarantor hereby waives any rights which such Guarantor may have to require and Loan Party), in order to enforce such payment by any Guarantor, first to (a) institute suit or exhaust its remedies against Borrower or others liable on the Guaranteed Debt or any other person, (b) enforce the Loan Parties' rights against any security which shall ever have been given to secure the Guaranteed Debt, (c) enforce the Loan Parties's rights against any other guarantors of the Guaranteed Debt, (d) join Borrower or any others liable on the Guaranteed Debt in any action seeking to enforce this Guaranty Agreement, (e) exhaust any remedies available to the Loan Parties against any security which shall ever have been given to secure the Guaranteed Debt, or (f) resort to any other means of obtaining payment of the Guaranteed Debt. The Loan Parties shall not be required to mitigate damages or take any other action to reduce, collect, or enforce the Guaranteed Debt. Further, each Guarantor expressly waives each and every right to which it may be entitled by virtue of the suretyship law of the State of Texas, including without limitation, any rights pursuant to Rule 31, Texas Rules of Civil Procedure, Articles 1986 and 1987, Revised Civil Statutes of Texas and Chapter 34 of the Texas Business and Commerce Code. SECTION 1.08. WAIVER OF NOTICES, ETC. Each Guarantor agrees to the provisions of the Credit Agreement (including without limitation, Section 11.1 thereof, which provides for mandatory arbitration), the Notes, and the other Loan Documents, and hereby waives notice of (a) any loans or advances made by any Loan Party to Borrower, (b) acceptance of this Guaranty Agreement, (c) any amendment or extension of the Credit Agreement, the Notes, the other Loan Documents, or any other instrument or document pertaining to all or any part of the Guaranteed Debt, (d) the execution and delivery by Borrower and any Loan Party of any other loan or credit agreement or of Borrower's execution and delivery of any promissory notes or other documents in connection therewith, (e) the occurrence of any Default or Potential Default, (f) any Loan Party's transfer or disposition of the Guaranteed Debt, or any part thereof, (g) sale or foreclosure (or posting or advertising for sale or foreclosure) of any collateral for the Guaranteed Debt, Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 53 57 (h) protest, proof of nonpayment, or default by Borrower, or (i) any other action at any time taken or omitted by any Loan Party, and, generally, all demands and notices of every kind in connection with this Guaranty Agreement, the Credit Agreement, the Notes, the other Loan Documents, and any documents or agreements evidencing, securing or relating to any of the Guaranteed Debt and the obligations hereby guaranteed. Section 1.09. EFFECT OF BANKRUPTCY, OTHER MATTERS. In the event that, pursuant to any insolvency, bankruptcy, reorganization, receivership, or other debtor relief law, or any judgment, order, or decision thereunder, or for any other reason, (a) any Loan Party must rescind or restore any payment, or any part thereof, received by such Loan Party in satisfaction of the Guaranteed Debt, as set forth herein, any prior release or discharge from the terms of this Guaranty Agreement given to any Guarantor by such Loan Party shall be without effect, and this Guaranty Agreement shall remain in full force and effect, (b) Borrower shall cease to be liable to the Loan Parties for any of the Guaranteed Debt (other than by reason of the indefeasible payment in full thereof by Borrower), the obligations of the Guarantors under this Guaranty Agreement shall remain in full force and effect. It is the intention of the Loan Parties and Guarantors that Guarantors' obligations hereunder shall not be discharged except by Guarantors' performance of such obligations and then only to the extent of such performance. Without limiting the generality of the foregoing, it is the intention of the Loan Parties and Guarantors that the filing of any bankruptcy or similar proceeding by or against Borrower or any person or party obligated on any portion of the Guaranteed Debt shall not affect the obligations of Guarantors under this Guaranty Agreement or the rights of the Loan Parties under this Guaranty Agreement, including, without limitation, the right or ability of the Loan Parties to pursue or institute suit against Guarantor for the entire Guaranteed Debt. ARTICLE II ADDITIONAL EVENTS AND CIRCUMSTANCES NOT REDUCING OR DISCHARGING GUARANTOR'S OBLIGATIONS Each Guarantor hereby consents and agrees to each of the following, and agrees that such Guarantor's obligations under this Guaranty Agreement shall not be released, diminished, impaired, reduced, or adversely affected by any of the following, and waives any common law, equitable, statutory or other rights (including without limitation rights to notice) which such Guarantor might otherwise have as a result of or in connection with any of the following: Section 2.01. MODIFICATIONS, ETC. Any renewal, extension, increase, modification, alteration, or rearrangement of all or any part of the Guaranteed Debt, or of the Credit Agreement, the Notes, or any other Loan Document; Section 2.02. ADJUSTMENT, ETC. Any adjustment, indulgence, forbearance, or compromise that might be granted or given by any Loan Party to Borrower or Guarantor; Section 2.03. CONDITION, COMPOSITION OR STRUCTURE OF BORROWER OR GUARANTOR. The insolvency, bankruptcy, arrangement, adjustment, composition, structure, liquidation, disability, dissolution, or lack of power of Borrower or any other party at any time liable for the payment of all or part of the Guaranteed Debt; or any dissolution of Borrower or such Guarantor, or any sale, lease or transfer of any or all of the assets of Borrower or such Guarantor, or any changes in name, business, location, composition, structure, or changes in the shareholders, partners, or members (whether by accession, secession, cessation, death, dissolution, transfer of assets, or other matter) of Borrower or such Guarantor; or any reorganization of Borrower or such Guarantor; Section 2.04. INVALIDITY OF GUARANTEED DEBT. The invalidity, illegality, or unenforceability of all or any part of the Guaranteed Debt, or any document or agreement executed in connection with the Guaranteed Debt, for any reason whatsoever, including without limitation the fact that (a) the Guaranteed Debt, or any part thereof, exceeds the amount permitted by law, (b) the act of creating the Guaranteed Debt or any part thereof is ultra vires, (c) the officers or representatives executing the Credit Agreement, the Notes, the other Loan Documents, or other documents or otherwise creating the Guaranteed Debt acted in excess of their authority, (d) the Guaranteed Debt violates applicable usury laws, (e) Borrower has valid defenses, claims, or offsets (whether at law, in equity, or by agreement) which render the Guaranteed Debt wholly or partially uncollectible from Borrower, (f) the creation, performance, or repayment of the Guaranteed Debt (or the execution, delivery, and performance of any document or instrument representing part of the Guaranteed Debt or executed in connection with the Guaranteed Debt, or given to secure the repayment of the Guaranteed Debt) is illegal, uncollectible, or unenforceable, or (g) the Credit Agreement, the Notes, the other Loan Documents, or other documents or instruments pertaining to the Guaranteed Debt have been forged or otherwise are irregular or not genuine or authentic. Section 2.05. RELEASE OF OBLIGORS. Any full or partial release of the liability of Borrower on the Guaranteed Debt or any part thereof, or of any co-guarantors, or any other person or entity now or hereafter liable, whether directly or indirectly, jointly, severally, or jointly and severally, to pay, perform, guarantee, or assure the payment of the Guaranteed Debt or any part thereof, it being recognized, acknowledged and agreed by Each Guarantor that Such Guarantor may be required to pay the Guaranteed Debt in full without assistance or support of any other party, and Such Guarantor has not been induced to enter into this Guaranty Agreement on the basis of a contemplation, belief, understanding, or agreement that other parties will be liable to perform the Guaranteed Debt, or that the Loan Parties will look to other parties to perform the Guaranteed Debt; notwithstanding the foregoing, Guarantors do not hereby waive or release (expressly or impliedly) any rights of subrogation, reimbursement, or contribution which it Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 54 58 may have, after payment in full of the Guaranteed Debt, against others liable on the Guaranteed Debt; Guarantors' rights of subrogation and reimbursement are, however, subordinate to the rights and claims of the Loan Parties; SECTION 2.06. OTHER SECURITY. The taking or accepting of any other security, collateral, or guaranty, or other assurance of payment, for all or any part of the Guaranteed Debt; SECTION 2.07. RELEASE OF COLLATERAL, ETC. Any release, surrender, exchange, subordination, deterioration, waste, loss, or impairment (including without limitation negligent, willful, unreasonable, or unjustifiable impairment) of any collateral, property, or security, at any time existing in connection with, or assuring or securing payment of, all or any part of the Guaranteed Debt; SECTION 2.08. CARE AND DILIGENCE The failure of any Loan Party or any other party to exercise diligence or reasonable care or act, fail to act, or comply with any duty in the administration, preservation, protection, enforcement, sale application, disposal, or other handling or treatment of all or any part of Guaranteed Debt or any collateral, property, or security at any time securing any portion thereof, including, without limiting the generality of the foregoing, the failure to conduct any foreclosure or other remedy fairly, in a commercially reasonable manner, or in such a way so as to obtain the best possible price or a favorable price or otherwise act or fail to act; SECTION 2.09. STATUS OF LIENS. The fact that any collateral, security, security interest, or lien contemplated or intended to be given, created, or granted as security for the repayment of the Guaranteed Debt shall not be properly perfected or created, or shall prove to be unenforceable or subordinate to any other security interest or lien, it being recognized and agreed by each Guarantor that such Guarantor is not entering into this Guaranty agreement in reliance on, or in contemplation of the benefits of, the validity, enforceability, collectibility, or value of any of the collateral for the Guaranteed Debt; notwithstanding the foregoing, Guarantors do not hereby waive or release (expressly or impliedly) any right to be subrogated to the rights of the Loan Parties in any collateral or security for the Guaranteed Debt after payment in full of the Guaranteed Debt; Guarantor's rights of subrogation are, however, subordinate to the rights, claims, liens and security interests of the Loan Parties; SECTION 2.10. OFFSET. Any existing or future right of offset, claim, or defense of Borrower against the Loan Parties, or any other party, or against payment of the Guaranteed Debt, whether such right of offset, claim, or defense arises in connection with the Guaranteed Debt (or the transactions creating the Guaranteed Debt) or otherwise; SECTION 2.11. MERGER. The reorganization, merger, or consolidation of Borrower or any Guarantor into or with any other corporation or entity; SECTION 2.12. PREFERENCE. Any payment by Borrower to any Loan Party is held to constitute a preference under bankruptcy laws, or for any reason any Loan Party is required to refund such payment or pay such amount to Borrower or someone else; or SECTION 2.13. OTHER ACTIONS TAKEN OR OMITTED. Any other action taken or omitted to be taken with respect to the Credit Agreement, the Guaranteed Debt, or the security and collateral therefor, whether or not such action or omission prejudices any Guarantor or increases the likelihood or risk that Guarantor will be required to pay the Guaranteed Debt pursuant to the terms hereof; it is the unambiguous and unequivocal intention of each Guarantor that such Guarantor shall be obligated to pay the Guaranteed Debt when due, notwithstanding any occurrence, circumstance, event, action, or omission whatsoever, whether contemplated or uncontemplated, and whether or not otherwise or particularly described herein, except for the full and final payment and satisfaction of the Guaranteed Debt. ARTICLE III REPRESENTATIONS AND WARRANTIES To induce the Loan Parties to enter into the Credit Agreement and extend credit to Borrower, each Guarantor represents and warrants to the Loan Parties that: Section 3.01. BENEFIT. Such Guarantor has received, or will receive, direct or indirect benefit from the making of this Guaranty and the Guaranteed Debt; Section 3.02. FAMILIARITY AND RELIANCE. Such Guarantor is familiar with, and has independently reviewed books and records regarding, the financial condition of Borrower and is familiar with the value of any and all collateral intended to be created as security for the payment of the Guaranteed Debt; however, such Guarantor is not relying on such financial condition or the collateral as an inducement to enter into this Guaranty Agreement; Section 3.03. NO REPRESENTATION BY THE LOAN PARTIES. No Loan Party or any other party has made any representation, warranty, or statement to such Guarantor in order to induce such Guarantor to execute this Guaranty Agreement. Section 3.04. GUARANTOR'S FINANCIAL CONDITION. As of the date hereof, and after giving effect to this Guaranty Agreement and the contingent obligation evidenced hereby, such Guarantor is, and will be, solvent, and has and will have assets which, fairly valued, exceed its obligations, liabilities, and debts; Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 55 59 SECTION 3.05. DIRECTORS' DETERMINATION OF BENEFIT. The Board of Directors of such Guarantor, acting pursuant to a duly called and constituted meeting, after proper notice, or pursuant to a valid unanimous consent, has determined that this Guaranty directly or indirectly benefits such Guarantor and is in the best interests of such Guarantor; SECTION 3.06. LEGALITY. The execution, delivery and performance by Such Guarantor of this Guaranty Agreement and the consummation of the transactions contemplated hereunder (a) have been duly authorized by all necessary trust action of Such Guarantor, and (b) do not, and will not, contravene or conflict with any law, statute or regulation whatsoever to which Such Guarantor is subject or constitute a default (or an event which with notice or lapse of time or both would constitute a default) under, or result in the breach of, any indenture, mortgage, deed of trust, charge, lien, or any contract, agreement, or other instrument to which Such Guarantor is a party or which may be applicable to Such Guarantor or any of its assets, or violate any provisions of its Trust Agreement, Bylaws, or any other organizational document of Such Guarantor; this Guaranty Agreement is a legal and binding obligation of Such Guarantor and is enforceable in accordance with its terms, except as limited by bankruptcy, insolvency or other laws of general application relating to the enforcement of creditors' rights; and SECTION 3.07. SURVIVAL. All representations and warranties made by such Guarantor herein shall survive the execution hereof. ARTICLE IV SUBORDINATION OF CERTAIN INDEBTEDNESS SECTION 4.01. SUBORDINATION OF GUARANTOR CLAIMS. As used herein, the term "Guarantor Claims" shall mean all debts and liabilities of Borrower to any Guarantor, whether such debts and liabilities now exist or are hereafter incurred or arise, or whether the obligations of Borrower thereon be direct, contingent, primary, secondary, several, joint and several, or otherwise, and irrespective of whether such debts or liabilities be evidenced by note, contract, open account, or otherwise, and irrespective of the person or persons in whose favor such debts or liabilities may, at their inception, have been, or may hereafter be created, or the manner in which they have been or may hereafter be acquired by any Guarantor. The Guarantor Claims shall include without limitation all rights and claims of any Guarantor against Borrower (arising as a result of subrogation or otherwise) as a result of such Guarantor's payment of all or a portion of the Guaranteed Debt. Until the Guaranteed Debt shall be paid and satisfied in full and each Guarantor shall have performed all of its obligations hereunder, if a Potential Default or Default exists, then no Guarantor shall receive or collect, directly or indirectly, from Borrower or any other party any amount upon the Guarantor Claims. SECTION 4.02 CLAIMS IN BANKRUPTCY. In the event of receivership, bankruptcy, reorganization, arrangement, debtor's relief, or other insolvency proceedings involving Borrower as debtor, the Loan Parties shall have the right to prove its claim in any such proceeding so as to establish its rights hereunder and receive directly from the receiver, trustee, or other court custodian dividends and payments which would otherwise be payable upon Guarantor Claims. Each Guarantor hereby assigns such dividends and payments to the Loan Parties. Should any Loan Party receive, for application upon the Guaranteed Debt, any such dividend or payment which is otherwise payable to such Guarantor, and which, as between Borrower and such Guarantor, shall constitute a credit upon the Guarantor Claims, then upon payment to the Loan Parties in full of the Guaranteed Debt, such Guarantor shall become subrogated to the rights of the Loan Parties to the extent that such payments to the Loan Parties on the Guarantor Claims have contributed toward the liquidation of the Guaranteed Debt, and such subrogation shall be with respect to that proportion of the Guaranteed Debt which would have been unpaid if the Loan Parties had not received dividends or payments upon the Guarantor Claims. SECTION 4.03. PAYMENTS HELD IN TRUST. In the event that, notwithstanding Sections 4.01 and 4.02 above, a Guarantor should receive any funds, payment, claim or distribution which is prohibited by such Sections, Guarantors agrees to hold in trust for the Loan Parties, in kind, all funds, payments, claims, or distributions so received, and agree that such Guarantor shall have absolutely no dominion over such funds, payments, claims, or distributions so received except to pay them promptly to the Agent, for the benefit of the Loan Parties, and such Guarantor promptly pay the same to the Agent, for the benefit of the Loan Parties. SECTION 4.04. LIENS SUBORDINATE. Guarantors agree that any liens, security interests, judgement liens, charges, or other encumbrances upon Borrower's assets securing payment of the Guarantor Claims shall be and remain inferior and subordinate to any liens, security interests, judgement liens, charges, or other encumbrances upon Borrower's assets securing payment of the Guaranteed Debt, regardless of whether such encumbrances in favor of any Guarantor or the Loan Parties presently exist or are hereafter created or attach. Without the prior written consent of the Agent, no Guarantor shall (a) exercise or enforce any creditor's right it may have against Borrower, or (b) foreclose, repossess, sequester, or otherwise take steps or institute any action or proceedings (judicial or otherwise, including, without limitation, the commencement of, or joinder in, any liquidation, bankruptcy, rearrangement, debtor's relief, or insolvency proceeding) to enforce any liens, mortgages, deeds of trust, security interest, collateral rights, judgments, or other encumbrances on assets of Borrower held by any Guarantor. SECTION 4.05. NOTATION OF RECORDS. All promissory notes, accounts receivable ledgers, or other evidences of the Guarantor Claims accepted by or held by any Guarantor shall contain a specific written notice thereon that the indebtedness evidenced thereby is subordinated under the terms of this Guaranty Agreement. Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 56 60 ARTICLE V MISCELLANEOUS Section 5.01. WAIVER. No failure to exercise, and no delay in exercising, on the part of any Loan Party, any right hereunder shall operate as a waiver thereof, nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right. The rights of the Loan Parties hereunder shall be in addition to all other rights provided by law. No modification or waiver of any provision of this Guaranty Agreement, nor consent to departure therefrom, shall be effective unless in writing and no such consent or waiver shall extend beyond the particular case and purpose involved. No notice or demand given in any case shall constitute a waiver of the right to take other action in the same, similar or other instances without such notice or demand. Section 5.02. NOTICES. Any notices or other communications required or permitted to be given by this Guaranty Agreement must be (a) given in writing and personally delivered or mailed by prepaid certified or registered mail, return receipt requested, or (b) made by tested telex delivered or transmitted, to the party to whom such notice or communication is directed, to the address of such party as follows: Guarantors: Camden Subsidiary, Inc. c/o Camden Property Trust 3200 Southwest Freeway Suite 1500 Houston, Texas 77027 Attention: Mr. G. Steven Dawson Camden Operating, L.P. c/o Camden Property Trust 3200 Southwest Freeway Suite 1500 Houston, Texas 77027 Attention: Mr. G. Steven Dawson Loan Parties: NationsBank of Texas, N. A., as Agent 700 Louisiana, 5th Floor Houston, Texas 77002 Attention: Real Estate Administration Any such notice or other communication shall be deemed to have been given (whether actually received or not) on the day it is personally delivered as aforesaid or, if mailed, on the day it is mailed as aforesaid, or, if transmitted by telex, on the day that such notice is transmitted as aforesaid. Any party may change its address for purposes of this Guaranty Agreement by giving notice of such change to the other party pursuant to this Section 5.02. Section 5.03. GOVERNING LAW. This Guaranty Agreement has been prepared, and is intended to be performed in the State of Texas, and the substantive laws of such state shall govern the validity, construction, enforcement, and interpretation of this Guaranty Agreement. For purposes of this Guaranty Agreement and the resolution of disputes hereunder, each Guarantor hereby irrevocably submits and consents to, and waives any objection to, the non-exclusive jurisdiction of any Texas state court, or any United States federal court, sitting in the City of Houston, Texas. Section 5.04. INVALID PROVISIONS. If any provision of this Guaranty Agreement is held to be illegal, invalid, or unenforceable under present or future laws effective during the term of this Guaranty Agreement, such provision shall be fully severable and this Guaranty Agreement shall be construed and enforced as if such illegal, invalid, or unenforceable provision had never comprised a part of this Guaranty Agreement, and the remaining provisions of this Guaranty Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance from this Guaranty Agreement, unless such continued effectiveness of this Guaranty Agreement, as modified, would be contrary to the basic understandings and intentions of the parties as expressed herein. Section 5.05. ENTIRETY AND AMENDMENTS. This Guaranty Agreement embodies the entire agreement between the parties and supersedes all prior agreements and understandings, if any, relating to the subject matter hereof, and this Guaranty Agreement may be amended only by an instrument in writing executed by an authorized officer of the party against whom such amendment is sought to be enforced. Section 5.06. PARTIES BOUND; ASSIGNMENT. This Guaranty Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors, assigns and legal representatives; provided, however, that no Guarantor may, without the prior written consent of the Agent, assign any of its rights, powers, duties, or obligations hereunder. Section 5.07. HEADINGS. Section headings are for convenience of reference only and shall in no way affect the interpretation of this Guaranty Agreement. Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 57 61 SECTION 5.08. MULTIPLE COUNTERPARTS. This Guaranty Agreement may be executed in amy number of counterparts, all of which taken together shall constitute one and the same agreement, and any of the parties hereto may execute this Guaranty Agreement by signing any such counterpart. SECTION 5.09. RIGHTS AND REMEDIES. If any Guarantor becomes liable for any indebtedness owing by Borrower to the Loan Parties, by endorsement or other than under this Guaranty Agreement, such liability shall not be in any manner impaired or affected hereby and the rights of the Loan Parties hereunder shall be cumulative of any and all other rights that the Loan Parties (or any of them) may ever have against Guarantors. The exercise by the Loan Parties of any right or remedy hereunder or under any other instrument, or at law or in equity, shall not preclude the concurrent or subsequent exercise of any other right or remedy. EXECUTED as of the day and year first above written. GUARANTORS: ------------------------------------ By: --------------------------------- Name: -------------------------- Title: ------------------------- Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 58 62 EXHIBIT "M" ADVANCE NOTE Effective as of $ Houston, Texas November 25, 1997 ----------- FOR VALUE RECEIVED, the undersigned, CAMDEN PROPERTY TRUST (herein called "Borrower"), hereby promises to pay to the order of ____________________, a __________________________ ("Lender"), in immediately available funds in lawful money of the United States of America, at the address of Agent (as such term is defined in the hereinafter referenced Loan Agreement) which is 700 Louisiana, 5th Floor, in the City of Houston, Harris County, Texas 77002, or at such other place as may be from time to time designated by Lender by notice to Borrower, the lesser of ___________________ and NO/100 DOLLARS ($______) or the unpaid principal amount of the Advances (as defined in the Loan Agreement) made by Lender to Borrower pursuant to the Loan Agreement, payable at such times, and in such amounts, as are set forth in the Loan Agreement. The books and records of Agent shall be prima facie evidence of all sums due Lender. Borrower promises to pay interest on the unpaid principal amount of the Advances made by Lender to Borrower from the date such principal amount is disbursed to Borrower until such principal amount is paid in full at such interest rates as are set forth in the Loan Agreement. This Note has been executed and delivered pursuant to the Restatement and Amendment of Loan Agreement (the "Loan Agreement") dated of even effective date herewith between Borrower, NationsBank of Texas, N.A., as Agent and for itself and other "Lenders" described therein. Capitalized terms used and not defined herein are used herein with the meanings given them in the Loan Agreement. This Note is one of the "Advance Notes" referred to in the Loan Agreement. Reference is hereby made to the Loan Agreement for all purposes, including, but not limited to provisions regarding (a) the payment and prepayment hereof and the acceleration of the maturity hereof, certain of which provisions are contained in Article 4 of the Loan Agreement, (b) exercise of rights, powers, and remedies, (c) payment of attorney's fees, court costs, and other costs of collection, and (d) certain waivers by Borrower and other obligors. It is the intent of Lender and Borrower and all parties to the Loan Documents to conform to and contract in strict compliance with applicable usury Law from time to time in effect. All agreements between Lender or any other holder hereof and Borrower (or any other party liable with respect to any indebtedness under the Loan Documents) are hereby limited by the provisions of this paragraph which shall override and control all such agreements, whether now existing or hereafter arising. In no way, nor in any event or contingency (including but not limited to prepayment, default, demand for payment, or acceleration of maturity of any obligation), shall the interest taken, reserved, contracted for, charged, chargeable or received under this Note or under any of the other Loan Documents, or otherwise, exceed the Maximum Rate. If, from any possible construction of any document, interest would otherwise be payable in excess of the Maximum Rate, any such construction shall be subject to the provisions of this paragraph and such document shall, ipso facto, be automatically reformed and the interest payable shall be automatically reduced to the Maximum Rate, without the necessity of execution of any amendment or new document. If the holder hereof shall ever receive anything of value that is characterized as interest under applicable Law and that would apart from this provision be in excess of the Maximum Rate, an amount equal to the amount that would have been excessive interest shall, without penalty, be applied to the reduction of the principal amount owing on the indebtedness evidenced hereby in the inverse order of its maturity and not to the payment of interest, or refunded to Borrower or the other payor thereof if and to the extent such amount that would have been excessive exceeds such unpaid principal. The right to accelerate maturity of this Note or any other indebtedness does not include the right to accelerate any interest that has not otherwise accrued on the date of such acceleration, and the holder hereof does not intend to charge or receive any unearned interest in the event of acceleration. All interest paid or agreed to be paid to the holder hereof shall, to the extent permitted by applicable Law, be amortized, prorated, allocated and spread throughout the full stated term (including any renewal or extension) of such indebtedness so that the amount of interest on account of such indebtedness does not exceed the Maximum Rate. As used in this paragraph, the term "applicable Law" shall mean the Laws of the State of Texas or the federal Laws of the United States applicable to this transaction, whichever Laws allow the greater interest, as such Laws now exist or may be changed or amended or come into effect in the future. If more than one Person executes this Note as Borrower, all of said Persons shall be jointly and severally liable for payment of the indebtedness evidenced hereby. Borrower and all sureties, endorsers, guarantors and any other Person now or hereafter liable for the payment of this Note in whole or in part, hereby severally (i) waive demand, presentment for payment, notice of dishonor and of nonpayment, protest, notice of protest, notice of intent to accelerate, notice of acceleration and all other notice (except any notices that are specifically required by this Note or any other Loan Document), filing of suit and diligence in collecting this Note or enforcing any of the security herefor; (ii) agree to any substitution, subordination, exchange or release of any such security or the release of any Person primarily or secondarily liable hereon; (iii) agree that the holder hereof shall not be required first to institute suit or exhaust its remedies hereon against Borrower or others liable or to become liable hereon or to enforce its rights against them or any security herefor; (iv) consent to any extension or postponement of time of payment of this Note for any period or periods of time and to any partial payments, before or after maturity, and to any other indulgences Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 59 63 with respect hereto, without notice thereof to any of them; and (v) submit (and waive all rights to object) to non-exclusive personal jurisdiction in the State of Texas, and venue in the county in which payment is to be made as specified on the first page of this Note, for the enforcement of any and all obligations under the Loan Documents. This Note may not be amended except in a writing specifically intended for such purpose and executed by the party against whom enforcement of the amendment is sought. Any alleged amendment which is not so documented shall not be effective as to any parties. THIS NOTE, AND ITS VALIDITY, ENFORCEMENT AND INTERPRETATION, SHALL BE GOVERNED BY TEXAS LAW (WITHOUT REGARD TO ANY CONFLICT OF LAWS PRINCIPLES) AND APPLICABLE UNITED STATES FEDERAL LAW. IN WITNESS WHEREOF, Borrower has duly executed this Note as of the date first above written. BORROWER: CAMDEN PROPERTY TRUST By: ----------------------- G. Steven Dawson, Senior Vice President of Finance and Chief Financial Officer Restatement and Amendment of Loan Agreement Dated as of November 25, 1997 60 EX-11.1 5 STATEMENT RE COMPUTATION OF PER SHARE EARNINGS 1 Exhibit 11.1 CAMDEN PROPERTY TRUST COMPUTATION OF EARNINGS PER COMMON SHARE
FOR THE YEAR ENDED DECEMBER 31, --------------------------------------- 1997 1996 1995 --------- --------- ---------- BASIC EARNINGS PER SHARE Weighted Average Common Shares Outstanding 26,257 14,849 14,325 ========= ========= ========== Basic Earnings Per Share $ 1.46 $ 0.59 $ 0.86 ========= ========= ========== DILUTED EARNINGS PER SHARE Weighted Average Common Shares Outstanding 26,257 14,849 14,325 Shares Issuable from Assumed Conversion of: Common Share Options and Awards Granted 330 130 4 Convertible Preferred Shares 85 Operating Partnership Units 1,769 --------- --------- ---------- Weighted Average Common Shares Outstanding, as Adjusted 28,356 14,979 14,414 ========= ========= ========== Diluted Earnings Per Share $ 1.41 $ 0.58 $ 0.86 ========= ========= ========== EARNINGS FOR BASIC AND DILUTED COMPUTATION: Net Income $ 38,438 $ 8,713 $ 12,330 Preferred Share Dividends (4) (39) --------- --------- ---------- Net Income to Common Shareholders (Basic Earnings Per Share Computation) 38,438 8,709 12,291 Preferred Share Dividends 4 39 Minority Interest in Operating Partnership 1,655 --------- --------- ---------- Net Income to Common Shareholders, as Adjusted $ 40,093 $ 8,713 $ 12,330 (Diluted Earnings Per Share Computation) ========= ========= ==========
EX-21.1 6 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21.1
STATE OF INCORPORATION/ NAME UNDER WHICH NAMES OF SUBSIDIARIES ORGANIZATION BUSINESS IS DONE - -------------------------- -------------- ----------------------- 1. Camden Operating L.P. Delaware Camden Operating L.P. 2. Camden Subsidiary, Inc. Delaware Camden Subsidiary, Inc. 3. Camden Subsidiary II, Inc. Delaware Camden Subsidiary II, Inc.
EX-23.1 7 CONSENT OF DELOITTE & TOUCHE LLP 1 EXHIBIT 23.1 INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in Registration Statements No. 33-80230 filed on June 15, 1994 and No. 333-32569 filed on July 31, 1997, each on Form S-8, Amendment No. 2 to No. 33-84658 filed on March 30, 1995, Amendment No. 1 to No. 33-84536 filed on March 30, 1995, Amendment No. 1 to No. 333-24637 filed on April 14, 1997, and No. 333-25637 filed on April 22, 1997, each on Form S-3, of Camden Property Trust of our report dated January 16, 1998, appearing in this Annual Report on Form 10-K of Camden Property Trust for the year ended December 31, 1997. /s/ --------------------------- DELOITTE & TOUCHE LLP Houston, Texas February 2, 1998 EX-24.1 8 POWERS OF ATTORNEY 1 EXHIBIT 24.1 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint D. Keith Oden and G. Steven Dawson, and each of them, each with full power to act without the other, his true and lawful attorneys-in-fact and agents, each with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign the Form 10-K for the year ended December 31, 1997 and to sign any and all amendments to the Form 10-K and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact and agents or any of them may lawfully do or cause to be done by virtue hereof. /s/ ---------------------------------------- Richard J. Campo ---------------------------------------- Print Name Dated: February 2, 1998 2 EXHIBIT 24.1 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint Richard J. Campo and G. Steven Dawson, and each of them, each with full power to act without the other, his true and lawful attorneys-in-fact and agents, each with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign the Form 10-K for the year ended December 31, 1997 and to sign any and all amendments to the Form 10-K and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact and agents or any of them may lawfully do or cause to be done by virtue hereof. /s/ ---------------------------------------- D. Keith Oden ---------------------------------------- Print Name Dated: February 2, 1998 3 EXHIBIT 24.1 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint D. Keith Oden and Richard J. Campo, and each of them, each with full power to act without the other, his true and lawful attorneys-in-fact and agents, each with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign the Form 10-K for the year ended December 31, 1997 and to sign any and all amendments to the Form 10-K and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact and agents or any of them may lawfully do or cause to be done by virtue hereof. /s/ ---------------------------------------- G. Steven Dawson ---------------------------------------- Print Name Dated: February 2, 1998 4 EXHIBIT 24.1 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint D. Keith Oden, Richard J. Campo and G. Steven Dawson, and each of them, each with full power to act without the other, his true and lawful attorneys-in-fact and agents, each with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign the Form 10-K for the year ended December 31, 1997 and to sign any and all amendments to the Form 10-K and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact and agents or any of them may lawfully do or cause to be done by virtue hereof. /s/ ---------------------------------------- William R. Cooper ---------------------------------------- Print Name Dated: January 30, 1998 5 EXHIBIT 24.1 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint D. Keith Oden, Richard J. Campo and G. Steven Dawson, and each of them, each with full power to act without the other, his true and lawful attorneys-in-fact and agents, each with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign the Form 10-K for the year ended December 31, 1997 and to sign any and all amendments to the Form 10-K and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact and agents or any of them may lawfully do or cause to be done by virtue hereof. /s/ ---------------------------------------- George A. Hrdlicka ---------------------------------------- Print Name Dated: February 2, 1998 6 EXHIBIT 24.1 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint D. Keith Oden, Richard J. Campo and G. Steven Dawson, and each of them, each with full power to act without the other, his true and lawful attorneys-in-fact and agents, each with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign the Form 10-K for the year ended December 31, 1997 and to sign any and all amendments to the Form 10-K and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact and agents or any of them may lawfully do or cause to be done by virtue hereof. /s/ ---------------------------------------- Lewis A. Levey ---------------------------------------- Print Name Dated: February 1, 1998 7 EXHIBIT 24.1 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint D. Keith Oden, Richard J. Campo and G. Steven Dawson, and each of them, each with full power to act without the other, his true and lawful attorneys-in-fact and agents, each with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign the Form 10-K for the year ended December 31, 1997 and to sign any and all amendments to the Form 10-K and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact and agents or any of them may lawfully do or cause to be done by virtue hereof. /s/ ---------------------------------------- F. Gardner Parker ---------------------------------------- Print Name Dated: February 2, 1998 8 EXHIBIT 24.1 POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned does hereby constitute and appoint D. Keith Oden, Richard J. Campo and G. Steven Dawson, and each of them, each with full power to act without the other, his true and lawful attorneys-in-fact and agents, each with full power of substitution and resubstitution, for him and in his name, place and stead, in any and all capacities, to sign the Form 10-K for the year ended December 31, 1997 and to sign any and all amendments to the Form 10-K and to file the same, with all exhibits thereto, and all other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, full power and authority to do and perform each and every act and thing requisite and necessary to be done as fully to all intents and purposes as the undersigned might or could do in person, hereby ratifying and confirming all that each of said attorneys-in-fact and agents or any of them may lawfully do or cause to be done by virtue hereof. /s/ ---------------------------------------- Steven A. Webster ---------------------------------------- Print Name Dated: January 30, 1998 EX-27 9 FINANCIAL DATA SCHEDULE
5 1,000 12-MOS DEC-31-1997 DEC-31-1997 10,516 0 0 0 0 0 1,397,138 94,665 1,323,620 0 480,754 0 0 317 710,247 1,323,620 0 199,789 0 91,623 44,836 0 28,537 0 0 0 0 0 0 38,438 1.46 1.41
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