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EXHIBIT 10.2
CONTRIBUTION AGREEMENT
EFFECTIVE AS OF SEPTEMBER 11, 1998
BY AND AMONG
CRESCENT OPERATING, INC.,
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
▇▇▇▇ ▇. ▇▇▇▇
AND
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, III
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CONTRIBUTION AGREEMENT
THIS CONTRIBUTION AGREEMENT (this "Agreement") is effective as of
September 11, 1998 (the "Effective Date"), by and among Crescent Operating,
Inc., a Delaware corporation ("COI"), ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ ("▇▇▇▇▇▇▇"), ▇▇▇▇ ▇.
▇▇▇▇ ("▇▇▇▇") and ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, III ("▇▇▇▇▇▇▇▇" and, collectively with
▇▇▇▇▇▇▇ and ▇▇▇▇, the "CDMC Parties").
RECITALS:
A. The CDMC Parties are all of the directors of, and the holders
of all of the issued and outstanding voting common stock (the "CDMC Voting
Stock") of, Crescent Development Management Corp., a Delaware corporation
("CDMC").
B. Crescent Real Estate Equities Limited Partnership, a Delaware
limited partnership ("Crescent"), owns all of the remaining equity interest
(which is non-voting) in CDMC.
C. CDMC owns economic interests in various other entities (each
such entity a "Subsidiary").
D. COI is a publicly-held company, the common stock of which is
admitted to trade on the NASDAQ National Market System.
E. COI and the CDMC Parties have formed COPI Colorado, L.P., a
Delaware limited partnership (the "Partnership"), by filing with the Delaware
Secretary of State a Certificate of Limited Partnership on September 11, 1998
under Title 6, Chapter 17 of the Delaware Laws and is being organized
contemporaneously herewith. In connection with the Partnership's organization,
COI and the CDMC Parties are agreeing to make initial equity contributions to
the Partnership pursuant to this Agreement and contemporaneously herewith are
entering into that certain agreement of limited partnership, effective the
Effective Date, among COI and the CDMC Parties relating to the Partnership (the
"Partnership Agreement").
F. COI and the CDMC Parties, by making to each other the
representations, warranties and covenants contained herein and by agreeing to
indemnify each other in the manner and to the extent set forth herein, wishes
to induce the other to enter into this Agreement and to make such equity
contributions to the Partnership pursuant to this Agreement and the Partnership
Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
representations, warranties, covenants and agreements set forth herein and
other good and valuable consideration, the receipt and sufficiency of which are
hereby acknowledged, and subject to the conditions set forth herein, the
parties hereto agree as follows:
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ARTICLE I
CONTRIBUTIONS TO PARTNERSHIP
SECTION 1.1 FORMATION OF PARTNERSHIP; PARTNERSHIP AGREEMENT. COI
and the CDMC Parties hereby ratify the formation of the Partnership and
contemporaneously herewith have entered into the Partnership Agreement. COI
has acquired a 50% general partner interest in the Partnership and each CDMC
Party has acquired a 16 2/3% limited partner interest in the Partnership. COI
is the Partnership's sole general partner and the CDMC Parties are the
Partnership's sole limited partners.
SECTION 1.2 CONTRIBUTIONS BY COI AND CDMC PARTIES. In accordance
with the Partnership Agreement but subject to the last sentence of this Section
1.2, COI hereby agrees that not later than September 25, 1998 (the
"Contribution Due Date"), it shall make an equity contribution (the "COI
Contribution") of $9.0 million in cash (the "COI Contribution Amount") to the
Partnership by wire transfer of the COI Contribution Amount to the
Partnership's bank account; however, the COI Contribution Amount can be
contributed in increments to meet cash needs of the Partnership, provided that
the aggregate amount of the COI Contribution shall be contributed not later
than the Contribution Due Date; and, in accordance with the Partnership
Agreement but subject to the last sentence of this Section 1.2, each CDMC Party
hereby agrees that not later than the Contribution Due Date, he shall make an
equity contribution (collectively with the COI Contribution, the
"Contributions") of the CDMC Voting Stock (the "CDMC Shares") owned by each
CDMC Party as set forth below:
▇▇▇▇▇▇▇ 666.67 shares
▇▇▇▇ 666.67 shares
▇▇▇▇▇▇▇▇ 666.66 shares
to the Partnership by delivering stock certificates representing the CDMC
Shares, accompanied by duly-executed irrevocable stock powers and assignments,
to the Partnership. For purposes of this Agreement and as set forth in the
Partnership Agreement (but subject to the following proviso), the aggregate
fair value of the CDMC Parties' Contributions shall equal the COI Contribution
Amount; provided, however, that COI's agreement as to the fair value of the
CDMC Parties Contribution is made in reliance upon the accuracy of the
representations and warranties that the CDMC Parties have made in this
Agreement and that nothing contained in this sentence shall be construed as
qualifying or limiting in any respect such representations and warranties or
the indemnity obligations that the CDMC Parties have made in this Agreement.
COI and the CDMC Parties agree, however, to coordinate the making of the
Contributions to the Partnership so that at no time shall the aggregate value
of the Contributions that have been made through that time by the CDMC Parties
to the Partnership exceed the value of the that portion of the COI Contribution
Amount that has been made through that time by COI.
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ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE CDMC PARTIES
To induce COI to enter into this Agreement and the Partnership
Agreement, to make the COI Contribution and to perform the other obligations to
be performed by COI pursuant to this Agreement and the Partnership Agreement,
the CDMC Parties severally represent and warrant to COI as follows:
SECTION 2.1 ORGANIZATION, QUALIFICATION AND CORPORATE POWER.
(a) CDMC is a corporation duly incorporated, validly existing and
in good standing under the laws of the state of Delaware, and, to the knowledge
of each CDMC Party, has all corporate powers and all governmental licenses,
authorizations, permits, consents and approvals required to carry on the
business in which it is engaged and to own and use the properties owned and
used by it (collectively, "Governmental Authorizations"), except such
Governmental Authorizations the absence of which would not, in the aggregate,
have a Material Adverse Effect (as hereinafter defined) on CDMC. The CDMC
Parties have delivered to COI true and complete copies of CDMC's Certificate of
Incorporation and Bylaws, each of which reflects all amendments made thereto at
any time prior to the date of this Agreement. CDMC is duly qualified to do
business as a foreign corporation and is in good standing in each jurisdiction
in which the character of the property owned or leased by it, the employment of
its employees or the nature of its activities makes such qualification
necessary, except where the failure to be so qualified would not have a
Material Adverse Effect on CDMC. The stock record books of CDMC and the stock
shareholder lists of CDMC (copies of which the CDMC Parties have previously
furnished to COI) are complete and correct in all respects and accurately
reflect the record ownership and, to the knowledge of each CDMC Party, the
beneficial ownership of all the outstanding shares of CDMC's capital stock and
all other securities issued by CDMC. CDMC is not in default or in violation of
any restriction, lien, encumbrance, indenture, contract, lease, sublease, loan
agreement, note or other obligation or liability by which it is bound or to
which any of its assets is subject except such defaults or violations as would
not, in the aggregate, have a Material Adverse Effect on CDMC.
(b) Schedule 2.1(b) sets forth a list of all Subsidiaries. The
CDMC Parties have delivered to COI true and complete copies of each
Subsidiary's organizational documents, each of which reflects all amendments
made thereto at any time prior to the date of this Agreement. To the knowledge
of each CDMC Party, each Subsidiary is duly organized, validly existing and (to
the extent applicable) in good standing under the laws of the jurisdiction of
its organization, and, to the knowledge of each CDMC Party, has all corporate
powers and all Governmental Authorizations, except such Governmental
Authorizations the absence of which would not, in the aggregate, have a
Material Adverse Effect (as hereinafter defined) on such Subsidiary. To the
knowledge of each CDMC Party, each Subsidiary is duly qualified to do business
and is in good standing in each jurisdiction in which the character of the
property owned or leased by it, the
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employment of its employees or the nature of its activities makes such
qualification necessary, except where the failure to be so qualified would not
have a Material Adverse Effect on such Subsidiary. To the knowledge of each
CDMC Party, no Subsidiary is in default or in violation of any restriction,
lien, encumbrance, indenture, contract, lease, sublease, loan agreement, note
or other obligation or liability by which it is bound or to which any of its
assets is subject except such defaults or violations as would not, in the
aggregate, have a Material Adverse Effect on such Subsidiary.
(c) For purposes of this Agreement, a "Material Adverse Effect"
with respect to any person or entity (including CDMC, any Subsidiary and/or
COI), means a material adverse effect on the condition (financial or
otherwise), business, properties, assets, liabilities (including contingent
liabilities), results of operations or prospects of such person or entity and
the affiliated companies and subsidiaries and/or parent corporation of such
person or entity under the same ownership, taken as a whole; and "Material
Adverse Change" means a change or a development that has resulted or will
result in a Material Adverse Effect.
SECTION 2.2 AUTHORIZATION. This Agreement has been duly executed
and delivered by each CDMC Party and constitutes the valid and binding
agreement of such CDMC Party, enforceable against him in accordance with its
terms, except as such enforcement may be limited by bankruptcy, insolvency or
other similar laws effecting the enforcement of creditors' rights generally or
by general principles of equity.
SECTION 2.3 NON-CONTRAVENTION. To the knowledge of each CDMC
Party, none of the execution and delivery by the CDMC Parties of this Agreement
or the performance by the CDMC Parties of their respective obligations
hereunder or the consummation by the CDMC Parties of the transactions
contemplated by this Agreement does or will:
(a) contravene or conflict with CDMC's Certificate of
Incorporation or Bylaws or with the organizational documents of any Subsidiary;
(b) contravene or conflict with or constitute a violation of any
provision of any Laws (as defined below) or any order, judgment, injunction or
decree issued by any court, agency, bureau or other governmental authority
(collectively, "Orders") to which CDMC, any Subsidiary and/or any CDMC Party is
a party or by which CDMC, any Subsidiary and/or any CDMC Party or any of their
respective assets is bound;
(c) violate, breach, be in conflict with or constitute a default
(or an event that, with notice or lapse of time or both, would constitute a
default) under any note, bond, indenture, mortgage, deed of trust, lease,
franchise, permit, authorization, license, contract, instrument or other
agreement or commitment (each a "Contract") to which CDMC, any Subsidiary
and/or any CDMC Party is a party or by which CDMC or any Subsidiary or any of
their respective assets is bound;
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(d) result in a contractual right to cause the termination or
cancellation of or loss of a benefit under, or the right to accelerate any
obligations pursuant to, any Contract to which CDMC or any Subsidiary is a
party or by which CDMC or any Subsidiary or any of their respective assets is
bound, or any Governmental Authorization held by CDMC or any Subsidiary; or
(e) result in the creation or imposition of any Lien (as
hereinafter defined) upon any properties, assets or business of CDMC or any
Subsidiary;
except, with respect to clauses (b), (c), (d) and (e) above, for
contraventions, defaults, losses, Liens and other matters referred to in such
clauses that in the aggregate reasonably would not be expected to have a
Material Adverse Effect on CDMC or any Subsidiary. For purposes of this
Agreement, the term "Lien" means, with respect to any asset, any mortgage,
lien, pledge, charge, security interest or encumbrance of any kind in respect
of such asset.
SECTION 2.4 CAPITALIZATION, TITLE AND STOCK RIGHTS.
(a) As of the date hereof, the authorized capital stock of CDMC
consists solely of 2,000 shares of CDMC Voting Stock, all of which are issued
and outstanding, and 18,000 shares of CDMC nonvoting common stock, all of which
are issued and outstanding (the "CDMC Nonvoting Stock"). The CDMC Shares (A)
constitute all of the issued and outstanding shares of CDMC Voting Stock, (B)
are owned (beneficially and of record) solely by the CDMC Parties in the
respective amounts set forth in Section 1.2 hereof and (C) are free and clear
of all Liens. All of the issued and outstanding shares of CDMC Nonvoting Stock
are owned of record (and, to the knowledge of each CDMC Party, beneficially) by
Crescent. Upon consummation of the transactions contemplated by this
Agreement, the Partnership will acquire the CDMC Shares free and clear of any
Liens. The CDMC Voting Stock has been duly authorized and validly issued and
is fully paid and nonassessable. The CDMC Voting Stock has been issued and
purchased in compliance with all applicable federal, state, local and foreign
statutes, laws (including case law), regulations, ordinances, rules, codes,
plans, permits, concessions, grants, franchises, licenses, agreements,
governmental restrictions and Orders (collectively, "Laws").
(b) To the knowledge of each CDMC Party, CDMC has no outstanding
securities convertible into or evidencing the right to purchase or subscribe
for any shares of its capital stock or for any other CDMC securities nor are
there any outstanding or authorized subscriptions, options (including inactive
or non-qualified stock options), warrants, calls, rights, commitments or any
other agreements or arrangements of any kind (including statutory or
contractual preemptive rights) obligating CDMC to issue any shares of its
capital stock or any other CDMC securities or any securities convertible into
or evidencing the right to purchase or subscribe for any such shares of capital
stock or other securities, and there are no similar arrangements with respect
to any dividend rights, voting rights, sale or transfer of shares of CDMC's
capital stock. There are no existing rights of any CDMC Party or of any other
person or entity to require CDMC to register any CDMC securities or to
participate with CDMC in any registration by CDMC of its securities.
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SECTION 2.5 SUBSIDIARIES AND JOINT VENTURES. To the knowledge of
each CDMC Party, CDMC does not own any equity interest in any entity, is not a
party to any partnership (limited or general), joint venture or similar
agreement and is not obligated to purchase any equity interest in or any
interest convertible into or exchangeable for an equity interest in any entity
or to enter into any such agreement other than the Subsidiaries.
SECTION 2.6 CDMC FINANCIAL STATEMENTS. The CDMC Parties have
delivered to COI the following financial information pertaining to CDMC:
audited consolidated financial statements of CDMC and its subsidiaries for the
year ended December 31, 1997, and unaudited consolidated financial statements
of CDMC and its subsidiaries for the period ended June 30, 1998 (collectively,
the "Financial Statements"). The Financial Statements have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the period covered thereby and present fairly in all respects the
financial condition of CDMC as of the dates thereof and the results of its
operations and changes in cash flows for such period. To the extent that the
Financial Statements contain forecasted information, such forecasts are, to the
knowledge and belief of Sellers, based upon reasonable assumptions. Since
December 31, 1997, there have been no changes in CDMC's methods of accounting
for tax or financial statement purposes.
SECTION 2.7 BUSINESS ACTIVITY. The purpose and business of CDMC
is investment through the Subsidiaries in real estate development, resort
property management and ancillary transportation services principally in the
State of Colorado.
SECTION 2.8 ABSENCE OF CERTAIN CHANGES. Except as disclosed in
the Financial Statements or on Schedule 2.8, since June 30, 1998, to the
knowledge of each CDMC Party, CDMC has in all respects conducted its business
in the ordinary course, consistent with past practices, and there has not been:
(a) any Material Adverse Change affecting CDMC or any Subsidiary;
(b) any loan to or other transaction (excluding transactions
related to the performance of services as an officer, manager or employee)
outside the ordinary course of business with any officer, manager, employee or
stockholder of CDMC or any Subsidiary giving rise to any claim or right of CDMC
or any Subsidiary against any such person or of such person against CDMC or any
Subsidiary;
(c) any damage, destruction or other property or casualty loss
(whether or not covered by insurance) affecting the business, assets,
liabilities, earnings or prospects of CDMC or any Subsidiary that, in the
aggregate, has had or reasonably may be expected to have a Material Adverse
Effect on CDMC or any Subsidiary;
(d) any increase in indebtedness for borrowed money or capitalized
lease obligations of CDMC or any Subsidiary;
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(e) any sale, assignment, transfer or other disposition of any
tangible or intangible asset used in the business of CDMC or any Subsidiary;
(f) any amendment, termination or waiver by CDMC or any Subsidiary
of any right of substantial value under any Contract or Governmental
Authorization held by CDMC or any Subsidiary;
(g) any reduction in the amounts of coverage provided by existing
casualty and liability insurance policies with respect to the business or
properties of CDMC or any Subsidiary;
(h) any (i) grant of any severance or termination pay to any
director, officer or employee of CDMC, (ii) entering into of any employment,
deferred compensation or other similar agreement (or any amendment to any such
existing agreement) with any director, officer or employee of CDMC, (iii) any
increase in benefits payable under any existing severance or termination pay
policies or employment agreements of CDMC, or (iv) any increase in
compensation, bonus or other benefits payable to directors, officers or
employees of CDMC;
(i) any adoption of or amendment to or alteration of any bonus,
incentive, compensation, severance, stock option, stock appreciation right,
pension, matching gift, profit-sharing, employee stock ownership, retirement,
pension, group insurance, death benefit, or other fringe benefit plan,
arrangement or trust agreement in which any employee, officer or director of
CDMC has an interest;
(j) any capital expenditure, capital addition or capital
improvement incurred or undertaken by CDMC;
(k) any other transaction or commitment entered into other than in
the ordinary course of business by CDMC or any Subsidiary;
(l) any direct or indirect agreement by CDMC or any Subsidiary or
any person on behalf of CDMC or any Subsidiary to take any of the foregoing
actions; or
(m) any dividend or distribution of any kind whatsoever declared
or paid by CDMC with respect to the CDMC Voting Stock or the CDMC Nonvoting
Stock.
SECTION 2.9 NO UNDISCLOSED LIABILITIES. To the knowledge of each
CDMC Party, CDMC has no debt, liability or obligation of any nature, whether
accrued, absolute, contingent or otherwise, whether due or to become due,
except to the extent set forth in the Financial Statements or as set forth on
Schedule 2.9.
SECTION 2.10 LITIGATION. Schedule 2.10 sets forth any instances
in which (a) CDMC or any Subsidiary is subject to any Order (other than Orders
of general applicability), (b) there is any charge, complaint, lawsuit or
governmental investigation pending or threatened in writing against
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CDMC or, to the knowledge of each CDMC Party, any Subsidiary or (c) CDMC or, to
the knowledge of each CDMC Party, any Subsidiary is a plaintiff in any action,
domestic or foreign, judicial or administrative, in which a counterclaim
against CDMC or any Subsidiary is pending.
SECTION 2.11 TAX RETURNS AND AUDITS. The taxable year of CDMC
ends December 31. CDMC has (and, to the knowledge of each CDMC Party, each
Subsidiary has) duly and timely filed or caused to be filed all federal,
foreign, state and local income, franchise, sales and use, value added,
property, employment, excise, informational or any other tax returns ("Tax
Returns") required to be filed by it and has paid in full or fully reserved
against in its financial statements (and, in the case of CDMC, the Financial
Statements) all taxes, interest, penalties, assessments and deficiencies due or
claimed to be due by it to foreign, federal, state or local taxing authorities
(including taxes on properties, income, franchises, licenses, sales, use and
payrolls). To the knowledge of each CDMC Party, such Tax Returns are correct,
and neither CDMC nor any Subsidiary is required to pay any taxes for such
periods except as shown in such Tax Returns. Neither CDMC nor any Subsidiary
is a United States real property holding corporation as defined in Section 897
of the Internal Revenue Code of 1986, as amended (the "Code"). No stockholder
of CDMC is a foreign person within the meaning of Section 1445(b)(2) of the
Code.
SECTION 2.12 CONTRACTS.
(a) Schedule 2.12 includes a complete and accurate list of all
Contracts (true and complete copies of which have been delivered to COI) to
which CDMC is a party or by which CDMC or its assets are bound.
(b) To the knowledge of each CDMC Party, neither CDMC nor any
Subsidiary (as the case may be) nor any other party is in default under any
Contract to which CDMC or any Subsidiary is a party and no event has occurred
that (after notice or lapse of time or both) would become a breach or default
under, or would permit the modification, cancellation or termination of or the
acceleration of any obligation under, any such Contract or result in the
creation of any Lien upon, or any person's obtaining any right to acquire, any
properties, assets or rights of CDMC or any Subsidiary, that, in any such case,
has had or reasonably would be expected to have a Material Adverse Effect on
CDMC or any Subsidiary.
(c) To the knowledge of each CDMC Party, each such Contract is in
full force and effect and is valid and legally binding, and there are no
unresolved disputes involving or with respect to any such Contract. To the
knowledge of each CDMC Party, no party to a Contract has advised CDMC, any
Subsidiary or the CDMC Parties that it intends either to terminate a Contract
or to refuse to renew a Contract upon the expiration of the term thereof.
SECTION 2.13 ASSETS.
(a) All of CDMC's assets are set forth on Schedule 2.13 hereto.
CDMC owns no real estate. Other than as previously disclosed to COI, neither
CDMC nor any Subsidiary is a party
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to or bound by a lease of real property (each a "Lease"). To the knowledge of
each CDMC Party, with respect to each Lease: (a) the Lease has been validly
executed and delivered by CDMC or the applicable Subsidiary and, to the
knowledge of CDMC and the CDMC Parties, by the other party or parties thereto,
and is a binding agreement; (b) neither CDMC nor the Subsidiary (as applicable)
and, to the knowledge of CDMC and the CDMC Parties, no other party to the Lease
is in breach or default thereunder, and no event has occurred on the part of
CDMC or the applicable Subsidiary or, to the knowledge of CDMC and the CDMC
Parties, on the part of any other party that, with notice or lapse of time or
both, would constitute such a breach or default or permit termination,
modification or acceleration under the Lease; (c) the Lease will continue to be
binding in accordance with its terms following the Closing; (d) neither CDMC
nor the Subsidiary (as applicable) has repudiated, and, to the knowledge of
CDMC and the CDMC Parties, no other party to the Lease has repudiated, any
provision thereof; (e) there are no disputes, oral agreements or delayed
payment programs in effect as to the Lease; and (f) all facilities leased
thereunder have been approved by all necessary governmental authorities, have
been maintained in accordance with normal industry practice and are in good
condition, working order and repair.
(b) To the knowledge of each CDMC Party, CDMC has good and
marketable title to, or a valid leasehold interest in, each item of tangible
property, whether real, personal or mixed, set forth on Schedule 2.13 hereto,
subject to no Liens except as otherwise disclosed to COI.
(c) To the knowledge of each CDMC Party, each Subsidiary has good
and marketable title to, or a valid leasehold interest in, each item of
tangible property, whether real, personal or mixed, reflected on its books and
records as owned or used by it, subject to no Liens except as otherwise
disclosed to COI.
SECTION 2.14 ENVIRONMENTAL MATTERS.
(a) For the purposes of this Agreement, the following terms have
the following meanings:
"Environmental Laws" shall mean any and all Laws relating to
human health, the environment or to emissions, discharges or releases
of Hazardous Substances (as hereinafter defined) into the environment
or otherwise relating to the manufacture, processing, distribution,
use, treatment, storage, disposal, transport or handling of Hazardous
Substances or the cleanup or other remediation thereof.
"Environmental Liabilities" shall mean all liabilities,
whether vested or unvested, contingent or fixed, actual or potential,
that (i) arise under or relate to Environmental Laws and (ii) relate
to actions occurring or conditions existing on or prior to the date
hereof.
"Hazardous Substances" shall mean any chemical, pollutant,
contaminant, material, solid waste, hazardous waste or combination
thereof, including (i) any toxic, radioactive,
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caustic or otherwise hazardous substance, (ii) petroleum and its
derivatives, by-products and other hydrocarbons, and (iii)
polychlorinated biphenyls, asbestos, lead and radon gas, whether
solid, liquid or gaseous in nature, that poses or may pose a hazard to
human health or the environment.
"Regulated Activity" shall mean any generation, treatment,
storage, recycling, transportation, disposal, release or remediation
of any Hazardous Substances.
(b) To the knowledge of each CDMC Party, no notice, notification,
demand, request for information, citation, summons, complaint or order has been
received by CDMC or any Subsidiary, no complaint has been filed, no penalty has
been assessed and no investigation or review is pending or, to the knowledge of
each CDMC Party, has been threatened by any governmental entity or other party
with respect to any (i) alleged violation by CDMC or any Subsidiary of any
Environmental Law, (ii) alleged failure by CDMC or any Subsidiary to have any
environmental permit, certificate, license, approval, registration or
authorization required in connection with the conduct of its business or (iii)
the participation by CDMC or any Subsidiary in any Regulated Activity.
(c) To the knowledge of each CDMC Party, neither CDMC nor any
Subsidiary has any Environmental Liabilities and there has been no release of
Hazardous Substances into the environment by CDMC or any Subsidiary or with
respect to any of its properties that has had, or reasonably would be expected
to have, a Material Adverse Effect on CDMC or any Subsidiary.
SECTION 2.15 GUARANTEES. To the knowledge of each CDMC Party,
other than as set forth on Schedule 2.15, CDMC is not a guarantor or otherwise
liable for any indebtedness of any other person, firm or corporation other than
endorsements for collection in the ordinary course of business.
SECTION 2.16 POWERS OF ATTORNEY. To the knowledge of each CDMC
Party, there are no outstanding powers of attorney or similar instruments
executed by CDMC.
SECTION 2.17 COMPLIANCE WITH LAWS. To the knowledge of each CDMC
Party, CDMC, each Subsidiary and each of their respective directors, officers
and employees (the individuals only in their capacities as representatives of
such entity) have complied in all respects with all Laws, and no claim has been
filed or threatened in writing against CDMC or any Subsidiary alleging a
violation of any such Laws.
SECTION 2.18 NO PROCEEDINGS. To the knowledge of each CDMC Party,
there is no legal action or governmental proceeding or investigation pending
or, to the knowledge of each CDMC Party, threatened against the CDMC Parties,
any Subsidiary or CDMC that would adversely affect or prevent the consummation
of the transactions contemplated by this Agreement, nor are CDMC, any
Subsidiary or the CDMC Parties subject to any outstanding Order that could
adversely affect or prevent the consummation of the transactions contemplated
by this Agreement.
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ARTICLE III
REPRESENTATIONS AND WARRANTIES OF COI
To induce the CDMC Parties to enter into this Agreement and the
Partnership Agreement, to make the CDMC Parties' Contributions and to perform
the other obligations to be performed by the CDMC Parties pursuant to this
Agreement and the Partnership Agreement, COI represents and warrants to each
CDMC Party as follows:
SECTION 3.1 CORPORATE EXISTENCE AND GOOD STANDING. COI is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware.
SECTION 3.2 CORPORATE AUTHORIZATION. The execution, delivery and
performance by COI of this Agreement and the consummation by COI of the
transactions contemplated by this Agreement are within the corporate powers of
COI and have been duly authorized by all necessary action of the directors and
stockholders of COI. This Agreement has been duly executed and delivered by
COI and constitutes the valid and binding agreement of COI enforceable against
COI in accordance with its terms, except as such enforcement may be limited by
bankruptcy, insolvency or other similar laws affecting the enforcement of
creditors' rights generally or by general principles of equity.
SECTION 3.3 NON-CONTRAVENTION. To the knowledge of COI, none of
the execution and delivery by COI of this Agreement and the performance by COI
of its obligations hereunder or the consummation by COI of the transactions
contemplated by this Agreement, does or will:
(a) contravene or conflict with the Certificate of Incorporation
or Bylaws of COI; or
(b) contravene or conflict with or constitute a violation of any
provision of any Law or Order by which COI is bound.
SECTION 3.4 NO PROCEEDINGS. To the knowledge of COI, there is no
legal action or governmental proceeding or investigation pending or, to the
knowledge of COI, threatened against COI that would adversely affect or prevent
the consummation of the transactions contemplated by this Agreement, nor is COI
subject to any outstanding Order that could adversely affect or prevent the
consummation of the transactions contemplated by this Agreement.
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ARTICLE IV
INDEMNIFICATION
SECTION 4.1 INDEMNIFICATION BY THE CDMC PARTIES. Subject to the
terms and conditions of this Agreement, each CDMC Party agrees, severally, to
indemnify, defend and hold harmless the Partnership, COI and each of COI's
officers, directors, partners, shareholders, employees, agents,
representatives, control persons and affiliates, including CDMC (each a "COI
Indemnitee"), for his proportionate share (based on the number of CDMC Shares
held by such CDMC Party as set forth in Section 1.2 hereof as a proportion of
the total number of CDMC Shares), from and in respect of any and all claims,
demands, actions, losses, costs, expenses, obligations, liabilities, actual
damages, recoveries and deficiencies, including, without limitation, interest,
penalties, fines and reasonable attorneys' fees (collectively "Damages"),
actually incurred by a COI Indemnitee to the extent that such Damages arise or
result from or in connection with, or relate to, directly or indirectly, in
whole or in part: (a) any breach by any CDMC Party of any of its
representations and warranties set forth in this Agreement; (b) the failure by
any CDMC Party to perform any of the covenants and agreements set forth in this
Agreement that are required to be performed by him; (c) any liability or
obligation of CDMC to the extent (i) arising in connection with facts or
circumstances existing on or prior to the date hereof and (ii) not disclosed in
the Financial Statements in accordance with generally accepted accounting
principles consistently applied or not fully and accurately disclosed on a
schedule hereto; or (d) reasonable costs of enforcement incurred by any COI
Indemnitee in the event of a failure by a CDMC Party to satisfy his
indemnification obligations pursuant to this Article IV.
SECTION 4.2 INDEMNIFICATION BY COI. Subject to the terms and
conditions of this Agreement, COI agrees to indemnify, defend and hold harmless
in full each CDMC Party and his agents, representatives and affiliates (each a
"CDMC Party Indemnitee") from and in respect of any and all Damages actually
incurred by a CDMC Party Indemnitee to the extent that such Damages arise or
result from or in connection with, or relate to, directly or indirectly, in
whole or in part: (a) any breach by COI of any of its representations and
warranties set forth in this Agreement; (b) the failure by COI to perform any
of the covenants and agreements set forth in this Agreement that are required
to be performed by it; (c) any liability or obligation of any kind or nature to
the extent arising from COI's operation of CDMC's business after the date
hereof; or (d) reasonable costs of enforcement incurred by any CDMC Party
Indemnitee in the event of COI's failure to satisfy its indemnification
obligations pursuant to this Article IV.
SECTION 4.3 THIRD-PARTY CLAIMS. As promptly as reasonably
possible after a party entitled to indemnification hereunder (the "Notifying
Party") becomes aware thereof, the Notifying Party will notify the party or
parties against whom indemnification is to be sought hereunder (collectively,
the "Indemnitor") of the existence of any claim, demand or other matter to
which the Indemnitor's indemnification obligations would apply. The Notifying
Party will give the Indemnitor a reasonable opportunity to defend any such
claim, demand or other matter at its own expense and with counsel of its choice
reasonably acceptable to the Notifying Party. The Indemnitor may settle any
such dispute, demand or claim defended by it hereunder in its discretion;
provided, however, that any such settlement that the Indemnitor effects without
the Notifying Party's consent will be solely for the Indemnitor's account and
the Notifying Party will not be liable for any amounts whatsoever payable in
connection with any such settlement. If the Indemnitor fails to so defend
within a reasonable time after notice to it, the Notifying Party will
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have the right, but not the obligation, to undertake the defense of, and to
compromise or settle (exercising reasonable business judgment), the claim or
other matter on behalf, for the account, and at the risk, of the Indemnitor.
SECTION 4.4 LIMITATIONS ON INDEMNIFICATION RIGHTS.
(a) Notwithstanding anything in this Agreement to the contrary,
Claims may be brought with respect to any willful or knowing breach or
misrepresentation without limitation as to time or amount.
(b) No claim or action shall be brought under this Article IV for
breach of a representation or warranty from and after the date that such
representation or warranty terminates in accordance with Section 5.10 hereof;
provided, however, that any claim made by a party hereunder by the giving of
written notice or by commencement of an arbitration proceeding pursuant to the
Arbitration Agreement (as defined below) for breach of a representation or
warranty prior to the termination of the survival period for such claim shall
be preserved despite the subsequent termination of such survival period.
(c) Neither CDMC Party Indemnitees nor COI Indemnitees
(collectively, "Indemnitees") shall be entitled to indemnification with respect
to matters set forth in Sections 4.1(a) or 4.2(a), respectively, unless the
total amount for which all CDMC Party Indemnitees in the aggregate or all COI
Indemnitees in the aggregate, as the case may be, are entitled to
indemnification (on a cumulative basis) exceeds $100,000.00, but in any such
event CDMC Party Indemnitees or COI Indemnitees, as the case may be, shall then
be entitled to indemnification from the first dollar of claim.
(d) No Indemnitees shall be entitled to indemnification with
respect to matters set forth in Sections 4.1(c) or 4.2(c), respectively, unless
the total amount for which all CDMC Party Indemnitees in the aggregate or all
COI Indemnitees in the aggregate, as the case may be, are entitled to
indemnification thereunder (on a cumulative basis) exceeds $500,000.00, but in
any such event CDMC Party Indemnitiees or COI Indemnitees, as the case may be,
shall then be entitled to indemnification from the first dollar of claim;
provided, however, that subsection (c) above, and not this subsection (d),
shall apply to entitlement to indemnification with respect to matters that are
within the scope of both Sections 4.1(a) and 4.1(c).
SECTION 4.5 MANNER OF ENFORCING INDEMNIFICATION RIGHTS. The
parties acknowledge and agree that, if both an Indemnitor and an Indemnitee are
partners in the Partnership, the Indemnitee shall have the right, but not the
obligation, to satisfy the Indemnitor's indemnity obligation pursuant to this
Article IV through an adjustment to the respective partnership interests of the
Indemnitor and the Indemnitee in the Partnership (with any such adjustment to
be made by the Partnership's general partner acting in its reasonable
discretion).
SECTION 4.6 EXCLUSIVITY OF INDEMNIFICATION RIGHTS. The
indemnification rights under this Article IV are the exclusive contractual
remedy for a breach of this Agreement, but any statutory remedy (including a
right of contribution under Environmental Laws and any rights under state or
federal securities laws) are and shall be unaffected by, and cumulative with,
the rights set forth in this Article IV.
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ARTICLE V
MISCELLANEOUS
SECTION 5.1 CONFIDENTIALITY. Except as and to the extent
required by Law or as requested by any supervisory authority having applicable
jurisdiction, the CDMC Parties will not disclose or use, and each CDMC Party
will direct its representatives not to disclose or use to the detriment of COI
or CDMC, any Confidential Information (as defined below) with respect to COI
furnished, or to be furnished, by COI in connection with the transactions
contemplated by this Agreement. For purposes of this Section, "Confidential
Information" means any information about COI furnished in connection with the
transactions contemplated by this Agreement, unless such information is already
generally known to the public. In addition, the CDMC Parties acknowledge that
they are aware that COI is a public company, that persons in possession of
material, nonpublic information about a public company should abstain from
transacting in securities of such company or from tipping such information to
any other person who might transact in securities of such company, and that
federal and state securities laws impose severe penalties upon persons who
transact in securities of a public company while in possession of material
nonpublic information about such company.
Furthermore, except as and to the extent required by Law or by a
self-regulatory organization of applicable jurisdiction, without COI's prior
written consent, no CDMC Party will, and each CDMC Party will direct its
representatives not to, make, directly or indirectly, any public comment,
statement or communication with respect to, or otherwise to disclose or to
permit the disclosure of the existence of the transactions contemplated by this
Agreement or any of the terms, conditions or other aspects of the transactions
contemplated by this Agreement.
SECTION 5.2 TAX COOPERATION. COI and the CDMC Parties shall
cooperate in the preparation, execution and filing of all returns,
questionnaires, applications or other documents regarding any gains, sales,
use, transfer or value added, stock transfer and stamp taxes, any transfer,
recording, registration and other fees, and any similar taxes or fees that
become payable in connection with the transactions contemplated by this
Agreement that are required or permitted to be filed at any time before or
after the date hereof. COI and the CDMC Parties shall not take inconsistent
reporting positions with the Internal Revenue Service with respect to the
transactions contemplated by this Agreement. COI agrees not to amend any tax
positions with respect to CDMC taken prior to the date of this Agreement other
than such amendments as may be required in the opinion of COI's legal counsel
in order to comply with the Code.
SECTION 5.3 FURTHER ASSURANCES. Each party agrees to cooperate
fully with the other parties and to execute such further instruments, documents
and agreements and to give such further written assurances as reasonably may be
requested by any other party to better evidence and reflect the transactions
contemplated by this Agreement, to carry into effect the intents and purposes
of this Agreement and to assist the Partnership in confirming its title to the
CDMC Shares.
SECTION 5.4 FEES AND EXPENSES. Unless and until otherwise agreed
by the parties, each party shall bear its own fees and expenses (including
counsel fees and fees of brokers and investment bankers contracted by such
party) in connection with the transactions contemplated by this Agreement.
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SECTION 5.5 NOTICES. All notices, demands, requests or other
communications that may be or are required to be given, served or sent by
either party to any other party pursuant to this Agreement shall be in writing
and shall be mailed by first-class, registered or certified mail, return
receipt requested, postage prepaid, or transmitted by hand delivery, telegram
or facsimile transmission addressed as follows:
(a) If to COI:
Crescent Operating, Inc.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Attn.: ▇▇. ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Executive Vice President
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy (which will not constitute notice) to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attn.: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Esq.
(b) If to ▇▇▇▇▇▇▇:
▇▇. ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(c) If to ▇▇▇▇:
▇▇. ▇▇▇▇ ▇. ▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
(d) If to ▇▇▇▇▇▇▇▇:
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, III
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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with a copy (which will not constitute notice) to:
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
Any party may designate by written notice a new address to which any notice,
demand, request or communication may thereafter be given, served or sent. Each
notice, demand, request or communication that is mailed, delivered or
transmitted in the manner described above will be deemed sufficiently given,
served, sent and received for all purposes at such time as it is delivered to
the addressee with the return receipt, the delivery receipt, the affidavit of
messenger or (with respect to a facsimile transmission) the answer back being
deemed conclusive evidence of such delivery or at such time as delivery is
refused by the addressee upon presentation.
SECTION 5.6 APPLICABLE LAW.
(a) THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN
ACCORDANCE WITH THE LAWS OF THE STATE OF TEXAS (EXCLUSIVE OF CONFLICTS OF LAW
PRINCIPLES) AND SHALL, TO THE MAXIMUM EXTENT PRACTICABLE, BE DEEMED TO CALL FOR
PERFORMANCE IN TARRANT COUNTY, TEXAS.
(b) COI and the CDMC Parties have entered into an Arbitration
Agreement of even date herewith with respect to this Agreement and certain
other matters (the "Arbitration Agreement").
SECTION 5.7 SUCCESSORS AND ASSIGNS. This Agreement and the
provisions hereof shall be binding upon each of the parties and their
respective permitted successors and assigns. This Agreement may not be
assigned by any party without the prior written consent of the other parties.
Notwithstanding the immediately-preceding sentence, however, COI may assign all
or any portion of its rights and delegate all or any portion of its obligations
under this Agreement to any wholly owned subsidiary of COI; provided, however,
that COI shall remain jointly and severally liable for the performance of COI's
obligations hereunder.
SECTION 5.8 SEVERABILITY. If any provision of this Agreement, or
the application thereof, shall for any reason or to any extent held to be
invalid or unenforceable, the remainder of this Agreement and application of
such provision to other persons or circumstances shall continue in full force
and effect and in no way be affected, impaired or invalidated.
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SECTION 5.9 ENTIRE AGREEMENT. This Agreement and the Partnership
Agreement, together with the schedules and exhibits hereto and thereto, and the
Arbitration Agreement and Side Agreement (defined below) together constitute
the entire understanding and agreement of the parties with respect to the
subject matter hereof and thereof and supersede all prior and contemporaneous
agreements or understandings, inducements or conditions, express or implied,
written or oral, among the parties with respect to such subject matter. In the
event of a conflict or inconsistency between the provisions of this Agreement
and the Partnership Agreement, the provisions of this Agreement shall control.
Simultaneously with the execution and delivery of this Agreement, the parties
hereto are executing and delivering an Agreement Regarding Schedules and Other
Matters ("Side Agreement").
SECTION 5.10 SURVIVAL OF REPRESENTATIONS, WARRANTIES AND
COVENANTS. The representations, warranties and covenants set forth in this
Agreement shall survive the execution and delivery of this Agreement and
consummation of the transactions contemplated by this Agreement. All
representations and warranties set forth in this Agreement shall terminate and
be of no further force or effect (a), in the case of Sections 2.11 ("Tax
Returns and Audits") and 2.14 ("Environmental Matters"), from and after the
expiration of all statutes of limitations that would apply to a cause of action
relating to the matters set forth therein, (b) in the case of Section 2.4
("Capitalization, Title and Stock Rights"), never, and (c) in all other cases,
from and after the second anniversary of the date hereof.
SECTION 5.11 AMENDMENT AND WAIVERS. No amendment of any provision
of this Agreement shall be valid unless the same shall be in writing and signed
by the parties hereto. No waiver by any party of any default,
misrepresentation or breach of warranty or covenant hereunder, whether
intentional or not, shall not be deemed to extend to any prior or subsequent
default, misrepresentation or breach of warranty or covenant hereunder or
affect in any way any rights arising by virtue of any prior or subsequent
occurrence thereof.
SECTION 5.12 CONSTRUCTION OF AGREEMENT. A reference to an
Article, Section, Schedule or Exhibit shall mean an Article or Section of, or
Schedule or Exhibit to, this Agreement unless otherwise explicitly set forth.
The titles and headings herein are for reference purposes only and shall not in
any manner limit the construction of this Agreement, which shall be considered
as a whole. The words "include," "includes" and "including" when used herein
shall be deemed in each case to be followed by the words "without limitation."
As used herein, a matter shall be deemed to be within the "knowledge" of a
party if such party (or, in the case of a party that is not a natural person,
any executive officer thereof or person occupying a position of like
responsibility or authority) possesses actual knowledge of such matter, or
possesses actual knowledge of facts that would or should cause a prudent person
in a similar position to make inquiry of other persons who would have made such
matter known to him, or possesses actual knowledge of facts that would or
should have put a prudent person on notice of such matter.
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SECTION 5.13 COUNTERPARTS. This Agreement may be executed in any
number of counterparts, each of which shall be an original as against any party
whose signature appears thereon and all of which together shall constitute one
and the same instrument. This Agreement shall become binding when one or more
counterparts hereof, individually or taken together, shall bear the signatures
of all the parties reflected hereon as signatories.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
CRESCENT OPERATING, INC.,
a Delaware corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Executive Vice
President
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
/s/ ▇▇▇▇ ▇. ▇▇▇▇
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▇▇▇▇ ▇. ▇▇▇▇
/s/ ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, III
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▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, III