<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Schedule 13D**
Under the Securities Exchange Act of 1934
(Amendment No. )*
Crescent Operating, Inc.
(Name of Issuer)
Common Stock, Par Value $0.01 Per Share
(Title of Class of Securities)
22575M100
(Cusip Number)
Mr. Gerald W. Haddock
306 West Seventh Street, Suite 1025
Fort Worth, Texas 76102
(817) 339-2200
(Name, Address and Telephone Number of Person
Authorized to Receive Notices and Communications)
September 17, 1998
(Date of Event which Requires Filing of this Statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following
box [ ].
*The remainder of this cover page shall be filled out for a reporting person's
initial filing on this form with respect to the subject class of securities,
and for any subsequent amendment containing information which would alter
disclosures provided in a prior cover page.
The information required on the remainder of this cover page shall not be
deemed to be "filed" for the purpose of Section 18 of the Securities Exchange
Act of 1934 ("Act") or otherwise subject to the liabilities of that section of
the Act but shall be subject to all other provisions of the Act (however, see
the Notes).
**The total number of shares of Stock reported herein is 638,846 shares, which
constitutes approximately 5.4% of the 11,739,528 shares deemed outstanding
pursuant to Rule 13d-3(d)(1)(i) under the Act. Except as otherwise stated
herein, all ownership percentages set forth herein assume that there are
11,399,377 shares of Stock outstanding.
<PAGE> 2
<TABLE>
<S> <C>
1. Name of Reporting Person:
COPI Colorado, L. P.
2. Check the Appropriate Box if a Member of a Group:
(a) / /
(b) / X /
3. SEC Use Only
4. Source of Funds: OO - Contributions from COI
5. Check box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e):
/ /
6. Citizenship or Place of Organization: Delaware
7. Sole Voting Power: 145,000 (1)
Number of
Shares
Beneficially 8. Shared Voting Power: -0-
Owned By
Each
Reporting 9. Sole Dispositive Power: 145,000 (1)
Person
With
10. Shared Dispositive Power: -0-
11. Aggregate Amount Beneficially Owned by Each Reporting Person:
145,000
12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares:
/ X /
13. Percent of Class Represented by Amount in Row (11): 1.3%
14. Type of Reporting Person: PN
</TABLE>
- ------------
(1) Power is exercised through COI, its sole general partner.
2
<PAGE> 3
<TABLE>
<S> <C>
1. Name of Reporting Person:
Crescent Operating, Inc.
2. Check the Appropriate Box if a Member of a Group:
(a) / /
(b) / X /
3. SEC Use Only
4. Source of Funds: Not Applicable
5. Check box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e):
/ /
6. Citizenship or Place of Organization: Delaware
7. Sole Voting Power: 145,000 (1)
Number of
Shares
Beneficially 8. Shared Voting Power: -0-
Owned By
Each
Reporting 9. Sole Dispositive Power: 145,000 (1)
Person
With
10. Shared Dispositive Power: -0-
11. Aggregate Amount Beneficially Owned by Each Reporting Person:
145,000
12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares:
/ X /
13. Percent of Class Represented by Amount in Row (11): 1.3%
14. Type of Reporting Person: CO
</TABLE>
- --------
(1) Solely in its capacity as the sole general partner of COPI Colorado.
3
<PAGE> 4
<TABLE>
<S> <C>
1. Name of Reporting Person:
Gerald W. Haddock
2. Check the Appropriate Box if a Member of a Group:
(a) / /
(b) / X /
3. SEC Use Only
4. Source of Funds: See Item 3.
5. Check box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e):
/ /
6. Citizenship or Place of Organization: USA
7. Sole Voting Power: 215,218 (1)
Number of
Shares
Beneficially 8. Shared Voting Power: -0-
Owned By
Each
Reporting 9. Sole Dispositive Power: 215,218 (1)
Person
With
10. Shared Dispositive Power: -0-
11. Aggregate Amount Beneficially Owned by Each Reporting Person:
215,218 (1)
12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares:
/ X /
13. Percent of Class Represented by Amount in Row (11): 1.9% (2)
14. Type of Reporting Person: IN
</TABLE>
- -----------
(1) Includes (a) 158,104 shares of the Stock issuable to GWH upon the
exercise of options that are exercisable within 60 days, (b) 10,170
shares held by a family limited partnership of which GWH is a general
partner (the "GWH Family Partnership") and (c) 51 shares held for his
benefit in the Crescent Real Estate Equities, Ltd. 401(k) Plan (the
"401(k) Plan"). Pursuant to Rule 13d-4 of the Act, GWH disclaims
beneficial ownership with respect to all shares of the Stock held by
the GWH Family Partnership in excess of his pecuniary interest
therein.
(2) Assumes, pursuant to Rule 13d-3(d)(1)(i) under the Act, that there are
11,557,481 shares of the Stock outstanding.
4
<PAGE> 5
<TABLE>
<S> <C>
1. Name of Reporting Person:
John C. Goff
2. Check the Appropriate Box if a Member of a Group:
(a) / /
(b) / X /
3. SEC Use Only
4. Source of Funds: See Item 3.
5. Check box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e):
/ /
6. Citizenship or Place of Organization: USA
7. Sole Voting Power: 270,461 (1)
Number of
Shares
Beneficially 8. Shared Voting Power: -0-
Owned By
Each
Reporting 9. Sole Dispositive Power: 270,461 (1)
Person
With
10. Shared Dispositive Power: -0-
11. Aggregate Amount Beneficially Owned by Each Reporting Person:
270,461 (1)
12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares:
/ X /
13. Percent of Class Represented by Amount in Row (11): 2.3% (2)
14. Type of Reporting Person: IN
</TABLE>
- ----------
(1) Includes (a) 182,047 shares of the Stock issuable upon the
exercise of options that are exercisable within 60 days, (b) 15,256
shares held by a family limited partnership of which JCG is a general
partner (the "JCG Family Partnership") and (c) 50 shares held for his
benefit in the 401(k) Plan. Pursuant to Rule 13d-4 of the Act, JCG
disclaims beneficial ownership with respect to all shares of the Stock
held by the JCG Family Partnership in excess of his pecuniary interest
therein.
(2) Assumes, pursuant to Rule 13d-3(d)(1)(i) under the Act, that there are
11,581,424 shares of the Stock outstanding.
5
<PAGE> 6
<TABLE>
<S> <C>
1. Name of Reporting Person:
Harry H. Frampton, III
2. Check the Appropriate Box if a Member of a Group:
(a) / /
(b) / X /
3. SEC Use Only
4. Source of Funds: See Item 3.
5. Check box if Disclosure of Legal Proceedings is Required Pursuant to Items 2(d) or 2(e):
/ /
6. Citizenship or Place of Organization: USA
7. Sole Voting Power: 8,167
Number of
Shares
Beneficially 8. Shared Voting Power: -0-
Owned By
Each
Reporting 9. Sole Dispositive Power: 8,167
Person
With
10. Shared Dispositive Power: -0-
11. Aggregate Amount Beneficially Owned by Each Reporting Person:
8,167
12. Check Box if the Aggregate Amount in Row (11) Excludes Certain Shares:
/ X /
13. Percent of Class Represented by Amount in Row (11): less than 0.1%
14. Type of Reporting Person: IN
</TABLE>
6
<PAGE> 7
Item 1. SECURITY AND ISSUER.
This statement relates to shares of the common stock, par value $0.01
per share (the "Stock"), of Crescent Operating, Inc., a Delaware corporation
(the "Issuer"). The principal executive offices of the Issuer are located at
306 West Seventh Street, Suite 1025, Fort Worth, Texas 76102.
Item 2. IDENTITY AND BACKGROUND.
(a) Pursuant to Rule 13d-1(a) of Regulation 13D-G of the General
Rules and Regulations under the Act, the undersigned hereby file this Schedule
13D Statement on behalf of COPI Colorado, L. P., a Delaware limited partnership
("COPI Colorado"), Crescent Operating, Inc., a Delaware corporation ("COI"),
Gerald W. Haddock ("GWH"), John C. Goff ("JCG") and Harry H. Frampton, III
("HHF"). COPI Colorado, COI, GWH, JCG and HHF are sometimes hereinafter
collectively referred to as the "Reporting Persons." The Reporting Persons are
making this single, joint filing because they may be deemed to constitute a
"group" within the meaning of Section 13(d)(5)(b)(1) of the Act, although
neither the fact of this filing nor anything contained herein shall be deemed
to be an admission by the Reporting Persons that a group exists.
(b) - (c)
COPI Colorado
COPI Colorado is a Delaware limited partnership the principal business
of which is investing in securities of the Issuer and of Crescent Development
Management Corp., a Delaware corporation ("CDMC"). The principal business
address of COPI Colorado, which also serves as its principal office, is 306
West Seventh Street, Suite 1025, Fort Worth, Texas 76102. Pursuant to
Instruction C to Schedule 13D of the Act, information with respect to COI, the
sole general partner of COPI Colorado, is set forth below.
COI
COI is a Delaware corporation the principal businesses of which are
management of or investment in, through subsidiaries, diverse business segments,
including hospitality, land development, equipment sales and leasing, healthcare
and refrigerated warehousing. The principal business address of COI, which also
serves as its principal office, is 306 West Seventh Street, Suite 1025, Fort
Worth, Texas 76102. Pursuant to Instruction C to Schedule 13D of the Act,
information with respect to each director, executive officer and controlling
person of COI is as follows:
7
<PAGE> 8
<TABLE>
<CAPTION>
RESIDENCE OR PRINCIPAL OCCUPATION
NAME BUSINESS ADDRESS OR EMPLOYMENT
<S> <C> <C>
GWH See answers below See answers below
Jeffrey L. Stevens 306 West Seventh Street, Executive Vice President and
Suite 1025 Chief Operating Officer of
Fort Worth, Texas 76102 COI; President of Petroleum
Financial, Inc. ("PFI")
Richard E. Rainwater 777 Main Street, Suite 2250 Personal investment for own
Fort Worth, Texas 76102 account
JCG See answers below See answers below
Richard P. Knight 306 West Seventh Street, Chief Financial Officer of COI
Suite 1025
Fort Worth, Texas 76102
Anthony M. Frank 101 California Street Chairman of Belvedere Capital
Suite 2050 Partners ("Belvedere")
San Francisco, California 94111
Carl F. Thorne 1445 Ross Avenue President and Chief Executive
Suite 2700 Officer of ENSCO International
Dallas, Texas 75202 Incorporated ("ENSCO")
Paul E. Rowsey, III 500 Crescent Court President of Rosewood Property
Suite 300 Company ("Rosewood")
Dallas, Texas 75201
</TABLE>
PFI is a Texas corporation the principal business of which is providing
accounting, financial and management services to business enterprises. The
principal business address of PFI, which also serves as its principal office, is
306 West Seventh Street, Suite 1025, Fort Worth, Texas 76102.
Belvedere is a California corporation the principal business of which
is serving as general partner of the California Community Financial
Institutions Fund LP, which is an investment fund that invests primarily in
California community banks. The principal business address of Belvedere, which
also serves as its principal office, is 101 California Street, Suite 2050, San
Francisco, California 94111.
ENSCO is a Delaware corporation the principal businesses of which are
oil field services and offshore drilling. The principal business address of
ENSCO, which also serves as its principal office, is 1445 Ross Avenue, Suite
2700, Dallas, Texas 75202.
Rosewood is a Delaware corporation the principal business of which is
commercial real estate development and investment. The principal business
address of Rosewood, which also serves as its principal office, is 300 Crescent
Court, Suite 300, Dallas, Texas 75201.
8
<PAGE> 9
GWH
GWH's principal occupations or employment are serving as the President
and Chief Executive Officer of Crescent Real Estate Equities Company, a Texas
real estate investment trust ("Crescent Equities") and, in connection with
Crescent Equities, serving as sole director and President of Crescent Real
Estate Equities, Ltd., a Delaware corporation and wholly-owned subsidiary of
Crescent Equities that acts as the sole general partner of Crescent Real Estate
Equities Limited Partnership, a Delaware limited partnership that is
majority-owned by Crescent Equities ("Crescent Partnership"); and serving as
President and Chief Executive Officer of the Issuer. GWH's business address is
777 Main Street, Suite 2100, Fort Worth, Texas 76102.
JCG
JCG's principal occupations or employment are serving as Vice Chairman
of the Board of Trust Managers of Crescent Equities, serving as Vice Chairman of
the Issuer and personal investment for his own account. JCG's business address
is 777 Main Street, Suite 2250, Fort Worth, Texas 76102.
HHF
HHF's principal occupation or employment is real estate development.
HHF's business address is 100 East Thomas Place, Avon, Colorado 81620.
(d) None of the persons identified in this Item 2 has, during the
last five years, been convicted in a criminal proceeding (excluding traffic
violations or similar misdemeanors).
(e) None of the persons identified in this Item 2 has, during the
last five years, been a party to a civil proceeding of a judicial or
administrative body of competent jurisdiction and as a result of such
proceeding was or is subject to a judgment, decree or final order enjoining
future violations of, or prohibiting or mandating activities subject to,
federal or state securities laws or finding any violation with respect to such
laws.
(f) All of the natural persons identified in this Item 2 are citizens
of the United States of America.
Item 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The source and amount of the funds used by each of the Reporting
Persons to purchase shares of Stock are as follows:
9
<PAGE> 10
<TABLE>
<CAPTION>
NAME OF
REPORTING PERSON SOURCE OF FUNDS AMOUNT OF FUNDS
<S> <C> <C>
COPI Colorado Contributions from COI $ 963,491
COI Not Applicable Not Applicable
GWH Personal Funds (1)(2) $ 64,775 (3)
Undetermined (4) 156,523 (5)
(6) Not Applicable
JCG Undetermined (4) $ 180,227 (7)
(8) Not Applicable
HHF (9) Not Applicable
</TABLE>
(1) As used herein, the term "Personal Funds" may include sums
borrowed from banks and brokerage firm margin accounts, none
of which were borrowed or otherwise obtained for the specific
purpose of acquiring, handling, trading or voting the Stock.
(2) GWH used Personal Funds to acquire 3,000 shares of the Stock.
(3) GWH used the indicated amount to acquire the 3,000 shares of
the Stock referenced in footnote (2).
(4) The source of the funds to be used by the Reporting Person to
exercise part or all of the options to acquire shares of the
Stock held by such Reporting Person, assuming such exercise,
has not yet been determined.
(5) The indicated amount assumes exercise in full of options
exercisable within 60 days to acquire 158,104 shares of the
Stock at a price of $0.99 per share.
(6) GWH acquired 43,893 shares of the Stock effective June 12,
1997 through Crescent Equities' distribution of shares of the
Stock to shareholders of Crescent Equities and unit holders of
Crescent Partnership of record on May 30, 1997 (the "Record
10
<PAGE> 11
Date"), on the basis of one share of the Stock for every 10
shares of beneficial interest of Crescent Equities, and one
share of the Stock for every five units of limited partnership
interest of Crescent Partnership, held on the Record Date (the
"Issuer Stock Distribution"). The 10,170 shares of the Stock
owned by the GWH Family Partnership and the 51 shares of the
Stock held for GWH's benefit in the 401(k) Plan also were
acquired through the Issuer Stock Distribution.
(7) The indicated amount assumes exercise in full of options
exercisable within 60 days to acquire 182,047 shares of the
Stock at a price of $0.99 per share.
(8) JCG acquired 73,108 shares of the Stock through the Issuer
Stock Distribution. The 15,256 shares of the Stock owned by
the JCG Family Partnership and the 50 shares of the Stock held
for JCG's benefit in the 401(k) Plan also were acquired through
the Issuer Stock Distribution.
(9) HHF acquired all of the shares of the Stock reported herein as
beneficially owned by him through the Issuer Stock
Distribution.
Item 4. PURPOSE OF TRANSACTION.
The Reporting Persons entered into the transactions described in Item
6 for investment purposes. Depending on market conditions and other factors
that each Reporting Person may deem material to its investment decision (and,
in the case of COPI Colorado, on the provisions of the Partnership Agreement
and the Contribution Agreement, as such terms are defined in Item 6), such
Reporting Person may purchase shares of the Stock in the open market or in
private transactions and GWH and/or JCG may exercise the options held by them
to acquire shares of the Stock. Depending on these same factors (and, in the
case of COPI Colorado, on the provisions of the Partnership Agreement and the
Contribution Agreement, as such terms are defined in Item 6), each Reporting
Person may make no such purchases and/or may sell shares of the Stock in the
open market or in private transactions, and GWH and/or JCG may not exercise the
options held by them to acquire shares of the Stock.
See also Item 6, which is incorporated herein by reference.
Except as set forth herein or in the Exhibits filed or to be filed
herewith, the Reporting Persons have no present plans or proposals that relate
to or that would result in any of the actions specified in clauses (a) through
(j) of Item 4 of Schedule 13D of the Act.
11
<PAGE> 12
Item 5. INTEREST IN SECURITIES OF THE ISSUER.
(a)
COPI Colorado
The aggregate number of shares of the Stock that COPI Colorado owns
beneficially, pursuant to Rule 13d-3 of the Act, is 145,000, which constitutes
approximately 1.3% of the outstanding shares of the Stock.
COI
In its capacity as the general partner of COPI Colorado, COI may,
pursuant to Rule 13d-3 of the Act, be deemed to be the beneficial owner of
145,000 shares of the Stock, which constitutes approximately 1.3% of the
outstanding shares of the Stock.
GWH
Because of (1) his direct holdings of 46,893 shares of the Stock, (2)
the 10,170 shares of the Stock held by the GWH Family Partnership of which he
may be deemed the beneficial owner because of his status as a general partner
thereof, (3) his indirect holdings of 51 shares of Stock in the 401(k) Plan and
(4) his ownership of options that are exercisable within 60 days to acquire
158,104 shares of the Stock, GWH may, pursuant to Rule 13d-3 of the Act, be
deemed to be the beneficial owner of 215,218 shares of the Stock in the
aggregate, which constitutes approximately 1.9% of the 11,557,481 shares of the
Stock deemed outstanding pursuant to Rule 13d-3(d)(1)(i) of the Act. Pursuant
to Rule 13d-4 of the Act, GWH disclaims beneficial ownership with respect to all
shares of the Stock held by the GWH Family Partnership in excess of his
pecuniary interest therein.
JCG
Because of (1) his direct holdings of 73,108 shares of the Stock, (2)
the 15,256 shares of the Stock held by the JCG Family Partnership of which he
may be deemed the beneficial owner because of his status as a general partner
thereof, (3) his indirect holdings of 50 shares of Stock in the 401(k) Plan and
(4) his ownership of options that are exercisable within 60 days to acquire
182,047 shares of the Stock, JCG may, pursuant to Rule 13d-3 of the Act, be
deemed to be the beneficial owner of 270,461 of the Stock in the aggregate,
which constitutes approximately 2.3% of the 11,581,424 shares of the Stock
deemed outstanding pursuant to Rule 13d-3(d)(1)(i) of the Act. Pursuant to
Rule 13d-4 of the Act, JCG disclaims beneficial ownership with respect to all
shares of the Stock held by the JCG Family Partnership in excess of his
pecuniary interest therein.
12
<PAGE> 13
HHF
The aggregate number of shares of the Stock that HHF owns
beneficially, pursuant to Rule 13d-3 of the Act, is 8,167, which constitutes
less than 0.1% of the outstanding shares of the Stock.
To the best of the knowledge of each of the Reporting Persons, other
than as set forth above, none of the Reporting Persons is the beneficial owner
of any shares of the Stock.
(b)
COPI Colorado
Acting through its sole general partner, COPI Colorado has the sole
power to vote or to direct the vote or to dispose or to direct the disposition
of 145,000 shares of the Stock.
COI
In its capacity as the sole general partner of COPI Colorado, COI has
the sole power to vote or to direct the vote or to dispose or to direct the
disposition of 145,000 shares of the Stock.
GWH
GWH has the sole power to vote or to direct the vote or to dispose or
to direct the disposition of (1) the 46,893 shares of the Stock directly held by
him, (2) the 10,170 shares of the Stock held by the GWH Family Partnership of
which he may be deemed the beneficial owner because of his status as a general
partner thereof, (3) the 51 shares of Stock held for his benefit in the 401(k)
Plan and (4), pursuant to Rule 13d-3(d)(1)(i) of the Act, the 158,104 shares of
the Stock issuable to him upon his exercise of options that are exercisable
within 60 days.
JCG
JCG has the sole power to vote or to direct the vote or to dispose or
to direct the disposition of (a) the 73,108 shares of the Stock directly held
by him, (b) the 15,256 shares of the Stock held by the JCG Family Partnership
of which he may be deemed the beneficial owner because of his status as a
general partner thereof, (c) the 50 shares of Stock held for his benefit in the
401(k) Plan and (d), pursuant to Rule 13d-3(d)(1)(i) of the Act, the 182,047
shares of the Stock issuable to him upon his exercise of options that are
exercisable within 60 days.
13
<PAGE> 14
HHF
HHF has the sole power to vote or to direct the vote or to dispose or
to direct the disposition of 8,167 shares of the Stock.
(c) During the past sixty (60) days, COPI Colorado has purchased
shares of the Stock in open-market transactions on NASDAQ, as follows:
<TABLE>
<CAPTION>
NUMBER PRICE
DATE OF SHARES PER SHARE
<S> <C> <C>
09/11/98 50,000 $5.66
09/14/98 14,000 6.03
09/14/98 5,000 6.22
09/14/98 6,000 6.19
09/17/98 12,500 6.31
09/17/98 5,000 6.34
09/17/98 2,500 6.41
09/23/98 50,000 8.03
</TABLE>
Except as set forth in this Schedule 13D, to the best of the knowledge
of each of the Reporting Persons, none of the persons named in response to
paragraph (a) has effected any transactions in the Stock during the past 60
days.
(d) Each of the Reporting Persons affirms that no person other
than such Reporting Person has the right to receive or the power to direct the
receipt of dividends from, or the proceeds from the sale of, the Stock owned by
such Reporting Person other than (1) the GWH Family Partnership with respect to
the shares of the Stock owned by it and (2) the JCG Family Partnership with
respect to the shares of the Stock owned by it.
(e) Not applicable.
Item 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR
RELATIONSHIPS WITH RESPECT TO SECURITIES OF THE ISSUER.
Effective September 11, 1998, COI, GWH, JCG and HHF entered into the
Agreement of Limited Partnership of COPI Colorado L. P., a copy of which is
filed herewith as Exhibit 10.1 (the "Partnership Agreement"), the Contribution
Agreement, a copy of which is filed herewith as Exhibit 10.2 (the "Contribution
Agreement"), and the Agreement regarding Schedules and Other Matters, a copy of
which is filed herewith as Exhibit 10.3 (the "Side Agreement"). The
description that follows of the Partnership Agreement, the Contribution
Agreement and the Side Agreement is not, and does not purport to be, complete,
and is qualified in its entirety by reference to such exhibits. Capitalized
terms used below in the descriptions of the Partnership Agreement, the
Contribution Agreement or the Side Agreement, as the case may be, not otherwise
defined in this Schedule 13D have the meanings respectively ascribed to them in
such agreements.
14
<PAGE> 15
Pursuant to the Partnership Agreement, the purpose of COPI Colorado is
to invest in shares of the Stock and in the CDMC Stock. Additional capital
contributions of existing partners shall be made by all partners in proportion
to their respective Partnership Interests and only upon the consent of all
existing partners. COPI Colorado may admit additional limited partners only
with the consent of partners holding all Partnership Interests. The Partnership
Agreement provides that, subject to customary restrictions, the general partner
shall have exclusive power to control and manage COPI Colorado (including,
specifically, the full and exclusive authority to exercise any voting,
dispositive or other rights associated with shares of the Stock).
The Partnership Agreement exculpates COI (in its capacity as general
partner) from liability to the Limited Partners for any action or inaction in
connection with purchasing, holding or disposing of shares of the Stock due to
its status as the Issuer, and specifically states that COI (in such capacity)
can restrict COPI Colorado's purchases of shares of the Stock to comply with
Rule 10b-18 of the Act and may cease COPI Colorado's purchase of shares of the
Stock during distributions of shares of the Stock, even though such actions
might adversely affect COPI Colorado's profits. The Partnership Agreement also
contains other customary indemnities.
The Partnership Agreement generally prohibits transfers of Partnership
Interests except (1) to other partners, (2) to Affiliates of a partner or (3)
with the consent of partners holding at least 80% of all Partnership Interests.
The Partnership Agreement also provides that, if any event or transaction
occurs that would cause any limited partner to own, directly or indirectly
pursuant to Code section 318(a)(3)(A), as modified by Code section
856(d)(5)(B), a 25% or greater capital interest or profits interest in COPI
Colorado, such portion of the profits and capital interest of such limited
partner as is required to decrease the profits and capital interest of such
partner in COPI Colorado to 24.9% shall automatically be transferred from such
partner to the general partner, effective immediately prior to the occurrence
of such event or transaction.
The Partnership Agreement permits distributions in kind to the
partners (1) upon COPI Colorado's liquidation or (2) with the consent of
all partners, and requires that distributions in kind upon liquidation, if any,
be made in compliance with applicable securities and other laws and in a manner
designed to result in (i) the General Partner's first receiving all of the CDMC
Stock held by the Partnership before receiving any other Partnership assets and
(ii) the Limited Partners' first receiving all of the shares of the Stock held
by the Partnership before receiving any other Partnership assets. In the event
of COPI Colorado's liquidation, the liquidator (which generally will be the
general partner) is exculpated from, and shall be indemnified against,
liability for any action or inaction in connection with such liquidation,
provided that the liquidator acted or failed to act in good faith and upon a
reasonable belief that such action was in COPI Colorado's best interests. The
Partnership Agreement does not restrict the ability of the partners to engage
in any and all business activities, including such activities that compete
directly with COPI Colorado. The Partnership Agreement generally may be amended
only upon the approval of the holders of at least 80% of all Partnership
Interests.
The Partnership Agreement contains other customary terms and
conditions.
Pursuant to the Contribution Agreement, COI agreed to make (and has
made) an initial contribution to COPI Colorado of $9.0 million in cash in
exchange for a 50% general partner interest in COPI Colorado, and GWH, JCG and
HHF agreed to make (and have made) initial contributions to COPI Colorado of all
15
<PAGE> 16
of the issued and outstanding shares of the voting common stock of CDMC in the
aggregate in exchange for an aggregate 50% limited partner interest in COPI
Colorado.
In the Contribution Agreement, GWH, JCG and HHF (who are defined
therein as the "CDMC Parties") severally (1) make customary representations and
warranties with respect to the CDMC Stock, CDMC and its subsidiaries and their
respective businesses, and (2) generally have agreed to indemnify each COI
Indemnitee against Damages in connection with (i) breaches of representations,
warranties or covenants respectively made by them in the Contribution Agreement
and (ii) CDMC's operations on or prior to the date of the Contribution
Agreement. Also in the Contribution Agreement, COI (1) makes customary
representations and warranties with respect to its existence, authority and
similar matters, and (2) generally has agreed to indemnify each CDMC Party
Indemnitee against Damages in connection with (i) COI's breach of
representations, warranties or covenants made by it in the Contribution
Agreement and (ii) CDMC's operations after the date of the Contribution
Agreement.
The Side Agreement addresses the fact that the schedules to the
Contribution Agreement that qualify the several representations and warranties
of the CDMC Parties, and the Arbitration Agreement, have not been completed.
Pursuant to the Side Agreement, the CDMC Parties severally (1) represent and
warrant that they have provided COI all of the information that will appear on
such schedules, and (2) covenant that such schedules (i) will be delivered
within thirty days after the date of the Side Agreement and (ii) will contain
no information that differs in any material respect from the Provided
Disclosure Information. In the event that the CDMC Parties fail to perform
their covenants set forth in the immediately-preceding sentence, COI shall have
the unilateral right, notwithstanding anything to the contrary in the
Partnership Agreement or the Contribution Agreement, (1) to rescind the
Contribution Agreement and to obtain the return of the COI Contribution (and/or
the proceeds thereof) in full, plus accrued interest thereon calculated at an
annual rate of eight percent (8%), or (2) to cause a dissolution of COPI
Colorado and to wind-up COPI Colorado in accordance with the procedures set
forth in the Partnership Agreement, or (3) to make such adjustment in the value
of the CDMC Contribution, and to make such corresponding adjustment to the
respective capital accounts and percentage interests of COI and the CDMC
Parties under the Partnership Agreement, as COI shall determine in its
reasonable discretion.
Except as set forth herein or in the Exhibits filed or to be filed
herewith, there are no other contracts, arrangements, understandings or
relationships with respect to the Stock owned by the Reporting Persons.
16
<PAGE> 17
Item 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit 10.1 -- Agreement of Limited Partnership of COPI Colorado, L. P.
Exhibit 10.2 -- Contribution Agreement
Exhibit 10.3 -- Agreement regarding Schedules and Other Matters
Exhibit 99.1 -- Agreement pursuant to Rule 13d-1(f)(1)(iii)
17
<PAGE> 18
After reasonable inquiry and to the best of my knowledge and belief, I
certify that the information set forth in this statement is true, complete and
correct.
Dated: September 28, 1998
COPI COLORADO, L. P., a Delaware limited
partnership
By: CRESCENT OPERATING, INC.,
a Delaware corporation
By: /s/ Jeffrey L. Stevens
Jeffrey L. Stevens, Executive
Vice President
CRESCENT OPERATING, INC.,
a Delaware corporation
By: /s/ Jeffrey L. Stevens
Jeffrey L. Stevens, Executive
Vice President
/s/ Gerald W. Haddock
GERALD W. HADDOCK
/s/ John C. Goff
JOHN C. GOFF
/s/ Harry H. Frampton, III
HARRY H. FRAMPTON, III
18
<PAGE> 19
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT DESCRIPTION
<S> <C>
10.1 Agreement of Limited Partnership of COPI Colorado, L. P., filed herewith.
10.2 Contribution Agreement, filed herewith.
10.3 Agreement regarding Schedules and Other Matters, filed herewith.
99.1 Agreement pursuant to Rule 13d-1(f)(1)(iii), filed herewith.
</TABLE>
<PAGE> 1
EXHIBIT 10.1
--------------------------------
AGREEMENT OF LIMITED PARTNERSHIP
OF
COPI COLORADO, L.P.
--------------------------------
Dated Effective as of September 11, 1998
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
ARTICLE I DEFINED TERMS ............................................................. 1
ARTICLE II ORGANIZATIONAL MATTERS ................................................... 8
Section 2.1 Formation of Partnership ........................................... 8
Section 2.2 Name ............................................................... 8
Section 2.3 Principal Office and Registered Agent .............................. 8
Section 2.4 Power of Attorney .................................................. 8
Section 2.5 Term ............................................................... 9
ARTICLE III PURPOSE ................................................................. 9
Section 3.1 Purpose and Business ............................................... 9
ARTICLE IV CAPITAL CONTRIBUTIONS .................................................... 9
Section 4.1 Capital Contributions of the Partners .............................. 9
Section 4.2 Admission of Additional Limited Partners ........................... 10
ARTICLE V DISTRIBUTIONS ............................................................. 10
Section 5.1 Distributions of Net Cash Flow ..................................... 10
Section 5.2 Amounts Withheld ................................................... 10
Section 5.3 Distributions Upon Liquidation ..................................... 10
Section 5.4 Distributions in Kind .............................................. 10
Section 5.5 Distributions to Cover Tax Liabilities ............................. 10
ARTICLE VI ALLOCATIONS .............................................................. 11
Section 6.1 Allocations For Capital Account Purposes ........................... 11
Section 6.2 Allocation of Nonrecourse Debt ..................................... 11
ARTICLE VII MANAGEMENT .............................................................. 11
Section 7.1 Management ......................................................... 11
Section 7.2 Certificate of Limited Partnership ................................. 12
Section 7.3 Restrictions on General Partner's Authority ........................ 12
Section 7.4 General Partner Compensation ....................................... 13
Section 7.5 Indemnification .................................................... 13
Section 7.6 Title to Partnership Assets ........................................ 13
Section 7.7 Reliance by Third Parties .......................................... 14
Section 7.8 Other Matters Concerning the General Partner ....................... 14
</TABLE>
-ii-
<PAGE> 3
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
ARTICLE VIII RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS ............................. 15
Section 8.1 Limitation of Liability ............................................ 15
Section 8.2 Management of Business ............................................. 15
Section 8.3 Return of Capital .................................................. 15
Section 8.4 Rights of Limited Partners Relating to the Partnership ............. 15
ARTICLE IX BOOKS, RECORDS, ACCOUNTING AND REPORTS ................................... 16
Section 9.1 Records and Accounting ............................................. 16
Section 9.2 Fiscal Year ........................................................ 16
Section 9.3 Reports ............................................................ 16
ARTICLE X TAX MATTERS ............................................................... 16
Section 10.1 Preparation of Tax Returns ........................................ 16
Section 10.2 Tax Elections ..................................................... 17
Section 10.3 Tax Matters Partner ............................................... 17
Section 10.4 Organizational Expenses ........................................... 17
Section 10.5 Withholding ....................................................... 17
ARTICLE XI TRANSFERS AND WITHDRAWALS ................................................ 18
Section 11.1 Transfer .......................................................... 18
Section 11.2 General Provisions ................................................ 18
Section 11.3 Restrictions on Ownership, Transfer, and Acquisition
of Partnership Interests ........................................ 19
ARTICLE XII ADMISSION OF PARTNERS ................................................... 19
Section 12.1 Admission of Substituted General Partner .......................... 19
Section 12.2 Admission of Additional or Substituted Limited Partners ........... 19
Section 12.3 Allocations and Distributions for Additional or
Substituted Partners ............................................ 20
Section 12.4 Amendment of Agreement and Certificate of
Limited Partnership ............................................. 20
ARTICLE XIII DISSOLUTION AND LIQUIDATION ............................................ 20
Section 13.1 Dissolution ....................................................... 20
Section 13.2 Winding Up ........................................................ 21
Section 13.3 Compliance with Timing Requirements of Regulations ................ 22
Section 13.4 Deemed Contribution and Distribution .............................. 22
Section 13.5 Rights of Limited Partners ........................................ 23
Section 13.6 Documentation of Liquidation ...................................... 23
</TABLE>
-iii-
<PAGE> 4
<TABLE>
<CAPTION>
Page No.
--------
<S> <C>
Section 13.7 Reasonable Time for Winding-Up .................................... 23
Section 13.8 Liability of Liquidator ........................................... 23
ARTICLE XIV AMENDMENT OF PARTNERSHIP AGREEMENT ...................................... 24
Section 14.1 Amendments ........................................................ 24
ARTICLE XV OUTSIDE ACTIVITIES OF PARTNERS ........................................... 24
Section 15.1 Outside Activities of Partners .................................... 24
ARTICLE XVI PARTNER REPRESENTATIONS AND WARRANTIES .................................. 25
Section 16.1 Representations and Warranties .................................... 25
ARTICLE XVII GENERAL PROVISIONS ..................................................... 25
Section 17.1 Addresses and Notice .............................................. 25
Section 17.2 Titles and Captions ............................................... 26
Section 17.3 Pronouns and Plurals .............................................. 26
Section 17.4 Further Action .................................................... 26
Section 17.5 Binding Effect .................................................... 26
Section 17.6 Creditors ......................................................... 26
Section 17.7 Waiver ............................................................ 26
Section 17.8 No Agency ......................................................... 27
Section 17.9 Entire Understanding .............................................. 27
Section 17.10 Counterparts ..................................................... 27
Section 17.11 Applicable Law ................................................... 27
Section 17.12 Invalidity of Provisions ......................................... 27
Section 17.13 Arbitration ...................................................... 27
</TABLE>
Exhibit A -- Listing of Partners, Initial Capital Contributions and Partnership
Interests
Exhibit B -- Capital Account Maintenance
Exhibit C -- Special Tax Allocation Rules
-iv-
<PAGE> 5
AGREEMENT OF LIMITED PARTNERSHIP
OF COPI COLORADO, L.P.
THIS AGREEMENT OF LIMITED PARTNERSHIP, dated and delivered as of the __
day of September, 1998, but effective for all purposes as of September 11, 1998,
is entered into by and among the undersigned parties.
W I T N E S S E T H:
WHEREAS, the undersigned parties, on September 11, 1998, joined
together and formed a limited partnership known as "COPI Colorado, L.P." under
the Act (as hereinafter defined) pursuant to that certain Certificate of Limited
Partnership of COPI Colorado, L.P. (the "Partnership") filed with the Secretary
of State of Delaware on September 11, 1998; and
WHEREAS, the undersigned parties desire to set forth herein in writing
the purposes and terms and conditions of the Partnership.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained and other good and valuable consideration, the receipt,
adequacy and sufficiency of which are hereby acknowledged, the parties hereto,
intending legally to be bound, hereby agree as follows:
ARTICLE I
DEFINED TERMS
Except as otherwise herein expressly provided, the following terms and
phrases shall have the meanings set forth below:
"Act" means the Delaware Revised Uniform Limited Partnership Act, as it
may be amended from time to time, and any successor to such statute.
"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.
<PAGE> 6
"Adjusted Capital Account Deficit" means, with respect to any Partner,
the deficit balance, if any, in such Partner's Adjusted Capital Account as of
the end of the relevant fiscal year.
"Adjusted Property" means any property the Carrying Value of which has
been adjusted pursuant to Section 1.D of Exhibit B hereof.
"Affiliate" means, with respect to any Partner, (i) any spouse, parent,
sibling, lineal ascendant, and lineal descendant of a Partner, (ii) any trust
for the benefit of a party described in (i) above, or (iii) any corporation,
partnership, or other entity in which any Partner(s) or parties described in (i)
or (ii) above own in the aggregate fifty percent (50%) or more of the total
ownership interests and have majority voting control.
"Agreement" means this Agreement of Limited Partnership, as it may be
amended, supplemented or restated from time to time.
"Arbitration Agreement" has the meaning given to such term in the Side
Agreement.
"Bankruptcy" of a Person shall be deemed to have occurred when (a) the
Person commences a voluntary proceeding seeking liquidation, reorganization or
other relief under any bankruptcy, insolvency or other similar law now or
hereafter in effect, (b) the Person is adjudged as bankrupt or insolvent, or a
final and nonappealable order for relief under any bankruptcy, insolvency or
similar law now or hereafter in effect has been entered against the Person, (c)
the Person executes and delivers a general assignment for the benefit of the
Person's creditors, (d) the Person files an answer or other pleading admitting
or failing to contest the material allegations of a petition filed against the
Person in any proceeding of the nature described in clause (b) above, (e) the
Person seeks, consents to or acquiesces in the appointment of a trustee,
receiver or liquidator for the Person or for all or any substantial part of the
Person's properties, (f) any proceeding seeking liquidation, reorganization or
other relief under any bankruptcy, insolvency or other similar law now or
hereafter in effect has not been dismissed within one hundred twenty (120) days
after the commencement thereof, (g) the appointment without the Person's consent
or acquiescence of a trustee, receiver or liquidator has not been vacated or
stayed within one hundred eighty (180) days of such appointment, or (h) an
appointment referred to in clause (g) is not vacated within one hundred eighty
(180) 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.
"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.
-2-
<PAGE> 7
"Carrying Value" means (i) with respect to a Contributed Property or
Adjusted Property, the Gross Asset Value of such property reduced (but not below
zero) by all Depreciation with respect to such property charged to the Partners'
Capital Accounts and (ii) with respect to any other Partnership property, the
adjusted basis of such property for federal income tax purposes, all as of the
time of determination. The Carrying Value of any property shall be adjusted from
time to time in accordance with Exhibit B hereof, and to reflect changes,
additions or other adjustments to the Carrying Value for improvements and
dispositions and acquisitions of Partnership properties, as deemed appropriate
by the General Partner.
"CDMC Stock" means the shares of voting common stock of Crescent
Development Management Corp., a Delaware corporation, being contributed by the
Limited Partners to the Partnership pursuant to the Contribution Agreement.
"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.
"Contributed Property" means each property or other asset (but
excluding cash), in such form as may be permitted by the Act, contributed to the
Partnership. Once the Carrying Value of a Contributed Property is adjusted
pursuant to Section 1.D of Exhibit B hereof, such property shall no longer
constitute a Contributed Property for purposes of Exhibit B hereof, but shall be
deemed an Adjusted Property for such purposes.
"Contribution Agreement" means that certain Contribution Agreement
effective as of September 11, 1998, by and among Crescent Operating, Inc.,
Gerald W. Haddock, John C. Goff, and Harry H. Frampton, III.
"COPI Stock" means shares of common stock of Crescent Operating, Inc..
"Crescent Operating, Inc." means Crescent Operating, Inc., a Delaware
corporation.
"Depreciation" means, for each fiscal year, an amount equal to the
federal income tax depreciation, amortization, or other cost recovery deduction
allowable with respect to an asset for such year, except that if the Carrying
Value of an asset differs from its adjusted basis for federal income tax
purposes at the beginning of such year or other period, Depreciation shall be an
amount which bears the same ratio to such beginning Carrying Value as the
federal income tax depreciation, amortization, or other cost recovery deduction
for such year bears to such beginning adjusted tax basis; provided, however,
that if the federal income tax depreciation, amortization, or other cost
recovery deduction for such year is zero, Depreciation shall be determined with
reference to such beginning Carrying Value using any reasonable method selected
by the General Partner.
-3-
<PAGE> 8
"General Partner" means Crescent Operating, Inc., its duly admitted
successors and assigns and any other Person who is a General Partner at the time
of reference thereto, in each case in its capacity as a General Partner in the
Partnership.
"General Partnership Interest" means the Partnership Interest held by
the General Partner.
"Gross Asset Value" of any Contributed Property or Properties means the
value of such property or properties at the time of contribution as determined
by the agreement of the Partners.
"Incapacity" or "Incapacitated" means, (i) as to any individual
Partner, death, total physical disability or entry of an order by a court of
competent jurisdiction adjudicating him incompetent to manage his Person or his
estate; (ii) as to any corporation which is a Partner, the filing of a
certificate of dissolution, or its equivalent, for the corporation or the
revocation of its charter; (iii) as to any partnership which is a Partner, the
dissolution and commencement of winding up of the partnership; (iv) as to any
limited liability company which is a Partner, the dissolution and commencement
of winding up of the limited liability company; (v) as to any estate which is a
Partner, the distribution by the fiduciary of the estate's entire interest in
the Partnership; (vi) as to any trustee of a trust which is a Partner, the
termination of the trust (but not the substitution of a new trustee); or (vii)
as to any Partner, the Bankruptcy of such Partner.
"IRS" means the Internal Revenue Service, which administers the
internal revenue laws of the United States.
"Limited Partner" means any Person named as a Limited Partner in
Exhibit A attached hereto, as such Exhibit may be amended from time to time, or
any Substituted Limited Partner or additional Limited Partner, in such Person's
capacity as a Limited Partner in the Partnership.
"Limited Partnership Interest" means a Partnership Interest of a
Limited Partner in the Partnership and includes any and all benefits to which
the holder of such a Partnership Interest may be entitled as provided in this
Agreement, together with all obligations of such Person to comply with the terms
and provisions of this Agreement.
"Liquidating Event(s)" has the meaning set forth in Section 13.1
hereof.
"Liquidator" has the meaning set forth in Section 13.2.A hereof.
"Net Asset Value" of a property means the Gross Asset Value of such
property as of the time of its contribution to the Partnership, 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 Cash Flow" means any excess of the sum of (i) cash receipts of the
Partnership during a given fiscal period from all sources whatsoever (including,
without limitation, interest income, dividend income and the net cash proceeds
received by the Partnership from the sale of CDMC Stock or COPI Stock or other
Partnership assets) other than (A) proceeds from a Terminating Capital
Transaction, and (B) any Capital Contribution made by a Partner to the
Partnership (unless the General Partner determines in its sole discretion that
all or any portion of such Capital Contribution should be included in Net Cash
-4-
<PAGE> 9
Flow), plus (ii) the amount of any reduction in working capital or other
reserves of the Partnership previously established pursuant to (b) below, over
the sum of (a) all Partnership expenses incurred during such fiscal period, plus
(b) the amount of any increase in working capital or other reserves reasonably
established during such fiscal period to provide for accrued or reasonably
anticipated expenses or other loss contingencies of the Partnership or for
future investments of the Partnership which the General Partner determines are
reasonably appropriate.
"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 Loss" means, for any taxable period, the excess, if any, of the
Partnership's items of loss and deduction for such taxable period over the
Partnership's items of income and gain for such taxable period. The items
included in the calculation of Net Loss shall be determined in accordance with
Section 1.B of Exhibit B. Once an item of income, gain, loss or deduction that
has been included in the initial computation of Net Loss is subjected to the
special allocation rules in Exhibit C, Net Loss or the resulting Net Income,
whichever the case may be, shall be recomputed without regard to such items.
"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, and "Partners"
means the General Partner and the Limited Partners.
"Partner Minimum Gain" means an amount, with respect to each Partner
Nonrecourse Debt, equal to the Partnership Minimum Gain that would result if
such Partner Nonrecourse Debt were treated as a Nonrecourse Liability,
determined in accordance with Regulations Section 1.704-2(i)(3).
"Partner Nonrecourse Debt" has the meaning set forth in Regulations
Section 1.704-2(b)(4).
"Partner Nonrecourse Deductions" has the meaning set forth in
Regulations Section 1.704- 2(i)(2), and the amount of Partner Nonrecourse
Deductions with respect to a Partner Nonrecourse Debt for a fiscal year shall be
determined in accordance with the rules of Regulations Section 1.704-2(i)(2).
-5-
<PAGE> 10
"Partnership" means the limited partnership formed under the Act and
pursuant to this Agreement.
"Partnership Interest" means an ownership interest in the Partnership
representing a Capital Contribution by either a Limited Partner or the General
Partner and includes any and all benefits to which the holder of such a
Partnership Interest may be entitled as provided in this Agreement, together
with all obligations of such Person to comply with the terms and provisions of
this Agreement.
"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.
"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.
"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.
"Securities Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Side Agreement" means that certain Agreement regarding Schedules and
Other Matters effective as of September 11, 1998, by and among Crescent
Operating, Inc., Gerald W. Haddock, John C, Goff, and Harry H. Frampton, III.
"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 Value of
such property as of such date, over (ii) the Carrying Value
-6-
<PAGE> 11
of such property (prior to any adjustment to be made on such date pursuant to
Exhibit B hereof) as of such date.
"Unrealized Loss" attributable to any item of Partnership property
means, as of any date of determination, the excess, if any, of (i) the Carrying
Value of such property (prior to any adjustment to be made on such date pursuant
to Exhibit B hereof) as of such date, over (ii) the Value of such property as of
such date.
"Value" shall mean the following with respect to any assets held by the
Partnership:
(a) The value of any publicly traded security owned by the
Partnership shall be determined as of the close of trading on the date as of
which the value is being determined by taking the last reported sale price of
such security on such date on the exchange where it is primarily traded or, if
such security is not traded on an exchange, such security shall be valued at the
last reported sale price on the NASDAQ National Market List, or if such security
is not reported on the NASDAQ National Market List, such security shall be
valued at the average of the last reported bid and asked prices on such date as
reported by an established quotation service for over-the-counter securities.
Where such data is not reported, the security, including without limitation
government, municipal government agency and corporate bond securities, shall be
valued on the basis of such dealer quotations or pricing systems (as determined
in the reasonable discretion of the General Partner), including without
limitation the average of the interdealer spread for such securities.
(b) Assets of the Partnership other than publicly-traded securities
shall be valued at a fair value as determined in good faith by the General
Partner; provided, however, that any Partner may by written notice to the
General Partner object to such value and propose another value, and, if the
Partners are unable to agree upon a value within thirty (30) days of the date on
which an objecting Partner provides a written objection notice to the General
Partner, the matter shall be submitted to arbitration pursuant to procedures set
forth in the Arbitration Agreement. The arbitrator shall choose either the value
determined by the General Partner or the value proposed by the objecting
Partner. If the arbitrator determines that the value determined by the General
Partner was appropriate, then the objecting Partner shall pay all of the costs
associated with the arbitration. Notwithstanding the foregoing, the value of the
CDMC Stock, as of its date of contribution to the Partnership, shall be
determined in accordance with the terms of the Contribution Agreement and the
related Side Agreement.
ARTICLE II
ORGANIZATIONAL MATTERS
Section 2.1 Formation of Partnership
The Partners hereby confirm the formation of the Partnership as a
limited partnership on September 11, 1998, pursuant to the provisions of the Act
and upon the terms and conditions set forth in this Agreement. Except as
expressly provided herein to the contrary, the rights and obligations of the
Partners and the administration and termination of the Partnership shall be
governed by the Act. The Partnership Interest of each Partner shall be personal
property for all purposes.
-7-
<PAGE> 12
Section 2.2 Name
The name of the Partnership is COPI Colorado, L.P.
Section 2.3 Principal Office and Registered Agent
The principal office of the Partnership is 306 West 7th Street, Suite
1025, Fort Worth, Texas 76102, or such other place as the General Partner may
from time to time designate. The registered agent of the Partnership is The
Corporation Service Company, located at 1013 Centre Road, Wilmington, Delaware
19805-1297, or such other Person as the General Partner may from time to time
designate. The Partnership may maintain offices at such other place or places
within or outside the State of Delaware as the General Partner deems advisable.
Section 2.4 Power of Attorney
A. Each Limited Partner constitutes and appoints the General Partner,
any Liquidator, and authorized officers and attorneys-in-fact of each, and each
of those acting singly, in each case with full power of substitution, as its
true and lawful agent and attorney-in-fact, with full power and authority in its
name, place and stead to:
(1) execute, swear to, acknowledge, deliver, file and record in
the appropriate public offices (a) all certificates, documents
and other instruments (including, without limitation, the
Certificate and all amendments or restatements of this
Agreement or the Certificate) that the General Partner or the
Liquidator deems appropriate or necessary to qualify or
continue the existence or qualification of the Partnership as
a limited partnership (or a partnership in which the limited
partners have limited liability) in the State of Delaware and
in all other jurisdictions in which the Partnership may
conduct business or own property; (b) all instruments that the
General Partner deems appropriate or necessary to reflect any
amendment, change, modification or restatement of this
Agreement made in accordance with its terms; (c) all
conveyances and other instruments or documents that the
General Partner or Liquidator, as the case may be, deems
appropriate or necessary to reflect the dissolution and
liquidation of the Partnership pursuant to the terms of this
Agreement, including, without limitation, a certificate of
cancellation; and (d) all instruments relating to the Capital
Contribution of any Partner or the admission, withdrawal,
removal or substitution of any Partner made pursuant to the
terms of this Agreement; and
(2) execute, swear to, acknowledge and file all ballots, consents,
approvals, waivers, certificates and other instruments
appropriate or necessary, in the reasonable discretion of the
General Partner, to make, evidence, give, confirm or ratify
any vote, consent, approval, agreement or other action which
is made or given by the Partners hereunder or is consistent
with the terms of this Agreement or appropriate or necessary,
in the reasonable discretion of the General Partner, to
effectuate the terms or intent of this Agreement.
-8-
<PAGE> 13
Nothing contained herein shall be construed as authorizing the General Partner
to amend this Agreement except in accordance with Article 14 hereof or as may be
otherwise expressly provided for in this Agreement.
B. The foregoing power of attorney is hereby declared to be irrevocable
and a power coupled with an interest, in recognition of the fact that each of
the Partners will be relying upon the power of the General Partner to act as
contemplated by this Agreement in any filing or other action by it on behalf of
the Partnership, and it shall survive and not be affected by the subsequent
Incapacity of any Limited Partner or the transfer of all or any portion of such
Limited Partner's Partnership Interest and shall extend to such Limited
Partner's heirs, successors, assigns and personal representatives.
Section 2.5 Term
The term of the Partnership shall commence upon the filing of the
Certificate in the office of the Secretary of State of Delaware and shall
continue until it is dissolved pursuant to the provisions of Article 13 or as
otherwise provided by law.
ARTICLE III
PURPOSE
Section 3.1 Purpose and Business
The purpose and nature of the business to be conducted by the
Partnership shall be to invest in CDMC Stock and COPI Stock, to invest excess
funds held by the Partnership in such temporary investments as the General
Partner shall determine appropriate, and to conduct such other businesses as may
be agreed to by all Partners from time to time.
ARTICLE IV
CAPITAL CONTRIBUTIONS
Section 4.1 Capital Contributions of the Partners
A. Each of the Partners hereby agrees to make an initial Capital
Contribution as set forth in Exhibit A attached hereto in accordance with the
terms and conditions set forth in the Contribution Agreement and in the Side
Agreement.
B. The General Partner shall arrange for the provision of such
additional funds as the General Partner deems necessary or advisable for the
business of the Partnership. Such additional funds may be in the form of a loan
or loans to the Partnership from a Partner or any other Person, a capital
contribution from an existing or additional Partner, or otherwise; provided
however, that (i) any additional Capital Contributions of existing Partners
shall be made by all Partners in proportion to their respective Partnership
Interests and only upon the consent of all existing Partners, and (ii) any
additional Partner shall make a Capital Contribution only upon the consent of
all of the Partners.
-9-
<PAGE> 14
Section 4.2 Admission of Additional Limited Partners
The General Partner may admit additional Limited Partners to the
Partnership only with the consent of all of the Partners.
ARTICLE V
DISTRIBUTIONS
Section 5.1 Distributions of Net Cash Flow
The General Partner shall cause the Partnership to distribute at least
annually all of the Net Cash Flow generated by the Partnership during such
period to the Partners in proportion to their respective Partnership Interests.
Section 5.2 Amounts Withheld
All amounts withheld pursuant to the Code or any provisions of any
state or local tax law and Section 10.5 hereof with respect to any allocation,
payment or distribution to a Partner shall be treated as amounts distributed to
such Partner pursuant to Section 5.1 for all purposes under this Agreement.
Section 5.3 Distributions Upon Liquidation
Proceeds from a Terminating Capital Transaction and any other cash
received or reductions in reserves made after commencement of the liquidation of
the Partnership shall be distributed to the Partners in accordance with Section
13.2.
Section 5.4 Distributions in Kind
No distributions in kind shall be made to the Partners except in
connection with the liquidation of the Partnership as set forth in Section
13.2.B hereof or with the consent of all Partners.
Section 5.5 Distributions to Cover Tax Liabilities
Notwithstanding anything to the contrary in this Article V, it is the
intent of the Partnership that each Partner shall receive cash distributions
from the Partnership with respect to each calendar year in an amount sufficient
to offset such Partner's federal and state income tax liability with respect to
such Partner's share of any Net Income for such calendar year (the "Tax
Liability"); provided, however, that a Partner's Tax Liability shall not include
any tax liability incurred by a Limited Partner in connection with his
contribution of CDMC Stock to the Partnership. Accordingly, the General Partner
shall determine for each calendar year the amount of each Partner's Tax
Liability for such year and, subject to the limitations hereinafter set forth,
shall make distributions to the Partners, in proportion to their respective
Partnership Interests, until each Partner has received aggregate distributions
under Sections 5.1 and 5.5 with respect to such year in an amount equal to his,
her or its Tax Liability. In calculating each Partner's Tax Liability, the
General Partner shall use the maximum marginal federal and state income tax
rates applicable to an individual or corporation, as the case may be (with the
state income tax rate based on the state of residency of any individual Partner
and the location of the principal place of business of any non-individual
Partner).
-10-
<PAGE> 15
The General Partner shall make distributions to the Partners under this Section
5.5 with respect to a given calendar year only to the extent of any Net Cash
Flow of the Partnership for such year, increased by the amount of any Net Cash
Flow held in reserve accounts pursuant to clause (ii)(b) of the definition of
Net Cash Flow for the purpose of funding future investments of the Partnership.
In no event shall the General Partner be required to use Capital Contributions
made by the Partners to fund distributions under this Section 5.5. As noted
above, all distributions to the Partners under this Section 5.5 shall be made in
proportion to the respective Partnership Interests of the Partners.
ARTICLE VI
ALLOCATIONS
Section 6.1 Allocations For Capital Account Purposes
For purposes of maintaining the Capital Accounts and in determining the
rights of the Partners among themselves, after giving effect to the special
allocations set forth in Section 1 of Exhibit C, the Partnership's Net Income,
Net Loss, and all other items of income, gain, loss and deduction (computed in
accordance with Exhibit B hereof) shall be allocated among the Partners in each
taxable year (or portion thereof) in proportion to their respective Partnership
Interests.
Section 6.2 Allocation of Nonrecourse Debt
For purposes of Regulations Section 1.752-3(a), the Partners agree that
Nonrecourse Liabilities of the Partnership in excess of the sum of (i) the
amount of Partnership Minimum Gain and (ii) the total amount of Nonrecourse
Built-in Gain shall be allocated among the Partners in accordance with their
respective Partnership Interests.
ARTICLE VII
MANAGEMENT
Section 7.1 Management
Subject to the provisions of Section 7.3 hereof, the control and
conduct of the Partnership business shall be vested exclusively in the General
Partner and all decisions affecting the Partnership, its policies and its
management shall be made by the General Partner. The rights and powers of the
General Partner to carry on the business of the Partnership shall include, but
not be limited to, the following rights and powers.
(1) To acquire (by purchase, contribution or otherwise), hold,
sell and otherwise deal in the CDMC Stock, the COPI Stock, and
all other assets held by the Partnership, and to exercise all
rights, powers, privileges and other incidents of ownership
with respect thereto;
(2) To open, maintain and withdraw from such bank accounts and
brokerage accounts as the General Partner deems appropriate;
-11-
<PAGE> 16
(3) To borrow money and obtain credit (including margin credit)
and pledge Partnership assets as security for such borrowings;
(4) To make, on behalf of the Partnership, any and all filings,
reports, notices and schedules required by law (including the
Securities Exchange Act);
(5) Entirely at the General Partner's discretion, to lend monies
to Limited Partners (each a "Borrowing Partner") at interest
rates not less than the Partnership's costs of funds (each a
"Partnership Loan"); and
(6) Generally, to perform all acts appropriate and incidental to
the foregoing and to carrying out the purposes of the
Partnership.
The General Partner shall have the full and exclusive authority to exercise any
voting or other rights associated with any securities owned by the Partnership,
including but not limited to CDMC Stock and COPI Stock.
Section 7.2 Certificate of Limited Partnership
To the extent that such action is determined by the General Partner to
be necessary or appropriate, the General Partner shall file amendments to and
restatements of the Certificate and do all things necessary or appropriate to
maintain the Partnership as a limited partnership (or a partnership in which the
limited partners have limited liability) under the laws of the State of Delaware
and each other jurisdiction in which the Partnership may elect to do business or
own property. The General Partner shall use all reasonable efforts to cause to
be filed such other certificates or documents as it may deem reasonable,
necessary or appropriate for the continuation, qualification and operation of a
limited partnership (or a partnership in which the limited partners have limited
liability) in the State of Delaware and any other jurisdiction in which the
Partnership may elect to do business or own property.
Section 7.3 Restrictions on General Partner's Authority
The General Partner shall not have the authority to take the following
actions:
(1) take any action in contravention of this Agreement or which
would make it impossible to carry on the ordinary business of
the Partnership;
(2) possess Partnership property, or assign any rights in specific
Partnership property, for other than a Partnership purpose;
(3) do any act in contravention of applicable law; or
(4) perform any act that would subject a Limited Partner to
liability as a general partner in any jurisdiction or any
other liability except as provided herein or under the Act.
Section 7.4 General Partner Compensation
Except as otherwise specifically provided in this Agreement (including
the provisions of Articles 5 and 6 regarding distributions, payments, and
allocations to which it may be entitled), the General Partner shall not be
compensated for its services as general partner of the Partnership. The General
Partner shall, however, be reimbursed for any out-of-pocket expenses incurred in
connection with the Partnership
-12-
<PAGE> 17
business, including without limitation legal fees and other expenses incurred in
connection with the formation of the Partnership.
Section 7.5 Indemnification
A. To the fullest extent permitted by law, the Partnership shall
indemnify each Partner, and save and hold each Partner harmless from and in
respect of (i) all claims, actions, demands or threats thereof, against the
Partnership or such Partner that arise out of, or in any way relate to the
Partnership, the Partnership business or the Partnership assets, and any losses
or damages resulting therefrom, including amounts paid in settlement or
compromise of any such claim, action, demand or threat thereof, and (ii) all
fees, costs, and expenses, including reasonable attorneys' fees, incurred in
connection with, or resulting from, any such claim, action, demand or threat
thereof; provided, however, that this indemnification shall not extend to acts
of gross negligence, material, uncured breach of the Agreement or willful
misconduct of such Partner.
B. Each Partner shall be liable to the Partnership and the other
Partners for any acts of gross negligence, material, uncured breach of the
Agreement or willful misconduct of such Partner relating to the Partnership, the
Partnership business or the Partnership assets, and shall indemnify the
Partnership and the other Partners, and save and hold the Partnership and the
other Partners harmless from and in respect of (i) all claims, actions, demands
or threats thereof, against the Partnership or the other Partners that arise out
of, or in any way relate to such acts, and any losses or damages resulting
therefrom, including amounts paid in settlement or compromise of any such claim,
action, demand or threat thereof, and (ii) all fees, costs and expenses,
including reasonable attorneys' fees, incurred in connection with, or resulting
from, any such claim, action, demand or threat thereof.
Section 7.6 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,
the General Partner or one or more nominees, as the General Partner may
determine. The General Partner hereby declares and warrants that any Partnership
assets for which legal title is held in the name of the General Partner or any
nominee shall be held by the General Partner for the use and benefit of the
Partnership in accordance with the provisions of this Agreement; provided,
however, that the General Partner shall use its best efforts to cause beneficial
and record title to such assets to be vested in the Partnership as soon as
reasonably practicable. 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.
Section 7.7 Reliance by Third Parties
Notwithstanding anything to the contrary in this Agreement, any Person
dealing with the Partnership shall be entitled to assume that the General
Partner has full power and authority to encumber, sell or otherwise use in any
manner any and all assets of the Partnership and to enter into any contracts on
behalf of the Partnership, and such Person shall be entitled to deal with the
General Partner as if it were the Partnership's sole party in interest, both
legally and beneficially. Each Limited Partner hereby waives any
-13-
<PAGE> 18
and all defenses or other remedies which may be available against such Person to
contest, negate or disaffirm any action of the General Partner in connection
with any such dealing. In no event shall any Person dealing with the General
Partner or its representatives be obligated to ascertain that the terms of this
Agreement have been complied with or to inquire into the necessity or expedience
of any act or action of the General Partner or its representatives. Each and
every certificate, document or other instrument executed on behalf of the
Partnership by the General Partner or its representatives shall be conclusive
evidence in favor of any and every Person relying thereon or claiming thereunder
that (i) at the time of the execution and delivery of such certificate, document
or instrument, this Agreement was in full force and effect, (ii) the Person
executing and delivering such certificate, document or instrument was duly
authorized and empowered to do so for and on behalf of the Partnership, and
(iii) such certificate, document or instrument was duly executed and delivered
in accordance with the terms and provisions of this Agreement and is binding
upon the Partnership.
Section 7.8 Other Matters Concerning the General Partner
A. The Limited Partners expressly acknowledge that the General Partner
(or the Liquidator, as applicable) is acting on behalf of the Partnership and
the shareholders of Crescent Operating, Inc. collectively, that the General
Partner (or the Liquidator, as applicable), in deciding whether to cause the
Partnership to take (or decline to take) any actions, will resolve any conflict
between the interests of the Partnership and the shareholders of Crescent
Operating, Inc. in good faith, taking into account first the interests of such
shareholders, and that the General Partner (or the Liquidator, as applicable)
shall not be liable to the Partnership or to any Partner for monetary damages
for losses sustained, liabilities incurred, or benefits not derived by Limited
Partners in connection with such decisions, provided that the General Partner
(or the Liquidator, as applicable) has acted in good faith.
B. Notwithstanding anything to the contrary in this Agreement, the
General Partner (or the Liquidator, as applicable) shall not be liable to the
Limited Partners for any action the General Partner (or the Liquidator, as
applicable) takes or fails to take on behalf of the Partnership in connection
with purchasing, holding, or disposing of COPI Stock due to the status of the
General Partner as the issuer of COPI Stock. (For example, the General Partner
can restrict open-market purchases of COPI Stock by the Partnership to comply
with Rule 10b-18 of the Securities Exchange Act and may cease the purchasing of
COPI Stock by the Partnership during distributions of COPI Stock, even though
such actions might adversely affect the profits of the Partnership.)
ARTICLE VIII
RIGHTS AND OBLIGATIONS OF LIMITED PARTNERS
Section 8.1 Limitation of Liability
The Limited Partners shall have no liability under this Agreement
except as expressly provided in this Agreement, including Section 10.5 hereof,
or under the Act.
Section 8.2 Management of Business
No Limited Partner (other than any officer, director, employee,
partner, member, agent or trustee of the General Partner, the Partnership or any
of their Affiliates, in his, her or its capacity as such) shall
-14-
<PAGE> 19
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.
The transaction of any such business by the General Partner, any of its
Affiliates or any officer, director, employee, partner, member, agent or trustee
of the General Partner, the Partnership or any of their Affiliates, in their
capacity as such, shall not affect, impair or eliminate the limitations on the
liability of the Limited Partners under this Agreement.
Section 8.3 Return of Capital
No Limited Partner shall be entitled to the withdrawal or return of its
Capital Contribution, except to the extent of distributions made pursuant to
this Agreement or upon termination of the Partnership as provided herein. No
Limited Partner shall have priority over any other Limited Partner either as to
the return of Capital Contributions or, except to the extent provided by Exhibit
C hereof, or otherwise expressly provided in this Agreement, as to profits,
losses or distributions.
Section 8.4 Rights of Limited Partners Relating to the Partnership
In addition to other rights provided by this Agreement or by the Act,
each Limited Partner shall have the right to obtain:
(1) a copy of the Partnership's federal, state and local income
tax returns and financial statements for each fiscal year;
(2) a current list of the name and last known business, residence
or mailing address of each Partner;
(3) 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 pursuant to which
this Agreement, the Certificate and all amendments to the
Agreement and the Certificate have been executed;
(4) true and full information regarding the amount of cash and a
description and statement of any other property or services
contributed by each Partner and which each Partner has agreed
to contribute in the future, and the date on which each became
a Partner;
(5) true and full information regarding the state of the business
and financial condition of the Partnership; and
(6) information concerning any financial transactions of the
Partnership (e.g., the identity of the seller/purchaser, the
purchase price, and other terms of the transaction).
-15-
<PAGE> 20
ARTICLE IX
BOOKS, RECORDS, ACCOUNTING AND REPORTS
Section 9.1 Records and Accounting
The 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 Partners any information, lists and copies
of documents set forth in Section 8.4 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 any 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.
Section 9.2 Fiscal Year
The fiscal year of the Partnership shall be the calendar year, or such
other fiscal year as required under Section 706 of the Code.
Section 9.3 Reports
As soon as practicable after the end of each fiscal year, the General
Partner shall arrange for the preparation and delivery to each Limited Partner
of annual financial statements for the Partnership.
ARTICLE X
TAX MATTERS
Section 10.1 Preparation of Tax Returns
The General Partner shall arrange for the preparation and timely filing
by the Partnership's independent public accountants 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 delivery
to the Limited Partners of all tax information reasonably required by the
Limited Partners for federal, state and local income tax reporting purposes.
Section 10.2 Tax Elections
Except as otherwise provided herein, the General Partner shall, in its
reasonable discretion, determine whether to make any available election or
choose any available reporting method pursuant to the Code or state or local tax
law. The General Partner 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 General Partner's determination in
its reasonable discretion that such revocation is in the best interests of all
of the Partners.
-16-
<PAGE> 21
Section 10.3 Tax Matters Partner
A. The 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
each of the Limited Partners, provided that such information is provided to the
Partnership by the Limited Partners.
B. The tax matters partner shall receive no compensation for its
services. All third party costs and expenses incurred by the tax matters partner
in performing its duties as such (including legal and accounting fees) shall be
borne by the Partnership. Nothing herein shall be construed to restrict the
Partnership from engaging an accounting firm to assist the tax matters partner
in discharging its duties hereunder.
Section 10.4 Organizational Expenses
The Partnership shall elect to deduct expenses, if any, incurred by it
in organizing the Partnership ratably over a sixty (60)-month period as provided
in Section 709 of the Code.
Section 10.5 Withholding
Each Limited Partner hereby authorizes the Partnership to withhold from
or pay on behalf of or with respect to such Limited Partner any amount of
federal, state, local, or foreign taxes that the General Partner determines that
the Partnership is required to withhold or pay with respect to any amount
distributable or allocable to such Limited Partner pursuant to this Agreement,
including, without limitation, any taxes required to be withheld or paid by the
Partnership pursuant to Sections 1441, 1442, 1445, or 1446 of the Code. Any
amount paid on behalf of or with respect to a Limited Partner shall constitute a
loan by the Partnership to such Limited Partner, which loan shall be repaid by
such Limited Partner within fifteen (15) days after notice from the General
Partner that such payment must be made unless (i) the Partnership withholds such
payment from a distribution which would otherwise be made to the Limited
Partner, or (ii) the General Partner determines, in its reasonable discretion,
that such payment may be satisfied out of the available funds of the Partnership
which would, but for such payment, be distributed to the Limited Partner. Any
amounts withheld pursuant to the foregoing clauses (i) or (ii) shall be treated
as having been distributed to such Limited Partner. Each Limited Partner hereby
unconditionally and irrevocably grants to the Partnership a security interest in
such Limited Partner's Partnership Interest to secure such Limited Partner's
obligation to pay to the Partnership any amounts required to be paid pursuant to
this Section 10.5. In the event that a Limited Partner fails to pay any amounts
owed to the Partnership pursuant to this Section 10.5 when due, the General
Partner may, in its reasonable discretion, (but shall have no obligation to)
elect to make the payment to the Partnership on behalf of such defaulting
Limited Partner, and in such event shall be deemed to have loaned such amount to
such defaulting Limited Partner and, until repayment of such loan, shall succeed
to all rights and remedies of the Partnership as against such defaulting Limited
Partner (including, without limitation, the right to receive distributions). Any
amounts payable by a Limited Partner hereunder shall bear interest at the base
rate on corporate loans at large United States money center commercial banks, as
published from time to time in the Wall Street Journal, plus four percentage
points (but not higher than the maximum lawful rate) from the date such amount
is due (i.e., fifteen (15) days after demand) until such amount is paid in full.
Each Limited
-17-
<PAGE> 22
Partner shall take such actions as the Partnership or the General Partner shall
request in order to perfect or enforce the security interest created hereunder.
ARTICLE XI
TRANSFERS AND WITHDRAWALS
Section 11.1 Transfer
A. The term "transfer," when used in this Article XI with respect to a
Partnership Interest, shall be deemed to refer to a transaction by which the
General Partner purports to assign its General Partnership Interest, in whole or
in part, to another Person or by which a Limited Partner purports to assign its
Limited Partnership Interest, in whole or in part, to another Person, and
includes a sale, assignment, gift, pledge, encumbrance, hypothecation, mortgage,
exchange or any other disposition by law or otherwise.
B. No Partnership Interest shall be transferred, in whole or in part,
except (i) to another Partner or to an Affiliate of a Partner (subject to the
provisions of Section 11.3 below), or (ii) with the consent of the Partners
holding at least eighty percent (80%) of all Partnership Interests.
C. If the General Partner transfers a portion (but not all) of its
General Partnership Interest to another Person in accordance with Section 11.1.B
above, such transferred portion shall convert immediately to a Limited
Partnership Interest.
D. Any transfer or purported transfer of a Partnership Interest not
made in accordance with this Article XI shall be null and void.
E. The General Partner may prohibit any transfer otherwise permitted
under this Section 11.1 by a Limited Partner of its Partnership Interest if, in
the opinion of legal counsel to the Partnership, such transfer would require
filing of a registration statement under the Securities Act or would otherwise
violate any federal or state securities laws or regulations applicable to the
Partnership or the Partnership Interest.
Section 11.2 General Provisions
A. No Partner may withdraw from the Partnership other than as a result
of a permitted transfer of all of such Partner's Partnership Interest in
accordance with this Article XI. Any Partner who shall transfer all of its
Partnership Interest in a permitted transfer pursuant to this Article XI shall
cease to be a Partner.
B. If any Partnership Interest is transferred pursuant to this Article
XI at any time other than the end of a fiscal year, Net Income, Net Loss, each
item thereof and all other items attributable to such interest for such fiscal
year shall be allocated between the transferor Partner and the transferee
Partner in the same ratio as the number of days in such fiscal year before and
after such transfer, except that gain or loss attributable to the sale or other
disposition of all or substantially all of the Partnership assets or to other
extraordinary non-recurring items shall be allocated to the owner of the
Partnership Interest as of the date of closing of the sale or other disposition,
or, with respect to other extraordinary non-recurring
-18-
<PAGE> 23
items, the date the profit is realized or the loss is incurred, as the case may
be. All distributions of Net Cash Flow made prior to the date of such transfer
or exchange shall be made to the transferor Partner, and all distributions of
Net Cash Flow made on or after the date of such transfer or exchange shall be
made to the transferee Partner.
Section 11.3 Restrictions on Ownership, Transfer, and Acquisition of
Partnership Interests
Notwithstanding any other provision of this Agreement, upon the
occurrence of any transfer, acquisition, change in the capital structure of the
Partnership, allocation, distribution, or other purported change in the
beneficial or constructive ownership of the Partnership Interests or other event
or transaction that, if effective, would cause any Partner (other than the
General Partner) to own, directly or indirectly pursuant to section 318(a)(3)(A)
of the Code as modified by section 856(d)(5)(B) of the Code, a twenty-five
percent (25%) or greater capital interest or profits interest in the
Partnership, such portion of the profits and capital interest of such Partner in
the Partnership (including without limitation such portion of the Partnership
Interest and/or Capital Account of such Partner) as is required to decrease the
profits and capital interest of such Partner in the Partnership to twenty-four
and nine-tenths percent (24.9%) shall not become the interest of such Partner
but shall automatically become the interest of the General Partner, effective
immediately prior to the occurrence of such event or transaction.
ARTICLE XII
ADMISSION OF PARTNERS
Section 12.1 Admission of Substituted General Partner
A. A successor to all of the General Partner's General Partnership
Interest in accordance with Section 11.1 hereof who is proposed to be admitted
as a substituted General Partner shall be admitted to the Partnership as the
General Partner, effective simultaneously with such transfer. Any such
transferee shall carry on the business of the Partnership without dissolution.
In each case, the admission shall be subject to the substituted General Partner
executing and delivering to the Partnership an acceptance of all of the terms
and conditions of this Agreement and such other documents or instruments as may
be required to effect the admission.
Section 12.2 Admission of Additional or Substituted Limited Partners
Any Person who is proposed to be admitted to the Partnership as an
additional or substituted Limited Partner in accordance with Sections 4.2 and
11.1 hereof, respectively, shall be admitted only upon furnishing to the General
Partner (i) evidence of acceptance in form satisfactory to the General Partner
of all of the terms and conditions of this Agreement, including, without
limitation, the power of attorney granted in Section 2.4 hereof, and (ii) such
other documents or instruments as may be required in the discretion of the
General Partner in order to effect such Person's admission as a Limited Partner.
The admission of any Person as a Limited Partner shall become effective on the
date upon which the name of such Person is recorded on the books and records of
the Partnership.
-19-
<PAGE> 24
Section 12.3 Allocations and Distributions for Additional or
Substituted Partners
If a Partner is admitted to the Partnership at any time other than the
end of a fiscal year, Net Income, Net Loss, each item thereof and all other
items for such fiscal year shall be allocated among such Partner and all other
Partners by taking into account their varying interests during such fiscal year
in accordance with Section 706(d) of the Code. For this purpose, Net Income, Net
Loss, each item thereof and all other items for such fiscal year shall be
prorated based on the portion of the taxable year that has elapsed prior to the
admission of such Partner, except that gain or loss attributable to the sale or
other disposition of all or substantially all of the Partnership assets or to
other extraordinary non-recurring items shall be allocated to the Partners who
own Partnership Interests as of the date of closing of the sale or other
disposition, or, with respect to other extraordinary non-recurring items, the
date the profit is realized or the loss is incurred, as the case may be. All
distributions of Net Cash Flow made prior to the date of admission of such
Partner shall be made solely to Partners other than such Partner, and all
distributions of Net Cash Flow made on or after the date of admission of such
Partner shall be made to all Partners including such Partner.
Section 12.4 Amendment of Agreement and Certificate of Limited
Partnership
For the admission to the Partnership of any Partner in accordance with
the provisions of this Agreement, the General Partner shall take all steps
necessary and appropriate under the Act to amend the records of the Partnership
and, if necessary, to prepare as soon as practical an amendment of this
Agreement (including an amendment of Exhibit A) and, if required by law, shall
prepare and file an amendment to the Certificate and may for this purpose
exercise the power of attorney granted pursuant to Section 2.4 hereof.
ARTICLE XIII
DISSOLUTION AND LIQUIDATION
Section 13.1 Dissolution
The Partnership shall not be dissolved by the admission of substituted
or additional Partners in accordance with the terms of this Agreement. Upon the
withdrawal of the General Partner, any substituted General Partner shall
continue the business of the Partnership. The Partnership shall dissolve, and
its affairs shall be wound up, upon the first to occur of any of the following
("Liquidating Events"):
A. December 31, 2098;
B. the Incapacity or other event of withdrawal of the General Partner,
as defined in the Act, unless within ninety (90) days after the withdrawal
Partners holding at least eighty percent (80%) of all remaining Partnership
Interests 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 Partners; or
D. entry of a decree of judicial dissolution of the Partnership
pursuant to the provisions of the Act; the sale of all or substantially all of
the assets and properties of the Partnership, unless the General
-20-
<PAGE> 25
Partner 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).
Section 13.2 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 13.2.B below), and
satisfying the claims of its creditors and Partners. 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 General Partner (or,
in the event there is no remaining General Partner, any Person elected by
Limited Partners owning a majority-in-interest of the total Partnership
Interests of the Limited Partners (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 (subject to any applicable restrictions as referenced
in Section 7.8), and the proceeds therefrom shall be applied and distributed in
the following order:
(1) First, to the payment and discharge of all of the
Partnership's debts and liabilities to creditors other than
the Partners;
(2) Second, to the payment and discharge of all of the
Partnership's debts and liabilities to the Partners; and
(3) The balance, if any, to the General Partner and Limited
Partners in accordance with their positive Capital Account
balances, after giving effect to all contributions,
distributions, and allocations for all periods.
The Liquidator shall not receive any additional compensation for any services
performed pursuant to this Article XIII.
B. Notwithstanding the provisions of Section 13.2.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 determines that an immediate sale of part or all of the
Partnership's assets would be impractical, would cause undue loss to the
Partners, or would not comply with applicable securities or other laws, 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 those Partners as creditors). Alternatively, subject
to compliance with applicable securities or other laws, the Liquidator may
distribute Partnership assets to the Partners, in lieu of cash, as tenants in
common and in accordance with the provisions of Section 13.2.A hereof, and the
Partners hereby agree that it is their intent that, to the greatest extent
possible, the Liquidator shall distribute the COPI Stock to the Limited Partners
and the CDMC Stock to the General Partner and that, in lieu of cash, Partnership
Loans be returned to the respective Borrowing Partners. 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 deems reasonable and equitable and to any
agreements governing the operation of
-21-
<PAGE> 26
such assets at such time. The fair market value of any Partnership asset
distributed in kind shall be the Value of such asset as determined in accordance
with the provisions of this Agreement.
C. As part of the liquidation and winding-up of the Partnership, the
Liquidator may sell Partnership assets (or assets owned by any other entity in
which the Partnership is an owner), on the best terms and conditions as the
Liquidator in good faith believes are reasonably available at the time, subject
to compliance with applicable securities or other laws.
Section 13.3 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 XIII to the General Partner 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. In the reasonable discretion of the Liquidator, a pro rata portion
of the distributions that would otherwise be made to the General Partner and
Limited Partners pursuant to this Article XIII may be:
(i) distributed to a trust established for the benefit of the
General Partner and Limited Partners for the purposes of
liquidating Partnership assets, collecting amounts owed to the
Partnership, and paying any contingent or unforeseen
liabilities or obligations of the Partnership arising out of
or in connection with the Partnership. The assets of any such
trust shall be distributed to the General Partner and Limited
Partners from time to time, in the reasonable discretion of
the Liquidator, in the same proportions as the amount
distributed to such trust by the Partnership would otherwise
have been distributed to the General Partner and Limited
Partners pursuant to this Agreement; or
(ii) withheld to provide a reasonable reserve for Partnership
liabilities (contingent or otherwise) and to reflect the
unrealized portion of any installment obligations owed to the
Partnership, provided that such withheld amounts shall be
distributed to the General Partner and Limited Partners as
soon as practicable.
Section 13.4 Deemed Contribution and Distribution
Notwithstanding any other provisions of this Article XIII, 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).
-22-
<PAGE> 27
Section 13.5 Rights of Limited Partners
Except as otherwise provided in this Agreement, each Limited Partner
shall look solely to the assets of the Partnership for the return of its Capital
Contribution and shall have no right or power to demand or receive property
other than cash from the Partnership. No Limited Partner shall have priority
over any other Limited Partner as to the return of its Capital Contributions,
distributions, or allocations, except as expressly provided in this Agreement.
Section 13.6 Documentation of Liquidation
Upon the completion of the liquidation of the Partnership cash and
property as provided in Section 13.2 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.
Section 13.7 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 13.2 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.
Section 13.8 Liability of Liquidator
A. The Liquidator shall not have any liability to the Partnership or
its Partners for taking or failing to take any action, provided that the
Liquidator acted in good faith and upon a reasonable belief that such action (or
inaction) was in the best interests of the Partnership.
B. The Liquidator shall be indemnified and held harmless by the
Partnership from and against any and all claims, demands, liabilities, costs,
damages and causes of action of any nature whatsoever arising out of or
incidental to the Liquidator's taking of any action authorized under or within
the scope of this Agreement; provided, however, that the Liquidator shall not be
entitled to indemnification, and shall not be held harmless, where the claim,
demand, liability, cost, damage or cause of action at issue arises out of:
(1) a matter entirely unrelated to the Liquidator's action or
conduct pursuant to the provisions of this Agreement; or
(2) the proven willful misconduct or gross negligence of the
Liquidator.
-23-
<PAGE> 28
ARTICLE XIV
AMENDMENT OF PARTNERSHIP AGREEMENT
Section 14.1 Amendments
A. Amendments to this Agreement may be proposed by the General Partner
or any Limited Partner. A proposed amendment shall be adopted and be effective
as an amendment hereto if it is approved by the Partners holding at least eighty
percent (80%) of all Partnership Interests.
B. Notwithstanding Section 14.1.A, the General Partner shall have the
power, without the consent of the Limited Partners, to amend this Agreement as
may be required to reflect the admission, substitution, termination, or
withdrawal of Partners in accordance with this Agreement (including, without
limitation, adjustments to Exhibit A to reflect such events).
C. Notwithstanding anything to the contrary contained in Section 14.1.A
hereof, this Agreement shall not be amended without the prior written consent of
each Partner adversely affected if such amendment would (i) convert a Limited
Partnership Interest into a General Partnership Interest, (ii) modify the
limited liability of a Limited Partner, (iii) alter rights of the Partner to
receive distributions pursuant to Article V, or the allocations specified in
Article VI, (iv) cause the termination of the Partnership prior to the time set
forth in Section 13.1, or (v) amend the provisions of clauses (i) and (ii) of
Section 4.1.B, Section 4.2, or this Section 14.1.C.
ARTICLE XV
OUTSIDE ACTIVITIES OF PARTNERS
Section 15.1 Outside Activities of Partners
Any Partner and any officer, director, partner, member, employee,
agent, trustee, Affiliate or shareholder of any Partner shall be entitled to and
may have business interests and engage in business activities in addition to
those relating to the Partnership, including business interests and activities
in direct competition with the Partnership. Neither the Partnership nor any
Partners shall have any rights by virtue of this Agreement in any business
ventures of any Partner. None of the Partners nor any other Person shall have
the rights by virtue of this Agreement or the partnership relationship
established hereby in any business ventures of any other Person, and such Person
shall have no obligation pursuant to this Agreement to offer any interest in any
such business ventures to the Partnership, any Partner or any such other Person,
even if such opportunity is of a character which, if presented to the
Partnership, any Partner or such other Person, could be taken by such Person.
ARTICLE XVI
PARTNER REPRESENTATIONS AND WARRANTIES
Section 16.1 Representations and Warranties
A. Each Partner represents and warrants severally and not jointly, and
solely on behalf of itself, to the Partnership and the other Partners as
follows:
-24-
<PAGE> 29
(1) Organization. If such Partner is not a natural person,
such Partner is duly formed and validly existing and is qualified to do business
and in good standing in the jurisdictions in which it is required to be so
qualified, except for such failures to be qualified or in good standing as would
not, in the aggregate, have a material adverse effect on such Partner.
(2) 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 such enforceability may be limited by bankruptcy,
insolvency, reorganization or other laws affecting creditors' rights generally,
or by general equitable principles).
(3) 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, except for such filings,
reports, notices and schedules that may be required under the Securities
Exchange Act in connection with the Partnership's acquisition of the COPI Stock
as contemplated hereby.
(4) 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 Limited Partner represents and warrants that its Limited
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 XVII
GENERAL PROVISIONS
Section 17.1 Addresses and 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 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. A copy of
all notices addressed to Harry H. Frampton, III shall also be sent to James F.
Wood, Esquire, at Sherman & Howard L.L.C., 3000 First Interstate Tower North,
633 Seventeenth Street, Denver, Colorado 80202.
-25-
<PAGE> 30
Section 17.2 Titles and Captions
All article or section titles or captions in this Agreement are for
convenience only. They shall not be deemed part of this Agreement and in no way
define, limit, extend or describe the scope or intent of any provisions hereof.
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.
Section 17.3 Pronouns and Plurals
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. Any references in this Agreement to "including" shall be deemed to mean
"including without limitation."
Section 17.4 Further Action
The parties shall execute and deliver all documents, provide all
information and take or refrain from taking action as may be necessary or
appropriate to achieve the purpose of this Agreement.
Section 17.5 Binding Effect
This Agreement shall be binding upon and inure to the benefit of the
parties hereto and their heirs, executors, administrators, successors, legal
representatives and permitted assigns.
Section 17.6 Creditors
None of the provisions of this Agreement shall be for the benefit of,
or shall be enforceable by, any creditor of the Partnership.
Section 17.7 Waiver
No failure by any party to insist upon the strict performance of any
covenant, duty, agreement or condition of this Agreement or to exercise any
right or remedy consequent upon a breach thereof shall constitute a waiver of
any such breach or any other covenant, duty, agreement or condition.
Section 17.8 No Agency
Nothing contained herein shall be construed to constitute any Partner
the agent of another Partner, except as specifically provided herein, or in any
manner to limit the Partners in the carrying on of their own respective
businesses or activities.
-26-
<PAGE> 31
Section 17.9 Entire Understanding
This Agreement constitutes the entire agreement and understanding among
the Partners and supersedes any prior understanding and/or written or oral
agreements among them respecting the subject matter herein.
Section 17.10 Counterparts
This Agreement may be executed in counterparts, all of which together
shall constitute one agreement binding on all the parities hereto,
notwithstanding that all such parties are not signatories to the original or the
same counterpart. Each party shall become bound by this Agreement immediately
upon affixing its signature hereto.
Section 17.11 Applicable Law
This Agreement shall be construed in accordance with and governed by
the laws of the State of Delaware, without regard to the principles of conflicts
of law.
Section 17.12 Invalidity of Provisions
If any provision of this Agreement is or becomes invalid, illegal or
unenforceable in any respects, the validity, legality and enforceability of the
remaining provisions contained herein shall not be affected thereby.
Section 17.13 Arbitration
All claims, disputes and controversies between the parties hereto
(including, without limitation, any claims, disputes and controversies between
the Partnership and any one or more of the Partners and any claims, disputes and
controversies among any two or more Partners) arising out of or in connection
with this Agreement or the Partnership created hereby, relating to the validity,
construction, performance, breach, enforcement or termination thereof, or
otherwise, shall be resolved by arbitration in accordance with the procedures
set forth in the Arbitration Agreement.
-27-
<PAGE> 32
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first written above.
GENERAL PARTNER:
CRESCENT OPERATING, INC., a Delaware
corporation
By: /s/ JEFFREY L. STEVENS
-----------------------------------
Jeffrey L. Stevens,
Executive Vice President
LIMITED PARTNERS:
/s/ GERALD W. HADDOCK
---------------------------------------
Gerald W. Haddock
/s/ JOHN C. GOFF
---------------------------------------
John C. Goff
/s/ HARRY H. FRAMPTON, III
---------------------------------------
Harry H. Frampton, III
-28-
<PAGE> 33
EXHIBIT A
LISTING OF PARTNERS, INITIAL CAPITAL CONTRIBUTIONS AND
PARTNERSHIP INTERESTS
<TABLE>
<CAPTION>
Name and Address of Partner Initial Capital Contribution Partnership Interest
- --------------------------- ---------------------------- --------------------
<S> <C> <C>
General Partner:
Crescent Operating, Inc. $9,000,000 in cash 50%
306 West 7th Street, Suite 1025
Fort Worth, Texas 76102
Limited Partners:
Gerald W. Haddock 666.67 shares of CDMC Stock 16.67%
777 Main Street, Suite 2100
Fort Worth, Texas 76102
John C. Goff 666.67 shares of CDMC Stock 16.67%
777 Main Street, Suite 2250
Fort Worth, Texas 76102
Harry H. Frampton, III 666.66 shares of CDMC Stock 16.66%
100 East Thomas Place
Avon, Colorado 81620
</TABLE>
A-1
<PAGE> 34
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
B-1
<PAGE> 35
date of disposition 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).
(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
fair market value of all securities and other Partnership
assets shall be the Value of such assets as determined in
accordance with the provisions of this Agreement.
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
B-2
<PAGE> 36
consistent with such Regulations. In the event the 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 Partner, or the
Limited Partners) are computed in order to comply with such Regulations, the
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 XIII of the Agreement upon the dissolution of the Partnership. The
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-3
<PAGE> 37
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 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-1
<PAGE> 38
C. Limitation on Loss Allocations and Qualified Income Offset. Net Loss
shall not be allocated to any Limited Partner to the extent that such allocation
would cause such Limited Partner to have an Adjusted Capital Account Deficit at
the end of such taxable year (or increase any existing Adjusted Capital Account
Deficit). All Net Loss in excess of the limitations set forth in the immediately
preceding sentence shall be allocated to the General Partner. 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 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 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 Loss 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 Loss and other items
and the Regulatory Allocations 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.
C-2
-29-
<PAGE> 39
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.
C. For purposes of Sections 2.B(1)(a) and 2.B(2)(a) of this Exhibit C,
the General Partner shall utilize the "traditional method" described in
Regulations Section 1.704-3(b) to eliminate Book-Tax Disparities attributable to
a Contributed Property or Adjusted Property.
D. The Partners recognize that there is no Book-Tax Disparity
attributable to the CDMC Stock even though the CDMC Stock is a Contributed
Property.
C-3
<PAGE> 1
EXHIBIT 10.2
CONTRIBUTION AGREEMENT
EFFECTIVE AS OF SEPTEMBER 11, 1998
BY AND AMONG
CRESCENT OPERATING, INC.,
GERALD W. HADDOCK,
JOHN C. GOFF
AND
HARRY H. FRAMPTON, III
<PAGE> 2
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"), Gerald W. Haddock ("Haddock"), John C.
Goff ("Goff") and Harry H. Frampton, III ("Frampton" and, collectively with
Haddock and Goff, 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:
<PAGE> 3
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:
Haddock 666.67 shares
Goff 666.67 shares
Frampton 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.
<PAGE> 4
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
<PAGE> 5
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;
<PAGE> 6
(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.
<PAGE> 7
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;
<PAGE> 8
(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
<PAGE> 9
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
<PAGE> 10
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,
<PAGE> 11
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.
<PAGE> 12
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.
<PAGE> 13
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
<PAGE> 14
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.
<PAGE> 15
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.
<PAGE> 16
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.
307 West Seventh Street, Suite 1025
Fort Worth, Texas 76102
Attn.: Mr. Jeffrey L. Stevens, Executive Vice President
Facsimile: (817) 339-1001
with a copy (which will not constitute notice) to:
Robinson & Bowden L.L.P.
512 Main Street, Suite 901
Fort Worth, Texas 76102
Facsimile: (817) 332-3381
Attn.: Stephen R. Robinson, Esq.
(b) If to Haddock:
Mr. Gerald W. Haddock
777 Main Street, Suite 2100
Fort Worth, Texas 76102
Facsimile: (817) 321-2002
(c) If to Goff:
Mr. John C. Goff
777 Main Street, Suite 2250
Fort Worth, Texas 76102
Facsimile: (817) 820-2772
(d) If to Frampton:
Mr. Harry H. Frampton, III
100 East Thomas Place
Avon, Colorado 81620
Facsimile: (970) 845-7205
<PAGE> 17
with a copy (which will not constitute notice) to:
Sherman & Howard L.L.C.
633 Seventeenth Street, Suite 3000
Denver, Colorado 80202
Facsimile: (303) 298-0940
Attention: James F. Wood, 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.
<PAGE> 18
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.
<PAGE> 19
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/ JEFFREY L. STEVENS
-----------------------------------
Jeffrey L. Stevens, Executive Vice
President
/s/ GERALD W. HADDOCK
---------------------------------------
GERALD W. HADDOCK
/s/ JOHN C. GOFF
---------------------------------------
JOHN C. GOFF
/s/ HARRY H. FRAMPTON, III
---------------------------------------
HARRY H. FRAMPTON, III
<PAGE> 1
EXHIBIT 10.3
AGREEMENT REGARDING SCHEDULES AND OTHER MATTERS
This Agreement regarding Schedules and Other Matters is made as of
September 11, 1998 by and among Crescent Operating, Inc., a Delaware
corporation ("COI"), Gerald W. Haddock ("Haddock"), John C. Goff ("Goff") and
Harry H. Frampton, III ("Frampton"). Haddock, Goff and Frampton are
collectively referred to herein as the "CDMC Parties."
RECITALS:
A. The parties hereto are entering into that certain agreement of
limited partnership (the "Partnership Agreement") relating to COPI Colorado,
L.P., a Delaware limited partnership (the "Partnership"), and are
simultaneously entering into a Contribution Agreement of even date herewith
that pertains to, among other things, the terms and conditions pursuant to
which COI and the CDMC Parties will make capital contributions to the
Partnership (the "Contribution Agreement").
B. Sections 2.1(b) ("Subsidiaries"), 2.8 ("Material Adverse
Changes"), 2.9 ("Undisclosed Liabilities"), 2.10 ("Litigation"), 2.12
("Contracts"), 2.13 ("Assets") and 2.15 ("Guarantees") of the Contribution
Agreement refer to schedules (the "Schedules") that qualify the representations
and warranties set forth in such sections of the Contribution Agreement (the
"Sections").
C. Section 5.6(b) of the Contribution Agreement recites that the
parties have entered into the Arbitration Agreement with respect to the
Contribution Agreement and certain other matters.
D. Notwithstanding the references in the Sections to the
Schedules, as of the effective date of the Contribution Agreement the Schedules
have not been completed and, as a result, the Schedules are not attached to the
Contribution Agreement.
E. Notwithstanding the recitation in Section 5.6(b) of the
Contribution Agreement that the parties have entered into the Arbitration
Agreement, as of the effective date the Arbitration Agreement has not been
completed and, as a result, the parties have not entered into such agreement.
F. COI and the CDMC Parties wish to memorialize their
understanding regarding, among other things, the matters described above.
<PAGE> 2
NOW, THEREFORE, in consideration of the premises and other good and
valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. To induce COI to enter into the Contribution Agreement and the
Partnership Agreement, to make the COI Contribution and to perform the other
obligations to be performed by COI pursuant to the Contribution Agreement and
the Partnership Agreement, each of the CDMC Parties severally:
(a) represents and warrants to COI that the CDMC Parties have
provided to COI all information necessary to render all of
their respective representations and warranties in the
Contribution Agreement true, correct and complete (such
provided information constituting the "Provided Disclosure
Information"); and
(b) covenants that the Schedules, when completed and delivered to
COI and appended to the Contribution Agreement, will contain
no information that differs in any material respect from the
Provided Disclosure Information (the Schedules as described
collectively constituting "Conforming Schedules").
2. The representations, warranties and covenants set forth in
paragraph 1 above shall constitute representations, warranties and covenants
made under, and subject to all of the terms and conditions of, the Contribution
Agreement to the same extent as if set forth in full therein; provided,
however, that the representations and warranties set forth in paragraph 1 above
shall be of no further force or effect upon and after such time as the CDMC
Parties deliver Conforming Schedules to COI.
3. The Arbitration Agreement shall be on substantially the same
terms and conditions as the form of arbitration agreement set forth as Exhibit
A hereto (the "Exhibit A Arbitration Agreement").
4. In the event that the CDMC Parties fail to deliver Conforming
Schedules to COI within thirty (30) days of the effective date hereof, COI
shall have the unilateral right and power, at its option, and notwithstanding
anything to the contrary in the Partnership Agreement or the Contribution
Agreement, (a) to rescind the Contribution Agreement and to obtain the return
of the COI Contribution (and/or the proceeds thereof) in full, plus accrued
interest thereon calculated at an annual rate of eight percent (8%), or (b) to
cause a dissolution of the Partnership and to wind-up of the Partnership in
accordance with the procedures set forth therein, or (c) to make such
adjustment in the value of the CDMC Contribution, and to make such
corresponding adjustment to the respective capital accounts and percentage
interests of COI and the CDMC Parties under the Partnership Agreement, as COI
shall determine in its reasonable discretion (the "Adjustments"). In the event
that COI elects to make the Adjustments pursuant to clause (b) of the
immediately- preceding sentence, COI shall notify the CDMC promptly of the
Adjustments and the CDMC Parties shall have ten (10) days following their
receipt of such notification within which to object to the Adjustments. In the
event that COI and the CDMC Parties are unable
<PAGE> 3
thereafter to resolve their dispute within ten (10) days following the date on
which the CDMC Parties notify COI of their objection to the Adjustments, the
dispute shall be resolved pursuant to paragraph 5 hereof. The failure of the
CDMC Parties to object to the Adjustments within the specified time period
shall be deemed to constitute their irrevocable and unconditional acceptance
thereof.
5. The provisions of the Arbitration Agreement (or, if the
Arbitration Agreement is not then in full force and effect, the provisions set
forth in the Exhibit A Arbitration Agreement) shall apply, and shall constitute
the exclusive remedy applicable, to any disputes that may arise among the
parties with respect to this Agreement.
6. All undefined capitalized terms used herein have the same
meanings respectively ascribed to them in the Contribution Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement
regarding Schedules and Other Matters as of the date first above written.
CRESCENT OPERATING, INC.,
a Delaware corporation
by:/s/ JEFFREY L. STEVENS
----------------------------------
Jeffrey L. Stevens, Executive Vice
President
/s/ GERALD W. HADDOCK
-------------------------------------
GERALD W. HADDOCK
/s/ JOHN C. GOFF
-------------------------------------
JOHN C. GOFF
/s/ HARRY H. FRAMPTON, III
-------------------------------------
HARRY H. FRAMPTON, III
<PAGE> 1
Exhibit 99.1
Pursuant to Rule 13d-1(f)(1)(iii) of Regulation 13D-G of the General
Rules and Regulations of the Securities and Exchange Commission under the
Securities Exchange Act of 1934, as amended, the undersigned agrees that the
statement to which this Exhibit is attached is filed on behalf of each of them
in the capacities set forth below.
COPI COLORADO, L. P., a Delaware limited
partnership
By: CRESCENT OPERATING, INC.,
a Delaware corporation
By: /s/ Jeffrey L. Stevens
Jeffrey L. Stevens, Executive
Vice President
CRESCENT OPERATING, INC.,
a Delaware corporation
By: /s/ Jeffrey L. Stevens
Jeffrey L. Stevens, Executive
Vice President
/s/ Gerald W. Haddock
GERALD W. HADDOCK
/s/ John C. Goff
JOHN C. GOFF
/s/ Harry H. Frampton, III
HARRY H. FRAMPTON, III
