UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to _________
Commission file number: 1-12110
CAMDEN PROPERTY TRUST
(Exact Name of Registrant as Specified in Its Charter)
TEXAS
76-6088377
(State or Other Jurisdiction of
(I.R.S. Employer Identification
Incorporation or Organization)
Number)
3 Greenway Plaza, Suite 1300, Houston, Texas 77046
(Address of Principal Executive Offices) (Zip Code)
(713) 354-2500
(Registrant's Telephone Number, Including Area Code)
N/A
(Former Name, Former Address and Former Fiscal Year, If Changed Since Last Report)
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES X NO
APPLICABLE ONLY TO CORPORATE ISSUERS:
Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:
As of May 1, 2002, there were 41,123,940 shares of Common Shares of Beneficial Interest, $0.01 par value outstanding.
CAMDEN PROPERTY TRUST
Table of Contents
PART I FINANCIAL INFORMATION Page
-------
Item 1 Financial Statements
Consolidated Balance Sheets (Unaudited) as of
March 31, 2002 and December 31, 2001 ................. 3
Consolidated Statements of Operations (Unaudited)
for the three months ended March 31, 2002 and 2001 ... 4
Consolidated Statements of Cash Flows (Unaudited)
for the three months ended March 31, 2002 and 2001 ... 5
Notes to Consolidated Financial Statements (Unaudited) .. 6
Item 2 Management's Discussion and Analysis of Financial
Condition and Results of Operations .................. 13
Item 3 Quantitative and Qualitative Disclosures About
Market Risk ......................................... 22
PART II OTHER INFORMATION
Item 1 Legal Proceedings ....................................... 23
Item 2 Changes in Securities and Use of Proceeds ............... 23
Item 3 Defaults Upon Senior Securities ......................... 23
Item 4 Submission of Matters to a Vote of Security Holders ..... 23
Item 5 Other Information ....................................... 23
Item 6 Exhibits and Reports on Form 8-K ........................ 23
SIGNATURES ............................................................. 24
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PART I. FINANCIAL INFORMATIONItem 1. Financial Statements CAMDEN PROPERTY TRUST CONSOLIDATED BALANCE SHEETS (Unaudited) (In thousands) ASSETS March 31, December 31, 2002 2001 ------------- -------------- Real estate assets, at cost: Land .................................................. $ 362,557 $ 362,717 Buildings and improvements ............................ 2,238,459 2,230,161 ------------- -------------- 2,601,016 2,592,878 Less: accumulated depreciation ........................ (447,289) (422,154) ------------- -------------- Net operating real estate assets .............. 2,153,727 2,170,724 Properties under development, including land .......... 167,122 143,596 Investment in joint ventures ........................... 16,537 17,073 Investment in third party development properties ....... 72,913 69,983 ------------- -------------- Total real estate assets ...................... 2,410,299 2,401,376 Accounts receivable - affiliates ............................ 5,260 4,586 Notes receivable - affiliates ............................... 1,800 1,800 Other assets, net ........................................... 33,887 33,121 Cash and cash equivalents ................................... 7,540 5,625 Restricted cash ............................................. 3,419 3,157 ------------- -------------- Total assets ................................. $ 2,462,205 $ 2,449,665 ============= ============== LIABILITIES AND SHAREHOLDERS' EQUITY Liabilities: Notes payable: Unsecured .................................... $ 958,499 $ 923,890 Secured ....................................... 281,882 283,157 Accounts payable ....................................... 19,376 13,337 Accrued real estate taxes .............................. 13,290 28,378 Accrued expenses and other liabilities ................. 41,592 46,275 Distributions payable .................................. 31,717 30,298 ------------- -------------- Total liabilities ............................. 1,346,356 1,325,335 Minority interests: Units convertible into perpetual preferred shares ...... 149,815 149,815 Units convertible into common shares ................... 54,435 56,264 ------------- -------------- Total minority interests ....................... 204,250 206,079 Shareholders' equity: Common shares of beneficial interest ................... 478 476 Additional paid-in capital ............................. 1,310,294 1,297,239 Distributions in excess of net income .................. (207,284) (194,718) Unearned restricted share awards ....................... (16,722) (8,621) Less: treasury shares, at cost ......................... (175,167) (176,125) ------------- -------------- Total shareholders' equity .................... 911,599 918,251 ------------- -------------- Total liabilities and shareholders' equity .... $ 2,462,205 $ 2,449,665 ============= ============== See Notes to Consolidated Financial Statements.
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CAMDEN PROPERTY TRUST CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share amounts) Three Months Ended March 31, ------------------------- 2002 2001 ----------- ----------- Revenues Rental income $ 92,192 $ 92,210 Other property income ...................................... 7,425 6,951 ----------- ----------- Total property income ................................. 99,617 99,161 Fee and asset management ................................... 1,338 1,543 Other income ............................................... 2,850 1,954 ----------- ----------- Total revenues ........................................ 103,805 102,658 ----------- ----------- Expenses Property operating and maintenance ......................... 27,865 28,159 Real estate taxes .......................................... 10,583 10,066 General and administrative ................................. 3,589 3,283 Impairment provision for technology investments ............ - 1,090 Other expenses ............................................. 1,178 - Interest ................................................... 17,104 17,143 Depreciation and amortization ............................. 26,057 24,496 ----------- ----------- Total expenses ........................................ 86,376 84,237 ----------- ----------- Income before gain on sale of properties, equity in income of joint ventures and minority interests ................... 17,429 18,421 Gain of sale of properties ...................................... - 1,716 Equity in income of joint ventures .............................. 225 2,696 Income allocated to minority interests: Distributions on units convertible into perpetual preferred shares ........................................ (3,218) (3,218) Income allocated to units convertible into common shares ... (454) (1,071) ----------- ----------- Net income ...................................................... 13,982 18,544 Preferred share dividends ....................................... - (2,343) ----------- ----------- Net income to common shareholders ............................... $ 13,982 $ 16,201 =========== =========== Basic earnings per share ........................................ $ 0.34 $ 0.43 Diluted earnings per share ...................................... $ 0.32 $ 0.41 Distributions declared per common share ......................... $ 0.635 $ 0.610 Weighted average number of common shares outstanding ............ 40,826 37,975 Weighted average number of common and common dilutive equivalent shares outstanding ........................... 44,648 39,570 See Notes to Consolidated Financial Statements.
4
CAMDEN PROPERTY TRUST CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (In thousands) Ended March 31, 2002 2001 ---------- ---------- CASH FLOW FROM OPERATING ACTIVITIES Net income ....................................................... $ 13,982 $ 18,544 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization .............................. 26,057 24,496 Equity in income of joint ventures, net of cash received .. 536 791 Gain on sale of properties ................................. - (1,716) Income allocated to units convertible into common shares ... 454 1,071 Accretion of discount on unsecured notes payable ........... 109 119 Net change in operating accounts ........................... (11,625) (7,741) ---------- ---------- Net cash provided by operating activities ............. 29,513 35,564 CASH FLOW FROM INVESTING ACTIVITIES Increase in real estate assets ................................... (32,379) (18,855) Net proceeds from sale of properties and townhomes ............... 1,075 6,549 Increase in investment in joint ventures ......................... - (559) Increase in investments in third party development properties .... (2,930) (7,259) Increase in technology investments ............................... - (1,626) Other ............................................................ (698) (503) ---------- ---------- Net cash used in investing activities ...................... (34,932) (22,253) CASH FLOW FROM FINANCING ACTIVITIES Net increase (decrease) in unsecured lines of credit and short-term borrowings ......................................... 69,000 (70,000) Proceeds from notes payable ...................................... - 197,802 Repayment of notes payable ....................................... (35,775) 113,343) Distributions to shareholders and minority interests ............. (29,910) (28,544) Other ............................................................ 4,019 (37) ---------- ---------- Net cash provided by (used in) financing activities ........ 7,334 (14,122) ---------- ---------- Net increase (decrease) in cash and cash equivalents ....... 1,915 (811) Cash and cash equivalents, beginning of period ...................... 5,625 4,936 ---------- ---------- Cash and cash equivalents, end of period ............................ $ 7,540 $ 4,125 ========== ========== SUPPLEMENTAL INFORMATION Cash paid for interest, net of interest capitalized .............. $ 17,912 $ 11,722 Interest capitalized ............................................. 2,263 3,103 SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES Value of shares issued under benefit plans, net .................. $ 9,314 $ 5,039 Conversion of operating partnership units to common shares ....... 680 90 Conversion of 7.33% subordinated debentures to common shares, net ................................................. - 1,936 See Notes to Consolidated Financial Statements.
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The accompanying interim unaudited financial information has been prepared according to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted according to such rules and regulations. Management believes that the disclosures included are adequate to make the information presented not misleading. In the opinion of management, all adjustments and eliminations, consisting only of normal recurring adjustments, necessary to present fairly the financial position of Camden Property Trust as of March 31, 2002 and the results of operations and cash flows for the three months ended March 31, 2002 and 2001 have been included. The results of operations for such interim periods are not necessarily indicative of the results for the full year.
Business
Camden Property Trust is a real estate investment trust and, with our subsidiaries, reports as a single business segment with activities related to the ownership, development, construction and management of multifamily communities. As of March 31, 2002, we owned interests in, operated or were developing 147 multifamily properties containing 52,412 apartment homes located in nine states. Two of our newly developed multifamily properties containing 1,000 apartment homes were in lease-up at quarter end. Four of our multifamily properties, which includes the expansion of an existing operating property, containing 1,367 apartment homes were under development at March 31, 2002. Additionally, we have several sites which we intend to develop into multifamily apartment communities.
Property Update
We currently have four properties under development: Camden Harbour View, a 538-unit property located in Long Beach, California; Camden Vineyards, a 264-unit property located in Murrieta, California and Camden Oak Crest, a 364-unit property located in Houston, Texas. We are also constructing an additional 201 units at an existing operating property, Camden Miramar, located in Corpus Christi, Texas.
During the first quarter, we disposed of one property with 300 apartment homes. The operating property is located in Las Vegas and was being held through a joint venture. Our portion of the gain from this disposition totaled $37,000 and is included in "Equity in income of joint ventures."
Subsequent to quarter end, we purchased two properties located in Tampa, Florida, which were developed under our third party development program, for an aggregate of $70.2 million, as they fit our diversification strategy. Marina Pointe II, which has been renamed Camden Bay, is a 352-unit property which was completed and stabilized operations during 2001. Camden Ybor City is a 454-unit property which was completed during the first quarter 2002 and is expected to stabilize operations during the fourth quarter of 2002.
6
Real Estate Assets, at Cost
We capitalized $7.6 million and $4.1 million in the quarters ended March 31, 2002 and 2001, respectively, of renovation and improvement costs which we believe extended the economic lives and enhanced the earnings of our multifamily properties.
Property Operating and Maintenance Expenses
Property operating and maintenance expenses included normal repairs and maintenance expenses totaling $6.1 million and $6.9 million for the quarters ended March 31, 2002 and 2001, respectivley.
Common Share Dividend Declaration
In March 2002, we announced that our Board of Trust Managers had declared a dividend of $0.635 per share for the first quarter of 2002 which was paid on April 17, 2002 to all common shareholders of record as of March 28, 2002. We paid an equivalent amount per unit to holders of common operating partnership units. This distribution to common shareholders and holders of common operating partnership units equates to an annualized dividend rate of $2.54 per share or unit. Recent Accounting Pronouncements
In June 2001, FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations", which is effective for fiscal years beginning after June 15, 2002. SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The adoption of SFAS No. 143 will not have a material impact on our financial position, results of operations, or cash flows.
Reclassifications
Certain reclassifications have been made to amounts in prior year financial statements to conform with current year presentation.
Basic earnings per share is computed using net income to common shareholders and the weighted average number of common shares outstanding. Diluted earnings per share reflects common shares issuable from the assumed conversion of common share options and awards granted, preferred shares, units convertible into common shares and convertible subordinated debentures. Only those items that have a dilutive impact on our basic earnings per share are included in diluted earnings per share.
7
The following table presents information necessary to calculate basic and diluted earnings per share for the three months ended March 31, 2002 and 2001:
Three Months Ended March 31, -------------------------- 2002 2001 ------------ ----------- Basic earnings per share Weighted average common shares outstanding ................. 40,826 37,975 ============ =========== Basic earnings per share .............................. $ 0.34 $ 0.43 ============ =========== Diluted earnings per share(a) Weighted average common shares outstanding ................. 40,826 37,975 Shares issuable from assumed conversion of: Common share options and awards granted ............... 1,357 1,022 Units convertible into common shares .................. 2,465 573 ------------ ----------- Weighted average common shares outstanding, as adjusted .... 44,648 39,570 ============ =========== Diluted earnings per share ............................ $ 0.32 $ 0.41 ============ =========== Earnings for basic and diluted computation Net income .................................................. $ 13,982 $ 18,544 Less: Preferred share dividends ............................. - (2,343) ------------ ----------- Net income to common shareholders (Basic earnings per share computation) ................ 13,982 16,201 Income allocated to units convertible into common shares .... 454 - ------------ ----------- Net income to common shareholders, as adjusted (Diluted earnings per share computation) .............. $ 14,436 $ 16,201 ============ =========== (a) For the quarter ended March 31,2001, 3.2 million preferred shares, 2.0 million units convertible into common shares and 79,000 convertible subordinated debentures were not included in the diluted earnings per share calculation as they were not dilutive.
Our construction division performs services for our internally developed construction pipeline, as well as provides services for third party owners of multifamily, commercial and retail properties. In addition to providing construction services to third party multifamily owners, for selected properties in markets we are comfortable making investments in, we may provide financing for a portion of the project costs. In connection with this program, we have entered into agreements with unaffiliated third parties to develop, construct, and manage five multifamily projects containing a total of 1,667 apartment homes. We are providing financing for a portion of each project in the form of notes receivable which mature through 2005. Interest on these notes accrues at 10% annually and is being recognized as earned. These notes are secured by second liens on the assets and partial guarantees by the third party owners. We expect these notes to be repaid from operating cash flow or proceeds from the sale of the individual properties. At March 31, 2002 and 2001, these notes had principal balances totaling $72.9 million and $78.0 million, respectively.
These projects are supported with adequate third party equity to allow us to earn fees for managing the development, construction and eventual operations of these properties. The related fees we earned for all projects totaled $678,000 and $249,000 for the quarters ended March 31, 2002 and 2001, respectively. Two projects are currently under construction, and one project is in the lease-up phase. We expect that the remaining two projects currently under construction will begin leasing during 2002.
8
The following is a detail of our third party construction subject to notes receivable as of March 31, 2002:
Estimated/
Number of Budgeted/ Estimated/ Actual Date
Apartment Actual Cost Actual Date of of
Property and Location Homes ($ millions) Completion Stabilization
---------------------------------- ----------- -------------- ---------------- -------------
Stabilized
Marina Pointe II
Tampa, FL ............. 352 $ 29 1Q01 3Q01
Creekside
Denver, CO ........... 279 33 3Q01 3Q01
In lease-up
Ybor City
Tampa, FL ............. 454 40 1Q02 4Q02
Under Construction
Little Italy
San Diego, CA ........ 160 36 4Q02 3Q03
Otay Ranch
San Diego, CA ........ 422 57 1Q03 4Q03
----------- --------------
Total Third Party Development .. 1,667 $ 195
=========== ==============
Subsequent to quarter end, we purchased the two properties located in Tampa, Florida, which were developed under our third party development program, for an aggregate of $70.2 million, as they fit our diversification strategy. Marina Pointe II, which has been renamed Camden Bay, is a 352-unit property which was completed and stabilized operations during 2001. Camden Ybor City is a 454-unit property which was completed during the first quarter 2002 and is expected to stabilize operations during the fourth quarter of 2002.
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The following is a summary of our indebtedness:
(In millions)
March 31, December 31,
2002 2001
----------- --------------
Unsecured Line of Credit and Short Term Borrowings ............. $ 226.0 $ 157.0
Senior Unsecured Notes
7.03% Notes, due 2003 ....................................... 50.0 50.0
7.14% Notes, due 2004 ....................................... 199.5 199.4
7.11% - 7.28% Notes, due 2006 ............................... 174.2 174.2
6.77% Notes, due 2010 ....................................... 99.9 99.9
7.69% Notes, due 2011 ....................................... 149.4 149.4
----------- --------------
673.0 672.9
Medium Term Notes
6.68% - 6.74% Notes, due 2002 ............................... - 34.5
6.88% - 7.17% Notes, due 2004 ............................... 30.0 30.0
7.63% Notes, due 2009 ....................................... 15.0 15.0
6.79% Notes, due 2010 ....................................... 14.5 14.5
----------- --------------
59.5 94.0
----------- --------------
Total Unsecured Notes .......................................... 958.5 923.9
Secured Notes
7.00% - 8.50% Conventional Mortgage Notes, due 2003 - 2009 .. 181.5 182.5
3.17% - 7.29% Tax-exempt Mortgage Notes, due 2023 - 2031 .... 100.4 100.6
----------- --------------
281.9 283.1
----------- --------------
Total Notes Payable ............................................ $ 1,240.4 $ 1,207.0
=========== ==============
We have a $420 million unsecured line of credit which matures in August 2004. The scheduled interest rate is currently based on spreads over LIBOR or Prime. The scheduled interest rates are subject to change as our credit ratings change. Advances under the line of credit may be priced at the scheduled rates, or we may enter into bid rate loans with participating banks at rates below the scheduled rates. These bid rate loans have terms of six months or less and may not exceed the lesser of $200 million or the remaining amount available under the line of credit. The line of credit is subject to customary financial covenants and limitations. At quarter end, we were in compliance with all covenants and limitations.
During the first quarter, we repaid $34.5 million of maturing medium-term notes. These notes had interest rates ranging from 6.68% to 6.74% and were repaid using proceeds available under our unsecured line of credit.
At March 31, 2002, our floating rate debt totaled $287.8 million and had a weighted average interest rate of 2.9%
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The effect of changes in the operating accounts on cash flows from operating activities is as follows:
(In thousands)
Three Months
Ended March 31,
----------------------------
2002 2001
----------- ------------
Decrease (increase) in assets:
Accounts receivable - affiliates .......... $ (263) $ 208
Other assets, net ......................... (670) (1,882)
Restricted cash .......................... (262) (63)
Increase (decrease) in liabilities:
Accounts payable .......................... 6,039 3,906
Accrued real estate taxes ................. (15,088) (13,980)
Accrued expenses and other liabilities .... (1,381) 4,070
----------- ------------
Net change in operating accounts ..... $ (11,625) $ (7,741)
=========== ============
Our operating partnership has issued $100 million of 8.5% Series B Cumulative Redeemable Perpetual Preferred Units and $53 million of 8.25% Series C Cumulative Redeemable Perpetual Preferred Units. Distributions on the preferred units are payable quarterly. The preferred units are redeemable for cash by the operating partnership on or after the fifth anniversary of issuance at par plus the amount of any accumulated and unpaid distributions. The preferred units are convertible after 10 years by the holder into corresponding Series B or C Cumulative Redeemable Perpetual Preferred Shares. The preferred units are subordinate to present and future debt.
During the first quarter of 2002, we granted 325,678 restricted shares to certain key employees and non-employee trust managers. The restricted shares were issued based on the market value of our common shares at the date of grant and have vesting periods of up to ten years. We also granted 510,000 options with an exercise price equal to the market value on the date of grant. The options become exercisable in equal increments over three years, beginning on the first anniversary of the grant. During the three month period ended March 31, 2002, previously granted options to purchase 166,433 shares became exercisable and 97,958 restricted shares vested. During 2002, 243,405 options were exercised at prices ranging from $24.88 to $30.36.
In 1998, we began repurchasing our securities under a program approved by our Board of Trust Managers. The plan allows us to repurchase or redeem up to $200 million of our securities through open market purchases and private transactions. Management consummates these repurchases and redemptions at the time when they believe that we can reinvest available cash flow into our own securities at yields which exceed those currently available on direct real estate investments. As of March 31, 2002, we had repurchased 6.9 million common shares and redeemed approximately 106,000 units convertible in to common shares for a total cost of $180.9 million. No common shares or units convertible into common shares have been repurchased in 2002.
11
We have completed construction of 17 for-sale townhomes in the downtown Dallas area at a total cost of approximately $5.5 million. During the three months ended March 31, 2002, we sold four units at a total sales price of approximately $1.1 million. The proceeds received from these townhome sales are included in other income in our consolidated statements of operations. Other expenses in our consolidated statements of operations represents the construction costs associated with the townhomes sold during the quarter. As of March 31, 2002, we had eight of the 17 townhomes remaining to be sold.
Construction Contracts. As of March 31, 2002, we were obligated for approximately $86.5 million of additional expenditures on our four development properties (a substantial amount of which we expect to be funded with debt).
Contingencies. We are subject to various legal proceedings and claims that arise in the ordinary course of business. These matters are generally covered by insurance. While the resolution of these matters cannot be predicted with certainty, management believes that the final outcome of such matters will not have a material adverse effect on our consolidated financial statements.
In the ordinary course of our business, we issue letters of intent indicating a willingness to negotiate for the purchase or sale of multifamily properties or development land. In accordance with local real estate market practice, such letters of intent are non-binding, and neither party to the letter of intent is obligated to pursue negotiations unless and until a definitive contract is entered into by the parties. Even if definitive contracts are entered into, the letters of intent and resulting contracts contemplate that such contracts will provide the purchaser with time to evaluate the properties and conduct due diligence and during which periods the purchaser will have the ability to terminate the contracts without penalty or forfeiture of any deposit or earnest money. There can be no assurance that definitive contracts will be entered into with respect to any properties covered by letters of intent or that we will acquire or sell any property as to which we may have entered into a definitive contract. Further, due diligence periods are frequently extended as needed. An acquisition or sale becomes probable at the time that the due diligence period expires and the definitive contract has not been terminated. We are then at risk under an acquisition contract, but only to the extent of any earnest money deposits associated with the contract, and are obligated to sell under a sales contract.
We are currently in the due diligence period for the purchase of land for development and the acquisition of a property. No assurance can be made that we will be able to complete the negotiations or become satisfied with the outcome of the due diligence.
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Overview
The following discussion should be read in conjunction with all of the financial statements and notes appearing elsewhere in this report as well as the audited financial statements appearing in our 2001 Annual Report to Shareholders. Where appropriate, comparisons are made on a dollars per-weighted-average-unit basis in order to adjust for changes in the number of apartment homes owned during each period. The statements contained in this report that are not historical facts are forward-looking statements, and actual results may differ materially from those included in the forward-looking statements. These forward-looking statements involve risks and uncertainties including, but not limited to, the following: changes in general economic conditions, changes in financial markets and interest rates, our failure to qualify as a real estate investment trust ("REIT") and environmental uncertainties and natural disasters.
Business
Camden Property Trust is a real estate investment trust and, with our subsidiaries, reports as a single business segment with activities related to the ownership, development, construction and management of multifamily communities. As of March 31, 2002, we owned interests in, operated or were developing 147 multifamily properties containing 52,412 apartment homes located in nine states. Our properties, excluding properties in lease-up and under development, had a weighted average occupancy rate of 91.7% for the quarter ended March 31, 2002. This represents the average occupancy for all properties during the first quarter of 2002 weighted by the number of apartment homes in each property. Two of our newly developed multifamily properties containing 1,000 apartment homes were in lease-up at quarter end. Four of our multifamily properties, which includes the expansion of an existing operating property, containing 1,367 apartment homes were under development at March 31, 2002 Additionally, we have several sites which we intend to develop into multifamily apartment communities.
Property Update
We currently have four properties under development: Camden Harbour View, a 538-unit property located in Long Beach, California; Camden Vineyards, a 264-unit property located in Murrieta, California and Camden Oak Crest, a 364-unit property located in Houston, Texas. We are also constructing an additional 201 units at an existing operating property, Camden Miramar, located in Corpus Christi, Texas.
During the first quarter, we disposed of one property with 300 apartment homes. The operating property is located in Las Vegas and was being held through a joint venture. Our portion of the gain from this disposition totaled $37,000 and is included in "Equity in income of joint ventures."
Subsequent to quarter end, we purchased two properties located in Tampa, Florida, which were developed under our third party development program, for an aggregate of $70.2 million, as they fit our diversification strategy. Marina Pointe II, which has been renamed Camden Bay, is a 352-unit property which was completed and stabilized operations during 2001. Camden Ybor City is a 454-unit property which was completed during the first quarter 2002 and is expected to stabilize operations during the fourth quarter of 2002.
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Property Portfolio
Our multifamily property portfolio, excluding land held for future development and joint venture properties which we do not manage is summarized as follows:
March 31, 2002 December 31, 2001
------------------------ ------------------------
Apartment Apartment
Homes Properties Homes Properties
----------- ------------ ----------- ------------
Operating Properties
West Region
Las Vegas, Nevada (a)............... 10,353 36 10,653 37
Denver, Colorado (a)................ 2,529 8 2,529 8
Phoenix, Arizona ................... 2,109 7 2,109 7
Southern California ................ 1,653 4 1,653 4
Tucson, Arizona .................... 821 2 821 2
Reno, Nevada ....................... 450 1 450 1
Central Region
Dallas, Texas ...................... 8,359 23 8,359 23
Houston, Texas ..................... 7,190 16 7,190 16
St. Louis, Missouri ................ 2,123 6 2,123 6
Austin, Texas....................... 1,745 6 1,745 6
Corpus Christi, Texas .............. 1,663 4 1,663 4
Kansas City, Missouri .............. 596 1 596 1
East Region
Tampa, Florida ..................... 5,023 11 5,023 11
Orlando, Florida ................... 2,804 6 2,804 6
Charlotte, North Carolina ......... 1,659 6 1,659 6
Louisville, Kentucky ............... 1,448 5 1,448 5
Greensboro, North Carolina ........ 520 2 520 2
----------- ------------- ---------- ------------
Total Operating Properties .... 51,045 144 51,345 145
----------- ------------- ---------- ------------
Properties Under Development
West Region
Southern California ................ 802 2 802 2
Central Region
Houston, Texas ..................... 364 1 - -
Corpus Christi, Texas .............. 201 - - -
----------- ------------- ---------- ------------
Total Properties Under Development ...... 1,367 3 802 2
----------- ------------- ---------- ------------
Total Properties ....................... 52,412 147 52,147 147
----------- ------------- ---------- ------------
Less: Joint Venture Properties (a) .... 4,939 19 5,239 20
----------- ------------- ---------- ------------
Total Properties Owned 100% ............. 47,473 128 46,908 127
=========== ============= ========== ============
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At March 31, 2002, we had two completed properties under lease-up as follows:
Number of Estimated
Apartment % Leased Date of Date of
Property and Location Homes at 5/01/02 Completion Stabilization
--------------------------------- ----------- ------------ ------------ ---------------
Camden Farmers Market
Dallas, TX ................ 620 90% 2Q01 2Q02
Camden Crown Valley
Mission Viejo, CA ......... 380 85% 3Q01 2Q02
At March 31, 2002, we had four properties under construction as follows:
Number of Estimated Estimated Estimated
Apartment Cost Date of Date of
Property and Location Homes ($ millions) Completion Stabilization
--------------------------------- ----------- -------------- ------------ ---------------
Camden Miramar, Phase V
Corpus Christi, TX ........ 201 $ 4.6 3Q02 3Q02
Camden Vineyards
Murrieta, CA .............. 264 35.0 4Q02 2Q03
Camden Oak Crest
Houston, TX ................ 364 24.4 3Q03 2Q04
Camden Harbour View
Long Beach, CA ............ 538 127.0 3Q03 4Q04
----------- --------------
1,367 $ 191.0
=========== ==============
Where possible, we stage our construction to allow leasing and occupancy during the construction period which we believe minimizes the duration of the lease-up period following completion of construction. Our accounting policy related to properties in the development and leasing phase is that all operating expenses associated with occupied apartment homes are expensed against revenues generated by those apartment homes as they become occupied. All construction and carrying costs are capitalized and reported on the balance sheet in "Properties under development, including land" until individual buildings are completed. Carrying charges are principally interest and real estate taxes which are capitalized as part of properties under development. Upon completion of each building, the total cost of that building and the associated land is transferred to "Buildings and improvements" and "Land", respectively and the assets are depreciated over their estimated useful lives using the straight-line method of depreciation. Upon stabilization, all apartment homes are considered operating and we begin expensing all items that were previously considered carrying costs. We consider a property stabilized once it reaches 90% occupancy, or generally one year from opening the leasing office, with some allowances for larger than average properties.
If an event or change in circumstance indicates a potential impairment in the value of a property has occurred, our policy is to assess any potential impairment by making a comparison of the current and projected operating cash flows for such property over its remaining useful life, on an undiscounted basis, to the carrying amount of the property. If such carrying amounts are in excess of the estimated projected operating cash flows of the property, we would recognize an impairment loss equivalent to an amount required to adjust the carrying amount to its estimated fair market value.
Our consolidated financial statements include $167.1 million related to properties currently under development. Of this amount, $70.1.million relates to our four projects currently under construction. Additionally, we have $97.0 million invested in land held for future development. Included in this amount is $50.2 million in land development projects located in Houston, Dallas, and Long Beach. We are currently in the planning phase with respect to these properties to further develop apartment homes in these areas. We may also sell certain parcels of undeveloped land to third parties for commercial and retail development.
15
We have completed construction of 17 for-sale townhomes in the downtown Dallas area at a total cost of approximately $5.5 million. During the three months ended March 31, 2002, we sold four townhomes at a total sales price of approximately $1.1 million. The proceeds received from these townhome sales are included in other income in our consolidated statements of operations. Other expenses in our consolidated statements of operations represents the construction costs associated with the townhomes sold during the quarter. As of March 31, 2002, we had eight of the 17 townhomes remaining to be sold.
Third Party Development
Our construction division performs services for our internally developed construction pipeline, as well as provides services for third party owners of multifamily, commercial and retail properties. In addition to providing construction services to third party multifamily owners, for selected properties in markets we are comfortable making investments in, we may provide financing for a portion of the project costs. In connection with this program, we have entered into agreements with unaffiliated third parties to develop, construct, and manage five multifamily projects containing a total of 1,667 apartment homes. We are providing financing for a portion of each project in the form of notes receivable which mature through 2005. Interest on these notes accrues at 10% annually and is being recognized as earned. These notes are secured by second liens on the assets and partial guarantees by the third party owners. We expect these notes to be repaid from operating cash flow or proceeds from the sale of the individual properties. At March 31, 2002 and 2001, these notes had principal balances totaling $72.9 million and $78.0 million, respectively. We anticipate funding an additional $7.1 million on these third party development properties during 2002.
Results of Operations
Changes in revenues and expenses related to our operating properties from period to period are primarily due to property developments, dispositions, acquisitions, and the performance of the stabilized properties in the portfolio. Where appropriate, comparisons are made on a dollars-per-weighted-average-apartment home basis in order to adjust for such changes in the number of apartments homes owned during each period. Selected weighted averages for the quarters ended March 31, 2002 and 2001 are as follows:
Three Months
Ended March 31,
---------------------
2002 2001
---------- ---------
Rental income per apartment home per month ......................... $ 670 $ 682
Property operating and maintenance per apartment home per year ..... $ 2,430 $ 2,501
Real estate taxes per apartment home per year ...................... $ 923 $ 894
Weighted average number of operating apartment homes ............... 45,872 45,038
Weighted average occupancy by region
West ........................................................... 92.2% 95.3%
Central ........................................................ 92.4% 95.4%
East ........................................................... 89.6% 92.3%
16
Comparison of the Quarters Ended March 31, 2002 and March 31, 2001
Earnings before interest, depreciation and amortization increased $530,000, or 0.9%, from $60.1 million to $60.6 million for the quarter ended March 31, 2001 and 2002, respectively. The weighted average number of apartment homes for the first quarter of 2002 increased by 834 apartment homes, or 1.9%, to 45,872 from 45,038 for the first quarter of 2001. The increase in the weighted average number of apartment homes is due to the acquisition of one property totaling 272 apartment homes and an increase in occupancy at our newly constructed properties. Total operating properties we owned 100% were 125 and 122 at March 31, 2002 and 2001, respectively. The weighted average number of apartment homes and the operating properties exclude the impact of our ownership interest in properties owned in joint ventures.
Our apartment communities generate rental revenue and other income through the leasing of apartment homes. Total property revenues comprised 96.0% and 96.6% of our total revenues for the quarters ended March 31, 2002 and 2001, respectively. The decrease in rental revenue as a percent of total revenue is due to an increase in non-property related revenue from the sales of townhomes during 2002, which are included in other income. No townhomes sales occurred during the first quarter of 2001. Our primary financial focus for our apartment communities is net operating income. Net operating income represents total property revenues less property operating and maintenance expenses, including real estate taxes. Net operating income increased $233,000, or 0.4%, from $60.9 million to $61.2 million for the quarters ended March 31, 2001 and 2002, respectively.
Rental income for the quarter ended March 31, 2002 remained constant as compared to the quarter ended March 31, 2001. Rental income per apartment home per month decreased $12 or 1.8%, from $682 to $670 for the first quarters of 2001 and 2002, respectively. The decrease was primarily due to higher concessions and vacancy rates during 2002. Overall average occupancy was 91.7% and 94.7% for the quarters ended March 31, 2002 and 2001, respectively.
Other property income increased $474,000 from $7.0 million to $7.4 million for the quarter ended March 31, 2001 and 2002, respectively, which represents a monthly increase of $3 per apartment home. The increase in other property income was due primarily to increases from revenue sources such as telephone, cable, water and other miscellaneous property fees.
Fee and asset management in 2002 decreased $205,000 over 2001. This decrease is primarily due to fees earned on third party construction projects in 2001. Other income for the quarter ended March 31, 2002 increased $896,000 over the quarter ended 2001. This increase was due to the sale of four townhomes.
Property operating and maintenance expenses decreased $294,000, from $28.2 million for the quarter ended March 31, 2001 to $27.9 million for the quarter ended March 31, 2002. On an annualized basis, property operating and maintenance expenses decreased $71 per unit, or 2.8%. This decrease is primarily due to decreases in repairs and maintenance expenses per apartment home, partially offset by increases in salary and benefit expenses. Property operating and maintenance expenses as a percent of total property income decreased slightly from 28.4% to 28.0% for the quarters ended March 31, 2001 and 2002, respectively.
Real estate taxes increased $517,000 from $10.1 million to $10.6 million for the first quarters of 2001 and 2002, respectively, which represents an annual increase of $29 per apartment home. The increase per apartment home was primarily due to increases in property valuations and property tax rates.
General and administrative expenses increased $306,000 from $3.3 million to $3.6 million, and increased as a percent of revenues from 3.2% to 3.5% for the quarters ended March 31, 2001 and 2002 respectively. The increase was primarily due to increases in costs associated with our third party construction division and an increase in salary and benefit expenses.
17
Gross interest cost before interest capitalized to development properties decreased from $20.2 million for the quarter ended March 31, 2001 to $19.4 million for the quarter ended March 31, 2002. The overall decrease in interest expense was due to lower average interest rates on our line of credit, offset by higher average debt balances during 2002. Interest capitalized decreased to $2.3 million from $3.1 million for the quarters ended March 31, 2002 and 2001, respectively, due to lower development activity during 2002.
Depreciation and amortization increased from $24.5 million for the first quarter of 2001 to $26.1 million for the first quarter of 2002. This increase was due to new development, property acquisition and capital improvements during the period.
Gains on sales of properties for the quarter ended March 31, 2001 was from the sale of 15.2 acres of undeveloped land located in Houston. No sales were recorded during the first quarter 2002.
Equity in income of joint ventures decreased $2.5 million from the first quarter of 2001, primarily from gains recognized from the sales of joint venture properties. During the first quarter of 2001, two properties totaling 556 apartment homes were sold. During the first quarter 2002, one property with 300 apartment homes was sold.
Financial Structure
We intend to continue maintaining what management believes to be a conservative capital structure by:
| (i) | using a prudent combination of debt and common and preferred equity; |
| (ii) | extending and sequencing the maturity dates of our debt where possible; |
| (iii) | managing interest rate exposure using fixed rate debt and hedging where management believes it is appropriate; |
| (iv) | borrowing on an unsecured basis in order to maintain a substantial number of unencumbered assets; and |
| (v) | maintaining conservative coverage ratios. |
The interest expense coverage ratio, net of capitalized interest, was 3.5 and 3.6times for the quarters ended March 31, 2002 and 2001, respectively. At March 31, 2002 and 2001, 80.6% and 76.7%, respectively, of our properties (based on invested capital) were unencumbered. Our weighted average maturity of debt, excluding our line of credit, was 6.8 years and 6.6 years at March 31, 2002 and 2001, respectively. Interest expense coverage ratio is derived by dividing interest expense for the period into the sum of income before gain on sale of properties, equity in income of joint ventures and minority interests, depreciation and amoritization, interest and impairment provision for technology investments.
18
We intend to meet our short-term liquidity requirements through cash flows provided by operations, our unsecured line of credit, discussed in the financial flexibility section below and other short-term borrowings. We expect that our ability to generate cash will be sufficient to meet our short-term liquidity needs, which include:
| (i) | normal operating expenses; |
| (ii) | current debt service requirements; |
| (iii) | recurring capital expenditures; |
| (iv) | property developments; |
| (v) | investments in third party development properties; |
| (vi) | common share repurchases; and |
| (vii) | distributions on our common and preferred equity. |
We consider our long-term liquidity requirements to be the repayment of maturing debt, including borrowings under our unsecured line of credit, and funding of acquisitions. We intend to meet our long-term liquidity requirements through the use of common and preferred equity capital, senior unsecured debt and property dispositions.
We intend to concentrate our growth efforts toward selective development and acquisition opportunities in our current markets, and through the acquisition of existing operating portfolios and the development of properties in selected new markets. During the quarter ended March 31, 2002, we incurred $25.3 million in development costs and no acquisition costs. We are developing four properties at an aggregate cost of approximately $191.0 million, $70.1 million of which was incurred through March 31, 2002. We intend to fund our developments and acquisitions through a combination of equity capital, partnership units, medium-term notes, construction loans, other debt securities and our unsecured line of credit. We also seek to selectively dispose of assets that management believes have a lower projected net operating income growth rate than the overall portfolio, or no longer conform to our operating and investment strategies. We intend to continue rebalancing our portfolio with the goal of limiting any one market to no more than 12% of total real estate assets. We expect that any such sales should generate capital for acquisitions and new developments or for debt reduction. Real estate to be disposed of is reported at the lower of its carrying amount or its estimated fair value, less its cost to sell. Depreciation expense is not recorded during the period in which such assets are held for sale.
Net cash provided by operating activities totaled $29.5 million for the quarter ended March 31, 2002, a decrease of $6.1 million, or 17.0%, over the same period in 2001. Equity in income of joint ventures decreased $2.5 million due to the sale of two joint venture properties in 2001. Also, accured expenses and other liabilities decreased $1.4 million during the first quarter of 2002, compared to an increase of $4.1 million during the same period in 2001. This fluctuation was due to timing of interest payments on new unsecured debt issued during 2001.
Net cash used in investing activities totaled $34.9 million for the quarter ended March 31, 2002 compared to $22.3 million for the same period in 2001. For the quarter ended March 31, 2002, net cash used in investing activities included expenditures for property development and capital improvements totaling $25.3 million and $7.6 million, respectively. These expenditures were offset by $1.1 million in net proceeds received from townhome sales during 2002. Additionally, advances to third party development properties totaled $2.9 million during 2002. For the quarter ended March 31, 2001, net cash used in investing activities included expenditures for property development and capital improvements totaling $15.1 million and $4.1 million, respectively. For the three months ended March 31, 2001, investments in third party development properties and investments in technology initiatives increased $7.3 million a $1.6 million, respectively. These cash out flows were offset by $6.5 million in net proceeds received from property dispositions during 2001.
19
Net cash provided by financing activities totaled $7.3 million for the quarter ended March 31, 2002 compared to net cash used in financing activities totaling $14.1 million for the quarter ended March 31, 2001. During the quarter ended March 31, 2002, we paid distributions totaling $29.9 million. Our line of credit increased $69.0 million, for the quarter ended March 31, 2002, primarily from the repayment of notes payable, which decreased $35.8 million, and the funding of development properties. During the quarter ended March 31, 2001, we paid $28.5 million in distributions. We also received proceeds totaling $197.8 million from the issuance of senior unsecured notes. The proceeds from these issuances were used to pay down borrowings under our line of credit and repay notes payable, which decreased $70.0 million and $113.3 million, respectively, for the quarter ended March 31, 2001.
In 1998, we began repurchasing our securities under a program approved by our Board of Trust Managers. The plan allows us to repurchase or redeem up to $200 million of our securities through open market purchases and private transactions. Management consummates these repurchases and redemptions at the time when they believe that we can reinvest available cash flow into our own securities at yields which exceed those currently available on direct real estate investments. These repurchases were made and we expect that future repurchases, if any, will be made without incurring additional debt and, in management’s opinion, without reducing our financial flexibility. At March 31, 2002, we had repurchased approximately 6.9 million common shares and redeemed approximately 106,000 units at a total cost of $180.9 million. No common shares or units convertible into common shares have been repurchased in 2002.
In March 2002, we announced that our Board of Trust Managers had declared a dividend in the amount of $0.635 per share for the first quarter of 2002 which was paid on April 17, 2002 to all common shareholders of record as of March 28, 2002. We paid an equivalent amount per unit to holders of the common operating partnership units. This distribution to common shareholders and holders of common operating partnership units equates to an annualized dividend rate of $2.54 per share or unit.
As of March 31, 2002, we had unsecured debt totaling $958.5 million and secured mortgage loans totaling $281.9 million. Our indebtedness, excluding our unsecured line of credit, has a weighted average maturity of 6.8 years as of March 31, 2002. Scheduled repayments on outstanding debt, including our line of credit, at March 31, 2002 is as follows:
(In millions)Year Amount --------- ---------- 2002 ....................... $ 3.6 2003 ....................... 87.3 2004 ....................... 460.8 2005 ....................... 61.4 2006 ....................... 210.7 2007 and thereafter ........ 416.6 ---------- Total ...................... $ 1,240.4 ==========
20
Financial Flexibility
We have a $420 million unsecured line of credit which matures in August 2004. The scheduled interest rate is currently based on spreads over LIBOR or Prime. The scheduled interest rates are subject to change as our credit ratings change. Advances under the line of credit may be priced at the scheduled rates, or we may enter into bid rate loans with participating banks at rates below the scheduled rates. These bid rate loans have terms of six months or less and may not exceed the lesser of $200 million or the remaining amount available under the line of credit. The line of credit is subject to customary financial covenants and limitations.
As an alternative to our unsecured line of credit, we from time to time borrow using competitively bid unsecured short-term notes with lenders who may or may not be a part of the unsecured line of credit bank group. Such borrowings vary in term and pricing and are typically priced at interest rates below those available under the unsecured line of credit.
As of March 31, 2002, we had $194.0 million available under our unsecured line of credit and $435.5 million available under our universal shelf registration. We have significant unencumbered real estate assets which could be sold or used as collateral for financing purposes should other sources of capital not be available.
At March 31, 2002, our floating rate debt totaled $287.8 million and had a weighted average interest rate of 2.9%.
Management considers FFO to be an appropriate measure of performance of an equity REIT. The National Association of Real Estate Investment Trusts currently defines FFO as net income (computed in accordance with generally accepted accounting principles), excluding gains (or losses) from debt restructuring and sales of property, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures. Our definition of diluted FFO also assumes conversion at the beginning of the period of all dilutive convertible securities, including minority interests, which are convertible into common equity.
We believe that in order to facilitate a clear understanding of our consolidated historical operating results, FFO should be examined in conjunction with net income as presented in the consolidated financial statements and data included elsewhere in this report. FFO is not defined by generally accepted accounting principles. FFO should not be considered as an alternative to net income as an indication of our operating performance or to net cash provided by operating activities as a measure of our liquidity. Further, FFO as disclosed by other REIT’s may not be comparable to our calculation.
21
The calculation of basic and diluted FFO for the three months ended March 31, 2002 and 2001 follows:
(In thousands)
Three Months
Ended March 31,
-------------------------
2002 2001
---------- ----------
Funds from operations:
Net income to common shareholders ........................... $ 13,982 $ 16,201
Real estate depreciation .................................... 25,139 23,807
Adjustments for unconsolidated joint ventures ............... 527 (1,595)
Gain on sales of properties ................................. - (1,716)
Preferred share dividends ................................... - 2,343
Income allocated to units convertible into common shares .... 454 1,071
Adjustments for convertible subordinated debentures ......... - 34
---------- ----------
Funds from operations - diluted ................................ $ 40,102 $ 40,145
========== ==========
Weighted average shares - basic ................................ 40,826 37,975
Common share options and awards granted ..................... 1,357 1,022
Units convertible into common shares ........................ 2,465 2,539
Preferred shares ............................................ - 3,207
Convertible subordinated debentures ......................... - 79
---------- ----------
Weighted average shares - diluted .............................. 44,648 44,822
========== ==========
We lease apartments under lease terms generally ranging from six to thirteen months. Management believes that such short-term lease contracts lessen the impact of inflation due to the ability to adjust rental rates to market levels as leases expire.
In June 2001, FASB issued SFAS No. 143, "Accounting for Asset Retirement Obligations", which is effective for fiscal years beginning after June 15, 2002. SFAS No. 143 addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. The adoption of SFAS No. 143 will not have a material impact on our financial position, results of operations or cash flows.
No material changes have occurred since our Annual Report on Form 10-K for the year ended December 31, 2001.
22
PART II. OTHER INFORMATION
| Item 1. |
Legal Proceedings
None |
| Item 2. |
Changes in Securities and Use of Proceeds
None |
| Item 3. |
Defaults Upon Senior Securities
None |
| Item 4. |
Submission of Matters to a Vote of Security Holders
None |
| Item 5. |
Other Information
None |
| Item 6. |
Exhibits and Reports on Form 8-K
(a) Exhibits 10.1 Amended and Restated 2002 Share Incentive Plan of Camden Property Trust 10.2 Camden Property Trust Short Term Incentive Plan (b) Reports on Form 8-K None |
23
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on our behalf by the undersigned thereunto duly authorized.
| /s/ G. Steven Dawson | May 3, 2002 |
| ------------------------------------------ | ----------------------------- |
|
G. Steven Dawson
Chief Financial Officer, Sr. Vice President - Finance, and Secretary |
Date |
| /s/ Dennis M. Steen | May 3, 2002 |
| ------------------------------------------ | ----------------------------- |
|
Dennis M. Steen
Vice President - Controller, Chief Accounting Officer and Treasurer |
Date |
24
1. Purpose.
The purpose of this Plan is to benefit the Company's shareholders by encouraging high levels of performance by individuals who are key to the success of the Company and to enable the Company to attract, motivate and retain talented and experienced individuals essential to its continued success. This is to be accomplished by providing such individuals an opportunity to obtain or increase their proprietary interest in the Company's performance and by providing such individuals with additional incentives to remain with the Company.
2. Definitions.
The following terms, as used herein, shall have the meaning specified:
(a) "Additional Bonus Shares" shall have the meaning set forth in Section 6(f)(2).
(b) "Affiliate" shall mean any corporation or other entity more than 50% of whose stock or other interests having general voting power is owned by the Company or by another Affiliate of the Company.
(c) "Alternative Rights" shall have the meaning set forth in Section 6(a)(2).
(d) "Award" shall mean an award granted pursuant to Section 6.
(e) "Board" shall mean the Board of Trust Managers of the Company, as it may be comprised from time to time.
(f) "Bonus Shares" shall have the meaning set forth in Section 6(f)(2).
(g) "Change in Control" shall means the occurrence of any of the following:
| (1) any "person" (as such term is used in Sections 13(d) and 14(d) of the Exchange Act) (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any company owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of Shares in the Company) together with its "affiliates" and "associates" (as such terms are defined in Rule 12b-2 of the Exchange Act) makes a tender or exchange offer for or is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), or has become the beneficial owner during the most recent twelve-month period ending on the date of the most recent acquisition by such person, directly or indirectly, of securities of the Company representing 40% or more of the combined voting power of the Company's then outstanding securities; or |
| (2) during any period of two consecutive years (not including any period prior to the Effective Date), individuals who at the beginning of such period constitute the Board, and any new Trust Manager (other than a Trust Manager designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (1), (3) or (4) of this definition) whose election by the Board or nomination-for election by the Company's shareholders was approved by a vote of at least two-thirds of the Trust Managers then still in office who either were Trust Managers at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof; or |
| (3) the shareholders of the Company approve a merger or consolidation of the Company with any other company other than (i) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 80% of the combined voting power of the voting securities of the Company (or such surviving entity) outstanding immediately after such merger or consolidation or (ii) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as hereinabove defined) acquires more than 25% of the combined voting power of the Company's then outstanding securities; or |
| (4) the shareholders of the Company adopt a plan of complete liquidation of the Company or approve an agreement for the sale, exchange or disposition by the Company of all or a significant portion of the Company's assets. For purposes of this clause (4), the term "the sale, exchange or disposition by the Company of all or a significant portion of the Company's assets" shall mean a sale or other disposition transaction or series of related transactions involving assets of the Company or any subsidiary of the Company (including the stock of any subsidiary of the Company) in which the value of the assets or stock being sold or otherwise disposed of (as measured by the purchase price being paid therefore or by such other method as the Board determines is appropriate in a case where there is no readily ascertainable purchase price) constitutes more than 33?% of the aggregate market value of the outstanding Shares (on a fully diluted basis) plus the aggregate market value of the Company's other outstanding equity securities. The aggregate market value of the Shares shall be determined by multiplying the number of Shares (on a fully diluted basis) outstanding on the date of the execution and delivery of a definitive agreement with respect to the transaction or series of related transactions by the average closing price of the Shares for the ten trading days immediately preceding such date. The aggregate market value of any other equity securities of the Company shall be determined in a manner similar to that prescribed in the immediately preceding sentence for determining the aggregate market value of the Shares or by such other method as the Board shall determine is appropriate. |
Notwithstanding the foregoing, (except as provided otherwise in an Award) a Change in Control shall not be deemed to have occurred if, prior to the time a Change in Control would otherwise be deemed to have occurred pursuant to the above provisions, the Board determines otherwise.
(h) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time.
(i) "Committee" shall mean a committee appointed pursuant to Section 3(a) or, if no such Committee is appointed, the Board.
(j) "Company" shall mean Camden Property Trust.
(k) "Conjunctive Rights" shall have the meaning set forth in Section 6(a)(2).
(l) "Deposit Shares" shall have the meaning set forth in Section 6(f)(2).
(m) "Director" shall mean any person who shall from time to time serve as a member of the board of directors of any Affiliate.
(n) "Dividend Equivalent Right" shall mean an Award granted pursuant to Section 6(e).
(o) "Effective Date" shall mean February 5, 2002.
(p) "Election Date" shall mean the date an Independent Trust Manager is first elected to the Board.
(q) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time.
(r) "Fair Market Value" shall mean the closing price of the relevant security as reported on the composite tape of New York Stock Exchange issues (or such other reporting system as shall be selected by the Committee) on the relevant date, or if no sale of the security is reported for such date, the next following day for which there is a reported sale. The Committee shall determine the Fair Market Value of any security that is not publicly traded, using such criteria as it shall determine, in its sole discretion, to be appropriate for such valuation.
(s) "Incentive Exchange Right" shall have the meaning set forth in Section 6(f)(1).
(t) "Incentive Payment Shares" shall have the meaning set forth in Section 6(f)(1).
(u) "Independent Trust Manager" shall mean any Trust Manager who is (i) (A) a "non-employee director" within the meaning of Rule 16b3(b)(3)(i) of the Exchange Act, and (B) an "outside director" within the meaning of Code Section 162(m) and the regulations promulgated thereunder, and (ii) who is not an employee of the Company or any Affiliate; provided, that a Trust Manager who is (x) a Director or (y) a consultant, or both, but is not an employee, also may be an Independent Trust Manager.
(v) "Insider" shall mean any person who is subject to Section 16.
(w) "ISO" shall mean an incentive stock option within the meaning of Code Section 422.
(x) "Limited Rights" shall have the meaning set forth in Section 6(d).
(y) "Mature Shares" shall mean, with respect to an exercise date, Shares held by a Participant for at least six months prior to such exercise date.
(z) "NQO" shall mean a stock option that is not within the meaning of Code Section 422.
(aa) "Option" shall mean any option granted pursuant to Sections 6(a)(1).
(bb) "Outstanding Shares" shall mean, with respect to any date, the total of the number of Shares outstanding, plus (ii) the number of Shares reserved for issuance upon conversion of securities convertible into or exchangeable for Shares, plus (iii) the number of Shares, if any, held as "treasury stock" by the Company, each as on such date.
(cc) "Participant" shall mean any person who has been granted an Award pursuant to this Plan.
(dd) "Performance Share Award" shall have the meaning set forth in Section 6(c).
(ee) "Performance Unit" shall have the meaning set forth in Section 6(c).
(ff) "Reload Option" shall have the meaning set forth in Section 6(a)(7).
(gg) "Restricted Shares" shall mean the Shares issued as a result of a Restricted Share Award.
(hh) "Restricted Share Award" shall mean a grant of the right to purchase Shares pursuant to Section 6(b). Such Shares, when and if issued, shall be subject to such transfer restrictions and risk of forfeiture as the Committee shall determine at the time the Award is granted, until such specific conditions are met. Such conditions may be based on continuing employment or achievement of pre-established performance objectives, or both.
(ii) "Rights" shall mean an Award granted pursuant to Section 6(a)(2).
(jj) "Section 16" shall mean Section 16 of the Exchange Act or any successor regulation and the rules promulgated thereunder by the Securities and Exchange Commission, as they may be amended from time to time.
(kk) "Shares" shall mean the common shares of beneficial interest of the Company, par value $.01 per share.
(ll) "Spread" shall mean (i) with respect to Conjunctive Rights and Alternative Rights, the excess of the Fair Market Value of one Share on the date of exercise of such Rights over the purchase price per Share payable under the related Option, and (ii) with respect to Rights not granted in connection with an Option, the excess of the Fair Market Value of one Share on the date of exercise of such Rights over the Fair Market Value of one Share on the date such Rights were granted.
(mm) "Texas Act" shall mean the Texas Real Estate Investment Trust Act, as amended from time to time.
(nn) "Trust Manager" shall mean any person who shall from time to time be a member of the Board.
3. Administration and Interpretation.
(a) Administration. This Plan shall be administered by a Committee, which shall consist of two or more Independent Trust Managers. The Board may from time to time remove and appoint members of the Committee in substitution for, or in addition to, members previously appointed and may fill vacancies, however caused, in the Committee. The Committee may prescribe, amend and rescind rules and regulations for administration of this Plan and shall have full power and authority to construe and interpret this Plan. A majority of the members of the Committee shall constitute a quorum, and the act of a majority of the members present at a meeting or the acts of a majority of the members evidenced in writing shall be the acts of the Committee. The Committee may correct any defect or any omission or reconcile any inconsistency in this Plan or in any Award or grant made hereunder in the manner and to the extent it shall deem desirable.
The Committee shall have the full and exclusive right to grant all Awards under this Plan, which may be Options, Rights, Limited Rights, Restricted Share Awards, Dividend Equivalent Rights, Performance Units and Performance Share Awards. In granting Awards, the Committee shall take into consideration the contribution the individual has made or may make to the success of the Company or its Affiliates and such other factors as the Committee shall determine. The Committee shall periodically determine the Participants in this Plan and the nature, amount, pricing, time and other terms of Awards to be made to such individuals, subject to the other terms and provisions of this Plan. The Committee shall also have the authority to consult with and receive recommendations from officers and other individuals of the Company and its Affiliates with regard to these matters. In no event shall any individual, his or her legal representative, heirs, legatees, distributees or successors have any right to participate in this Plan except to such extent, if any, as the Committee shall determine.
The Committee may from time to time in granting Awards under this Plan prescribe such other terms and conditions concerning such Awards as it deems appropriate, including, without limitation, the achievement of specific goals established by the Committee, provided that such terms and conditions are not more favorable to any individual than those expressly set forth in this Plan.
The Committee may delegate to the officers of or individuals associated with the Company the authority to execute and deliver such instruments and documents, to do all such acts and things, and to take all such other steps deemed necessary, advisable or convenient for the effective administration of this Plan in accordance with its terms and purpose, except that the Committee may not delegate any discretionary authority with respect to substantive decisions or functions regarding this Plan or Awards hereunder as these relate to Insiders, including but not limited to decisions regarding the timing, eligibility, pricing, amount or other material term of such Awards.
(b) Interpretation. The Committee shall have the power to interpret and administer this Plan. All questions of interpretation with respect to this Plan, the number of Shares or other security granted hereunder, and the terms of any Award shall be determined by the Committee and its determination shall be final and conclusive upon all parties in interest. In the event of any conflict between an Award and this Plan, the terms of this Plan shall govern. It is the intent of the Company that this Plan and Awards hereunder satisfy and be interpreted in a manner that, in the case of participants who are or may be Insiders, satisfies the applicable requirements of Rule 16b-3 of the Exchange Act, so that such persons will be entitled to the benefits of Rule 16b-3 or other exemptive rules under Section 16 and will not be subjected to liability thereunder. If any provision of this Plan or of any Award would otherwise frustrate or conflict with the intent expressed in this Section 3(b), that provision to the extent possible shall be interpreted and deemed amended so as to avoid such conflict. To the extent of any remaining irreconcilable conflict with such intent, the provision shall be deemed void as applicable to insiders.
(c) Limitation on Liability. Neither the Committee nor any member thereof shall be liable for any act, omission, interpretation, construction or determination made in connection with this Plan in good faith, and the members of the Committee shall be entitled to indemnification and reimbursement by the Company in respect of any claim, loss, damage or expense (including counsel fees) arising therefrom to the full extent permitted by law. The members of the Committee shall be named as insureds under any directors and officers (or similar) liability insurance coverage which the Company may have in effect from time to time.
4. Eligibility.
The class of persons who are potential recipients of Awards granted under this Plan consist of the (i) Independent Trust Managers, (ii) Directors, (iii) key employees of the Company or any Affiliate and (iv) consultants to the Company or any Affiliate, in each case (other than in the case of clause (i)), as determined by the Committee from time to time. The Independent Trust Managers, Directors, key employees and consultants to whom Awards are granted under this Plan, and the number of Shares or other security subject to each such Award, shall be determined by the Committee in its sole discretion, subject, however, to the terms and conditions of this Plan. Persons to whom Awards may be granted include key employees, consultants and Directors who are also Trust Managers. No Award may be granted to an Independent Trust Manager other than in accordance with Section 6(b)(5).
5. Shares Subject to Grants Under this Plan.
(a) Limitation on Number of Shares. The Shares subject to grants of Awards shall be authorized but unissued Shares, Shares purchased in the open market or privately and such Shares, if any, held as "treasury stock" by the Company. Subject to adjustment as hereinafter provided, the aggregate number of Shares as which Awards may be granted under this Plan shall not exceed 10% of the Outstanding Shares. Subject to adjustment as hereinafter provided, the aggregate number of Shares as which Awards may be granted to a participant during a calendar year under this Plan shall not exceed 1,000,000 Shares.
(b) Shares ceasing to be subject to an Award because of the exercise of an Option or Right or the vesting of an Award shall no longer be subject to any further grant under this Plan. However, if any outstanding Option or Right, in whole or in part, expires or terminates unexercised or is canceled or if any Award, in whole or in part, expires or is terminated or forfeited, for any reason prior to February 5, 2012, the Shares allocable to the unexercised, terminated, canceled or forfeited portion of such Award may again be made the subject of grants under this Plan; provided, however, that, with respect to any Option or Rights granted to any Participant who is a "covered person" as defined in Code Section 162(m) and the regulations promulgated thereunder that is canceled, the number of Shares subject to such Option and/or Rights shall continue to count against the maximum number of Shares which may be the subject of Options and for Rights granted to such Participant.
For the purposes of computing the total number of Shares granted under this Plan, the following rules shall apply to Awards payable in Shares or other securities, where appropriate:
| (1) except as provided in clause (5) below, each Option shall be deemed to be the equivalent of the maximum number of Shares that may be issued upon exercise of the particular Option; |
| (2) except as provided in clause (5) below, each other Share-based Award payable in some other security shall be deemed to be equal to the number of Shares to which it relates; |
| (3) except as provided in clause (5) below, where the number of Shares available under the Award is variable on the date it is granted, the number of Shares shall be deemed to be the maximum number of Shares that could be received under that particular Award; |
| (4) where Alternative Rights are granted in connection with an Option, only the number of Shares subject to the Option shall be counted, and any Shares as to which such Option is canceled due to the exercise of such Alternative Rights shall not again be available for further grants under this Plan; and |
| (5) each Share awarded or deemed to be awarded under the preceding subsections shall be treated as Shares, even if the Award is for a security other than Shares. |
(c) Adjustments of Aggregate Number of Shares. The aggregate number of Shares stated in Section 5(a) shall be subject to appropriate adjustment, from time to time, in accordance with the provisions of Section 7 hereof.
6. Awards.
(a) Options and Rights.
| (1) Grants of Options. Options granted under this Plan may be either ISOs or NQOs. At the time an Option is granted, the Committee may, in its discretion, designate whether an Option shall be an ISO. No Option which is intended to qualify as an ISO shall be granted under this Plan to any individual who, at the time of such grant, is not an employee of the Company or an Affiliate. |
| Notwithstanding any other provision of this Plan to the contrary, to the extent that the aggregate Fair Market Value (determined at the date an Option is granted) of the Shares with respect to which an Option intended to be an ISO (and any other ISO granted to the holder under this Plan or any other plans of the Company or an Affiliate) first becomes exercisable during any calendar year exceeds $100,000, the portion of such Option which would exceed the $100,000 limitation shall be treated as an NQO. Options with respect to which no designation is made by the Committee shall be deemed to be ISOs to the extent that the $100,000 limitation described in the preceding sentence is met. This paragraph shall be applied by taking Options into account in the order in which they are granted. |
| No ISO shall be granted to any person who, at the time of the grant, owns Shares possessing more than 10% of the total combined voting power of the Company or any Affiliate, unless (i) on the date such ISO is granted, the Option price is at least 110% of the Fair Market Value per Share subject to the ISO and (ii) such ISO by its terms is not exercisable after the expiration of five years from the date such ISO is granted. |
| The purchase price per Share pursuant to the exercise of any Option shall be fixed by the Committee at the time of grant; provided, however, that the purchase price per Share (regardless of whether such Option is an ISO or an NQO) shall not be less than the Fair Market Value of a Share on the date on which the Option is granted. In addition, the Committee shall designate the number of Shares, the terms and conditions (which may include, without limitation, the achievement of specific goals), with respect to Options granted under this Plan. Options may be granted by the Committee to any eligible person at any time and from time to time. |
| The form of Option shall be as determined from time to time by the Committee. A certificate of Option signed by the Chairman of the Board or the President or Vice President and attested by the Treasurer or an Assistant Treasurer or Secretary or an Assistant Secretary of the Company shall be delivered to each person to whom Options are granted. |
| (2) Grants of Rights. The Committee shall have the authority in its discretion to grant to any eligible person Rights, which may be granted separately or in connection with an Option (either at the time of grant or, with respect to an NQO, at any time during the term of the Option). Rights granted in connection with an Option shall be granted with respect to the same number of Shares then covered by the Option and may be exercised, as determined by the Committee in its discretion at the time of the grant of the Rights, either in conjunction with, or as an alternative to, the exercise of the related Option; provided, however, that Rights granted in connection with an ISO can only be exercised as alternative to the exercise of the ISO. |
|
Rights granted in connection with an Option that entitle the holder thereof to
receive payment from the Company only if and to the extent that the related
Option is exercisable and is exercised are referred to herein as "Conjunctive
Rights." Upon any exercise of an Option in respect of which Conjunctive Rights
shall have been granted, the holder of the Conjunctive Rights shall be entitled
to receive payment of an amount equal to the product obtained by multiplying (i)
the Spread, or such percentage or portion of the Spread as shall be determined
by the Committee at the time of grant, by (ii) the number of Shares in respect
of which the related Option shall have then been so exercised. Notwithstanding
any provision of this Plan to the contrary, Conjunctive Rights may not be
granted in relationship to an ISO.
Rights granted in connection with an Option that entitle the holder thereof to receive payment from the Company only if, and to the extent that, the related Option is exercisable, by surrendering the Option with respect to the number of Shares as to which such Rights are then exercised are referred to herein as "Alternative Rights." Notwithstanding the preceding sentence, any Alternative Rights that relate to an ISO may be exercised only at such times that there is a positive Spread. Upon any exercise of Alternative Rights, the holder thereof shall be entitled to receive payment of an amount-equal to the-product obtained by multiplying (i) the Spread, or such percentage or portion of the Spread as shall be determined by the Committee at the time of grant, by (ii) the number of Shares in respect of which the Alternative Rights shall have then been so exercised. Rights granted without relationship to an Option shall be exercisable at such rate as determined by the Committee. Such Rights shall entitle the holder, upon the exercise thereof, to receive payment from the Company of an amount equal to the product obtained by multiplying (i) the Spread, or such percentage or portion of the Spread as shall be determined by the Committee at the time of grant, by (ii) the number of Shares in respect of which the Rights shall have then been so exercised. Notwithstanding anything contained herein, the Committee may, in its sole discretion, limit the amount payable upon the exercise of Rights. Any such limitation shall be determined as of the date of grant and noted on the certificate evidencing the grant of the Rights. Payment of the amount determined hereunder upon the exercise of any Rights shall be made solely in cash, or solely in Shares valued at their Fair Market Value on the date of exercise of the Rights, or in a combination thereof, as the holder may elect, provided that any election by the holder shall be subject to approval by the Committee. No fractional Shares shall be issued by the Company, and settlement therefor shall be made in cash. Notwithstanding any other provision of this Plan or of the Rights, for purposes of determining the amount of the Spread in the case of a holder of Rights who is an Insider, the Committee, in its sole discretion, may designate a single Fair Market Value per Share with respect to all such holders who exercise Rights during any single ten-day period; provided, however, that the Fair Market Value per Share designated by the Committee during any such period shall in no event be greater than the highest Fair Market Value per Share on any day during such period or less than the lowest Fair Market Value per Share on any day during such period. The form of Rights shall be as determined from time to time by the Committee. A certificate of Rights signed by the Chairman of the Board or the President or a Vice President and attested by the Treasurer or an Assistant Treasurer, or Secretary or an Assistant Secretary, of the Company shall be delivered to each person to whom Rights are granted. The Committee may fix such waiting periods, exercise dates or other limitations as it shall deem appropriate with respect to Rights granted under this Plan, including, without limitation, the achievement of specific goals; provided, however, that each Right granted hereunder shall be exercisable only upon consent of the Committee. |
| (3) Payment of Option Exercise Price. Upon exercise of an Option, the full Option purchase price for the Shares with respect to which the Option is being exercised shall be payable to the Company, (i) in cash or by a check payable and acceptable to the Company or (ii) subject to the approval of the Committee, by tendering to the Company Shares owned by the holder for at least six months having an aggregate Fair Market Value per Share as of the date of exercise and tender which is not greater than the full Option purchase price for the Shares with respect to which the Option is being exercised and by paying the remainder of the Option purchase price as provided in (i) above; however, the Committee may, upon confirming that the holder owns the number of additional Shares being tendered, authorize the issuance of a new certificate for the number of Shares being acquired pursuant to the exercise of the Option less the number of Shares being tendered upon the exercise and return to the holder (or not require surrender of) the certificate for the Shares being tendered upon the exercise. Notwithstanding the preceding, a holder may not use any Shares acquired pursuant to an Award granted under this Plan (or any other plan maintained by the Company or any Affiliate) unless the holder has beneficially owned such Shares for at least six months. Payment instruments will be received subject to collection. In addition to the foregoing methods of payment, the full Option purchase price for Shares with respect to which the Option is being exercised may be payable to the Company by such other methods as the Committee may permit from time to time. |
| (4) Term. The term of each Option and Right shall be determined by the Committee at the date of grant; provided, however, that each Option that is an ISO shall, notwithstanding anything in this Plan to the contrary, expire not more than ten years from the date the Option is granted (or five years from the date of grant to the extent required under Section 6(a)(1)) or, if earlier, the date specified in the certificate evidencing the grant of such Option. An Option that is an NQO shall expire not more than ten years from the date the Option is granted, or if earlier, the date specified in the certificate evidencing the grant of such Option. A Right not granted in connection with an Option shall expire not more than ten years from the date the Right is granted or, if earlier, the date specified in the certificate evidencing the grant of the Right. |
|
(5) Termination of Employment or
Relationship. In the event that a Participant's employment or relationship with
the Company and its Affiliates shall terminate, for reasons other than (i)
retirement pursuant to a retirement plan or policy of the Company or one of its
Affiliates ("retirement"), (ii) permanent disability as determined by the
Committee based on the opinion of a physician selected or approved by the
Committee ("permanent disability") or (iii) death, the Participant's Options and
Rights shall be exercisable by him or her, subject to subsection (4) above, only
within 90 business days after such termination, but only to the extent the
Option or Right was exercisable immediately prior to such
termination.
If a Participant shall retire, become permanently disabled or die while entitled to exercise an Option or Rights, the Participant or, if applicable, the Participant's estate, personal representative or beneficiary, as the case may be, shall have the right, subject to the provisions of subsection (4) above, to exercise the Option or Rights at any time within one year from the date of the Participant's retirement, permanent disability or death. Whether any termination is due to retirement or permanent disability, and whether an authorized leave of absence on military or government service or for other reasons shall constitute a termination for the purpose of this Plan, shall be determined by the Committee. If the employment, consulting arrangement or service of any Participant with the Company or an Affiliate shall be terminated because of the Participant's violation of the duties of such employment, consulting arrangement or service with the Company or an Affiliate as he or she may from time to time have, the existence of which violation shall be determined by the Committee in its sole discretion (which determination by the Committee shall be conclusive), all unexercised Options and Rights of such Participant shall terminate immediately upon such termination of such Participant's employment, consulting arrangement or service with the Company and all Affiliates, and a Participant whose employment, consulting arrangement or service with the Company and Affiliates is so terminated, shall have no right after such termination to exercise any unexercised Option or Rights he or she might have exercised prior to termination of his or her employment, consulting arrangement or service with the Company and Affiliates. |
| (6) Options Granted by Other Corporations. Options may be granted under this Plan from time to time in substitution for stock options held by employees and directors of corporations who become key employees or Trust Managers or directors of the Company or of any Affiliate as a result of any "corporate transaction" as defined in the Treasury Regulations promulgated under Code Section 424. |
| (7) Reload Options. An Option may, in the discretion of the Committee, include a reload option right which shall entitle the holder, upon (i) the exercise of such original Option prior to the holder's termination of employment, and (ii) payment of the appropriate exercise price in Mature Shares (the "Reload Option") to purchase, at the Fair Market Value per Share on the date of exercise of the original Option, the number of Shares equal to the number of whole Shares delivered by the holder in the payment of the exercise price of the original Option. The Reload Options shall be subject to the same terms and conditions as the original Options, provided, however, that they shall be fully-vested on the date of issuance. The exercise period for the Reload Options shall be the same as was applicable under the surrendered Options. |
| (8) Issuance of Restricted Shares. Notwithstanding the preceding subsections, upon exercise of an Option granted under the Plan, the Committee may, in its sole discretion and without the requirement of consent from the Participant, settle the Option by issuing Restricted Shares to the Participant. The restricted period under such Restricted Shares shall be no greater than five years. |
(b) Restricted Share Awards.
| (1) Awards of Restricted Shares. Restricted Share Awards may be awarded by the Committee to any individual eligible to receive the same, at any time and from time to time before February 5, 2012. In addition, and without limiting the generality of the foregoing, the Committee shall grant to any individual who is entitled to receive a bonus under the Company's cash bonus incentive plan, a Restricted Share Award with respect to Shares having a Fair Market Value on the date of the grant of such Restricted Share Award equal to a specified percentage determined by the Committee of the amount of such individual's bonus, provided that such individual has made an irrevocable election, at least six months prior to the date of the grant of such Restricted Share Award, to receive such Restricted Share Award in lieu of such bonus. |
| (2) Purchase Price under Restricted Share Awards. The purchase price of Restricted Shares to be purchased pursuant to a Restricted Share Award shall be fixed by the Committee at the time of the grant of the Restricted Share Award; provided, however, that such purchase price shall not be less than the par value per Share of the Shares subject to the Restricted Share Award. The Committee shall specify, within its discretion, the time and manner in which payment of such purchase price shall be paid. |
| (3) Description of Restricted Shares. All Restricted Shares purchased by an eligible person shall be subject to the following conditions: |
| (i) Restricted Shares shall be subject to such restrictions, terms and conditions as the Committee may establish, which may include, without limitation, "lapse" and "non-lapse" restrictions (as such terms are defined in regulations promulgated under Code Section 83) and the achievement of specific goals; |
| (ii) the Restricted Shares may not be sold, exchanged, pledged, transferred, assigned or otherwise encumbered or disposed of until the terms and conditions set by the Committee at the time of the grant of the Restricted Share Award have been satisfied; |
| (iii) each certificate representing Restricted Shares issued pursuant to this Plan shall bear a legend making appropriate reference to the following: |
|
"the Shares represented by this certificate have been issued pursuant to the
terms of the 2002 Share Incentive Plan of Camden Property Trust and may not be
sold, pledged, transferred, assigned or otherwise encumbered in any manner
except as is set forth in the terms of such award dated "
; and |
| (iv) except as set forth in Sections 6(a)(8) and 8, no Restricted Shares granted pursuant to this Plan shall be subject to vesting requirements over a period of less than three years. |
| If a certificate representing Restricted Shares is issued to an individual (whether or not escrowed as provided below), the individual shall be the record owner of such Shares and shall have all the rights of a shareholder with respect to such Shares (unless the Restricted Share Award specifically provides otherwise), including the right to vote and the right to receive dividends or other dividends made or paid with respect to such Shares. |
| In order to enforce the restrictions, terms and conditions that may be applicable to a Participant's Restricted Shares, the Committee may require the Participant, upon the receipt of a certificate or certificates representing such Shares, or at any time thereafter, to deposit such certificate or certificates, together with stock powers and other instruments of transfer, appropriately endorsed in blank, with the Company or an escrow agent designated by the Company under an escrow agreement, which may be a part of a Restricted Share Award, in such form as shall be determined by the Committee. |
| After the satisfaction of the terms and conditions set by the Committee with respect to Restricted Shares issued to an individual, and provided the Restricted Shares are not subject to a non-lapse restriction, a new certificate, without the legend set forth above, for the number of Shares that are no longer subject to such restrictions, terms and conditions shall be delivered to the individual. If such terms and conditions are satisfied as to a portion, but fewer than all, of such Shares, the remaining Shares issued with respect to such Award shall either be reacquired by the Company or, if appropriate under the terms of the award applicable to such Shares, shall continue to be subject to the restrictions, terms and conditions set by the Committee at the time of Award. |
| (4) Termination of Employment or Relationship. If the employment or relationship with the Company and its Affiliates of a holder of a Restricted Share Award is terminated for any reason before satisfaction of the terms and conditions for the vesting (within the meaning of Code Section 83) of all Shares subject to the Restricted Share Award, the number of Restricted Shares not theretofore vested shall be reacquired by the Company and forfeited, and the purchase price paid for such forfeited Shares by the holder shall be returned to the holder. If Restricted Shares issued shall be reacquired by the Company and forfeited as provided above, the individual, or in the event of his or her death, his or her personal representative, shall forthwith deliver to the Secretary of the Company the certificates representing such Shares, accompanied by such instrument of transfer, if any, as may reasonably be required by the Company. |
|
(5) Restricted Share Awards to Independent
Trust Managers. Each Independent Trust Manager shall be granted a Restricted
Share Award of 2,000 Restricted Shares on or her Election Date and a Restricted
Share Award of 2,000 Restricted Shares on May 1 of each succeeding year that the
individual remains an Independent Trust Manager. To the extent the Board shall
appoint a "Managing Independent Trust Manager," such person shall additionally
be granted on the date of appointment and on May 1 of the succeeding year a
Restricted Share Award of 2,000 Restricted Shares. In addition, on each May 1 of
each succeeding year that the individual remains Managing Independent Trust
Manager, the Managing Independent Trust Manager will receive a Restricted Share
Award of 1,000 Restricted Shares. The Restricted Shares granted under this
Section 6(b)(5) shall vest at the rate of 20% May 1 of each of the five years
succeeding the date of grant. Notwithstanding the preceding sentences, all or
any part of any Restricted Shares granted pursuant to this Section 6(b)(5) shall
immediately vest (but in no event during the six-month period commencing on the
date of grant) in the event of the holder's retirement from the Company and all
Affiliates on or after his or her 65th birthday, the holder's permanent
disability (within the meaning of Code Section 22(e)(3)), or the holder's death.
All or any part of any Restricted Shares granted pursuant to this Section
6(b)(5) also shall vest (but in no event during the six-month period commencing
on the date of grant) upon the occurrence of a Change in Control while the
holder is serving as a Trust Manager. Any Restricted Shares granted pursuant to
this Section 6(b)(5), to the extent unvested, shall terminate immediately upon
the holder's ceasing to serve as a Trust Manager (for any reason other than
retirement, permanent disability or death as described above).
No grants of Restricted Shares or any other grants under this Plan may be made to an Independent Trust Manager except in accordance with this Section 6(b)(5). Notwithstanding any other provision of this Plan to the contrary, the provisions of this Section 6(b)(5) shall not be amended more than once every six months, other than to comport with changes in the Code, the Employee Retirement Income Security Act of 1974, as amended, or the rules or regulations promulgated thereunder. |
(c) Performance Units and Performance Share Awards.
| (1) Awards. Awards may be granted in the form of performance units ("Performance Units") or performance share awards ("Performance Share Awards"). Performance Units are units valued by reference to designated criteria established by the Committee, other than Shares. Performance Share Awards are Shares expressed in terms of, or valued by reference to, a Share. Awards of Performance Units and Performance Share Awards shall refer to a commitment by the Company to make a distribution to the Participant or to his or her beneficiary depending on (i) the attainment of the performance objectives and other conditions established by the Committee and (ii) the base value of the Performance Unit or Performance Share Award, respectively, as established by the Committee. |
| (2) Settlement. Settlement of Performance Units and Performance Share Awards may, in the sole discretion of the Committee, be in cash, in Shares (held for at least six months), or a combination thereof. The Committee may designate a method of converting Performance Units into Shares, including but not limited to a method based on the Fair Market Value over a series of consecutive trading days. Prior to the settlement of any Performance Unit or Performance Share Award in Shares, the recipient of such Award shall pay to the Company an amount of cash equal to, at a minimum, the par value per Share multiplied by the number of Shares to be issued. |
| (3) No Rights as a Shareholder. Participants shall not be entitled to exercise any voting rights or to receive any interest or dividends with respect to Performance Units or Performance Share Awards. |
(d) Limited Rights. The Committee shall have the power to grant limited rights ("Limited Rights"), which shall be a part of an Award. Limited Rights shall provide for the automatic cash payment to the holder of the Award equal to the Spread (or other determination of the value of the Award as fixed by the Committee) upon the occurrence of a Change in Control on the dated fixed by the Committee at the time of the grant of such Limited Right. Limited Rights may provide that Committee approval is not required for the exercise of such Limited Right.
(e) Dividends and Dividend Equivalents. An Award (including without limitation an Option Award) may provide the Participant with the right to receive dividend payments or dividend equivalent payments with respect to Shares subject to the Award (both before and after the Shares subject to the Award are earned, vested or acquired), which payments may be either made currently or credited to an account for the Participant, and may be settled in cash or Shares as determined by the Committee. Any such settlements, and any such crediting of dividends or dividend equivalents or reinvestment in Shares, may be subject to such conditions, restrictions and contingencies as the Committee shall establish.
(f) Incentive Exchange Rights.
| (1) Cashless Exercise Right. Automatically upon vesting of 20,000 or more Options, the Participant holding such vested Options shall have the right (the "Incentive Exchange Right") to exercise (at any time during the time period the Options are exercisable) some or all of his or her vested Options by paying the exercise price with Mature Shares. Upon the exercise of Options through an Incentive Exchange Right, the Participant shall (i) be deemed to have exchanged the Mature Shares for replacement Shares from the Company (without the requirement of tendering the Mature Shares to the Company), and (ii) receive a number of additional Shares from the Company equal to the total number of Shares covered by the Options minus the number of Mature Shares used to pay the exercise price for the Options (the "Incentive Payment Shares"). Notwithstanding the preceding clause (i), the Company may direct that the Participant transfer his or her Mature Shares to the Company and issue replacement Shares for the Mature Shares. Upon request, the Participant shall provide to the Company proof that he or she holds title to the Mature Shares. |
| (2) Grant of Restricted Shares. Upon the exercise of an Incentive Exchange Right, the Participant shall be eligible to receive a grant of Restricted Shares by depositing 25% of the Incentive Payment Shares (the "Deposit Shares") with the Company. Upon receipt of the Deposit Shares, the Company shall grant to the Participant a number of Restricted Shares in an amount equal to 32.5% of the Incentive Payment Shares, 19.25% of which shall be designated as "Bonus Shares," and 80.75% of which shall be designated as "Additional Bonus Shares." The restrictions on the Bonus Shares shall lapse as follows: |
|
Years of Service
Year One Year Two Year Three |
Restriction Percentage
10% 10% 80% |
| The Deposit Shares shall be held by the Company until the restrictions applicable to the Bonus Shares have lapsed in full; provided, however, that the Participant may elect at any time (upon delivery of written notice to the Company) to withdraw the Deposit Shares from the custody of the Company. If the Participant elects to withdraw the Deposit Shares prior to the date that the restrictions applicable to some or all of the Bonus Shares have lapsed, the portion of the Bonus Shares which continue to be subject to the restrictions shall be forfeited to the Company. The restrictions on the Additional Bonus Shares shall lapse as follows: |
|
Years of Service
Year One Year Two Year Three Year Four Year Five |
Restriction Percentage
10% 10% 10% 10% 60% |
| If the Participant terminates employment with the Company (or an Affiliate) prior to the completion of the foregoing restriction periods, the Company shall, as soon as administratively feasible, issue to such Participant the Deposit Shares and such Participant shall forfeit the portion of the Bonus Shares and Additional Bonus Shares which are subject to the restrictions at that time. Bonus Shares, Additional Bonus Shares and any Deposit Shares held by the Company for the Participant shall have the same rights with respect to voting and dividends as Restricted Shares awarded under this Plan. |
| (3) Reload Grant. Upon exercise of the Incentive Exchange Right, the number of Options as to which such the right was exercised shall be "reloaded" and reissued to the Participant who exercised the Incentive Exchange Right, such Options to represent the right to purchase a number of Shares equal to the number of Options exercised less the number of Incentive Payment Shares. Upon being reloaded, each Reload Option shall again represent the right to purchase a Share at an exercise price equal to the Fair Market Value of the Share on the date of the notice of exercise of the Incentive Exchange Right. The reloaded Options shall be fully-vested on the date of issuance and the exercise period shall be the same as was applicable under the surrendered Options. |
| (4) Limitations. Notwithstanding anything herein to the contrary, the following limitations shall apply to grants under this Section 6(f): |
| (i) the maximum Fair Market Value of the Restricted Shares that may be granted by the Company under this Section 6(f) in any calendar year is $1,000,000 per person; |
| (ii) the maximum number of Restricted Shares that any officer, Trust Manager or holder of more than 5% of the Outstanding Shares may receive under this Section 6(f) is limited to an amount equal to 1% of the Outstanding Shares; and |
| (iii) the maximum number of Restricted Shares that may be issued under this Section 6(f) is limited to an amount equal to 5% of the Outstanding Shares. |
| If a Participant gives notice of his or her intention to exercise his or her Incentive Exchange Right and the Company has already paid its maximum amount of Incentive Payments under clauses (ii) or (iii) above, the election under this Section 6(f) shall be automatically revoked. |
(g) Consideration for Awards. Subject to the requirements of the Texas Act, the Company shall obtain such consideration for the grant of an Award under this Section 6 as the Committee in its discretion may determine.
7. Adjustment Provisions.
If, prior to the complete exercise of any Option, or prior to the expiration or lapse of all of the restrictions and conditions imposed pursuant to a Restricted Share Award, there shall be declared and paid a dividend upon the Shares or if the Shares shall be split up, converted, exchanged, reclassified or in any way substituted for, then (i) in the case of an Option, the Option, to the extent that it has not been exercised, shall entitle the holder thereof upon the future exercise of the Option to such number and kind of securities or cash or other property subject to the terms of the Option to which he or she would have been entitled had he or she actually owned the Shares subject to the unexercised portion of the Option at the time of the occurrence of such dividend, split-up, conversion, exchange, reclassification or substitution, and the aggregate purchase price upon the future exercise of the Option shall be the same as if the originally optioned Shares were being purchased thereunder; and (ii) in the case of Restricted Shares issued pursuant to a Restricted Share Award, the holder of such Award shall receive, subject to the same restrictions and other conditions of such Award as determined pursuant to the provisions of Section 6(b), the same securities or other property as are received by the holders of Shares pursuant to such dividend, split-up, conversion, exchange, reclassification or substitution. Any fractional Shares or securities payable upon the exercise of the Option as a result of such adjustment shall be payable in cash based upon the Fair Market Value of such Shares or securities at the time of such exercise. If any such event should occur, the number of Shares with respect to which Awards remain to be issued, or with respect to which Awards may be reissued, shall be adjusted in a similar manner.
In addition to the adjustments provided for in the preceding paragraph, upon the occurrence of any of the events referred to in said paragraph prior to the complete exercise of any Rights or Limited Rights, or prior to the complete expiration of the vesting period with respect to Performance Units or a Performance Share Award, the Committee, in its sole discretion, shall determine the amount of cash and/or number of Shares or other property to which the holder of the Rights shall be entitled upon their exercise, or to which the holder of the Performance Units or Performance Share Award shall be entitled upon the expiration of the vesting period, so that there shall be no increase or dilution in the cash and/or value of the Shares or other property to which the holder of Rights or of Performance Units or a Performance Share Award shall be entitled by reason of such events.
Notwithstanding any other provision of this Plan, in the event of a recapitalization, merger, consolidation, rights offering, separation, reorganization or liquidation, or any other change in the corporate structure or outstanding Shares, the Committee may make such equitable adjustments to the number of Shares and the class of shares available hereunder or to any outstanding Awards as it shall deem appropriate to prevent dilution or enlargement of rights.
8. Acceleration.
Notwithstanding any other provision of this Plan to the contrary, all or any part of any remaining unexercised Options and Rights granted to any person may be exercised in the following circumstances (but in no event during the six month period commencing on the date granted) and all or any part of any other Award not theretofore vested shall vest: (i) with respect to Options or Rights only, immediately upon (but prior to the expiration of the term of the Option or Rights) retirement, (ii) subject to the provisions of Section 6, upon the permanent disability or death of the holder, (iii) upon the occurrence of such special circumstance or event as in the opinion of the Committee merits special consideration or (iv) upon a Change in Control, in which case the date on which such immediate exercisability and accelerated vesting shall occur shall be the date of the occurrence of the Change in Control.
9. Participant's Agreement.
If, at the time of the exercise of any Option or Right or the granting or vesting of an Award, in the opinion of counsel for the Company, it is necessary or desirable, in order to comply with any then applicable laws or regulations relating to the sale of securities, that the individual exercising the Option or Right or receiving the Award shall agree to hold any Shares issued to the individual for investment and without any present intention to resell or distribute the same and that the individual will dispose of such Shares only in compliance with such laws and regulations, the individual will, upon the request of the Company, execute and deliver to the Company a further agreement to such effect.
10. Withholding Taxes.
No Award may be exercised and no distribution of Shares or cash pursuant to an Award may be made under this Plan until appropriate arrangements have been made by the holder with the Company for the payment of any amounts that the Company may be required to withhold with respect thereto, which arrangements may include the tender of previously owned Shares or the withholding of Shares issuable pursuant to such Award.
11. Termination of Authority to Make Grant.
No Awards will be granted pursuant to this Plan after February 5, 2012.
12. Amendment and Termination.
The Board may from time to time and at any time alter, amend, suspend, discontinue or terminate this Plan or, with the consent of an affected holder, any outstanding Awards hereunder, provided, however, that no such action of the Board may, without the approval of the shareholders of the Company, alter the provisions of this Plan or outstanding Awards so as to (i) increase the maximum number of Shares which may be subject to Awards under this Plan (except as provided in Section 5(b)); or (ii) change the class of persons eligible to receive Awards; or (iii) amend this Plan in any manner that would require shareholder approval under Rule 16b-3 of the Exchange Act or under Code Section 162(m); or (iv) reduce the purchase price on an outstanding Option.
13. Preemption by Applicable Laws and Regulations.
Notwithstanding anything in this Plan to the contrary, if, at any time specified herein for the making of any determination or payment, or the issuance or other distribution of Shares, any law, regulation or requirement of any governmental authority having jurisdiction in the premises shall require either the Company or the Participant (or the Participant's beneficiary), as the case may be, to take any action in connection with any such determination, payment, issuance or distribution, the issuance or distribution of such Shares or the making of such determination or payment, as the case may be, shall be deferred until such action shall have been taken.
14. Miscellaneous.
(a) No Employment Contract. Nothing contained in this Plan shall be construed as conferring upon any Participant the right to continue in the employ, or as a Trust Manager or Director of or consultant to, of the Company or any Affiliate.
(b) Employment or Service with Affiliates. Employment by, or service for, the Company for the purpose of this Plan shall be deemed to include employment by, or service for, any Affiliate.
(c) No Rights as a Shareholder. A Participant shall have no rights as a shareholder with respect to Shares covered by the Participant's Award until the date of the issuance of such Shares to the Participant pursuant thereto. No adjustment will be made for dividends or other distributions or rights for which the record date is prior to the date of such issuance.
(d) Nonassignability.
| (1) General. Neither a Participant nor a Participant's estate, personal representative or beneficiary shall have the power or right to sell, exchange, pledge, transfer, assign or otherwise encumber or dispose of such Participant's estate's, personal representative's or beneficiary's interest arising under this Plan nor shall such interest be subject to seizure for the payment of a Participant's or beneficiary's debts, judgments, alimony, or separate maintenance or be transferable by operation of the law in the event of a Participant's, estate's, personal representative's or beneficiary's bankruptcy or insolvency and to the extent any such interest arising under this Plan is awarded to a spouse pursuant to any divorce proceeding, such interest shall be deemed to be terminated and forfeited, notwithstanding any vesting provisions or other terms herein or in such Award. |
| (2) Transfers to Family Trusts. Notwithstanding the preceding or any other limitation on the transferability of Awards, the Committee may (in its sole discretion) permit a Participant to transfer an Award, or cause the Company to grant an Award that otherwise would be granted to a Participant, to a trust established for the benefit of one or more of the children, grandchildren or spouse of the Participant or pursuant to a qualified domestic relations order. Any Participant desiring to make a transfer pursuant to this subsection shall make application therefore in such manner and time specified by the Committee and shall comply with such other requirements as the Committee may require to assure compliance with all applicable securities laws. The Committee shall not give permission for such an issuance or transfer if it would give rise to short-swing liability under Section 16(b) or if it may not be made in compliance with all applicable federal, state and foreign securities laws. The granting of permission for such an issuance or transfer shall not obligate the Company to register the Shares to be issued under an Award under federal or state securities laws. |
(e) Application of Funds. The proceeds received by the Company from the sale of Shares pursuant to this Plan will be used for its general business purposes.
(f) Governing Law; Construction. All rights and obligations under this Plan shall be governed by, and this Plan shall be construed in accordance with, the laws of the State of Texas, without regard to the principles of conflicts of laws. Titles and headings to Sections herein are for purposes of reference only, and shall in no way limit, define or otherwise affect the meaning or interpretation of any provisions of this Plan.
1. Purpose. The purpose of the Camden Property Trust Short Term Incentive Plan (the "Plan") is to provide Executives of Camden Property Trust (the "Company") and its affiliates with incentive compensation based upon the level of achievement of financial and other performance criteria. The Plan will enhance the ability of the Company and its affiliates to attract individuals of exceptional managerial talent upon whom, in large measure, the sustained progress, growth and profitability of the Company depends.
2. Definitions. As used in the Plan, the following terms shall have the meanings set forth below:
(a) "Award" shall mean a cash payment.
(b) "Board" shall mean the Board of Trust Managers of the Company.
(c) "Change in Control" shall have the meaning set forth in the 2002 Share Incentive Plan of Camden Property Trust.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time and any successor thereto.
(e) "Committee" shall mean the Compensation Committee of the Board, which shall consist of two or more Trust Managers, each of whom shall be an "outside director" within the meaning of Code Section 162(m) and the regulations promulgated thereunder.
(f) "Covered Employee" shall mean a "covered employee" within the meaning of Code Section 162(m).
(g) "Disability" shall mean a disability as determined under the Company's long-term disability plan (as applicable to a Participant).
(h) "Executive" shall mean any manager of the Company or any affiliate holding a position at or above the vice president level or any salary grade level that the Committee determines, in its sole discretion, is the equivalent thereof.
(i) "FFO" shall mean the net income of the Company (computed in accordance with generally accepted accounting principles), excluding gains (or losses) from debt restructuring and sales of property, plus real estate depreciation and amortization, and after adjustments for unconsolidated partnerships and joint ventures.
(j) "Net Income" shall mean the net income of the Company as determined under generally accepted accounting principles, excluding (i) extraordinary items (net of applicable taxes); (ii) cumulative effects of changes in accounting principles; (iii) securities gains and losses (net of applicable taxes); and (iv) nonrecurring items (net of applicable taxes) including, but not limited to, gains or losses on asset dispositions and sales of divisions, business units or subsidiaries, restructuring charges, gains and losses from qualified benefit plan curtailments and settlements and income or expenses related to deferred tax assets.
(k) "Participant" shall mean any person selected by the Committee to participate in the Plan.
(l) "Person" shall mean any individual, corporation, partnership, association, joint-stock company, trust, unincorporated organization, or government or political subdivision thereof.
(m) "Plan Year" shall mean the Company's fiscal year.
(n) "Retirement" shall mean a termination of employment after the attainment of age 65.
(o) "Target Award" shall mean an Award level that may be paid if certain performance criteria are achieved in the Plan Year.
3. The Committee.
(a) The Plan shall be administered by the Committee. The Committee shall have full discretionary power to administer and interpret the Plan and to establish rules for its administration, subject to such resolutions, not inconsistent with the Plan, as may be adopted by the Board, except that the Committee (or any subcommittee thereof) shall have the exclusive authority to exercise any such power with respect to Awards to which Section 6 is applicable. In making any determinations under or referred to in the Plan, the Committee (and its delegates, if any) shall be entitled to rely on opinions, reports or statements of employees of the Company and its affiliates and of counsel, public accountants and other professional or expert persons.
(b) Except as limited by law or by the Company's organizational documents, and subject to the provisions herein, the Committee shall have full power to select the Executives who shall participate in the Plan; determine the size and types of Target Awards and Awards; determine the terms and conditions of Target Awards in a manner consistent with the Plan; construe and interpret the Plan and any agreement or instrument entered into under the Plan; establish, amend or waive rules and regulations for the Plan's administration; and (subject to the provisions of Section 6 herein) amend the terms and conditions of any outstanding Target Award to the extent such terms and conditions are within the discretion of the Committee as provided in the Plan. Further, the Committee shall make all other determinations which may be necessary or advisable for the administration of the Plan. As permitted by law, the Committee may delegate its authorities as identified hereunder.
(c) All determinations and decisions of the Committee as to any disputed question arising under the Plan, including questions of construction and interpretation, shall be final, binding and conclusive upon all parties.
(d) Each person who is or shall have been a member of the Committee, or of the Board, shall be indemnified and held harmless by the Company against and from any loss, cost, liability or expense that may be imposed upon or reasonably incurred by him or her in connection with or resulting from any claim, action, suit or proceeding to which he or she may be a party, or in which he or she may be involved by reason of any action taken or failure to act under the Plan, and against and from any and all amounts paid by him or her in settlement thereof, with the Company's approval, or paid by him or her in satisfaction of any judgment in any such action, suit or proceeding against him or her, provided he or she shall give the Company an opportunity, at its own expense, to handle and defend the same before he or she undertakes to handle and defend it on his or her own behalf. The foregoing right of indemnification shall not be exclusive of any other rights of indemnification to which such persons may be entitled under the Company's organizational documents, as a matter of law or otherwise or any power that the Company may have to indemnify them or hold them harmless.
4. Eligibility.
(a) Executives employed by the Company or any of its affiliates during a Plan Year in active employment are eligible to be Participants under the Plan for such Plan Year (whether or not so employed at the date an Award is made) and may be considered by the Committee for an Award. Participation in the Plan shall be determined by the Committee.
(b) Executives who are chosen to participate in any given Plan Year shall be so notified by the Committee in writing and shall be apprised of the performance measure(s), performance goal(s) and Target Award for the relevant Plan Year, as soon as is practicable.
(c) An Executive is not rendered ineligible to be a Participant by reason of being a member of the Board.
(d) An Executive who becomes eligible after the beginning of a Plan Year may participate in the Plan, and all Awards for such year will be paid pro rata based on the number of days such Executive participated in the Plan.
5. Awards.
(a) Prior to the beginning of each Plan Year, the Committee will establish (i) Target Awards for Participants and (ii) the performance criteria to be applicable to Awards for each Plan Year. The performance criteria utilized by the Committee may be based on individual performance, net cash provided by operating activities, earnings per share from continuing operations, FFO per share or per diluted share, operating income, revenues, gross margin, return on operating assets, return on equity, economic value added, share price appreciation, total shareholder return (measured in terms of share price appreciation and dividends, cost control, other financial objectives, tenant satisfaction indicators, operational efficiency measures and other measurable objectives tied to the Company's success or such other criteria as the Committee may determine.
(b) Once established, performance goals normally shall not be changed during the Plan Year. However, except as provided in Section 6 below, if the Committee determines that external changes or other unanticipated business conditions have materially affected the fairness of the goals, then the Committee may approve appropriate adjustments to the performance goals (either up or down) during the Plan Year, as such goals apply to the Target Award of specified Participants. In addition, the Committee shall have the authority to reduce or eliminate the Award determinations, based upon any objective or subjective criteria it deems appropriate. Notwithstanding any other provision of the Plan, in the event of any change in corporate capitalization, such as a share split, or a corporate transaction, such as any merger, consolidation, separation, including a spin-off, or other distribution of shares or property of the Company, any reorganization (whether or not such reorganization comes within the definition of such term in Code Section 368), or any partial or complete liquidation of the Company, such adjustment shall be made in the Target Award and/or the performance measures or performance goals related to then-current Plan Year, as may be determined to be appropriate and equitable by the Committee, in its sole discretion, to prevent dilution or enlargement of rights; provided, however, that subject to Section 6 below, no such adjustment shall be made if it would eliminate the ability of the Target Award held by Covered Employees to qualify for the "performance-based" exception under Code Section 162(m).
(c) Payment of Award amounts will be made by the Company at the direction of the Committee following the end of each Plan Year. Awards shall be paid as soon as practicable after the Plan Year. The Award amount with respect to a Participant shall be determined in the sole discretion of the Committee, or, in the case of an Award to a Participant who is not a Covered Employee, in the sole discretion of such person or committee empowered by the Committee or the Board.
(d) The determination of the Award amount for each Participant shall be made at the end of each Plan Year and may be less than (including no Award) or, subject to Section 6 in the case of a Participant who is a Covered Employee, greater than the Target Award.
(e) The Committee may establish guidelines governing the maximum amount of Awards that may be earned by Participants (either in the aggregate, by Participant class or among individual Participants) in each Plan Year. The guidelines may be expressed as a percentage of Company-wide goals or financial measures or such other measures as the Committee may from time to time determine.
(f) The Committee may establish minimum levels of performance goal achievement, below which no payouts of Awards shall be made to any Participant.
6. Awards To Covered Employees.
(a) The provisions of this Section 6 shall apply only to Covered Employees (and any other Executives described in subsection (b) below). In the event of any inconsistencies between this Section 6 and the other Plan provisions as they pertain to a Covered Employee, the provisions of this Section 6 shall control.
(b) If the Committee determines at the time a Target Award is established for a Participant that such Participant is, or may be as of the end of the tax year for which the Company would claim a tax deduction in connection with such Award, a Covered Employee, then the Committee may provide that this Section 6 is applicable to such Award under such terms as the Committee shall determine.
(c) If an Award is subject to this Section 6, then the payment of cash pursuant thereto shall be subject to the Company having a level of Net Income or FFO (as determined by the Committee) for the applicable Plan Year set by the Committee within the time prescribed by Code Section 162(m) or the regulations thereunder in order for the level to be considered "pre-established." The Committee may, in its discretion, reduce the amount of such an Award at any time prior to payment based on such criteria as it shall determine, including but not limited to individual merit and the attainment of specified levels of one or any combination of the following: net cash provided by operating activities, earnings per share from continuing operations, FFO per diluted share, operating income, revenues, gross margin, return on operating assets, return on equity, economic value added, share price appreciation, total shareholder return (measured in terms of share price appreciation and dividend growth) or cost control, of the Company or the affiliate or division of the Company for or within which the Participant is primarily employed.
(d) Notwithstanding any contrary provision of this Plan, the Committee may not adjust upwards the amount payable pursuant to any Award subject to this Section 6, nor may it waive the achievement of the Net Income/FFO requirement contained in Section 6(c), except in the case of the death or disability of the Participant.
(e) Prior to the payment of any Award subject to this Section 6, the Committee shall certify in writing that the Net Income/FFO requirement applicable to such Award was met.
(f) The Committee shall have the power to impose such other restrictions on Awards subject to this Section 6 as it may deem necessary or appropriate to ensure that such Awards satisfy all requirements for "performance-based compensation" within the meaning of Code Section 162(m)(4)(C), the regulations promulgated thereunder and any successors thereto.
(g) Unless otherwise provided by an Award's terms, and unless a deferral election is made by a Participant pursuant to subsection (h) below, each Participant's Award shall be paid in cash, in one lump sum, within 45 calendar days after the end of each Plan Year.
(h) The Committee may permit (or require, if necessary, to preserve full deductibility under Code Section 162(m)) a Participant to defer such Participant's receipt of the payment of cash that would otherwise be due pursuant to his Award. If any such deferral election is required or permitted, the Committee shall, in its sole discretion, establish rules and procedures for such payment deferrals.
7. Termination of Employment.
(a) In the event a Participant's employment is terminated by reason of death, Disability or Retirement, the Award determined in accordance with Section 5 or Section 6, as applicable, shall be reduced to reflect participation prior to termination only. The reduced award shall be determined by multiplying said Award by a fraction, the numerator of which shall be the number of days of employment in the Plan Year through the date of employment termination, and the denominator of which shall be 365. In the case of a Participant's Disability, the employment termination shall be deemed to have occurred on the date that the Committee determines the definition of Disability to have been satisfied. The Award thus determined shall be paid within seventy-five (75) calendar days following the end of the Plan Year in which employment termination occurs.
(b) In the event a Participant's employment is terminated for any reason other than death, Disability or Retirement (of which the Committee shall be the sole judge), all of the Participant's rights to an Award for the Plan Year then in progress shall be forfeited. However, except in the event of an involuntary employment termination for Cause, the Committee, in its sole discretion, may pay a prorated award for the portion of the Plan Year that the Participant was employed by the Company, computed as determined by the Committee.
8. Limitations and Reservations.
(a) No person shall have any claim to an Award under the Plan and there is no obligation for uniformity of treatment of Participants under the Plan. Neither the Plan nor any action taken hereunder shall be construed as giving to any Participant the right to be retained in the employ of the Company or any affiliate.
(b) No Participant or any other party claiming an interest in amounts earned under the Plan shall have any interest whatsoever in any specific asset of the Company. To the extent that any party acquires a right to receive payments under the Plan, such right shall be equivalent to that of an unsecured general creditor of the Company.
(c) The Company or any affiliate shall have the right to deduct from any Award to be paid under the Plan any federal, state or local taxes required by law to be withheld with respect to such payment.
(d) Awards under the Plan will, to the extent provided therein, be included in base compensation or covered compensation under the retirement programs of the Company for purposes of determining pensions, retirement and death related benefits.
(e) Notwithstanding any contrary provision of the Plan, the maximum amount which may be paid to a Participant in any fiscal year is $5 million.
9. Rights of Participants.
(a) Nothing in the Plan shall interfere with or limit in any way the right of the Company to terminate any Participant's employment at any time, nor confer upon any Participant any right to continue in the employ of the Company.
(b) No right or interest of any Participant in the Plan may be alienated, assigned or otherwise transferred, or subject to any lien, directly, by operation of law or otherwise, including, but not limited to, execution, levy, garnishment, attachment, pledge and bankruptcy.
10. Change in Control. In the event of a Change in Control, each Participant shall be entitled to receive (a) the greater of (i) such Participant's Target Award for the then current Plan Year or (ii) the estimated actual performance as of the date of the Change in Control, projected to the end of such Plan Year, as determined by the Compensation Committee, multiplied by (b) the number of days within such Plan Year prior to the effective date of the Change in Control divided by 365. Such amount shall be paid in cash to each Participant within 30 days after the effective date of the Change in Control.
11. Designation Of Beneficiaries. A Participant may, if the Committee permits, designate a beneficiary or beneficiaries to receive all or part of the Award which may be made to the Participant, or may be payable, after such Participant's death. A designation of beneficiary shall be made in accordance with procedures specified by the Company and may be replaced by a new designation or may be revoked by the Participant at any time. In case of the Participant's death, an Award with respect to which a designation of beneficiary has been made (to the extent it is valid and enforceable under applicable law) shall be paid to the designated beneficiary or beneficiaries. Any Award granted or payable to a Participant who is deceased and not subject to such a designation shall be distributed to the Participant's estate. If there shall be any question as to the legal right of any beneficiary to receive an Award under the Plan, the amount in question may be paid to the estate of the Participant, in which event the Company or its affiliates shall have no further liability to anyone with respect to such amount.
12. General.
(a) The Board may modify or terminate the Plan at any time, effective at such date as the Board may determine. The Senior Vice President of Finance and Chief Financial Officer of the Company or his delegate (or any successor to such officer's responsibilities) shall be authorized to make minor or administrative changes in the Plan or changes required by or made desirable by law or government regulation. Such a modification may affect present and future Participants. For purposes of this Section, a change to the Plan that affects any Award to a Covered Employee shall not be a minor or administrative change.
(b) The Plan, and all agreements hereunder, shall be governed by the laws of the State of Texas and applicable Federal law.
(c) Except where otherwise indicated by the context, any masculine term used herein also shall include the feminine, the plural shall include the singular and the singular shall include the plural.
(d) In the event any provision of the Plan shall be held illegal or invalid for any reason, the illegality or invalidity shall not affect the remaining parts of the Plan, and the Plan shall be construed and enforced as if the illegal or invalid provision had not been included.
(e) All costs of implementing and administering the Plan shall be borne by the Company.
(f) All obligations of the Company under the Plan shall be binding upon and inure to the benefit of any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation or otherwise, of all or substantially all of the business and/or assets of the Company.
(g) The Plan shall become effective as of February 5, 2002 and shall terminate on February 5, 2012 or at such earlier date as may be determined by the Board in accordance with Section 9.