AGREEMENT AND PLAN OF MERGER
THIS AGREEMENT AND PLAN OF MERGER, dated as of January 16, 1998 (this
"Agreement"), is entered into by and among Crescent Real Estate Equities
Company, a Texas real estate investment trust ("Crescent") and Station
Casinos, Inc., a Nevada corporation (the "Company") (Crescent and the Company
being hereinafter collectively referred to as the "Constituent Entities").
WITNESSETH:
WHEREAS, Crescent and the Company contemplate the merger of the Company
with and into Crescent (the "Merger"), upon the terms and subject to the
conditions set forth herein, whereby each issued and outstanding share of
Common Stock, $.01 par value, of the Company ("Company Common Stock"), not
owned by Crescent, the Company or their respective wholly owned subsidiaries
will be converted into common shares of beneficial interest, par value $.01
per share, of Crescent ("Common Shares");
WHEREAS, the Board of Trust Managers of Crescent and the Board of
Directors of the Company each has determined that the Merger is in
furtherance of and consistent with their respective long-term business
strategies and is fair to and in the best interest of their respective
shareholders or stockholders, as the case may be; and
WHEREAS, the parties to this Agreement intend that the Merger shall be
treated as a nontaxable merger of the Company with and into Crescent;
NOW, THEREFORE, in consideration of the premises, representations,
warranties and agreements herein contained, the parties agree as follows.
ARTICLE I
THE MERGER
Section 1.1. THE MERGER. Upon the terms and subject to the conditions
hereof, and in accordance with the Nevada Revised Statutes chapters 78 and
92A, collectively known as the Nevada General Corporation Law, as amended
(the "NGCL") and Sections 23.10 through 23.60 of the Texas Real Estate
Investment Trust Act, as amended (the "REIT Act"), the Company shall be
merged with and into Crescent as of the Effective Time (as defined in Section
1.2). Following the Merger, the separate corporate existence of the Company
shall cease and Crescent shall continue as the surviving corporation (the
"Surviving Corporation") and shall succeed to and assume all the rights and
obligations of the Company in accordance with the NGCL and the REIT Act.
To facilitate the combination of the businesses of the Company and
Crescent, the parties to this Agreement will (i) reincorporate the Company in
any other state that would permit the merger of the Company with and into
Crescent and, at the request of either party
to this Agreement, each of the reincorporation of the Company and the merger
of the Company with and into Crescent will be authorized by separate vote of
the Company's stockholders with respect to each of such reincorporation and
the merger, or (ii) merge the Company with and into a wholly owned subsidiary
of Crescent.
Section 1.2 EFFECTIVE TIME. As soon as practicable after all of the
conditions set forth in Article VI have been satisfied or waived, but not
more than 30 days prior to the contemplated date of Closing (as hereinafter
defined) pursuant to Section 1.15, Articles of Merger (the "Articles of
Merger") shall be duly prepared and executed by Crescent and the Company and
delivered to the Secretary of State of the State of Nevada and the County
Clerk of Tarrant County, Texas, for filing. The Merger shall become
effective when the Articles of Merger, executed in accordance with the
relevant provisions of the NGCL and the REIT Act, are filed with the
Secretary of State of the State of Nevada and the County Clerk of Tarrant
County, Texas; provided, however, that, upon mutual consent of the
Constituent Entities, the Articles of Merger may provide for a later date of
effectiveness of the Merger not more than 30 days after the date the Articles
of Merger are filed. When used in this Agreement, the term "Effective Time"
shall mean the later of the date and time at which the Articles of Merger are
accepted for record in Nevada and in Texas or such later time established by
the Articles of Merger.
Section 1.3 EFFECTS OF THE MERGER. The Merger shall have the effects
set forth in Section 92A.250 of the NGCL and in Section 23.60 of the REIT Act.
Section 1.4 DECLARATION OF TRUST AND BYLAWS; TRUST MANAGERS.
(a) At the Effective Time, the Declaration of Trust of Crescent, as in
effect immediately prior to the Effective Time, shall be the Declaration of
Trust of the Surviving Entity until thereafter changed or amended as provided
therein or by applicable law. At the Effective Time, the Bylaws of Crescent,
as in effect immediately prior to the Effective Time, shall be the Bylaws of
the Surviving Entity until thereafter changed or amended as provided therein
or in the Declaration of Trust.
(b) The trust managers of Crescent at the Effective Time shall be the
trust managers of the Surviving Entity until the earlier of their resignation
or removal or until their respective successors are duly elected and
qualified, as the case may be.
(c) Crescent shall use all reasonable efforts to cause the Board of
Trust Managers of Crescent to be increased in size, effective at the
Effective Time, by two members, with such new members being Mr. Frank J.
Fertitta III and Mr. Lorenzo J. Fertitta.
Section 1.5 CONVERSION OF SECURITIES. As of the Effective Time, by
virtue of the Merger and without any action on the part of Crescent, the
Company or the holders of any securities of the Constituent Entities:
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(a) (i) Subject to the provisions of Sections 1.8 and 1.10
hereof, each share of Company Common Stock (including restricted shares
of Company Common Stock issued under the Company Plans (as defined
below)) issued and outstanding immediately prior to the Effective Time
(other than shares to be canceled in accordance with Section 1.5(d))
together with the associated Right shall as of the Effective Time be
converted into the right to receive the number of validly issued, fully
paid and nonassessable Common Shares equal to the Exchange Ratio (as
defined below). All such shares of Company Common Stock (and the
associated Rights), when so converted, shall no longer be outstanding
and shall automatically be canceled and retired and shall cease to exist
and each holder of a certificate representing any such shares (and the
associated Rights) shall cease to have any rights with respect thereto,
except the right to receive (A) any dividends and other distributions in
accordance with Section 1.7, (B) certificates representing the Common
Shares into which such shares (and the associated Rights) are converted
and (C) any cash, without interest, in lieu of fractional Common Shares
to be issued or paid in consideration therefor upon the surrender of
such Certificate in accordance with Sections 1.6 and 1.8.
(ii) The Exchange Ratio shall be .466.
(b) Subject to the provisions of Sections 1.8 and 1.10 hereof,
each share of the Company's $3.50 Convertible Preferred Stock (the
"Convertible Preferred Stock") issued and outstanding immediately prior
to the Effective Time shall as of the Effective Time be converted into
the right to receive one validly issued, fully paid and nonassessable
$3.50 Convertible Preferred Share of Crescent (the "Crescent Convertible
Preferred Shares") having the terms required in Section 7(h) of the
Certificate of Resolutions Establishing Designation, Preferences and
Rights of $3.50 Convertible Preferred Stock of the Company dated March
25, 1996 (the "Certificate of Designation"). All such shares of
Convertible Preferred Stock, when so converted into Crescent Convertible
Preferred Shares, shall no longer be outstanding and shall automatically
be canceled and retired and shall cease to exist and each holder of a
certificate representing any such shares of Convertible Preferred Stock
shall cease to have any rights with respect thereto, except the right to
receive (A) any dividends and other distributions in accordance with
Section 1.7 and (B) certificates representing the Crescent Convertible
Preferred Shares into which such shares of Convertible Preferred Stock
are converted to be issued in consideration therefor upon the surrender
of such Certificate in accordance with Section 1.6.
(c) Subject to the provisions of Sections 1.8 and 1.10 hereof,
each share of the Company's Redeemable Preferred Stock (as hereinafter
defined) issued and outstanding immediately prior to the Effective Time
shall as of the Effective Time be canceled and no cash, capital stock of
Crescent or other consideration shall be delivered in exchange therefor.
(d) All shares of Company Common Stock that are held in the
treasury of the Company and shares of Company Common Stock owned by
Crescent (together, in
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each case, with the associated Right (as defined in Section 3.2)) shall be
canceled and no cash, capital stock of Crescent or other consideration
shall be delivered in exchange therefor. All shares of Company Common
Stock that are held by any wholly owned Subsidiary (as defined in
Section 2.1) of the Company or Crescent (together, in each case, with
the associated Right (as defined in Section 3.2)) shall be converted
into validly issued, fully paid and nonassessable Common Shares, par
value $.01 per share, of the Surviving Entity.
Section 1.6 CRESCENT TO MAKE CERTIFICATES AVAILABLE.
(a) EXCHANGE OF CERTIFICATES. Crescent shall authorize BankBoston,
N.A. (or such other person or persons as shall be acceptable to Crescent and
the Company) to act as the Exchange Agent hereunder (the "Exchange Agent").
As soon as practicable after the Effective Time, Crescent shall deposit with
the Exchange Agent, in trust for the holders of shares of Company Common
Stock and Convertible Preferred Stock converted in the Merger, certificates
representing the Common Shares or Crescent Convertible Preferred Shares, as
the case may be, issuable in exchange for outstanding shares of Company
Common Stock or Convertible Preferred Stock, as the case may be, cash
required to make payments in lieu of any fractional shares pursuant to
Section 1.8 and cash or other property to pay or make any dividends or
distributions pursuant to Section 1.7 (such cash and Common Shares or
Crescent Convertible Preferred Shares, as the case may be, together with any
dividends or distributions with respect thereto, being hereinafter referred
to as the "Exchange Fund"). The Exchange Agent shall invest any cash
included in the Exchange Fund as directed by Crescent, on a daily basis. Any
interest or other income resulting from such investments shall be paid to
Crescent. The Exchange Agent shall deliver the Common Shares and the
Crescent Convertible Preferred Shares contemplated to be issued and cash or
other property distributable pursuant to Section 1.7 out of the Exchange Fund.
(b) EXCHANGE PROCEDURES. As soon as practicable after the Effective
Time, the Exchange Agent shall mail to each record holder of a certificate or
certificates that immediately prior to the Effective Time represented
outstanding shares of Company Common Stock or Convertible Preferred Stock, as
the case may be, converted in the Merger (the "Certificates"), a letter of
transmittal in form reasonably acceptable to the Company (which shall specify
that delivery shall be effected, and risk of loss and title to the
Certificates shall pass, only upon actual delivery of the Certificates to the
Exchange Agent, and shall contain instructions for use in effecting the
surrender of the Certificates in exchange for certificates representing
Common Shares or Crescent Convertible Preferred Shares, as the case may be,
and cash or other property distributable pursuant to Sections 1.7 and 1.8).
Upon surrender for cancellation to the Exchange Agent of a Certificate,
together with such letter of transmittal, duly executed, the holder of such
Certificate shall be entitled to receive in exchange therefor a certificate
representing that number of whole Common Shares or Crescent Convertible
Preferred Shares and cash into which the Company Common Stock (and the
associated Rights) or the Convertible Preferred Stock, as the case may be,
represented by the surrendered Certificate shall have been converted at the
Effective Time pursuant to this Article I, cash in lieu of any fractional
Common Shares in accordance with Section 1.8 and any dividends or other
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distributions in accordance with Section 1.7, and any Certificate so
surrendered shall forthwith be canceled.
Section 1.7 DIVIDENDS; TRANSFER TAXES; WITHHOLDING. No dividends
or other distributions that are declared on or after the Effective Time on
the Common Shares or Crescent Convertible Preferred Shares, as the case may
be, or are payable to the holders of record thereof on or after the Effective
Time, will be paid to any person entitled by reason of the Merger to receive
a certificate representing Common Shares or Crescent Convertible Preferred
Shares, as the case may be, until such person surrenders the related
Certificate or Certificates, as provided in Section 1.6, and no cash payment
pursuant to Section 1.8 will be paid to any such person until such person
shall so surrender the related Certificate or Certificates. Subject to the
effect of applicable law, there shall be paid to each record holder of a new
certificate representing such Common Shares or Crescent Convertible Preferred
Shares, as the case may be: (i) at the time of such surrender or as promptly
as practicable thereafter, the amount, if any, of any dividends or other
distributions theretofore paid with respect to the Common Shares or Crescent
Convertible Preferred Shares, as the case may be, represented by such new
certificate and having a record date on or after the Effective Time and a
payment date prior to such surrender; (ii) at the appropriate payment date or
as promptly as practicable thereafter, the amount, if any, of any dividends
or other distributions payable with respect to such Common Shares or Crescent
Convertible Preferred Shares, as the case may be, and having a record date on
or after the Effective Time but prior to such surrender and a payment date on
or subsequent to such surrender; and (iii) at the time of such surrender or
as promptly as practicable thereafter, the amount of any cash payable
pursuant to Section 1.8 to which such holder is entitled pursuant to Section
1.8. In no event shall the person entitled to receive such dividends or
other distributions or cash be entitled to receive interest on such dividends
or other distributions or cash. If any certificate representing Common
Shares or Crescent Convertible Preferred Shares, as the case may be, or cash
or other property is to be issued or delivered in a name other than that in
which the Certificate surrendered in exchange therefor is registered, it
shall be a condition of such exchange that the Certificate so surrendered
shall be properly endorsed and otherwise in proper form for transfer and that
the person requesting such exchange shall pay to the Exchange Agent any
transfer or other taxes required by reason of the issuance of certificates
for such Common Shares or Crescent Convertible Preferred Shares, as the case
may be, in a name other than that of the registered holder of the Certificate
surrendered, or shall establish to the satisfaction of the Exchange Agent
that such tax has been paid or is not applicable. Crescent or the Exchange
Agent shall be entitled to deduct and withhold from the consideration
otherwise payable pursuant to this Agreement to any holder of shares of
Company Common Stock or Convertible Preferred Stock, as the case may be, such
amounts as Crescent or the Exchange Agent is required to deduct and withhold
with respect to the making of such payment under the Internal Revenue Code of
1986, as amended (the "Code"), or under any provision of state, local or
foreign tax law. To the extent that amounts are so withheld by Crescent or
the Exchange Agent, such withheld amounts shall be treated for all purposes
of this Agreement as having been paid to the holder of the shares of Company
Common Stock or Convertible Preferred Stock, as the case may be, in respect
of which such deduction and withholding was made by Crescent or the Exchange
Agent.
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Section 1.8 NO FRACTIONAL SECURITIES. No certificates or scrip
representing fractional Common Shares shall be issued upon the surrender for
exchange of Certificates pursuant to this Article I, and no Crescent dividend
or other distribution or stock split shall relate to any fractional share,
and no fractional share shall entitle the owner thereof to vote or to any
other rights of a security holder of Crescent. In lieu of any such
fractional share, each holder of Company Common Stock who would otherwise
have been entitled to a fraction of a Common Share upon surrender of
Certificates for exchange pursuant to this Article I will be paid an amount
of cash (without interest), rounded to the nearest cent, determined by
multiplying (i) the Market Price of a Common Share on the second NYSE trading
day prior to the Company Stockholder Meeting (as defined in Section 5.1) by
(ii) the fractional interest to which such holder would otherwise be
entitled. The "Market Price" of a Common Share or a share of Company Common
Stock, as applicable, on any date means the average of the daily closing
prices per Common Share (or share of Company Common Stock, as applicable) as
reported on the NYSE Composite Transactions reporting system (as published in
The Wall Street Journal or, if not published therein, in another
authoritative source mutually selected by the Company and Crescent) for the
20 consecutive NYSE trading days (the "Averaging Period") immediately
preceding such date. As promptly as practicable after the determination of
the amount of cash to be paid to holders of fractional share interests, the
Exchange Agent shall so notify Crescent, and Crescent shall deposit such
amount with the Exchange Agent and shall cause the Exchange Agent to forward
payments to such holders of fractional share interests subject to and in
accordance with the terms of Section 1.6, Section 1.7 and this Section 1.8.
For purposes of paying such cash in lieu of fractional shares, all
Certificates surrendered for exchange by a Company stockholder shall be
aggregated, and no such Company stockholder will receive cash in lieu of
fractional shares in an amount equal to or greater than the value of one full
Common Share with respect to such Certificates surrendered.
Section 1.9 RETURN OF EXCHANGE FUND. Any portion of the Exchange Fund
which remains undistributed to the former stockholders of the Company for one
year after the Effective Time shall be delivered to Crescent and any such
former stockholders who have not theretofore complied with this Article I
shall thereafter look only to Crescent for payment of their claim for Common
Shares, any cash payable pursuant to Section 1.8 and any dividends or
distributions with respect to Common Shares. Crescent shall not be liable to
any former holder of Company Common Stock for any such Common Shares, cash
and dividends and distributions held in the Exchange Fund which is delivered
to a public official pursuant to any applicable abandoned property, escheat
or similar law.
Section 1.10 ADJUSTMENT OF EXCHANGE RATIO. In the event that, prior
to the Effective Time, Crescent effects any reclassification, stock split or
stock dividend or other distribution of rights, assets or securities with
respect to Common Shares, any change or conversion of Common Shares into
other securities or any other dividend or distribution with respect to the
Common Shares, other than:
(a) any extraordinary dividend paid or to be paid by Crescent which
Crescent reasonably determines is or are in the aggregate sufficient, when
considered together with all
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dividends anticipated to be paid within the tax year including the Effective
Time, to equal all anticipated current and accumulated earnings and profits
for such tax year of the Company and Crescent, in which case, Crescent shall
give prior written notice to the Company which shall contain the basis for,
and computations and calculations of, the extraordinary dividend; or
(b) distributions in the aggregate not to exceed the greater of (i) the
amount of any quarterly dividend that may be paid by Crescent in the ordinary
course, including customary increases thereof, and (ii) distributions of
"real estate investment taxable income" (as such term is defined for purposes
of the Code) without regard to any net capital gains or the deduction for
dividends paid,
then appropriate and proportionate adjustments, if any, shall be made to the
Exchange Ratio, and all references to the Exchange Ratio in this Agreement
shall be deemed to be to the Exchange Ratio as so adjusted.
Section 1.11 NO FURTHER OWNERSHIP RIGHTS IN COMPANY CAPITAL STOCK. All
Common Shares or Crescent Convertible Preferred Shares, as the case may be,
and cash issued or paid upon the surrender for exchange of Certificates in
accordance with the terms hereof (including any cash or other property paid
pursuant to Section 1.8) shall be deemed to have been issued in full
satisfaction of all rights pertaining to the shares of Company Common Stock
(and associated Rights) or Convertible Preferred Stock, as the case may be,
represented by such Certificates subject, however, to the Surviving Entity's
obligation to pay any dividends or make any other distributions with a record
date prior to the Effective Time which may have been declared or made by the
Company on such shares of Company Common Stock or Convertible Preferred
Stock, as the case may be, prior to the date of this Agreement and which
remain unpaid at the Effective Time.
Section 1.12 CLOSING OF COMPANY TRANSFER BOOKS. At the Effective Time,
the stock transfer books of the Company shall be closed and no transfer of
shares of Company Common Stock shall thereafter be made on the records of the
Company. If, after the Effective Time, Certificates are presented to the
Exchange Agent or Crescent, such Certificates shall be canceled and exchanged
as provided in this Article I.
Section 1.13 LOST CERTIFICATES. If any Certificate shall have been
lost, stolen or destroyed, upon the making of an affidavit of that fact by
the person claiming such Certificate to be lost, stolen or destroyed and, if
required by Crescent or the Exchange Agent, the posting by such person of a
bond in such reasonable amount as Crescent or the Exchange Agent may direct
(but consistent with the practices Crescent applies to its own shareholders)
as indemnity against any claim that may be made against them with respect to
such Certificate, the Exchange Agent will issue in exchange for such lost,
stolen or destroyed Certificate the Common Shares, any cash payable pursuant
to Section 1.8 to which the holders thereof are entitled and any dividends or
other distributions to which the holders thereof are entitled pursuant to
Section 1.7.
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Section 1.14 FURTHER ASSURANCES. Each party hereto will, prior to the
Effective Time, execute such further deeds, bills of sale, assignments or
assurances or any other acts or things as are reasonably requested by the
other to consummate the Merger, to vest the Surviving Entity with full title
to all assets, properties, privileges, rights, approvals and franchises of
either of the Constituent Entities or to effect the other purposes of this
Agreement. If at any time after the Effective Time the Surviving Entity
shall consider or be advised that any deeds, bills of sale, assignments or
assurances or any other acts or things are necessary, desirable or proper (a)
to vest, perfect or confirm, of record or otherwise, in the Surviving Entity
its right, title or interest in, to or under any of the rights, privileges,
powers, franchises, properties or assets of either of the Constituent
Entities, or (b) otherwise to carry out the purposes of this Agreement, the
Surviving Entity and its proper officers or trustees or their designees shall
be authorized to execute and deliver, in the name and on behalf of either of
the Constituent Entities, all such deeds, bills of sale, assignments and
assurances and to do, in the name and on behalf of either Constituent Entity,
all such other acts and things as may be necessary, desirable or proper to
vest, perfect or confirm the Surviving Entity's right, title or interest in,
to or under any of the rights, privileges, powers, franchises, properties or
assets of such Constituent Entity and otherwise to carry out the purposes of
this Agreement.
Section 1.15 CLOSING. The closing of the Merger (the "Closing") and
all actions contemplated by this Agreement to occur at the Closing shall take
place at the offices of Shaw Pittman Potts & Trowbridge, 2300 N Street N.W.,
Washington, D.C. 20037, at 10:00 a.m., local time, on a date to be specified
by the parties, which (subject to fulfillment or waiver of the conditions set
forth in Article VI) shall be within the first 15 days of the calendar
quarter following the calendar quarter in which the last of the conditions
set forth in Article VI shall have been fulfilled or waived, or at such other
time and place as Crescent and the Company shall agree.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF CRESCENT
Crescent represents and warrants to the Company as follows:
Section 2.1 ORGANIZATION, STANDING AND POWER. Crescent has been
formed as a real estate investment trust under the laws of the State of Texas
in accordance with the REIT Act. The County Clerk of Tarrant County, Texas,
has certified in writing that the Restated Declaration of Trust of the
Company (the "Declaration of Trust") is recorded in Volume 12645, beginning
at Page 1811, in the records of the County Clerk. The Declaration of Trust
is in effect, and no dissolution, revocation or forfeiture proceedings
regarding the Company have been commenced. The Company has power and
authority under its Declaration of Trust, Amended and Restated Bylaws, as
amended (the "Crescent Bylaws") and the REIT Act to own, lease and operate
its properties and to conduct the business in which it is engaged. Each
Subsidiary of Crescent is duly organized, validly existing and in good
standing under the laws of the jurisdiction in which it is organized and has
the requisite corporate (in the case of a Subsidiary that is a corporation)
or other power and authority to carry on its business as now
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being conducted, except where the failure to be so organized, existing or in
good standing or to have such power or authority, individually or in the
aggregate, has not had, and would not reasonably be expected to have, a
Material Adverse Effect (as hereinafter defined) on Crescent. Crescent and
each of its Subsidiaries are duly qualified to do business, and are in good
standing, in each jurisdiction where the character of their properties owned
or held under lease or the nature of their activities makes such
qualification necessary, except where the failure to be so qualified,
individually or in the aggregate, has not had, and would not reasonably be
expected to have, a Material Adverse Effect on Crescent.
For all purposes of this Agreement, any reference to any state of facts,
event, change or effect having a "Material Adverse Effect" on or with respect
to Crescent or the Company, as the case may be, means such state of facts,
event, change or effect which has had, or would reasonably be expected to
have, a material adverse effect on the business, properties, results of
operations or financial condition of Crescent and its Subsidiaries, taken as
a whole, or the Company and its Subsidiaries, taken as a whole, as the case
may be; provided, however that a "Material Adverse Effect" shall not include
any state of facts, event, change or effect (i) disclosed on or prior to the
date of this Agreement in (a) any of the Company SEC Documents (as
hereinafter defined) or the Crescent SEC Documents (as hereinafter defined),
other than as disclosed in any forward looking statement disclaimer or
general or economic risk factors contained in such Crescent SEC Documents or
Company SEC Documents, (b) in this Agreement, or (c) in any schedule, exhibit
or related document furnished to the other party in connection herewith, (ii)
generally affecting companies in the industries in which the Company or
Crescent operates or (iii) relating to Missouri gaming laws, regulations and
licenses to the extent that they affect the Company's property or operations
in Kansas City, Missouri. For all purposes of this Agreement, "Subsidiary"
means any corporation, partnership, limited liability company, joint venture
or other legal entity of which Crescent or the Company, as the case may be
(either alone or through or together with any other Subsidiary), (i) owns,
directly or indirectly, more than 50% of the stock or other equity interests
the holders of which are generally entitled to vote for the election of the
board of directors or other governing body of such corporation, partnership,
limited liability company, joint venture or other legal entity or (ii) is a
general partner, trustee or other entity performing similar functions. Any
reference in this Agreement to disclosure letters shall be deemed to include
matters described in the Crescent SEC Documents or the Company SEC Documents,
provided, however, that Crescent and the Company shall use their reasonable
best efforts to include in any disclosure letter relevant matters described
in the Crescent SEC Documents or the Company SEC Documents, respectively.
Section 2.2 CAPITAL STRUCTURE. At the date hereof, the authorized
capital stock of Crescent solely consists of 250,000,000 Common Shares,
250,000,000 excess shares issuable in exchange for Common Shares ("Excess
Common Shares"), 100,000,000 preferred shares of beneficial interest, par
value $.01 per share (the "Preferred Shares"), and 100,000,000 excess shares
issuable in exchange for Preferred Shares ("Excess Preferred Shares"). At
the close of business on January 16, 1998, 118,151,909 Common Shares were
issued and outstanding. At the close of business on January 16, 1998,
Crescent had no shares reserved for issuance, except (i) 12,620,870 Common
Shares reserved for issuance upon the exchange of 6,310,435 units of
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ownership interest (the "Units") of Crescent Real Estate Equities Limited
Partnership, a Delaware limited partnership (the "Operating Partnership"),
(ii) 15,704,163 Common Shares reserved for issuance pursuant to the 1994
Crescent Real Estate Equities, Inc. Stock Incentive Plan, the Second Amended
and Restated 1995 Crescent Real Estate Equities Company Stock Incentive Plan,
the 1995 Crescent Real Estate Equities Limited Partnership Unit Incentive
Plan and the 1996 Crescent Real Estate Equities Limited Partnership Unit
Incentive Plan (collectively with the Crescent Real Estate Equities, Ltd.
401(k) Plan, as amended, the "Crescent Stock Plans"), (iii) the possible
issuance of up to 664,294 Common Shares upon the exchange of a portion of a
partnership interest in Desert Mountain Properties Limited Partnership, and
(iv) an outstanding option to acquire 217,530 Common Shares. Except as set
forth above, at the close of business on January 16, 1998, no shares of
capital stock or other voting securities of Crescent were issued, reserved
for issuance or outstanding. All the outstanding Common Shares are validly
issued, fully paid and nonassessable and free of preemptive rights. All
Common Shares issuable in exchange for Company Common Stock at the Effective
Time in accordance with this Agreement will be, when so issued, duly
authorized, validly issued, fully paid and nonassessable and free of
preemptive rights. As of the date of this Agreement, except as identified in
this paragraph and except for (a) this Agreement, (b) stock options issued
and unexercised pursuant to the Crescent Stock Plans covering not in excess
of 8,938,000 Common Shares (collectively, the "Crescent Stock Options"), (c)
12,620,870 Common Shares issuable upon the exchange of 6,310,435 Units, (d)
Common Shares issuable pursuant to the Forward Stock Purchase Contract
agreement dated as of August 12, 1997 (the "UBS Forward Purchase Contract")
with an affiliate of Union Bank of Switzerland, and (e) Common Shares
issuable pursuant to the Swap Agreement dated as of December 12, 1997 (the
"Merrill Lynch Swap Agreement") with an affiliate of Merrill Lynch & Co.,
Inc., there are no options, warrants, calls, rights or agreements to which
Crescent or any of its Subsidiaries is a party or by which any of them is
bound obligating Crescent or any of its Subsidiaries to issue, deliver or
sell, or cause to be issued, delivered or sold, additional shares of capital
stock of Crescent or any of its Subsidiaries or obligating Crescent or any of
its Subsidiaries to grant, extend or enter into any such option, warrant,
call, right or agreement. Each outstanding share of capital stock of each
Subsidiary of Crescent that is a corporation is duly authorized, validly
issued, fully paid and nonassessable and, except as disclosed in the Crescent
SEC Documents (as defined in Section 2.5) filed prior to the date of this
Agreement, each such share that is owned by Crescent or another Subsidiary of
Crescent, is owned free and clear of all security interests, liens, claims,
pledges, mortgages, options, rights of first refusal, agreements, limitations
on voting rights, charges and other encumbrances of any nature whatsoever
(each, a "Lien"). As of the date of this Agreement, none of Crescent or any
Subsidiary has outstanding any bonds, debentures, notes or other indebtedness
of Crescent having the right to vote (or convertible into, or exchangeable
for, securities having the right to vote) on any matters on which
shareholders of Crescent may vote. As of the date of this Agreement, there
are no outstanding contractual obligations of Crescent or any of its
Subsidiaries to repurchase, redeem or otherwise acquire any shares of capital
stock of Crescent or any of its Subsidiaries, except those pursuant to the
UBS Forward Purchase Agreement and the Merrill Lynch Swap Agreement. Exhibit
21 to the Annual Report on Form 10-K of Crescent for the year ended December
31, 1996 (the "Crescent Annual Report"), as filed with the Securities and
Exchange Commission (the "SEC"), is a true, accurate and correct statement
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in all material respects of all the information that was required to be set
forth therein by the rules and regulations of the SEC.
Section 2.3 AUTHORITY. The Board of Trust Managers of Crescent has
approved and adopted this Agreement, and (i) has authorized the filing of a
registration statement on Form S-4 with the SEC by Crescent under the
Securities Act of 1933, as amended (together with the rules and regulations
promulgated thereunder, the "Securities Act"), for the purpose of registering
the Common Shares to be issued in connection with the Merger as contemplated
by this Agreement (together with any amendments or supplements thereto,
whether prior to or after the effective date thereof, the "Registration
Statement"), and (ii) has authorized the purchase of Redeemable Preferred
Stock of the Company in an amount not to exceed $115,000,000. Crescent has
all requisite power and authority to enter into this Agreement and, to
consummate the transactions contemplated hereby. The execution and delivery
of this Agreement by Crescent and the consummation by Crescent of the
transactions contemplated hereby have been duly authorized by all necessary
action on the part of Crescent. This Agreement has been duly executed and
delivered by Crescent and (assuming the valid authorization, execution and
delivery of this Agreement by the Company and the validity and binding effect
of this Agreement on the Company) constitutes the valid and binding
obligation of Crescent enforceable against it in accordance with its terms,
except as enforceability may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar law affecting the enforcement of
creditors' rights generally and by general equitable principles (regardless
of whether such enforceability is considered in a proceeding in equity or at
law).
Section 2.4 CONSENTS AND APPROVALS; NO VIOLATION. Assuming that all
consents, approvals, authorizations and other actions described in this
Section 2.4 have been obtained and all filings and obligations described in
this Section 2.4 have been made, the execution and delivery of this Agreement
do not, and the consummation of the transactions contemplated hereby and
compliance with the provisions hereof will not, result in any violation of,
or default or loss of a material benefit (with or without notice or lapse of
time, or both) under, or give to others a right of termination, cancellation
or acceleration of any obligation under, or result in the creation of any
lien upon any of the properties, assets or operations of Crescent or any of
its Subsidiaries under, any provision of (i) the Declaration of Trust or
Crescent Bylaws, as applicable, (ii) any provision of the comparable charter
or organizational documents of any Subsidiary of Crescent, (iii) any loan or
credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to Crescent
or any of its Subsidiaries or (iv) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Crescent or any of its
Subsidiaries or any of their respective properties, assets or operations,
other than, in the case of clauses (ii), (iii) or (iv), any such violations,
defaults, losses, rights or liens that, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect on
Crescent, materially impair the ability of Crescent to perform its
obligations hereunder or prevent the consummation of any of the transactions
contemplated hereby. No filing or registration with, or authorization,
consent or approval of, any domestic (federal or state), foreign or
supranational court, commission, governmental body, regulatory agency,
authority or
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tribunal (a "Governmental Entity") is required by or with respect to Crescent
or any of its Subsidiaries in connection with the execution and delivery of
this Agreement by Crescent or is necessary for the consummation of the Merger
and the other transactions contemplated by this Agreement, except (i) in
connection, or in compliance, with the provisions of the Hart-Scott-Rodino
Antitrust Improvements Act of 1976, as amended (the "HSR Act"), the
Securities Act and the Securities Exchange Act of 1934, as amended (together
with the rules and regulations promulgated thereunder, the "Exchange Act"),
including, but not limited to, the filing of any registration statements on
Forms S-4 and S-8, (ii) the filing of the Articles of Merger with the
Secretary of State of the State of Nevada and with the County Clerk of
Tarrant County, Texas and appropriate documents with the relevant authorities
of other states in which Crescent or any of its Subsidiaries are qualified to
do business, (iii) such filings and consents as may be required under any
environmental, health or public or work safety law or regulation pertaining
to any notification, disclosure or required approval triggered by the Merger
or by the transactions contemplated by this Agreement, (iv) such filings as
may be required in connection with the taxes described in Section 5.11, (v)
applicable requirements, if any, of, or filings with, state securities or
"blue sky" laws ("Blue Sky Laws") and the NYSE, (vi) as may be required under
foreign laws, (vii) filings with and approvals by any regulatory authority
with jurisdiction over the Company's gaming operations required under any
federal, state, local or foreign statute, ordinance, rule, regulation,
permit, consent, approval, license, judgment, order, decree, injunction or
other authorization governing or relating to the current or contemplated
casino and gaming and/or liquor activities and operations of the Company,
including the Nevada Gaming Control Act and the rules and regulations
promulgated thereunder, the Missouri Gaming Law and the Missouri Riverboat
Gambling Act and the respective rules and regulations promulgated thereunder,
and the Louisiana Video Draw Poker Devices Control Act and the rules and
regulations promulgated thereunder (collectively, the "Gaming Laws"), (viii)
such other consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under the laws of any foreign
country in which the Company or any of its subsidiaries conducts any business
or owns any property or assets, and (ix) such other consents, orders,
authorizations, registrations, declarations and filings the failure of which
to be obtained or made, individually or in the aggregate, would not
reasonably be expected to have a Material Adverse Effect on Crescent,
materially impair the ability of Crescent to perform its respective
obligations hereunder or prevent the consummation of any of the transactions
contemplated hereby.
Section 2.5 SEC DOCUMENTS AND OTHER REPORTS. Crescent has filed all
required documents with the SEC since January 1, 1996 (together with all
other filings by Crescent with the SEC since January 1, 1996, the "Crescent
SEC Documents"). As of their respective dates, the Crescent SEC Documents
complied in all material respects with the requirements of the Securities Act
or the Exchange Act, as the case may be, and, at the respective times they
were filed, none of the Crescent SEC Documents contained any untrue statement
of a material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The consolidated
financial statements (including, in each case, any notes thereto) of Crescent
included in the Crescent SEC Documents complied as to form in all material
respects with applicable accounting requirements and the published rules and
regulations of the SEC with
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respect thereto as of their respective dates of filing, were prepared in
accordance with generally accepted accounting principles (except, in the case
of the unaudited statements, as permitted by Regulation S-X of the SEC)
applied on a consistent basis during the period involved (except as may be
indicated therein or in the notes thereto) and fairly presented the
consolidated financial position of Crescent and its consolidated Subsidiaries
as of the respective dates thereof and the consolidated results of their
operations and their consolidated cash flows for the periods then ended
(subject, in the case of unaudited statements, to normal year-end audit
adjustments and to any other adjustments described therein). Except as
disclosed in the Crescent SEC Documents or as required by generally accepted
accounting principles, Crescent has not, since December 31, 1996, made any
change in the accounting practices or policies applied in the preparation of
its financial statements.
Section 2.6 REGISTRATION STATEMENT AND PROXY STATEMENT. None of the
information to be supplied by Crescent for inclusion or incorporation by
reference in the Registration Statement or the proxy statement/prospectus
included therein (together with any amendments or supplements thereto, the
"Proxy Statement") relating to the Company Stockholder Meeting (as defined in
Section 5.1) will (i) in the case of the Registration Statement, at the time
it becomes effective and at the Effective Time, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein not misleading
or (ii) in the case of the Proxy Statement, at the time of the mailing of the
Proxy Statement and at the time of the Stockholder Meeting, contain any
untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. If at any time prior to the Effective Time any event with
respect to Crescent, its officers and trust managers or any of its
Subsidiaries shall occur that is required to be described in the Proxy
Statement or the Registration Statement, such event shall be so described,
and an appropriate amendment or supplement shall be promptly filed with the
SEC and, as required by law, disseminated to the stockholders of the Company.
Section 2.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in the Crescent SEC Documents filed prior to the date of this Agreement,
since December 31, 1996, (a) Crescent and its Subsidiaries have not sustained
any loss or interference with their business or properties from fire, flood,
windstorm, accident or other calamity (whether or not covered by insurance)
that, individually or in the aggregate, has had, or would reasonably be
expected to have, a Material Adverse Effect on Crescent, (b) there have not
been any events, changes or developments that, individually or in the
aggregate, have had or would reasonably be expected to have, a Material
Adverse Effect on Crescent and (c) there has not been any split, combination
or reclassification of any of the capital stock of Crescent or any issuance
or the authorization of any issuance of any other securities in respect of,
in lieu of or in substitution for shares of such capital stock, except as
contemplated by this Agreement.
Section 2.8 PERMITS AND COMPLIANCE. Each of Crescent and its
respective Subsidiaries is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances, exceptions,
consents, certificates, approvals and orders of any
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Governmental Entity necessary for Crescent or any of its Subsidiaries to own,
lease and operate its properties or to carry on its business as it is now
being conducted (the "Crescent Permits"), except where the failure to have
any of the Crescent Permits, individually or in the aggregate, has not had,
and would not reasonably be expected to have, a Material Adverse Effect on
Crescent, and, as of the date of this Agreement, no suspension or
cancellation of any of the Crescent Permits is pending or, to the Knowledge
of Crescent (as hereinafter defined), threatened, except where the suspension
or cancellation of any of the Crescent Permits, individually or in the
aggregate, has not had, and would not reasonably be expected to have, a
Material Adverse Effect on Crescent. None of Crescent or any of its
Subsidiaries is in violation of (A) its respective declaration of trust,
charter, by-laws or other organizational documents, (B) any applicable law,
ordinance, administrative or governmental rule or regulation or (C) any
order, decree or judgment of any Governmental Entity having jurisdiction over
Crescent or any of its Subsidiaries, except, in the case of clauses (A), (B)
and (C), for any violations that, individually or in the aggregate, have not
had, and would not reasonably be expected to have a Material Adverse Effect
on Crescent. Except as disclosed in the Crescent SEC Documents filed prior
to the date of this Agreement, as of the date hereof, there is no contract or
agreement that is material to the business, properties, results of operations
or financial condition of Crescent and its Subsidiaries, taken as a whole.
Except as set forth in the Crescent SEC Documents, prior to the date of this
Agreement, no event of default or event that, but for the giving of notice or
the lapse of time or both, would constitute an event of default exists or,
upon the consummation by Crescent of the transactions contemplated by this
Agreement, will exist under any indenture, mortgage, loan agreement, note or
other agreement or instrument for borrowed money, any guarantee of any
agreement or instrument for borrowed money or any lease, license or other
agreement or instrument to which Crescent or any of its Subsidiaries is a
party or by which Crescent or any such Subsidiary is bound or to which any of
the properties, assets or operations of Crescent or any such Subsidiary is
subject, other than any defaults that, individually or in the aggregate, have
not had, and would not reasonably be expected to have, a Material Adverse
Effect on Crescent. For purposes of this Agreement, the term "Knowledge"
when used with respect to Crescent means the actual knowledge as of the date
hereof and as of the Effective Time of the individuals identified in SCHEDULE
2.8.
Section 2.9 TAX MATTERS. Except as otherwise set forth in a disclosure
letter making reference to this section, (i) Crescent and each of its
Subsidiaries have timely filed all federal, state, local, foreign and
provincial income and Franchise Tax Returns and all other material Tax
Returns required to have been filed or appropriate extensions therefor have
been properly obtained, and such Tax Returns are, true, correct and complete,
except to the extent that any failure to so file or any failure to be true,
correct and complete, individually or in the aggregate, has not had, and
would not reasonably be expected to have, a Material Adverse Effect on
Crescent; (ii) all Taxes required to have been paid by Crescent and each of
its Subsidiaries have been timely paid or extensions for payment have been
property obtained, except to the extent that any failure to pay any such
Taxes or to properly obtain an extension for such payment, individually or in
the aggregate, has not held, and would not reasonably be expected to have, a
Material Adverse Effect on Crescent; (iii) Crescent and each of its
Subsidiaries have complied in all material respects with all rules and
regulations relating to the
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withholding of Taxes except to the extent that any failure to comply with
such rules and regulations, individually or in the aggregate, has not had,
and would not reasonably be expected to have, a Material Adverse Effect on
Crescent; (iv) none of Crescent or any of its Subsidiaries has waived in
writing any statute of limitations in respect of its federal, state, local,
foreign or provincial income or franchise Taxes and no deficiency with
respect to any Taxes has been proposed, asserted or assessed against Crescent
or any of its Subsidiaries, except to the extent that any such waiver or
deficiency, individually or in the aggregate, has not had, and would not
reasonably be expected to have, a Material Adverse Effect on Crescent; (v)
all Federal income Tax Returns referred to in clause (i) for all years
through 1993 have been examined by and settled with the Internal Revenue
Service or the period for assessment of Taxes in respect of which such Tax
returns were required to be filed has expired; (vi) as of the date hereof and
at the Effective Time, no material issues that have been raised in writing by
the relevant taxing authority in connection with the examination of the Tax
Returns referred to in clause (i) are currently pending; (vii) all material
deficiencies asserted or material assessments made as a result of any
examination of any Tax Returns referred to in clause (i) by any taxing
authority have been paid in full; (viii) the most recent financial statements
contained in the Crescent SEC Documents reflect an adequate reserve for all
Taxes payable by Crescent and its Subsidiaries for all taxable periods and
portions thereof through the date of such financial statements; and (ix)
there are no material liens for Taxes (other than for current Taxes not yet
due and payable) on the assets of Crescent or any of its Subsidiaries. For
purposes of this Agreement: (i) "Taxes" means any federal, state, local,
foreign or provincial income, gross receipts, property, sales, use, license,
excise, franchise, employment, payroll, withholding, alternative or add on
minimum, ad valorem, value-added, transfer or excise tax, or other tax,
custom, duty, governmental fee or other like assessment or charge of any kind
whatsoever, together with any interest or penalty imposed by any Governmental
Entity, and (ii) "Tax Return" means any return, report or similar statement
(including the attached schedules) required to be filed with respect to any
Tax, including, without limitation, any information return, claim for refund,
amended return or declaration of estimated Tax.
Section 2.10 ACTIONS AND PROCEEDINGS. Except as set forth in the
Crescent SEC Documents filed prior to the date of this Agreement, there are
no outstanding orders, judgments, injunctions, awards or decrees of any
Governmental Entity against or involving Crescent or any of its Subsidiaries,
or against or involving any of the trust managers, directors, officers or
employees of Crescent or any of its Subsidiaries, as such, any of its or
their properties, assets or business or any of the Crescent Stock Plans that,
individually or in the aggregate, have had, or would reasonably be expected
to have, a Material Adverse Effect on Crescent. As of the date of this
Agreement, there are no actions, suits or claims or legal, administrative or
arbitrative proceedings or investigations pending or, to the Knowledge of
Crescent, threatened against or involving Crescent or any of its Subsidiaries
or any of its or their trust managers, directors, officers or employees, as
such, or any of its or their properties, assets or business or any Crescent
Stock Plan that, individually or in the aggregate, have had, or would
reasonably be expected to have, a Material Adverse Effect on Crescent. As of
the date hereof, there are no actions, suits, labor disputes or other
litigation, legal or administrative proceedings or governmental
investigations pending or, to the Knowledge of Crescent, threatened against
or affecting Crescent or any of its Subsidiaries or any of its or
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their trust managers, directors, officers or employees, as such, or any of
its or their properties, assets or business relating to the transactions
contemplated by this Agreement.
Section 2.11 COMPLIANCE WITH WORKER SAFETY AND ENVIRONMENTAL LAWS.
(a) Except as otherwise set forth in a disclosure letter making
reference to this section, (i) the properties, assets and operations of
Crescent and its Subsidiaries are in compliance with all applicable federal,
state, local, regional and foreign laws, rules and regulations, orders,
decrees, common law judgments, permits and licenses relating to public and
worker health and safety (collectively, "Worker Safety Laws") and the
protection, regulation and clean-up of the indoor and outdoor environment and
activities or conditions related thereto, including, without limitation,
those relating to the generation, handling, disposal, transportation or
release of hazardous or toxic materials, substances, wastes, pollutants and
contaminants including, without limitation, asbestos, petroleum, radon and
polychlorinated biphenyls (collectively, "Environmental Laws"), except for
any violation that, individually or in the aggregate, has not had, or would
not reasonably be expected to have, a Material Adverse Effect on Crescent;
and (ii) with respect to such properties, assets and operations, including
any previously owned, leased or operated properties, assets or operations, as
of the date hereof and at the Effective Time, there are no past, present or
reasonably anticipated future events, conditions, circumstances, activities,
practices, incidents, actions or plans of Crescent or any of its Subsidiaries
that may interfere with or prevent compliance or continued compliance with
applicable Worker Safety Laws and Environmental Laws, other than any such
interference or prevention that, individually or in the aggregate, has not
had, or would not reasonably be expected to have, a Material Adverse Effect
on Crescent.
(b) (i) Crescent and its Subsidiaries have not caused or permitted any
property, asset, operation, including any previously owned property, asset or
operation, to use generate, manufacture, refine, transport, treat, store,
handle, dispose, transfer or process hazardous or toxic materials,
substances, wastes, pollutants or contaminants, except in material compliance
with all Environmental Laws and Worker Safety Laws, other than any such
activity that, individually or in the aggregate, has not had, and would not
reasonably be expected to have, a Material Adverse Effect on Crescent; (ii)
Crescent and its Subsidiaries have not reported to any Governmental Entity
any material violation of an Environmental Law or any release, discharge or
emission of any hazardous or toxic materials, substances, wastes, pollutants
or contaminants, other than any such violation, release, discharge or
emission that, individually or in the aggregate, has not had, and would not
reasonably be expected to have, a Material Adverse Effect on Crescent, and
(iii) as of the date hereof and at the Effective Time, Crescent has no
Knowledge of any pending, threatened or anticipated claims or liabilities
under CERCLA, 42 U.S.C. sec. 9601 et seq., RCRA, 42 U.S.C. sec. 6901 et seq.,
or equivalent state law provisions and no Knowledge that any current or
former property, asset or operation is identified or currently proposed for
the National Priorities List at 40 CFR sec. 300, Appendix B, or the CERCLIS
or equivalent state lists or hazardous substances release sites, other than
with respect to Crescent's Poydras property.
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Section 2.12 LIABILITIES. Except as set forth in the Crescent SEC
Documents filed prior to the date hereof, Crescent and its Subsidiaries have
no liabilities, absolute or contingent, other than liabilities that,
individually or in the aggregate, have not had, and would not reasonably be
expected to have, a Material Adverse Effect on Crescent.
Section 2.13 INTELLECTUAL PROPERTY. Crescent and its Subsidiaries own
or have the right to use all patents, patent rights, trademarks, trade names,
service marks, trade secrets, copyrights and other proprietary intellectual
property rights (collectively, "Intellectual Property Rights") as are
necessary in connection with the business of Crescent and its Subsidiaries,
taken as a whole, except where the failure to have such Intellectual Property
Rights, individually or in the aggregate, has not had, and would not
reasonably be expected to have, a Material Adverse Effect on Crescent.
Neither Crescent nor any of its Subsidiaries has infringed any Intellectual
Property Rights of any third party other than any infringements that,
individually or in the aggregate, have not had, and would not reasonably be
expected to have, a Material Adverse Effect on Crescent.
Section 2.14 NO REQUIRED VOTE OF CRESCENT SHAREHOLDERS. No vote of the
shareholders of Crescent is required by law, the organizational documents of
Crescent or otherwise in order for Crescent to consummate the Merger and the
transactions contemplated hereby.
Section 2.15 REIT STATUS. Crescent is a "real estate investment trust"
for federal income tax purposes. The consummation of the transactions
contemplated by this Agreement will not cause Crescent to cease to qualify as
a "real estate investment trust" for federal income tax purposes.
Section 2.16 BROKERS. No broker, investment banker or other person is
entitled to any broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Crescent.
Section 2.17 ERISA.
(a) Except as would not reasonably be expected to have, individually or
in the aggregate, a Material Adverse Effect on Crescent, nor any of its ERISA
Affiliates (as hereinafter defined) has withdrawn from any Company
Multiemployer Plan (as hereinafter defined) at any time within the past six
years or instituted, or is currently considering taking, any action to do so.
(b) There has been no failure to make any contribution or pay any amount
due to any Crescent Plan as required by Section 412 of the Code, Section 302
of ERISA, or the terms of any such Plan, and no Crescent Plan, nor any trust
created thereunder, has incurred any "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived.
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(c) As of the date hereof and at the Effective Time, neither Crescent
nor any of its ERISA Affiliates has been notified by any Crescent
Multiemployer Plan that such Crescent Multiemployer Plan is currently in
reorganization or insolvency under and within the meaning of Section 4241 or
4245 of ERISA or that such Crescent Multiemployer Plan intends to terminate
or has been terminated under Section 4041A of ERISA. As of the date hereof
and at the Effective Time, neither the Company nor any of its ERISA
Affiliates has any liability or obligation under any welfare plan to provide
life insurance or medical benefits after termination of employment to any
employee or dependent other than as required by (i) Part 6 of Title I of
ERISA or (ii) the laws of a jurisdiction outside the United States.
(d) As used herein, (i) "Crescent Plan" means a "pension plan" (as
defined in Section 3(2) of ERISA (other than a Crescent Multiemployer Plan)),
a "welfare plan" (as defined in Section 3(1) of ERISA), or any material
bonus, profit sharing, deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock, vacation, severance,
death benefit, insurance or other plan, arrangement or understanding, in each
case established or maintained or contributed to by Crescent or any of its
ERISA Affiliates or as to which Crescent or any of its ERISA Affiliates
otherwise may have any liability, (ii) "Crescent Multiemployer Plan" means a
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) to which
Crescent or any of its ERISA Affiliates is or has been obligated to
contribute or otherwise may have any liability.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Crescent as follows:
Section 3.1 ORGANIZATION, STANDING AND POWER. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Nevada and has the requisite corporate power and
authority to carry on its business as now being conducted. Each Subsidiary
of the Company is duly organized, validly existing and in good standing under
the laws of the jurisdiction in which it is organized and has the requisite
corporate (in the case of a Subsidiary that is a corporation) or other power
and authority to carry on its business as now being conducted, except where
the failure to be so organized, existing or in good standing or to have such
power or authority, individually or in the aggregate, has not had, and would
not reasonably be expected to have, a Material Adverse Effect on the Company.
The Company and each of its Subsidiaries are duly qualified to do business,
and are in good standing, in each jurisdiction where the character of their
properties owned or held under lease or the nature of their activities makes
such qualification necessary, except where the failure to be so qualified,
individually or in the aggregate, has not had, and would not reasonably be
expected to have, a Material Adverse Effect on the Company.
Section 3.2 CAPITAL STRUCTURE. At the date hereof, the authorized
capital stock of the Company consists of 90,000,000 shares of Company Common
Stock, and 5,000,000 shares of Preferred Stock, $.01 par value per share
("Company Preferred Stock"). At the close of
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business on January 16, 1998, (i) 35,306,657 shares of Company Common Stock
(and associated Rights) were issued and outstanding, (ii) 2,070,000 shares of
Convertible Preferred Stock were issued and outstanding, (iii) no shares of
Company Common Stock were held in the treasury of the Company or by its
Subsidiaries, (iv) 6,307,000 shares of Company Common Stock were reserved for
issuance pursuant to the Company Stock Compensation Program, as amended,
options to purchase 5,485,743 shares of Company Common Stock had been issued
and were outstanding pursuant to such Stock Compensation Program, (v)
1,000,000 shares of Company Common Stock were reserved for issuance pursuant
to the Company's 401(k) Plan, dated as of October 14, 1993, as amended, and
as of December 31, 1997, no shares of Company Common Stock had been issued
and were outstanding pursuant to such 401(k) Plan, (vi) 6,742,671 shares of
Company Common Stock were reserved for issuance pursuant to the Certificate
of Designation, and (vi) no shares of Company Common Stock were reserved in
connection with the Rights Agreement dated October 6, 1997 (the "Rights
Agreement") between the Company and Continental Stock Transfer & Trust
Company pursuant to which the Company declared a dividend on October 6, 1997
of one preferred share purchase right (a "Right") for each outstanding share
of Company Common Stock. Except as set forth above, at the close of business
on January 16, 1998, no shares of capital stock or other voting securities of
the Company were issued, reserved for issuance or outstanding. All the
outstanding shares of Company Common Stock were validly issued, fully paid
and nonassessable and free of preemptive rights. Except as otherwise set
forth in a disclosure letter making reference to this section, there are no
options, warrants, calls, rights or agreements to which the Company or any of
its Subsidiaries is a party or by which any of them is bound obligating the
Company or any of its Subsidiaries to issue, deliver, or sell, or cause to be
issued, delivered or sold, additional shares of capital stock of the Company
or any of its Subsidiaries or obligating the Company or any of its
Subsidiaries to grant, extend or enter into any such option, warrant, call,
right or agreement. Except as otherwise set forth in a disclosure letter
making reference to this section, each outstanding share of capital stock of
each Subsidiary of the Company that is a corporation is duly authorized,
validly issued, fully paid and nonassessable and, except as disclosed in the
Company SEC Documents (as defined in Section 3.5) filed prior to the date of
this Agreement, each such share that is owned by the Company or another
Subsidiary of the Company, is owned free and clear of all Liens. As of the
date of this Agreement, the Company does not have outstanding any bonds,
debentures, notes or other indebtedness of the Company having the right to
vote (or convertible into, or exchangeable for, securities having the right
to vote) on any matters on which stockholders of the Company may vote.
Except as otherwise set forth in a disclosure letter making reference to this
section, there are no outstanding contractual obligations of the Company or
any of its Subsidiaries to repurchase, redeem or otherwise acquire any shares
of capital stock of the Company or any of its Subsidiaries. Exhibit 21 to
the Company's Annual Report on Form 10-K for the year ended March 31, 1997,
as filed with the SEC (the "Company Annual Report"), is a true, accurate and
correct statement in all material respects of all the information required to
be set forth therein by the rules and regulations of the SEC.
Section 3.3 AUTHORITY. The Board of Directors of the Company (i) has
unanimously approved and adopted this Agreement, (ii) has resolved to
recommend the approval of this Agreement by the Company's stockholders and
has directed that this
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Agreement be submitted to the Company's stockholders for approval, (iii) has
adopted amendments to the Company's Stock Compensation Program providing that
a Company employee's options shall not terminate if, in connection with the
Merger, the employee becomes employed by an entity other than the Company,
(iv) has approved the modification of the vesting schedule for the options
granted under the Company's Stock Compensation Program on September 29, 1997
to provide that such options will vest in equal installment amounts over five
years; and (v) has directed the filing of the Proxy Statement with the SEC.
The Company has all requisite corporate power and authority to enter into
this Agreement and, subject to approval by the stockholders of the Company of
this Agreement, to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by the Company and the consummation
by the Company of the transactions contemplated hereby have been duly
authorized by all necessary corporate action on the part of the Company,
subject to approval of this Agreement by the stockholders of the Company.
This Agreement has been duly executed and delivered by the Company and
(assuming the valid authorization, execution and delivery of this Agreement
by Crescent and the validity and binding effect of this Agreement on
Crescent) constitutes the valid and binding obligation of the Company
enforceable against the Company in accordance with its terms, except as
enforceability may be limited by bankruptcy, insolvency, reorganization,
moratorium or other similar law affecting the enforcement of creditors'
rights generally and by general equitable principles (regardless of whether
such enforceability is considered in a proceeding in equity or at law.
Section 3.4 CONSENTS AND APPROVALS; NO VIOLATION. Assuming that all
consents, approvals, authorizations and other actions described in this
Section 3.4 or set forth in a disclosure letter making reference to this
section, have been obtained and all filings and obligations described in this
Section 3.4 have been made, the execution and delivery of this Agreement do
not, and the consummation of the transactions contemplated hereby and
compliance with the provisions hereof will not, result in any violation of,
or default or the loss of a material benefit (with or without notice or lapse
of time, or both) under, or give to others a right of termination,
cancellation or acceleration of any obligation under, or result in the
creation of any Lien, upon any of the properties, assets or operations of the
Company or any of its Subsidiaries under any provision of (i) the Amended and
Restated Articles of Incorporation of the Company (the "Articles of
Incorporation"), or the Restated Bylaws of the Company, as amended (the
"Company Bylaws"), (ii) any provision of the comparable charter or
organization documents of any Subsidiary of the Company, (iii) any loan or
credit agreement, note, bond, mortgage, indenture, lease or other agreement,
instrument, permit, concession, franchise or license applicable to the
Company or any of its Subsidiaries or (iv) any judgment, order, decree,
statute, law, ordinance, rule or regulation applicable to the Company or any
of its Subsidiaries or any of their respective properties, assets or
operations, other than, in the case of clauses (ii), (iii) or (iv), any such
violations, defaults, losses, rights or liens that, individually or in the
aggregate, would not reasonably be expected to have a Material Adverse Effect
on the Company, materially impair the ability of the Company to perform its
obligations hereunder or prevent the consummation of any of the transactions
contemplated hereby. Except as set forth in a disclosure letter making
reference to this section, no filing or registration with, or authorization,
consent or approval of, any
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Governmental Entity or any other person is required by or with respect to the
Company or any of its Subsidiaries in connection with the execution and
delivery of this Agreement by the Company or is necessary for the
consummation of the Merger and the other transactions contemplated by this
Agreement, except (i) in connection, or in compliance, with the provisions of
the HSR Act, the Securities Act and the Exchange Act, (ii) in connection, or
in compliance, with the provisions of the Articles of Merger with the
Secretary of State of the State of Nevada and with the County Clerk of
Tarrant County, Texas and appropriate documents with the relevant authorities
of other states in which the Company or any of its Subsidiaries is qualified
to do business, (iii) such filings and consents as may be required under any
environmental, health or public or worker safety law or regulation pertaining
to any notification, disclosure or required approval triggered by the Merger
or by the transactions contemplated by this Agreement, (iv) such filings as
may be required in connection with the taxes described in Section 5.11, (v)
applicable requirements, if any, of Blue Sky Laws and the NYSE, (vi) as may
be required under foreign laws, (vii) filings with and approvals, consents,
findings of suitability, registrations, licenses, permits, orders and
authorizations in respect of the Gaming Laws, (viii) for the requisite
approval by the vote of the holders of the Company Common Stock and
Convertible Preferred Stock in accordance with applicable law and the
Articles of Incorporation and Bylaws of the Company, and (viii) such other
consents, orders, authorizations, registrations, declarations and filings the
failure of which to be obtained or made, individually or in the aggregate,
would not reasonably be expected to have a Material Adverse Effect on the
Company, materially impair the ability of the Company to perform its
obligations hereunder or prevent the consummation of any of the transactions
contemplated hereby.
Section 3.5 SEC DOCUMENTS AND OTHER REPORTS. The Company has filed all
required documents with the SEC since March 31, 1996 (together with all other
filings by the Company with the SEC since March 31, 1996, the "Company SEC
Document"). As of their respective dates, the Company SEC Documents complied
in all material respects with the requirements of the Securities Act or the
Exchange Act, as the case may be, and, at the respective times they were
filed, none of the Company SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. The consolidated
financial statements (including, in each case, any notes thereto) of the
Company included in the Company SEC Documents complied as to form in all
material respects with applicable accounting requirements and the published
rules and regulations of the SEC with respect thereto as of their respective
dates of filing, were prepared in accordance with generally accepted
accounting principles (except, in the case of the unaudited statements, as
permitted by Regulation S-X of the SEC) applied on a consistent basis during
the periods involved (except as may be indicated therein or in the notes
thereto) and fairly presented the consolidated financial position of the
Company and its consolidated Subsidiaries as of the respective dates thereof
and the consolidated results of operations and their consolidated cash flows
for the periods then ended (subject, in the case of unaudited statements, to
normal year-end audit adjustments and to any other adjustments described
therein). Except as disclosed in the Company SEC Documents or as required by
generally
-21-
accepted accounting principles, the Company has not, since March 31, 1997,
made any change in the accounting practices or policies applied in the
preparation of its financial statements.
Section 3.6 REGISTRATION STATEMENT AND PROXY STATEMENT. Except as
contemplated by the next sentence, none of the information to be supplied by
the Company for inclusion or incorporation by reference in the Registration
Statement or the Proxy Statement will (i) in the case of the Registration
Statement, at the time it becomes effective and at the Effective Time,
contain any untrue statement of a material fact or omit to state any material
fact required to be stated therein or necessary in order to make the
statements therein not misleading or (ii) in the case of the Proxy Statement,
at the time of the mailing of the Proxy Statement and at the time of the
Company Stockholder Meeting, contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they are made, not misleading. If at any time prior to the Effective
Time any event with respect to the Company, its officers and directors or any
of its Subsidiaries shall occur that is required to be described in the Proxy
Statement or the Registration Statement, such event shall be so described,
and an appropriate amendment or supplement shall be promptly filed with the
SEC and, as required by law.
Section 3.7 ABSENCE OF CERTAIN CHANGES OR EVENTS. Except as disclosed
in this Agreement, as set forth in a disclosure letter making reference to
this section or in the Company SEC Documents filed prior to the date of this
Agreement, since March 31, 1997, (a) the Company and its Subsidiaries have
not sustained any loss or interference with their business or properties from
fire, flood, windstorm, accident or other calamity (whether or not covered by
insurance) that, individually or in the aggregate, has had, or would
reasonably be expected to have, a Material Adverse Effect on the Company and
(b)(i) there has been no change in the capital stock of the Company (except
for the issuance of shares of the Company Common Stock pursuant to Company
Plans) and no dividend or distribution of any kind declared, paid or made by
the Company on any class of its stock (except for dividends declared and paid
on the Convertible Preferred Stock or the Redeemable Preferred Stock in the
ordinary course of business and consistent with past practice) and (ii) there
have not been any events, changes or developments that, individually or in
the aggregate, have had or would reasonably be expected to have a Material
Adverse Effect on the Company. The aggregate amount of indebtedness of the
Company and its Subsidiaries as of September 30, 1997, is set forth in
SCHEDULE 3.7.
Section 3.8 PERMITS AND COMPLIANCE. Except as set forth in a
disclosure letter making reference to this section, each of the Company and
its Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates,
approvals and orders of any Governmental Entity necessary for the Company or
any of its Subsidiaries to own, lease and operate its properties or to carry
on its business as it is now being conducted (the "Company Permits"), except
where the failure to have any of the Company Permits, individually or in the
aggregate, has not had, and would not reasonably be expected to have, a
Material Adverse Effect on the Company, and, as of the date of this
Agreement, no suspension or cancellation of any of the Company Permits is
pending or, to the Knowledge of the Company (as hereinafter defined),
threatened, except
-22-
where the suspension or cancellation of any of the Company Permits,
individually or in the aggregate, has not had, and would not reasonably be
expected to have, a Material Adverse Effect on the Company. Neither the
Company nor any of its Subsidiaries is in violation of (A) its charter,
by-laws or other organizational documents, (B) any applicable law, ordinance,
administrative or governmental rule or regulation or (C) any order, decree or
judgment of any Governmental Entity having jurisdiction over the Company or
any of its Subsidiaries, except, in the case of clauses (A), (B) and (C), for
any violations that, individually or in the aggregate, has not had, and would
not reasonably be expected to have, a Material Adverse Effect on the Company.
Except as disclosed in the Company SEC Documents filed prior to the date of
this Agreement or as set forth in a disclosure letter making reference to
this section, as of the date hereof, there is no contract or agreement that
is material to the business, properties, results of operations or financial
condition of the Company and its Subsidiaries, taken as a whole. Except as
set forth in the Company SEC Documents or in a disclosure letter making
reference to this section, prior to the date of this Agreement, no event of
default or event that, but for the giving of notice or the lapse of time or
both, would constitute an event of default exists or, upon the consummation
by the Company of the transactions contemplated by this Agreement, will exist
under any indenture, mortgage, loan agreement, note or other agreement or
instrument for borrowed money, any guarantee of any agreement or instrument
for borrowed money or any lease, license or other agreement or instrument to
which the Company or any of its Subsidiaries is a party or by which the
Company or any such Subsidiary is bound or to which any of the properties,
assets or operations of the Company or any such Subsidiary is subject, other
than any defaults that, individually or in the aggregate, have not had, and
would not reasonably be expected to have, a Material Adverse Effect on the
Company. For purposes of this Agreement, the term "Knowledge" when used with
respect to the Company means the actual knowledge as of the date hereof and
at the Effective Time of the individuals identified in SCHEDULE 3.8.
Section 3.9 TAX MATTERS. Except as otherwise set forth in a disclosure
letter making reference to this section, (i) the Company and each of its
Subsidiaries have timely filed all federal, state, local, foreign and
provincial income and franchise Tax Returns and all other material Tax
Returns required to have been filed or appropriate extensions therefor have
been properly obtained, and such Tax Returns are true, correct and complete,
except to the extent that any failure to so file or any failure to be true,
correct and complete, individually or in the aggregate, has not had, and
would not reasonably be expected to have, a Material Adverse Effect on the
Company; (ii) all Taxes required to have been paid by the Company and each of
its Subsidiaries have been timely paid or extensions for payment have been
properly obtained, except to the extent that any failure to pay any such
Taxes or to properly obtain an extension for such payment, individually or in
the aggregate, has not had, and would not reasonably be expected to have, a
Material Adverse Effect on the Company; (iii) the Company and each of its
Subsidiaries have complied in all material respects with all rules and
regulations relating to the withholding of Taxes except to the extent that
any failure to comply with such rules and regulations, individually or in the
aggregate, has not had, and would not reasonably be expected to have, a
Material Adverse Effect on the Company; (iv) neither the Company nor any of
its Subsidiaries has waived in writing any statute of limitations in respect
of its federal, state, local, foreign or provincial income or franchise Taxes
and no deficiency with respect to
-23-
any Taxes has been proposed, asserted or assessed against the Company or any
of its Subsidiaries, except the extent that any such waiver or deficiency,
individually or in the aggregate has not had, and would not reasonably be
expected to have, a Material Adverse Effect on the Company; (v) all federal
income Tax Returns referred to in clause (i) for all years through May 31,
1993 have been examined by and settled with the Internal Revenue Service or
the period for assessment of the Taxes in respect of which such Tax Returns
were required to be filed has expired; (vi) as of the date hereof and at the
Effective Time, no material issues that have been raised in writing by the
relevant taxing authority in connection with the examination of the Tax
Returns referred to in clause (i) are currently pending; and (vii) all
material deficiencies asserted or material assessments made as a result of
any examination of any Tax Returns referred to in clause (i) by any taxing
authority have been paid in full; (viii) the most recent financial statements
contained in the Company SEC Documents reflect an adequate reserve for all
Taxes payable by the Company and its Subsidiaries for all taxable periods and
portions thereof through the date of such financial statements; and (ix)
there are no material liens for Taxes (other than for current Taxes not yet
due and payable) on the assets of the Company or any of its Subsidiaries.
Section 3.10 ACTIONS AND PROCEEDINGS. Except as set forth in the
Company SEC Documents filed prior to the date of this Agreement or as set
forth in a disclosure letter making reference to this section, there are no
outstanding orders, judgments, injunctions, awards or decrees of any
Governmental Entity against or involving the Company or any of its
Subsidiaries, or against or involving any of the directors, officers or
employees of the Company or any of its Subsidiaries, as such, any of its or
their properties, assets for business or any Company Plan (as hereinafter
defined) that, individually or in the aggregate, have had, or would
reasonably be expected to have, a Material Adverse Effect on the Company.
Except as otherwise set forth in a disclosure letter making reference to this
section, as of the date of this Agreement, there are no actions, suits, labor
disputes or claims or legal, administrative or arbitrative proceedings or
investigations pending or, to the Knowledge of the Company, threatened
against or involving the Company or any of its Subsidiaries or any of its or
their directors, officers or employees as such, or any of its or their
properties, assets or business or any Company Plan that, individually or in
the aggregate, have had, or would reasonably be expected to have, a Material
Adverse Effect on the Company. Except as otherwise set forth in a disclosure
letter making reference to this section, as of the date hereof, there are no
actions, suits, labor disputes or other litigation, legal or administrative
proceedings or governmental investigations pending or, to the Knowledge of
the Company, threatened against or affecting the Company or any of its
Subsidiaries or any of its or their officers, directors or employees, as
such, or any of its or their properties, assets or business relating to the
transactions contemplated by this Agreement.
Section 3.11 CERTAIN AGREEMENTS. Except as otherwise set forth in a
disclosure letter making reference to this section, neither the Company nor
any of its Subsidiaries is a party to any oral or written agreement or plan,
including any stock option plan, stock appreciation rights plan, restricted
stock plan or stock purchase plan, any of the benefits of which will be
increased, or the vesting of the benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this Agreement or
the value of any of the benefits of
-24-
which will be calculated on the basis of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement. Subject to Section 5.8 and except as set forth in a disclosure
letter making reference to this section, no holder of any option to purchase
shares of Company Common Stock or Company Preferred Stock, or shares of
Company Common Stock or Company Preferred Stock granted in connection with
the performance of services for the Company or its Subsidiaries, is or will
be entitled to receive cash from the Company or any Subsidiary in lieu of or
in exchange for such option or shares as a result of the transactions
contemplated by this Agreement.
Section 3.12 ERISA.
(a) SCHEDULE 3.12(a) contains a list of each Company Plan (as
hereinafter defined) maintained by the Company and each material Company Plan
maintained by a Subsidiary of the Company. To the extent applicable, with
respect to each Company Plan, the Company has made, or will as soon as
practicable after the date hereof, make available to Crescent a true and
correct copy of (i) the most recent annual report (Form 5500) filed with the
IRS, (ii) such Company Plan and all amendments thereto, (iii) each trust
agreement, insurance contract or administration agreement relating to such
Company Plan, (iv) the most recent summary plan description for each Company
Plan for which a summary plan description is required, (v) the most recent
actuarial report or valuation relating to a Company Plan subject to Title IV
of ERISA, (vi) the most recent determination letter, if any, issued by the
IRS with respect to any Company Plan intended to be qualified under section
401(a) of the Code, (vii) any request for a determination currently pending
before the IRS and (viii) all correspondence with the IRS, the Department of
Labor or the Pension Benefit Guaranty Corporation relating to any outstanding
controversy. Except as would not reasonably be expected to have,
individually or in the aggregate, a Material Adverse Effect on the Company,
(i) each Company Plan complies with ERISA, the Code and all other applicable
statutes and governmental rules and regulations, (ii) no "reportable event"
(within the meaning of Section 4043 of ERISA) has occurred within the past
three years with respect to any Company Plan which is likely to result in
liability to the Company, (iii) neither the Company nor any of its ERISA
Affiliates (as hereinafter defined) has withdrawn from any Company
Multiemployer Plan (as hereinafter defined) at any time within the past six
years or instituted, or is currently considering taking, any action to do so,
and (iv) no action has been taken, or is currently being considered, to
terminate any Company Plan subject to Title IV of ERISA.
(b) There has been no failure to make any contribution or pay any amount
due to any Company Plan as required by Section 412 of the Code, Section 302
of ERISA, or the terms of any such Plan, and no Company Plan, nor any trust
created thereunder, has incurred any "accumulated funding deficiency" (as
defined in Section 302 of ERISA), whether or not waived.
(c) As of the date hereof and at the Effective Time, with respect to the
Company Plans, no event has occurred and, to the Knowledge of the Company,
there exists no
-25-
condition or set of circumstances in connection with which the Company or any
ERISA Affiliate would be subject to any liability under the terms of such
Company Plans, ERISA, the Code or any other applicable law which has had, or
would reasonably be expected to have, a Material Adverse Effect on the
Company. All Company Plans that are intended to be qualified under Section
401(a) of the Code have been determined by the IRS to be so qualified, or a
timely application for such determination is now pending or will be filed on
a timely basis and, to the Knowledge of the Company, there is no reason why
any Company Plan is not so qualified in operation. As of the date hereof and
at the Effective Time, neither the Company nor any of its ERISA Affiliates
has been notified by any Company Multiemployer Plan that such Company
Multiemployer Plan is currently in reorganization or insolvency under and
within the meaning of Section 4241 or 4245 of ERISA or that such Company
Multiemployer Plan intends to terminate or has been terminated under Section
4041A of ERISA. As of the date hereof and at the Effective Time, neither the
Company nor any of its ERISA Affiliates has any liability or obligation under
any welfare plan to provide life insurance or medical benefits after
termination of employment to any employee or dependent other than as required
by (i) Part 6 of Title I of ERISA or (ii) the laws of a jurisdiction outside
the United States.
(d) As used herein, (i) "Company Plan" means a "pension plan" (as
defined in Section 3(2) of ERISA (other than a Company Multiemployer Plan)),
a "welfare plan" (as defined in Section 3(1) of ERISA), or any material
bonus, profit sharing, deferred compensation, incentive compensation, stock
ownership, stock purchase, stock option, phantom stock, vacation, severance,
death benefit, insurance or other plan, arrangement or understanding, in each
case established or maintained or contributed to by the Company or any of its
ERISA Affiliates or as to which the Company or any of its ERISA Affiliates
otherwise may have any liability, (ii) "Company Multiemployer Plan" means a
"multiemployer plan" (as defined in Section 4001(a)(3) of ERISA) to which the
Company or any of its ERISA Affiliates is or has been obligated to contribute
or otherwise may have any liability, and (iii) with respect to any person,
"ERISA Affiliate" means any trade or business (whether or not incorporated)
which is under common control or would be considered a single employer with
such person pursuant to Section 414(b), (c), (m) or (o) of the Code and the
regulations promulgated under those sections or pursuant to Section 4001(b)
of ERISA and the regulations promulgated thereunder.
(e) SCHEDULE 3.12(e) contains a list, as of the date of this Agreement,
of all (i) severance and employment agreements with officers of the Company
and each ERISA Affiliate, (ii) severance programs and related formal policies
of the Company with or relating to its employees and (iii) plans, programs,
agreements and other arrangements of the Company with or relating to its
employees which contain change of control or similar provisions, in each case
involving a severance or employment agreement or arrangement with an
individual officer or employee, only to the extent such agreement or
arrangement provides for minimum annual payments in excess of $150,000. The
Company has provided to Crescent a true and complete copy of each of the
foregoing.
-26-
(f) Except as otherwise set forth in a disclosure letter making
reference to this section, all compensation issued pursuant to the Stock
Plans is "qualified performance based compensation" and is deductible under
section 162(m) of the Code.
Section 3.13 COMPLIANCE WITH WORKER SAFETY AND ENVIRONMENTAL LAWS.
(a) Except as otherwise set forth in a disclosure letter making
reference to this section, (i) the properties, assets and operations of the
Company and its Subsidiaries are in compliance with all applicable federal,
state, local, regional and foreign laws, rules and regulations, orders,
decrees, common law, judgments, permits and licenses relating to public and
worker health and safety (collectively, "Worker Safety Laws") and the
protection, regulation and clean-up of the indoor and outdoor environment and
activities or conditions related thereto, including, without limitation,
those relating to the generation, handling, disposal, transportation or
release of hazardous or toxic materials, substances, wastes, pollutants and
contaminants including, without limitation, asbestos, petroleum, radon and
polychlorinated biphenyls (collectively, "Environmental Laws"), except for
any violations that, individually or in the aggregate, have not had, and
would not reasonably be expected to have, a Material Adverse Effect on the
Company; and (ii) with respect to such properties, assets and operations,
including any previously owned, leased or operated properties, assets or
operations, as of the date hereof and at the Effective Time, there are no
past, present or reasonably anticipated future events, conditions,
circumstances, activities, practices, incidents, actions or plans of the
Company or any of its Subsidiaries that may interfere with or prevent
compliance or continued compliance with applicable Worker Safety Laws and
Environmental Laws, other than any such interference or prevention that,
individually or in the aggregate, has not had, and would not reasonably be
expected to have, a Material Adverse Effect on the Company.
(b) Except as set forth in a disclosure letter making reference to this
section, (i) the Company and its Subsidiaries have not caused or permitted
any property, asset, operation, including any previously owned property,
asset or operation, to use, generate, manufacture, refine, transport, treat,
store, handle, dispose, transfer or process hazardous or toxic materials,
substances, wastes, pollutants or contaminants, except in material compliance
with all Environmental Laws and Worker Safety Laws, other than any such
activity that, individually or in the aggregate, has not had, and would not
reasonably be expected to have, a Material Adverse Effect on the Company;
(ii) the Company and its Subsidiaries have not reported to any Governmental
Entity any material violation of an Environmental Law or any release,
discharge or emission of any hazardous or toxic materials, substances,
wastes, pollutants or contaminants, other than any such violation, release,
discharge or emission that, individually or in the aggregate, has not had,
and would not reasonably be expected to have, a Material Adverse Effect on
the Company, and (iii) as of the date hereof and at the Effective Time, the
Company has no knowledge of any pending, threatened or anticipated claims or
liabilities under CERCLA, 42 U.S.C. sec. 9601 et seq., RCRA, 42 U.S.C. sec.
6901 et seq., or equivalent state law provisions and no knowledge that any
current or former property, asset or operation is identified or currently
proposed for the National Priorities List at 40 CFR sec. 300, appendix B, or
the CERCLIS or equivalent state lists or hazardous substances release sites.
-27-
Section 3.14 LIABILITIES. Except as otherwise set forth in a disclosure
letter making reference to this section or reserved against in the balance
sheet of the Company set forth in its Annual Report on Form 10-K for the
fiscal year ended March 31, 1997, as of the date hereof and as of the
Effective Time, the Company and its Subsidiaries have no liabilities,
absolute or contingent, other than liabilities that, individually or in the
aggregate, have not had, and would not reasonably be expected to have, a
Material Adverse Effect on the Company.
Section 3.15 INTELLECTUAL PROPERTY. Except as set forth in a
disclosure letter making reference to this section, the Company and its
Subsidiaries own or have the right to use all Intellectual Property Rights as
are necessary in connection with the business of the Company and its
Subsidiaries, taken as a whole, except where the failure to have such
Intellectual Property Rights, individually or in the aggregate, has not had,
and would not reasonably be expected to have, a Material Adverse Effect on
the Company. Neither the Company nor any of its Subsidiaries has infringed
any Intellectual Property Rights of any third party other than any
infringements that, individually or in the aggregate, have not had, and would
not reasonably be expected to have, a Material Adverse Effect on the Company.
The Company has provided to Crescent in a disclosure letter making reference
to this section a list of all of its Intellectual Property Rights material to
the conduct of its business.
Section 3.16 RIGHTS AGREEMENT. The Company has taken all necessary
action to (i) render the Rights inapplicable to the Merger and the other
transactions contemplated by this Agreement and (ii) ensure that (y) neither
Crescent nor any of its affiliates is an Acquiring Person (as defined in the
Rights Agreement) and (z) a Distribution Date (as defined in the Rights
Agreement) does not occur by reason of the announcement or consummation of
the Merger or the consummation of any of the other transactions contemplated
by this Agreement.
Section 3.17 PARACHUTE PAYMENTS TO DISQUALIFIED INDIVIDUALS. Except as
set forth in a disclosure letter making reference to this section, there will
be no "excess parachute payments" (as such term is defined in Section 280G(a)
of the Code) payable to employees of the Company and its Subsidiaries who are
"disqualified individuals" under Section 280G of the Code, whether or not
such employee's employment is terminated in connection with the transactions
contemplated under this Agreement.
Section 3.18 STATE TAKEOVER STATUTES. The Board of Directors of the
Company has, to the extent such statutes are applicable, taken (or, with
respect to Sections 78.378 to 78.3793 and Sections 78.411 to 78.444 of the
NGCL, will take prior to the Effective Time) all action necessary to exempt
Crescent, its Subsidiaries and affiliates, the Merger, this Agreement and the
transactions contemplated hereby from Sections 78.378 to 78.3793 and Sections
78.411 to 78.444 of the NGCL, or to satisfy the requirements thereof. To the
Knowledge of the Company, no other state takeover statutes are applicable to
the Merger, this Agreement or the transactions contemplated hereby.
-28-
Section 3.19 REQUIRED VOTE OF COMPANY STOCKHOLDERS. The affirmative
vote of the holders of 66 2/3% of the outstanding shares of Company Common
Stock and 66 2/3% of the outstanding shares of Company Preferred Stock is
required to approve this Agreement. No other vote of the stockholders of the
Company is required by law, the Articles of Incorporation or the Company
Bylaws or otherwise in order for the Company to consummate the Merger and the
transactions contemplated hereby.
Section 3.20 BROKERS. No broker, investment banker or other person,
other than Salomon Smith Barney, the fees and expenses of which will be paid
by the Company (as reflected in agreements between such firms and the
Company, copies of which have been furnished to Crescent), is entitled to any
broker's finder's or other similar fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by
or on behalf of the Company.
Section 3.21 LABOR MATTERS.
(a) As of the date hereof and at the Effective Time, neither the Company
nor any of its Subsidiaries is a party to or otherwise bound by any
collective bargaining agreement, contract or other agreement or understanding
with a labor union or labor organization, nor is the Company or any of its
Subsidiaries the subject of any material proceeding asserting that the
Company or any of its Subsidiaries has committed an unfair labor practice or
seeking to compel it to bargain with any labor union or labor organization.
(b) As of the date hereof and at the Effective Time, there are no
pending or, to the Knowledge of the Company, threatened, nor has there been
for the past five years, any labor strike, dispute, walk-out, work stoppage,
slow-down or lockout involving the Company or any of its Subsidiaries that,
individually or in the aggregate, have not had, and would not reasonably be
expected to have, a Material Adverse Effect on the Company.
Section 3.22 TITLE. The Company and its Subsidiaries have good and
valid title to or, in the case of leased properties, a good and valid
leasehold interest in, all of the assets which they purports to own or lease,
including all assets (real, personal or mixed, tangible or intangible)
reflected in the September 30, 1997 consolidated financial statements of the
Company, or acquired by the Company thereafter, except those assets disposed
of in the ordinary course of business after September 30, 1997, and the title
to each such property and asset is free and clear of any title defects,
objections, liens, mortgages, security interests, pledges, charges and
encumbrances, adverse claims, equities or other adverse interests of any kind
including without limitation, leases, chattel mortgages, conditional sales
contracts, collateral security arrangements and other title or interest
retention arrangements (collectively, "Encumbrances"), except (i) any lien
for taxes or other governmental charges not yet delinquent, or the validity
of which is being contested in good faith by appropriate proceedings and as
to which adequate reserves have been established by the Company, (ii) any
Encumbrances reflected on the financial statements contained in the Company
SEC Documents, with such changes in the amount thereof as may have occurred
since September 30, 1997 in the ordinary course of business and which changes
will not materially reduce the
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aggregate value of the property and assets held by the Company or its
Subsidiaries, (iii) such other imperfections of title or Encumbrances which,
as of the Effective Time, will not materially reduce the aggregate value of
the property and assets of the Company or its Subsidiaries, and (iv) any
Encumbrances or other matters identified in a disclosure letter delivered to
Crescent pursuant to this Agreement.
Section 3.23 LEASES. All leases of real or personal property having a
term of one year or more and with aggregate remaining lease payments due of
$50,000 or more to which the Company and/or its Subsidiaries are a party are
in good standing, valid and effective in accordance with their respective
terms, and there is not under any of such leases any existing default or
event of default (or event which with notice or lapse of time, or both, would
constitute a default and in respect of which the Company has not taken
adequate steps to prevent a default from occurring) that would, individually
or in the aggregate, reasonably be expected to have a Material Adverse Effect
on the Company, materially impair the ability of the Company to perform its
obligations hereunder or prevent the consummation of any of the transactions
contemplated hereby.
ARTICLE IV
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 4.1 CONDUCT OF BUSINESS BY THE COMPANY PENDING THE MERGER.
Except as contemplated by Section 6.3, during the period from the date of
this Agreement to the Effective Time, the Company shall, and shall cause each
of its Subsidiaries to, carry on its business in the usual, regular and
ordinary course in substantially the same manner as heretofore conducted and,
to the extent consistent therewith, use all reasonable efforts to keep
available the services of its current officers and employees and preserve its
relationships with customers, suppliers, licensors, lessors and others having
business dealings with it to the end that its goodwill and ongoing business
shall be unimpaired at the Effective Time; provided, however, that the
Company shall be permitted to terminate or modify the business and operations
of the Company's hotel/casino facility located in Kansas City, Missouri in
the event that an order, judgment, injunction, award or decree of any
Governmental Entity against the Company or its Subsidiaries is granted or
issued which results in the suspension, termination or revocation of the
gaming licenses for such hotel/casino facility. Except as otherwise expressly
permitted by this Agreement, the Company shall not, and shall not permit any
of its Subsidiaries to, without the prior written consent of Crescent:
(a) (i) declare, set aside or pay any dividends on, or make any
other actual, constructive or deemed distributions in respect of, any of
its capital stock, or otherwise make any payments to its stockholders in
their capacity as such (other than dividends declared and paid on the
Company Preferred Stock or the Redeemable Preferred Stock in the ordinary
course of business and customary with past practice, and dividends and
other distributions by direct or indirect wholly owned Subsidiaries), (ii)
other than in the case of any direct or indirect wholly owned Subsidiary,
split, combine or reclassify any of its capital stock or issue or authorize
the issuance of any other securities in
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respect of, in lieu of or in substitution for shares of its capital stock
or (iii) purchase, redeem or otherwise acquire any shares of capital stock
of the Company or any of its Subsidiaries or any other securities thereof
or any rights, warrants or options to acquire any such shares or other
securities;
(b) except as set forth in Section 5.17, issue, deliver, sell, pledge,
dispose of or otherwise encumber any shares of its capital stock, any other
voting securities or equity equivalent or any securities convertible into,
or any rights, warrants or options to acquire any such shares, voting
securities, equity equivalent or convertible securities, other than (i)
the issuance of shares of Company Common Stock (and associated Rights)
upon the exercise of employee stock options pursuant to the Company Plans
outstanding on the date of this Agreement in accordance with their current
terms and (ii) the issuance of Company Common Stock upon the conversion of
shares of Company Preferred Stock or Redeemable Preferred Stock;
(c) amend its articles or certificate of incorporation or by-laws
or other comparable organizational documents;
(d) except as set forth in Section 5.23, acquire or agree to acquire
(i) by merging or consolidating with, or by purchasing a substantial
portion of the assets of or equity in, or by any other manner, any business
or any corporation, partnership, association or other business organization
or division thereof or (ii) any assets that are, individually or in the
aggregate material to the Company and its Subsidiaries taken as a whole,
other than transactions that are in the ordinary course of business
consistent with past practice and not material to the Company and its
Subsidiaries taken as a whole;
(e) except as set forth in a disclosure letter making reference to
this section, sell, lease, license, mortgage, grant an interest in or
easement in, or otherwise encumber or subject to any Lien or otherwise
dispose of, or agree to sell, lease, license, mortgage, grant an interest
in or easement in, or otherwise encumber or subject to any Lien or
otherwise dispose of, any of its assets, other than transactions that are
in the ordinary course of business consistent with past practice and not
material to the Company and its Subsidiaries taken as whole;
(f) incur any indebtedness for borrowed money, guarantee any such
indebtedness, issue or sell any debt securities or warrants or other
rights to acquire any debt securities, guarantee any debt securities or
make any loans, advances or capital contributions to, or other investments
in, any other person, or enter into any arrangement having the economic
effect of any of the foregoing, other than (i) indebtedness incurred in
the ordinary course of business consistent with past practice and (ii)
indebtedness, loans, advances, capital contributions and investments
between the Company and any of its wholly owned Subsidiaries or between
any of such wholly owned Subsidiaries;
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(g) except as set forth in Section 5.23, alter (through merger,
liquidation, reorganization, restructuring or in any other fashion) the
corporate structure or ownership of the Company or any Subsidiary;
(h) except as provided in Sections 5.8 and 5.18, enter into or
adopt any new, or amend any existing severance plan, agreement or
arrangement or enter into any new compensation or other welfare
arrangement or plan, or amend any existing Company Plan or employment or
consulting agreement, other than as required by law, except that the
Company or its Subsidiaries may enter into (a) employment agreements if
such agreements (i) are no longer than one year in duration (ii) provide
for an annual base salary of less than $150,000, and (iii) provide, in
the aggregate, for annual base salaries of less than $1,000,000, and (b)
consulting agreements in the ordinary course of business that are
terminable on no more than 90 days' notice without penalty;
(i) except (1) as permitted under Section 4.1(h), or (2) to the
extent required by written employment agreements existing on the date of
this Agreement, increase the compensation payable or to become payable
to its officers or employees, except for (i) increases in the ordinary
course of business consistent with past practice in salaries or wages of
non-officer employees of the Company or any of its Subsidiaries and (ii)
except to the extent required under the terms of any applicable
incentive plan;
(j) grant or award any stock options, restricted stock, performance
shares, stock appreciation rights or other equity-based incentive awards;
(k) take any action, other than reasonable and usual actions in the
ordinary course of business consistent with past practice, with respect
to accounting policies or procedures (other than actions required to be
taken by generally accepted accounting principles);
(l) except as set forth in a disclosure letter making reference to
this section, make or agree to make any new capital expenditure or
expenditures which, individually, is in excess of $1,000,000 or which,
in the aggregate, are in excess of $10,000,000;
(m) pay, discharge or satisfy any claims, liabilities or
obligations (absolute, accrued, asserted or unasserted, contingent or
otherwise), other than the payment, discharge or satisfaction, in the
ordinary course of business (i) consistent with past practice, of
liabilities reflected or reserved against in, or contemplated by, (a)
the most recent consolidated financial statements (or the notes thereto)
of the Company included in the Company SEC Documents or (b) the
condensed consolidated balance sheets of the Company and its
Subsidiaries as set forth in a disclosure letter making reference to
this section, or (ii) incurred in the ordinary course of business
consistent with past practice;
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(n) settle or compromise any material federal, state, local or
foreign tax liability; or
(o) authorize, recommend, propose or announce an intention to do
any of the foregoing, or enter into any contract, agreement, commitment
or arrangement to do any of the foregoing.
Section 4.2 CONDUCT OF BUSINESS BY CRESCENT PENDING THE MERGER. Except
as contemplated by Section 6.3, during the period from the date of this
Agreement to the Effective Time, Crescent shall, and shall cause each of
its Subsidiaries to, carry on its or their respective businesses in the
usual, regular and ordinary course in substantially the same manner as
heretofore conducted and, to the extent consistent therewith, use all
reasonable efforts to keep available the services of its or their
respective current officers and employees and preserve their respective
relationships with customers, suppliers, licensors, lessors and others
having business dealings with them to the end that their goodwill and
ongoing business shall be unimpaired at the Effective Time. Except as
otherwise expressly permitted by this Agreement, Crescent shall not, and
shall not permit any of its Subsidiaries to, without the prior written
consent of the Company:
(a) (i) declare, set aside or pay any dividends on, or make any
other actual, constructive or deemed distributions in respect of, any of
its capital stock, or otherwise make any payments to its shareholders or
stockholders, as applicable, in their capacity as such (other than (A)
any extraordinary dividend paid or to be paid by Crescent which Crescent
reasonably determines is sufficient, when considered together with all
dividends anticipated to be paid within the tax year including the
Effective Time, to equal all anticipated current and accumulated
earnings and profits for such tax year of the Company and Crescent, (B)
distributions in the aggregate not to exceed the greater of (i) the
amount of any quarterly dividend that may be paid by Crescent in the
ordinary course and (ii) distributions of "real estate investment
taxable income" (as such term is defined for purposes of the Code)
without regard to any net capital gains or the deduction for dividends
paid (provided that this Section 4.2(a) shall not be deemed to restrict
any increases in the dividend rate of Crescent in the ordinary course
consistent with past practice) and (C) dividends and other distributions
by direct, indirect or wholly owned Subsidiaries) or (ii) other than in
the case of any Subsidiary, split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other securities
in respect of, in lieu of or in substitution for Common Shares;
(b) in the case of Crescent only, amend its Declaration of Trust;
(c) take or omit any action that would reasonably be expected to
cause Crescent to cease to qualify as a "real estate investment trust"
for federal income tax purposes; or
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(d) authorize, recommend, propose or announce an intention to do
any of the foregoing, or enter into any contract, agreement, commitment
or arrangement to do any of the foregoing.
Section 4.3 NO SOLICITATION.
(a) Except as may be required pursuant to this Agreement, the Company
shall not, nor shall it permit any of its Subsidiaries to, nor shall it
authorize or permit any officer, director or employee of or any investment
banker, attorney, accountant, agent or other advisor or representative of the
Company or any of its Subsidiaries to, (i) solicit, initiate, or encourage
the submission of, any takeover proposal, (ii) except to the extent permitted
by paragraph (b), enter into any agreement with respect to any takeover
proposal or (iii) participate in any discussions or negotiations regarding or
furnish to any person any information with respect to the Company's business,
properties or assets, or take any other action to facilitate any inquiries or
the making of any proposal that constitutes, or may reasonably be expected to
lead to, any takeover proposal; provided, however, that if prior to the
Company Stockholder Meeting (as defined in Section 5.1), the Company shall
have received an unsolicited written takeover proposal from a reputable buyer
which offer, in the written opinion of Salomon Smith Barney, as the Company's
financial advisors, appears to be a "superior proposal" (as defined below)
and which, in the written opinion of legal counsel to the Company reasonably
acceptable to Crescent, the Company's Board of Directors is legally obligated
to consider by principles of fiduciary duty to stockholders under the NGCL,
the foregoing restrictions shall not apply to such proposal. Without
limiting the foregoing, it is understood that any violation of the
restrictions set forth in the preceding sentence by any officer, director or
employee of or any investment banker, attorney, accountant, agent or other
advisor or representative of the Company or any of its Subsidiaries, whether
or not such person is purporting to act on behalf of the Company or
otherwise, shall be deemed to be a breach of this paragraph by the Company.
For all purposes of this Agreement, "takeover proposal" means any proposal,
other than a proposal by Crescent or an affiliate of Crescent for a merger,
consolidation, share exchange, business combination or other similar
transaction involving the Company or any of its Significant Subsidiaries or
any proposal or offer (including, without limitation, any proposal or offer
to stockholders of the Company), other than a proposal or offer by Crescent
or an affiliate of Crescent (i) to acquire in any manner, directly or
indirectly, an equity interest in or any voting securities of, the Company or
any of its Significant Subsidiaries or (ii) to acquire or lease in any
manner, directly or indirectly, any property, business or other assets that,
individually or in the aggregate, would satisfy any of the tests for a
"significant subsidiary" within the meaning of Rule 1-02 of Regulation S-X of
the SEC. The Company immediately shall cease and cause to be terminated all
existing discussions or negotiations with any persons conducted heretofore
with respect to, or that could reasonably be expected to lead to, any
takeover proposal. As used herein, a "Significant Subsidiary" means any
Subsidiary that would constitute a "significant subsidiary" within the
meaning of Rule 1-02 of Regulation S-X of the SEC.
(b) Neither the Board of Directors of the Company nor any committee
thereof shall (i) withdraw or modify, or propose to withdraw or modify, in a
manner adverse to Crescent,
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the approval or recommendation by the Board of Directors of the Company or
any such committee of this Agreement, any of the transactions contemplated by
this Agreement, or the Merger, (ii) approve or recommend, or propose to
approve or recommend, any takeover proposal, or (iii) take action to render
the Rights inapplicable to any takeover proposal. Notwithstanding the
foregoing, the Board of Directors of the Company, to the extent required by
the fiduciary obligations thereof, as determined by and set forth in the
written opinion of legal counsel to the Company reasonably acceptable to
Crescent, may approve or recommend (and, in connection therewith, withdraw or
modify its approval or recommendation of this Agreement or the Merger) a
Superior Proposal (as defined below), subject to the terms set forth in this
Section 4.3(b). Prior to approving or recommending a Superior Proposal,
entering into a binding written agreement with respect to the transaction
contemplated by any such Superior Proposal or withdrawing or modifying its
approval or recommendation of this Agreement, the Company (i) shall notify
Crescent in writing that it intends to accept a Superior Proposal and enter
into such a binding, written agreement with respect to the transaction
contemplated thereby, and (ii) attach the most current version of such
agreement to such notice. Crescent shall have the opportunity, within ten
business days of receipt of the Company's written notification of its
intention to enter into a binding agreement for a Superior Proposal, to make
an offer that the Board of Directors of the Company determines, in good faith
after consultation with its financial advisors, is at least as favorable,
from a financial point of view, to the shareholders of the Company as the
Superior Proposal. The Company agrees that it will not enter into a binding
agreement referred to in clause (i) above until at least the eleventh
business day after it has provided the notice to Crescent required thereby
and to notify Crescent promptly if its intention to enter into a written
agreement referred to in its notification shall change at any time after
giving such notification. For all purposes of this Agreement, "superior
proposal" means a bona fide written proposal made by a third party to acquire
the Company pursuant to a tender or exchange offer, a merger, a share
exchange, a sale of all or substantially all its assets or otherwise on terms
which, in the written opinion of Salomon Smith Barney, are financially
superior to those provided for in the Merger, and for which financing, to
the extent required, is then fully committed or which, in the good faith
judgment of Salomon Smith Barney is reasonably capable of being financed by
such third party. If, to the extent permitted by this Section 4.3(b), the
Board of Directors of the Company approves or recommends a superior proposal,
the Company may take appropriate action to render the Rights inapplicable to
such superior proposal.
(c) Each of Frank J. Fertitta III, Lorenzo J. Fertitta III and Blake L.
Sartini, by such individual's execution of this Agreement, agrees to vote the
shares of capital stock of the Company owned by such individual that have the
power to vote in favor of the Merger; provided that such individuals shall be
free to vote their shares in their sole discretion if the Board of Directors
of the Company terminates this Agreement in accordance with Section 7.1(g)
hereof.
(d) The Company promptly shall immediately advise Crescent orally and in
writing of any takeover proposal or any inquiry with respect to or which
could reasonably be expected to lead to any takeover proposal, the material
terms and conditions of such takeover
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proposal or inquiry and the identity of the person making any such takeover
proposal or inquiry. The Company will keep Crescent fully informed of the
status and details of any such takeover proposal or inquiry.
Section 4.4 THIRD PARTY STANDSTILL AGREEMENTS. Except to the extent
reasonably required in connection with the Company's obligations under this
Agreement, during the period from the date of this Agreement through the
Effective Time, the Company shall not terminate, amend, modify or waive any
provision of any confidentiality or standstill or similar agreement to which
the Company or any of its Subsidiaries is a party (other than any involving
Crescent) unless, in the written opinion of counsel to the Company reasonably
acceptable to Crescent, failure to take such action would violate the
fiduciary obligations of the Board of Directors of the Company, under
applicable law. During such period, the Company agrees to enforce, to the
fullest extent permitted under applicable law, the provisions of any such
agreements, including, but not limited to, obtaining injunctions to prevent
any breaches of such agreements and to enforce specifically the terms and
provisions thereof in any court of the United States or any state thereof
having jurisdiction.
ARTICLE V
ADDITIONAL AGREEMENTS
Section 5.1 STOCKHOLDERS MEETING. The Company shall, as soon as
practicable following the date of this Agreement, duly call, give notice of,
convene and hold, a meeting of its stockholders, (the "Company Stockholder
Meeting") for the purpose of considering the approval of this Agreement. The
Company will, through its Board of Directors, recommend to its stockholders,
approval of such matters and shall not withdraw such recommendation except to
the extent that the Board of Directors of the Company shall have withdrawn or
modified its approval or recommendation of this Agreement of the Merger as
permitted by Section 4.3(b). Without limiting the generality of the
foregoing, the Company agrees that its obligations pursuant to the first
sentence of this Section 5.1 shall not be affected by the commencement,
public proposal, public disclosure or communication to the Company of any
takeover proposal. The Company and Crescent shall coordinate and cooperate
with respect to the timing of such meeting.
Section 5.2 FILINGS; OTHER ACTIONS.
(a) The Company and Crescent shall promptly prepare and file with the
SEC the Proxy Statement and Crescent shall prepare and file with the SEC the
Registration Statement, in which the Proxy Statement will be included as a
prospectus. Each of Crescent and the Company shall use all reasonable
efforts to have the Registration Statement declared effective under the
Securities Act as promptly as practicable after such filing. As promptly as
practicable after the Registration Statement shall have become effective, the
Company shall mail the Proxy Statement to its stockholders. Crescent shall
also take any action (other than qualifying to do business in any
jurisdiction in which they are currently not so qualified) required to be
taken under any applicable state securities laws in connection with the
issuance
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of Common Shares and Crescent Convertible Preferred Shares in the Merger and
upon the exercise of the Substitute Options (as defined in Section 5.8), and
the Company shall furnish all information concerning the Company and the
holders of Company Common Stock as may be reasonably requested in connection
with any such action, including information relating to the number of Common
Shares and Crescent Convertible Preferred Shares required to be registered.
(b) Each party hereto agrees, subject to applicable laws relating to the
exchange of information, promptly to furnish the other parties hereto with
copies of written communications (and memoranda setting forth the substance
of all oral communications) received by such party, or any of its
subsidiaries, affiliates or associates (as such terms are defined in Rule
12b-2 under the Exchange Act as in effect on the date hereof), from, or
delivered by any of the foregoing to, any Governmental Entity in respect of
the transactions contemplated hereby; provided, however, that neither party
shall be required to provide the other with copies of individuals' gaming
applications and other information provided to gaming regulators with respect
thereto.
(c) Each of the Company and Crescent will promptly, and in any event
within twenty business days after execution and delivery of this Agreement,
make all filings or submissions as are required under the HSR Act. Each of
the Company and Crescent will promptly furnish to the other such necessary
information and reasonable assistance as the other may request in connection
with its preparation of any filing or submissions necessary under the HSR
Act. Without limiting the generality of the foregoing, each of the Company
and Crescent will promptly notify the other of the receipt and content of any
inquiries or requests for additional information made by any Governmental
Entity in connection therewith and will promptly (i) comply with any such
inquiry or request and (ii) provide the other with a description of the
information provided to any Governmental Entity with respect to any such
inquiry or request. In addition, each of the Company and Crescent will keep
the other apprised of the status of any such inquiry or request.
Section 5.3 COMFORT LETTERS.
(a) The Company shall use all reasonable efforts to cause to be
delivered to Crescent "comfort" letters of Arthur Andersen LLP, the Company's
independent public accountants, dated the date on which the Registration
Statement shall become effective and as of the Effective Time, and addressed
to Crescent and the Company, in form and substance reasonably satisfactory to
Crescent and reasonably customary in scope and substance for letters
delivered by independent public accountants in connection with transactions
such as those contemplated by this Agreement.
(b) Crescent shall use all reasonable efforts to cause to be delivered
to the Company "comfort" letters of Arthur Andersen LLP, Crescent's
independent public accountants, dated the date on which the Registration
Statement shall become effective and as of the Effective Time, and addressed
to the Company and Crescent, in form and substance reasonably
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satisfactory to the Company and reasonably customary in scope and substance
for letters delivered by independent public accountants in connection with
transactions such as those contemplated by this Agreement.
Section 5.4 ACCESS TO INFORMATION. Subject to currently existing
contractual and legal restrictions applicable to Crescent or to the Company
or any of its Subsidiaries, each of Crescent and the Company shall, and shall
cause each of its Subsidiaries to, afford to the accountants, counsel,
financial advisors and other representatives of the other party hereto
reasonable access to, and permit them to make such inspections as they may
reasonably require, during normal business hours during the period from the
date of this Agreement through the Effective Time, all their respective
properties, books, tax returns, contracts, commitments and records
(including, without limitation, the work papers of independent accountants,
if available and subject to the consent of such independent accountants) and,
during such period, each of Crescent and the Company shall, and each shall
cause each of its Subsidiaries to, furnish promptly to the other (i) a copy
of each report, schedule, registration statement and other document filed by
it during such period pursuant to the requirements of federal or state
securities laws and (ii) all other information concerning its business,
properties and personnel as the other may reasonably request. No
investigation pursuant to this Section 5.4 shall affect any representation or
warranty in this Agreement of any party hereto or any condition to the
obligations of the parties hereto.
Section 5.5 COMPLIANCE WITH THE SECURITIES ACT. Within 30 days
following the date of this Agreement, the Company shall cause to be prepared
and delivered to Crescent a list (reasonably satisfactory to counsel for
Crescent) identifying all persons who, at the time of the Company Stockholder
Meeting, in the Company's reasonable judgment may be deemed "affiliates" of
the Company as that term is used in paragraphs (c) and (d) of Rule 145 under
the Securities Act (the "Rule 145 Affiliates"). The Company shall use all
reasonable efforts to cause each person who is identified as a Rule 145
Affiliate in such list to deliver to Crescent on or prior to the Effective
Time a written agreement in substantially the form of SCHEDULE 5.5 hereto,
executed by such person.
Section 5.6 STOCK EXCHANGE LISTINGS. Crescent shall use all reasonable
efforts to list on the NYSE, upon official notice of issuance, the Common
Shares and the Crescent Convertible Preferred Shares to be issued in
connection with the Merger.
Section 5.7 FEES AND EXPENSES.
(a) Except as provided in Section 5.7(b) and (c), whether or not the
Merger is consummated, all costs and expenses incurred in connection with
this Agreement and the transactions contemplated hereby, including the fees
and disbursements of counsel, financial advisors and accountants, shall be
paid by the party incurring such costs and expenses, except that expenses
incurred in connection with printing and mailing the Proxy Statement and the
Registration Statement shall be borne equally by Crescent and the Company.
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(b) Provided that Crescent is not in material breach of its
representations, warranties and agreements under this Agreement, (i) if this
Agreement is terminated by either Crescent or the Board of Directors of the
Company pursuant to Section 7.1(e), (ii) if this Agreement is terminated by
Crescent pursuant to Section 7.1(f), or (iii) if this Agreement is terminated
by the Board of Directors of the Company pursuant to Section 7.1(g), then the
Company shall pay to Crescent $54,000,000 (the "Crescent Termination Fee") in
same-day funds, plus (notwithstanding paragraph (a) of this Section 5.7) all
the expenses (as defined below), on the date of such termination or if
Crescent elects, over a two-year period beginning on the date of termination
with payment amounts and dates to be determined by Crescent. For purposes of
this Section 5.7, the "transaction value" shall mean the aggregate value of
the consideration to be paid by Crescent for the Company's equity securities,
plus aggregate liabilities of the Company as shown on its most recent
financial statement.
(c) If this Agreement is terminated and, as a result of such termination,
Crescent is entitled to the Crescent Termination Fee as provided in Section
5.7(b) above, then the Company shall (notwithstanding paragraph (a) of this
Section 5.7), on the date of such termination, pay to Crescent the cash amount
necessary to permit Crescent fully to reimburse itself and its affiliates for
all out-of-pocket fees and expenses incurred at any time prior to such
termination by any of them or on their behalf in connection with the Merger, the
preparation of this Agreement and the transactions contemplated by this
Agreement (including any currency or interest rate hedging activities in
connection with the transactions contemplated hereby), including (x) all fees
and expenses of counsel, investment banking firms, financial advisors
(regardless of whether such financial advisors are affiliates of Crescent),
accountants, experts and consultants to Crescent or any of their affiliates and
(y) all fees and expenses payable to banks, investment banking firms and other
financial institutions and their respective counsel, accountants and agents in
connection with arranging or providing financing) (fees and expenses under
clause (y) collectively, "Financing Fees," and the fees and expenses
contemplated by this paragraph (c), collectively, the "Expenses").
(d) The parties acknowledges that the agreements contained in paragraphs
(b) and (c) of this Section 5.7 are an integral part of the transactions
contemplated by this Agreement, and that, without these agreements, neither
would enter into this Agreement; accordingly, if any person fails to pay
promptly any amount due pursuant to this Section 5.7 and, in order to obtain
such payment, another party commences a suit that results in a judgment for
any such amount, the party against whom the judgment is rendered shall pay to
the complaining party its cost and expenses (including attorneys' fees) in
connection with such suit together with interest on the amount of the fee at
the prime or base rate of Citibank, N.A. from the date such payment was due
under this Agreement.
Section 5.8 STOCK OPTIONS.
(a) As of the Effective Time, each Company Stock Option that is outstanding
immediately prior to the Effective Time pursuant to the stock option plans that
are part of the Company's Stock Compensation Program (and excluding any "stock
purchase plan" within the meaning of Section 423 of the Code) in effect on the
date hereof (the "Stock Plans") shall
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be assumed by Crescent and become and represent a fully exercisable option to
purchase the number of Common Shares (a "Substitute Option") (decreased to
the nearest full share) determined by multiplying (i) the number of shares of
Company Common Stock subject to such Company Stock Option immediately prior
to the Effective Time by (ii) the Exchange Ratio, at an exercise price per
Common Share (rounded up to the nearest tenth of a percent) equal to the
exercise price per share of Company Common Stock immediately prior to the
Effective Time. Crescent shall pay cash to holders of Company Stock Options
in lieu of issuing fractional Common Shares upon the exercise of Substitute
Options. As of the Effective Time, each Substitute Option shall be subject
to the same terms and conditions as were applicable immediately prior to the
Effective Time under the related Company Stock Option and Stock Plan under
which it was granted, including those providing for the accelerated
exercisability and other special rights arising upon an "Acceleration Event"
in accordance with the terms of such Stock Plan. The Company agrees to use
all reasonable efforts to obtain any necessary consents of holders of Company
Stock Options and take such other actions as may be necessary to effect this
Section 5.8. The accelerated lapse of restrictions and other special rights
with respect to any shares of restricted Company Common Stock issued under
the Stock Plans shall also be preserved following the Effective Time in
accordance with the terms of the Stock Plans.
(b) In respect of each Company Stock Option as converted into a
Substitute Option pursuant to Section 5.8(a) and assumed by Crescent, and the
Common Shares underlying such option, Crescent shall file and keep current a
registration statement on Form S-8 (or a post-effective amendment to a
Registration Statement on Form S-8) or other appropriate form for as long as
such options remain outstanding and shall reserve sufficient Common Shares
for issuance upon exercise of such Substitute Options.
(c) The provisions of this Section 5.8 are intended to be for the
benefit of, and shall be enforceable by, each person who is or has been an
employee of the Company or any of its Subsidiaries and is a holder of Company
Stock Options under the Stock Plans, and such employee's heirs and personal
representatives and shall be binding on all successors and assigns of
Crescent.
Section 5.9 REASONABLE EFFORTS.
(a) Upon the terms and subject to the conditions set forth in this
Agreement, each of the parties agrees to use all reasonable efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, and to
assist and cooperate with the other parties in doing, all things necessary,
proper or advisable to consummate and make effective, in the most expeditious
manner practicable, the Merger and the other transactions contemplated by
this Agreement, including, but not limited to: (i) obtaining all necessary
actions or non-actions, waivers, consents and approvals from all Governmental
Entities and making all necessary applications, registrations and filings
(including filings with Governmental Entities) and taking all reasonable
steps as may be necessary to obtain an approval or waiver from, or to avoid
an action or proceeding by, any Governmental Entity (including those in
connection with the HSR Act, state takeover statutes and Gaming Laws), (ii)
obtaining all necessary consents,
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approvals or waivers from third parties, (iii) defending any lawsuits or
other legal proceedings, whether judicial or administrative, challenging this
Agreement or the consummation of the transactions contemplated hereby,
including seeking to have any stay or temporary restraining order entered by
any court or other Governmental Entity with respect to the Merger or this
Agreement vacated or reversed, (iv) taking any and all actions necessary to
satisfy all of the conditions applicable to such party as set forth in
Article VI of this Agreement, and (v) executing and delivering any additional
instruments necessary to consummate the transactions contemplated by this
Agreement.
(b) Each of the Company and Crescent shall use all reasonable efforts
not to take any action that, in any such case, might reasonably be expected
to (i) cause any of the representations or warranties made by it in this
Agreement that is qualified as to materiality to be untrue, (ii) cause any of
the representations or warranties made by it contained in this Agreement that
is not so qualified to be untrue in any material respect, (iii) result in a
breach of any covenant made by it in this Agreement, (iv) result directly or
indirectly in any of the conditions to the Merger set forth in Article VI not
being satisfied or (v) impair the ability of the parties to consummate the
Merger at the earliest practicable time (regardless of whether such action
would otherwise be permitted or not prohibited hereunder).
(c) The Company shall use its reasonable best efforts to restructure its
existing leases prior to the Effective Time so that the terms thereof shall
conform to the provisions of Section 22.3 of the Master Lease Agreement (as
hereinafter defined).
Section 5.10 PUBLIC ANNOUNCEMENTS. Crescent and the Company will not
issue any press release with respect to the transactions contemplated by this
Agreement or otherwise issue any written public statements with respect to
such transactions (i) prior to ten business days from the date hereof, unless
otherwise agreed, and (ii) without prior consultation with each other party,
except as may be required by applicable law.
Section 5.11 TRANSFER AND GAINS TAX. Crescent will pay any federal,
state, local, foreign or provincial tax which is attributable to the transfer
of the beneficial ownership of the Company's or its Subsidiaries' real and
personal property, if any (collectively, the "Gains Taxes"), any penalties or
interest with respect to the Gains Taxes, payable in connection with the
consummation of the Merger (except as otherwise provided in Section 1.7), any
federal, state, local, foreign or provincial tax which is attributable to the
transfer of Company Common Stock or Common Shares pursuant to the terms of
this Agreement (collectively, "Stock Transfer Taxes") and any penalties or
interest with respect to any such Stock Transfer Taxes. The Company and
Crescent agree to cooperate with the other in the filing of any returns with
respect to the Gains Taxes, including supplying in a timely manner a complete
list of all real property interests held by the Company and its Subsidiaries
and any information with respect to such property that is reasonably
necessary to complete such returns. The portion of the consideration
allocable to the real property of the Company and its Subsidiaries shall be
agreed to between Crescent and the Company. The stockholders of the Company
shall be deemed to have agreed to be bound by the allocation established
pursuant to this Section 5.11 in the preparation of any return with respect
to the Gains Taxes.
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Section 5.12 STATE TAKEOVER LAWS. If any "fair price," "business
combination" or "control share acquisition" statute or other similar statute
or regulation shall become applicable to the transactions contemplated
hereby, Crescent and the Company and their respective Boards of Trust
Managers or Directors, as the case may be, shall use all reasonable efforts
to grant such approvals and take such actions as are necessary so that the
transactions contemplated hereby may be consummated as promptly as
practicable on the terms contemplated hereby and shall otherwise act to
minimize the effects of any such statute or regulation on the transactions
contemplated hereby.
Section 5.13 INDEMNIFICATION; DIRECTORS AND OFFICERS INSURANCE.
(a) Crescent agrees that all rights to indemnification and exculpation
from liabilities for acts or omissions occurring prior to the Effective Time
now existing in favor of the current or former directors or officers of the
Company and its Subsidiaries as provided in their respective articles or
certificates of incorporation or by-laws (or comparable organizational
documents) and any indemnification agreements of the Company shall survive
the Merger and shall continue in full force and effect in accordance with
their terms for a period of not less than five years from the Effective Time
and the obligations of the Company in connection therewith shall be assumed
by Crescent. Crescent shall provide, or shall cause the Surviving Entity to
provide, the Company's current directors and officers an insurance and
indemnification policy (including any fiduciary liability policy) that
provides coverage with respect to any claims made during the five-year period
following the Effective Time for events occurring prior to the Effective Time
(the "D&O Insurance") that is substantially similar to the Company's existing
policies or, if substantially equivalent insurance coverage is unavailable,
the best available coverage; provided, however, that the Surviving Entity
shall not be required to pay an annual premium for the D&O insurance in
excess of 120 percent of the last annual premium paid prior to the date
hereof (which premium the Company represents and warrants to be approximately
$540,000 in the aggregate), but if such annual premium would but for this
proviso exceed such amount, then Crescent shall purchase as much coverage as
possible for such amount.
(b) The provisions of this Section 5.13 are intended to be for the
benefit of, and shall be enforceable by, each person who is or has been a
director or officer of the Company or a subsidiary of the Company, and such
director's or officer's heirs and personal representatives and shall be
binding on all successors and assigns of Crescent.
Section 5.14 NOTIFICATION OF CERTAIN MATTERS. Crescent shall use all
reasonable efforts to give prompt notice to the Company, and the Company
shall use all reasonable efforts to give prompt notice to Crescent, of: (i)
the occurrence, or nonoccurrence, of any event the occurrence, or
nonoccurrence, of which it is aware and which would be reasonably likely to
cause (x) any representation or warranty contained in this Agreement to be
untrue or inaccurate in any material respect or (y) any covenant, condition
or agreement contained in this Agreement not to be complied with or satisfied
in all material respects, (ii) any failure of either Crescent or the Company,
as the case may be, to comply in a timely manner with or satisfy any
covenant, condition or agreement to be complied with or satisfied by it
hereunder
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or (iii) any event, change or development that, individually or in the
aggregate, has had, or would reasonably be expected to have, a Material
Adverse Effect on Crescent or the Company, as the case may be; provided,
however, that the delivery of any notice pursuant to this Section 5.14 shall
not limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
Section 5.15 RIGHTS AGREEMENT. The Board of Directors of the Company
shall take all further action (in addition to that referred to in Section
3.16) requested in writing by Crescent (including redeeming the Rights
immediately prior to the Effective Time of the Merger or amending the Rights
Agreement) in order to render the Rights inapplicable to the Merger and the
other transactions contemplated by this Agreement. Except as requested in
writing by Crescent, prior to the Company Stockholder Meeting, the Board of
Directors of the Company shall not (i) amend the Rights Agreement or (ii)
take any action with respect to, or make any determination under, the Rights
Agreement (including a redemption of the Rights).
Section 5.16 SCHEDULES, EXHIBITS AND DISCLOSURE LETTERS. Whenever, in
this Agreement, reference is made to a schedule, exhibit or disclosure letter
(or other similar provision for information to be made available), such
schedule, exhibit or disclosure letter (or other similar provision of
information) must be provided in writing and by the appropriate party on the
date of execution of this Agreement, and actually received by the other
parties hereto, and no such schedule, exhibit or disclosure letter (or other
similar provision of information) shall be effective if provided after such
date.
Section 5.17 PREFERRED STOCK INVESTMENT. At the option of the Company,
Crescent agrees to purchase from the Company up to an aggregate of 115,000
shares of a new series of preferred stock of the Company with the
designations, rights, preferences and other terms set forth in the
Certificate of Resolution attached hereto as Schedule 5.17 (the "Redeemable
Preferred Stock"). Each share of Redeemable Preferred Stock shall be
purchased at a price of $1,000 per share (plus accrued dividends from the
previous regular quarterly dividend payment date or, if there has not yet
been a regular quarterly dividend payment date, then as of the date hereof,
based on a 365-day year) in cash in increments of 5,000 shares. Subject to
the conditions below, Crescent must fund the purchase price for the purchase
of shares on the 10th business day following the date of a notice from the
Company to Crescent (a "Draw Notice") stating the number of shares of
Redeemable Preferred Stock to be sold to Crescent on such 10th business day
and the aggregate amount to be paid for such shares; provided that for
purchases of 25,000 shares or more, the date of such purchase shall be the
20th business day following the date of such Draw Notice. Notwithstanding the
foregoing, Crescent shall not be required to purchase shares of Redeemable
Preferred Stock (i) more than two times in any 30-day period (ii) unless, on
the purchase date set forth in a Draw Notice (A) the representations and
warranties of the Company set forth in Article II are true and correct in all
material respects and (B) the Company has not breached any of its covenants
set forth in this Agreement in any material respect, and (iii) unless, the
number of shares to be purchased, plus the aggregate number of shares then
outstanding, does not exceed 115,000. Unless written consent is received from
Crescent, the Company agrees to use the net proceeds from sales of
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shares of Redeemable Preferred Stock to repay indebtedness under the
Company's Amended and Restated Reducing Revolving Loan Agreement dated as of
March 19, 1996, as amended, borrowings under which were used for acquisitions
and master-planned expansions. The parties agree that the provisions of this
Section 5.17 shall survive any termination of this Agreement. Crescent agrees
to vote all shares of the Company's equity securities held by Crescent in
favor of the Merger, and any transferee of the Redeemable Preferred Stock
shall be subject to such agreement to vote in favor of the Merger.
Section 5.18 JOINT VENTURE. The parties anticipate that Crescent
Operating, Inc. ("COI") will serve as one of the parties to an Agreement of
Limited Partnership by and among (i) COI and certain of its affiliates and
(ii) entities owned by certain members of the Company's existing management
(the "Operating Joint Venture"). Pursuant to the obligation of Crescent Real
Estate Equities Limited Partnership ("Crescent OP") to offer the opportunity
to participate in the Operating Joint Venture to COI under that certain
Intercompany Agreement to which they are parties, promptly following the date
of this Agreement, Crescent will cause Crescent OP to make such offer. In
the event that COI does not accept the offer to become a party to the
Operating Joint Venture, Crescent shall promptly take all necessary action to
provide another entity to serve in that capacity at the Effective Time (COI
or the entity serving in such capacity being referred to herein as the "JV
Parent"). Frank J. Fertitta III, Lorenzo J. Fertitta and Blake L. Sartini
(the "Ownership Group") shall form an entity (the "Company JV Parent") and
cause such entity to enter into the Agreement of Limited Partnership, and the
Company shall cause an additional entity (i) to be formed by other members of
its management and (ii) to enter into the Agreement of Limited Partnership.
A form of the Agreement of Limited Partnership is attached hereto as SCHEDULE
5.18(i).
The Company shall sell, assign, transfer and convey, prior to the
Effective Time, to the Operating Joint Venture, as directed by Crescent and with
Crescent's approval, certain of the Company's non-real estate assets pursuant to
the Bill of Sale attached hereto as SCHEDULE 5.18(ii).
At the Effective Time, Crescent shall enter into, through Crescent
OP, and shall cause the JV Parent and the Ownership Group shall cause the
Company JV Parent to enter into, on behalf of the Operating Joint Venture,
one or more master lease agreements, in the form of SCHEDULE 5.18(iii)
attached hereto (the "Master Lease Agreement"), with the Operating Joint
Venture; provided, however, that (i) Crescent shall have the option (on a
lease-by-lease basis), prior to the Effective Date, to include a provision in
the Master Lease Agreement that, as to any sublease that does not conform to
the requirements of the Master Lease Agreement as to subleases, the
percentage rent provided for in the Master Lease Agreement will be computed
to exclude any revenues from such sublease, and (ii) the parties shall make
such revisions to the definition of "Gross Revenues" and "Gross Winnings"
contained in the Master Lease Agreement as shall be necessary to comply with
the provisions of Section 856 of the Code relating to rents from real
property not based on profits. The parties acknowledge that Crescent and
the Ownership Group have entered into a letter agreement of even date
herewith regarding the terms upon which the Master Lease Agreement will be
executed.
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At or prior to the Effective Time, the Company shall assign, and
Crescent , the Company and the Ownership Group shall cause the Operating
Joint Venture to assume the employment agreements (the "Employment
Agreements") of each of Frank J. Fertitta III, Glenn C. Christenson, Blake L.
Sartini, Scott M. Nielson, and William W. Warner (the "Key Executives") and
the other management employees listed on SCHEDULE 5.18(iv) hereto (the
"Management Employees") and the Company Plans other than the Stock Plans. At
such time, Crescent shall cause the JV Parent to guarantee, in the form of
SCHEDULE 5.18(v), the performance by the Operating Joint Venture of its
obligations under such Employment Agreements and Company Plans (the "JV
Parent Guarantee"); provided that the JV Parent Guarantee shall be
subordinate to all obligations of the JV Parent to Crescent. In addition,
Crescent shall unconditionally guarantee, in the form of SCHEDULE 5.18(vi),
the performance by the JV Parent of its obligations under the JV Parent
Guarantee with respect only to the Key Executives (the "Crescent Guarantee"),
without regard to any such subordination. The obligations of the JV Parent
to execute the JV Parent Guarantee and Crescent to execute the Crescent
Guarantee as to any person shall be conditioned on such person accepting
employment with the Operating Joint Venture. The Company shall use its best
efforts to cause each of the Management Employees and the Key Executives to
consent to the assignment of such employee's employment agreement to the
Operating Joint Venture. The rights and benefits of the Management Employees
and the Key Executives under the employment agreements after the assignment
to the Operating Joint Venture shall be at least as favorable to such persons
as they were immediately prior to such assignment: with the only changes
being: (i) the substitution of the Operating Joint Venture as the employer;
(ii) the substitution of the Operating Joint Venture as the primary obligor
under such Company Plans and (iii) an amendment to the Employment Agreement
of Frank J. Fertitta III to include a non-competition provision identical to
that included in the other Employment Agreements in the form of SCHEDULE
5.18(vii). Any such assignment and acceptance of employment shall not be
deemed to imply in any way that the change-of-control provisions of such
agreements and plans have not been triggered with respect to
changes-of-control payments or terminations after a change-of-control. In
addition, the parties agree that all securities issuable, or any compensation
based on the market value of specified securities, under any of the Company
Plans other than the Stock Plans shall be issued in the form of, and shall be
based on the market value of, the common stock of the JV Parent.
Section 5.19 INTENTIONALLY OMITTED.
Section 5.20 THIRD PARTY BENEFICIARY. Crescent's obligations under (i)
Section 5.18 with respect to the employment of the Key Executives, (ii)
Section 6.2(i) with respect to the appointment of Frank J. Fertitta III and
Lorenzo J. Fertitta to the Board of Trust Managers of Crescent, and (iii)
Section 5.22 with respect to the Registration Rights and Lock-Up Agreements
shall be deemed to be for the benefit of each of those individuals, and the
Ownership Group, respectively, as well as the Company, and each of those
individuals, respectively, shall have a direct right of action, as a third
party beneficiary or otherwise, against Crescent for any breach thereof.
Neither the Company nor Crescent shall amend, modify or waive any of the
aforementioned provisions, without the express written consent of each of the
aforementioned individuals affected thereby.
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Section 5.21 LIABILITY OF CRESCENT UNDER COMPANY PLANS AND EMPLOYMENT
AGREEMENTS. Except for the Stock Plans referred to in Section 5.8 and the
obligations of Crescent described in Section 5.18, Crescent shall not have,
and the Company shall take all steps within its control to assure that
Crescent shall not have, any obligation or liability under any of the Company
Plans or any employment agreement to which the Company is a party that is now
or hereafter in effect.
Section 5.22 AGREEMENT WITH MANAGEMENT. Crescent and each member of
the Ownership Group shall enter into Registration Rights and Lock-Up
Agreements in the form of SCHEDULE 5.22 attached hereto.
Section 5.23 CORPORATE RESTRUCTURING. The Company shall merge all of
its Subsidiaries with and into itself, such that on the Closing Date the
Company shall have no Subsidiaries.
Section 5.24 REIT-RELATED TRANSACTIONS. The Company shall take such
further actions and engage in such further transactions as determined by
Crescent to be reasonably necessary, in the opinion of counsel to Crescent,
to preserve Crescent's status as a "real estate investment trust" under the
Code, so long as such actions have no adverse economic effect on the Company
and its stockholders in the event the Merger is not consummated.
ARTICLE VI
CONDITIONS PRECEDENT TO THE MERGER
Section 6.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER.
The respective obligations of the parties to effect the Merger shall be
subject to the fulfillment (or waiver by such party) at or prior to the
Effective Time of the following conditions:
(a) STOCKHOLDER APPROVAL. At or prior to the Effective Time, this
Agreement shall have been duly approved by the requisite vote of holders of
the Company Common Stock and Convertible Preferred Stock in accordance with
applicable law and the Articles of Incorporation and Bylaws of the Company.
(b) STOCK EXCHANGE LISTINGS. The Common Shares and the Crescent
Convertible Preferred Shares issuable in the Merger and pursuant to the
Substitute Options shall have been authorized for listing on the NYSE,
subject to official notice of issuance.
(c) HSR AND OTHER APPROVALS.
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(i) The waiting period (and any extension thereof) applicable to the
consummation of the Merger under the HSR Act shall have expired or been
earlier terminated.
(ii) All consents, approvals, orders or authorizations of or
registrations, declarations or filings with any Governmental Entity, which
the failure to obtain, make or occur would reasonably be expected to have a
Material Adverse Effect on the Company (assuming the Merger had taken place),
shall have been obtained, shall have been made or shall have occurred, and
shall be in full force and effect.
(iii) All consents, approvals, findings of suitability, licenses,
permits, orders or authorizations of and registrations, declarations or
filings with any Governmental Entity with jurisdiction in respect of Gaming
Laws, in each case, required or necessary in connection with the Merger and
this Agreement and the transactions contemplated by this Agreement
(including, but not limited to, approval, licensing or registration of (i)
Crescent and its officers, trust managers and shareholders, as necessary and
(ii) the Operating Joint Venture and any of its subsidiaries) shall have been
obtained and made and shall be in full force and effect.
(d) REGISTRATION STATEMENT. The Registration Statement shall have
become effective in accordance with the provisions of the Securities Act. No
stop order suspending the effectiveness of the Registration Statement shall
have been issued by the SEC and no proceedings for that purposes shall have
been initiated or, to the knowledge of Crescent or the Company, threatened by
the SEC. All necessary state securities or blue sky authorizations shall
have been received.
(e) NO ORDER. No court or other Governmental Entity having
jurisdiction over the Company or Crescent, or any of its respective
Subsidiaries, shall (after the date of this Agreement) have enacted, issued,
promulgated, enforced or entered any law, rule, regulation, executive order,
decree, injunction or other order (whether temporary, preliminary or
permanent) which is then in effect and has the effect of making the Merger or
any of the transactions contemplated hereby illegal; provided, however, that
each of the parties shall have used all reasonable efforts to prevent and to
appeal as promptly as possible any such law, rule, regulation, executive
order, decree, injunction or other order.
(f) CHANGE IN TAX LAWS.
(i) There shall not have been any federal legislative or
regulatory change that would cause Crescent to cease to qualify as a "real
estate investment trust" for federal income tax purposes.
(ii) There shall not have been any federal legislative or
regulatory change that would cause the Merger to be taxable to any of
Crescent, the Company, the shareholders of Crescent or the stockholders of
the Company.
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(g) AGREEMENTS WITH MANAGEMENT. The Operating Joint Venture, the
Company JV Parent and the Ownership Group shall have entered into a Right of
First Refusal and Non-Competition Agreement in the form of SCHEDULE 6.1(G).
Section 6.2 CONDITIONS TO OBLIGATION OF THE COMPANY TO EFFECT THE
MERGER. The obligation of the Company to effect the Merger shall be subject
to the fulfillment (or waiver by the Company) at or prior to the Effective
Time of the following additional conditions:
(a) PERFORMANCE OF OBLIGATIONS; REPRESENTATIONS AND WARRANTIES.
Crescent shall have performed each of its agreements contained in this
Agreement required to be performed at or prior to the Effective Time, each of
the representations and warranties of Crescent contained in this Agreement
that is qualified as to materiality shall be true and correct at and as of
the Effective Time as if made at and as of such time (other than
representations and warranties which address matters only as of a certain
date, which shall be true and correct as of such certain date) and each of
the representations and warranties that is not so qualified shall be true and
correct in all material respects at and as of the Effective Time as if made
on and as of such date (other than representations and warranties which
address matters only as of a certain date, which shall be true and correct in
all material respects as of such certain date), in each case except as
contemplated or permitted by this Agreement, and the Company shall have
received certificates signed on behalf of each of Crescent by its Vice
Chairman, President and Chief Executive Officer or Senior Vice President, Law
and Secretary and its Senior Vice President, Chief Financial and Accounting
Officer to such effect.
(b) CONSENTS UNDER AGREEMENTS. Crescent shall have obtained the
consent or approval of each person that is not a Governmental Entity whose
consent or approval shall be required in connection with the transactions
contemplated hereby under any loan or credit agreement, note, mortgage,
indenture, lease, hotel management agreement, joint venture agreement or
other agreement or instrument to which Crescent or a Subsidiary is a party,
except as to which the failure to obtain such consents and approvals,
individually or in the aggregate, would not be expected, in the reasonable
opinion of Company, to have a Material Adverse Effect on the Crescent or upon
the consummation of the transactions contemplated in this Agreement.
(c) NO LITIGATION. There shall not be pending or threatened any suit,
action or proceeding by any Governmental Entity or any other person, or
before any court or governmental authority, agency or tribunal, domestic or
foreign, in each case that has a significant likelihood of success
challenging the acquisition by Crescent of any shares of Company Common
Stock, seeking to restrain or prohibit the consummation of the Merger or any
of the other transactions contemplated by this Agreement or seeking to obtain
from Crescent any damages that are material in relation to the Company,
Crescent and its Subsidiaries taken as a whole.
(d) TAX OPINION. On the Closing Date, the opinion of Shaw, Pittman,
Potts & Trowbridge, counsel to Crescent, shall have been delivered to the
Company in form and substance reasonably satisfactory to the Company stating
(i) that Crescent is a "real estate
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investment trust" for federal income tax purposes, (ii) that consummation of
the transactions contemplated by this Agreement will not cause Crescent to
cease to qualify as a "real estate investment trust" for federal income tax
purposes, and (iii) that the Merger will be treated for Federal income tax
purposes as a reorganization within the meaning of section 368(a) of the
Code, and that each of Crescent and the Company will be a party to that
reorganization within the meaning of section 368(b) of the Code. Such
counsel shall not unreasonably refuse to deliver such opinion, and issues
relating to the subsequent transfer of the assets from Crescent to the
Crescent OP shall not constitute a reasonable basis for refusal to render
such opinion. In rendering such opinion, such counsel shall be entitled to
rely upon representations made in this Agreement or requested by such counsel
and made by Crescent and the Crescent OP, and on representations requested by
such counsel and made by the Company.
(e) LEGAL OPINION. The Company shall have received an opinion of Shaw,
Pittman, Potts & Trowbridge, counsel to Crescent, dated the Closing Date,
substantially in the form attached as SCHEDULE 6.2(e).
(f) COMFORT LETTER. The Company shall have received, in form and
substance reasonably satisfactory to the Company, from Arthur Anderson LLP,
Crescent's independent public accountants, the "comfort" letter described in
Section 5.3(b).
(g) PREFERRED STOCK INVESTMENT. Crescent shall have performed all of
its obligations, if any, pursuant to Section 5.17 hereof, in all material
respects.
(h) COMPANY PLANS. The Operating Joint Venture shall have assumed all
obligations under and adopted the Company Plans (other than the Stock Plans
referred to in Section 5.8), without regard to materiality. The Operating
Joint Venture shall have agreed to honor without modification or contest, and
to make required payments when due under, all Company Plans (as defined
herein, but without regard to materiality) in accordance with their terms as
of the date of this Agreement (as modified to the extent permitted by this
Agreement). The Operating Joint Venture shall have agreed to employ at their
current locations each person who is an employee of the Company immediately
prior to the Effective Time (the "Affected Employees") on terms no less
favorable in the aggregate (including with respect to position, duties,
responsibilities, compensation, incentives and location) than those provided
on the date hereof to the Affected Employees. The Operating Joint Venture
shall have agreed to provide each Affected Employee with benefits that are at
least equivalent in the aggregate to the benefits provided to each such
Affected Employee immediately prior to the Effective Time. Crescent agrees
that, for purposes of all employee benefit plans (including, but not limited
to, all "employee benefit plans" within the meaning of Section 3(3) of ERISA,
and all policies and employee fringe benefit programs, including vacation
policies) of the Operating Joint Venture (such plans, programs, policies and
arrangements, the "Buyer Plans") in which the Affected Employees may
participate following the Effective Time under which an employee's
eligibility or benefits depends, in whole or in part, on length of service,
credit will be given to the Affected Employees for service previously
credited with the Company or any affiliates of the Company prior to the
Effective Time, provided, that such crediting of
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service does not result in duplication of benefits, and provided that such
crediting of service shall not be given for benefit accrual purposes under
any Buyer Plan that is a defined benefit plan. Affected Employees shall also
be given credit for any deductible or co-payment amounts paid in respect of
the plan year in which the Effective Time occurs, to the extent that,
following the Effective Time, they participate in any Buyer Plan for which
deductibles or co-payments are required. The Operating Joint Venture shall
have caused each Buyer Plan to waive (i) any preexisting condition
restriction or (ii) waiting period limitation which would otherwise be
applicable to an Affected Employee on or after the Effective Time. On or
prior to the Effective Time, the Operating Joint Venture shall have assumed
all liabilities and obligations whatsoever for all accrued benefits under the
Company 401(k) Plan in respect of the Affected Employees and Crescent shall
be relieved of all such liabilities and obligations. Crescent and the
Company shall cooperate in the filing of documents required, if any, by the
transfer of assets and liabilities described herein.
(i) ADDITIONAL DIRECTORS. Frank J. Fertitta III and Lorenzo J.
Fertitta shall have become members of the Boards of Trust Managers of
Crescent and the Board of Directors of the JV Parent.
Section 6.3 CONDITIONS TO OBLIGATIONS OF CRESCENT to Effect the
Merger. The obligations of Crescent to effect the Merger shall be subject to
the fulfillment (or waiver by Crescent) at or prior to the Effective Time of
the following additional conditions:
(a) PERFORMANCE OF OBLIGATIONS; REPRESENTATIONS AND WARRANTIES. The
Company shall have performed each of its agreements contained in this
Agreement required to be performed at or prior to the Effective Time, each of
the representations and warranties of the Company contained in this Agreement
that is qualified as to materiality shall be true and correct at and as of
the Effective Time as if made at and as of such time (other than
representations and warranties which address matters only as of a certain
date, which shall be true and correct as of such certain date) and each of
the representations and warranties that is not so qualified shall be true and
correct in all material respects at and as of the Effective Time as if made
on and as of such date (other than representations and warranties which
address matters only as of a certain date, which shall be true and correct in
all material respects as of such certain date), in each case except as
contemplated or permitted by this Agreement, and Crescent shall have received
a certificate signed on behalf of the Company by its Chief Executive Officer
and its Chief Financial Officer to such effect.
(b) CONSENTS UNDER AGREEMENTS. The Company shall have obtained any
amendments, waivers, consents or approvals with respect to the agreements and
documents listed on Schedule 6.3(b) attached hereto, as Crescent shall
reasonably request.
(c) LETTERS FROM COMPANY AFFILIATES. Crescent shall have received from
each person named in the list referred to in Section 5.5 an executed copy of
an agreement substantially in the form of Schedule 6.3(c) hereto.
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(d) NO LITIGATION. There shall not be pending or threatened any suit,
action or proceeding by any Governmental Entity or any other person that has
a significant likelihood of success (i) seeking to restrain or prohibit the
consummation of the Merger or any of the other transactions contemplated by
this Agreement or seeking to obtain from the Company any damages that are
material in relation to the Company, Crescent and their respective
Subsidiaries taken as a whole, (ii) seeking to prohibit or limit the
ownership or operation by the Company, Crescent or any of its respective
Subsidiaries of any material portion of the combined business or assets of
the Company, Crescent and their respective Subsidiaries, or to compel the
Company, Crescent or their respective Subsidiaries to dispose of or hold
separate any material portion of the combined business or assets of the
Company, Crescent and their respective Subsidiaries, as a result of the
Merger or any of the other transactions contemplated by this Agreement, (iii)
seeking to impose limitations on the ability of Crescent to acquire or hold,
or exercise full rights of ownership of, any shares of Company Common Stock
or Convertible Preferred Stock, including, without limitation, the right to
vote any Company Common Stock or Convertible Preferred Stock purchased by it
on all matters properly presented to the stockholders of the Company, (iv)
except as set forth in the Company SEC Documents, seeking to prohibit
Crescent or any of its Subsidiaries from effectively controlling in any
material respect the business or operations of the Company or its
Subsidiaries or (v) which otherwise would reasonably be expected to have a
Material Adverse Effect on the Company; other than any suit, action or
proceedings against the Company or its Subsidiaries seeking to revoke any
gaming licenses or require any modification of the Company's hotel/casino
facility located in Kansas City, Missouri.
(e) RIGHTS AGREEMENT. The Rights shall not have become nonredeemable,
exercisable, distributed or triggered pursuant to the terms of the Rights
Agreement.
(f) TAX OPINION. On the Closing Date, the opinion of Shaw, Pittman,
Potts & Trowbridge, counsel to Crescent, shall have been delivered to
Crescent in form and substance reasonably satisfactory to Crescent stating
(i) that Crescent is a "real estate investment trust" for federal income tax
purposes, (ii) that consummation of the transactions contemplated by this
Agreement will not cause Crescent to cease to qualify as a "real estate
investment trust" for federal income tax purposes, and (iii) that the Merger
will be treated for Federal income tax purposes as a reorganization within
the meaning of section 368(a) of the Code, and that each of Crescent and the
Company will be a party to that reorganization within the meaning of section
368(b) of the Code. Also on the Closing Date, the opinion of Shaw, Pittman,
Potts & Trowbridge shall have been delivered to Crescent in form and
substance reasonably satisfactory to Crescent stating that, except as
disclosed in this Agreement or in the SEC Documents, (i) the transactions
contemplated by Section 5.18 shall have complied in all respects with
applicable law, (ii) to the extent applicable, such transactions shall have
been effective to transfer the full and complete interest in and rights with
respect to the disposed assets and (iii) such transactions are not the
subject of any pending or threatened claim or challenge by any person. Such
counsel shall not unreasonably refuse to deliver such opinions, and issues
relating to the subsequent transfer of the assets from Crescent to Crescent
OP shall not constitute a reasonable basis for refusal to render the
opinions. In rendering such
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opinions, such counsel shall be entitled to rely upon representations
requested by such counsel and made by Crescent.
(g) RESIGNATIONS. Crescent shall have received the resignations of
each officer and director of the Company and each of its Subsidiaries.
(h) COMFORT LETTER. Crescent shall have received, in form and
substance reasonably satisfactory to Crescent, from Arthur Anderson LLP, the
Company's independent public accountants, the "comfort" letter described in
Section 5.3(a).
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 7.1 TERMINATION. This Agreement may be terminated at any time
prior to the Effective Time, whether before or after approval of any matters
presented in connection with the Merger by the stockholders of the Company:
(a) by mutual written consent of Crescent and the Company;
(b) by either Crescent or the Company if there has been a material
breach of the representations, warranties, covenants and agreements on the
part of the other set forth in this Agreement, which breach has not been
cured within ten business days following receipt by the breaching party of
notice of such breach from the nonbreaching party;
(c) by either Crescent or the Company if any permanent order, decree,
ruling or other action of a court or other competent authority restraining,
enjoining or otherwise preventing the consummation of the Merger shall have
become final and non-appealable;
(d) by either Crescent or the Company if the Merger shall not have been
consummated before January 31, 1999, unless the failure to consummate the
Merger is the result of a material breach of this Agreement by the party
seeking to terminate this Agreement; provided, however, that the passage of
such period shall be tolled for any part thereof during which any party shall
be subject to a nonfinal order, decree, ruling or other action restraining,
enjoining or otherwise preventing the consummation of Merger;
(e) by either Crescent or the Board of Directors of the Company if any
required approval of the Merger by the holders of each class of capital stock
of the Company shall not have been obtained by reason of the failure to
obtain the required vote upon a vote held at a duly held meeting of such
stockholders or at any adjournment thereof;
(f) by Crescent if the Board of Directors of the Company shall or shall
resolve to (i) not recommend, or withdraw its approval or recommendation of,
the Merger, this Agreement or any of the transactions contemplated hereby,
(ii) modify such approval or recommendation
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in a manner adverse to Crescent or (iii) approve or recommend a superior
proposal pursuant to Section 4.3(b); or
(g) by the Board of Directors of the Company if (i) to the extent
permitted by Section 4.3(b), the Board of Directors of the Company authorizes
the Company to enter into a binding written agreement concerning a
transaction that constitutes a Superior Proposal and the Company provides
notification to Crescent in accordance with Section 4.3(b), and (ii) Crescent
does not make, within ten business days of receipt of the Company's written
notification of its intention to enter into a binding agreement for a
Superior Proposal, an offer that the Board of Directors of the Company
determines, in good faith after consultation with its financial advisors, is
at least as favorable, from a financial point of view, to the shareholders of
the Company as the Superior Proposal, and (iii) the Company, prior to such
termination has paid to Crescent an amount in cash equal to the sum of the
Crescent Termination Fee plus all Expenses as provided by Section 5.7.
Section 7.2 EFFECT OF TERMINATION. In the event of termination of
this Agreement by either Crescent or the Company, as provided in Section 7.1,
this Agreement shall forthwith become void and there shall be no liability
hereunder on the part of the Company, Crescent or their respective officers,
directors or trust managers (except for Sections 2.16, 3.20 and 5.7, this
Section 7.2 and Article VIII, which shall survive the termination); provided,
however, that nothing contained in this Section 7.2 shall relieve any party
hereto from any liability for any breach of this Agreement and the
obligations under Section 5.17 shall survive the termination.
Section 7.3 AMENDMENT. This Agreement may be amended by the parties
hereto, by or pursuant to action taken by their respective Boards of
Directors or Trust Managers, as the case may be, at any time before or after
approval of the matters presented in connection with the Merger by the
stockholders of the Company, but, after any such approval, no amendment shall
be made which by law requires further approval by such stockholders without
such further approval. This Agreement may not be amended except by an
instrument in writing duly executed by each of the parties hereto.
Section 7.4 WAIVER. At any time prior to the Effective Time, the
parties hereto may (i) extend the time for performance of any of the
obligations or other acts of the other parties hereto, (ii) waive any
inaccuracies in the representations and warranties contained herein or in any
document delivered pursuant hereto and (iii) waive compliance with any of the
Agreements or conditions contained herein which may legally be waived. Any
agreement on the part of a party hereto to any such extension or waiver shall
be valid only if set forth in an instrument in writing duly executed by such
party. The failure of any party to this Agreement to assert any of its
rights under this Agreement or otherwise shall not constitute a waiver of
such rights.
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ARTICLE VIII
GENERAL PROVISIONS
Section 8.1 NON-SURVIVAL OF REPRESENTATIONS AND WARRANTIES. The
representations and warranties in this Agreement or in any instrument
delivered pursuant to this Agreement shall terminate at the Effective Time.
Section 8.2 NOTICES. All notices and other communications hereunder
shall be in writing and shall be deemed given when delivered personally, one
day after being delivered to a nationally recognized overnight courier or
when telecopied (with a confirmatory copy sent by such overnight courier) to
the parties at the following addresses (or at such other address for a party
as shall be specified by like notice):
(a) if to Crescent, to
Crescent Real Estate Equities Company
777 Main Street
Suite 2100
Fort Worth, TX 76102
Attention: Gerald W. Haddock
President and Chief Executive Officer
Facsimile No.: (817) 878-0429
with copies to:
Crescent Real Estate Equities Company
777 Main Street
Suite 2100
Fort Worth, TX 76102
Attention: David M. Dean
Senior Vice President, Law
Facsimile No.: (817) 878-0429
Robert B. Robbins
Shaw, Pittman, Potts & Trowbridge
2300 N Street, N.W.
Washington, D.C. 20037
Facsimile No.: (202) 663-8007
(b) if to the Company, to:
Station Casinos, Inc.
2411 W. Sahara Avenue
Las Vegas, NV 89120
Attention: Scott M Nielson
Facsimile No.: (702) 367-2424
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with a copy to:
Milbank, Tweed, Hadley & McCloy
601 South Figueroa Street
Thirtieth Floor
Los Angeles, CA 90017
Attention: Kenneth J. Baronsky
Eric H. Schunk
Facsimile No.: (213) 629-5063
Section 8.3 INTERPRETATION. When a reference is made in this Agreement
to a Section or Article, such reference shall be to a Section or Article of
this Agreement unless otherwise indicated. The table of contents and
headings contained in this Agreement are for reference purposes only and
shall not affect in any way the meaning or interpretation of this Agreement.
Whenever the words "include," "includes" or "including" are used in this
Agreement, they shall be deemed to be followed by the words "without
limitation".
Section 8.4 COUNTERPARTS. This Agreement may be executed in
counterparts, all of which shall be considered one and the same agreement,
and shall become effective when one or more counterparts have been signed by
each of the parties and delivered to the other parties.
Section 8.5 ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This
Agreement constitutes the entire agreement and supersedes all prior
agreements and understandings, both written and oral, among the parties with
respect to the subject matter hereof, except that the confidentiality and
standstill agreement between the parties shall remain in full force and
effect, provided, further, however, that the Company agrees that such
agreement shall not prohibit Crescent's purchases of the Convertible
Preferred Stock. Any shares so purchased shall be voted in favor of the
Merger and any subsequent transferee from Crescent of the Convertible
Preferred Stock shall be bound by the foregoing voting agreement. Except as
set forth in Section 5.20, this Agreement is not intended to confer upon any
person other than the parties hereto any rights or remedies hereunder.
Section 8.6 GOVERNING LAW. Except to the extent that the laws of the
States of Nevada, Missouri and Louisiana are mandatorily applicable to the
Merger, including, without limitation, the Gaming Laws, this Agreement shall
be governed by, and construed in accordance with, the laws of the State of
Delaware, regardless of the laws that might otherwise govern under applicable
principles of conflicts of laws thereof.
Section 8.7 ASSIGNMENT. Neither this Agreement nor any of the rights,
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties.
Section 8.8 SEVERABILITY. If any term or other provision of this
Agreement is invalid, illegal or incapable of being enforced by any rule of
law or public policy, all other
-55-
terms, conditions and provisions of this Agreement shall nevertheless remain
in full force and effect so long as the economic and legal substance of the
transactions contemplated hereby are not affected in any manner materially
adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
shall negotiate in good faith to modify this Agreement so as to effect the
original intent of the parties as closely as possible in a mutually accepted
manner in order that the transactions contemplated by this Agreement may be
consummated as originally contemplated to the fullest extent possible.
Section 8.9 ENFORCEMENT OF THIS AGREEMENT. The parties hereto agree
that irreparable damage would occur in the event that any of the provisions
of this Agreement were not performed in accordance with their specific
wording or were otherwise breached. It is accordingly agreed that the
parties hereto shall be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to obtain specific performance of the terms
and provisions hereof in any court of the United States or any state having
jurisdiction, such remedy being in addition to any other remedy to which any
party is entitled at law or in equity. In any arbitration, suit or other
proceeding that may be initiated to enforce any of the rights or obligations
created hereunder, the prevailing party shall be entitled to the award of its
costs and expenses, including attorneys' fees in connection with such
arbitration, suit or other proceeding, together with interest on any damages
or other amounts awarded, from the dates on which such damages, costs or
expenses were incurred and until paid, at the prime or base rate of Citibank,
N.A.
-56-
Section 8.10 LIMITED LIABILITY OF SHAREHOLDERS. All persons dealing
with Crescent must look solely to Crescent's property for the enforcement of
any claims against Crescent, as the trust managers, officers, agents and
shareholders of Crescent assume no personal obligations of Crescent, and
their respective properties shall not be subject to claims of any person
relating to such obligation.
IN WITNESS WHEREOF, Crescent and the Company have caused this Agreement
to be signed by their respective officers thereunto duly authorized, and the
members of the Ownership Group have signed this Agreement, all as of the date
first written above.
CRESCENT REAL ESTATE EQUITIES COMPANY
By: /s/ DAVID M. DEAN
--------------------------------
Name: David M. Dean
Title: SVP, Law
STATION CASINOS, INC.
By: /s/ FRANK J. FERTITTA III
--------------------------------
Name:
Title:
SOLELY FOR PURPOSES OF SECTIONS 4.3(c)
AND 5.18:
/s/ FRANK J. FERTITTA III
--------------------------------
Frank J. Fertitta III
/s/ LORENZO J. FERTITTA
--------------------------------
Lorenzo J. Fertitta
/s/ BLAKE L. SARTINI
--------------------------------
Blake L. Sartini
Schedule 5.17
CERTIFICATE OF RESOLUTION ESTABLISHING DESIGNATION,
PREFERENCES AND RIGHTS OF
$100 REDEEMABLE PREFERRED STOCK
of
STATION CASINOS, INC.
Pursuant to Section 78.195 of the Nevada Revised Statutes.
RESOLVED, that pursuant to the authority vested in the Board of Directors
of Station Casinos, Inc., a Nevada corporation (the "Corporation"), by the
Amended and Restated Articles of Incorporation of the Corporation, a series of
Preferred Stock, par value $.01 per share (the "Preferred Stock"), of the
Corporation, be and hereby is created, and that the number of shares thereof and
the voting powers, designations, preferences, limitations, restrictions,
relative rights and distinguishing designation of the shares of such series are
as follows:
Section 1. DESIGNATION AND AMOUNT. The designation of such series of
Preferred Stock authorized by this resolution shall be the $100 Redeemable
Preferred Stock (herein the "$100 Preferred Stock"). The number of shares of
$100 Preferred Stock shall be 115,000, which number may be increased or
decreased by the Board of Directors of the Corporation from time to time;
PROVIDED that no decrease shall reduce such number of shares below the aggregate
number of shares then outstanding plus the number of shares reserved for
issuance. The purchase price for each share of $100 Preferred Stock shall be
$1,000.
Section 2. RANK. All shares of $100 Preferred Stock shall rank prior,
both as to payment of dividends and as to distributions of assets upon
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, to all of the Corporation's now or hereafter issued Common Stock.
The term "Common Stock" shall mean the Common Stock, $.01 par value per share,
of the Corporation as the same exists at the date hereof or as such stock may be
constituted from time to time. All shares of $100 Preferred Stock shall rank on
parity with, both as to payment of dividends and as to distributions of assets
upon liquidation, dissolution or winding up of the Corporation, whether
voluntary or involuntary, to all of the Corporation's outstanding shares of
$3.50 Convertible Preferred Stock.
Section 3. DIVIDENDS. The holders of $100 Preferred Stock shall be
entitled to receive, when, as and if declared by the
-1-
Board of Directors of the Corporation out of funds of the Corporation at the
time legally available therefor, dividends on any shares of Preferred Stock at
the annual rate of $100 per share and no more, which shall be fully cumulative,
shall accrue without interest from January __, 1998 (or if issued after March
15, 1998, then from the day after the quarterly dividend payment date last
preceding the issuance date) and shall be payable in cash quarterly in arrears
on March 15, June 15, September 15 and December 15 of each year, commencing on
the first such quarterly date following the issuance of such share (except that
if any such date is a Saturday, Sunday or legal holiday, then such dividend
shall be payable on the next succeeding day that is not a Saturday, Sunday or
legal holiday) to holder of records as they appear on the stock transfer books
of the Corporation on such record dates, not more than 60 nor less than 10 days
preceding the payment dates for such dividends, as are fixed by the Board of
Directors. For purposes hereof, the term "legal holiday" shall mean any day on
which banking institutions are authorized to close in New York, New York or in
Las Vegas, Nevada.
Subject to the next paragraph of this Section 3, dividends on account of
arrears for any past dividend period may be declared and paid at any time,
without reference to any regular dividend payment date. The amount of
dividends payable per share of $100 Preferred Stock for each quarterly dividend
period shall be computed by dividing the annual amount by four. The amount of
dividends payable for the initial dividend period and any period shorter than a
full quarterly dividend period shall be computed on the basis of a 365-day
year. Holders of $100 Preferred Stock shall not be entitled to any dividend,
whether payable in cash, property or stock, in excess of the full cumulative
dividends on such shares of $100 Preferred Stock.
On each dividend payment date all dividends which shall have accrued on
each share of $100 Preferred Stock outstanding on such dividend payment date
shall accumulate and be deemed to become "due" whether or not there shall be
funds legally available for the payment thereof. Any dividend which shall not
be paid on the dividend payment date on which it shall become due shall be
deemed to be "past due" until such dividend shall be paid or until the share of
$100 Preferred Stock with respect to which such dividend became due shall no
longer be outstanding, whichever is the earlier to occur. No interest, sum of
money in lieu of interest, or other property or securities shall be payable in
respect of any dividend payment or payments which are past due. Dividends paid
on shares of $100 Preferred Stock in an amount less than the total amount of
such dividends at the time accumulated and payable on such shares shall be
allocated pro rata on a share-by-share basis among all such shares at the time
outstanding.
-2-
No dividends or other distributions, other than dividends payable solely
in shares of Common Stock or other capital stock of the Corporation ranking
junior as to dividends and as to liquidation rights to the $100 Preferred Stock
which is neither convertible into, nor exchangeable or exercisable for, any
securities of the Corporation other than Common Stock or other capital stock of
the Corporation ranking junior as to dividends and as to liquidation rights to
the $100 Preferred Stock, shall be paid, or declared and set apart for payment,
and no purchase, redemption or other acquisition shall be made by the
Corporation of, any shares of Common Stock or other capital stock of the
Corporation ranking junior as to dividends or as to liquidation rights to the
$100 Preferred Stock (the "Junior Dividend Stock") unless and until all accrued
and unpaid dividends on the $100 Preferred Stock, including the full dividend
for the then current dividend period, shall have been paid or declared and set
apart for payment and the Corporation is not in default in respect of the
optional redemption of any shares of $100 Preferred Stock.
No full dividends shall be paid or declared and set apart for payment on
any class or series of the Corporation's capital stock ranking, as to
dividends, on a parity with the $100 Preferred Stock (the "Parity Dividend
Stock") for any period unless full cumulative dividends have been, or
contemporaneously are, paid or declared and set apart for such payment on the
$100 Preferred Stock for all dividend payment periods terminating on or prior
to the date of payment of such full cumulative dividends. No full dividends
shall be paid or declared and set apart for payment on the $100 Preferred Stock
for any period unless full cumulative dividends have been, or contemporaneously
are, paid or declared and set apart for payment on the Parity Dividend Stock
for all dividend periods terminating on or prior to the date of payment of such
full cumulative dividends. When dividends are not paid in full upon the $100
Preferred Stock and the Parity Dividend Stock, all dividends paid or declared
and set aside for payment upon shares of $100 Preferred Stock and the Parity
Dividend Stock shall be paid or declared and set aside for payment pro rata so
that the amount of dividends paid or declared and set aside for payment per
share on the $100 Preferred Stock and the Parity Dividend Stock shall in all
cases bear to each other the same ratio that accrued and unpaid dividends per
share on the shares of $100 Preferred Stock and the Parity Dividend Stock bear
to each other.
The Corporation shall not permit any subsidiary of the Corporation to
purchase or otherwise acquire for consideration any shares of the stock of the
Corporation unless the Corporation could, under this Section 3, purchase or
otherwise acquire such shares at such time and in such manner.
-3-
Any reference to "distribution" contained in this Section 3 shall not be
deemed to include any distribution made in connection with any liquidation
dissolution or winding up of the Corporation, whether voluntary or involuntary.
Section 4. LIQUIDATION PREFERENCE. In the event of any liquidation,
dissolution or winding up of the Corporation, whether voluntary or involuntary,
the holders of $100 Preferred Stock shall be entitled to receive out of the
assets of the Corporation, whether such assets are stated capital or surplus of
any nature, an amount equal to the dividends accrued and unpaid thereon to the
date of final distribution to such holders, whether or not declared, without
interest, and a sum equal to $1,000 per share, and no more, before any payment
shall be made or any assets distributed to the holders of Common Stock or any
other class or series of the Corporation's capital stock ranking junior to the
liquidation rights of the $100 Preferred Stock (the "Junior Liquidation Stock").
In the event the assets of the Corporation available for distribution to
stockholders upon any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, shall be insufficient to pay in full the
amounts payable with respect to the $100 Preferred Stock, the $3.50 Convertible
Preferred Stock and any other class or series of the Corporation's capital stock
which may hereafter be created having parity as to liquidation rights with the
$100 Preferred Stock (the "Parity Liquidation Stock"), the holders of the $100
Preferred Stock and the holders of the Parity Liquidation Stock shall share
ratably in any distribution of assets of the Corporation in proportion to the
full respective preferential amounts to which they are entitled (but only to the
extent of such preferential amounts). After payment in full of the liquidation
preferences of the shares of $100 Preferred Stock, the holders of such shares
shall not be entitled to any further participation in any distribution of assets
by the Corporation. Neither a merger, consolidation, or other business
combination of the Corporation with or into another corporation or other entity
nor a sale or transfer of all or part of the Corporation's assets for cash,
securities or other property shall be considered a liquidation, dissolution or
winding up of the Corporation for purposes of this Section 4 (unless in
connection therewith the liquidation of the Corporation is specifically
approved).
The holder of any shares of $100 Preferred Stock shall not be entitled to
receive any payment owned for such shares under this Section 4 until such holder
shall cause to be delivered to the Corporation (i) the certificate(s)
representing such shares of $100 Preferred Stock and (ii) transfer instrument(s)
satisfactory to the Corporation and sufficient to transfer such shares of $100
Preferred Stock to the Corporation free of any adverse interest. As in the case
of the Redemption Price referred
-4-
to below, no interest shall accrue on any payment upon liquidation after the due
date thereof.
Section 5. REDEMPTION AT OPTION OF THE CORPORATION. The Corporation, at
its option, may at any time after the date of first issuance redeem for cash or
shares of Common Stock (as provided below) the $100 Preferred Stock, in whole or
from time to time in part, on any date set by the Board of Directors at the
liquidation preference per share, plus, in each case, an amount equal to all
dividends on the $100 Preferred Stock accrued and unpaid thereon, whether or not
declared or due, to the date fixed for redemption (subject to the right of the
holder of record of shares of $100 Preferred Stock on a record date for the
payment of a dividend on the $100 Preferred Stock to receive the dividend due on
such shares of $100 Preferred Stock on the corresponding dividend payment date),
such sum being hereinafter referred to as the "Redemption Price".
In payment of the Redemption Price for each share of $100 Preferred Stock
to be redeemed, the Corporation shall, at the option of the Corporation, either
(i) pay an amount in cash equal to the Redemption Price or (ii) issue such
number of shares of Common Stock as equals (x) the then-current Redemption Price
of the $100 Preferred Stock, divided by (y) 90% of the Market Price of the
Common Stock; PROVIDED that with respect to any said Common Stock redemption of
shares of $100 Preferred Stock owned by Crescent Real Estate Equities Company or
its affiliates, the Corporation may only issue shares of voting Common Stock in
redemption of the $100 Preferred Stock so that after such issuance said owner(s)
will beneficially own no more than 9.9% of the outstanding Common Stock, and any
issuance exceeding such percentage shall be deemed non-voting Common Stock
(other than voting rights required by law) for all purposes. Prior to the
issuance of such non-voting Common stock, the Corporation shall take any
corporate action necessary therefore, including creating a new class of
non-voting Common Stock. The "Market Price" shall be equal to the average of
the daily closing prices of the Common Stock for the 20 consecutive trading days
immediately preceding the first business day immediately preceding the date of
the applicable redemption notice. The closing price of the Common Stock on the
trading day immediately preceding the first business day immediately preceding
the date of the applicable redemption notice. The "closing price" for each day
shall be the last reported sales price or, in case no such reported sales take
place on such day, the average of the closing bid and asked prices for such day,
in each case as reported by the New York Stock Exchange Composite Transaction
reporting system (as published in The Wall Street Journal or, if not published
therein, in another authoritative source) ("NYSE"), or if such last sale price
is not so reported by the NYSE, or if no such sale takes place on such day, the
mean between the closing bid and
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asked prices for the Common stock as reported by the NYSE. If the shares of
Common Stock are not reported by the NYSE, the "closing price" for each day
shall be the last reported sales price or, in case no such reported sales take
place on such day, the average of the closing bid and asked prices for such day,
in each case as reported by the national exchange or national market system on
which the Common Stock is traded. If the shares of Common Stock are neither
listed on the NYSE or any other national exchange nor quoted by a national
market system, the determination of Market Price shall be determined in good
faith by the Board of Directors of the Corporation or, if such determination
cannot be made, by a nationally recognized independent investment banking firm
selected in good faith by the Board of Directors of the Corporation. For the
purposes of this Section 5, trading day shall mean a day on which the securities
exchange specified for purposes of this Section 5 shall be open for business or,
if the shares of Common Stock shall not be listed on such exchange for such
period, a day with respect to which quotation of the character referred to in
the next preceding sentence shall be reported. In lieu of any fractional share
of Common Stock which would otherwise be issued upon any redemption of $100
Preferred Stock, the Corporation shall pay a cash adjustment in respect of such
fractional interest in an amount in cash (computed to the nearest cent) equal to
the Market Price multiplied by the fractional interest that otherwise would have
been deliverable upon such redemption of such $100 Preferred Stock.
In case of the redemption of less than all of the then outstanding $100
Preferred Stock, the shares of $100 Preferred Stock to be redeemed shall be
redeemed pro rata or by lot or in such other manner as the Board of Directors
may determine. Notwithstanding the foregoing, the Corporation shall not redeem
less than all of the $100 Preferred Stock at any time outstanding until all
dividends accrued and in arrears upon all $100 Preferred Stock then outstanding
shall have been paid for the current and all past dividend periods.
Not more than 90 nor less than 60 days prior to the redemption date, notice
by first class mail, postage prepaid, shall be given to each holder of record of
the $100 Preferred Stock to be redeemed, at such holder's address as it shall
appear upon the stock transfer books of the Corporation. Each such notice of
redemption shall specify the date fixed for redemption, the Redemption Price,
the place or places of payment, that payment will be made upon presentation and
surrender of the certificate(s) evidencing the shares of $100 Preferred Stock to
be redeemed, that on and after the redemption date, dividends will cease to
accrue on such shares.
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Any notice that is mailed as herein provided shall be conclusively presumed
to have been duly given, whether or not the holder of the $100 Preferred Stock
receives such notice; and failure to give such notice by mail, or any defect in
such notice, to the holders of any shares designated for redemption shall not
affect the validity of the proceedings for the redemption of any other shares of
$100 Preferred Stock. On or after the date fixed for redemption as stated in
such notice, each holder of the shares called for redemption shall surrender the
certificate evidencing such shares to the Corporation at the place designated in
such notice and shall thereupon be entitled to receive payment of the Redemption
Price as herein provided. If less than all the shares represented by any such
surrendered certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares. If, on the date fixed for redemption, shares
of Common Stock and funds necessary for the redemption shall be available
therefor and shall have been irrecoverably deposited or set aside, then,
notwithstanding that the certificates evidencing any shares so called for
redemption shall not have been surrendered the dividends with respect to the
shares so called shall cease to accrue after the date fixed for redemption, the
shares shall no longer be deemed outstanding, the holders thereof shall cease to
be holders of $100 Preferred Stock, and all rights whatsoever with respect to
the shares so called for redemption (except the right of the holders to receive
payment of the Redemption Price as herein provided without interest upon
surrender of their certificates therefor) shall terminate. At the close of
business on the redemption date, each holder of $100 Preferred Stock so redeemed
(unless the Corporation defaults on its obligations to deliver shares of Common
Stock or cash) shall be, without any further action, deemed, as applicable, a
holder of the number of shares of Common Stock for which such $100 Preferred
Stock is redeemable or a holder of the right to receive from the Corporation a
cash payment for which such $100 Preferred Stock is redeemable.
The shares of $100 Preferred Stock shall not be subject to the operation of
any purchase, retirement, mandatory redemption or sinking fund.
The holder of any shares of $100 Preferred Stock redeemed upon exercise of
the Corporation's redemption right shall not be entitled to receive payment of
the Redemption Price for such shares until such holder shall cause to be
delivered to the place specified in the notice given with respect to such
redemption (i) the certificate(s) representing such shares of $100 Preferred
Stock redeemed and (ii) transfer instrument(s) satisfactory to the Corporation
and sufficient to transfer such shares of $100 Preferred Stock to the
Corporation free of any adverse interest. No interest shall accrue on the
Redemption Price of any share of $100 Preferred Stock after its redemption date.
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All shares of Common Stock which may be delivered upon redemption of the
$100 Preferred Stock will upon delivery be duly and validly issued and fully
paid and non-assessable, free of all liens and charges and not subject to any
preemptive rights, and prior to giving any notice of redemption the Corporation
shall take any corporate action necessary therefor.
Section 6. MANDATORY DISPOSITION PURSUANT TO GAMING LAWS. If a record or
beneficial owner of the $100 Preferred Stock is required by the Nevada Gaming
Commission, the Nevada State Gaming Control Board, the Missouri Gaming
Commission or any agency of any state, county, city or other political
subdivision which has, or may at any time after the date of this Certificate of
Resolution have, any jurisdiction over all or any portion of the gaming
activities of the Corporation or any of its subsidiaries or any successor to
such authority ("Gaming Authority") to be found suitable, such record or
beneficial owner shall apply for a finding of suitability within 30 days after
the request of such Gaming Authority. The applicant for a finding of
suitability must pay all costs of the investigation for such finding of
suitability. If a record or beneficial owner does not comply with the foregoing
sentence or if such record or beneficial owner is required to be found suitable
and is not found suitable by such Gaming Authority or if the Corporation is
advised by any such Gaming Authority that such owner may not continue to own its
shares, then the record or beneficial owner shall, upon request of the
Corporation, dispose of such owner's $100 Preferred Stock within 30 days or
within that time prescribed by such Gaming Authority, whichever is earlier.
Section 7. CONVERSION PRIVILEGE.
(a) Right of Conversion. Subject to and upon compliance with the
provisions of this Section 7, each share of $100 Preferred Stock shall, at the
option of the holder thereof, be convertible at any time after January 16, 1999
(unless such share is called for redemption, then to and including but not after
the close of business on the date that is five days immediately prior to the
date fixed for such redemption, unless the Corporation shall default in payment
due upon redemption thereof), into that number of fully paid and non-assessable
shares of Common Stock (calculated as to each conversion to the nearest 1/100th
of a share) obtained by dividing $1,000 by the Conversion Price in effect at
such time and by surrender of such share so to be converted in the manner
provided in Section 7(b); PROVIDED that with respect to any said Common Stock
conversion of shares of $100 Preferred Stock owned by Crescent Real Estate
Equities Company or its affiliates, the Corporation will only issue shares of
voting Common Stock upon conversion of the $100 Preferred Stock so that after
such conversion said owner(s) will beneficially own no more than 9.9% of the
outstanding Common Stock, and any issuance of Common Stock upon
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any conversion that exceeds such percentage shall be deemed a conversion for
non-voting Common Stock (other than voting rights required by law) for all
purposes. Prior to the issuance of any non-voting Common Stock, the Corporation
shall take any corporate action necessary therefore, including creating a new
class of non-voting Common Stock.
(b) Manner of Exercise of Conversion Privilege. In order to exercise the
conversion privilege, the holder of one or more shares of $100 Preferred Stock
to be converted shall surrender such shares at any of the offices or agencies to
be maintained for such purpose by the Corporation accompanied by the funds, if
any, required by the last paragraph of this Section 7(b) and shall give written
notice of conversion in the form provided on such shares of $100 Preferred Stock
(or such other notice as is acceptable to the Corporation) to the Corporation at
such office or agency that the holder elects to convert the shares of $100
Preferred Stock specified in said notice. Such notice shall also state the name
or names, together with address or addresses, in which the certificate or
certificates for shares of Common Stock which shall be issuable in such
conversion shall be issued. Each share of $100 Preferred Stock surrendered for
conversion shall, unless the shares issuable on conversion are to be issued in
the same name as the name in which such share is registered, be accompanied by
instruments of transfer, in form satisfactory to the Corporation, duly executed
by the holder or his duly authorized attorney and an amount sufficient to pay
any transfer or similar tax. As promptly as practicable after the surrender of
such shares of $100 Preferred Stock and the receipt of such notice, instruments
of transfer of such shares of $100 Preferred Stock and the receipt of such
notice, instruments of transfer and funds, if any, as aforesaid, the Corporation
shall issue and shall deliver at such office or agency to such Holder, or on his
written order a certificate or certificates for the number of full shares of
Common Stock issuable upon the conversion of such share of $100 Preferred Stock
in accordance with the provisions of this Section 7 and a check or cash in
respect of any fractional interest in a share of Common Stock arising upon such
conversion, as provided in Section 7(c).
Each conversion shall be deemed to have been effected immediately prior to
the close of business on the date on which such shares of $100 Preferred Stock
shall have been surrendered and such notice (and any applicable instruments of
transfer and any required taxes) received by the Corporation as aforesaid, and
the person or persons in whose name or names any certificate or certificates for
shares of Common Stock shall be issuable upon such conversion shall be deemed to
have become the holder or holders of record of the shares represented thereby at
such time on such date, and such conversion shall be at the Conversion Price in
effect at such time on such date, unless the
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stock transfer books of the Corporation shall be closed on that date, in which
event such person or persons shall be deemed to have become such holder or
holders of record at the close of business on the next succeeding day on which
such stock transfer books are open, but such conversion shall be at the
Conversion Price in effect on the date upon which such shares of $100 Preferred
Stock shall have been surrendered and such notice received by the Corporation.
Any shares of $100 Preferred Stock surrendered for conversion during the
period from the close of business on the record date for any dividend payment to
the opening of business on the related dividend payment date shall (unless such
shares of $100 Preferred Stock shall have been called for redemption on a date
in such period) be accompanied by payment, in funds acceptable to the
Corporation, of an amount equal to the dividend otherwise payable on such
dividend payment date; provided, however, that no such payment need be made if
there shall exist at the time of conversion a default in the payment of
dividends on the shares of $100 Preferred Stock. An amount equal to such
payment shall be paid by the Corporation on such dividend payment date to the
holder of such shares of $100 Preferred Stock at the close of business on such
record date; provided, however, that if the Corporation shall default in the
payment of dividends on such dividend payment date, such amount shall be paid to
the person who made such required payment. Except as provided for above in this
Section, no adjustment shall be made for dividends accrued on any shares of $100
Preferred Stock converted or for dividends on any shares issued upon the
conversion of such shares as provided in this Section.
(c) Cash Payments in Lieu of Fractional Shares. No fractional shares or
scrip representing fractions of shares of Common Stock shall be issued upon
conversion of Convertible Preferred Stock. If more than one share of
Convertible Preferred Stock shall be surrendered for conversion at one time by
the same holder, the number of full shares of Common Stock issuable upon
conversion thereof shall be computed on the basis of the aggregate of $1,000 for
each such share so surrendered. In lieu of any fractional interest in a share
of Common Stock which would otherwise be deliverable upon the conversion of any
share of Convertible Preferred Stock, the Corporation shall pay to the holder of
such shares an amount in cash (computed to the nearest cent) equal to the
closing price (as defined in Section 5 hereof) on the business day next
preceding the day of conversion multiplied by the fractional interest that
otherwise would have been deliverable upon conversion of such share.
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(d) Adjustment of Conversion Price. The "Conversion Price" shall
mean and be $16.50, subject to adjustment from time to time by the
Corporation as follows:
(i) In case the Corporation shall (A) pay a dividend or make
a distribution on its Common Stock in shares of Common Stock, (B) subdivide
its outstanding shares of Common Stock into a greater number of shares, (C)
combine its outstanding shares of Common Stock into a smaller number of
shares, or (D) issue by reclassification of its Common Stock any shares of
capital stock of the Corporation, then in each such case the Conversion Price
in effect immediately prior to such action shall be adjusted so that the
holder of any share of Convertible Preferred Stock thereafter surrendered for
conversion shall be entitled to receive the number of shares of Common Stock
or other capital stock of the Corporation which he would have owned or been
entitled to receive immediately following such action had such share been
converted immediately prior to the occurrence of such event. An adjustment
made pursuant to this subsection (i) shall become effective immediately after
the record date, in the case of a dividend or distribution, or immediately
after the effective date, in the case of a subdivision, combination or
reclassification. If, as a result of an adjustment made pursuant to this
subsection (i), the holder of any share of Convertible Preferred Stock
thereafter surrendered for conversion shall become entitled to receive shares
of two or more classes of capital stock or shares of Common Stock and other
capital stock of the Corporation, the Board of Directors (whose determination
shall be conclusive and shall be described in a statement filed by the
Corporation with the stock transfer or conversion agent, as appropriate)
shall determine the allocation of the adjusted Conversion Price between or
among shares of such classes of capital stock or shares of Common Stock and
other capital stock.
(ii) In case the Corporation shall issue rights or warrants to
all holders of its outstanding shares of Common Stock entitling them (for a
period expiring within 45 days after the record date mentioned below) to
subscribe for or purchase shares of Common Stock at a price per share less
than the current market price per share (as determined pursuant to subsection
(iv) of this Section 7(d)) of the Common Stock (other than pursuant to any
stock option, restricted stock or other incentive or benefit plan or stock
ownership or purchase plan for the benefit of employees, directors or
officers or any dividend reinvestment plan of the Corporation in effect at
the time hereof or any other similar plan adopted or implemented hereafter),
then the Conversion Price in effect immediately prior thereto shall be
adjusted so that it shall equal the price determined by multiplying the
Conversion Price in effect immediately prior to the date of issuance of such
rights or warrants by a fraction of which the numerator shall be the number
of shares of Common Stock outstanding on the date of issuance of
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such rights or warrants (immediately prior to such issuance) plus the number
of shares which the aggregate offering price of the total number of shares so
offered would purchase at such current market price, and of which the
denominator shall be the number of shares of Common Stock outstanding on the
date of issuance of such rights or warrants (immediately prior to such
issuance) plus the number of additional shares of Common Stock offered for
subscription or purchase. Such adjustment shall be made successively
whenever any rights or warrants are issued, and shall become effective
immediately after the record date for the determination of stockholders
entitled to receive such rights or warrants; provided, however, in the event
that all the shares of Common Stock offered for subscription or purchase are
not delivered upon the exercise of such rights or warrants, upon the
expiration of such rights or warrants the Conversion Price shall be
readjusted to the Conversion Price which would have been in effect had the
numerator and the denominator of the foregoing fraction and the resulting
adjustment been made based upon the number of shares of Common Stock actually
delivered upon the exercise of such rights or warrants rather than upon the
number of shares of Common Stock offered for subscription or purchase. In
determining whether any rights or warrants entitle the holders to subscribe
for or purchase shares of Common Stock at less than such current market
price, and in determining the aggregate offering price of such shares of
Common Stock, there shall be taken into account any consideration received by
the Corporation for such rights or warrants, the value of such consideration,
if other than cash, to be determined by the Board of Directors (whose
determination shall be conclusive and shall be described in a statement filed
by the Corporation with the stock transfer or conversion agent, as
appropriate).
(iii) In case the Corporation shall, by dividend or otherwise,
distribute to all holders of its outstanding Common Stock or capital stock
(other than Common Stock), evidences of its indebtedness or assets (including
securities and cash, but excluding any regular periodic cash dividend of the
Corporation and dividends or distributions payable in stock for which
adjustment is made pursuant to subsection (i) of this Section 7(d)) or rights
or warrants to subscribe for or purchase securities of the Corporation
(excluding those referred to in subsection (ii) of this Section 7(d)), then
in each such case the Conversion Price shall be adjusted so that the same
shall equal the price determined by multiplying the Conversion Price in
effect immediately prior to the record date of such distribution by a
fraction of which the numerator shall be the current market price per share
as determined pursuant to subsection (iv) of this Section 7(d) of the Common
Stock less the fair market value on such record date (as determined by the
Board of Directors, whose determination shall be conclusive and shall be
described in a statement filed by the Corporation with the stock transfer or
conversion agent, as appropriate) of the
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portion of the capital stock or assets or the evidences of indebtedness or
assets so distributed to the holder of one share of Common Stock or of such
subscription rights or warrants applicable to one share of Common Stock, and
of which the denominator shall be such current market price per share of
Common Stock. Such adjustment shall become effective immediately after the
record date for the determination of stockholders entitled to receive such
distribution.
(iv) For the purpose of any computation under subsections (ii)
and (iii) of this Section 7(d), the current market price per share of Common
Stock on any date shall be deemed to be the average of the closing price (as
defined in Section 5) for the shorter of (A) 30 consecutive trading days (as
defined in Section 5) ending on the last full trading day prior to the Time
of Determination or (B) the period commencing on the date next succeeding the
first public announcement of the issuance of such rights or warrants or such
distribution through such last full trading day prior to the Time of
Determination. For purposes of the foregoing, the term "Time of
Determination" shall mean the time and date of the earlier (I) the record
date for determining stockholders entitled to receive the rights, warrants or
distributions referred to in Section 7(d)(ii) and (iii) or (II) the
commencement of "ex-dividend" trading on the exchange or market referred to
in the definition of "closing price."
(v) In any case in which this Section 7(d) shall require that
an adjustment be made immediately following a record date or an effective
date the Corporation may elect to defer (but only until the filing by the
Corporation with the stock transfer or conversion agent, as the case may be,
of the certificate required by subsection (vii) of this Section 7(d)) issuing
to the holder of any share of Convertible Preferred Stock converted after
such record date or effective date the shares of Common Stock issuable upon
such conversion over and above the shares of Common Stock issuable upon such
conversion on the basis of the Conversion Price prior to adjustment, and
paying to such holder any amount of cash in lieu of a fractional share.
(vi) No adjustment in the Conversion Price shall be required
to be made unless such adjustment would require an increase or decrease of at
least one percent of such price; provided, however, that any adjustments
which by reason of this subsection (vi) are not required to be made shall be
carried forward and taken into account in any subsequent adjustment. All
calculations under this Section 7(d) shall be made to the nearest cent or to
the nearest 1/1000th of a share, as the case may be. Anything in this
Section 7(d) to the contrary notwithstanding, the Corporation shall be
entitled to make such reduction in the Conversion Price, in addition to those
required by this Section
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7(d), as it in its discretion shall determine to be advisable in order that
any stock dividend, subdivision of shares distribution of rights to purchase
stock or securities, or distribution of securities convertible into or
exchangeable for stock hereafter made by the Corporation to its stockholders
shall not be taxable to the recipients. Except as set forth in subsections
(i), (ii) and (iii) above, the Conversion Price shall not be adjusted for the
issuance of Common Stock, or any securities convertible into or exchangeable
for Common Stock or carrying the right to purchase any of the foregoing, in
exchange for cash, property or services.
(vii) Whenever the Conversion Price is adjusted as herein
provided, (A) the Corporation shall promptly file with the stock transfer or
conversion agent, as appropriate, a certificate setting forth the Conversion
Price after such adjustment and a brief statement of the facts requiring such
adjustment and the manner of computing the same, which certificate shall be
conclusive evidence of the correctness of such adjustment, and (B) the
Corporation shall also mail or cause to be mailed by first class mail,
postage prepaid, as soon as practicable to each holder of record of shares of
$100 Preferred Stock a notice stating that the Conversion Price has been
adjusted and setting forth the adjusted Conversion Price. The stock transfer
or conversion agent, as the case may be, shall not be under any duty or
responsibility with respect to the certificate required by this subsection
(vii) except to exhibit the same to any holder of shares of $100 Preferred
Stock who requests to inspect it.
(viii) In the event that at any time, as a result of an
adjustment made pursuant to subsection (i) of this Section 7(d), the holder
of any share of $100 Preferred Stock thereafter surrendered for conversion
shall become entitled to receive any shares of the Corporation other than
shares of Common Stock, thereafter the Conversion Price of such other shares
so receivable upon conversion of any share of $100 Preferred Stock shall be
subject to adjustment from time to time in a manner and on terms as nearly
equivalent as practicable to the provisions with respect to Common Stock
contained in this Section.
(ix) The Corporation from time to time may decrease the
Conversion Price by any amount for any period of time if the period is at
least 20 days and if the decrease is irrevocable during the period. Whenever
the Conversion Price is so decreased, the Corporation shall mail to holders
of record of shares of Convertible Preferred Stock a notice of the decrease
at least 15 days before the date the decreased Conversion Price takes effect,
and such notice shall state the decreased Conversion Price and the period it
will be in effect.
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(e) Notice to Holders Prior to Certain Corporate Actions. In Case:
(i) the Corporation shall take any action which would
require an adjustment in the Conversion Price pursuant to Section 7(d); or
(ii) the Corporation shall authorize the granting to the
holders of its Common Stock generally of rights or warrants to subscribe
for or purchase any shares of stock of any class or of any other rights; or
(iii) there shall be any reorganization or reclassification
of the Common Stock (other than a subdivision or combination of the
outstanding Common Stock and other than a change in the par value of the
Common Stock), or any merger or consolidation to which the Corporation is a
party or any statutory exchange of securities with another corporation and
for which approval of any stockholders of the Corporation is required, or
any sale or transfer of all or substantially all of the assets of the
Corporation; or
(iv) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Corporation;
then in each such case the Corporation shall cause to be given to the holders
of shares of $100 Preferred Stock and the stock transfer or conversion agent,
as appropriate, as promptly as possible, but in any event at least 20 days
prior to the applicable date hereinafter specified, a notice stating (i) the
date on which a record is to be taken for the purpose of such action or
granting of rights or warrants, or, if a record is not be taken, the date as
of which the holders of Common Stock of record to be entitled to such
distribution, rights or warrants are to be determined, or (ii) the date on
which such reorganization, reclassification, merger, consolidation, sale,
transfer, statutory exchange, dissolution, liquidation or winding-up is
expected to become effective or occur, and the date as of which it is
expected that holders of Common Stock of record shall be entitled to exchange
their shares of Common Stock for securities, cash or other property
deliverable upon such reorganization, reclassification, merger,
consolidation, sale, transfer, statutory exchange, dissolution, liquidation
or winding-up. Failure to give such notice or any defect therein shall not
affect the legality or validity or the proceedings described in subsection
(i), (ii), (iii) or (iv) of this Section 7(e).
(f) Reservation of Shares of Common Stock. The Corporation
covenants that it will at all times after January ___, 1999 reserve and keep
available, free from preemptive rights, out
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of the aggregate of its authorized but unissued shares of Common Stock or its
issued shares of Common Stock held in its treasury, or both, for the purpose
of effecting conversions of shares of $100 Preferred Stock, the full number
of shares of Common Stock deliverable upon the conversion of all outstanding
shares of $100 Preferred Stock not theretofore converted and on or before
(and as a condition of ) taking any action that would cause an adjustment of
the Conversion Price resulting in an increase in the number of shares of
Common Stock deliverable upon conversion above the number thereof previously
reserved and available therefor, the Corporation shall take all such action
so required. For purposes of this Section 7(f), the number of shares of
Common Stock which shall be deliverable upon the conversion of all
outstanding shares of $100 Preferred Stock shall be computed as if at the
time of computation all outstanding shares of $100 Preferred Stock were held
by a single holder.
Before taking any action which would cause an adjustment reducing
the Conversion Price below the then par value (if any) of the shares of
Common Stock deliverable upon conversion of the shares of $100 Preferred
Stock, the Corporation shall take any corporate action which may, in the
opinion of its counsel, be necessary in order that the Corporation may
validly and legally issue fully paid and non-assessable shares of Common
Stock at such adjusted Conversion Price.
(g) Transfer Taxes, Etc. The Corporation shall pay any and all
documentary stamp, issue or transfer taxes, and any other similar taxes
payable in respect of the issue or delivery of shares of Common Stock upon
conversions of shares of $100 Preferred Stock pursuant hereto; provided,
however, that the Corporation shall not be required to pay any tax which may
be payable in respect of any transfer involved in the issue or delivery of
shares of Common Stock in a name other than that of the holder of the shares
of $100 Preferred Stock to be converted and no such issue or delivery shall
be made unless and until the person requesting such issue or delivery has
paid to the Corporation the amount of any such tax or has established, to the
satisfaction of the Corporation, that such tax has been paid.
(h) Covenant as to Common Stock. The Corporation covenants that
all shares of Common Stock which may be delivered upon conversions of shares
of $100 Preferred Stock will upon delivery be duly and validly issued and
fully paid and non-assessable, free of all liens and charges and not subject
to any preemptive rights.
The Corporation further covenants that if at any time the Common
Stock shall be listed on the New York Stock Exchange or any other national
securities exchange or the Nasdaq National Market,
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the Corporation will, if permitted by the rules of such exchange or market,
list and keep listed so long as the Common Stock shall be so listed on such
exchange or market, all Common Stock issuable upon conversion of the shares
of $100 Preferred Stock.
Section 8. MERGER OR CONSOLIDATION OR SALE OF ASSETS. In case of any
merger or consolidation to which the Corporation is a party (other than
merger or consolidation in which the Corporation is the continuing
corporation and Common Stock of the Corporation outstanding immediately prior
to the merger or consolidation are not exchanged for cash, or the securities
or other property of another corporation), or in case of any sale or transfer
to another corporation of the property of the Corporation as an entirety or
substantially as an entirety, or in the case of any statutory exchange of
securities with another corporation (other than in connection with a merger
or acquisition), then lawful provision shall be made by the corporation
formed by such consolidation or the corporation whose securities, cash or
other property will immediately after the merger or consolidation be owned,
by virtue of the merger or consolidation, by the holders of Common Stock of
the Corporation immediately prior to the merger or consolidation, or the
corporation which shall have acquired such assets or securities of the
Corporation (collectively the "Formed, Surviving or Acquiring Corporation"),
as the case may be, providing that the holder of each share of $100 Preferred
Stock then outstanding shall have the right thereafter to receive only the
kind and amount of securities, cash or other property receivable upon such
merger, consolidation, sale, transfer or statutory exchange that such holder
would have received had such holder's outstanding shares of $100 Preferred
Stock been redeemed by the Corporation entirely for Common Stock immediately
prior to such merger, consolidation, sale, transfer or statutory exchange.
Notwithstanding the foregoing, in the event that the record or
beneficial owner of shares of $100 Preferred Stock (or an affiliate of such
owner) is the Formed, Surviving or Acquiring Corporation in any such merger,
consolidation, sale, transfer or statutory exchange, then the provisions of
the foregoing paragraph shall not apply to such record or beneficial owner's
shares of $100 Preferred Stock and all rights of such record or beneficial
owner with respect to such shares of $100 Preferred Stock shall be limited
solely those contained in the agreement or plan which implements such merger,
consolidation, sale, transfer or statutory exchange.
Section 9. VOTING RIGHTS.
(a) General. The holders of $100 Preferred Stock shall not have any
voting rights except as set forth below or as otherwise from time to time
required by law. In connection with
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any right to vote, each holder of $100 Preferred Stock will have one vote for
each share held. Any shares of $100 Preferred Stock held by the Corporation
or any entity controlled by the Corporation shall not have voting rights
hereunder and shall not be counted in determining the presence of a quorum
(b) Class Voting Rights. So long as the $100 Preferred Stock is
outstanding, the Corporation shall not, without the affirmative vote or
consent of the holders of at least 66 2/3 percent of all outstanding $100
Preferred Stock (unless the vote or consent of a greater percentage is
required by applicable law or the Amended and Restated Articles of
Incorporation of the Corporation), voting separately as a class, (i) amend,
alter or repeal (by merger, consolidation or otherwise) any provision of the
Amended and Restated Articles of Incorporation or the Bylaws of the
Corporation, as amended, so as to affect adversely the relative rights,
preferences, qualifications, limitations or restrictions of the $100
Preferred Stock, (ii) authorize or issue, or increase the authorized amount
of, any additional class or series of stock, or any security convertible into
stock of such class or series, ranking prior to the $100 Preferred Stock in
respect of the payment of dividends or upon liquidation, dissolution or
winding up of the Corporation or (iii) effect any reclassification of the
$100 Preferred Stock. A class vote on the part of the $100 Preferred Stock
shall, without limitation, specifically not be deemed to be required (except
as otherwise required by law or resolution of the Corporation's Board of
Directors) in connection with: (a) the authorization, issuance or increase in
the authorized amount of any shares of any other class or series of stock
that ranks junior to, or on a parity with, the $100 Preferred Stock in
respect of the payment of dividends and upon liquidation, dissolution or
winding up of the Corporation; or (b) the authorization, issuance or increase
in the amount of any notes, bonds, mortgages, debentures or other obligations
of the Corporation not convertible into or exchangeable, directly or
indirectly, for stock ranking prior to the $100 Preferred Stock in respect of
the payment of dividends or upon liquidation, dissolution or winding up of
the Corporation.
Section 10. OUTSTANDING SHARES. For the purposes of this Certificate of
Resolution all shares of $100 Preferred Stock shall be deemed outstanding
from and after the date of issuance of such share except (i) from the date
fixed for redemption pursuant to Section 5, all shares of $100 Preferred
Stock that have been so called for redemption under Section 5 if shares of
Common Stock and funds necessary for payment of the redemption price have
been irrevocably set apart, (ii) from the date of surrender of certificates
representing shares of $100 Preferred Stock, all shares of $100 Preferred
Stock converted into Common Stock and (iii) from the date of registration of
transfer, all shares of $100
-18-
Preferred Stock held of record by the Corporation or any subsidiary of the
Corporation.
Section 11. STATUS OF REDEEMED OR ACQUIRED SHARES. Shares of $100
Preferred Stock redeemed by the Corporation, received upon conversion
pursuant to Section 7 or otherwise acquired by the Corporation will be
restored to the status of authorized and unissued shares of $100 Preferred
Stock.
Section 12. PREEMPTIVE RIGHTS. The $100 Preferred Stock is not entitled
to any preemptive or subscription rights in respect of any securities of the
Corporation.
Section 13. SEVERABILITY OF PROVISIONS. Whenever possible, each
provision hereof shall be interpreted in a manner as to be effective and
valid under applicable law, but if any provision hereof is held to be
prohibited by or invalid under applicable law, such provision shall be
ineffective only to the extent of such prohibition or invalidity, without
invalidating or otherwise adversely affecting the remaining provisions
hereof. If a court of competent jurisdiction should determine that a
provision hereof would be valid or enforceable if a period of time were
extended or shortened or a particular percentage were increased or decreased,
then such court may make such change as shall be necessary to render the
provision in question effective and valid under applicable law.
-19-
IN WITNESS WHEREOF, Station Casinos, Inc. has caused this
certificate to be signed on its behalf by ________________, its Executive
Vice President and Secretary, and its corporate seal to be hereunto affixed,
this _______ day of ___________, 1998.
STATION CASINOS, INC.
By:
---------------------------
Name:
Title:
STATE OF NEVADA )
) ss:
COUNTY OF CLARK )
This instrument was acknowledged before me on _________ __, 1998, by
________________ as Executive Vice President and Secretary of Station
Casinos, Inc.
- ----------------------------------------
Notary Public
My commission expires:
------------------
-20-
Schedule 5.18(i)
STATION OPERATING , L.P.
AGREEMENT OF LIMITED PARTNERSHIP
THIS AGREEMENT OF LIMITED PARTNERSHIP (the "Agreement"), dated as of
_______________, 1998, is entered into by and among [COI Entity], a Delaware
corporation, ("COI GP"), Crescent Operating, Inc., a Delaware corporation
("COI"), [Top Management Entity] ("SMG") and [Management Group Entity]
("MGE").
W I T N E S S E T H:
WHEREAS, Crescent Real Estate Equities Company, a Texas Real Estate
Investment Trust ("Crescent"), and Station Casinos, Inc., a Nevada
corporation ("Station Casinos"), are parties to an Agreement and Plan of
Merger dated as of January 15, 1998 (the "Merger Agreement"), which Merger
Agreement relates to the agreement of Crescent and Station Casinos to merge
Station Casinos with and into Crescent;
WHEREAS, COI GP, COI, SMG and MGE have agreed to form this limited
partnership (the "Partnership") to lease from Crescent, following the
consummation of the Merger Agreement, the real estate currently owned and/or
ground leased by Station Casinos or its subsidiaries;
WHEREAS, the parties hereto desire to document this Partnership, formed
pursuant to Title 6, Chapter 17 of the Annotated Code of Delaware, known as
the Delaware (1)Revised Uniform Limited Partnership Act (the "Act"), and
other relevant laws of the State of Delaware, as such Act and other relevant
laws exist at the date hereof, for the purposes and upon the terms and
conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt,
adequacy and sufficiency of which are hereby acknowledged, the parties
hereto, intending legally to be bound, hereby agree as follows:
- ------------
(1) Station's Nevada gaming counsel advises that in order to receive a gaming
license, the partnership must either be formed under the laws of Nevada or
must form form a subsidiary that will hold the gaming licenses. This is to
be resolved before the agreement is executed.
1
ARTICLE I
DEFINED TERMS
Except as otherwise herein expressly provided, the following terms and
phrases shall have the meanings set forth below:
"Adjusted Capital Account" means the Capital Account maintained for each
Partner as of the end of each fiscal year (i) increased by any amounts which
such Partner is obligated to restore pursuant to any provision of this
Agreement or is treated as being obligated to restore pursuant to Regulations
Section 1.704-1(b)(2)(ii)(c) or is deemed to be obligated to restore pursuant
to the penultimate sentences of Regulations Sections 1.704-2(g)(1) and
1.704-2(i)(5) and (ii) decreased by the items described in Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and
1.704-1(b)(2)(ii)(d)(6). The foregoing definition of Adjusted Capital
Account is intended to comply with the provisions of Regulations Section
1.704-1(b)(2)(ii)(d) and shall be interpreted consistently therewith.
"Adjusted Capital Account Deficit" means, with respect to any Partner,
the deficit balance, if any, in such Partner's Adjusted Capital Account as of
the end of the relevant fiscal year.
"Adjusted Property" means any property the value of which has been
adjusted pursuant to Section 1.D of Exhibit B hereof.
"Affiliate" means, with respect to any Person, (i) such Person or a
member of his or her immediate family, (ii) any Person who directly or
indirectly owns, controls or holds the power to vote ten percent (10%) or
more of the outstanding voting securities (including partnership or limited
liability company interests) of the Person in question; (iii) any Person ten
percent (10%) or more of whose outstanding securities (including partnership
or limited liability company interests) are directly or indirectly owned,
controlled by, or held with power to vote by the Person in question; (iv) any
Person directly or indirectly controlling, controlled by or under common
control with the Person in question; (v) if the Person in question is a
corporation, any executive officer or director of such Person or of any
corporation directly or indirectly controlling such Person; (vi) if the
Person in question is a partnership, any general partner of the partnership
or any limited partner owning or controlling ten percent (10%) or more of
either the capital or profits interests in the partnership, and (vii) if the
Person in question is a limited liability company, any managing member of the
limited liability company or any member owning or controlling ten percent
(10%) or more of either the capital or profits interests in the limited
liability company. In addition to the foregoing, for purposes of this
Agreement Crescent shall be deemed to be an Affiliate of COI. As used in
this definition, "control" shall mean the possession, directly or indirectly,
of the power to direct or cause the direction of the management and policies
of a Person, whether through the ownership of voting securities, by contract,
or otherwise.
"Agreement" means this Agreement of Limited Partnership, as it may be
amended, supplemented or restated from time to time.
2
"Available Cash" for any period means the excess of (a) the sum of (i)
the total cash receipts of the Partnership for such period from the ownership
and operation of the Partnership's assets, including but not limited to cash
receipts from rental of property and other business operations of the
Partnership, and from dividends or distributions received on account of the
Partnership's ownership of securities of any Person, (ii) the amount of any
reduction in the reserves of the Partnership referred to in (b)(iv) below
which the Executive Committee reasonably determines is appropriate, and (iii)
other available Partnership funds (but not including capital contributions to
the Partnership, or unforfeited security, damage or similar deposits received
from tenants), over (b) the sum of (i) all operating expenditures paid by the
Partnership during such period, (ii) all debt service payments made by the
Partnership, (iii) any amounts expended by the partnership for capital
expenditures out of operating receipts, and (iv) the amount of any increase
in reserves (including without limitation working capital reserves or
reserves for other anticipated expenditures) established during such period
which the Executive Committee reasonably determines are necessary or
appropriate.
"Bankruptcy" of a Person (or a "Bankrupt" Person) shall be deemed to
have occurred when (a) the Person commences a voluntary proceeding seeking
liquidation, reorganization or other relief under any bankruptcy, insolvency
or other similar law now or hereafter in effect, (b) the Person is adjudged
as bankrupt or insolvent, or a final and nonappealable order for relief under
any bankruptcy, insolvency or similar law now or hereafter in effect has been
entered against the Person, (c) the Person executes and delivers a general
assignment for the benefit of the Person's creditors, (d) the Person files an
answer or other pleading admitting or failing to contest the material
allegations of a petition filed against the Person in any proceeding of the
nature described in clause (b) above, (e) the Person seeks, consents to or
acquiesces in the appointment of a trustee, receiver or liquidator for the
Person or for all or any substantial part of the Person's properties, (f) any
proceeding seeking liquidation, reorganization or other relief under any
bankruptcy, insolvency or other similar law now or hereafter in effect has
not been dismissed within one hundred twenty (120) days after the
commencement thereof, (g) the appointment without the Person's consent or
acquiescence of a trustee, receiver or liquidator has not been vacated or
stayed within ninety (90) days of such appointment, or (h) an appointment
referred to in clause (g) is not vacated within ninety (90) days after the
expiration of any such stay.
"Book-Tax Disparities" means, with respect to any item of Contributed
Property or Adjusted Property, as of the date of any determination, the
difference between the Carrying Value of such Contributed Property or
Adjusted Property and the adjusted basis thereof for federal income tax
purposes as of such date. A Partner's share of the Partnership's Book-Tax
Disparities in all of its Contributed Property and Adjusted Property will be
reflected by the difference between such Partner's Capital Account balance as
maintained pursuant to Exhibit B and the hypothetical balance of such
Partner's Capital Account computed as if it had been maintained strictly in
accordance with federal income tax accounting principles.
"Capital Account" means the Capital Account maintained for a Partner
pursuant to Exhibit B hereof.
3
"Capital Contribution" means, with respect to any Partner, any cash, cash
equivalents or the Net Asset Value of Contributed Property which such Partner
contributes to the Partnership.
"Carrying Value" means (i) with respect to a Contributed Property or
Adjusted Property, the Gross Asset Value of such property reduced (but not
below zero) by all Depreciation with respect to such property charged to the
Partners' Capital Accounts and (ii) with respect to any other Partnership
property, the adjusted basis of such property for federal income tax
purposes, all as of the time of determination. The Carrying Value of any
property shall be adjusted from time to time in accordance with Exhibit B
hereof, and to reflect changes, additions or other adjustments to the
Carrying Value for improvements and dispositions and acquisitions of
Partnership properties, as deemed appropriate by the Executive Committee.
"Certificate" means the Certificate of Limited Partnership of the
Partnership filed in the office of the Secretary of State of Delaware, as
amended from time to time in accordance with the terms hereof and the Act.
"Code" means the Internal Revenue Code of 1986, as amended and in effect
from time to time, as interpreted by the applicable regulations thereunder.
Any reference herein to a specific section or sections of the Code shall be
deemed to include a reference to any corresponding provision of future law.
"COI" means Crescent Operating, Inc., a Delaware corporation.
"COI GP" means [________________].
"Contributed Property" means each property or other asset (but excluding
cash), in such form as may be permitted by the Act, contributed to the
Partnership. Once the Carrying Value of a Contributed Property is adjusted
pursuant to Section 1.D of Exhibit B hereof, such property shall no longer
constitute a Contributed Property for purposes of Exhibit B hereof, but shall
be deemed an Adjusted Property for such purposes.
"Crescent" means Crescent Real Estate Equities Limited Partnership, a
Delaware limited partnership.
"Depreciation" means, for each fiscal year, an amount equal to the
federal income tax depreciation, amortization, or other cost recovery
deduction allowable with respect to an asset for such year, except that if
the Carrying Value of an asset differs from its adjusted basis for federal
income tax purposes at the beginning of such year or other period,
Depreciation shall be an amount which bears the same ratio to such beginning
Carrying Value as the federal income tax depreciation, amortization, or other
cost recovery deduction for such year bears to such beginning adjusted tax
basis; provided, however, that if the federal income tax depreciation,
amortization, or other cost recovery deduction for such year is zero,
Depreciation shall be determined with reference to such beginning Carrying
Value using any reasonable method selected by the Executive Committee.
4
"General Partner or General Partners" means SMG and COI GP, as well as
the duly admitted successors and assigns thereof and any other Person who is
a General Partner at the time of reference thereto.
"Gross Asset Value" of any Contributed Property or Properties
contributed by a Partner to the Partnership means the fair market value of
such property or properties at the time of contribution as determined by the
Executive Committee using such reasonable method of valuation as it may
adopt. The Executive Committee shall, in its sole and absolute discretion,
use such method as it deems reasonable and appropriate to allocate the
aggregate of the Gross Asset Value of Contributed Properties contributed in a
single or integrated transaction among the separate properties on a basis
proportional to their respective fair market values.
"IRS" means the Internal Revenue Service, which administers the internal
revenue laws of the United States.
"Limited Partner" means COI or a designee of COI, its duly admitted
successors and assigns, MGE and any other Person who is a Limited Partner at
the time of reference thereto.
"Liquidating Event(s)" has the meaning set forth in Section 11.1 hereof.
"Liquidator" has the meaning set forth in Section 11.2 hereof.
"Managing General Partner" shall mean SMG.
"MGE" means [ ], a Nevada limited
liability company.
"Net Asset Value" in the case of any Contributed Property contributed by
a Partner to the Partnership means the Gross Asset Value of such property,
reduced by any liabilities either treated as assumed by the Partnership upon
such contribution or to which such property is treated as subject when
contributed pursuant to Section 752 of the Code.
"Net Income" means, for any taxable period, the excess, if any, of the
Partnership's items of income and gain for such taxable period over the
Partnership's items of loss and deduction for such taxable period. The items
included in the calculation of Net Income shall be determined in accordance
with Section 1.B of Exhibit B. Once an item of income, gain, loss or
deduction that has been included in the initial computation of Net Income is
subjected to the special allocation rules in Exhibit C, Net Income or the
resulting Net Loss, whichever the case may be, shall be recomputed without
regard to such item.
"Net Invested Capital" of a Partner means the aggregate Capital
Contributions made by such Partner to the Partnership, reduced by
distributions made to such Partner under Section 5.1(b) hereof.
"Net Loss" means, for any taxable period, the excess, if any, of the
Partnership's items of loss and deduction for such taxable period over the
Partnership's items of income and gain for
5
such taxable period. The items included in the calculation of Net Loss shall
be determined in accordance with Section 1.B of Exhibit B. Once an item of
income, gain, loss or deduction that has been included in the initial
computation of Net Loss is subjected to the special allocation rules in
Exhibit C, Net Loss or the resulting Net Income, whichever the case may be,
shall be recomputed without regard to such items.
"Nonrecourse Built-in Gain" means, with respect to any Contributed
Properties or Adjusted Properties that are subject to a mortgage or negative
pledge securing a Nonrecourse Liability, the amount of any taxable gain that
would be allocated to the Partners pursuant to Section 2.B of Exhibit C if
such properties were disposed of in a taxable transaction in full
satisfaction of such liabilities and for no other consideration.
"Nonrecourse Deductions" has the meaning set forth in Regulations
Section 1.704-2(b)(1), and the amount of Nonrecourse Deductions for a fiscal
year shall be determined in accordance with the rules of Regulations Section
1.704-2(c).
"Nonrecourse Liability" has the meaning set forth in Regulations Section
1.752-1(a)(2).
"Partner" means a General Partner or a Limited Partner.
"Partner Minimum Gain" means an amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(I)(3).
"Partner Nonrecourse Debt" has the meaning set forth in Regulations
Section 1.704-2(b)(4).
"Partner Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704-2(I)(2), and the amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a Partnership year
shall be determined in accordance with the rules of Regulations Section
1.704-2(I)(2).
"Partnership" means the limited partnership formed under the Act and
pursuant to this Agreement and the Certificate.
"Partnership Interest" means an ownership interest in the Partnership
representing a Capital Contribution by either a Limited Partner or a General
Partner and includes any and all benefits to which the holder of such a
Partnership Interest may be entitled as provided in this Agreement, together
with all obligations of such Person to comply with the terms and provisions
of this Agreement. The Partnership Interest of each Partner shall be
expressed as a percentage of the total Partnership Interests owned by all of
the Partners, as specified in Exhibit A attached hereto, as such Exhibit may
be amended from time to time.
6
"Partnership Minimum Gain" has the meaning set forth in Regulations
Section 1.704-2(b)(2), and the amount of Partnership Minimum Gain, as well as
any net increase or decrease in Partnership Minimum Gain, for a fiscal year
shall be determined in accordance with the rules of Regulations Section
1.704-2(d).
"Person" means an individual or a corporation, partnership, limited
liability company, trust, unincorporated organization, association or other
entity.
"Preferred Return" means, with respect to any Partner, a twelve percent
(12%) per annum return, compounded on an annual basis, on the Net Invested
Capital of such Partner outstanding from time to time.
"Recapture Income" means any gain recognized by the Partnership
(computed without regard to any adjustment required by Section 734 or Section
743 of the Code) upon the disposition of any property or asset of the
Partnership, which gain is characterized as ordinary income because it
represents the recapture of deductions previously taken with respect to such
property or asset.
"Regulations" means the income tax regulations promulgated under the
Code, as such regulations may be amended from time to time (including
corresponding provisions of succeeding regulations).
"Regulatory Allocations" has the meaning set forth in Section 1.H of
Exhibit C hereof.
"REIT" means a real estate investment trust under Sections 856 through
860 of the Code.
"Residual Gain" or "Residual Loss" means any item of gain or loss, as
the case may be, of the Partnership recognized for federal income tax
purposes resulting from a sale, exchange or other disposition of Contributed
Property or Adjusted Property, to the extent such item of gain or loss is not
allocable pursuant to Section 2.B.1(a) or 2.B.2(a) of Exhibit C to eliminate
Book-Tax Disparities.
"Securities Act" means the Securities Act of 1933, as amended, or any
successor statute.
"SMG" means [ ], a Nevada corporation.
"Terminating Capital Transaction" means any sale or other disposition of
all or substantially all of the assets of the Partnership or a related series
of transactions that, taken together, result in the sale or other disposition
of all or substantially all of the assets of the Partnership.
"Unrealized Gain" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (I) the fair
market value of such property (as determined under Exhibit B hereof) as of
such date, over (ii) the Carrying Value of such property (prior to any
adjustment to be made on such date pursuant to Exhibit B hereof) as of such
date.
7
"Unrealized Loss" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (i) the
Carrying Value of such property (prior to any adjustment to be made on such
date pursuant to Exhibit B hereof) as of such date, over (ii) the fair market
value of such property (as determined under Exhibit B hereof) as of such date.
ARTICLE II
ORGANIZATIONAL MATTERS
2.1 Formation of Partnership
The Partners hereby form the Partnership as a limited partnership
pursuant to the provisions of the Act and other relevant laws of the State of
Delaware, as such Act and other relevant laws exist at the date hereof, for
the purposes and upon the terms and conditions set forth in this Agreement.
Except as expressly provided herein to the contrary, the rights and
obligations of the Partners and the administration and termination of the
Partnership shall be governed by the Act. The Partnership Interest of each
Partner shall be personal property for all purposes.
2.2 Name
The name of the Partnership is Station Operating, L.P. The
Partnership's business may be conducted under any other name or names to the
extent that the General Partners reasonably determine that such is necessary
in order to comply with applicable law.
2.3 Principal Office and Registered Agent
The principal office of the Partnership is 2411 West Sahara Boulevard,
Las Vegas, Nevada 89102, or such other place as the General Partners may from
time to time designate. The registered agent of the Partnership is The
Prentice-Hall Corporation System, Inc., located at 1013 Centre Road, in the
city of Wilmington, County of New Castle, Delaware 19805, or such other
Person as the Managing General Partner may from time to time designate. The
Partnership may maintain offices at such other place or places within or
outside the State of Delaware as the Managing General Partners deem
advisable.
2.4 Term
The term of the Partnership shall continue until thirty (30) years from
the date first above written, unless it is dissolved sooner pursuant to the
provisions hereof or as otherwise provided by law.
8
ARTICLE III
PURPOSE, POWERS, AND STATUS AS PARTNERS
3.1 Purpose and Business
The character and general nature of the business to be conducted by the
Partnership is to operate, manage and conduct gaming in gaming casinos on or
within the premises known as The Palace Station, in Las Vegas, Nevada; Sunset
Station, in Henderson, Nevada; Texas Station, in Las Vegas, Nevada; Boulder
Station, in Las Vegas, Nevada; Station Casino Kansas City, in Kansas City,
Missouri; and Station Casino St. Charles, in St. Charles, Missouri. The
purpose and nature of the business to be conducted by the Partnership is (i)
to conduct any business that has as its principal purpose the conduct of
gaming activities and any other associated business operations customarily
associated with gaming activities, including restaurant and hotel operations
and similar businesses; (ii) to enter into any partnership, joint venture or
other similar arrangement to engage in any of the foregoing or the ownership
of interests in any entity engaged in any of the foregoing, and to exercise
all of the powers of an owner in any such entity; and (iii) to do anything
necessary, appropriate, proper, advisable, desirable, convenient or
incidental to the foregoing; provided, however, that such business shall not
be conducted in such a manner as to disqualify Crescent Real Estate Equities
Company from at all times qualifying as a REIT, unless such entity
voluntarily terminates its REIT status pursuant to its declaration of trust.
3.2 Powers
Subject to all of the terms, covenants, conditions and limitations
contained in this Agreement and any other agreement entered into by the
Partnership, the Partnership shall have full power and authority to do any
and all acts and things necessary, appropriate, proper, advisable, desirable,
incidental to or convenient for the furtherance and accomplishment of the
purposes and business described herein and for the protection and benefit of
the Partnership, including, without limitation, full power and authority,
directly or through its ownership interest in other Persons, to enter into,
perform and carry out contracts of any kind, borrow money and issue evidences
of indebtedness, whether or not secured by mortgage, deed of trust, pledge or
other lien, acquire and develop real property, and lease, sell, transfer or
otherwise dispose of real property; provided, however, that the Partnership's
business and powers shall be limited and conducted in such a manner as to
permit Crescent Real Estate Equities Company at all times to qualify as a
REIT, unless such entity voluntarily terminates its REIT status pursuant to
its declaration of trust.
3.3 Withdrawal of Capital
Other than as set forth in this Agreement, no Partner shall have the
right to withdraw any part of its Capital Account prior to the termination of
the Partnership. No Partner shall have the right to demand and receive
property of the Partnership, instead of cash, in return of its Capital
Account, except as specifically provided in this Agreement. All rights to
withdraw a Partner's Capital Account shall be subject to the provisions of
the Act.
9
3.4 Liability of Limited Partners
No Limited Partner shall be liable for any debts, liabilities, contracts
or obligations of the Partnership. A Limited Partner shall be liable only to
make payments of its Capital Contribution when due under this Agreement.
3.5 Withdrawal and Assignment; Right of First Refusal
(a) No Partner shall have the right to withdraw from the Partnership, or
to transfer, hypothecate, sell or assign in any manner (an "Assignment") this
Agreement, any of its rights or obligations hereunder, or any interest in the
Partnership, or to otherwise enter into any agreement or arrangement the
result of which would be for another Person to become directly or indirectly
interested in the Partnership, without the prior written consent of each
other Partner (a "Consent"), except (i) assignments to any trust as to which
a shareholder of SMG is a settlor or co-settlor or grantor or co-grantor; any
corporation, partnership or other entity which is a controlled Affiliate of
SMG; or any executor, administrator or legal representative of any such
shareholder's estate, (ii) the pledge or grant of a security interest in such
rights hereunder, or (iii) as otherwise provided in this Agreement, provided,
that no such assignee shall succeed to the rights of the assignor to
participate in decisions relating to the Partnership, including voting rights
with respect to the assigned interest or the right to designate members of
the Executive Committee, without the prior written consent of each other
Partner.
Notwithstanding anything to the contrary expressed or implied in this
Agreement, the sale, assignment, transfer, pledge, or other disposition of
any interest in the Partnership is void unless approved in advance by the
Nevada Gaming Commission (the "Commission"). If at any time the Commission
finds that an individual owner of any such interest is unsuitable to hold
that interest, the commission shall immediately notify the partnership of
that fact. The Partnership shall, within ten days from the date that it
receives the notice from the Commission, return to the unsuitable owner the
amount of his capital account as reflected on the books of the Partnership.
Beginning on the date when the Commission serves notice of a determination of
unsuitability, pursuant to the preceding sentence, upon the Partnership, it
is unlawful for the unsuitable owner: (a) to receive any share of the profits
or distributions of any cash or other property other than a return of capital
as required above; (b) to exercise, directly or through any trustee or
nominee, any voting right conferred by such interest; or (c) to receive any
remuneration in any form from the Partnership, for services rendered or
otherwise.
Any Limited Partner granted delayed licensing that is later found
unsuitable by the Commission shall return all evidence of any ownership in
the Partnership to the Partnership, at which time the Partnership shall
refund to the unsuitable Limited Partner no more than the amount that he paid
for his ownership interest, and the unsuitable Limited Partner shall no
longer have any direct or indirect interest in the Partnership.
(b) Other than with respect to Assignments permitted under the
exceptions set forth in Section 3.5(a)(i), (ii) or (iii), and notwithstanding
and in addition to Sections 3.5(a) and
10
7.6(n) of this Agreement, in the event that a Partner (the "Assigning
Partner") receives the Consent of the other General and Limited Partners (the
"Remaining Partners") to an Assignment, the Remaining Partners shall,
notwithstanding having given such Consent, have a right of first refusal with
respect to the subject of the proposed Assignment by the Assigning Partner
(the "Asset"). Pursuant to such right of first refusal, the Remaining
Partners shall have an option (but not an obligation) to purchase all, but
not less than all, of the Asset, at the price of the proposed Assignment and
on terms substantially equivalent to the terms of the proposed Assignment.
(c) The period of this option (the "Option Period") shall commence upon
the receipt of the request for Consent from the Assigning Partner and shall
last for 180 days. Any such option may be exercised by the Remaining
Partners giving notice thereof within the Option Period to the Assigning
Partner. In such event, the parties shall take all necessary steps and
cooperate in good faith to effect (within 30 days after the date on which the
Option Period expires) the purchase of the Asset by the Remaining Partner on
the terms described above. Failure to effect such purchase within such 30-day
period shall be deemed a decision not to exercise the right of first refusal.
3.6 Put Right of SMG and MGE.
In the event that the equity securities of the Partnership (or a
successor to the Partnership) are not listed on a national securities
exchange or on Nasdaq National Market System on or prior to the fifth
anniversary of the date of this Agreement, SMG and MGE shall have the right
to exchange their Partnership Interests (i) for common stock of COI (or such
other entity as may have been substituted for COI by Crescent prior to the
execution of this Agreement) or (ii) for cash, if COI's (or such other
entity's) common stock is not then listed on a national securities exchange
or Nasdaq National Market System, in either case having a value or in an
amount equal to each Partner's percentage interest applied to a number that
is eight times the Partnership's average annual earnings before interest
expense, taxes, depreciation and amortization ("EBITDA") for (aa) the two
fiscal years of the Partnership preceding such anniversary (based on
financial statements of the Partnership audited by an independent certified
public accountant), and (bb) the fiscal year in which such anniversary occurs
(based on projections of EBITDA for such period that are agreed by all of the
Partners). Such projected EBITDA shall be prepared by the Managing General
Partner within 30 days after such anniversary date and shall be submitted to
COI (or such other entity), which shall have 15 days within which to approve
or reject such projections. In the event that the Partners are unable to
agree upon such projected EBITDA by the 90th day following such fifth
anniversary, COI and SMG each shall select a firm of independent public
accountants, and such accounting firms shall jointly select a third firm
which shall review the projections and, within not more than 45 days from the
date selected, shall make such adjustments to the projections prepared by the
Managing General Partner as it deems appropriate and shall advise the parties
of the projected EBITDA, which shall be binding on the parties. COI and SMG
shall divide equally the cost of such accountant, unless (a) the adjustment
to EBITDA is to increase the projection by 20% or more, in which case the
cost shall be borne by COI, or (b) the adjustment to EBITDA is to decrease
the projection by 20% or more, in which case the cost shall be borne by SMG.
The parties agree to cooperate with each other to structure the exchange of
11
SMG's and MGE's partnership interests, to the extent practicable, in a manner
that minimizes tax liability to SMG and MGE and their respective members and
shareholders.
ARTICLE IV
CAPITAL CONTRIBUTIONS
4.1 Capital Contributions of the Partners
(a) The Partners shall make the following initial Capital
Contributions to the Partnership upon the execution and delivery of this
Agreement:
MGE: $1,000
COI GP: $1,000
COI: $11,000,000
SMG: $1,000
the Partners shall have Partnership Interests in the Partnership as set forth
in Exhibit A, which Partnership Interests shall be adjusted in Exhibit A from
time to time by the General Partners to the extent necessary.
(b) Additional Capital Contributions shall not be required and may
be made only upon the agreement of all of the Partners. Any Partner shall be
entitled to lend to the Partnership, on a subordinated basis, such funds as
shall reasonably be required to fund the expenses of the Partnership, and any
such loan shall bear interest at the rate of 12% per annum, with payments of
interest and, to the extent agreed by the Partnership, principal to be made
on a quarterly basis.
(c) Except as expressly provided in this Article IV, the Partners
shall have no obligation to make any additional Capital Contributions or
loans to the Partnership.
4.2 Borrowing
Subject to Section 7.6(k) of this Agreement, if the Executive Committee
determines that it is in the best interests of the Partnership to provide for
additional Partnership funds for any Partnership purpose in excess of any
other funds determined by the Executive Committee to be available to the
Partnership, the Executive Committee may cause the Partnership to obtain
such funds from outside borrowings.
4.3 No Interest on Capital
No Partner shall be entitled to interest on its Capital Contribution or its
Capital Account.
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ARTICLE V
DISTRIBUTIONS
5.1 Distributions of Available Cash
The Executive Committee shall approve and the Managing General Partner
shall cause the Partnership to distribute quarterly all Available Cash to the
Partners as follows:
(a) First, to pay the Partners their accrued, unpaid Preferred
Return amounts (on a pro rata basis, in proportion to the respective accrued,
unpaid Preferred Return amount of each Partner);
(b) Second, to pay the Partners their Net Invested Capital amounts
(on a pro rata basis, in proportion to the respective Net Invested Capital
amount of each Partner); and
(c) Third, to the Partners in proportion to their respective
Partnership Interests.
All distributions during a fiscal year under this Section 5.1 shall be
subject to year-end adjustment. If any Partner receives distributions of
Available Cash during a Partnership fiscal year which, in the aggregate, are
in excess of the amount of Available Cash to which such Partner would be
entitled for such fiscal year if distributions of Available Cash had been
made annually, then (i) such excess distribution shall be repaid to the
Partnership by such Partner within ten (10) days after demand therefor by any
Partner, and (ii) such excess distribution shall be redistributed to the
Partner or Partners entitled to receive the same.
5.2 Distributions to Cover Tax Liabilities
(a) Notwithstanding anything to the contrary contained above in
this Article V, it is the intent of the Partnership that each Partner shall
receive a cash distribution from the Partnership with respect to each
calendar year in an amount sufficient to offset such Partner's federal, state
and local income tax liability (the "Tax Liability") with respect to such
Partner's share of any Partnership income and gain from such year (for this
purpose, Net Income and other items of income and gain allocated to SMG for
such year shall be included only to the extent that the cumulative
allocations of such items to SMG exceed the cumulative allocations of Net
Loss and other items of loss and deduction to SMG for all prior fiscal
years). Accordingly, the Executive Committee shall determine, for each
calendar year, the amount of each Partner's Tax Liability. In calculating
each Partner's Tax Liability, the Executive Committee shall use the effective
combined maximum federal, state and local income tax rates applicable to an
individual resident of St. Louis, Missouri (reducing the effective state and
local income tax rates to take into account the benefit of the federal income
tax deduction (calculated based on the maximum federal income tax rate)
attributable to such state and local income taxes). To the extent that the
distributions of Available Cash to any Partner pursuant to Section 5.1 hereof
for a calendar year are
13
insufficient to cover such Partner's Tax Liability with respect to such year,
the Partnership shall make an additional distribution to each such Partner on
or before April 15 of the subsequent calendar year in order to cause the sum
of such additional distribution plus the distributions to such Partner with
respect to such calendar year under Section 5.1 hereof to equal his or its
Tax Liability.
(b) To the extent the Partnership makes distributions under
Section 5.2(a), subsequent distributions of Available Cash and liquidating
distributions to the Partners shall be made among the Partners in a manner so
that, to the extent possible, the cumulative distributions of Available Cash
to each Partner shall be equal to the amount that would have been distributed
to such Partner if the distributions under Section 5.2(a) had not been made.
(c) To the extent that distributions are made to SMG under Section
5.2(a), and upon liquidation of the Partnership such Partner receives
cumulative distributions from the Partnership in an amount that exceeds the
cumulative amount that would have been payable to such Partner if no
distributions to the Partners had been made under Section 5.2(a), such
Partner hereby personally guarantees to immediately repay to the Partnership,
for immediate distribution to the other Partners, the lesser of the following
two amounts: (i) any such excess and (ii) the sum of (A) all reductions in
the tax liabilities of the partners of SMG attributable to SMG's partnership
interest during periods ending prior to the liquidation of the Partnership
(other than reductions attributable to losses to the extent such losses were
taken into account in the calculation in the parenthetical in the first
sentence of Section 5.2(a)) and (B) the product of 15% (fifteen percent)
times the amount of any loss carryforwards of the partners of SMG
attributable to SMG's partnership interest (including therein any losses
generated as a result of the liquidation of the Partnership). At the request
of COI GP, SMG shall furnish certificates from the accountants of the
partners of SMG or other reasonable verification to establish the amount of
such tax reductions and loss carryforwards. SMG and each of its members
shall enter into a separate guarantee agreement, in the form attached hereto,
with the Partnership to severally guarantee the obligations of SMG under this
Section 5.2(c).
5.3 Distributions Upon Liquidation
Notwithstanding anything to the contrary contained in this Article V,
proceeds from a Terminating Capital Transaction and any other cash received
or reductions in reserves made after commencement of the liquidation of the
Partnership shall be distributed to the Partners in accordance with Section
11.2.
ARTICLE VI
ALLOCATIONS
6.1 Allocations for Capital Account Purposes
After giving effect to the special allocations set forth in Section 1 of
Exhibit C, Net Income and Net Loss shall be allocated among the Partners as
follows:
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(a) First, an amount of gross income shall be allocated to the
Partners in proportion to their respective "Excess Distributions" amounts (as
hereinafter defined), until the Excess Distributions amount of each Partner
has been reduced to zero. The "Excess Distributions" amount of a Partner
means the excess of (i) the total distributions under Sections 5.1(a) made to
such Partner during the current fiscal year and all prior fiscal years, over
(ii) the total gross income allocated to such Partner under this Section
6.1(a) for all prior fiscal years;
(b) Thereafter, (except as provided in Section 6.1(d)) any
remaining Net Income and Net Loss (other than Net Income representing gain
from or Net Loss representing loss from a Terminating Capital Transaction)
shall be allocated among the Partners in proportion to their respective
Partnership Interests. Any remaining Net Income representing gain from or
Net Loss representing loss from a Terminating Capital Transaction shall be
allocated among the Partners in a manner so as to cause the positive Capital
Account of each Partner to be equal to the amount that would be payable to
such Partner if an amount equal to the sum of (i) the positive Capital
Accounts of all Partners, determined prior to any allocation of Net Income
representing gain from or Net Loss representing loss from a Terminating
Capital Transaction under this Section 6.1(b) for such fiscal year (but after
any allocation of Net Income or Net Loss under Section 6.1(a) or the first
sentence of this Section 6.1(b) for such fiscal year and after all
distributions under Article V hereof made during such fiscal year have been
reflected), plus (or minus, as applicable) (ii) the Net Income representing
gain from or Net Loss representing loss from a Terminating Capital
Transaction to be allocated among the Partners under this Section 6.1(b) with
respect to such fiscal year, were distributed among the Partners in
accordance with Sections 5.1 and 5.2(b) hereof.
(c) Any remaining Net Loss representing loss from a Terminating
Capital Transaction shall be allocated among the Partners in proportion to
their respective Partnership Interests.
(d) Notwithstanding anything to the contrary contained above in
this Section 6.1. Net Loss shall not be allocated to any Partner pursuant to
this Section 6.1 to the extent that such allocation would cause such Partner
to have an Adjusted Capital Account Deficit at the end of such taxable year,
but shall instead be allocated among the remaining Partners in proportion to
such Partners' respective Partnership Interests. Any obligations under
Section 5.2(c) shall not be considered obligations to restore deficits for
purposes of computing Adjusted Capital Account Deficits. To the extent Net
Loss is allocated to any Partner pursuant to the first sentence of this
Section 6.1(d), corresponding amounts of Net Income shall be allocated to
such Partner as soon as practicable.
6.2 Allocation of Nonrecourse Debt
For purposes of Regulations Section 1.752-3(a), the Partners agree that
Nonrecourse Liabilities of the Partnership in excess of the sum of (i) the
amount of Partnership Minimum Gain and (ii) the total amount of Nonrecourse
Built-in Gain shall be allocated among the Partners in accordance with their
respective then-existing Partnership Interests.
15
ARTICLE VII
MANAGEMENT AND OPERATION OF BUSINESS
7.1 Management
Except as otherwise provided in this Agreement, all management powers
over the business and affairs of the Partnership are exclusively vested in
the General Partners and in the Executive Committee described below, and no
Limited Partner shall have any right to participate in or exercise control or
management power over the business and affairs of the Partnership. The
Managing General Partner shall conduct the business and affairs of the
Partnership in accordance with this Agreement, the approved capital and
operating budgets referred to herein, and the Act. The initial Managing
General Partner shall be SMG, which shall remain the Managing General Partner
until removed as hereinafter provided or changed by action of the Executive
Committee. The Managing General Partner may be removed as Managing General
Partner by the other General Partner upon written notice in the event of a
finding by a court having jurisdiction of the Managing General Partner that
the Managing General Partner has engaged in fraud, willful misconduct, gross
negligence, or breach of this Agreement, in which case it automatically shall
be removed as Managing General Partner and the successor Managing General
Partner shall be the other General Partner unless the other General Partner
chooses not to serve, in which case the Managing General Partner shall be a
person appointed by the Executive Committee. SMG shall have no authority to
assign or delegate its position as the initial Managing General Partner or to
otherwise subcontract a material aspect of the performance of its primary
duties to any party. Except as otherwise provided by the Executive
Committee, the Managing General Partner shall not be entitled to receive any
fees or other compensation in respect of its activities as the Managing
General Partner, but shall be entitled to reimbursement of all out-of-pocket
expenses (excluding compensation payable to the Managing General Partner's
employees, other direct or indirect overhead or travel costs) incurred in
carrying out its duties as Managing General Partner.
All executive authority over the Managing General Partner shall be
vested in an Executive Committee of six members, three of which shall be
designated by SMG and three of which shall be designated by COI GP
Subsidiary. Each member of the Executive Committee shall act as agent for
and under the sole and exclusive direction and control of the entity by which
such member was designated, and shall be free to represent the views and
positions of such appointing entity The General Partners shall take no action
described in Section 7.6 without the affirmative vote of 2/3 of the members
of the Executive Committee.
7.2 Operating Plan
The Managing General Partner shall submit to the Executive Committee,
for their review, annual capital and operating budgets and an operating plan
for the Partnership, which annual capital and operating budgets and operating
plan shall be prepared and submitted to the Executive Committee not later
than 75 days prior to the commencement of the fiscal year for which the
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annual capital and operating budgets are to be applicable. The matters
included within such proposed capital and operating budgets and operating
plan shall include, without limitation,
(a) a description of all capital which will be required during the
year in question, a statement of the projected source of that capital (i.e.,
whether from loans or Partner contributions or otherwise) and a schedule of
the dates on which all capital from the Partners is expected to be required;
(b) plans for any material acquisition or lease of real or
personal property, or for any material construction or capital expenditures,
whether by the Partnership or by one of the Companies;
(c) a projected annual income statement for the next year on a
month-by-month basis, and projected operating cash flow statements and
balance sheets of the Partnership for the next three succeeding fiscal years;
(d) plans for any material distribution, or election not to
distribute, funds of the Partnership;
(e) a description of the proposed investment of any of the
Partnership's funds which are (or are expected to become) available for
investment;
(f) a narrative review of the budgets and operating plan for the
prior year, identifying and analyzing any material variances of actual
results from projected results; and
(g) such other information, plans, contracts, agreements or other
matters necessary in order to inform the Partners of all matters relevant to
the business of the Partnership and the management of its assets, or to
enable the Partners to make an informed decision with respect to their
approval of such budgets and operating plan, and such additional information
as may be requested by any Partner.
The Managing General Partner shall meet with the Partners at such times
as may be reasonably requested by the Partners to review such budgets and
operating plan, and shall not implement any such budgets or operating plan
unless approved in writing by all of the Partners. The Managing General
Partner shall use its best efforts to cause the Partnership to operate in
accordance with such approved annual capital and operating budgets and
operating plan, and shall promptly advise the Partners of any material
deviation therefrom.
7.3 Structure of Investment in Assets and Subsidiaries of Partnership
The Managing General Partner shall cause the Partnership's investment in
the Partnership's assets to be in substantially the form and structure
described in Attachment 7.3 hereto and shall not deviate from such form and
structure except upon the unanimous written consent of the Partners unless
required in order for Crescent to maintain its status as a real estate
investment trust. If the Partnership shall have any majority-owned
subsidiaries or other entities, the Manag-
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ing General Partner shall cause the organizational and other constituent
documents of such subsidiaries or other entities to provide that such
subsidiaries or other entities shall take no action that, if taken by the
Partnership, would require the consent of all or a specified percentage of
the Partners, unless the consent of all or such specified percentage of the
Partners is first obtained.
7.4 Management of Assets
The Managing General Partner shall be responsible for the management of
the Partnership's assets that are held within subsidiaries or other entities
and, to the extent permitted by the voting and other rights held by the
Partnership with respect to such subsidiaries or other entities, shall cause
the businesses and affairs of such subsidiaries or other entities to be
conducted in accordance with the best interests of the Partnership, and shall
cause the Partnership to perform its obligations under any material lease to
which the Partnership may be a party, including without limitation, the
Master Lease with Crescent Real Estate Equities Limited Partnership
[of even date herewith]. To the extent permitted by the voting and other
rights held by the Partnership with respect to such subsidiaries or other
entities, the Managing General Partner shall require that management of such
subsidiaries or other entities work together with the General Partners to
develop annual capital and operating budgets for each of such subsidiaries or
other entities, which annual capital and operating budgets shall be prepared
and submitted to the Partners not later than 75 days prior to the
commencement of the fiscal year for which the annual capital and operating
budgets are to be applicable. The Managing General Partner shall meet with
the Partners at such times as may be reasonably requested by the Partners to
review such budgets, and shall not approve any such budgets unless approved
in writing by all of the Partners. The Managing General Partner shall use
its best efforts to cause such subsidiaries or other entities to operate in
accordance with such approved annual capital and operating budgets, and shall
promptly advise the Partners of any material deviation therefrom.
7.5 Certificates and Documents
The Managing General Partner shall cause to be filed such certificates or
documents as may be reasonable and necessary or appropriate for the
continuation, qualification and operation of a limited partnership (or a
partnership in which the limited partners have limited liability) in the State
of Delaware and any other jurisdiction in which the Partnership may elect to do
business or own property.
7.6 Restrictions on General Partner's Authority
Except as specifically approved in the annual capital and operating budgets
approved pursuant to Section 7.4, and notwithstanding any other provision of
this Agreement, no General Partner shall have the authority to do or to cause
the Partnership to do any of the following things; and in all of the following
cases, such actions may be taken only upon the written approval of the Executive
Committee:
(a) taking any action in contravention of this Agreement or which
would make it impossible to carry on the ordinary business of the Partnership,
including without limita-
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tion any action which would interfere with the ability of the Partnership to
preserve and maintain its existence and all its rights, privileges and
franchises up to the time of the Partnership's dissolution as provided for in
this Agreement;
(b) possessing Partnership property, or assigning any rights in
specific Partnership property, for other than a Partnership purpose;
(c) doing any act in contravention of applicable law;
(d) performing any act that would subject a Limited Partner to
liability as a general partner or any other liability in any jurisdiction,
except as provided herein or under the Act;
(e) causing the dissolution, termination, liquidation or winding-up
of the Partnership;
(f) approving the annual capital and operating budgets of the
Partnership, or of any subsidiary or other majority-owned entity, or any
deviations in any such budget by 10% or more in the aggregate;
(g) exercising the authority, to hire or fire a chief executive
officer of the Partnership or of any subsidiary or other majority-owned entity
of the Partnership;
(h) requiring the Partners to make Capital Contributions;
(i) other than transactions necessary to preserve Crescent Real
Estate Equities Company's REIT status, undertaking any transactions with a
Partner or any Affiliate of any Partner, including without limitation (A)
making any loan, advance or extension of credit to any Partner or Affiliate
of any Partner, and (B) selling, transferring or conveying any property to,
purchasing or receiving any property from, lending to or borrowing funds
from, providing services to or receiving services from, or entering into any
other transaction with, any Partner or any Affiliate of any Partner, directly
or indirectly;
(j) effecting or agreeing to the sale or acquisition of any asset of
the Partnership (including, without limitation, equity interests in any Person)
with a value of more than $500,000;
(k) creating any security interest, lien or other encumbrance on any
of the Partnership's assets if the creation thereof would cause one Partner but
not the other to be adversely affected thereby;
(l) guaranteeing any direct or indirect obligation of any Partner or
Affiliate of any Partner;
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(m) exercising the authority to effect or agree to the sale (whether
of all or a majority of the stock or assets), liquidation, merger, change in
control, reorganization or consolidation of any subsidiary or other
majority-owned entity;
(n) other than with respect to assignments permitted under Sections
3.5(a)(i), (ii) and (iii), admitting new Partners, permitting the assignment of
any Partnership Interest, or issuing additional interests in the Partnership or
other Partnership securities;
(o) the appointment of the independent public accountant for the
Partnership or any change in the Partnership's independent public accountant, or
the selection or change of any other auditor, independent accounting firm or
consultant of the Partnership, or the decision to use a particular accounting
principle for the Partnership;
(p) the execution, renewal, amendment or termination of any lease
relating to the business of the Partnership providing for annual payments of
more than $50,000;
(q) the exercise by the Partnership of the voting rights of any
equity interests owned by the Partnership, and, with regard to any person in
which the Partnership owns an equity interest, to cause the making of any
decision, the taking of any action or providing any consent or approval with
regard to any matter which if made or taken by the Partnership would have
required the approval of the Partners or the Executive Committee;
(r) any sale, transfer, assignment or other disposition of all or
substantially all of the assets of the Partnership or any merger, consolidation
or business combination transaction involving the Partnership;
(s) the possession of any Partnership asset for other than
Partnership purposes;
(t) hiring or terminating the employment of or transferring
employment to any affiliate of the Partnership of any employee of the
Partnership with total annual compensation in excess of $100,000;
(u) adoption of any material amendment to any employee incentive
compensation, profit sharing, bonus or benefit plan;
(v) execution of any property management, leasing or similar
agreement which has a term of more than 12 months or which is not terminable
upon 30 days notice;
(w) dissolution of the Partnership;
(x) any material change to the name or identity of any Partnership
asset; and
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(y) any other matter specifically identified herein as requiring
submission to, or approval of, the Executive Committee.
7.7 Buy-Sell Arrangements
(a) In the event (i) the Partners or the Executive Committee
fail(s) in good faith to reach an agreement with respect to any proposed
action set forth in Section 7.6 hereof (other than with respect to
Assignments governed by Section 3.5 of this Agreement) on a timely basis, or
(ii) there is an "EBITDA Triggering Event" as defined below, any Partner may
commit either to purchase another Partner's Partnership Interest at a
specified Offer Price or to sell its own Partnership Interest for an amount
equal to such Offer Price multiplied by a fraction of which the numerator is
the offering Partner's Percentage Interest in the Partnership and the
denominator is the other Partner's Percentage Interest in the Partnership,
which decision to purchase or sell shall then be made by the other Partner.
If neither Partner sets such an Offer Price, such purchase or sale shall not
occur unless and until a Partner does so set such a price in the future. Any
such offer to purchase shall be made in writing and shall be delivered to the
other party in the manner provided in this Agreement. Such notice shall
specify a time by which the receiving party shall respond, which time shall
be not less than 60 days from the date of receipt of such notice. If the
receiving party accepts such offer, or elects to purchase the offering
party's interest, the time and place of the closing of any such purchase
shall be specified by the receiving party. Any such closing shall take place
not less than 120 days from the date of the acceptance of the offer or the
election to purchase in Las Vegas, Nevada or Fort Worth, Texas, as specified
by the acquiring person. At the closing, the purchaser shall pay the
purchase price in immediately available funds wired to such account as the
seller shall specify.
(b) The Managing General Partner shall distribute to the Partners, not
later than January 31 of each year, a calculation of the Partnership's EDITDA
for the preceding year. If such EBITDA is 10% or more below the target EDITDA
provided on Exhibit 7.7 hereto, COI may by written notice provided prior to
February 28 of such year declare that such shortfall constitutes an "EBITDA
Triggering Event" for purposes of this Section 7.7.
(c) In the event paragraph (a) of this Section 7.7 is triggered, the
Partners agree to cooperate in good faith to accomplish the contemplated
buy-sell arrangement on a prompt and commercially appropriate manner.
7.8 Other Matters Concerning the General Partners
Each of the General Partners shall have the right, in respect of any of
its powers or obligations hereunder, to act through any of its duly
authorized officers and a duly appointed attorney or attorneys-in-fact. Each
such attorney shall, to the extent provided by such General Partner in the
power of attorney, have full power and authority to do and perform all and
every act and duty which is permitted or required to be done by such General
Partner hereunder.
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7.9 Title to Partnership Assets
Title to Partnership assets, whether real, personal or mixed and whether
tangible or intangible, shall be deemed to be owned by the Partnership as an
entity, and no Partner, individually or collectively, shall have any ownership
interest in such Partnership assets or any portion thereof. Title to any or all
of the Partnership assets may be held in the name of the Partnership, or one or
more nominees, as the Executive Committee may reasonably determine. All
Partnership assets shall be recorded as the property of the Partnership in its
books and records, irrespective of the name in which legal title to such
Partnership assets is held.
7.10 Executive Committee
(a) The number of members of the Executive Committee may be increased
or decreased from time to time by the Executive Committee, so long as half of
the members of the Executive Committee shall represent and shall have been
appointed by COI GP and half of the members shall represent and shall have been
appointed by SMG. The Executive Committee shall hold regular meetings at least
quarterly at the principal offices of the Partnership. Additional meetings may
be held as long as the Executive Committee meets no more often than once each
month, with such meeting occurring upon not less than five business days notice
from any member thereof specifying the time, date and place of the meeting. A
written record of all decisions made by the Executive Committee shall be made by
the Executive Committee member or officer appointed by the Executive Committee
as Secretary of the Executive Committee, and kept in the records of the
Partnership.
(b) A majority in number of the members of the Executive Committee
shall constitute a quorum for transaction of business at any meeting of the
Executive Committee; provided, however, that if less than a majority of the
members are present at a meeting, a majority of the members present at such
meeting may adjourn the meeting without further notice. The act or affirmative
vote of a majority in number of the Executive Committee present at a meeting at
which a quorum is present shall be the act of the Executive Committee, provided,
however, that at least one member of the Executive Committee appointed by COI
and one member of the Executive Committee appointed by SMG shall have consented
to such action.
(c) Any action which may be taken at a meeting of the Executive
Committee may be taken without a meeting if a consent in writing, setting forth
the action so taken, is signed by the number of members of the Executive
Committee required to approve such action at a properly called and constituted
meeting of the Executive Committee at which all of the members of the Executive
Committee were present and voting. The members of the Executive Committee may
participate in and act at meetings of the Executive Committee through the use of
a conference telephone or other communications equipment by means of which all
persons participating in the meeting can hear each other. Participation in such
meeting shall constitute attendance in person at the meeting by the person or
persons so participating.
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(d) Except as otherwise determined by the Executive Committee, no
member thereof shall be entitled to receive any salary or other remuneration
from the Partnership for his services as a member of the Executive Committee but
shall be entitled to reimbursement of direct expenses.
7.11 Limitation of Liability and Indemnification
In the performance of their duties under this Agreement, the General
Partners and the members of the Executive Committee shall act in good faith and
in a manner that they reasonably believe to be in furtherance of the purposes
and business interests of the Partnership. The General Partners and the members
of the Executive Committee shall not be held liable to any Partner or to the
Partnership for any losses sustained, or liabilities incurred, in connection
with, or attributable to, errors in judgment, ordinary negligence, or other
fault as long as any such person acted (or omitted to act) in good faith and
reasonably believed that its action or omission which caused such loss was in
furtherance of the purposes and business interests of the Partnership and such
act or omission did not constitute fraud, willful misconduct or gross
negligence.
The Partnership shall indemnify, defend and hold harmless each General
Partner each Limited Partner and each member of the Executive Committee and each
shareholder, director, officer, partner, employee or other agent of or in such
Partner (each an "Indemnitee") to the extent of the Partnership assets, from and
against any losses, expenses, judgments, fines, settlements or damages
(collectively, "Losses") suffered or incurred by the Partnership or such
Indemnitee arising out of any claim based upon acts performed or omitted to be
performed by the Partnership or such Indemnitee, even if the claim is based upon
an act negligently performed or omitted to be performed by the Indemnitee, as
long as such act was performed or omitted to be performed in connection with the
business of the Partnership, including, without limitation, costs, expenses and
attorneys' fees expended in the settlement or defense of any such claim;
provided, however, that the foregoing indemnity shall not extend to any act or
omission on the part of such Indemnitee involving willful misconduct, fraud or
gross negligence. Unless otherwise prohibited by applicable law, an Indemnitee
shall be entitled to immediate reimbursement from Partnership funds to cover
losses incurred in investigating, defending or settling claims, whether civil,
criminal, administrative or investigative, in which the Indemnitee may be
involved, or threatened to be involved, as a party or otherwise.
The Managing General Partner shall exercise reasonable efforts to procure
liability insurance covering the members of the Executive Committee and the
executive officers of the Partnership, on such terms and in such amounts as may
be approved by the Executive Committee.
7.12 Liability of General Partners
Each General Partner shall be personally liable to third parties for the
recourse debts and obligations of the Partnership except as otherwise provided
in the documents creating such debts or obligations.
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As security for the performance of the obligations of COI GP hereunder as a
General Partner, COI and COI GP hereby guarantee to each other Partner the
faithful performance by COI GP of its duties as General Partner, provided that
the liability of COI and COI GP pursuant to this guarantee shall be limited to
the Partnership Interests of COI and COI GP, and no party asserting rights
hereunder shall have recourse to any assets of COI or COI GP other than such
Partnership Interests.
As security for the performance of the obligations of SMG hereunder as
Managing General Partner, MGE and SMG hereby guarantee to each other Partner the
faithful performance by SMG of its duties as Managing General Partner, provided
that the liability of MGE and SMG pursuant to this guarantee shall be limited to
MGE's and SMG's Partnership Interests, and no party asserting rights hereunder
shall have recourse to any assets of MGE or SMG other than such Partnership
Interests.
ARTICLE VIII
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
8.1 Limitation of Liability
The Limited Partners shall have no liability under this Agreement except as
expressly provided in this Agreement or under the Act.
8.2 Management of Business
No Limited Partner shall take part in the operation, management or control
(within the meaning of the Act) of the Partnership's business, transact any
business in the Partnership's name or have the power to sign documents for or
otherwise bind the Partnership; provided, however, that acting with regard to
any of the matters listed in Section 7.6 of this Agreement shall not be deemed
to be taking part in the operation, management or control (within the meaning of
the Act) of the Partnership's business.
8.3 Rights of Limited Partners Relating to the Partnership
In addition to other rights provided by this Agreement or by the Act, the
Limited Partners shall have the right, at any time and for any purpose, at the
Partnership's expense:
(a) to obtain a copy of the Partnership's federal, state and local
income tax returns for each fiscal year;
(b) to obtain a copy of this Agreement and the Certificate, and all
amendments to the Agreement and the Certificate, together with executed copies
of all powers of attorney (if any) pursuant to which this Agreement, the
Certificate and all amendments to the Agreement and the Certificate have been
executed; and
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(c) to obtain true and full information regarding the financial books
and records of the Partnership.
8.4 Qualifications of Equity Owners of MGE.
COI shall have the right to approve the issuance of shares of MGE to any
Person, which approval shall not be unreasonably withheld, and the operating
agreement of MGE shall reflect such approval rights of COI. In addition, each
of the equity owners of MGE shall be an employee of the Partnership, and the
operating agreement of MGE shall provide that any member of MGE who ceases to be
employed by the Partnership during the five-year period commencing on the date
of this Agreement shall forfeit his unvested interest in MGE.
ARTICLE IX
BOOKS, RECORDS, ACCOUNTING AND REPORTS
9.1 Records and Accounting
The Managing General Partner shall keep or cause to be kept at the
principal office of the Partnership appropriate books and records with respect
to the Partnership's business, including, without limitation, all books and
records necessary to provide to the Limited Partner any information and copies
of documents required to be provided pursuant to Section 8.3 hereof. Any
records maintained by or on behalf of the Partnership in the regular course of
its business may be kept on, or be in the form of, photographs, micrographics,
computer disks or any other information storage device, provided that the
records so maintained are convertible into clearly legible written form within a
reasonable period of time. The books of the Partnership shall be maintained,
for financial and tax reporting purposes, on an accrual basis in accordance with
generally accepted accounting principles.
9.2 Fiscal Year
The fiscal year of the Partnership shall be the calendar year.
9.3 Reports
As soon as practicable after the close of each fiscal quarter (other than
the last quarter of the fiscal year), the Managing General Partner shall cause
to be delivered to the Partners a quarterly report containing detailed financial
statements of the Partnership for such fiscal quarter, presented in accordance
with generally accepted accounting principles. As soon as practicable after the
close of each fiscal year, the Managing General Partner shall cause to be
delivered to the Limited Partner an annual report containing detailed financial
statements of the Partnership for such fiscal year, presented in accordance with
generally accepted accounting principles. The annual financial statements shall
be audited by a nationally recognized firm of independent public accountants
reasonably selected by the Managing General Partner.
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ARTICLE X
TAX MATTERS
10.1 Preparation of Tax Returns
The Managing General Partner shall arrange for the preparation and timely
filing of all returns of Partnership income, gains, deductions, losses and other
items required of the Partnership for federal, state and local income tax
purposes, and the preparation and timely delivery to the Limited Partner of all
tax information reasonably required by the Limited Partner for federal, state
and local income tax reporting purposes.
10.2 Tax Elections
Except as otherwise provided herein, the Managing General Partner shall, in
its reasonable discretion after discussion with the Limited Partner, determine
whether to make any available election or choose any available reporting method
pursuant to the Code or state or local tax law; provided, however, that the
Managing General Partner shall at the request of any Partner make the election
under Section 754 of the Code in accordance with applicable regulations
thereunder. The Executive Committee shall have the right to seek to revoke any
such election (including, without limitation, the election under Section 754 of
the Code) or change any reporting method upon the Executive Committee's
determination in its reasonable discretion after discussion with the Limited
Partner that such revocation is in the best interests of all of the Partners.
10.3 Tax Matters Partner
The Managing General Partner shall be the "tax matters partner" of the
Partnership for federal income tax purposes. Pursuant to Section 6223(c)(3) of
the Code, upon receipt of notice from the IRS of the beginning of an
administrative proceeding with respect to the Partnership, the tax matters
partner shall furnish the IRS with the name, address and profits interest of the
Limited Partners.
10.4 Organizational Expenses
The Partnership shall elect to deduct expenses, if any, incurred by it in
organizing the Partnership ratably over a 60-month period as provided in Section
709 of the Code.
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ARTICLE XI
DISSOLUTION AND LIQUIDATION
11.1 Dissolution
The Partnership shall not be dissolved by the admission of additional
partners; provided, however, that additional partners shall be admitted only (i)
as expressly permitted by this Agreement, or (ii) upon the approval of the
Executive Committee. The Partnership shall dissolve, and its affairs shall be
wound up, upon the first to occur of any of the following ("Liquidating
Events"):
(a) the expiration of the Partnership's term as provided in Section
2.4 hereof;
(b) an event of withdrawal of all of the General Partners, as defined
in the Act (provided, however, that this provision is not intended to confer
upon the General Partners any right to withdraw, such action being prohibited
under Section 3.5 of this Agreement), unless within ninety (90) days after the
withdrawal remaining Partners owning a majority-in-interest of the total
Partnership Interests of the remaining Partners agree in writing to continue the
business of the Partnership and to the appointment, effective immediately prior
to the date of withdrawal, of a substitute General Partner;
(c) an election to dissolve the Partnership made in writing by all of
the General Partners and Limited Partners;
(d) the entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Act;
(e) the sale of all or substantially all of the assets and properties
of the Partnership (or of its subsidiaries), unless the Executive Committee
elects to continue the Partnership business for the purpose of the receipt and
the collection of indebtedness or the collection of other consideration to be
received in exchange for the assets of the Partnership (which activities shall
be deemed to be part of the winding up of the Partnership); or
(f) a final and non-appealable judgment is entered by a court with
appropriate jurisdiction ruling that a General Partner is Bankrupt or insolvent,
or a final and non-appealable order for relief is entered by a court with
appropriate jurisdiction against a General Partner, in each case under any
federal or state Bankruptcy or insolvency laws as now or hereafter in effect,
unless prior to the entry of such order or judgment the remaining Partners
owning a majority-in-interest of the total Partnership Interests of the
remaining Partners agree in writing to continue the business of the Partnership
and to the appointment, effective as of a date prior to the date of such order
or judgment, of a substituted General Partner.
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11.2 Winding Up
(a) Upon the occurrence of a Liquidating Event, the Partnership shall
continue solely for the purposes of winding up its affairs in an orderly manner,
liquidating its assets (subject to the provisions of Section 11.2(b) below), and
satisfying the claims of its creditors and Partners. During such time period,
no Partner shall take any action that is inconsistent with, or not necessary to
or appropriate for, the winding up of the Partnership's business and affairs.
The Managing General Partner or, in the event there is no remaining Managing
General Partner, any Person elected by Limited Partners owning a
majority-in-interest of the total Partnership Interests of the Limited Partners
(in either case, the "Liquidator") shall be responsible for overseeing the
winding up and dissolution of the Partnership and shall take full account of the
Partnership's liabilities and property, and the Partnership property shall be
liquidated as promptly as is consistent with obtaining the fair market value
thereof, and the proceeds therefrom shall be applied and distributed in the
following order:
(i) First, to the payment and discharge of all of the
Partnership's debts and liabilities to creditors other than the Partners;
(ii) Second, to the payment and discharge of all of the
Partnership's debts and liabilities to the Partners; and
(iii) Third, the balance, if any, to the Partners in
accordance with their positive Capital Account balances, after giving effect to
all contributions, distributions, and allocations for all periods.
The Managing General Partner or other Liquidator shall not receive any
compensation for any services performed pursuant to this Article XI.
(b) Notwithstanding the provisions of Section 11.2(a) hereof which
require liquidation of the assets of the Partnership, but subject to the order
of priorities set forth therein, if prior to or upon dissolution of the
Partnership the Liquidator reasonably determines that an immediate sale of part
or all of the Partnership's assets would be impractical or would cause undue
loss to the Partners, the Liquidator may, in its reasonable discretion, defer
for a reasonable time the liquidation of any assets except those necessary to
satisfy liabilities of the Partnership (including to Partners as creditors)
and/or distribute to the Partners, in lieu of cash, as tenants in common and in
accordance with the provisions of Section 11.2(a) hereof, undivided interests in
such Partnership assets as the Liquidator reasonably deems not suitable for
liquidation. Any such distributions in kind shall be made only if, in the good
faith judgment of the Liquidator, such distributions in kind are in the best
interest of the Partners, and shall be subject to such conditions relating to
the disposition and management of such properties as the Liquidator reasonably
deems reasonable and equitable and to any agreements governing the operation of
such properties at such time. The Liquidator shall determine the fair market
value of any property distributed in kind in good faith, using such reasonable
method of valuation as it may adopt.
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(c) As part of the liquidation and winding-up of the Partnership, a
proper accounting shall be made of the Capital Account of each Partner,
including an analysis of changes to the Capital Account from the date of the
last previous accounting. Financial statements presenting such accounting shall
include a report of an independent certified public accountant selected by the
Liquidator, and shall be distributed promptly to all Partners.
(d) As part of the liquidation and winding-up of the Partnership, the
Liquidator may sell Partnership assets at the best price and on the best terms
and conditions as the Liquidator in good faith reasonably believes are
reasonably available at the time.
11.3 Compliance with Timing Requirements of Regulations
In the event the Partnership is "liquidated" within the meaning of
Regulations Section 1.704-1(b)(2)(ii)(g), distributions shall be made pursuant
to this Article XI to the General Partners and Limited Partners who have
positive Capital Accounts in compliance with Regulations Section
1.704-1(b)(2)(ii)(b)(2). If any Partner has a deficit balance in its Capital
Account (after giving effect to all contributions, distributions and allocations
for all taxable years, including the year during which such liquidation occurs),
such Partner shall have no obligation to make any contribution to the capital of
the Partnership with respect to such deficit, and such deficit shall not be
considered a debt owed to the Partnership or to any other Person for any purpose
whatsoever.
11.4 Deemed Contribution and Distribution
Notwithstanding any other provisions of this Article XI, in the event the
Partnership is liquidated within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g) but no Liquidating Event has occurred, the Partnership's
property shall not be liquidated, the Partnership's liabilities shall not be
paid or discharged, and the Partnership's affairs shall not be wound up.
Instead, the Partnership shall be deemed to have contributed all of its assets
and liabilities to a new partnership in exchange for an interest in the new
partnership. Immediately thereafter, the Partnership shall be deemed to have
liquidated by distributing interests in the new partnership to the Partners
(including the transferee of a Partnership Interest).
11.5 Documentation of Liquidation
Upon the completion of the liquidation of the Partnership cash and property
as provided in Section 11.2 hereof, the Partnership shall be terminated and the
Certificate and all qualifications of the Partnership as a foreign limited
partnership in jurisdictions other than the State of Delaware shall be canceled
and such other actions as may be necessary to terminate the Partnership shall be
taken. The Liquidator shall have the authority to execute and record any and
all documents or instruments required to effect the dissolution, liquidation and
termination of the Partnership.
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11.6 Reasonable Time for Winding-Up
A reasonable time shall be allowed for the orderly winding-up of the
business and affairs of the Partnership and the liquidation of its assets
pursuant to Section 11.2 hereof, in order to minimize any losses otherwise
attendant upon such winding-up, and the provisions of this Agreement shall
remain in effect among the Partners during the period of liquidation.
11.7 Waiver of Partition
Each Partner hereby waives any right to a partition of the Partnership
property.
ARTICLE XII
AMENDMENT OF AGREEMENT
12.1 Amendments
No amendment of this Agreement may be adopted unless it is approved in
writing by all of the Partners. However, the General Partners by unanimous
written consent shall have the power, without the consent of the Limited
Partners, to amend this Agreement as may be required to facilitate or implement
any of the following purposes:
(a) to add to the obligations of the General Partners or surrender
any right or power granted to the General Partners or any Affiliate of the
General Partners for the benefit of the Limited Partners; and
(b) to reflect the admission, substitution, termination, or
withdrawal of Partners in accordance with this Agreement.
ARTICLE XIII
PARTNER REPRESENTATIONS AND WARRANTIES
13.1 Representations and Warranties
(a) Each Partner represents and warrants to the Partnership and the
other Partner as follows:
(i) Organization. If such Partner is not a natural person, such
Partner is duly formed and validly existing, is qualified to do business and in
good standing in the jurisdictions in which it does business, and has all
necessary power and authority to enter into this Agreement, to carry out its
obligations hereunder and to consummate the transactions contemplated hereby.
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(ii) Due Authorization; Binding Agreement. This Agreement has
been duly executed and delivered by such Partner, or an authorized
representative of such Partner, and constitutes a legal, valid and binding
obligation of such Partner, enforceable against such Partner in accordance with
the terms hereof, except as enforceability may be limited by bankruptcy,
conservatorship, receivership, insolvency, moratorium or similar laws affecting
creditors' rights generally or by general principles of equity.
(iii) Consents and Approvals. No consent, waiver, approval
or authorization of, or filing, registration or qualification with, or notice
to, any governmental unit or any other Person is required to be made, obtained
or given by such Partner in connection with the execution, delivery and
performance of this Agreement, other than consents, waivers, approvals or
authorizations which have been obtained prior to the date hereof.
(iv) No Conflict with Other Documents or Violation of Law. The
execution of this Agreement by such Partner and such Partner's performance of
the transactions contemplated herein will not violate any document, instrument,
agreement, stipulation, judgment, order, or any applicable federal, state or
local law, ordinance or regulation, to which such Partner is a party or by which
such Partner is bound.
(b) Each Partner represents and warrants that its Partnership
Interest is being acquired for its own account and not with a view to the
distribution or other sale thereof, except in a transaction which is exempt from
registration under the Securities Act or registered thereunder.
ARTICLE XIV
GENERAL PROVISIONS
14.1 Governing Law
This Agreement and all transactions hereunder shall be governed by the laws
of the State of Delaware, without regard to the application of conflict of law
principles. The parties hereby irrevocably submit to the jurisdiction of the
courts of the State of Delaware solely in respect of the interpretation and
enforcement of the provisions of this Agreement, and hereby waive, and agree not
to assert, as a defense in any action, suit or proceeding for the interpretation
or enforcement hereof or of any such document, that it is not subject thereto or
that such action, suit or proceeding may not be brought or is not maintainable
in said courts or that the venue thereof may not be appropriate or that this
Agreement may not be enforced in or by such courts, and the parties hereto
irrevocably agree that all claims with respect to such action or proceeding
shall be heard and determined in such a Delaware State court . The parties
hereby consent to and grant any such court jurisdiction over the person of such
parties and over the subject matter of such dispute.
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14.2 Notice
All notices, requests, demands and other communications hereunder to a
Partner shall be in writing and shall be deemed to have been duly given if
delivered by hand or if sent by certified mail, return receipt requested,
properly addressed and postage prepaid, or transmitted by commercial overnight
courier to the Partner at the address set forth in Exhibit A or at such other
address as the Partner shall notify the Managing General Partner in writing.
Such communications shall be deemed sufficiently given, served, sent or received
for all purposes at such time as delivered to the addressee (with the return
receipt or delivery receipt being deemed conclusive evidence of such delivery)
or at such time as delivery is refused by the addressee upon presentation.
14.3 Entire Agreement
This Agreement constitutes the entire agreement between the parties with
respect to the subject matter herein, and supersedes all prior agreements,
instruments and understandings with respect to the subject matter herein.
14.4 Waiver; Remedies
No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.
14.5 Interpretation
(a) Whenever the context may require, any pronoun used in this
Agreement shall include the corresponding masculine, feminine or neuter forms,
and the singular form of nouns, pronouns and verbs shall include the plural and
vice versa. Wherever this Agreement refers to Partners or the parties hereto as
if there are only two such Partners or parties, it is understood and agreed that
such references intend to refer to SMG and all of its Affiliates (if any) who
are parties to this Agreement as one Partner or party, and that such references
intend to refer to COI and all of its Affiliates (if any) who are parties to
this Agreement as the other Partner or party.
(b) The headings contained in this Agreement have been inserted for
the convenience of reference only, and neither such headings nor the placement
of any term hereof under any particular heading shall in any way restrict or
modify any of the terms or provisions hereof.
(c) The rule that an agreement should be construed against the party
drafting it shall not apply to this Agreement because both parties have played a
significant role in negotiating and drafting this Agreement.
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(d) Any references in this Agreement to "including" shall be deemed
to mean "including without limitation." Except as specifically provided
otherwise, (I) references to "Articles" and "Sections" are to Articles and
Sections of this Agreement, and (ii) references to "Exhibits" are to the
Exhibits attached to this Agreement. Each Exhibit attached hereto and referred
to herein is hereby incorporated by reference.
14.6 Further Action
Each party to this Agreement agrees to cooperate with the other parties
hereto to carry out the purpose and intent of this Agreement, including without
limitation the execution and delivery to the appropriate party of all such
further documents as may reasonably be required in order to carry out the terms
of this Agreement. Without limiting the foregoing, each Partner shall cooperate
with the other Partner and shall act in a commercially reasonable manner and in
good faith to carry out the purpose and intent of the Partnership.
14.7 Counterparts
This Agreement may be executed in counterparts, all of which together shall
constitute one agreement binding on all the parties hereto, notwithstanding that
all such parties are not signatories to the original or the same counterpart.
14.8 Assignment
Subject to Section 3.5 of this Agreement, neither this Agreement nor a
Partner's interest in the Partnership shall be assignable by any Partner without
the consent of each of the General Partners. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their successors, legal
representatives and permitted assigns.
14.9 Expenses
The parties shall each pay their own fees and expenses, and those of their
agents, advisors, attorneys and accountants, with respect to the negotiation of
this Agreement and the formation and operation of the Partnership.
14.10 Public Announcements
In the case of any proposed public announcement relating to the Partnership
or the business of the Partnership or any of its subsidiaries, SMG will act as
spokesperson for the Partnership but (a) shall provide notice to COI of any
proposed press release or other public announcement and (b) shall not make any
such press release or announcement unless and until COI is satisfied with the
content of any such press release or public announcement, except where an
immediate public announcement is required by law. Where such an announcement is
required by law (in the reasonable opinion of counsel to SMG), COI shall be
given opportunity to review and comment upon the proposed announcement.
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14.11 Creditors
None of the provisions of this Agreement shall be for the benefit of, or
shall be enforceable by, any creditor of the Partnership.
14.12 Severability
The provisions of this Agreement shall be deemed severable, and if any part
of any provision is held to be illegal, void, voidable, invalid, nonbinding or
unenforceable in its entirety or partially or as to any party, for any reason,
such provision may be changed, consistent with the intent of the parties hereto,
to the extent reasonably necessary to make the provision, as so changed, legal,
valid, binding and enforceable. If any provision of this Agreement is held to
be illegal, void, voidable, invalid, nonbinding or unenforceable in its entirety
or partially or as to any party, for any reason, and if such provision cannot be
changed consistent with the intent of the parties hereto to make it fully legal,
valid, binding and enforceable, then such provision shall be stricken from this
Agreement, and the remaining provisions of this Agreement shall not in any way
be affected or impaired, but shall remain in full force and effect.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
SMG
By: ___________________________________
Name: ___________________________________
Title:___________________________________
MGE
By: ___________________________________
Name: ___________________________________
Title:___________________________________
COI GP
By: ___________________________________
Name: ___________________________________
Title:___________________________________
Crescent Operating, Inc.
By: ___________________________________
Name: ___________________________________
Title:___________________________________
35
EXHIBIT A
PARTNERS AND PARTNERSHIP INTERESTS
Name and Address of Partner Partnership
- --------------------------- Interest
-----------
General Partners:
[SMG] 24.9%
[COI GP] 1%
Limited Partners:
Crescent Operating, Inc. 49.0%
777 Main Street
Suite 2100
Fort Worth, TX 76102
MGE 25.1%
____________________
____________________
____________________
A-1
EXHIBIT B
CAPITAL ACCOUNT MAINTENANCE
1. Capital Accounts of the Partners
A. The Partnership shall maintain for each Partner a separate Capital
Account in accordance with the rules of Regulations Section 1.704-1(b)(2)(iv).
Such Capital Account shall be increased by (I) the amount of all Capital
Contributions made by such Partner to the Partnership pursuant to this Agreement
and (ii) such Partner's share of Net Income allocated to such Partner pursuant
to Section 6.1 of the Agreement and all items of Partnership income and gain
(including income and gain exempt from tax) computed in accordance with Section
1.B hereof and allocated to such Partner pursuant to Exhibit C hereof, and
decreased by (x) the amount of cash or Net Asset Value of all actual and deemed
distributions of cash or property made to such Partner pursuant to this
Agreement and (y) such Partner's share of Net Loss allocated to such Partner
pursuant to Section 6.1 of the Agreement and all items of Partnership deduction
and loss computed in accordance with Section 1.B hereof and allocated to such
Partner pursuant to Exhibit C hereof.
B. For purposes of computing the amount of any item of income, gain,
deduction or loss to be reflected in the Partners' Capital Accounts, unless
otherwise specified in this Agreement, the determination, recognition and
classification of any such item shall be the same as its determination,
recognition and classification for federal income tax purposes determined in
accordance with Section 703(a) of the Code (for this purpose all items of
income, gain, loss or deduction required to be stated separately pursuant to
Section 703(a)(1) of the Code shall be included in taxable income or loss), with
the following adjustments:
(1) Except as otherwise provided in Regulations Section
1.704-1(b)(2)(iv)(m), the computation of all items of income, gain, loss and
deduction shall be made without regard to any election under Section 754 of the
Code which may be made by the Partnership, provided that the amounts of any
adjustments to the adjusted bases of the assets of the Partnership made pursuant
to Section 734 of the Code as a result of the distribution of property by the
Partnership to a Partner (to the extent that such adjustments have not
previously been reflected in the Partners' Capital Accounts) shall be reflected
in the Capital Accounts of the Partners in the manner and subject to the
limitations prescribed in Regulations Section 1.704-1(b)(2)(iv)(m).
(2) The computation of all items of income, gain, loss and deduction shall
be made without regard to the fact that items described in Sections 705(a)(1)(B)
or 705(a)(2)(B) of the Code are not includable in gross income or are neither
currently deductible nor capitalized for federal income tax purposes.
(3) Any income, gain or loss attributable to the taxable disposition of
any Partnership property shall be determined as if the adjusted basis of such
property as of such date of disposi-
B-2
tion were equal in amount to the Partnership's Carrying Value with respect to
such property as of such date.
(4) In lieu of the depreciation, amortization, and other cost recovery
deductions taken into account in computing such taxable income or loss, there
shall be taken into account Depreciation for such fiscal year.
(5) In the event the Carrying Value of any Partnership Asset is adjusted
pursuant to Section 1.D hereof, the amount of any such adjustment shall be taken
into account as gain or loss from the disposition of such asset.
(6) Any items specially allocated under Section 2 of Exhibit C hereof
shall not be taken into account.
C. Generally, a transferee of a Partnership Interest shall succeed to a
pro rata portion of the Capital Account of the transferor.
D. (1) Consistent with the provisions of Regulations Section
1.704-1(b)(2)(iv)(f), and as provided in Section 1.D(2), the Carrying Values of
all Partnership assets shall be adjusted upward or downward to reflect any
Unrealized Gain or Unrealized Loss attributable to such Partnership property, as
of the times of the adjustments provided in Section 1.D(2) hereof, as if such
Unrealized Gain or Unrealized Loss had been recognized on an actual sale of each
such property and allocated pursuant to Section 6.1 of the Agreement.
(2) Such adjustments shall be made as of the following times: (a)
immediately prior to the acquisition of an additional interest in the
Partnership by any new or existing Partner in exchange for more than a de
minimis Capital Contribution; (b) immediately prior to the distribution by the
Partnership to a Partner of more than a de minimis amount of property as
consideration for an interest in the Partnership; and (c) immediately prior to
the liquidation of the Partnership within the meaning of Regulations Section
1.704-1(b)(2)(ii)(g), provided however that adjustments pursuant to clauses (a)
and (b) above shall be made only if the Managing General Partner determines that
such adjustments are necessary or appropriate to reflect the relative economic
interests of the Partners in the Partnership.
(3) In accordance with Regulations Section 1.704-1(b)(2)(iv)(e) the
Carrying Value of Partnership assets distributed in kind shall be adjusted
upward and downward to reflect any Unrealized Gain or Unrealized Loss
attributable to such Partnership property, as of the time any such asset is
distributed, as if such Unrealized Gain or Unrealized Loss had been recognized
on an actual sale of such Partnership property and allocated pursuant to Section
6.1 of the Agreement.
(4) In determining such Unrealized Gain or Unrealized Loss the aggregate
cash amount and fair market value of all Partnership assets (including cash or
cash equivalents) shall be determined by the Executive Committee using such
reasonable method of valuation as it may adopt, or in the case of a liquidating
distribution pursuant to Article 11 of the Agreement, be de-
B-3
termined and allocated by the Liquidator using such reasonable methods of
valuation as it may adopt. The Executive Committee, or the Liquidator, as
the case may be, shall allocate such aggregate value among the assets of the
Partnership (in such manner as it determines in its sole and absolute
discretion to arrive at a fair market value for individual properties).
E. The provisions of this Agreement relating to the maintenance of
Capital Accounts are intended to comply with Regulations Section 1.704-1(b) and
shall be interpreted and applied in a manner consistent with such Regulations.
In the event the Managing General Partner shall determine that it is prudent to
modify the manner in which the Capital Accounts, or any debits or credits
thereto (including, without limitation, debits or credits relating to
liabilities which are secured by contributed or distributed property or which
are assumed by the Partnership, the General Partners, or the Limited Partners)
are computed in order to comply with such Regulations, the Managing General
Partner may make such modification, provided that it is not likely to have a
material effect on the amounts distributable to any Person pursuant to Article
11 of the Agreement upon the dissolution of the Partnership. The Managing
General Partner also shall (I) make any adjustments that are necessary or
appropriate to maintain equality between the Capital Accounts of the Partners
and the amount of Partnership capital reflected on the Partnership's balance
sheet, as computed for book purposes, in accordance with Regulations Section
1.704-1(b)(2)(iv)(q), and (ii) make any appropriate modifications in the event
unanticipated events might otherwise cause this Agreement not to comply with
Regulations Section 1.704-1(b).
B-4
EXHIBIT C
SPECIAL TAX ALLOCATION RULES
1. Special Allocation Rules.
Notwithstanding any other provision of the Agreement or this Exhibit C, the
following special allocations shall be made in the following order:
A. Minimum Gain Chargeback. Notwithstanding the provisions of Section
6.1 of the Agreement or any other provisions of this Exhibit C, if there is a
net decrease in Partnership Minimum Gain during any fiscal year (except as a
result of certain conversions and refinancings of Partnership indebtedness,
certain capital contributions, or certain revaluations of the Partnership
property as further described in Regulations Sections 1.704-2(d)(4),
1.704-2(f)(2) or 1.704-2(f)(3)), each Partner shall be specially allocated items
of Partnership income and gain for such year (and, if necessary, subsequent
years) in an amount equal to such Partner's share of the net decrease in
Partnership Minimum Gain, as determined under Regulations Section 1.704-2(g).
Allocations pursuant to the previous sentence shall be made in proportion to the
respective amounts required to be allocated to each Partner pursuant thereto.
The items to be so allocated shall be determined in accordance with Regulations
Sections 1.704-2(f)(6) and 1.704-2(j)(2). This Section 1.A is intended to
comply with the minimum gain chargeback requirements in Regulations Section
1.704-2(f) and for purposes of this Section 1.A. only, each Partner's Adjusted
Capital Account Deficit shall be determined prior to any other allocations
pursuant to Section 6.1 of the Agreement with respect to such fiscal year and
without regard to any decrease in Partner Minimum Gain during such fiscal year.
B. Partner Minimum Gain Chargeback. Notwithstanding any other provision
of Section 6.1 of the Agreement or any other provisions of this Exhibit C
(except Section 1.A hereof), if there is a net decrease in Partner Minimum Gain
attributable to a Partner Nonrecourse Debt during any fiscal year (except as a
result of certain conversions and refinancings of Partnership indebtedness,
certain capital contributions, or certain revaluations of the Partnership
property as further described in Regulations Sections 1.704-2(i)(3) and
1.704-2(i)(4)), each Partner who has a share of the Partner Minimum Gain
attributable to such Partner Nonrecourse Debt, determined in accordance with
Regulations Section 1.704-2(i)(5), shall be specially allocated items of
Partnership income and gain for such year (and, if necessary, subsequent years)
in an amount equal to such Partner's share of the net decrease in Partner
Minimum Gain attributable to such Partner Nonrecourse Debt, determined in
accordance with Regulations Section 1.704-2(i)(5). Allocations pursuant to the
previous sentence shall be made in proportion to the respective amounts required
to be allocated to each General Partner and Limited Partner pursuant thereto.
The items to be so allocated shall be determined in accordance with
Regulations Sections 1.704-2(i)(4) and 1.704-2(j)(2). This Section 1.B is
intended to comply with the minimum gain chargeback requirement in such
Section of the Regulations and shall be interpreted consistently therewith.
Solely for purposes of this Section 1.B, each partner's Adjusted Capital
Account Deficit shall be
C-2
determined prior to any other allocations pursuant to Section 6.1 of the
Agreement or this Exhibit with respect to such fiscal year, other than
allocations pursuant to Section 1.A hereof.
C. Qualified Income Offset. In the event any Partner unexpectedly
receives any adjustments, allocations or distributions described in Regulations
Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), or
1.704-1(b)(2)(ii)(d)(6), and after giving effect to the allocations required
under Sections 1.A and 1.B hereof, such Partner has an Adjusted Capital Account
Deficit, items of Partnership income and gain shall be specifically allocated to
such Partner in an amount and manner sufficient to eliminate, to the extent
required by the Regulations, its Adjusted Capital Account Deficit created by
such adjustments, allocations or distributions as quickly as possible. This
Section 1.C is intended to constitute a "qualified income offset" under
Regulation Section 1.704-1(b)(2)(ii)(d) and shall be interpreted consistently
therewith.
D. Nonrecourse Deductions. Nonrecourse Deductions for any taxable period
shall be allocated to the Partners in accordance with their respective
Partnership Interests. If the Managing General Partner determines in its good
faith discretion that the Partnership's Nonrecourse Deductions must be allocated
in a different ratio to satisfy the safe harbor requirements of the Regulations
promulgated under Section 704(b) of the Code, the Managing General Partner is
authorized, upon notice to the Limited Partners, to revise the prescribed ratio
to the numerically closest ratio which does satisfy such requirements.
E. Partner Nonrecourse Deductions. Any Partner Nonrecourse Deductions
for any fiscal year shall be specially allocated to the Partner who bears the
economic risk of loss with respect to the Partner Nonrecourse Debt to which such
Partner Nonrecourse Deductions are attributable in accordance with Regulations
Sections 1.704-2(b)(4) and 1.704-2(i).
F. Code Section 754 Adjustments. To the extent an adjustment to the
adjusted tax basis of any Partnership asset pursuant to Section 734(b) or 743(b)
of the Code is required, pursuant to Regulations Section 1.704-1(b)(2)(iv)(m),
to be taken into account in determining Capital Accounts, the amount of such
adjustment to the Capital Accounts shall be treated as an item of gain (if the
adjustment increases the basis of the asset) or loss (if the adjustment
decreases such basis), and such item of gain or loss shall be specially
allocated to the Partners in a manner consistent with the manner in which their
Capital Accounts are required to be adjusted pursuant to such Section of the
Regulations.
G. Sections 1245/1250 Recapture. If any portion of gain from the sale of
property is treated as Recapture Income, such Recapture Income shall be
allocated among the Partners in accordance with the provisions of Regulations
Sections 1.1245-1(e) and 1.1250-1(f).
H. Curative Allocations. The allocations set forth in Section 1.C of
this Exhibit C (the "Regulatory Allocations") are intended to comply with
certain requirements of the Regulations promulgated under Section 704 of the
Code. The Regulatory Allocations shall be taken into account in allocating Net
Income, Net Losses and other items of income, gain, loss and deduction to each
Partner so that, to the extent possible, and to the extent permitted by the
Regulations, the cumulative allocations of Net Income, Net Losses and other
items and the Regulatory Alloca-
C-3
tions to each Partner shall be equal to the net amount that would have been
allocated to each Partner if the Regulatory Allocations had not been made.
2. Allocations for Tax Purposes.
A. Except as otherwise provided in this Section 2, for federal income tax
purposes, each item of income, gain, loss and deduction shall be allocated among
the Partners in the same manner as its correlative item of "book" income, gain,
loss or deduction is allocated pursuant to Section 6.1 of the Agreement and
Section 1 of this Exhibit C.
B. Notwithstanding any other provision in this Agreement, in an attempt
to eliminate Book-Tax Disparities attributable to a Contributed Property or
Adjusted Property, items of income, gain, loss, and deduction shall be allocated
for federal income tax purposes (and not for "book" purposes) among the Partners
as follows:
(1) (a) In the case of a Contributed Property, such items
attributable thereto shall be allocated among the Partners consistent with the
principles of Section 704(c) of the Code that takes into account the variation
between the Gross Asset Value of such property and its adjusted basis at the
time of contribution; and
(b) any item of Residual Gain or Residual Loss attributable to a
Contributed Property shall be allocated among the Partners in the same manner as
its correlative item of "book" gain or loss is allocated pursuant to Section 6.1
of the Agreement and Section 1 of this Exhibit C.
(2) (a) In the case of an Adjusted Property, such items shall
(1) first, be allocated among the Partners in a manner
consistent with the principles of Section 704(c) of the Code to take into
account the Unrealized Gain or Unrealized Loss attributable to such property and
the allocations thereof pursuant to Exhibit B and
(2) second, in the event such property was originally a
Contributed Property, be allocated among the Partners in a manner consistent
with Section 2.B.(1) of this Exhibit C; and
(b) any item of Residual Gain or Residual Loss attributable to
an Adjusted Property shall be allocated among the Partners in the same manner as
its correlative item of "book" gain or loss is allocated pursuant to Section 6.1
of the Agreement and Section 1 of this Exhibit C.
(3) all other items of income, gain, loss and deduction shall be
allocated among the Partners in the same manner as their correlative item of
"book" gain or loss is allocated pursuant to Section 6.1 of the Agreement and
Section 1 of this Exhibit C.
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C. For purposes of Sections 2.B(1)(a) and 2.B(2)(a) of this Exhibit C,
the Executive Committee shall determine the method to be used under Regulations
Section 1.704-3 to eliminate Book-Tax Disparities attributable to a Contributed
Property or Adjusted Property; provided, however, that if the affirmative vote
of 2/3 of the members of the Executive Committee cannot be obtained for any
particular method, the "remedial" allocation method described in Regulations
Section 1.704-3(d) shall be used by the Partnership.
C-5
SCHEDULE 5.22
REGISTRATION RIGHTS AND LOCK-UP AGREEMENT
This Registration Rights and Lock-Up Agreement (the "Agreement") is
entered into as of __________, 1998 by and among Crescent Real Estate
Equities Company, a Texas real estate investment trust (the "Company"),
_________________, a Delaware limited partnership (the "Operating Joint
Venture") and Blake Sartini, Lorenzo J. Fertitta, and Frank J. Fertitta III
(each, individually, a "Shareholder" and collectively, the "Shareholders").
WHEREAS, each of the Shareholders currently owns shares of Common Stock,
par value $.01 per share (the "Station Common Stock"), of Station Casinos,
Inc., a Nevada corporation ("Station"), options to acquire shares of Common
Stock of Station, and also currently owns or may in the future own shares of
the $3.50 Convertible Preferred Stock of Station (the "Station Preferred
Stock");
WHEREAS, each of the Shareholders is to receive, in exchange for shares
of Station Common Stock currently owned by such Shareholders, common shares
of beneficial interest of the Company, $.01 par value per share (the "Common
Shares"), which shares are to be issued under the Securities Act of 1933, as
amended (the "Securities Act"), in connection with the merger of Station,
with and into the Company (the "Merger");
WHEREAS, each of the Shareholders is to receive, in exchange for options
to acquire Station Common Stock, options to purchase Common Shares in
connection with the Merger;
WHEREAS, each or certain of the Shareholders are to receive or may
receive, in exchange for shares of Station Preferred Stock, shares of
beneficial interest in the form of $3.50 Convertible Preferred Shares (the
"Preferred Shares") issued under the Securities Act in connection with the
Merger;
WHEREAS, in order to induce the Company to enter into the Agreement and
Plan of Merger (the "Merger Agreement"), dated as of January 16, 1998, by and
between the Company and Station, the Shareholders have agreed to the lock-up
set forth in Section 2 hereof;
WHEREAS, in order to induce the Shareholders to consummate certain
transactions relating to the Merger, the Company has agreed to provide the
Shareholders with the registration rights set forth in Section 3 hereof;
NOW, THEREFORE, in consideration of the foregoing, the mutual promises
and agreements set forth herein, and other valuable consideration, the
receipt and sufficiency of which are
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hereby acknowledged, the parties hereto agree as follows.
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1. CERTAIN DEFINITIONS.
As used in this Agreement, the following capitalized defined terms shall
have the following meanings:
"Agreement" shall have the meaning set forth above in the recitals
hereto.
"Common Shares" shall have the meaning set forth above in the recitals
hereto and, in addition, shall include any equity securities of the Company
or any corporate successor of the Company into or for which Common Shares are
converted or exchanged.
"Company" shall have the meaning set forth above in the recitals hereto.
"Merger" shall have the meaning set forth above in the recitals hereto.
"Merger Agreement" shall have the meaning set forth above in the
recitals hereto.
"NASD" shall mean the National Association of Securities Dealers, Inc.
"Operating Joint Venture" shall have the meaning set forth above in the
recitals hereto.
"Person" shall mean an individual, partnership, corporation, trust, or
incorporated organization, or a government agency or political subdivision
thereof.
"Preferred Shares" shall mean the $3.50 Convertible Preferred Shares of
the Company or any corporate successor of the Company.
"Prospectus" shall mean the prospectus included in a Registration
Statement, including any preliminary prospectus, as amended or supplemented
by any prospectus supplement, with respect to the terms of the offering of
any portion of the Registrable Shares covered by such Registration Statement,
and by all other amendments and supplements to such prospectus, including
post-effective amendments, and in each case including all material
incorporated by reference therein.
"Registrable Shares" shall mean the Shares, excluding (i) Shares that
previously were, but no longer are, outstanding, (ii) Shares for which a
Registration Statement relating to the sale thereof shall have become
effective under the Securities Act and which have been disposed of under such
Registration Statement, (iii) Shares sold pursuant to Rule 144 under the
Securities Act,
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(iv) Shares eligible for sale pursuant to Rule 144(k) under the Securities
Act, and (v) Shares for which sale under a Registration Statement is no
longer required under the Securities Act; PROVIDED, HOWEVER, that in no event
shall the Registrable Shares exceed the number of Shares having a Value
(measured at the time of the first sale of a Share pursuant to a Registration
Statement) of $30 million (a Value of $10 million per Shareholder, including
for this purpose all transferees of such Shareholder).
"Registration Expenses" shall mean any and all expenses incident to the
performance of or compliance with this Agreement, including, without
limitation: (i) all SEC, stock exchange or NASD registration and filing fees;
(ii) all fees and expenses incurred in connection with state securities or
"blue sky" laws (including reasonable fees and disbursements of counsel in
connection with "blue sky" qualification of any of the Registrable Shares and
the preparation of a Blue Sky Memorandum) and compliance with the rules of
the NASD; (iii) all expenses of any Persons in preparing or assisting in
preparing, word processing, printing and distributing any Registration
Statement, any Prospectus, certificates and other documents relating to the
performance of and compliance with this Agreement; (iv) all fees and expenses
incurred in connection with the listing, if any, of any of the Registrable
Shares on any securities exchange or exchanges pursuant to Section 3(c)
hereof; and (v) the fees and disbursements of counsel for the Company and of
the independent public accountants of the Company, including the expenses of
any "cold comfort" letters required by or incident to such performance and
compliance. Registration Expenses shall specifically exclude any brokerage
or underwriting discounts and commissions relating to the sale or disposition
of Registrable Shares by any selling Shareholder, the fees and disbursements
of counsel representing a selling Shareholder, and transfer taxes, if any,
relating to the sale or disposition of Registrable Shares by a selling
Shareholder, all of which shall be borne by such Shareholder in all cases.
"Registration Statement" shall mean any registration statement of the
Company and any other entity required to be a registrant with respect to such
registration statement pursuant to the requirements of the Securities Act
which covers any of the Registrable Shares, on an appropriate form, and all
amendments and supplements to such registration statement, including
post-effective amendments, in each case including the Prospectus contained
therein, all exhibits thereto and all materials incorporated by reference
therein.
"SEC" shall mean the Securities and Exchange Commission.
"Securities Act" shall have the meaning set forth above in the recitals
hereto.
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"Shareholder(s)" shall mean (i) each of the Persons identified as
Shareholders in the recitals hereto and (ii) any Person identified in Section
2 (A) to whom any of the Persons identified in the recitals hereto makes a
Transfer of Shares and (B) who executes a counterpart of this Agreement
agreeing to be bound by its terms and provisions.
"Shares" shall mean (i) the shares of Station Common Stock beneficially
owned (as such term is defined in Rule 13d-3 under the Securities Exchange
Act of 1934, as amended (the "Exchange Act")) by each of the Shareholders as
of the close of business on the date hereof, (ii) the shares of Station
Common Stock or, as the case may be, the Common Shares which are acquired
during the term hereof as a result of the exercise of options to purchase
shares of Station Common Stock or Common Shares, (iii) the shares of Station
Common Stock which are acquired during the term hereof as a result of the
conversion of shares of Station Preferred Stock that are beneficially owned
by each of the Shareholders, (iv) the Common Shares which are acquired during
the term hereof as a result of the conversion of Preferred Shares that are
beneficially owned by each of the Shareholders as of the close of business on
the date hereof, and (v) any shares of Station Common Stock, Station
Preferred Stock, Common Shares or Preferred Shares acquired by, or underlying
options, warrants, or similar securities granted to, any of the Shareholders
subsequent to the date hereof.
"Station" shall have the meaning set forth above in the recitals hereto.
"Station Common Stock" shall have the meaning set forth above in the
recitals hereto and, in addition, shall include any equity securities of
Station or any corporate successor of the Company into or for which shares of
Station Common Stock are converted or exchanged.
"Station Preferred Stock" shall mean the shares of $3.50 Convertible
Preferred Stock of Station or any corporate successor of Station.
"Value" shall mean, with respect to any shares of Station Common Stock
or any Common Shares, the average of the "closing price" of such shares or
Common Shares for the ten consecutive trading days immediately preceding the
date of a sale of Shares. The "closing price" for a trading day means (i)
the last sale price, regular way, on such trading day or, if no such sale
takes place on that day the average of the closing bid and asked prices on
that day, regular way, in either case as reported on the principal
consolidated transaction reporting system with respect to securities listed
or admitted to trading on the New York Stock Exchange, or (ii) if the shares
of Station Common Stock or the Common Shares being sold pursuant to Section 2
are not so listed or admitted to trading, as reported in the principal
consolidated
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transaction reporting system with respect to securities listed on the
principal national securities exchange on which such shares or Common Shares
are listed or admitted to trading or (iii) if the shares of Station Common
Stock or the Common Shares are not so listed or admitted to trading, the last
quoted price or, if not quoted, the average of the high and low bid and asked
prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System or (iv) if
such system is no longer in use, the principal automated quotation system
then in use or (v) if the shares of Station Common Stock or the Common Shares
are not so quoted by any such system, as determined in good faith by the
board of directors of Station for shares of Station Common Stock and by the
board of directors of the Company for Common Shares.
2. LOCK-UP AGREEMENT
(a) Each Shareholder hereby agrees that, except as set forth in
Section 2(b) or 2(c) below, from the date hereof until 18 months following
such date (the "Lock-Up Period"), such Shareholder will not offer, pledge,
sell, contract to sell, transfer by gift, grant any options for the sale of
or otherwise transfer, distribute or dispose of, directly or indirectly
(collectively, for purposes of this Section 2, a "Transfer"), any Shares (the
"Lock-Up").
(b) Notwithstanding the provisions of (a), after the expiration of
12 months from the date hereof, each Shareholder (including for this purpose
the transferees of such Shareholder) may Transfer Shares with a Value of $10
million or less, PROVIDED, HOWEVER, that the Shareholders (including for this
purpose all transferees of the Shareholders) may not Transfer Shares with an
aggregate Value in excess of $30 million pursuant to this exception.
(c) The following Transfers of Shares shall not be subject to the
Lock-Up set forth in Section 2(a):
(i) a Shareholder may Transfer Shares to his spouse,
siblings, parents or any natural or adopted children or other descendants or
to any personal trust in which such family member or such Shareholder retains
the entire beneficial interest;
(ii) a Shareholder may Transfer Shares on his death to such
Shareholder's estate, executor, administrator or personal representative or
to such Shareholder's beneficiaries pursuant to a devise or bequest or by
laws of descent and distribution;
(iii) a Shareholder may Transfer Shares pursuant to a pledge,
grant of security interest or other encumbrance effected in a BONA FIDE
transaction with an unrelated
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and unaffiliated pledgee if such pledgee agrees that, upon any foreclosure of
such pledge, the Shares so acquired shall remain subject to all of the terms
and provisions of this Agreement.
PROVIDED , HOWEVER, that in the case of any Transfer of Shares, the
transferor shall, at the Company's request, provide evidence (which may
include, without limitation, an opinion of counsel satisfactory in form,
scope and substance to the Company in its sole discretion as the issuer
thereof) satisfactory to the Company that the transfer is exempt from the
registration requirements of the Securities Act.
In the event any Shareholder Transfers Shares described in this Section
2(c), such Shares shall remain subject to this Agreement, and any Transfer or
purported Transfer of Shares by a Shareholder to a Person who does not
execute a counterpart of this Agreement shall be void AB INITIO and of no
force or effect. If the transferee executes and delivers a counterpart of
this Agreement, such transferee shall be deemed to be a Shareholder for all
purposes of this Agreement.
3. REGISTRATION.
(a) FILING OF REGISTRATION STATEMENTS. Subject to the conditions
set forth in this Agreement, the Company (i) shall file a Registration
Statement with the SEC covering all of the Registrable Shares, (ii) shall use
reasonable best efforts to cause such Registration Statement to be declared
effective on or before the effective date of the Merger, and (iii) agrees to
use reasonable efforts to keep such Registration Statement continuously
effective until the date on which the Shareholders no longer hold any
Registrable Shares.
(b) NOTICE OF EFFECTIVENESS. The Company shall notify each
Shareholder of the effectiveness of the Registration Statement and shall
furnish to each Shareholder such number of copies of the Registration
Statement (including any amendments, supplements and exhibits), the
Prospectus contained therein (including each preliminary prospectus and all
related amendments and supplements), and any documents incorporated by
reference in such Registration Statement or such other documents as the
Shareholder may reasonably request in order to facilitate its sale of the
Registrable Shares covered thereby in the manner described in the
Registration Statement.
(c) AMENDMENTS AND SUPPLEMENTS TO REGISTRATION STATEMENT; LISTING.
The Company shall prepare and file with the SEC from time to time such
amendments and supplements to each Registration Statement and prospectus used
in connection therewith as may be necessary to keep the Registration
Statement effective and to comply with the provisions of the Securities Act
with respect to the disposition of all the Shares covered by the Registration
Statement until such time as all of such Registrable
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Shares have been disposed of in accordance with the intended methods of
disposition by the Shareholders as set forth in the Registration Statement.
Upon five business days' notice, the Company shall file any supplement or
post-effective amendment to the applicable Registration Statement with
respect to the plan of distribution of such Shareholder's ownership interests
in Registrable Shares that is necessary to permit the sale of the
Shareholder's Registrable Shares pursuant to the Registration Statement,
including supplements or post-effective amendments required to give effect to
the designation of any underwriter or underwriting syndicate specified by
such Shareholder. The Company shall file any necessary listing applications
or amendments to the existing applications to cause the Shares registered
under any Registration Statement to be then listed or quoted on the primary
exchange or quotation system on which the Common Shares are then listed or
quoted.
(d) SEC REQUESTS. The Company shall promptly notify each
Shareholder of, and confirm in writing, any request by the SEC for amendments
or supplements to any Registration Statement or the Prospectus related
thereto or for additional information. In addition, the Company shall
promptly notify each Shareholder of, and confirm in writing, the filing of
the Registration Statement or any Prospectus, amendment or supplement related
thereto or any post-effective amendment to the Registration Statement and the
effectiveness of any post-effective amendment.
(e) PROSPECTUS DELIVERY. At any time when a Prospectus relating
to a Registration Statement is required to be delivered under the Securities
Act, the Company shall immediately notify each Shareholder of the happening
of any event as a result of which (i) the Prospectus included in the
Registration Statement, as then in effect, includes an untrue statement of a
material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading, and (ii) an
amendment or supplement to the Registration Statement is a requirement (an
"Event Notice"). In such event, the Company shall promptly prepare and
furnish to each Shareholder a reasonable number of copies of a supplement to
such Prospectus (or, after declaration of effectiveness by the SEC, of any
amendment to the Prospectus required to be filed as an amendment to the
Registration Statement) as may be necessary so that, as thereafter delivered
to the purchasers of Shares covered by the Registration Statement, such
prospectus shall not include an untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances under which they are
made, not misleading. The Company will, if necessary, amend the Registration
Statement of which such Prospectus is a part to reflect such amendment or
supplement and use its best efforts promptly to obtain an effectiveness order
for such amendment from the SEC. From and after the date of any Event
8
Notice, no Shareholder shall offer or sell any Shares covered by the
Registration Statement until such time as the Company delivers any such
Prospectus supplement or amendment to the Shareholder.
(f) STATE SECURITIES LAWS. Subject to the conditions set forth in
this Agreement, the Company shall, in connection with the filing of any
Registration Statement hereunder, file such documents as may be necessary to
register or qualify the Shares covered by the Registration Statement under the
securities or "Blue Sky" laws of such states as any Shareholder may reasonably
request, and the Company shall use its best efforts to cause such filings to
become effective; PROVIDED, HOWEVER, that the Company shall not be obligated to
qualify as a foreign corporation to do business under the laws of any such state
in which it is not then qualified or to file any general consent to service of
process in any such state, provided that the Company shall file a Uniform
Consent to Service of Process on Form U-2 or its successor in any state that
requires such a filing in connection with the offering of the Shares covered by
the Registration Statement and in which the Shareholder proposes to offer such
Shares. Once effective, the Company shall use its best efforts to keep such
filings effective until the earliest of such time as (i) the Shareholders no
longer hold any Registrable Shares, or (ii) in the case of a particular state, a
Shareholder has notified the Company that it no longer requires an effective
filing in such state in accordance with its original request for filing. The
Company shall promptly notify each Shareholder of, and confirm in writing, the
receipt by the Company of any notification with respect to the suspension of the
qualification of the Registrable Shares for sale under the securities or "Blue
Sky" laws of any jurisdiction or the initiation or threat of any proceeding for
such purpose.
(g) EXPENSES. The Company shall bear all Registration Expenses
incurred in connection with the registration of the Registrable Shares pursuant
to this Agreement. Each Shareholder shall bear its pro rata share of all other
expenses resulting from any disposition, sale or transfer of such Registrable
Shares by such Shareholder.
(h) COOPERATION. Each Shareholder hereby agrees (i) to cooperate
with the Company and to furnish to the Company in a timely manner all
information that the Company may reasonably request in connection with the
preparation of any Registration Statement and any filings with any state
securities commissions concerning its plan of distribution and ownership
interests with respect to such Shareholder's Registrable Shares and any other
information and (ii) to deliver or cause delivery of the Prospectus contained in
the Registration Statement to any purchaser of the shares covered by the
Registration Statement from the Shareholder except to the extent provided to the
contrary in Section 3(e) above.
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(i) SUSPENSION OF REGISTRATION REQUIREMENT. The Company shall
promptly notify each Shareholder of, and confirm in writing, the issuance by the
SEC of any stop order suspending the effectiveness of a Registration Statement
or the initiation of any proceedings for that purpose. Each Shareholder agrees
not to effect any sales from the date of such notice until the Company obtains
the withdrawal of any such order suspending the effectiveness of the applicable
Registration Statement. The Company shall use its best efforts to obtain the
withdrawal of any order suspending the effectiveness of the Registration
Statement and shall notify each Shareholder of such withdrawal within two
business days thereafter. Each Shareholder whose Registrable Shares are covered
by a Registration Statement filed pursuant to Section 3 (a) hereof agrees, if
requested by the Company in the case of a Company-initiated non-underwritten
offering or if requested by the managing underwriter or underwriters in a
Company-initiated underwritten offering, not to effect any public sale or
distribution of any of the securities of the Company of any class included in
such Registration Statement (or any security the value of which is determined
with reference to the value of such securities), including a sale pursuant to
Rule 144A or Rule 144 under the Securities Act (except as part of such
Company-initiated registration), during the 15-day period prior to, and during
the 90-day period beginning on the date of effectiveness of each
Company-initiated offering made pursuant to such Registration Statement, to the
extent timely notified in writing by the Company or the managing underwriters;
provided, however, that such 90-day period shall be extended by the number of
days from (and including) the date of the giving of any notice pursuant to
Section 3(d) or (e) hereof to (and including) the date when each seller of
Registrable Shares covered by such Registration Statement shall have received
the copies of the supplemented or amended Prospectus contemplated by Section
3(e) hereof.
(j) ADDITIONAL SHARES. The Company, at its option, may register,
under any Registration Statement and any filings with any state securities
commissions filed pursuant to this Agreement, any number of unissued Common
Shares of the Company or any Common Shares of the Company owned by any other
shareholder or shareholders of the Company unless the underwriter or
underwriters specified by the Shareholder asserts in writing that such
additional shares will, in its opinion, have a significant adverse effect on the
marketing of the Shareholder's Shares covered by the Registration Statement.
4. INDEMNIFICATION.
(a) INDEMNIFICATION BY THE COMPANY. The Company agrees to indemnify
and hold harmless each Shareholder as follows:
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(i) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement (or
any amendment thereto) pursuant to which the Registrable Shares were registered
under the Securities Act, including all documents incorporated therein by
reference, or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the statements therein not
misleading or arising out of any untrue statement or alleged untrue statement of
a material fact contained in any Prospectus (or any amendment or supplement
thereto), including all documents incorporated therein by reference, or the
omission or alleged omission therefrom of a material fact necessary in order to
make the statements therein, in the light of the circumstances under which they
were made, not misleading;
(ii) against any and all loss, liability, claim, damage and
expense whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or investigation or proceeding by any governmental
agency or body, commenced or threatened, or of any claim whatsoever based upon
any such untrue statement or omission, or any such alleged untrue statement or
omission, if such settlement is effected with the written consent of the
Company; and
(iii) against any and all expense whatsoever, as incurred
(including reasonable fees and disbursements of counsel), reasonably incurred in
investigating, preparing or defending against any litigation, or investigation
or proceeding by any governmental agency or body, commenced or threatened, in
each case whether or not a party, or any claim whatsoever based upon any such
untrue statement or omission, or any such alleged untrue statement or omission,
to the extent that any such expense is not paid under subparagraph (i) or (ii)
above;
PROVIDED, HOWEVER, that the indemnity provided pursuant to this Section 4 does
not apply to any Shareholder with respect to any loss, liability, claim, damage
or expense to the extent arising out of (1) any untrue statement or omission or
alleged untrue statement or omission made in reliance upon and in conformity
with written information furnished to the Company by such Shareholder expressly
for use in the Registration Statement (or any amendment thereto) or the
Prospectus (or any amendment or supplement thereto) or (2) such Shareholder's
failure to deliver an amended or supplemental Prospectus if such loss,
liability, claim, damage or expense would not have arisen had such delivery
occurred.
(b) INDEMNIFICATION BY SHAREHOLDERS. Each Shareholder severally
agrees to indemnify and hold harmless the Company and the other selling
Shareholders, and each Person, if any, who
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controls the Company (including each officer and director of the Company who
signed the Registration Statement) within the meaning of Section 15 of the
Securities Act, to the same extent as the indemnity contained in Section 4(a)
hereof (except that any settlement described in Section 4 (a)(ii) shall be
effected with the written consent of such Shareholder), but only insofar as
such loss, claim, damage or expense arises out of or is based upon (1) any
untrue statements or omissions made in the Registration Statement (or any
amendment thereto) or any Prospectus (or any amendment or supplement thereto)
in reliance upon and in conformity with written information furnished to the
Company by such Shareholder expressly for use in such Registration Statement
(or any amendment thereto) or such Prospectus (or any amendment or supplement
thereto) or (2) such Shareholder's failure to deliver an amended or
supplemental Prospectus if such loss, liability, claim, damage or expense
would not have arisen had such delivery occurred.
(c) CONDUCT OF INDEMNIFICATION PROCEEDINGS. The indemnified party
shall give reasonably prompt notice to the indemnifying party of any action or
proceeding commenced against it in respect of which indemnity may be sought
hereunder, but failure so to notify the indemnifying party (1) shall not relieve
it from any liability which it may have under the indemnity agreement provided
in paragraphs (a) or (b) of this Section 4, unless and to the extent it did not
otherwise learn of such action and the lack of notice by the indemnified party
results in the forfeiture by the indemnifying party of substantial rights and
defenses and (2) shall not, in any event, relieve the indemnifying party from
any obligations to the indemnified party other than the indemnification
obligation provided under paragraphs (a) or (b) of this Section 4. If the
indemnifying party so elects within a reasonable time after receipt of such
notice, the indemnifying party may assume the defense of such action or
proceeding at such indemnifying party's own expense with counsel chosen by the
indemnifying party and approved by the indemnified party, which approval shall
not be unreasonably withheld; PROVIDED, HOWEVER, that, if the indemnified party
reasonably determines that a conflict of interest exists where it is advisable
for the indemnified party to be represented by separate counsel or that, upon
advice of counsel, there may be legal defenses available to it which are
different from or in addition to those available to the indemnifying party, then
the indemnifying party shall not be entitled to assume such defense, and the
indemnified party shall be entitled to separate counsel at the indemnifying
party's expense. If the indemnifying party is not entitled to assume the
defense of such action or proceeding as a result of the provisions of the
preceding sentence, the indemnifying party's counsel shall be entitled to
conduct the indemnifying party's defense and counsel for the indemnified party
shall be entitled to conduct the defense of the indemnified party, it being
understood that both such counsel will cooperate with each other to conduct the
defense of such
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action or proceeding as efficiently as possible. If the indemnifying party
is not so entitled to assume the defense of such action or does not assume
such defense, after having received the notice referred to in the first
sentence of this paragraph, the indemnifying party will pay the reasonable
fees and expenses of counsel for the indemnified party. In such event,
however, the indemnifying party will not be liable for any settlement
effected without the written consent of the indemnifying party, with such
consent not to be unreasonably withheld. If an indemnifying party is
entitled to assume, and assumes, the defense of such action or proceeding in
accordance with this paragraph, the indemnifying party shall not be liable
for any fees and expenses of counsel for the indemnified party incurred
thereafter in connection with such action or proceeding, subject to the
proviso set forth in the second sentence of this paragraph (c).
5. CONTRIBUTION. In order to provide for just and equitable
contribution in circumstances in which the indemnity agreement provided for
in Section 4 is for any reason held to be unenforceable although applicable
in accordance with its terms, the Company and each Shareholder shall
contribute to the aggregate losses, liabilities, claims, damages and expenses
of the nature contemplated by such indemnity agreement incurred by the
Company and each such Shareholder, in such proportion as is appropriate to
reflect the relative fault of the Company on the one hand and such
Shareholder on the other, in connection with the statements or omissions
which resulted in such losses, claims, damages, liabilities or expenses, as
well as any other relevant equitable considerations. The relative fault of
the indemnifying party and indemnified party shall be determined by reference
to, among other things, whether the action in question, including any untrue
or alleged untrue statement of a material fact or omission or alleged
omission to state a material fact, has been made by, or relates to,
information supplied by, the indemnifying party or the indemnified party, and
the parties' relative intent, knowledge, access to information and
opportunity to correct or prevent such action.
The parties hereto agree that it would not be just or equitable if
contribution pursuant to this Section 5 were determined by pro rata
allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph. Notwithstanding the provisions of this Section 5, each Shareholder
shall be required to contribute the amount of any damages which such
Shareholder is required to pay by reason of such untrue statement or
omission, PROVIDED, HOWEVER, that no Shareholder shall be required under such
circumstances to pay any amount in excess of the total price at which the
Registrable Shares of such Shareholder were offered to the public.
Notwithstanding the foregoing, no person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the
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Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation. For purposes of this Section 5,
each director of the Company, each officer of the Company who signed the
Registration Statement and each person, if any, who controls the Company
within the meaning of Section 15 of the Securities Act shall have the same
rights to contribution as the Company.
6. NO OTHER OBLIGATION TO REGISTER SHARES. Except as otherwise expressly
provided in this Agreement, the Company shall have no obligation to a
Shareholder to register all or any portion of the Registrable Shares under the
Securities Act.
7. SHAREHOLDER REPRESENTATIONS, WARRANTIES AND AGREEMENTS. Each
Shareholder, jointly and not severally, and solely on behalf of itself,
represents and warrants to, and agrees with, the Company, that:
(a) This Agreement has been duly executed and delivered by such
Shareholder, and is the legal, valid and binding obligation of such Shareholder,
and is enforceable as to such Shareholder in accordance with its terms. No
consent of any party to any contract, agreement, instrument, lease, license,
arrangement or understanding to which such Shareholder is a party, or to which
any of such Shareholder's properties or assets are subject, which has not been
obtained, is required for the execution, delivery and performance of this
Agreement, and the execution, delivery and performance of this Agreement will
not violate, result in a breach of, conflict with or (with or without the giving
of notice or the passage of time or both) entitle any party to terminate or call
a default under any such contract, agreement, instrument, lease, license,
arrangement or understanding.
(b) Neither such Shareholder nor any of such Shareholder's affiliates
(as defined in the regulations under the Securities Act), will take, directly or
indirectly, during the term of this Agreement, any action designed to stabilize
(except as may be permitted by applicable law) or manipulate the price of any
security of the Company.
(c) Such Shareholder shall promptly furnish to the Company any and
all information as may be required by, or as may be necessary or advisable to
comply with the provisions of, the Securities Act, the Exchange Act, and the
rules and regulations of the SEC thereunder in connection with the
preparation and filing of any Registration Statement pursuant hereto, or any
amendment or supplement thereto, or any Preliminary Prospectus or Prospectus
included therein. All information to be furnished to the Company by or on
behalf of such Shareholder expressly for use in connection with the
preparation of any Preliminary Prospectus, the Prospectus, the Registration
Statement, or any amendment or supplement thereto, will not include any
untrue statement of a
-14-
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading.
8. UNDERWRITTEN REGISTRATION. No Shareholder of Registrable Securities
may participate in any underwritten registration hereunder unless such
Shareholder (i) executes and delivers the underwriting agreement or similar
documents relating thereto pursuant to which such Shareholder shall agree to
sell, upon the terms and subject to the conditions therein set forth, such
Shareholder's Shares on the basis provided therein, and (ii) completes and
executes all questionnaires, powers of attorney, indemnities, custodial or
escrow agreements and such other documents as may be necessary, advisable or
required pursuant to the terms thereof or as may be from time to time reasonably
requested by the underwriter or underwriters named therein, the Company, or
their respective legal counsel, in connection therewith. The Company will
cooperate to the extent reasonably required to permit the Shareholders to
conduct an underwritten offering and will enter into customary underwriting
arrangements. The Company shall have approval rights with respect to the
underwriter, which approval shall not be unreasonably withheld. The
Shareholders shall be entitled to no more than two underwritten offerings in any
year.
In the event of any conflict between the indemnification and contribution
terms as herein set forth and as set forth in any underwriting agreement entered
pursuant hereto, the underwriting agreement shall control.
9. SURVIVAL OF REPRESENTATIONS AND AGREEMENTS. All representations,
warranties, covenants and agreements contained in this Agreement shall be deemed
to be representations, warranties, covenants and agreements at the effective
date of each Registration Statement contemplated by this Agreement, and such
representations, warranties, covenants and agreements, including the indemnity
and contribution agreements contained in Sections 4 and 5 hereof, shall remain
operative and in full force and effect regardless of any investigation made by
or on behalf of the Company, any Shareholder or any Person which is entitled to
be indemnified under Section 4 hereof, and shall survive termination of this
Agreement.
10. AMENDMENTS AND WAIVERS. The provisions of this Agreement may not be
amended, modified, supplemented or waived without the prior written consent of
the Company and the Shareholders.
11. NOTICES. Except as set forth below, all notices and other
communications provided for or permitted hereunder shall be in writing and shall
be deemed to have been duly given if delivered personally or sent by telex or
telecopier, registered or certified mail (return receipt requested), postage
prepaid, or
-15-
courier or overnight delivery service to the respective parties at the
following addresses (or at such other address for any party as shall be
specified by like notice, provided that notices of a change of address shall
be effective only upon receipt thereof), and further provided that in case of
directions to amend the Registration Statement pursuant to Section 3(c), a
Shareholder must confirm such notice in writing by overnight express delivery
with confirmation of receipt:
If to the Company: Crescent Real Estate Equities Company
c/o Crescent Real Estate Equities
Limited Partnership
777 Main Street, Suite 2700
Fort Worth, Texas 76102
Attn: Gerald W. Haddock, President
Telephone: (817) 878-0444
Telecopier: (817) 878-0429
with copies to: Crescent Real Estate Equities Company
c/o Crescent Real Estate Equities
Limited Partnership 777 Main Street, Suite 2700
Fort Worth, Texas 76102 Attn: David M. Dean, Senior Vice
President-Law Telephone: (817) 878-0442
Telecopier: (817) 878-0429
and to: Shaw, Pittman, Potts & Trowbridge
2300 N Street, N.W.
Washington, D.C. 20037
Attn: Sylvia M. Mahaffey
Telephone: (202) 663-8027
Telecopier: (202) 663-8007
If to the Shareholders:
In addition to the manner of notice permitted above, notices given pursuant to
Sections 3(b) and 3(i) hereof may be effected telephonically and confirmed in
writing thereafter in the manner described above.
12. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
parties hereto and their respective successors and assigns and shall inure to
the benefit of the parties hereto. This Agreement may not be assigned by any
Shareholder, and any attempted assignment hereof by any Shareholder will be void
and of no effect and shall terminate all obligations of the Company hereunder;
PROVIDED, HOWEVER, that any Shareholder may assign its rights hereunder to any
Person who executes a counterpart of this Agreement, as the same may be amended.
13. COUNTERPARTS. This Agreement may be executed in any number of
counterparts and by the parties hereto in separate
-16-
counterparts, each of which when so executed shall be deemed to be an
original and all of which taken together shall constitute one and the same
agreement.
14. GOVERNING LAW. This Agreement shall be governed by and construed in
accordance with the laws of the State of Delaware applicable to contracts made
and to be performed wholly within said State.
15. SEVERABILITY. In the event that any one or more of the provisions
contained herein, or the application thereof in any circumstances, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions contained herein shall not be in any way impaired
thereby, it being intended that all of the rights and privileges of the parties
hereto shall be enforceable to the fullest extent permitted by law.
16. ENTIRE AGREEMENT. This Agreement is intended by the parties as a
final expression of their agreement and intended to be the complete and
exclusive statement of the agreement and understanding of the parties hereto in
respect of the subject matter contained herein. There are no restrictions,
promises, warranties or undertakings, other than those set forth or referred to
herein, with respect to such subject matter. This Agreement supersedes all
prior agreements and understandings between the parties with respect to such
subject matter.
17. NO SHAREHOLDER LIABILITY. No shareholder or other equity owner of the
Company assumes any personal liability for the obligations listed herein or for
the Company's performance of such obligations.
-17-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first written above.
CRESCENT REAL ESTATE EQUITIES COMPANY
By:
Name:
Title:
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SHAREHOLDER SIGNATURE PAGE
- -------------------------
Frank J. Fertitta III
- -------------------------
Lorenzo J. Fertitta
- -------------------------
Blake L. Sartini
-19-
SCHEDULE 6.1(g)
RIGHT OF FIRST REFUSAL AND NON-COMPETITION AGREEMENT
THIS RIGHT OF FIRST REFUSAL AND NON-COMPETITION AGREEMENT (the "Agreement")
is made and entered into as of the ___ day of _____, 1998, by and between
Crescent Real Estate Equities Company, a Texas real estate investment trust
("Crescent Equities"), Crescent Real Estate Equities Limited Partnership, a
Delaware limited partnership (the "Operating Partnership"), Crescent Operating,
Inc., a Delaware corporation ("Crescent Operating"), _____, a _____ corporation
("SMG"), _____, a _____ corporation ("MGE") and _____, a Delaware limited
Partnership (the "Joint Venture").
WHEREAS, Crescent Equities owns, directly or indirectly, a one percent
general partnership and an approximately 88.6 percent limited partnership
interest in the Operating Partnership;
WHEREAS, the Operating Partnership and Crescent Operating have entered into
an Intercompany Agreement dated as of June 3, 1997 providing to each other a
right of first opportunity and notification right with respect to certain
investment opportunities available to each of them;
WHEREAS, Crescent Operating owns, directly or indirectly, a 1.0% percent
general partnership interest and a 49.0% percent limited partnership interest in
the Joint Venture;
WHEREAS, SMG owns, directly or indirectly, a 24.9% percent general
partnership interest in the Joint Venture;
WHEREAS, the Joint Venture is a newly created partnership that was formed
for the purposes of, among other things, becoming a lessee and operator of
various types of hotel and casino gaming assets, including real estate owned by
the Operating Partnership and others; and
WHEREAS, in light of the purposes for which the Joint Venture was formed,
the (i) Operating Partnership and the Joint Venture desire to enter into this
Agreement in order to provide each other a right with respect to certain
investment opportunities available to each of them and (ii) SMG and Crescent
Operating, Crescent Equities and the Operating Partnership desire to enter into
this Agreement in order to provide each other with certain agreements not to
compete with the Joint Venture.
-1-
NOW, THEREFORE, in consideration of the premises and mutual undertakings
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged by each of the parties hereto, the
undersigned parties hereby agree as follows:
1. DEFINITIONS. Except as may be otherwise herein expressly provided,
the following terms and phrases shall have the meanings set forth below:
(a) "Company Affiliate" means any entity in which a majority of the
beneficial ownership interests are owned by the Operating Partnership or by any
entity controlled by, controlling or under common control with the Operating
Partnership.
(b) "Controlled Affiliate" of a party means an entity controlled by,
controlling or under common control with such party; PROVIDED THAT SMG's
Controlled Affiliates shall include, so long as they own any interest in SMG,
Frank J. Fertitta III, Lorenzo J. Fertitta and Blake L. Sartini, and their
respective spouses and immediate family members.
(c) "REIT Opportunity" means a direct or indirect opportunity to invest in
(i) real estate on which hotel and casino or other gaming-related operations are
conducted (a "Gaming Property")(including without limitation the opportunity to
provide services related to real estate or to invest in a hotel property), real
estate mortgages, real estate derivatives, or entities that invest primarily in
or have a substantial portion of their assets in the aforementioned types of
real estate assets, or (ii) any other gaming-related investments which may be
structured in a manner so as to be REIT-Qualified Investments (as hereinafter
defined), as determined by the Operating Partnership in its sole discretion.
The Operating Partnership shall have the right from time to time to provide
written notice to the Joint Venture specifying certain criteria for a REIT
Opportunity in addition to the criteria specified above in this definition of
REIT Opportunity. Any such written notice from the Operating Partnership may be
modified or canceled by written notice given by the Operating Partnership at any
time. The definition of REIT Opportunity shall be modified as appropriate from
time to time in accordance with any such written notices sent by the Operating
Partnership.
(d) "Tenant Opportunity" means the opportunity to become the lessee under
a "master" lease arrangement of a Gaming Property (i.e., a lease arrangement in
which the operators of the business conducted at the property prior to the date
the property is owned or acquired by the
-2-
Operating Partnership will cease to operate the business) owned or
subsequently acquired by the Operating Partnership or any of its Controlled
Affiliates if the Operating Partnership, in its sole discretion, determines
that, consistent with the status of Crescent Equities as a REIT, the
Operating Partnership is required to enter into such a "master" lease
arrangement for such Gaming Property; PROVIDED that such determination shall
be made by the Operating Partnership in its reasonable discretion. A Tenant
Opportunity shall not include (1) a property other than a Gaming Property,
(2) a Gaming Property which already has an existing "master" lessee as of the
date of this Agreement (or, with respect to a Gaming Property acquired
subsequent to the date of this Agreement, which has an existing binding
"master" lessee arrangement that predates the acquisition of the Gaming
Property by the Operating Partnership), provided that the Operating
Partnership shall offer any such "master" lessee interest to the Joint
Venture if the lessee interest subsequently becomes available), or (3) an
opportunity in which the seller of the Gaming Property desires to enter into
a "master" lease agreement with the Operating Partnership (each of the
foregoing circumstances being referred to herein as an "Excluded Tenant
Opportunity").
2. OPERATING PARTNERSHIP RIGHT OF FIRST OPPORTUNITY; NOTIFICATION RIGHT.
(a) RIGHT OF FIRST OPPORTUNITY.
(i) During the term of this Agreement, if the Joint Venture
develops a REIT Opportunity, or if any REIT Opportunity otherwise becomes
available to the Joint Venture or any of its Controlled Affiliates, the Joint
Venture or such Controlled Affiliate, as the case may be, shall first offer such
REIT Opportunity to the Operating Partnership. The offer shall be made by
written notice (the "Joint Venture Notice") from the Joint Venture to the
Operating Partnership, which the Joint Venture Notice shall contain a detailed
description of the material terms and conditions of the REIT Opportunity. The
Operating Partnership shall have ten days (the "Ten-Day Period") from the date
of receipt of the Joint Venture Notice to notify the Joint Venture in writing
that it has accepted or rejected the REIT Opportunity. If the Operating
Partnership does not respond by the end of the Ten-Day Period, the Operating
Partnership shall be deemed to have rejected the REIT Opportunity. If the
Operating Partnership accepts a REIT Opportunity, but subsequently decides not
to pursue such opportunity, or for any other reason fails to consummate the REIT
Opportunity, the Operating Partnership shall immediately provide written notice
that it is no longer pursuing such REIT Opportunity to the Joint Venture.
-3-
(ii) If the Operating Partnership rejects a REIT Opportunity
offered to it pursuant to Section 2(a)(i) above, or accepts such REIT
Opportunity but thereafter provides, or is required by the provisions hereof to
provide, written notice to the Joint Venture that it is no longer pursuing such
REIT Opportunity, the Joint Venture shall, for a period of one year after the
Operating Partnership Withdrawal Date (as hereinafter defined), be entitled to
acquire the REIT Opportunity (A) at a price, and on terms and conditions, that
are not more favorable to the Joint Venture in any material respect than the
price and terms and conditions set forth in the Joint Venture Notice relating to
such REIT Opportunity or (B) if the Operating Partnership, at any time after the
Joint Venture Notice, negotiated a different price, terms or conditions with the
seller, then at a price, and on terms and conditions, that are not more
favorable than, the price and terms and conditions negotiated by the Operating
Partnership with the seller). If the Joint Venture does not enter into a
binding agreement to acquire the REIT Opportunity within such one-year period,
or if the price and terms and conditions are more favorable to the Joint Venture
in any material respect than the price and terms and conditions set forth in the
Joint Venture Notice (or, if applicable, than the price and terms and conditions
negotiated by Operating Partnership with the seller subsequent to the Joint
Venture Notice), the Joint Venture shall again be required to comply with the
procedures set forth above in Section 2(a)(i) if it desires to acquire such REIT
Opportunity. The Operating Partnership Withdrawal Date means any one of the
following dates, as applicable: (A) the date that the Operating Partnership
notifies the Joint Venture that it has rejected the REIT Opportunity, (B) if the
Operating Partnership does not respond to the Joint Venture regarding the REIT
Opportunity, the expiration date of the Ten-Day Period, or (C) if the Operating
Partnership accepts the REIT Opportunity but subsequently ceases to pursue the
opportunity, the earlier of (i) 30 days after the date on which the Operating
Partnership ceases to pursue the REIT Opportunity or (ii) the date of receipt by
the Joint Venture of written notice from the Operating Partnership that it is no
longer pursuing the REIT Opportunity.
(iii) The Joint Venture agrees to use its commercially
reasonable best efforts to assist the Operating Partnership in structuring and
consummating any REIT Opportunity accepted by the Operating Partnership, on
terms determined by the Operating Partnership (including without limitation
structuring such investment opportunity as a "REIT-Qualified Investment," as
hereinafter defined). A "REIT-Qualified Investment" means an investment, the
income from which would qualify under the 95% gross income test set forth in
section 856(c)(2) of the Code, the ownership of which would not cause a REIT to
violate the asset
-4-
limitations set forth in section 856(c)(5) of the Code, and which otherwise
meets the federal income tax requirements applicable to REITs. Any expenses
incurred that are directly related to structuring an investment as a
REIT-Qualified Investment shall be borne solely by the Operating Partnership.
3. THE JOINT VENTURE RIGHT OF FIRST OPPORTUNITY FOR TENANT OPPORTUNITY.
(a) During the term of this Agreement, if the Operating Partnership
develops a Tenant Opportunity, or if any Tenant Opportunity otherwise becomes
available to the Operating Partnership or any of its Controlled Affiliates, the
Operating Partnership or such Controlled Affiliate, as the case may be, shall
first offer such Tenant Opportunity to the Joint Venture. The offer shall be
made by written notice (the "Operating Partnership Notice") from the Operating
Partnership to the Joint Venture, which Operating Partnership Notice shall
contain a detailed description of the material terms and conditions of the
Tenant Opportunity. SMG, on behalf of the Joint Venture shall have thirty days
(the "Thirty-Day Period") from the date of receipt of the Operating Partnership
Notice to notify the Operating Partnership in writing that it has accepted or
rejected the Tenant Opportunity on behalf of the Joint Venture. If SMG on
behalf of the Joint Venture does not respond by the end of the Thirty-Day
Period, SMG on behalf of the Joint Venture shall be deemed to have rejected the
Tenant Opportunity. If SMG on behalf of the Joint Venture accepts a Tenant
Opportunity, but subsequently decides not to pursue such opportunity, or for any
other reason fails to consummate the Tenant Opportunity within 60 days after the
Operating Partnership Notice (unless a longer period is agreed to by the
Operating Partnership), SMG on behalf of the Joint Venture shall immediately
provide written notice that it is no longer pursuing such Tenant Opportunity to
the Operating Partnership.
(b) If SMG on behalf of the Joint Venture rejects a Tenant
Opportunity, or accepts such Tenant Opportunity but thereafter provides, or is
required by the provisions hereof to provide, written notice to the Operating
Partnership that it is no longer pursuing such Tenant Opportunity, then the
Operating Partnership shall be free, subject to Section 4 hereof, for a period
of one year after the expiration of the Joint Venture Withdrawal Date (as
hereinafter defined) to enter into a binding agreement with respect to such
Tenant Opportunity with any party at a price and on terms and conditions that
are not more favorable to the Operating Partnership in any material respect than
the price and terms and conditions last proposed in writing by the Operating
Partnership to the Joint Venture. If the
-5-
Operating Partnership does not enter into a binding agreement with respect to
such Tenant Opportunity within such one-year period, or if the price and
terms and conditions are more favorable to the Operating Partnership in any
material respect than the price and terms and conditions last proposed in
writing by the Operating Partnership to the Joint Venture, the Operating
Partnership shall again be required to comply with the procedures set forth
above in Section 3(a) if it desires to pursue such Tenant Opportunity. The
Joint Venture Withdrawal Date means any one of the following dates, as
applicable: (A) the date that SMG on behalf of the Joint Venture notifies
the Operating Partnership that it has rejected the Tenant Opportunity, (B) if
the Joint Venture does not respond to the Operating Partnership regarding the
Tenant Opportunity, the expiration date of the Thirty-Day Period, or (C) if
the Joint Venture accepts the Tenant Opportunity but subsequently ceases to
pursue the opportunity, the earlier of (i) 30 days after the date on which
the Joint Venture ceases to pursue the Tenant Opportunity or (ii) the date of
receipt by the Operating Partnership of written notice from the Joint Venture
that it is no longer pursuing the Tenant Opportunity.
(c) The Joint Venture and the Operating Partnership agree to
cooperate with each other in structuring all dealings with outside parties in
connection with any Tenant Opportunity that the Joint Venture and the Operating
Partnership agree to enter into pursuant to Section 3(a) above. The Joint
Venture agrees to cooperate with the Operating Partnership in structuring any
Tenant Opportunity with the Operating Partnership as a "REIT-Qualified
Investment" for the Operating Partnership. The Operating Partnership shall have
the right, in its sole discretion, to structure any investment as a
REIT-Qualified Investment, even if such structuring prevents the Operating
Partnership from creating a Tenant Opportunity for the Joint Venture.
4. NON-COMPETITION.
(a) Notwithstanding anything to the contrary in this Agreement,
during the term of this Agreement, (i) without the prior written consent of SMG,
neither Crescent Equities, the Operating Partnership, Crescent Operating nor any
of their respective present or future Controlled Affiliates, and (ii) without
the prior written consent of the Operating Partnership, neither SMG, MGE nor any
of their respective present or future Controlled Affiliates, will own or operate
or otherwise engage in any activities related to any Gaming Properties other
than Gaming Properties operated and leased by the Joint Venture or an entity
under its control; PROVIDED, HOWEVER, that the foregoing
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restriction shall not prevent the Operating Partnership from owning Gaming
Property pursuant to an Excluded Tenant Opportunity or if gaming activities
conducted at a property are incidental to the primary business operations at
such property.
(b) The parties hereto recognize that the laws and public policies of
the various states of the United States may differ as to the validity and
enforceability of covenants similar to those set forth in this Section. It is
the intention of the parties that the provisions of this Section be enforced to
the fullest extent permissible under the laws and policies of each jurisdiction
in which enforcement may be sought, and that the unenforceability (or the
modification to conform to such laws or policies) of any provisions of this
Section shall not render unenforceable, or impair, the remainder of the
provisions of this Section. Accordingly, if any provision of this Section shall
be determined to be invalid or unenforceable, such invalidity or
unenforceability shall be deemed to apply only with respect to the operation of
such provision in the particular jurisdiction in which such determination is
made and not with respect to any other provision or jurisdiction.
(c) The parties hereto acknowledge and agree that any remedy at law
for any breach of the provisions of this Section would be inadequate, and the
parties hereby consents to the granting by any court of an injunction or other
equitable relief, without the necessity of actual monetary loss being proved, in
order that the breach or threatened breach of such provisions may be effectively
restrained.
5. GENERAL TERMS AND CONDITIONS FOR RIGHTS OF FIRST
OPPORTUNITY/NOTIFICATION RIGHTS.
(a) Unless waived or unless agreed to as part of an investment, each
party shall bear its own expenses with respect to any opportunity to which this
Agreement is applicable, and each party agrees that it shall not be entitled to
any compensation from the other party with respect to any such opportunity.
(b) Any opportunity which is offered to and accepted by the Operating
Partnership under this Agreement may be entered into by or on behalf of the
Operating Partnership or by any designee which is a Company Affiliate or
Controlled Affiliate of the Operating Partnership. Any opportunity which is
offered to and accepted by the Joint Venture under this Agreement may be entered
into by or on behalf of the Joint Venture or by any designee which is a
Controlled Affiliate of the Joint Venture.
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(c) All right of first opportunity and notification rights set forth
in this Agreement shall be subordinated to any seller consent and
confidentiality requirements; no party shall be required to comply with the
first opportunity and notification rights set forth in this Agreement if such
compliance would violate any seller consent or confidentiality requirements.
(d) While it is the intention of the parties to align their
businesses in accordance with the terms of this Agreement, each party shall act
independently in its own best interests, and neither party shall be considered a
partner or agent of the other party or to owe any fiduciary or other common law
duties to the other party.
6. SPECIFIC PERFORMANCE. Each party hereto hereby acknowledges that the
obligations undertaken by it pursuant to this Agreement are unique and that the
other party hereto would likely have no adequate remedy at law if such party
shall fail to perform its obligations hereunder, and such party therefore
confirms that the other party's right to specific performance of the terms of
this Agreement is essential to protect the rights and interests of the other
party. Accordingly, in addition to any other remedies that a party hereto may
have at law or in equity, such party shall have the right to have all
obligations, covenants, agreements and other provisions of this Agreement
specifically performed by the other party hereto and the right to obtain a
temporary restraining order or a temporary or permanent injunction to secure
specific performance and to prevent a breach or threatened breach of this
Agreement by the other party hereto. Each party submits to the jurisdiction of
the courts of the State of Delaware for this purpose.
7. AFFILIATES. Each party hereto shall cause all entities that are under
its control to comply with the terms hereof.
8. TERM. The term of the Agreement shall commence as of the date first
written above and shall terminate on the date on which either Crescent Operating
or SMG, ceases to own, directly or indirectly, any partnership or other equity
interest in the Joint Venture. Notwithstanding the foregoing, a party hereto
may terminate this Agreement if the other party or any Controlled Affiliate of
such other party is in default of this Agreement or any other agreement entered
into by the parties hereto or any of their Controlled Affiliates, if such
default is material and remains uncured for 15 days after receipt of notice
thereof.
9. MISCELLANEOUS.
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(a) NOTICES. Notices shall be sent to the parties at the following
addresses:
[To Come]
Notices may be sent by certified mail, return receipt requested, Federal
Express or comparable overnight delivery service, or facsimile. Notice will be
deemed received on the fourth business day following deposit in U.S. mail and on
the first business day following deposit with Federal Express or other delivery
service, or transmission by facsimile. Any party to this Agreement may change
its address for notice by giving written notice to the other party at the
address and in accordance with the procedures provided above.
(b) REASONABLE AND NECESSARY RESTRICTIONS. Each of the parties
hereto hereby acknowledges and agrees that the restrictions, prohibitions and
other provisions of this Agreement are reasonable, fair and equitable in scope,
term and duration, are necessary to protect the legitimate business interests of
the parties hereto and are a material inducement to the parties hereto to enter
into the transactions described in and contemplated by the recitals hereto.
Each party hereto covenants that it will not sue to challenge the enforceability
of this Agreement or raise any equitable defense to its enforcement.
(c) SUCCESSORS AND ASSIGNS. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns. This Agreement shall not be assigned without the
express written consent of each of the parties hereto. Notwithstanding the
foregoing, this Agreement may be assigned without the consent of any party
hereto in connection with any merger, consolidation, reorganization or other
combination of a party with or into another entity where the party is not the
surviving entity.
(d) AMENDMENTS; WAIVERS. No termination, cancellation, modification,
amendment, deletion, addition or other change in this Agreement, or any
provision hereof, or waiver of any right or remedy herein provided, shall be
effective for any purpose unless such change or waiver is specifically set forth
in a writing signed by the party or parties to be bound thereby. The waiver of
any right or remedy with respect to any occurrence on one occasion shall not be
deemed a waiver of such right or remedy with respect to such occurrence on any
other occasion.
(e) CHOICE OF LAW. This Agreement and the rights and obligations of
the parties hereunder shall be governed by the
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laws of the State of Delaware, without regard to the principles of choice of
law thereof.
(f) SEVERABILITY. In the event that one or more of the terms or
provisions of this Agreement or the application thereof to any person(s) or in
any circumstance(s) shall, for any reason and to any extent be found by a court
of competent jurisdiction to be invalid, illegal or unenforceable, such court
shall have the power, and hereby is directed, to substitute for or limit such
invalid term(s), provision(s) or application(s) and to enforce such substituted
or limited terms or provisions, or the application thereof. Subject to the
foregoing, the invalidity, illegality or enforceability of any one or more of
the terms or provisions of this Agreement, as the same may be amended from time
to time, shall not affect the validity, legality or enforceability of any other
term or provision hereof.
(g) ENTIRE AGREEMENT; NO THIRD-PARTY BENEFICIARIES. This Agreement
(i) constitutes the entire agreement and supersedes all prior agreements,
understandings, negotiations and discussions, whether written or oral, between
the parties hereto with respect to the subject matter hereof, so that no such
external or separate agreement relating to the subject matter of this Agreement
shall have any effect or be binding, unless the same is referred to specifically
in this Agreement or is executed by the parties after the date hereof; and (ii)
is not intended to confer upon any other person any rights or remedies
hereunder, and shall not be enforceable by any party not a signatory to this
Agreement.
(h) GENDER; NUMBER. As the context requires, any word used herein in
the singular shall extend to and include the plural, any word used in the plural
shall extend to and include the singular and any word used in any gender or the
neuter shall extend to and include each other gender or be neutral.
(i) HEADINGS. The headings of the sections hereof are inserted for
convenience of reference only and are not intended to be a part of or affect the
meaning or interpretation of this Agreement or of any term or provision hereof.
(j) COUNTERPARTS. This Agreement may be executed in two or more
counterparts, each of which together shall be deemed to be an original and all
of which together shall be deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be executed by one of its duly authorized corporate officers, as of the date
first above written.
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CRESCENT REAL ESTATE EQUITIES COMPANY
By:
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Title:
CRESCENT REAL ESTATE EQUITIES LIMITED PARTNERSHIP
By:
----------------------------------
Title:
CRESCENT OPERATING, INC.
By:
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Title:
[SMG]
By:
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Title:
[MGE]
By:
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Title:
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