THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PA

 

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                                                                   EXHIBIT 10.01

 

                     THIRD AMENDED AND RESTATED AGREEMENT OF

                               LIMITED PARTNERSHIP

 

                                       OF

 

                       CRESCENT REAL ESTATE EQUITIES LIMITED

                                   PARTNERSHIP

 

                           Dated as of January 2, 2003

 

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                                TABLE OF CONTENTS

 

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ARTICLE I DEFINED TERMS..........................................................................................       3

 

ARTICLE II ORGANIZATIONAL MATTERS................................................................................      15

 

         Section 2.1        Continuation of Partnership...........................................................      15

 

         Section 2.2        Name..................................................................................      15

 

         Section 2.3        Principal Office and Registered Agent.................................................      16

 

         Section 2.4        Power of Attorney.....................................................................      16

 

         Section 2.5        Term..................................................................................      17

 

ARTICLE III PURPOSE..............................................................................................      17

 

         Section 3.1        Purpose and Business..................................................................      17

 

         Section 3.2        Powers................................................................................      18

 

ARTICLE IV CAPITAL CONTRIBUTIONS.................................................................................      18

 

         Section 4.1        Capital Contributions of the Partners.................................................      18

 

         Section 4.2        Additional Funding....................................................................      19

 

         Section 4.3        Issuance of Additional Partnership Interests..........................................      21

 

         Section 4.4        No Preemptive Rights..................................................................      23

 

         Section 4.5        No Interest on Capital................................................................      23

 

          Section 4.6        Stock Incentive Plans.................................................................      23

 

         Section 4.7        Other Equity Compensation Plans.......................................................      24

 

         Section 4.8        Series A Preferred Partnership Units and Series B Redeemable Preferred

                           Partnership Units.....................................................................      26

 

ARTICLE V DISTRIBUTIONS..........................................................................................      28

 

         Section 5.1        Initial Partnership Distributions.....................................................      28

 

         Section 5.2        Requirement and Characterization of Distributions.....................................      28

 

         Section 5.3        Amounts Withheld......................................................................      28

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         Section 5.4        Distributions In Kind.................................................................      28

 

         Section 5.5         Distributions Upon Liquidation........................................................      29

 

         Section 5.6        Distribution Rights of Series A Preferred Shares and Series B Redeemable Preferred

                           Shares................................................................................      29

 

ARTICLE VI ALLOCATIONS...........................................................................................      29

 

         Section 6.1        Allocations For Capital Account Purposes..............................................      29

 

         Section 6.2        Allocation of Nonrecourse Debt........................................................      30

 

         Section 6.3        Allocations for Series A Preferred Partnership Units and Series B Redeemable

                           Preferred Partnership Units...........................................................      30

 

ARTICLE VII MANAGEMENT AND OPERATIONS OF BUSINESS................................................................      31

 

         Section 7.1        Management............................................................................      31

 

         Section 7.2        Certificate of Limited Partnership....................................................       35

 

         Section 7.3        Restrictions on General Partner's Authority...........................................      35

 

         Section 7.4        Reimbursement of the Crescent Group...................................................      35

 

          Section 7.5        Outside Activities of the Crescent Group..............................................      36

 

         Section 7.6        Contracts with Affiliates.............................................................      37

 

         Section 7.7        Indemnification.......................................................................      37

 

         Section 7.8        Liability of the General Partner......................................................      39

 

         Section 7.9        Other Matters Concerning the General Partner..........................................      40

 

         Section 7.10       Title to Partnership Assets...........................................................      41

 

         Section 7.11       Reliance by Third Parties.............................................................      41

 

         Section 7.12       Limited Partner Representatives.......................................................      41

 

ARTICLE VIII RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS..........................................................      42

 

         Section 8.1        Limitation of Liability...............................................................      42

 

         Section 8.2        Management of Business................................................................      42

 

         Section 8.3        Outside Activities of Limited Partners................................................      42

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         Section 8.4        Return of Capital.....................................................................      42

 

         Section 8.5        Rights of Limited Partners Relating to the Partnership................................      43

 

         Section 8.6        Exchange Rights.......................................................................      44

 

         Section 8.7        Covenants Relating to the Exchange Rights.............................................      44

 

         Section 8.8        Other Matters Relating to the Exchange Rights.........................................      45

 

ARTICLE IX BOOKS, RECORDS, ACCOUNTING AND REPORTS................................................................      46

 

         Section 9.1        Records and Accounting................................................................      46

 

         Section 9.2        Fiscal Year...........................................................................      46

 

         Section 9.3        Reports...............................................................................      46

 

ARTICLE X TAX MATTERS............................................................................................      46

 

         Section 10.1       Preparation of Tax Returns............................................................      46

 

         Section 10.2       Tax Elections.........................................................................      47

 

         Section 10.3       Tax Matters Partner...................................................................      47

 

         Section 10.4       Organizational Expenses...............................................................      48

 

         Section 10.5       Withholding...........................................................................      48

 

ARTICLE XI TRANSFERS AND WITHDRAWALS.............................................................................      49

 

         Section 11.1       Transfer..............................................................................      49

 

         Section 11.2       Transfer of Partnership Interests of the General Partner..............................       49

 

         Section 11.3       Transfer of Partnership Interests of Limited Partners Other Than Crescent Equities....      50

 

         Section 11.4       Substituted Limited Partners..........................................................      51

 

          Section 11.5       Assignees.............................................................................      52

 

         Section 11.6       General Provisions....................................................................      52

 

         Section 11.7       Acquisition of Partnership Interest by Partnership....................................      53

 

ARTICLE XII ADMISSION OF PARTNERS................................................................................      53

 

         Section 12.1       Admission of Substituted General Partner..............................................      53

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                                     (iii)

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         Section 12.2       Admission of Additional or Employee Limited Partners..................................      53

 

         Section 12.3       Amendment of Agreement and Certificate of Limited Partnership.........................      55

 

ARTICLE XIII DISSOLUTION AND LIQUIDATION.........................................................................      55

 

         Section 13.1       Dissolution...........................................................................      55

 

         Section 13.2       Winding Up............................................................................      56

 

         Section 13.3       Compliance with Timing Requirements of Regulations....................................      57

 

         Section 13.4       Deemed Contribution and Distribution..................................................      58

 

         Section 13.5       Rights of Limited Partners............................................................      58

 

         Section 13.6       Documentation of Liquidation..........................................................      58

 

         Section 13.7       Reasonable Time for Winding-Up........................................................      58

 

         Section 13.8       Liability of the Liquidator...........................................................      58

 

         Section 13.9       Waiver of Partition...................................................................      59

 

ARTICLE XIV AMENDMENT OF AGREEMENT...............................................................................      59

 

         Section 14.1       Amendments............................................................................      59

 

ARTICLE XV PARTNER REPRESENTATIONS AND WARRANTIES................................................................      60

 

         Section 15.1       Representations and Warranties........................................................      60

 

ARTICLE XVI ARBITRATION OF DISPUTES..............................................................................      61

 

         Section 16.1       Arbitration...........................................................................      61

 

         Section 16.2       Procedures............................................................................      61

 

         Section 16.3       Binding Character.....................................................................      62

 

         Section 16.4       Exclusivity...........................................................................      63

 

         Section 16.5       No Alteration of Agreement............................................................      63

 

ARTICLE XVII GENERAL PROVISIONS..................................................................................      63

 

         Section 17.1       Addresses and Notice..................................................................      63

 

         Section 17.2       Titles and Captions...................................................................      63

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         Section 17.3       Pronouns and Plurals..................................................................      63

 

         Section 17.4       Further Action........................................................................      64

 

         Section 17.5       Binding Effect........................................................................      64

 

         Section 17.6       Creditors.............................................................................      64

 

         Section 17.7       Waiver................................................................................      64

 

         Section 17.8       No Agency.............................................................................      64

 

         Section 17.9       Entire Understanding..................................................................      64

 

         Section 17.10      Counterparts..........................................................................      64

 

         Section 17.11      Applicable Law........................................................................      64

 

         Section 17.12      Invalidity of Provisions..............................................................      65

 

         Section 17.13      Guaranty by Crescent Equities.........................................................      65

 

         Section 17.14      Restriction on Sale of Sonoma Property................................................      65

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Exhibit A -- Partners, Partnership Units and Partnership Interests

 

Exhibit B -- Capital Account Maintenance

 

Exhibit C -- Special Tax Allocation Rules

 

Exhibit D -- Notice of Exchange

 

Exhibit E -- Listing of Approved Substituted Limited Partners

 

                                      (v)

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           THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP

 

                                        OF

 

                CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP

 

         THIS THIRD AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP, dated

as of January 2, 2003, is entered into by and among Crescent Real Estate

Equities, Ltd., a Delaware corporation, as general partner (the "General

Partner"), and those parties who are Limited Partners as listed on Exhibit A

hereto or who are admitted from time to time as Limited Partners as herein

provided.

 

                               W I T N E S S E T H:

 

         WHEREAS, Crescent Real Estate Equities Limited Partnership, a Delaware

limited partnership (the "Partnership"), was formed pursuant to that certain

Certificate of Limited Partnership dated February 9, 1994 and filed on February

9, 1994 in the office of the Secretary of State of Delaware, and that certain

Agreement of Limited Partnership dated as of February 9, 1994 (the "Initial

Agreement");

 

         WHEREAS, the Initial Agreement was amended and restated in its entirety

by that certain First Amended and Restated Agreement of Limited Partnership of

Crescent Real Estate Equities Limited Partnership, dated as of May 5, 1994, as

amended by the First Amendment to the First Amended and Restated Agreement of

Limited Partnership of Crescent Real Estate Equities Limited Partnership, dated

as of May 16, 1994, the Second Amendment to the First Amended and Restated

Agreement of Limited Partnership of Crescent Real Estate Equities Limited

Partnership, dated as of April 11, 1995, the Third Amendment to the First

Amended and Restated Agreement of Limited Partnership of Crescent Real Estate

Equities Limited Partnership, dated as of April 11, 1995, the Fourth Amendment

to the First Amended and Restated Agreement of Limited Partnership of Crescent

Real Estate Equities Limited Partnership, dated as of May 3, 1995, the Fifth

Amendment to the First Amended and Restated Agreement of Limited Partnership of

Crescent Real Estate Equities Limited Partnership, dated as of May 31, 1995, the

Sixth Amendment to the First Amended and Restated Agreement of Limited

Partnership of Crescent Real Estate Equities Limited Partnership, dated as of

June 1, 1995, the Seventh Amendment to the First Amended and Restated Agreement

of Limited Partnership of Crescent Real Estate Equities Limited Partnership,

dated as of August 23, 1995, the Eighth Amendment to the First Amended and

Restated Agreement of Limited Partnership of Crescent Real Estate Equities

Limited Partnership, dated as of December 31, 1995, the Restatement of Ninth

Amendment to the First Amended and Restated Agreement of Limited Partnership of

Crescent Real Estate Equities Limited Partnership, dated as of February 16,

1996, the Supplemental Amendment to the Restatement of Ninth Amendment to the

First Amended and Restated Agreement of Limited Partnership of Crescent Real

Estate Equities Limited Partnership, dated as of June 30, 1996, the Tenth

Amendment to the First Amended and Restated Agreement of Limited Partnership of

Crescent Real Estate Equities Limited Partnership, dated as of July 26, 1996,

the Eleventh Amendment to the First Amended and Restated Agreement of Limited

Partnership of Crescent Real Estate Equities Limited Partnership, dated as of

November 4, 1996, the Twelfth Amendment to the First Amended and Restated

Agreement of

 

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Limited Partnership, dated as of December 31, 1996, the Thirteenth Amendment to

the First Amended and Restated Agreement of Limited Partnership, dated as of

April 29, 1997 and the Fourteenth Amendment to the First Amended and Restated

Agreement of Limited Partnership, dated as of April 30, 1997 (hereinafter

referred to collectively as the "First Amended Agreement");

 

         WHEREAS, the First Amended Agreement was amended and restated in its

entirety by that certain Second Amended and Restated Agreement of Limited

Partnership of Crescent Real Estate Equities Limited Partnership, dated as of

November 1, 1997, as amended by the First Amendment to the Second Amended and

Restated Agreement of Limited Partnership of Crescent Real Estate Equities

Limited Partnership, dated as of February 19, 1998, the Second Amendment to the

Second Amended and Restated Agreement of Limited Partnership of Crescent Real

Estate Equities Limited Partnership, dated as of March 2, 1998, the Third

Amendment to the Second Amended and Restated Agreement of Limited Partnership of

Crescent Real Estate Equities Limited Partnership, dated as of April 27, 1998,

the Fourth Amendment to the Second Amended and Restated Agreement of Limited

Partnership of Crescent Real Estate Equities Limited Partnership, dated as of

June 1, 1998, the Fifth Amendment to the Second Amended and Restated Agreement

of Limited Partnership of Crescent Real Estate Equities Limited Partnership,

dated as of June 30, 1998, the Sixth Amendment to the Second Amended and

Restated Agreement of Limited Partnership of Crescent Real Estate Equities

Limited Partnership, dated as of July 15, 1998, the Seventh Amendment to the

Second Amended and Restated Agreement of Limited Partnership of Crescent Real

Estate Equities Limited Partnership, dated as of September 30, 1998, the Eighth

Amendment to the Second Amended and Restated Agreement of Limited Partnership of

Crescent Real Estate Equities Limited Partnership, dated as of January 31, 1999,

the Ninth Amendment to the Second Amended and Restated Agreement of Limited

Partnership of Crescent Real Estate Equities Limited Partnership, dated as of

April 15, 1999, the Tenth Amendment to the Second Amended and Restated Agreement

of Limited Partnership of Crescent Real Estate Equities Limited Partnership,

dated as of May 3, 1999, the Eleventh Amendment to the Second Amended and

Restated Agreement of Limited Partnership of Crescent Real Estate Equities

Limited Partnership, dated as of June 1, 1999, the Twelfth Amendment to the

Second Amended and Restated Agreement of Limited Partnership, dated as of June

3, 1999, the Thirteenth Amendment to the Second Amended and Restated Agreement

of Limited Partnership, dated as of December 31, 1999, the Fourteenth Amendment

to the Second Amended and Restated Agreement of Limited Partnership, dated as of

January 31, 2000, the Fifteenth Amendment to the Second Amended and Restated

Agreement of Limited Partnership, dated as of March 1, 2000, the Sixteenth

Amendment to the Second Amended and Restated Agreement of Limited Partnership,

dated as of July 31, 2001, the Seventeenth Amendment to the Second Amended and

Restated Agreement of Limited Partnership, dated as of December 31, 2001, the

Eighteenth Amendment to the Second Amended and Restated Agreement of Limited

Partnership, dated as of April 26, 2002, the Nineteenth Amendment to the Second

Amended and Restated Agreement of Limited Partnership, dated as of May 17, 2002,

and the Twentieth Amendment to the Second Amended and Restated Agreement of

Limited Partnership, dated as of January 1, 2003 (hereinafter referred to

collectively as the "Second Amended Agreement");

 

         WHEREAS, the General Partner desires to amend and restate in its

entirety the Second Amended Agreement pursuant to its authority under Sections

2.4 and 14.1.B of the Second

 

                                      - 2 -

 

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Amended Agreement and the powers of attorney granted to the General Partner by

the Limited Partners in order to (i) combine all of the provisions of the Second

Amended Agreement into one document, and (ii) make changes to provisions of the

Second Amended Agreement in accordance with Section 14.1.B(3) of the Second

Amended Agreement;

 

         NOW, THEREFORE, in consideration of the mutual covenants and agreements

herein contained and other good and valuable consideration, the receipt,

adequacy and sufficiency of which are hereby acknowledged, the parties hereto,

intending legally to be bound, hereby agree as follows:

 

                                    ARTICLE I

                                  DEFINED TERMS

 

         Except as otherwise herein expressly provided, the following terms and

phrases shall have the meanings set forth below:

 

         "Act" means the Delaware Revised Uniform Limited Partnership Act, as it

may be amended from time to time, and any successor to such statute.

 

         "Additional Funds" has the meaning set forth in Section 4.2.A hereof.

 

         "Additional Limited Partner" has the meaning set forth in Section 4.3

hereof.

 

         "Adjusted Capital Account" means the Capital Account maintained for

each Partner as of the end of each fiscal year (i) increased by any amounts

which such Partner is obligated to restore pursuant to any provision of this

Agreement or is treated as being obligated to restore pursuant to Regulations

Section 1.704-1(b)(2)(ii)(c) or is deemed to be obligated to restore pursuant to

the penultimate sentences of Regulations Sections 1.704-2(g)(1) and

1.704-2(i)(5) and (ii) decreased by the items described in Regulations Sections

1.704-1 (b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6).

The foregoing definition of Adjusted Capital Account is intended to comply with

the provisions of Regulations Section 1.704-l(b)(2)(ii)(d) and shall be

interpreted consistently therewith.

 

         "Adjusted Capital Account Deficit" means, with respect to any Partner,

the deficit balance, if any, in such Partner's Adjusted Capital Account as of

the end of the relevant fiscal year.

 

         "Adjusted Property" means any property the Carrying Value of which has

been adjusted pursuant to Section 1.D of Exhibit B hereof.

 

         "Adjustment Date" has the meaning set forth in Section 4.2.A(2) hereof.

 

         "Affiliate" means, with respect to any Person, any Person directly or

indirectly controlling, controlled by or under common control with such Person.

 

         "Agreement" means this Third Amended and Restated Agreement of Limited

Partnership, as it may be amended, supplemented or restated from time to time.

 

                                     - 3 -

 

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         "Amstar" means Amstar Continental Plaza Limited Partnership, a Colorado

limited partnership.

 

         "Amstar Required Cash Payment" means the "Required Cash Payment" as

defined in Article III of that certain Contribution Agreement dated February 8,

1994 between Amstar and the Partnership.

 

         "Assignee" means a Person to whom a Limited Partnership Interest has

been transferred in a manner permitted under this Agreement, but who has not

become a Substituted Limited Partner, and who has the rights set forth in

Sections 8.6, 11.3.A and 11.5.

 

         "Available Cash" means, with respect to any period for which such

calculation is being made, (i) the sum of:

 

                   A.        the Partnership's Net Income or Net Loss, as the case

         may be, for such period (without regard to adjustments resulting from

         allocations described in Section 1.A-E of Exhibit C),

 

                  B.        Depreciation and all other noncash charges deducted

         in determining Net Income or Net Loss for such period,

 

                  C.        the amount of any reduction in reserves of the

         Partnership referred to in clause (ii)(f) below (including, without

         limitation, reductions resulting because the General Partner determines

         such amounts are no longer necessary),

 

                  D.        the excess of proceeds from the sale, exchange,

         disposition, or refinancing of Partnership property during such period

         over the gain (or loss, as the case may be) recognized from such sale,

         exchange, disposition, or refinancing during such period (excluding

         Terminating Capital Transactions) as such items of gain or loss are

          determined in accordance with Section 1.B of Exhibit B, and

 

                  E.        all other cash received by the Partnership for such

         period, including cash contributions and loan proceeds (other than

         refinancing proceeds described in (d) above), that was not included in

         determining Net Income or Net Loss for such period;

 

         (ii)      less the sum of:

 

                  (a)       all principal debt payments made during such period

         by the Partnership,

 

                   (b)       capital expenditures made by the Partnership during

         such period,

 

                  (c)       investments in any entity (including loans made

         thereto) to the extent that such investments are not otherwise

         described in clauses (ii)(a) or (b),

 

                  (d)       all other expenditures and payments not deducted in

         determining Net Income or Net Loss for such period,

 

                                     - 4 -

 

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                  (e)        any amount included in determining Net Income or Net

         Loss for such period that was not received by the Partnership during

         such period, and

 

                  (f)       the amount of any increase in reserves (including,

         without limitation, working capital accounts or other cash or similar

         balances) established during such period which the General Partner

         determines are necessary or appropriate in its sole and absolute

         discretion.

 

         Notwithstanding the foregoing, Available Cash shall not include any

cash received or reductions in reserves, or take into account any disbursements

made or reserves established, after commencement of the dissolution and

liquidation of the Partnership.

 

         "Bankruptcy" of a Person shall be deemed to have occurred when (a) the

Person commences a voluntary proceeding seeking liquidation, reorganization or

other relief under any bankruptcy, insolvency or other similar law now or

hereafter in effect, (b) the Person is adjudged as bankrupt or insolvent, or a

final and nonappealable order for relief under any bankruptcy, insolvency or

similar law now or hereafter in effect has been entered against the Person, (c)

the Person executes and delivers a general assignment for the benefit of the

Person's creditors, (d) the Person files an answer or other pleading admitting

or failing to contest the material allegations of a petition filed against the

Person in any proceeding of the nature described in clause (b) above, (e) the

Person seeks, consents to or acquiesces in the appointment of a trustee,

receiver or liquidator for the Person or for all or any substantial part of the

Person's properties, (f) any proceeding seeking liquidation, reorganization or

other relief under any bankruptcy, insolvency or other similar law now or

hereafter in effect has not been dismissed within one hundred twenty (120) days

after the commencement thereof, (g) the appointment without the Person's consent

or acquiescence of a trustee, receiver or liquidator has not been vacated or

stayed within ninety (90) days of such appointment, or (h) an appointment

referred to in clause (g) is not vacated within ninety (90) days after the

expiration of any such stay.

 

         "Book-Tax Disparities" means, with respect to any item of Contributed

Property or Adjusted Property, as of the date of any determination, the

difference between the Carrying Value of such Contributed Property or Adjusted

Property and the adjusted basis thereof for federal income tax purposes as of

such date. A Partner's share of the Partnership's Book-Tax Disparities in all of

its Contributed Property and Adjusted Property will be reflected by the

difference between such Partner's Capital Account balance as maintained pursuant

to Exhibit B and the hypothetical balance of such Partner's Capital Account

computed as if it had been maintained strictly in accordance with federal income

tax accounting principles.

 

         "Business Day" means any day except a Saturday, Sunday or other day on

which banking institutions in the State of New York are authorized or obligated

by law or executive order to close.

 

         "Canyon Contribution Agreement" means that certain Contribution

Agreement, dated July 26, 1996, by and between the Partnership and Canyon Ranch.

 

         "Canyon Ranch" means Canyon Ranch, Inc. an Arizona corporation.

 

                                     - 5 -

 

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         "Canyon Ranch Property" means the property and assets specified in the

Canyon Contribution Agreement.

 

         "Capital Account" means the capital account maintained for a Partner

pursuant to Exhibit B hereof.

 

         "Capital Contribution" means, with respect to any Partner, any cash,

cash equivalents or the Net Asset Value of Contributed Property which such

Partner contributes to the Partnership.

 

         "Carrying Value" means (i) with respect to a Contributed Property or

Adjusted Property, the Gross Asset Value of such property reduced (but not below

zero) by all Depreciation with respect to such property charged to the Partners'

Capital Accounts and (ii) with respect to any other Partnership property, the

adjusted basis of such property for federal income tax purposes, all as of the

time of determination. The Carrying Value of any property shall be adjusted from

time to time in accordance with Exhibit B hereof, and to reflect changes,

additions or other adjustments to the Carrying Value for improvements and

dispositions and acquisitions of Partnership properties, as deemed appropriate

by the General Partner.

 

          "Cash Amount" means an amount of cash equal to the Value, as of the

date of receipt by Crescent Equities of a Notice of Exchange, of the REIT Shares

Amount. Notwithstanding the foregoing, if the Crescent Group raises the Cash

Amount through an offering of securities, borrowings or otherwise, the Cash

Amount shall be reduced by an amount equal to the expenses incurred by the

Crescent Group in connection with raising such funds (to the extent that such

expenses are allocable to funds used to pay the Cash Amount); provided, however,

that the total reduction of the Cash Amount for such expenses shall not exceed

five percent (5%) of the total Cash Amount as determined prior to reduction for

such expenses.

 

         "Certificate" means the Certificate of Limited Partnership of the

Partnership filed in the office of the Secretary of State of Delaware, as

amended from time to time in accordance with the terms hereof and the Act.

 

         "Code" means the Internal Revenue Code of 1986, as amended and in

effect from time to time, as interpreted by the applicable regulations

thereunder. Any reference herein to a specific section or sections of the Code

shall be deemed to include a reference to any corresponding provision of future

law.

 

         "Consultant Unit Agreement" means that certain Consultant Unit

Agreement, dated August 15, 1995, by and between Greenbrier and the Partnership.

 

         "Contributed Funds" has the meaning set forth in Section 4.2.A(2)

hereof

 

         "Contributed Property" means each property or other asset (but

excluding cash), in such form as may be permitted by the Act, contributed to the

Partnership. Once the Carrying Value of a Contributed Property is adjusted

pursuant to Section 1.D of Exhibit B hereof, such property shall no longer

constitute a Contributed Property for purposes of Exhibit B hereof, but shall be

deemed an Adjusted Property for such purposes.

 

         "Contribution Date" has the meaning set forth in Section 4.3 hereof.

 

                                     - 6 -

 

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         "Crescent Equities" means Crescent Real Estate Equities Company, a

Texas real estate investment trust.

 

         "Crescent Group" means Crescent Equities, the General Partner, and any

wholly owned subsidiaries of Crescent Equities or the General Partner.

 

         "Crescent Loan" has the meaning set forth in Section 4.2.A(1) hereof.

 

         "Declaration of Trust" means the Declaration of Trust of Crescent

Equities, as it may be amended, supplemented or restated from time to time.

 

         "Deemed Partnership Interest Value" as of any date shall mean, with

respect to a Partner, the product of (i) the Deemed Value of the Partnership as

of such date, multiplied by (ii) such Partner's Partnership Interest as of such

date.

 

         "Deemed Value of the Partnership" as of any date shall mean the

quotient of the following amounts:

 

         (i)       the product of (a) the Value of a REIT Share as of such date,

multiplied by (b) the total number of REIT Shares issued and outstanding as of

the close of business on such date (excluding treasury shares and, for purposes

of Section 4.2 hereof, excluding any REIT Shares issued in exchange for

Contributed Funds to be contributed to the Partnership by Crescent Equities on

the Adjustment Date for which the calculation is being made), divided by

 

         (ii)      the aggregate Partnership Interest of Crescent Equities and

the General Partner as of such date.

 

         "Demand Notice" has the meaning set forth in Section 16.2 hereof.

 

         "Depreciation" means, for each fiscal year, an amount equal to the

federal income tax depreciation, amortization, or other cost recovery deduction

allowable with respect to an asset for such year, except that if the Carrying

Value of an asset differs from its adjusted basis for federal income tax

purposes at the beginning of such year or other period, Depreciation shall be an

amount which bears the same ratio to such beginning Carrying Value as the

federal income tax depreciation, amortization, or other cost recovery deduction

for such year bears to such beginning adjusted tax basis; provided, however,

that if the federal income tax depreciation, amortization, or other cost

recovery deduction for such year is zero, Depreciation shall be determined with

reference to such beginning Carrying Value using any reasonable method selected

by the General Partner.

 

         "Employee Limited Partner" has the meaning set forth in Section 4.7.C

hereof.

 

         "Exchange Act" means the Securities Exchange Act of 1934, as amended,

or any successor statute.

 

         "Exchange Factor" means, effective as of March 20, 1997 (the record

date on which the two-for-one stock split of Crescent Equities common shares was

effected in the form of a 100% share dividend), 2.0, provided that in the event

that Crescent Equities (i) pays a dividend on its

 

                                     - 7 -

 

<PAGE>

 

outstanding REIT Shares in REIT Shares or makes a distribution to all holders of

its outstanding REIT Shares in REIT Shares, (ii) subdivides its outstanding REIT

Shares, or (iii) combines its outstanding REIT Shares into a smaller number of

REIT Shares, the Exchange Factor shall be adjusted by multiplying the Exchange

Factor by a fraction, the numerator of which shall be the number of REIT Shares

that would be issued and outstanding on the record date for such event if such

dividend, distribution, subdivision or combination had occurred as of such date,

and the denominator of which shall be the actual number of REIT Shares issued

and outstanding on the record date for such dividend, distribution, subdivision

or combination. Any adjustment of the Exchange Factor shall become effective

immediately after the effective date of such event retroactive to the record

date for such event; provided, however, that if Crescent Equities receives a

Notice of Exchange after the record date, but prior to the effective date, of

any such event, the Exchange Factor shall be determined as if Crescent Equities

had received the Notice of Exchange immediately prior to the record date for

such event. From the date of inception of the Partnership, until March 26, 1997,

the Exchange Factor was 1.0.

 

         "Exchange Right" has the meaning set forth in Section 8.6 hereof.

 

         "Exchanging Person" has the meaning set forth in Section 8.6.A hereof.

 

         "Falcon Point Property" means the Falcon Point single family

residential development located in Houston, Texas.

 

         "First Amended Agreement" has the meaning set forth in the Recitals to

this Agreement.

 

         "Funding Loan Proceeds" means the net cash proceeds received by the

Crescent Group in Connection with any Funding Loan, after deduction of all costs

and expenses incurred by the Crescent Group in connection with such Funding

Loan.

 

         "Funding Loan(s)" means any borrowing or refinancing of borrowings by

or on behalf of the Crescent Group from any lender for the purpose of causing

Crescent Equities to advance the proceeds thereof to the Partnership as a loan

pursuant to Section 4.2.A(1) hereof.

 

         "General Partner" means Crescent Real Estate Equities, Ltd. (formerly

known as CRE General Partner, Inc.), a Delaware corporation which is a wholly

owned subsidiary of Crescent Equities, its duly admitted successors and assigns

and any other Person who is a General Partner at the time of reference thereto.

 

         "General Partnership Interest" means the Partnership Interest held by

the General Partner.

 

         "Greenbrier" means Texas Greenbrier Associates, Inc., a Texas

corporation.

 

         "Greenbrier Agreement" means that certain Agreement of Acceptance of

the Partnership Agreement executed by Greenbrier and delivered to the General

Partner.

 

         "Gross Asset Value" of any Contributed Property or Properties

contributed by a Partner to the Partnership in connection with the execution of

the First Amended Agreement means the Net Asset Value of such Contributed

Property or Properties as set forth in Exhibit A thereof, increased by any

liabilities either treated as assumed by the Partnership upon the contribution

of

 

                                     - 8 -

<PAGE>

 

such property or properties or to which such property or properties are treated

as subject when contributed pursuant to the provisions of Section 752 of the

Code. The Gross Asset Value of any other Contributed Property or Properties

means the fair market value of such property or properties at the time of

contribution as determined by the General Partner using such reasonable method

of valuation as it may adopt. The General Partner shall, in its sole and

absolute discretion, use such method as it deems reasonable and appropriate to

allocate the aggregate of the Gross Asset Value of Contributed Properties

contributed in a single or integrated transaction among the separate properties

on a basis proportional to their respective fair market values.

 

         "HA Development Corporation" means Houston Area Development Corp., a

Texas corporation that will own the Falcon Point Property and the Huntington

Woods Property.

 

         "Huntington Woods Property" means the Huntington Woods single family

residential development located in Houston, Texas.

 

         "Incapacity" or "Incapacitated" means, (i) as to any individual

Partner, death, total physical disability or entry of an order by a court of

competent jurisdiction adjudicating him incompetent to manage his Person or his

estate; (ii) as to any corporation which is a Partner, the filing of a

certificate of dissolution, or its equivalent, for the corporation or the

revocation of its charter; (iii) as to any partnership which is a Partner, the

dissolution and commencement of winding up of the partnership; (iv) as to any

estate which is a Partner, the distribution by the fiduciary of the estate's

entire interest in the Partnership; (v) as to any trustee of a trust which is a

Partner, the termination of the trust (but not the substitution of a new

trustee); or (vi) as to any Partner, the Bankruptcy of such Partner.

 

         "Indemnitee" means (i) any Person made a party to a proceeding by

reason of his status as (A) a member of the Crescent Group, (B) a director or

officer of the Partnership or of a member of the Crescent Group, or (C) an

attorney-in-fact of the General Partner acting pursuant to Section 7.9.C, and

(ii) such other Persons (including Affiliates of the General Partner or the

Partnership) as the General Partner may designate from time to time, in its sole

and absolute discretion.

 

         "Initial Agreement" has the meaning set forth in the Recitals to this

Agreement.

 

         "IRS" means the Internal Revenue Service, which administers the

internal revenue laws of the United States.

 

         "Lien" means any liens, security interests, mortgages, deeds of trust,

charges, claims, encumbrances, pledges, options, rights of first offer or first

refusal and any other rights or interests of any kind or nature, actual or

contingent, or other similar encumbrances of any nature whatsoever.

 

         "Limited Partner" means any Person named as a Limited Partner in

Exhibit A attached hereto, as such Exhibit may be amended from time to time, or

any Substituted Limited Partner, Additional Limited Partner, or Employee Limited

Partner, in such Person's capacity as a Limited Partner in the Partnership.

 

                                     - 9 -

<PAGE>

 

          "Limited Partnership Interest" means a Partnership Interest of a

Limited Partner in the Partnership and includes any and all benefits to which

the holder of such a Partnership Interest may be entitled as provided in this

Agreement, together with all obligations of such Person to comply with the terms

and provisions of this Agreement.

 

         "Liquidating Event(s)" has the meaning set forth in Section 13.1

hereof.

 

         "Liquidation Preferences" has the meaning set forth in Section 6.3.B

hereof.

 

         "Liquidator" has the meaning set forth in Section 13.2 hereof.

 

         "Management Company" means Crescent Development Management Corp., a

Texas corporation that will provide management services to the Mira Vista

Property, the Falcon Point Property, the Huntington Woods Property, and certain

other properties that may be acquired by the Partnership in the future. The

Partnership will own one (1) share of voting common stock and nine thousand

eight hundred and ninety-nine (9,899) shares of nonvoting common stock of the

Management Company.

 

         "Mira Vista Property" means the single family residential development

located in Fort Worth, Texas, and a ninety-eight percent (98%) interest in the

limited liability company that owns the adjacent Mira Visa Golf Club.

 

         "MV Development Corporation" means Mira Vista Development Corp., a

Texas corporation that will own the Mira Vista Property.

 

         "Net Asset Value" in the case of any Contributed Property contributed

by a Partner to the Partnership in connection with the execution of this

Agreement shall be determined on an aggregate basis with respect to all of the

properties contributed by such Partner to the Partnership, and means the

aggregate Gross Asset Values of such properties, reduced by any liabilities

either treated as assumed by the Partnership upon the contribution of such

properties or to which such properties are treated as subject when contributed

pursuant to the provisions of Section 752 of the Code. The aggregate Net Asset

Values of the properties contributed by each Partner to the Partnership in

connection with the execution of the First Amended Agreement are set forth in

Exhibit A thereof. In the case of any other Contributed Property and as of the

time of its contribution to the Partnership, Net Asset Value means the Gross

Asset Value of such property, reduced by any liabilities either treated as

assumed by the Partnership upon such contribution or to which such property is

treated as subject when contributed pursuant to Section 752 of the Code.

 

         "Net Income" means, for any taxable period, the excess, if any, of the

Partnership's items of income and gain for such taxable period over the

Partnership's items of loss and deduction for such taxable period. The items

included in the calculation of Net Income shall be determined in accordance with

Section 1.B of Exhibit B. Once an item of income, gain, loss or deduction that

has been included in the initial computation of Net Income is subjected to the

special allocation rules in Exhibit C, Net Income or the resulting Net Loss,

whichever the case may be, shall be recomputed without regard to such item.

 

                                     - 10 -

<PAGE>

 

         "Net Loss" means, for any taxable period, the excess, if any, of the

Partnership's items of loss and deduction for such taxable period over the

Partnership's items of income and gain for such taxable period. The items

included in the calculation of Net Loss shall be determined in accordance with

Section 1.B of Exhibit B. Once an item of income, gain, loss or deduction that

has been included in the initial computation of Net Loss is subjected to the

special allocation rules in Exhibit C, Net Loss or the resulting Net Income,

whichever the case may be, shall be recomputed without regard to such items.

 

         "New Interests" has the meaning set forth in Section 8.7.C hereof.

 

         "New Securities" has the meaning set forth in Section 8.7.C hereof.

 

         "Nonrecourse Built-in Gain" means, with respect to any Contributed

Properties or Adjusted Properties that are subject to a mortgage or negative

pledge securing a Nonrecourse Liability, the amount of any taxable gain that

would be allocated to the Partners pursuant to Section 2.B of Exhibit C if such

properties were disposed of in a taxable transaction in full satisfaction of

such liabilities and for no other consideration.

 

          "Nonrecourse Deductions" has the meaning set forth in Regulations

Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for a fiscal

year shall be determined in accordance with the rules of Regulations Section

1.704-2(c).

 

         "Nonrecourse Liability" has the meaning set forth in Regulations

Section 1.752-1(a)(2).

 

         "Non-Unitholder Partnership Interest" means a Limited Partnership

Interest that does not have Partnership Units associated therewith.

 

         "Notice of Exchange" means the Notice of Exchange substantially in the

form of Exhibit D to this Agreement.

 

         "Partner" means a General Partner or a Limited Partner, and "Partners"

means the General Partner and the Limited Partners.

 

         "Partner Minimum Gain" means an amount, with respect to each Partner

Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if

such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,

determined in accordance with Regulations Section 1.704-2(i)(3).

 

         "Partner Nonrecourse Debt" has the meaning set forth in Regulations

Section 1.704-2(b)(4).

 

         "Partner Nonrecourse Deductions" has the meaning set forth in

Regulations Section 1.704-2(i)(2), and the amount of Partner Nonrecourse

Deductions with respect to a Partner Nonrecourse Debt for a Partnership year

shall be determined in accordance with the rules of Regulations Section

1.704-2(i)(2).

 

         "Partnership" means the limited partnership formed under the Act and

pursuant to this Agreement.

 

                                     - 11 -

<PAGE>

 

         "Partnership Interest" means an ownership interest in the Partnership

representing a Capital Contribution by either a Limited Partner or the General

Partner and includes any and all benefits to which the holder of such a

Partnership Interest may be entitled as provided in this Agreement, together

with all obligations of such Person to comply with the terms and provisions of

this Agreement. The Partnership Interest of each Partner shall be expressed as a

percentage of the total Partnership Interests owned by all of the Partners, as

specified in Exhibit A attached hereto, as such Exhibit may be amended from time

to time. All Partnership Interests shall be calculated to the nearest one

millionth of one percent (0.000000%), with amounts equal to or greater than

0.0000005% being rounded up to the next one millionth of one percent, and with

amounts less than 0.0000005% being rounded down to the next one millionth of one

percent.

 

         "Partnership Minimum Gain" has the meaning set forth in Regulations

Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as

any net increase or decrease in Partnership Minimum Gain, for a fiscal year

shall be determined in accordance with the rules of Regulations Section

1.704-2(d).

 

         "Partnership Record Date" means the record date established by the

General Partner for the distribution of Available Cash pursuant to Section 5.2

hereof, which record date shall be the same as the record date established by

Crescent Equities or otherwise pursuant to the Texas Act for a distribution to

its shareholders of some or all of its portion of such distribution.

 

         "Partnership Unit" means a unit representing the Exchange Rights

associated with the Partnership Interests issued to certain of the Limited

Partners pursuant to the terms of this Agreement, which unit may be exchanged

for REIT Shares or cash through the exercise of the Exchange Rights set forth in

Sections 8.6. The number of Partnership Units of each Limited Partner shall be

as specified in Exhibit A attached hereto, as such Exhibit may be amended from

time to time. The Partnership Units may be evidenced by certificates as set

forth in Section 4.1.C hereof.

 

         "Person" means an individual or a corporation, partnership, trust,

unincorporated organization, association or other entity.

 

         "Qualified Individual" has the meaning set forth in Section 16.2

hereof.

 

         "RainAm Investors" means RainAm Investment Properties Ltd., a Texas

limited partnership.

 

         "Recapture Income" means any gain recognized by the Partnership

(computed without regard to any adjustment required by Section 734 or Section

743 of the Code) upon the disposition of any property or asset of the

Partnership, which gain is characterized as ordinary income because it

represents the recapture of deductions previously taken with respect to such

property or asset.

 

         "Regulations" means the income tax regulations promulgated under the

Code, as such regulations may be amended from time to time (including

corresponding provisions of succeeding regulations).

 

         "Regulatory Allocations" has the meaning set forth in Section 1.H of

Exhibit C hereof.

 

                                     - 12 -

<PAGE>

 

         "REIT" means a real estate investment trust under Sections 856 through

860 of the Code.

 

         "REIT Share" means a common share of beneficial interest of Crescent

Equities.

 

         "REIT Shares Amount" means a number of REIT Shares equal to the product

of (i) the number of Partnership Units to be exchanged by an Exchanging Person

pursuant to Section 8.6, multiplied by (ii) the Exchange Factor; provided that

in the event Crescent Equities issues to all holders of REIT Shares rights,

options, warrants or convertible or exchangeable securities entitling the

shareholders to subscribe for or purchase REIT Shares, or any other securities

or property (collectively, the "rights"), then the REIT Shares Amount shall also

include such rights that a holder of that number of REIT Shares would be

entitled to receive.

 

         "Representative" has the meaning set forth in Section 7.12 hereof.

 

         "Requesting Party" has the meaning set forth in Section 16.2 hereof.

 

         "Residual Gain" or "Residual Loss" means any item of gain or loss, as

the case may be, of the Partnership recognized for federal income tax purposes

resulting from a sale, exchange or other disposition of Contributed Property or

Adjusted Property, to the extent such item of gain or loss is not allocable

pursuant to Section 2.B.1(a) or 2.B.2(a) of Exhibit C to eliminate Book-Tax

Disparities.

 

         "SEC" means the United States Securities and Exchange Commission.

 

         "Second Amended Agreement" has the meaning set forth in the Recitals to

this Agreement.

 

         "Securities Act" means the Securities Act of 1933, as amended, or any

successor statute.

 

          "Series A Preferred Partnership Units" means the preferred equity

ownership interests in the Partnership issued to Crescent Equities by the

Partnership in connection with the issuance by Crescent Equities of the Series A

Preferred Shares.

 

         "Series A Preferred Shares" means the 6-3/4% Series A Convertible

Cumulative Preferred Shares issued by Crescent Equities.

 

         "Series B Redeemable Preferred Partnership Units" means the preferred

equity ownership interests in the Partnership issued to Crescent Equities by the

Partnership in connection with the issuance by Crescent Equities of the Series B

Redeemable Preferred Shares.

 

         "Series B Redeemable Preferred Shares" means the Series B Cumulative

Redeemable Preferred Shares issued by Crescent Equities.

 

         "Sonoma" means Rahn Sonoma, Ltd., a Florida limited partnership.

 

         "Sonoma Contribution Agreement" means that certain Contribution

Agreement, dated September 13, 1996, by and among Crescent Real Estate Equities,

Inc., the Partnership, Sonoma, Peter H. Roberts and John H. Anderson.

 

                                     - 13 -

<PAGE>

 

         "Sonoma Property" means the property and assets specified in the Sonoma

Contribution Agreement.

 

         "Specified Exchange Date" means the tenth Business Day after receipt by

Crescent Equities of a Notice of Exchange, unless applicable law requires a

later date. Notwithstanding the foregoing, if Crescent Equities elects to pay

all or any portion of the consideration to an Exchanging Person in cash, the

Specified Exchange Date may be extended for an additional period to the extent

required for the Crescent Group to raise the funds required to pay the cash

consideration to the Exchanging Person.

 

         "Stock Incentive Plan" means The 1994 Crescent Real Estate Equities,

Inc. Stock Incentive Plan, as amended from time to time, or any other stock

incentive plan adopted by Crescent Equities.

 

         "Subsidiary Development Corporation(s)" means MV Development

Corporation and HA Development Corporation, and either of them.

 

         "Substituted Limited Partner" means a Person who is admitted as a

Limited Partner to the Partnership pursuant to Section 11.4.

 

         "Terminating Capital Transaction" means any sale or other disposition

of all or substantially all of the assets of the Partnership or a related series

of transactions that, taken together, result in the sale or other disposition of

all or substantially all of the assets of the Partnership.

 

         "Texas Act" means the Texas Real Estate Investment Trust Act, as the

same may be amended from time to time, or any successor statute thereto.

 

         "Trading Day" means a day on which the principal national securities

exchange on which the REIT Shares are listed or admitted to trading is open for

the transaction of business or, if the REIT Shares are not listed or admitted to

trading, means a Business Day.

 

         "Transaction" has the meaning set forth in Section 11.2.B hereof.

 

         "Unrealized Gain" attributable to any item of Partnership property

means, as of any date of determination, the excess, if any, of (i) the fair

market value of such property (as determined under Exhibit B hereof) as of such

date, over (ii) the Carrying Value of such property (prior to any adjustment to

be made on such date pursuant to Exhibit B hereof) as of such date.

 

         "Unrealized Loss" attributable to any item of Partnership property

means, as of any date of determination, the excess, if any, of (i) the Carrying

Value of such property (prior to any adjustment to be made on such date pursuant

to Exhibit B hereof) as of such date, over (ii) the fair market value of such

property (as determined under Exhibit B hereof) as of such date.

 

         "Value" means, with respect to a REIT Share as of any date, the average

of the "closing price" for the ten (10) consecutive Trading Days immediately

preceding such date (except as provided to the contrary in Sections 4.2, 4.3 and

4.6 hereof). The "closing price" for each such Trading Day means the last sale

price, regular way on such day, or, if no such sale takes place on

 

                                     - 14 -

<PAGE>

 

that day, the average of the closing bid and asked prices on that day, regular

way, in either case as reported on the principal consolidated transaction

reporting system with respect to securities listed or admitted to trading on the

New York Stock Exchange, or if the REIT Shares are not so listed or admitted to

trading, as reported in the principal consolidated transaction reporting system

with respect to securities listed on the principal national securities exchange

(including the National Market System of the National Association of Securities

Dealers, Inc. Automated Quotation System) on which the REIT Shares are listed or

admitted to trading or, if the REIT Shares are not so listed or admitted to

trading, the last quoted price or, if not quoted, the average of the high bid

and low asked prices in the over-the-counter market, as reported by the National

Association of Securities Dealers, Inc. Automated Quotation System or, if such

system is no longer in use, the principal automated quotation system then in use

or, if the REIT Shares are not so quoted by any such system, the average of the

closing bid and asked prices as furnished by a professional market maker

selected by the board of directors of the General Partner making a market in the

REIT Shares, or, if there is no such market maker or such closing prices

otherwise are not available, the fair market value of the REIT Shares as of such

day, as determined by the board of directors of the General Partner in its sole

discretion. In the event Crescent Equities issues to all holders of REIT Shares

rights, options, warrants or convertible or exchangeable securities entitling

the shareholders to subscribe for or purchase REIT Shares or any other property,

then the Value of a REIT Share shall include the value of such rights, as

determined by the board of directors of the General Partner acting in good faith

on the basis of such quotations and other information as it considers, in its

reasonable judgment, appropriate.

 

                                   ARTICLE II

                             ORGANIZATIONAL MATTERS

 

         Section 2.1        Continuation of Partnership

 

         The Partners hereby continue the Partnership as a limited partnership

pursuant to the provisions of the Act and upon the terms and conditions set

forth in this Agreement. Except as expressly provided herein to the contrary,

the rights and obligations of the Partners and the administration and

termination of the Partnership shall be governed by the Act. The Partnership

Interest of each Partner shall be personal property for all purposes.

 

         Section 2.2        Name

 

         The name of the Partnership is Crescent Real Estate Equities Limited

Partnership. The Partnership's business may be conducted under any other name or

names deemed advisable by the General Partner, including the name of the General

Partner or any Affiliate thereof. The words "Limited Partnership," "L.P." "Ltd."

or similar words or letters shall be included in the Partnership's name where

necessary for purposes of complying with the laws of any jurisdiction that so

requires. The General Partner in its sole and absolute discretion may change the

name of the Partnership at any time and from time to time and shall notify the

Limited Partners of such change in the regular communication to the Limited

Partners next succeeding the effectiveness of the change of name.

 

                                      - 15 -

<PAGE>

 

         Section 2.3        Principal Office and Registered Agent

 

         The principal office of the Partnership is 777 Main Street, Suite 2100,

Fort Worth, Texas 76102, or such other place as the General Partner may from

time to time designate. The registered agent of the Partnership is The

Prentice-Hall Corporation System, Inc., located at 1013 Centre Road, in the city

of Wilmington, County of New Castle, Delaware 19805, or such other Person as the

General Partner may from time to time designate. The Partnership may maintain

offices at such other place or places within or outside the State of Delaware as

the General Partner deems advisable.

 

         Section 2.4        Power of Attorney

 

                  A.        Each Limited Partner constitutes and appoints the

General Partner, any Liquidator, and authorized officers and attorneys-in-fact

of each, and each of those acting singly, in each case with full power of

substitution, as its true and lawful agent and attorney-in-fact, with full power

and authority in its name, place and stead to:

 

                  (1)       execute, swear to, acknowledge, deliver, file and

                           record in the appropriate public offices (a) all

                           certificates, documents and other instruments

                           (including, without limitation, the Certificate and

                           all amendments or restatements of this Agreement or

                           the Certificate) that the General Partner or the

                            Liquidator deems appropriate or necessary to qualify

                           or continue the existence or qualification of the

                           Partnership as a limited partnership (or a

                           partnership in which the limited partners have

                           limited liability) in the State of Delaware and in

                           all other jurisdictions in which the Partnership may

                           conduct business or own property; (b) all instruments

                           that the General Partner deems appropriate or

                           necessary to reflect any amendment, change,

                           modification or restatement of this Agreement made in

                            accordance with its terms; (c) all conveyances and

                           other instruments or documents that the General

                           Partner or Liquidator, as the case may be, deems

                           appropriate or necessary to reflect the dissolution

                           and liquidation of the Partnership pursuant to the

                           terms of this Agreement, including, without

                           limitation, a certificate of cancellation; and (d)

                           all instruments relating to the Capital Contribution

                           of any Partner or the admission, withdrawal, removal

                           or substitution of any Partner made pursuant to the

                           terms of this Agreement; and

 

                  (2)       execute, swear to, acknowledge and file all ballots,

                           consents, approvals, waivers, certificates and other

                           instruments appropriate or necessary, in the sole and

                           absolute discretion of the General Partner, to make,

                           evidence, give, confirm or ratify any vote, consent,

                           approval, agreement or other action which is made or

                           given by the Partners hereunder or is consistent with

                           the terms of this Agreement or appropriate or

                           necessary, in the sole discretion of the General

                           Partner, to effectuate the terms or intent of this

                           Agreement.

 

                                     - 16 -

<PAGE>

 

Nothing contained herein shall be construed as authorizing the General Partner

to amend this Agreement except in accordance with Article 14 hereof or as may be

otherwise expressly provided for in this Agreement.

 

                  B.        The foregoing power of attorney is hereby declared to

be irrevocable and a power coupled with an interest, in recognition of the fact

that each of the Partners will be relying upon the power of the General Partner

to act as contemplated by this Agreement in any filing or other action by it on

behalf of the Partnership, and it shall survive and not be affected by the

subsequent Incapacity of any Limited Partner or the transfer of all or any

portion of such Limited Partner's Partnership Interest and shall extend to such

Limited Partner's heirs, successors, assigns and personal representatives. Each

such Limited Partner hereby agrees to be bound by any representation made by the

General Partner, acting in good faith pursuant to such power of attorney; and

each such Limited Partner hereby waives any and all defenses which may be

available to contest, negate or disaffirm the action of the General Partner,

taken in good faith under such power of attorney. Each Limited Partner shall

execute and deliver to the General Partner or the Liquidator, within fifteen

(15) days after receipt of the General Partner's or Liquidator's request

therefor, such further designation, powers of attorney and other instruments as

the General Partner or the Liquidator, as the case may be, deems necessary to

effectuate this Agreement and the purposes of the Partnership.

 

         Section 2.5        Term

 

         The term of the Partnership commenced on February 9, 1994, and shall

continue until December 3 1, 2093, unless it is dissolved sooner pursuant to the

provisions of Article 13 or as otherwise provided by law.

 

                                    ARTICLE III

                                     PURPOSE

 

         Section 3.1        Purpose and Business

 

         The purpose and nature of the business to be conducted by the

Partnership is (i) to conduct any business that may be lawfully conducted by a

limited partnership organized pursuant to the Act, including, without

limitation, to acquire, hold, own, develop, construct, improve, maintain,

operate, sell, lease, transfer, encumber, convey, exchange, and otherwise

dispose of or deal with real and personal property of all kinds; to acquire

stock ownership interests in and to exercise all of the powers of a stockholder

in the Subsidiary Development Corporations and the Management Company; (ii) to

enter into any partnership, joint venture or other similar arrangement to engage

in any of the foregoing or the ownership of interests in any entity engaged in

any of the foregoing; and to exercise all of the powers of an owner in any such

entity; and (iii) to do anything necessary, appropriate, proper, advisable,

desirable, convenient or incidental to the foregoing; provided, however, that

such business shall be limited to and conducted in such a manner as to permit

Crescent Equities at all times to qualify as a REIT, unless Crescent Equities

voluntarily terminates its REIT status pursuant to its Declaration of Trust. In

connection with the foregoing, and without limiting Crescent Equities' right in

its sole discretion to cease qualifying as a REIT, the Partners acknowledge that

Crescent Equities'

 

                                      - 17 -

<PAGE>

 

current status as a REIT inures to the benefit of all the Partners and not

solely the Crescent Group.

 

         Section 3.2        Powers

 

         Subject to all of the terms, covenants, conditions and limitations

contained in this Agreement and any other agreement entered into by the

Partnership, the Partnership shall have full power and authority to do any and

all acts and things necessary, appropriate, proper, advisable, desirable,

incidental to or convenient for the furtherance and accomplishment of the

purposes and business described herein and for the protection and benefit of the

Partnership, including, without limitation, full power and authority, directly

or through its ownership interest in other entities, to enter into, perform and

carry out contracts of any kind, borrow money and issue evidences of

indebtedness, whether or not secured by mortgage, deed of trust, pledge or other

lien, acquire and develop real property, and lease, sell, transfer or otherwise

dispose of real property; provided, however, that the Partnership shall not

take, or refrain from taking, any action which, in the judgment of General

Partner, in its sole and absolute discretion, (i) could adversely affect the

ability of Crescent Equities to achieve or maintain qualification as a REIT,

(ii) could subject Crescent Equities to any additional taxes under Section 857

or Section 4981 of the Code, or (iii) could violate any law or regulation of any

governmental body or agency having jurisdiction over Crescent Equities or its

securities, unless such action (or inaction) shall have been specifically

consented to by the General Partner in writing.

 

                                   ARTICLE IV

                              CAPITAL CONTRIBUTIONS

 

         Section 4.1        Capital Contributions of the Partners

 

                  A.        Each Partner listed in Exhibit A has previously made

a Capital Contribution to the Partnership as specified in the First Amended

Agreement or in the Second Amended Agreement, as the case may be, in exchange

for its Partnership Units and Partnership Interest set forth in Exhibit A.

 

                  B.        The Partners shall own Partnership Units in the

amounts set forth in Exhibit A and shall have Partnership Interests in the

Partnership as set forth in Exhibit A, which Partnership Units and Partnership

Interests shall be adjusted in Exhibit A from time to time by the General

Partner to the extent necessary to reflect accurately the exercise of Exchange

Rights, Capital Contributions, transfers of Partnership Interests, admissions of

Additional Limited Partners or Employee Limited Partners, or similar events.

Except as provided in Section 10.5, or as a result of directly paying any

Partnership debt, the Partners shall have no obligation to make any additional

Capital Contributions or loans to the Partnership.

 

                  C.        The interest of each Limited Partner in Partnership

Units may be evidenced by one or more certificates in such form as the General

Partner may from time to time prescribe. Upon surrender to the General Partner

of a certificate evidencing the ownership of Partnership Units accompanied by

proper evidence of authority to transfer, the General Partner shall cancel the

old certificate, issue a new certificate to the Person entitled thereto and

record the transaction upon its books. The transfer of Partnership Units may be

effectuated only in

 

                                     - 18 -

<PAGE>

 

connection with a transfer of a Limited Partnership Interest pursuant to the

terms of Section 8.6 or Article 11 hereof. The General Partner may issue a new

certificate or certificates in place of any certificate or certificates

previously issued, which previously-issued certificate or certificates are

alleged to have been lost, stolen or destroyed, upon the making of an affidavit

of that fact by the owner claiming the certificate or certificates to be lost,

stolen or destroyed. When issuing such new certificate or certificates, the

General Partner may, in its discretion and as a condition precedent to the

issuance thereof, require the owner of such lost, stolen or destroyed

certificate or certificates, or its legal representative, to give the

Partnership a bond in such sum as the General Partner may direct as indemnity

against any claim that may be made against the Partnership with respect to the

certificate or certificates alleged to have been lost, stolen or destroyed.

 

         Section 4.2        Additional Funding

 

                  A.        If the General Partner determines that it is in the

best interests of the Partnership to provide for additional Partnership funds

("Additional Funds") for any Partnership purpose in excess of any other funds

determined by the General Partner to be available to the Partnership, the

General Partner (i) may cause the Partnership to obtain such funds from outside

borrowings, (ii) may cause the Partnership to obtain such funds by the admission

of Additional Limited Partners pursuant to Section 4.3 hereof, or (iii) may

elect to have Crescent Equities provide such Additional Funds to the

Partnership. On any date that Crescent Equities provides Additional Funds to the

Partnership (the "Funding Date"):

 

                  (1)       to the extent the General Partner elects to borrow

                           all or any portion of the Additional Funds through a

                           Funding Loan, the General Partner shall cause

                           Crescent Equities to lend (the "Crescent Loan") to

                            the Partnership the Funding Loan Proceeds on

                           comparable terms and conditions, including interest

                           rate, repayment schedule and costs and expenses, as

                           shall be applicable with respect to or incurred in

                           connection with the Funding Loan; or

 

                  (2)       to the extent the General Partner does not elect to

                           borrow all or any portion of the Additional Funds by

                           entering into a Funding Loan, the General Partner

                           shall cause Crescent Equities to contribute to the

                           Partnership as an additional Capital Contribution the

                            amount of the Additional Funds not loaned to the

                           Partnership as a Crescent Loan (the "Contributed

                           Funds") (hereinafter, each Funding Date on which

                           Crescent Equities so contributes Contributed Funds

                           pursuant to this subparagraph (2) is referred to as

                           an "Adjustment Date"). The Crescent Group may raise

                           such Contributed Funds through a private placement or

                           public offering of REIT Shares or otherwise. The

                           Partnership shall assume or pay the expenses,

                           including any applicable underwriting discounts

                            incurred by the Crescent Group in connection with

                           raising such Contributed Funds through a private

                           placement or public offering of its securities or

                           otherwise (i.e., Crescent Equities shall be treated

                           as contributing to the Partnership as Contributed

                           Funds the gross amount of funds raised, and the

                           Partnership shall be charged with the cost of raising

                           such funds, with

 

                                     - 19 -

<PAGE>

 

                           such cost allocated to all of the Partners in

                           accordance with Article VI of the Agreement).

 

                  B.        Effective on each Adjustment Date, Crescent Equities

shall receive an additional Partnership Interest (and the Partnership Interest

of each Limited Partner other than Crescent Equities shall be reduced) such

that:

 

                            (1)       the Partnership Interest of each Limited

Partner not owning Partnership Units (other than Crescent Equities) shall be

equal to a fraction, the numerator of which is equal to the Deemed Partnership

Interest Value of such Limited Partner (computed as of the Business Day

immediately preceding the Adjustment Date) and the denominator of which is equal

to the sum of (i) the Deemed Value of the Partnership (computed as of the

Business Day immediately preceding the Adjustment Date) and (ii) the amount of

Contributed Funds contributed by Crescent Equities on such Adjustment Date;

 

                           (2)       the combined Partnership Interest of

Crescent Equities and the General Partner shall be equal to a fraction, the

numerator of which is equal to the sum of (i) the combined Deemed Partnership

Interest Value of Crescent Equities and the General Partner (computed as of the

Business Day immediately preceding the Adjustment Date) and (ii) the amount of

the Contributed Funds contributed by Crescent Equities on such Adjustment Date

and the denominator of which is equal to the sum of (x) the Deemed Value of the

Partnership (computed as of the Business Day immediately preceding the

Adjustment Date) and (y) the amount of the Contributed Funds contributed by

Crescent Equities on such Adjustment Date. The Partnership Interest of the

General Partner shall remain one percent (1%), and the Partnership Interest of

Crescent Equities shall be equal to the combined Partnership Interest determined

in clause (2) of the preceding sentence, reduced by one percentage point (1%);

and

 

                           (3)       the Partnership Interest of each Limited

Partner owning Partnership Units shall be equal to the product of the following:

(i) the difference obtained from subtracting (x) the sum of the combined

Partnership Interest of Crescent Equities and the General Partner as calculated

in Section 4.2.B(2) hereof, plus the aggregate Non-Unitholder Partnership

Interests as calculated in Section 4.2.B(1) hereof, from (y) one hundred percent

(100%), and (ii) a fraction, the numerator of which is equal to the number of

Partnership Units held by such Limited Partner on such Adjustment Date, and the

denominator of which is equal to the total number of Partnership Units held by

all Limited Partners on such Adjustment Date.

 

         The General Partner shall be authorized on behalf of each of the

Partners to amend this Agreement to reflect the increase in the Partnership

Interest of Crescent Equities and the corresponding reduction of the Partnership

Interests of the other Limited Partners in accordance with the provisions of

this Section 4.2. The number of Partnership Units owned by the Limited Partners

and Assignees shall not be decreased in connection with any additional

contribution of funds to the Partnership by Crescent Equities pursuant to this

Section 4.2. Notwithstanding anything to the contrary contained in this

Agreement, for purposes of calculating the "Deemed Value of the Partnership" and

the "Deemed Partnership Interest Value" under this Section 4.2.B with respect to

cash amounts raised by Crescent in a private placement or public offering of

REIT Shares and contributed to the Partnership as Contributed Funds, the Value"

of a REIT Share shall be the gross offering price (prior to deduction of any

expenses, including without

 

                                     - 20 -

<PAGE>

 

limitation selling commissions or underwriting discounts) per REIT Share sold in

the private placement or public offering.

 

                   C.        The Partners hereby acknowledge and agree that any

Additional Funds provided by the Crescent Group (through Crescent Equities) to

the Partnership pursuant to this Section 4.2 may be in the form of real property

or an interest therein rather than cash. In the event that real property or an

interest therein is contributed by Crescent Equities to the Partnership pursuant

to this Section 4.2:

 

                           (1)       to the extent that the consideration given

in exchange for such real property or interest therein is in the form of

indebtedness, Crescent Equities shall be deemed to have made a Crescent Loan to

the Partnership pursuant to Section 4.2.A(1) hereof in an amount equal to the

amount of such indebtedness; and

 

                            (2)       to the extent that the consideration given

in exchange for such real property or interest therein is in the form of cash or

REIT Shares, (i) Crescent Equities shall be deemed to have contributed

Contributed Funds to the Partnership pursuant to Section 4.2.A(2) hereof in an

amount equal to the amount of cash or the Value (computed as of the Business Day

immediately preceding the date on which such real property or interest therein

is contributed to the Partnership) of the REIT Shares given as consideration,

and (ii) the Partnership Interests of the Limited Partners shall be adjusted as

set forth in Section 4.2.B hereof.

 

To the extent that the consideration given for such real property or interest

therein is New Securities, the provisions of Section 8.7.C hereof shall apply to

the contribution of the real property or interest therein by Crescent Equities

to the Partnership.

 

         Section 4.3        Issuance of Additional Partnership Interests

 

         At any time after the date hereof, without the consent of any Partner,

but subject to the provisions of Section 12.2 hereof, the General Partner may,

upon its determination that the issuance of additional Partnership Interests is

in the best interests of the Partnership, cause the Partnership to issue

Partnership Interests to and admit as a limited partner in the Partnership, any

Person (the "Additional Limited Partner") in exchange for the contribution by

such Person of cash and/or property in such amounts as is determined appropriate

by the General Partner to further the purposes of the Partnership under Section

3.1 hereof. In the event that an Additional Limited Partner is admitted to the

Partnership pursuant to this Section 4.3:

 

                  (1)       if the Additional Limited Partner does not receive

                           any Partnership Units in connection with the receipt

                           of his or its Partnership Interest, the Partnership

                           Interest of such Additional Limited Partner shall be

                           equal to a fraction, the numerator of which is equal

                           to the total dollar amount of the cash contributed

                           and/or the Net Asset Value of the property

                            contributed by the Additional Limited Partner as of

                           the date of contribution to the Partnership (the

                           "Contribution Date") and the denominator of which is

                           equal to the sum of (i) the Deemed Value of the

                           Partnership (computed as of the Business Day

                           immediately preceding the Contribution Date) and (ii)

                           the total dollar amount of the cash contributed

                           and/or the Net Asset Value

 

                                     - 21 -

<PAGE>

 

                           of the property contributed by the Additional Partner

                           as of the Contribution Date;

 

                   (2)       the Partnership Interest of Crescent Equities shall

                           be reduced, as of the Contribution Date, such that

                           the combined Partnership Interest of Crescent

                           Equities and the General Partner shall be equal to a

                           fraction, the numerator of which is equal to the

                           combined Deemed Partnership Interest Value of

                           Crescent Equities and the General Partner (computed

                           as of the Business Day immediately preceding the

                           Contribution Date) and the denominator of which is

                           equal to the sum of (i) the Deemed Value of the

                            Partnership (computed as of the Business Day

                           immediately preceding the Contribution Date) and (ii)

                           the total dollar amount of the cash contributed

                           and/or the Net Asset Value of the property

                           contributed by the Additional Limited Partner as of

                           the Contribution Date (with the Partnership Interest

                           of the General Partner remaining at one percent (1%),

                           and the Partnership Interest of Crescent Equities

                           equal to the combined Partnership Interest determined

                           above in this Section 4.3(2), reduced by one

                            percentage point (1%));

 

                  (3)       the Partnership Interest of each existing Limited

                           Partner not owning Partnership Units (other than

                           Crescent Equities) shall be reduced, as of the

                           Contribution Date, such that the Partnership Interest

                           of each such Limited Partner shall be equal to a

                           fraction, the numerator of which is equal to the

                            Deemed Partnership Interest Value of such Limited

                           Partner (computed as of the Business Day immediately

                           preceding the Contribution Date) and the denominator

                           of which is equal to the sum of (i) the Deemed Value

                           of the Partnership (computed as of the Business Day

                           immediately preceding the Contribution Date) and (ii)

                           the total dollar amount of the cash contributed

                           and/or the Net Asset Value of the property

                           contributed by the Additional Limited Partner as of

                           the Contribution Date; and

 

                  (4)       The Partnership Interest of each existing Limited

                           Partner owning Partnership Units and of the

                           Additional Limited Partner, if such Additional

                           Partner receives Partnership Units in connection with

                           the receipt of his or its Partnership Interest, shall

                           be equal to the product of the following: (i) the

                           difference obtained from subtracting (x) the sum of

                           the combined Partnership Interest of Crescent

                           Equities and the General Partner as calculated in

                           Section 4.3(2) hereof, plus the aggregate

                           Non-Unitholder Partnership Interests as calculated in

                           Sections 4.2(1) and (3) hereof, from (y) one hundred

                           percent (100%), and (ii) a fraction, the numerator of

                           which is equal to the number of Partnership Units

                           held by such Limited Partner on such Contribution

                           Date, and the denominator of which is equal to the

                           total number of Partnership Units held by all Limited

                           Partners (including the Additional Limited Partner)

                           on such Contribution Date.

 

                                     - 22 -

<PAGE>

 

         The General Partner shall be authorized on behalf of each of the

Partners to amend this Agreement to reflect the admission of any Additional

Limited Partner and any reduction of the Partnership Interests of the other

Limited Partners in accordance with the provisions of this Section 4.3.

 

         The number of Partnership Units owned by the Limited Partners and

Assignees shall not be decreased in connection with any admission of an

Additional Limited Partner pursuant to this Section 4.3. The General Partner may

(but is not required to) grant to an Additional Limited Partner Partnership

Units, which Partnership Units shall enable the Additional Limited Partner to

participate in the Exchange Rights, upon such terms and conditions as are deemed

appropriate by the General Partner. Notwithstanding anything to the contrary

contained in this Agreement, if the value of the Partnership Units granted to an

Additional Limited Partner is determined based on the average of the "closing

price" of a REIT Share for a period of time other than the ten (10)-day period

specified in the Article I definition of "Value" (including, without limitation,

a determination based on the "closing price" of a REIT Share for the Trading Day

immediately preceding the admission of such Additional Limited Partner), then

such other time period shall be used in calculating the "Value" of a REIT Share

for purposes of calculating the "Deemed Value of the Partnership" and the

"Deemed Partnership Interest Value" under this Section 4.3 with respect to the

admission of such Additional Limited Partner.

 

         Section 4.4        No Preemptive Rights

 

         Except as otherwise set forth in Section 4.2.A, no Person shall have

any preemptive, preferential or other similar right with respect to the making

of additional Capital Contributions or loans to the Partnership.

 

         Section 4.5        No Interest on Capital

 

         No Partner shall be entitled to interest on its Capital Contribution or

its Capital Account.

 

         Section 4.6        Stock Incentive Plans

 

                  A.        Grants of REIT Shares. If grants of REIT Shares are

made in connection with a Stock Incentive Plan,

 

                           (1)       Crescent Equities shall, as soon as

practicable after such grant, contribute to the capital of the Partnership an

amount equal to the price (if any) paid to Crescent Equities by the party

receiving the grant of REIT Shares;

 

                           (2)       Crescent Equities shall, as of the date on

which the grant of REIT Shares is made, be deemed to have contributed to the

Partnership as Contributed Funds pursuant to Section 4.2.A(2) hereof an amount

equal to the fair market value (computed using the "closing price" (as such term

is defined in the definition of the term "Value" in Article I hereof) as of the

date on which the grant of REIT Shares is made) of the REIT Shares delivered by

Crescent Equities to such party; and

 

                           (3)       the General Partner's Partnership Interest

shall remain unchanged, and the Partnership Interests of Crescent Equities and

the other Limited Partners shall be

 

                                     - 23 -

<PAGE>

 

adjusted as set forth in Section 4.2, based on the amount deemed to be

contributed, determined pursuant to Section 4.6.A(2); provided that, for

purposes of calculating the "Deemed Value of the Partnership" and the "Deemed

Partnership Interest Value" under Section 4.2, the "Value" of a REIT Share shall

be the "closing price" (as such term is defined in the definition of the term

Value" in Article I hereof) of a REIT Share as of the date on which the grant of

REIT Shares is made.

 

                  B.        Exercise of Stock Options. If stock options granted

in connection with a Stock Incentive Plan are exercised:

 

                           (1)       Crescent Equities shall, as soon as

practicable after such exercise, contribute to the capital of the Partnership an

amount equal to the exercise price paid to Crescent Equities by the exercising

party;

 

                           (2)       Crescent Equities shall, as of the date on

which the purchase of the REIT Shares is consummated by such exercising party,

be deemed to have contributed to the Partnership as Contributed Funds pursuant

to Section 4.2.A(2) hereof an amount equal to the fair market value (computed

using the "closing price" (as such term is defined in the definition of "Value"

in Article I hereof) as of the date on which such purchase of REIT Shares is

consummated by such exercising party) of the REIT Shares delivered by Crescent

Equities to such exercising party; and

 

                           (3)       the General Partner's Partnership Interest

shall remain unchanged, and the Partnership Interests of Crescent Equities and

the other Limited Partners shall be adjusted as set forth in Section 4.2, based

on the amount deemed to be contributed, determined pursuant to Section 4.6.B(2);

provided that, for purposes of calculating the "Deemed Value of the Partnership"

and the "Deemed Partnership Interest Value" under Section 4.2, the "Value" of a

REIT Share shall be the "closing price" (as such term is defined in the

definition of the term "Value" in Article I hereof) of a REIT Share as of the

date on which the purchase of REIT Shares is consummated by the exercising

party.

 

         Section 4.7        Other Equity Compensation Plans

 

                  A.        The Partnership may adopt a compensation plan for its

employees, agents or consultants pursuant to which the Partnership may grant

Limited Partnership Interests (including Partnership Units, which Partnership

Units shall enable the Limited Partner to participate in the Exchange Rights),

or options to acquire Limited Partnership Interests (including Partnership

Units, which Partnership Units shall enable the Limited Partner to participate

in the Exchange Rights), to one or more of its employees, agents or consultants

upon such terns and conditions as may be deemed necessary or appropriate by the

General Partner.

 

                  B.        The Management Company may adopt a compensation plan

for its employees, agents or consultants pursuant to which the Management

Company may grant Limited Partnership Interests (including Partnership Units,

which Partnership Units shall enable the Limited Partner to participate in the

Exchange Rights), or options to acquire Limited Partnership Interests (including

Partnership Units, which Partnership Units shall enable the Limited Partner to

participate in the Exchange Rights), to one or more of its employees, agents or

 

                                     - 24 -

<PAGE>

 

consultants. The Partnership may sell Limited Partnership Interests (including

Partnership Units, which Partnership Units shall enable the Limited Partner to

participate in the Exchange Rights) to the Management Company for delivery to

its employees, agents or consultants. The price at which the Partnership shall

sell such Partnership Interests to the Management Company shall be the fair

market value of such Partnership Interests, as determined by the General Partner

in its reasonable discretion.

 

                  C.         Upon any admission of an employee, agent or

consultant of the Partnership or the Management Company as an additional Limited

Partner (an "Employee Limited Partner") pursuant to Section 4.7.A or 4.7.B

above, the Partnership Interests of the other Partners shall be diluted, on a

pro rata basis, in proportion to their respective Partnership Interests, to

reflect the admission of the Employee Limited Partner. Notwithstanding the

foregoing, the Partnership Interest of the General Partner shall not be diluted

upon the admission of the Employee Limited Partner; any dilution that would

otherwise occur with respect to the Partnership Interest of the General Partner

in accordance with the terms of the preceding sentence shall be allocated

instead to Crescent Equities. The number of Partnership Units owned by the

Limited Partners and Assignees shall not be decreased in connection with any

admission of an Employee Limited Partner.

 

                  D.        In addition to the compensation plans described in

Sections 4.6, 4.7.A and 4.7.B hereof, the General Partner, in its sole and

absolute discretion and without the approval of the Limited Partners, may

propose and adopt on behalf of the Partnership employee benefit plans or other

incentive compensation plans (including, without limitation, plans granting REIT

Shares or options to purchase REIT Shares, plans granting Partnership Interests

(including Partnership Units) or options to purchase Partnership Interests

(including Partnership Units), "phantom" equity plans or other plans in which

compensation is tied to revenue or income amounts, or based on increases in the

market value of equity ownership interests) for the benefit of employees, agents

or consultants of any member of the Crescent Group, the Partnership, the

Management Company, the Subsidiary Development Corporation(s) or any Affiliate

of the foregoing in respect of services performed, directly or indirectly, for

the benefit of the Crescent Group, the Partnership, the Management Company or

the Subsidiary Development Corporation(s).

 

                  E.        Notwithstanding anything to the contrary contained

above in this Section 4.7, upon any admission of an Employee Limited Partner

pursuant to Section 4.7.A or 4.7.B above:

 

                  (1)       If the admission is made in connection with a grant

                           of Partnership Units to an Employee Limited Partner,

                           (a) the Employee Limited Partner shall, as of the

                           date on which the grant of the Partnership Units is

                           made, be deemed to have contributed to the

                           Partnership pursuant to Section 4.3 hereof an amount

                           equal to the fair market value of the Partnership

                            Units delivered to such Employee Limited Partner

                           (computed by calculating the product of the following

                           three items: (i) the number of Partnership Units

                            delivered to such Employee Limited Partner,

                           multiplied by (ii) the Exchange Factor, multiplied by

                           (iii) the "closing price," as such term is defined in

                           the definition of the term "Value" in Article I

                           hereof, of a REIT Share on the

 

                                     - 25 -

<PAGE>

 

                           date on which the grant of Partnership Units is made)

                           and (b) the General Partner's Partnership Interest

                           shall remain unchanged, and the Partnership Interests

                           of Crescent Equities and the other Limited Partners

                           shall be adjusted as set forth in Section 4.3, based

                           on the amount deemed to be contributed by the

                           Employee Limited Partner as determined pursuant to

                           clause (a) above; provided that, for purposes of

                            calculating the "Deemed Value of the Partnership" and

                           the "Deemed Partnership Interest Value" under Section

                           4.3, the "Value" of a REIT Share shall be the

                            "closing price" (as such term is defined in the

                           definition of the term "Value" in Article I hereof)

                           of a REIT Share as of the date on which the grant of

                           Partnership Units is made.

 

                  (2)       If the admission is made in connection with the

                           exercise of an option to purchase Partnership Units

                           by an Employee Limited Partner, (a) the Employee

                            Limited Partner shall, as of the date on which the

                           option to purchase Partnership Units is exercised, be

                           deemed to have contributed to the Partnership

                           pursuant to Section 4.3 hereof an amount equal to the

                           fair market value of the Partnership Units delivered

                           to such Employee Limited Partner (computed by

                           calculating the product of the following three items:

                           (i) the number of Partnership Units delivered to such

                           Employee Limited Partner, multiplied by (ii) the

                           Exchange Factor, multiplied by (iii) the "closing

                            price," as such term is defined in the definition of

                           the term "Value" in Article I hereof, of a REIT Share

                           on the date on which the option to purchase

                           Partnership Units is exercised) and (b) the General

                           Partner's Partnership Interest shall remain

                           unchanged, and the Partnership Interests of Crescent

                           Equities and the other Limited Partners shall be

                           adjusted as set forth in Section 4.3, based on the

                           amount deemed to be contributed by the Employee

                           Limited Partner as determined pursuant to clause (a)

                            above; provided that, for purposes of calculating the

                           "Deemed Value of the Partnership" and the "Deemed

                           Partnership Interest Value" under Section 4.3, the

                            "Value" of a REIT Share shall be the "closing price"

                           (as such term is defined in the definition of the

                           term "Value" in Article I hereof) of a REIT Share as

                           of the date on which the option to purchase

                           Partnership Units is exercised.

 

         Section 4.8        Series A Preferred Partnership Units and Series B

                           Redeemable Preferred Partnership Units

 

                  A.         Series A Preferred Partnership Units. Pursuant to

Section 8.7.C of the Agreement, effective on February 19, 1998, the issuance

date of the Series A Preferred Shares by Crescent Equities, the Partnership

issued 8,000,000 Series A Preferred Partnership Units to Crescent Equities. On

April 26, 2002, Crescent Equities issued an additional 2,800,000 Series A

Preferred Shares, and the Partnership issued an additional 2,800,000 Series A

Preferred Partnership Units to Crescent Equities. Crescent Equities shall have a

zero percentage Partnership Interest with respect to such Series A Preferred

Partnership Units and shall have no voting rights other than the right to vote

on any amendment to this Agreement if such amendment would (i) convert the

Series A Preferred Partnership Units into a general partner's

 

                                     - 26 -

<PAGE>

 

interest, (ii) modify the limited liability of Crescent Equities with respect to

the Series A Preferred Partnership Units, or (iii) alter the distribution,

redemption, conversion or liquidation rights of the Series A Preferred

Partnership Units. The distribution rights of the Series A Preferred Partnership

Units are set forth in Section 5.6 below, the tax allocations with respect to

the Series A Preferred Partnership Units are set forth in Section 6.3 below, and

the redemption and conversion rights of the Series A Preferred Partnership Units

are set forth in Sections 4.8.C and D below.

 

                  B.        Series B Redeemable Preferred Partnership Units.

Pursuant to Section 8.7.C of the Second Amended Agreement, effective on May 17,

2002, the issuance date of the Series B Redeemable Preferred Shares by Crescent

Equities, the Partnership issued 3,000,000 Series B Redeemable Preferred

Partnership Units to Crescent Equities. Crescent Equities shall have a zero

percentage Partnership Interest with respect to such Series B Redeemable

Preferred Partnership Units and shall have no voting rights other than the right

to vote on any amendment to this Agreement if such amendment would (i) convert

the Series B Redeemable Preferred Partnership Units into a general partner's

interest, (ii) modify the limited liability of Crescent Equities with respect to

the Series B Redeemable Preferred Partnership Units, or (iii) alter the

distribution, redemption, conversion or liquidation rights of the Series B

Redeemable Preferred Partnership Units. The distribution rights of the Series B

Redeemable Preferred Partnership Units are set forth in Section 5.6 below, the

tax allocations with respect to the Series B Redeemable Preferred Partnership

Units are set forth in Section 6.3 below, and the redemption rights of the

Series B Redeemable Preferred Partnership Units are set forth in Section 4.8.C

below.

 

                  C.        Redemption Rights. In the event that Crescent

Equities exercises its redemption right with respect to the Series A Preferred

Shares, the Partnership shall concurrently redeem a corresponding amount of

Series A Preferred Partnership Units at the same redemption price paid by

Crescent Equities for the Series A Preferred Shares (i.e., a redemption price of

$25 per Series A Preferred Share, plus any accrued, unpaid quarterly

distribution thereon). In the event that Crescent Equities exercises its

redemption right with respect to the Series B Redeemable Preferred Shares, the

Partnership shall concurrently redeem a corresponding amount of Series B

Redeemable Preferred Partnership Units at the same redemption price paid by

Crescent Equities for the Series B Redeemable Preferred Shares (i.e., a

redemption price of $25 per Series B Redeemable Preferred Share, plus any

accrued, unpaid quarterly distribution thereon).

 

                  D.        Conversion Rights. Upon exercise of any conversion

right with respect to the Series A Preferred Shares, (i) Crescent Equities

shall, as of the date on which the conversion is consummated, be deemed to have

contributed to the Partnership as Contributed Funds pursuant to Section 4.2.A(2)

of the Agreement an amount equal to the Value (computed as of the Business Day

immediately preceding the date on which such conversion is consummated) of the

REIT Shares delivered by Crescent Equities to such holder of Series A Preferred

Shares, (ii) the Partnership Interests of Crescent Equities and the other

Limited Partners shall be adjusted as set forth in Section 4.2 of the Agreement,

and (iii) a corresponding portion of Series A Preferred Partnership Units shall

be retired. Notwithstanding the foregoing, to the extent that Crescent Equities

pays cash to the holder of Series A Preferred Shares in lieu of fractional

shares upon conversion of such Series A Preferred Shares to REIT Shares, such

cash payment shall be treated

 

                                     - 27 -

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as a redemption of the corresponding portion of the Series A Preferred Shares

and the Partnership shall concurrently redeem a corresponding amount of Series A

Preferred Partnership Units at the same redemption price paid by Crescent

Equities for the Series A Preferred Shares.

 

                                     ARTICLE V

                                  DISTRIBUTIONS

 

         Section 5.1        Initial Partnership Distributions

 

         Upon execution of the First Amended and Restated Agreement, the

Partnership made (i) a distribution of one million five hundred thousand dollars

($1,500,000) to RainAm Investors, and (ii) a distribution in an amount equal to

the Amstar Required Cash Payment to Amstar. In addition, the Partnership

returned to the General Partner, CRE Limited Partner, Inc. and Gerald W. Haddock

the initial capital contributions of one dollar ($l), seventy-four dollars ($74)

and twenty-five dollars ($25),respectively, previously made by such Persons to

the Partnership.

 

         Section 5.2        Requirement and Characterization of Distributions

 

         Subject to Section 5.6 below, the General Partner shall cause the

Partnership to distribute quarterly all, or such portion deemed appropriate by

the General Partner, of Available Cash generated by the Partnership during such

quarter to the Partners who are Partners on the Partnership Record Date with

respect to such quarter in accordance with their respective Partnership

Interests on such Partnership Record Date. The General Partner shall take such

reasonable efforts, as determined by it in its sole and absolute discretion and

consistent with the qualification of Crescent Equities as a REIT, to distribute

Available Cash to the Limited Partners so as to preclude any such distribution

or portion thereof from being treated as part of a sale of property to the

Partnership by a Limited Partner under Section 707 of the Code or the

Regulations thereunder; provided that the General Partner and the Partnership

shall not have any liability to a Limited Partner under any circumstances as a

result of any distribution to a Limited Partner being so treated.

Notwithstanding the foregoing, the General Partner shall use its best efforts to

cause the Partnership to distribute sufficient amounts to enable Crescent

Equities to pay shareholder dividends that will (i) allow Crescent Equities to

achieve and maintain qualification as a REIT, and (ii) avoid the imposition of

any additional taxes under Section 857 or Section 4981 of the Code.

 

         Section 5.3        Amounts Withheld

 

         All amounts withheld pursuant to the Code or any provisions of any

state or local tax law and Section 10.5 hereof with respect to any allocation,

payment or distribution to a Partner shall be treated as amounts distributed to

such Partner pursuant to Section 5.2 for all purposes under this Agreement.

 

         Section 5.4        Distributions In Kind

 

         Pursuant to Section 17-605 of the Act, the General Partner has the

authority to make in-kind distributions of assets to the Partners. Any such

distributions in kind shall be distributed among the Partners in the same manner

as set forth in Section 5.2 with respect to Available Cash (provided that

distributions in kind made after commencement of the liquidation of the

 

                                     - 28 -

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Partnership shall be distributed to the Partners in accordance with Section

13.2). The General Partner shall determine the fair market value of any assets

distributed in kind using such reasonable method of valuation as it may adopt.

 

         Section 5.5        Distributions Upon Liquidation

 

         Proceeds from a Terminating Capital Transaction and any other cash

received or reductions in reserves made after commencement of the liquidation of

the Partnership shall be distributed to the Partners in accordance with Section

13.2.

 

         Section 5.6        Distribution Rights of Series A Preferred Shares and

                           Series B Redeemable Preferred Shares

 

         Notwithstanding anything to the contrary contained in Section 5.2

above, and prior to any distributions of Available Cash under such provision, on

any date on which Crescent Equities is required to make a distribution of

accrued, unpaid quarterly distributions to the holders of Series A Preferred

Shares or the holders of Series B Redeemable Preferred Shares, the General

Partner shall cause distributions of Available Cash to be made in cash to

Crescent Equities (i) with respect to the Series A Preferred Partnership Units,

in an amount equal to the amount that is required to be distributed by Crescent

Equities on that date to the holders of Series A Preferred Shares, and (ii) with

respect to the Series B Redeemable Preferred Partnership Units, in an amount

equal to the amount that is required to be distributed by Crescent Equities on

that date to the holders of Series B Redeemable Preferred Shares.

 

                                   ARTICLE VI

                                   ALLOCATIONS

 

         Section 6.1        Allocations For Capital Account Purposes

 

         For purposes of maintaining the Capital Accounts and in determining the

rights of the Partners among themselves, the Partnership's items of income,

gain, loss and deduction (computed in accordance with Exhibit B hereof) shall be

allocated among the Partners in each taxable year (or portion thereof) as

provided herein below.

 

                  A.        Net Income. After giving effect to the special

allocations set forth in Section 1 of Exhibit C and the allocations set forth in

Section 6.3 below, Net Income shall be allocated (i) first, to the General

Partner to the extent that Net Losses previously allocated to the General

Partner pursuant to the last sentence of Section 6.1.B exceed Net Income

previously allocated to the General Partner pursuant to this clause (i) of

Section 6.1.A, and (ii) thereafter, Net Income shall be allocated to the

Partners in accordance with their respective Partnership Interests.

 

                  B.        Net Losses. After giving effect to the special

allocations set forth in Section 1 of Exhibit C and the allocations set forth in

Section 6.3 below, Net Losses shall be allocated to the Partners in accordance

with their respective Partnership Interests, provided that Net Losses shall not

be allocated to any Limited Partner pursuant to this Section 6.1.B to the extent

that such allocation would cause such Limited Partner to have an Adjusted

Capital Account Deficit at the end of such taxable year (or increase any

existing Adjusted Capital

 

                                     - 29 -

<PAGE>

 

Account Deficit). All Net Losses in excess of the limitations set forth in this

Section 6.1.B shall be allocated to the General Partner.

 

                  C.        Allocations to Reflect Issuance of New Interests. In

the event that the Partnership issues New Interests to Crescent Equities

pursuant to Section 8.7.C, the General Partner shall make such revisions to

Sections 6.1.A and B above as it determines are necessary to reflect the

issuance of such New Interests.

 

         Section 6.2        Allocation of Nonrecourse Debt

 

         For purposes of Regulations Section 1.752-3(a), the Partners agree that

Nonrecourse Liabilities of the Partnership in excess of the sum of (i) the

amount of Partnership Minimum Gain and (ii) the total amount of Nonrecourse

Built-in Gain shall be allocated among the Partners in accordance with their

respective Partnership Interests.

 

         Section 6.3        Allocations for Series A Preferred Partnership Units

                           and Series B Redeemable Preferred Partnership Units

 

         Notwithstanding Sections 6.1.A and B above, after giving effect to the

special allocations set forth in Section 1 of Exhibit C to this Agreement:

 

                  A.        Each year, gross income of the Partnership shall be

allocated first to Crescent Equities until the cumulative amount allocated under

this Section 6.3.A to Crescent Equities for the current year and all prior years

is equal to the cumulative amount for the current year and all prior years of

the sum of (A) the distributions made to Crescent Equities under Section 5.6 of

this Agreement, (B) the portion of the distributions made to Crescent Equities

under Section 4.8.C of this Agreement (if any) that exceeds $25 per Series A

Preferred Partnership Unit and (C) the portion of the distributions made to

Crescent Equities under paragraph Section 4.8.C of this Agreement (if any) that

exceeds $25 per Series B Redeemable Preferred Partnership Unit. Any remaining

Net Profits or Net Losses (other than gain or loss from a sale or other

disposition of all or substantially all of the assets of the Partnership, which

shall be allocated as set forth in Sections 6.3.B and C below) shall be

allocated as set forth in Sections 6.1.A and B above.

 

                  B.        The gain of the Partnership from a sale or other

disposition of all or substantially all of the assets of the Partnership shall

be allocated among the Partners as follows: (A) first, to Crescent Equities in

the amount necessary to cause its Capital Account balance to be equal to the

liquidation preferences payable by Crescent Equities on the outstanding Series A

Preferred Shares and Series B Redeemable Preferred Shares (the "Liquidation

Preferences") (i.e., a liquidation payment of $25 per Series A Preferred Share,

plus any accrued, unpaid quarterly distribution thereon, and a liquidation

payment of $25 per Series B Redeemable Preferred Share, plus any accrued, unpaid

quarterly distribution thereon, subject to reduction on a pro rata basis (as

more fully set forth in the respective Statements of Designation for the Series

A Preferred Shares and the Series B Redeemable Preferred Shares) to the extent

that there are insufficient funds to pay the aforementioned liquidation

preferences in full), (B) second, to the Partners in the amounts necessary, and

in the ratio of such amounts, to cause the Capital Account balance of Crescent

Equities in excess of the Liquidation Preferences and the Capital Account of

each other

 

                                     - 30 -

<PAGE>

 

Partner to be in the same ratio as their respective Partnership Interests, and

(iii) thereafter, to all of the Partners in proportion to their respective

Partnership Interests.

 

                  C.        The loss of the Partnership from a sale or other

disposition of all or substantially all of the assets of the Partnership shall

be allocated among the Partners as follows: (A) first, to the Partners, if any,

having positive Capital Account balances, in the amounts necessary, and in the

ratio of such amounts, so as to cause the positive Capital Account Balance of

Crescent Equities to equal the Liquidation Preferences and the positive Capital

Account balance of each other Partner to equal zero (or, if there is

insufficient loss to accomplish this result, loss shall be allocated in a manner

so as to cause the positive Capital Account balance of Crescent Equities in

excess of the Liquidation Preference and the positive Capital Account balance of

each other Partner to be in the same ratio as their respective Partnership

Interests), (B) second, to Crescent Equities, until its positive Capital Account

balance equals zero, and (C) thereafter, to the Partners in proportion to their

respective Partnership Interests.

 

                                  ARTICLE VII

                       MANAGEMENT AND OPERATIONS OF BUSINESS

 

         Section 7.1        Management

 

                  A.        Except as otherwise expressly provided in this

Agreement, all management powers over the business and affairs of the

Partnership are exclusively vested in the General Partner, and no Limited

Partner shall have any right to participate in or exercise control or management

power over the business and affairs of the Partnership. The General Partner may

not be removed by the Limited Partners with or without cause. In addition to the

powers now or hereafter granted a general partner of a limited partnership under

applicable law or which are granted to the General Partner under any other

provision of this Agreement, the General Partner, subject to Section 7.3 hereof,

shall have full power and authority to do all things and perform all acts

specified in this Agreement or otherwise deemed necessary or desirable by it to

conduct the business of the Partnership, to exercise all Partnership powers set

forth in Section 3.2 hereof and to effectuate the Partnership purposes set forth

in Section 3.1 hereof (to the extent consistent with allowing Crescent Equities

at all times to qualify as a REIT, unless Crescent Equities voluntarily

terminates its REIT status pursuant to the Declaration of Trust), including,

without limitation, to:

 

                  (1)       acquire interests in real or personal property of any

                           kind and type, and any and all kinds of interests

                           therein, and determine the manner in which title

                           thereto is to be held; manage, insure against loss,

                           protect and subdivide any such property; improve,

                           develop or redevelop any such property; dedicate for

                           public use, vacate any such property subdivisions or

                           parts thereof, or resubdivide such property or any

                           part thereof; lease, renew or extend leases, amend,

                           change or modify the terms and provisions of leases,

                           and grant options to lease and options to renew

                           leases and options to purchase; partition, sell or

                            otherwise dispose of all or any portion of such

                           property; exchange all or any portion of such

                           property for other real or personal property; grant

                           easements or charges of any kind; release, convey or

                           assign any right, title or interest in or about or

                           easement appurtenant to such property or any part

                           thereof; construct and reconstruct,

 

                                      - 31 -

<PAGE>

 

                           remodel, alter, repair, add to or take from buildings

                           on such property; insure any Person having an

                           interest in or responsibility for the care,

                           management or repair of such property; direct the

                           trustee of any land trust to mortgage, lease, convey

                           or contract to convey the real estate held in such

                            land trust or to execute and deliver deeds,

                           mortgages, notes, and any and all documents

                           pertaining to the property subject to such land trust

                           or in any matter regarding such trust; and execute

                           assignments of all or any part of the beneficial

                           interest in such land trust;

 

                  (2)       employ, engage or contract with or dismiss from

                            employment or engagement Persons to the extent deemed

                           necessary by the General Partner for the operation

                           and management of the Partnership business,

                           including, but not limited to, employees, including

                           employees having such titles as the General Partner

                           may from time to time specify, such as "chairman of

                           the board," "chief executive officer," chief

                           operating officer," "president," "vice president,"

                           "secretary," "treasurer"; contractors;

                           subcontractors; engineers; architects; surveyors;

                            mechanics; consultants; accountants; attorneys;

                           insurance brokers; real estate brokers; and others;

 

                  (3)       make expenditures, borrow money, procure loans and

                           advances from any Person for Partnership purposes

                           (including, without limitation, borrow money to

                           permit the Partnership to make distributions in such

                           amounts as will permit Crescent Equities (so long as

                           Crescent Equities elects to qualify as a REIT) to

                           avoid the payment of any federal income tax

                           (including, for this purpose, any excise tax pursuant

                            to Section 4981 of the Code) and to make

                           distributions to its shareholders sufficient to

                           permit Crescent Equities to maintain REIT status) and

                           apply for and secure, from any Person, credit or

                           accommodations; contract, assume or guarantee

                           liabilities and obligations, direct or contingent and

                           of every kind and nature with or without security;

                           and repay, prepay, discharge, settle, adjust,

                           compromise, or liquidate any such loan, advance,

                           credit, obligation or liability;

 

                  (4)       pledge, hypothecate, mortgage, assign, deposit,

                           deliver, enter into sale and leaseback arrangements

                           or otherwise give as security or as additional or

                           substitute security, any and all Partnership

                           property, tangible or intangible, including, but not

                           limited to, real estate and beneficial interests in

                           land trusts, and make substitutions thereof, and

                            receive any proceeds thereof upon the release or

                           surrender thereof; sign, execute and deliver any and

                           all assignments, deeds and other contracts and

                           instruments in writing; authorize, give, make,

                           procure, accept and receive moneys, payments,

                           property, notices, demands, vouchers, receipts,

                           releases, compromises and adjustments; waive notices,

                           demands, protests and authorize and execute waivers

                           of every kind and nature; negotiate, execute, deliver

                           and receive written agreements, undertakings and

                            instruments of every kind and

 

                                     - 32 -

<PAGE>

 

                           nature; give oral instructions and make oral

                           agreements; and generally to do any and all other

                            acts and things incidental to any of the foregoing;

 

                  (5)       acquire and enter into any contract of insurance

                           which the General Partner deems necessary or

                           appropriate for the protection of the Partnership and

                           the Partners, for the conservation of the

                           Partnership's assets or for any purpose convenient or

                           beneficial to the Partnership;

 

                  (6)       conduct any and all banking transactions on behalf of

                           the Partnership; adjust and settle checking, savings,

                           and other accounts with such institutions as the

                            General Partner shall deem appropriate; draw, sign,

                           execute, accept, endorse, guarantee, deliver, receive

                           and pay any checks, drafts, bills of exchange,

                           acceptances, notes, obligations, undertakings and

                           other instruments for or relating to the payment of

                           money in, into, or from any account in the

                           Partnership's name; execute, procure, consent to and

                           authorize extensions and renewals of the same; and

                           make deposits and withdraw the same and negotiate or

                           discount commercial paper, acceptances, negotiable

                            instruments, bills of exchange and dollar drafts;

 

                  (7)       demand, sue for, receive, and otherwise take steps to

                           collect or recover all debts, rents, proceeds,

                           interests, dividends, goods, chattels, income from

                           property, damages and all other property, to which

                           the Partnership may be entitled or which are or may

                           become due the Partnership from any Person; commence,

                           prosecute or enforce, or defend, answer or oppose,

                           contest and abandon all legal proceedings in which

                           the Partnership is or may hereafter be interested;

                           settle, compromise or submit to arbitration any

                           accounts, debts, claims, disputes and matters which

                           may arise between the Partnership and any other

                            Person and grant an extension of time for the payment

                           or satisfaction thereof on any terms, with or without

                           security; and indemnify any Indemnitees against

                           liabilities and contingencies in accordance with the

                           provisions of Section 7.7 of this Agreement or

                           otherwise;

 

                  (8)       take all reasonable measures necessary to insure

                            compliance by the Partnership with applicable laws,

                           and other contractual obligations and arrangements

                           entered into by the Partnership from time to time in

                           accordance with the provisions of this Agreement,

                           including periodic reports as required to lenders;

                           and use all due diligence to insure that the

                           Partnership is in compliance with its contractual

                           obligations;

 

                  (9)       form, acquire a debt or equity ownership interest in,

                           and contribute or loan property to, any further

                           corporations, limited or general partnerships, joint

                           ventures, real estate investment trusts, or other

                           entities upon such terms and conditions as General

                           Partner deems appropriate;

 

                  (10)      invest assets of the Partnership on a temporary basis

                           in commercial paper, government securities, checking

                           or savings accounts, money market funds,

 

                                     - 33 -

<PAGE>

 

                           or any other highly liquid investments deemed

                           appropriate by the General Partner; make loans,

                           including participating or convertible loans, to

                           other Persons (including, without limitation, the

                           Subsidiary Development Corporation(s) and the

                           Management Company) upon such terms and conditions,

                           and for such security, as deemed appropriate by the

                           General Partner; repay obligations of any Person in

                           which the Partnership has an equity investment

                           (including, without limitation, the Subsidiary

                            Development Corporation(s) and the Management

                           Company); and purchase existing debt obligations held

                           by other Persons, including participating or

                           convertible debt obligations, upon such terms and

                           conditions, and for such security, as deemed

                           appropriate by the General Partner;

 

                  (11)      negotiate, execute and perform any contracts,

                            conveyance or other instruments that the General

                           Partner considers useful or necessary to the conduct

                           of the Partnership's operations or the implementation

                            of the General Partner's powers under this Agreement;

 

                  (12)      distribute Partnership cash or other assets in

                           accordance with this Agreement;

 

                  (13)      maintain the Partnership's books and records;

 

                  (14)      prepare and deliver all financial, regulatory, tax

                           and other filings or reports to governmental or other

                           agencies having jurisdiction over the Partnership;

                            and

 

                  (15)      take any action in connection with the Partnership's

                           direct or indirect investment in any other Person.

 

                  B.        Each of the Limited Partners agrees that the General

Partner is authorized to execute, deliver and perform the above-mentioned

agreements and transactions on behalf of the Partnership without any further

act, approval or vote of the Partners, notwithstanding any other provisions of

this Agreement (except as provided in Section 7.3), the Act or any applicable

law, rule or regulation. The execution, delivery or performance by the General

Partner or the Partnership of any agreement authorized or permitted under this

Agreement shall not constitute a breach by the General Partner of any duty that

the General Partner may owe the Partnership or the Limited Partners or any other

Persons under this Agreement or of any duty stated or implied by law or equity.

 

                  C.        At all times from and after the date hereof, the

General Partner may cause the Partnership to obtain and maintain (i) casualty,

liability and other insurance on the properties of the Partnership and (ii)

liability insurance for the Indemnitees hereunder.

 

                  D.        At all times from and after the date hereof, the

General Partner may cause the Partnership to establish and maintain working

capital reserves in such amounts as the General Partner, in its sole and

absolute discretion, deems appropriate and reasonable from time to time.

 

                                     - 34 -

<PAGE>

 

                  E.        In exercising its authority under this Agreement, the

General Partner may, but shall be under no obligation to, take into account the

tax consequences to any Partner of any action taken by it. The General Partner

and the Partnership shall not have liability to a Limited Partner under any

circumstances as a result of an income tax liability incurred by such Limited

Partner as a result of an action (or inaction) by the General Partner pursuant

to its authority under this Agreement.

 

         Section 7.2        Certificate of Limited Partnership

 

         To the extent that such action is determined by the General Partner to

be necessary or appropriate, the General Partner shall file amendments to and

restatements of the Certificate and do all things necessary or appropriate to

maintain the Partnership as a limited partnership (or a partnership in which the

limited partners have limited liability) under the laws of the State of Delaware

and each other jurisdiction in which the Partnership may elect to do business or

own property. Subject to the terms of Section 8.5.A(3) hereof, the General

Partner shall not be required, before or after filing, to deliver or mail a copy

of the Certificate or any amendment thereto to any Limited Partner. The General

Partner shall use all reasonable efforts to cause to be filed such other

certificates or documents as may be reasonable and necessary or appropriate for

the continuation, qualification and operation of a limited partnership (or a

partnership in which the limited partners have limited liability) in the State

of Delaware and any other jurisdiction in which the Partnership may elect to do

business or own property.

 

         Section 7.3        Restrictions on General Partner's Authority

 

         The General Partner shall not have the authority to:

 

                  A.        take any action in contravention of this Agreement or

which would make it impossible to carry on the ordinary business of the

Partnership;

 

                  B.        possess Partnership property, or assign any rights in

specific Partnership property, for other than a Partnership purpose;

 

                  C.        do any act in contravention of applicable law; or

 

                  D.        perform any act that would subject a Limited Partner

to liability as a general partner in any jurisdiction or any other liability

except as provided herein or under the Act.

 

         Section 7.4        Reimbursement of the Crescent Group

 

                  A.        Except as provided in this Section 7.4 and elsewhere

in this Agreement (including the provisions of Articles 5 and 6 regarding

distributions, payments, and allocations to which it may be entitled), the

General Partner shall not be compensated for its services as general partner of

the Partnership.

 

                  B.        The Crescent Group shall be reimbursed on a monthly

basis, or such other basis as the General Partner may determine in its sole and

absolute discretion, for all expenses the Crescent Group incurs relating to the

ownership and operation of, or for the benefit of, the

 

                                     - 35 -

<PAGE>

 

Partnership, provided that the amount of any such reimbursement shall be reduced

by any income received by the Crescent Group with respect to bank accounts or

other assets held by it as permitted in Section 7.5. The Limited Partners

acknowledge that the Crescent Group's sole business is the ownership of

interests in and operation of the Partnership, and that all of the Crescent

Group's operating expenses (including, without limitation, costs and expenses

relating to the formation and continuity of existence of the Crescent Group,

costs and expenses associated with compliance with the periodic reporting

requirements and all other rules and regulations of the SEC or any other

federal, state or local regulatory body, salaries payable to officers and

employees of the Crescent Group, fees and expenses payable to directors of the

Crescent Group, costs and expenses relating to the bank accounts or other assets

held by the Crescent Group as permitted in Section 7.5 and all other operating,

debt service or administrative costs of the Crescent Group) are incurred for the

benefit of the Partnership and shall be reimbursed by the Partnership. Such

reimbursements shall be in addition to any reimbursement to the Crescent Group

as a result of indemnification pursuant to Section 7.7 hereof. If and to the

extent any reimbursements to the Crescent Group are determined for federal

income tax purposes not to constitute payment of expenses of the Partnership,

the amounts so determined shall constitute guaranteed payments within the

meaning of Section 707(c) of the Code, shall be treated consistently therewith

by the Partnership and all Partners, and shall not be treated as distributions

for purposes of computing the Partners' Capital Accounts.

 

         Section 7.5        Outside Activities of the Crescent Group

 

         The Crescent Group shall not directly or indirectly enter into or

conduct any business, other than in connection with the ownership, acquisition

and disposition of Partnership Interests and the management of the business of

the Partnership, and such activities as are incidental thereto. The Crescent

Group shall not own any assets other than Partnership Interests in the

Partnership, and such bank accounts or similar instruments as it deems necessary

to carry out its responsibilities contemplated under this Agreement and the

Declaration of Trust. The Crescent Group shall not borrow funds for the purpose

of making distributions to the shareholders of any member of the Crescent Group

unless such borrowing is effectuated through the Partnership. Notwithstanding

anything to the contrary contained above in this Section 7.5, (1) Crescent

Equities may form additional direct or indirect wholly owned subsidiary entities

to serve as general partners of partnerships or managing members of limited

liability companies in which the Partnership also owns a direct or indirect

ownership interest, provided that (i) the General Partner determines that the

formation of the subsidiary entities is necessary or appropriate to further the

business objectives of the Partnership and (ii) the subsidiary entities (a) make

capital contributions in exchange for their ownership interests in the

partnerships and limited liability companies on a pro rata basis with the

Partnership and (b) do not own more than one percent (1%) of the total ownership

interests in any such partnership or limited liability company, and (2) the

Crescent Group may own such other assets as the General Partner determines are

necessary and appropriate to further the business interests of the Partnership,

upon such terms and conditions as the General Partner determines are necessary

and appropriate to protect the interests of the Partnership.

 

                                     - 36 -

<PAGE>

 

         Section 7.6        Contracts with Affiliates

 

                  A.        The Partnership may contribute assets and loan funds

to joint ventures, other partnerships, corporations or other business entities

in which it is or thereby becomes a participant upon such terms and subject to

such conditions consistent with this Agreement and applicable law as the General

Partner, in its sole and absolute discretion, deems advisable. The foregoing

authority shall not create any right or benefit in favor of any such other

business entities.

 

                  B.        Except as expressly permitted by this Agreement, no

Partner or Affiliate of a Partner shall sell, transfer or convey any property

to, purchase any property from, lend or borrow funds, provide services to, or

enter into any other transaction with the Partnership, directly or indirectly,

except pursuant to transactions that are on terms that are fair and reasonable

and no less favorable to the Partnership than could be obtained from an

unaffiliated third party.

 

                  C.        The General Partner is expressly authorized to enter

into, in the name and on behalf of the Partnership, noncompetition agreements

and other conflict avoidance agreements for its benefit with various Affiliates

of the Partnership and its Partners, on such terms as the General Partner, in

its sole and absolute discretion, believes are advisable.

 

         Section 7.7        Indemnification

 

                  A.        The Partnership shall indemnify each Indemnitee from

and against any and all losses, claims, damages, liabilities, joint or several,

expenses (including, without limitation, attorneys' fees and other legal fees

and expenses), judgments, fines, settlements, and other amounts arising from any

and all claims, demands, actions, suits or proceedings, civil, criminal,

administrative or investigative, that relate to the operations of the

Partnership as set forth in this Agreement in which such Indemnitee may be

involved, or is threatened to be involved, as a party or otherwise, unless it is

established that: (i) the act or omission of the Indemnitee was material to the

matter giving rise to the proceedings and either was committed in bad faith or

was the result of active and deliberate dishonesty; (ii) the Indemnitee actually

received an improper personal benefit in money, property or services; or (iii)

in the case of any criminal proceeding, the Indemnitee had reasonable cause to

believe that the act or omission was unlawful. Without limitation, the foregoing

indemnity shall extend to any liability of any Indemnitee, pursuant to a loan

guaranty or otherwise, for any indebtedness of the Partnership or any subsidiary

entity (including, without limitation, any indebtedness which the Partnership or

any subsidiary entity has assumed or taken subject to), and the General Partner

is hereby authorized and empowered, on behalf of the Partnership, to enter into

one or more indemnity agreements consistent with the provisions of this Section

7.7 in favor of any Indemnitee having or potentially having liability for any

such indebtedness. The termination of any proceeding by judgment, order or

settlement does not create a presumption that the Indemnitee did not meet the

requisite standard of conduct set forth in this Section 7.7.A. The termination

of any proceeding by conviction of an Indemnitee or upon a plea of nolo

contendre or its equivalent by an Indemnitee, or an entry of an order of

probation against an Indemnitee prior to judgment, creates a rebuttable

presumption that such Indemnitee acted in a manner contrary to that specified in

this Section 7.7.A with respect to the subject matter of such proceeding.

 

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                  B.        The right to indemnification conferred in this

Section 7.7 shall be a contract right and shall include the right of each

Indemnitee to be paid by the Partnership the expenses incurred in defending any

such proceeding in advance of its final disposition; provided, however, that the

payment of such expenses in advance of the final disposition of a proceeding

shall be made only upon delivery to the Partnership of (i) a written affirmation

of the Indemnitee of his or her good faith belief that the standard of conduct

necessary for indemnification by the Partnership pursuant to this Section 7.7

has been met, and (ii) a written undertaking by or on behalf of the Indemnitee

to repay all amounts so advanced if it shall ultimately be determined that the

standard of conduct has not been met.

 

                  C.        The indemnification provided pursuant to this Section

7.7 shall continue as to a Person who has ceased to have the status of an

Indemnitee pursuant to clause (i) of the definition of "Indemnitee" set forth in

Article I hereof and shall inure to the benefit of the heirs, successors,

assigns, executors and administrators of any such Person, or to a Person whose

status as an lndemnitee was originally established pursuant to clause (ii) of

such definition and was later terminated for any reason other than the

affirmative decision of the General Partner to terminate such status; provided,

however, that except as provided in Section 7.7.D with respect to proceedings

seeking to enforce rights to indemnification, the Partnership shall indemnify

any such Person seeking indemnification in connection with a proceeding (or part

thereof) initiated by such Person only if such proceeding (or part thereof) was

authorized by the General Partner.

 

                  D.        If a claim under Sections 7.7.A, 7.7.B or 7.7.C is

not paid in full by the Partnership within thirty (30) calendar days after a

written claim has been received by the Partnership, the Indemnitee making such

claim may at any time thereafter (but prior to payment of the claim) bring suit

against the Partnership to recover the unpaid amount of the claim and, if

successful, in whole or in part, such Indemnitee shall be entitled to be paid

also the expense of prosecuting such claim. It shall be a defense to any such

action (other than an action brought to enforce a claim for expenses incurred in

defending any proceeding in advance of its final disposition where the required

undertaking, if any, has been tendered to the Partnership) that the Indemnitee

has not met the standards of conduct set forth above which make it permissible

for the Partnership to indemnify the Indemnitee for the amount claimed, but the

burden of proving such defense shall be on the Partnership. Neither the failure

of the Partnership to have made a determination prior to the commencement of

such action that indemnification of the Indemnitee is proper in the

circumstances because he or she has met the applicable standard of conduct set

forth herein nor an actual determination by the Partnership that the Indemnitee

has not met such applicable standard of conduct, shall be a defense to the

action or create a presumption that the Indemnitee has not met the applicable

standard of conduct.

 

                  E.        Following any "change in control" of Crescent

Equities of the type required to be reported under Item 1 of Form 8-K

promulgated under the Exchange Act, any determination as to entitlement to

indemnification shall be made by independent legal counsel selected by the

Indemnitee, which such independent legal counsel shall be retained by the

General Partner on behalf of the Partnership and at the expense of the

Partnership.

 

                  F.        The right to indemnification and the payment of

expenses incurred in defending a proceeding in advance of its final disposition

conferred in this Section 7.7 shall not

 

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be exclusive of any other right which any person may have or hereafter acquire

under any statute or agreement, or pursuant to any vote of the Partners, or

otherwise.

 

                  G.        The Partnership may purchase and maintain insurance,

at its expense, on its own behalf and on behalf of any Indemnitee and of such

other Persons as the General Partner shall determine, against any liability

(including expenses) that may be asserted against and incurred by such Person in

connection with the Partnership's activities pursuant to this Agreement, whether

or not the Partnership would have the power to indemnify such Person against

such liability under the terms of this Agreement. In addition, the Partnership

may, together with Crescent Equities, enter into indemnification agreements with

one or more of the Indemnitees pursuant to which the Partnership and Crescent

Equities shall jointly and severally agree to indemnify such Indemnitee(s) to

the fullest extent permitted by law, and advance to such Indemnitee(s) all

related expenses, subject to reimbursement if it is subsequently determined that

indemnification is not permitted.

 

                  H.        Any indemnification pursuant to this Section 7.7

shall be made only out of assets of the Partnership, and neither the General

Partner nor any Limited Partner shall have any obligation to contribute to the

capital of the Partnership or otherwise provide funds to enable the Partnership

to fund its obligations under this Section 7.7.

 

                  I.        No Limited Partner shall be liable for the

obligations of the Partnership by reason of the indemnification provisions set

forth in this Agreement.

 

                  J.        An Indemnitee shall not be denied indemnification in

whole or in part pursuant to this Section 7.7 because such lndemnitee has an

interest in the transaction to which the indemnification relates if the

transaction otherwise was permitted by the terms of this Agreement.

 

                  K.        The provisions of this Section 7.7 are for the

benefit of the Indemnitees, their heirs, successors, assigns, executors and

administrators, and shall not be deemed to create any rights for the benefit of

any other Person. Any amendment, modification or repeal of this Section 7.7 or

any provision hereof shall be prospective only and shall not in any way affect

the limitations on the Partnership's liability to any Indemnitee under this

Section 7.7 as in effect immediately prior to such amendment, modification or

repeal with respect to claims arising from or relating to matters occurring, in

whole or in part, prior to such amendment, modification or repeal, regardless of

when such claims may arise or be asserted.

 

         Section 7.8        Liability of the General Partner

 

                  A.        Notwithstanding anything to the contrary set forth in

this Agreement, the General Partner shall not be liable for monetary damages to

the Partnership or any Partners for losses sustained or liabilities incurred as

a result of errors in judgment or of any act or omission if the General Partner

acted in good faith.

 

                  B.        The Limited Partners expressly acknowledge that the

General Partner is acting on behalf of the Partnership and the shareholders of

Crescent Equities collectively, that the General Partner is under no obligation

to consider the separate interests of the Limited Partners (including, without

limitation, the tax consequences to Limited Partners) in deciding

 

                                     - 39 -

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whether to cause the Partnership to take (or decline to take) any actions, and

that the General Partner shall not be liable to the Partnership or to any

Partner for monetary damages for losses sustained, liabilities incurred, or

benefits not derived by Limited Partners in connection with such decisions,

provided that the General Partner has acted in good faith.

 

                  C.        Subject to its obligations and duties as General

Partner set forth in Section 7.1.A hereof, the General Partner may exercise any

of the powers granted to it by this Agreement and perform any of the duties

imposed upon it hereunder either directly or by or through its agents. The

General Partner shall not be responsible for any misconduct or negligence on the

part of any such agent appointed by it in good faith.

 

                   D.        Any amendment, modification or repeal of this Section

7.8 or any provision hereof shall be prospective only and shall not in any way

affect the limitations on the General Partner's liability to the Partnership and

the Limited Partners under this Section 7.8 as in effect immediately prior to

such amendment, modification or repeal with respect to claims arising from or

relating to matters occurring, in whole or in part, prior to such amendment,

modification or repeal, regardless of when such claims may arise or be asserted.

 

         Section 7.9        Other Matters Concerning the General Partner

 

                  A.        The General Partner may rely, and shall be protected

in acting or refraining from acting, upon any resolution, certificate,

statement, instrument, opinion, report, notice, request, consent, order, bond,

debenture, or other paper or document believed by it to be genuine and to have

been signed or presented by the proper party or parties.

 

                  B.        The General Partner may consult with legal counsel,

accountants, appraisers, management consultants, investment bankers and other

consultants and advisers selected by it, and any act taken or omitted to be

taken in reliance upon the opinion of such Persons as to matters which such

General Partner reasonably believes to be within such Person's professional or

expert competence shall be conclusively presumed to have been done or omitted in

good faith.

 

                  C.        The General Partner shall have the right, in respect

of any of its powers or obligations hereunder, to act through any of its duly

authorized officers and a duly appointed attorney or attorneys-in-fact. Each

such attorney shall, to the extent provided by the General Partner in the power

of attorney, have full power and authority to do and perform all and every act

and duty which is permitted or required to be done by the General Partner

hereunder.

 

                  D.        Notwithstanding any other provision of this Agreement

or the Act, any action of the General Partner on behalf of the Partnership or

any decision of the General Partner to refrain from acting on behalf of the

Partnership, undertaken in the good faith belief that such action or omission is

necessary or advisable in order (i) to protect the ability of Crescent Equities

to achieve or maintain qualification as a REIT or (ii) to avoid the incurring by

Crescent Equities of any taxes under Section 857 or Section 4981 of the Code, is

expressly authorized under this Agr