EXHIBIT 10.3

 

EXECUTION VERSION

 

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FORMATION AND SALE AGREEMENT

 

by and among

 

Duke Ventures, LLC,

 

Crescent Resources, LLC,

 

Morgan Stanley Real Estate Fund V U.S., L.P.,

 

Morgan Stanley Real Estate Fund V Special U.S., L.P.,

 

Morgan Stanley Real Estate Investors V U.S., L.P.,

 

MSP Real Estate Fund V, L.P.,

 

and

 

Morgan Stanley Strategic Investments, Inc.

 

Dated as of September 7, 2006

 

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TABLE OF CONTENTS

 

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ARTICLE I    DEFINITIONS    1       

Section 1.1

   Definitions    1 ARTICLE II    CLOSING ACTIONS    7       

Section 2.1

   Closing    7       

Section 2.2

   Closing Actions    7       

Section 2.3

   Closing Deliveries    8       

Section 2.4

   Post-Closing Adjustment of Net Contribution/Distribution Amount    8 ARTICLE
III    REPRESENTATIONS AND WARRANTIES OF DUKE VENTURES    9       

Section 3.1

   Organization    9       

Section 3.2

   Authority    9       

Section 3.3

   No Conflicts    10       

Section 3.4

   Claims    10       

Section 3.5

   Brokers    10       

Section 3.6

   Ownership    10       

Section 3.7

   No Other Representation    10 ARTICLE IV    REPRESENTATIONS AND WARRANTIES OF
CRESCENT    10       

Section 4.1

   Organization    10       

Section 4.2

   Authority    11       

Section 4.3

   No Conflicts    11       

Section 4.4

   Claims; Orders    11       

Section 4.5

   Brokers    11       

Section 4.6

   Capitalization    11       

Section 4.7

   Financial Statements    12       

Section 4.8

   Permits; Compliance with Laws    12       

Section 4.9

   Absence of Certain Changes    12       

Section 4.10

   Taxes    13       

Section 4.11

   Contracts    14       

Section 4.12

   Environmental Matters    16       

Section 4.13

   Insurance    16       

Section 4.14

   Intellectual Property    16        Section 4.15    Labor Matters    17       

Section 4.16

   Employee Benefits    17       

Section 4.17

   Real Property    18       

Section 4.18

   Personal Property    20       

Section 4.19

   Accounts Receivable    20       

Section 4.20

   Financing Districts    20       

Section 4.21

   Related Party Transactions    20       

Section 4.22

   Bankruptcy    20       

Section 4.23

   No Other Representation    20 ARTICLE V    REPRESENTATIONS AND WARRANTIES OF
THE MS MEMBERS    21       

Section 5.1

   Organization    21       

Section 5.2

   Authority    21       

Section 5.3

   No Conflicts    21       

Section 5.4

   Claims    21       

Section 5.5

   Brokers    21       

Section 5.6

   Acknowledgement    21       

Section 5.7

   No Registration    21       

Section 5.8

   No Other Representation    22

 

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ARTICLE VI    COVENANTS    22       

Section 6.1

   Legacy Land    22       

Section 6.2

   Tax Matters    22       

Section 6.3

   Public Announcements    22       

Section 6.4

   Employee Benefits    22       

Section 6.5

   Environmental    22       

Section 6.6

   Insurance    22       

Section 6.7

   Leased Personal Property; Licensed Software    23       

Section 6.8

   Surety Bonds; Letters of Credit    24       

Section 6.9

   Reasonable Best Efforts; Further Assurances    25       

Section 6.10

   Sale of Additional Interests in Holdco    25       

Section 6.11

   Corporate Names    25 ARTICLE VII    INDEMNIFICATION, LIMITATIONS OF
LIABILITY, WAIVERS AND THIRD PARTY CLAIMS    26       

Section 7.1

   Indemnification    26       

Section 7.2

   Limitations of Liability    26       

Section 7.3

   Waiver of Other Representations    28       

Section 7.4

   Waiver of Remedies    29       

Section 7.5

   Procedure with Respect to Third Party Claims    29

ARTICLE VIII    MISCELLANEOUS

   30       

Section 8.1

   Notices    30       

Section 8.2

   Entire Agreement    31       

Section 8.3

   Expenses    31       

Section 8.4

   Disclosure    31       

Section 8.5

   Waiver    31       

Section 8.6

   Amendment    31       

Section 8.7

   No Third Party Beneficiary    31       

Section 8.8

   Assignment; Binding Effect    32       

Section 8.9

   Headings    32       

Section 8.10

   Invalid Provisions    32       

Section 8.11

   Counterparts; Facsimile    32       

Section 8.12

   Governing Law; Venue; and Jurisdiction; Waiver of Trial by Jury    32       

Section 8.13

   Attorneys’ Fees    32       

Section 8.14

   MS Member Representative; Joint Liability    33

Exhibit A – Amended and Restated Limited Liability Company Agreement of Crescent
Holdings, LLC

    

Exhibit B – Amended and Restated Articles of Organization of Crescent Resources,
LLC

    

Exhibit C – Amended and Restated Operating Agreement of Crescent Resources, LLC

    

Exhibit D – Transition Services Agreement

    

Exhibit E – Employee Matters Agreement

    

Exhibit F – Certificate of Formation of Crescent Holdings, LLC

    

Exhibit G – Purchase Price Calculation

    

Exhibit H – Estimated Transaction Expenses of the Parties

    

 

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FORMATION AND SALE AGREEMENT

 

This FORMATION AND SALE AGREEMENT (this “Agreement”) dated as of September 7,
2006 (the “Effective Date”) is made and entered into by and among (i) Duke
Ventures, LLC, a Nevada limited liability company (“Duke Ventures”),
(ii) Crescent Resources, LLC, a Georgia limited liability company (“Crescent”),
and (iii) Morgan Stanley Real Estate Fund V U.S., L.P., a Delaware limited
partnership (“MSREF”), Morgan Stanley Real Estate Fund V Special U.S., L.P., a
Delaware limited partnership (“MSREF Special”), Morgan Stanley Real Estate
Investors V U.S., L.P., a Delaware limited partnership (“MSREI”), MSP Real
Estate Fund V, L.P., a Delaware limited partnership (“MSP”), and Morgan Stanley
Strategic Investments, Inc., a Delaware corporation (“MSSI” and, together with
MSREF, MSREF Special, MSREI, and MSP are collectively referred to herein as the
“MS Members”).

 

W I T N E S S E T H

 

WHEREAS, immediately prior to the consummation of the transactions contemplated
hereby, Duke Ventures owns one hundred percent (100%) of the issued and
outstanding membership interests of Crescent (the “Crescent Membership
Interests”); and

WHEREAS, concurrently herewith (i) in accordance with the terms and conditions
of this Agreement, Duke Ventures will contribute one hundred percent (100%) of
the Crescent Membership Interests to Crescent Holdings, LLC, a newly formed
Delaware limited liability company (“Holdco”), in exchange for the issuance to
Duke Ventures of ninety-eight percent (98%) of the issued and outstanding
membership interests of Holdco (the “Holdco Membership Interests”) and
(ii) Crescent and Mr. Arthur W. Fields (“Mr. Fields”) are entering into an
employment agreement (the “Employment Agreement”) providing for, among other
things, the issuance to Mr. Fields of two percent (2%) of the Holdco Membership
Interests; and

WHEREAS, immediately following the transactions referred to above, Crescent will
enter into a Credit Agreement dated as of the Effective Date, with Bank of
America, N.A. and the other lenders named therein (collectively, the “Lender”),
pursuant to which Crescent is receiving $1,225,000,000 of proceeds (the “New
Debt Financing”), of which the net proceeds in the amount of $1,187,000,000 will
be immediately distributed to Holdco, and Holdco will distribute the same solely
to Duke Ventures; and

WHEREAS, in accordance with the terms and conditions of this Agreement,
immediately following the distribution of the net proceeds of the New Debt
Financing referred to above, the MS Members will collectively purchase from Duke
Ventures fifty percent (50%) of the Holdco Membership Interests held by Duke
Ventures (such Holdco Membership Interests being transferred in accordance
herewith being forty-nine percent (49%) of the total outstanding Holdco
Membership Interests and are referred to herein as the “Purchased Interests”);
and

WHEREAS, concurrently herewith, Duke Ventures, the MS Members and Mr. Fields are
entering into an amended and restated limited liability company agreement of
Holdco in the form attached hereto as Exhibit A (the “Operating Agreement”); and

WHEREAS, following the consummation of the transactions contemplated by this
Agreement and the execution of the Operating Agreement, the MS Members will
collectively own forty-nine percent (49%) of the Holdco Membership Interests,
Duke Ventures will own forty-nine percent (49%) of the Holdco Membership
Interests and Mr. Fields will own two percent (2%) of the Holdco Membership
Interests;

NOW THEREFORE, in consideration of the mutual agreements contained herein and
for other good and valuable consideration described herein, the parties to this
Agreement, intending to be legally bound hereby, agree as follows:

 

ARTICLE I

DEFINITIONS

 

Section 1.1 Definitions. As used in this Agreement, the following capitalized
terms have the meanings set forth below:

“AAA” means the American Arbitration Association.

“Accounting Expert” has the meaning given to it in Section 2.4(b).

“Administer” and “Administration” shall mean the process of adjusting Third
Party Insurance Claims, including the process of providing defense and
indemnification if and to the extent any defense and indemnification is required
under Section 6.6 below.

“Advanced Amounts” has the meaning given to it in Section 4.6(d).

“Affiliate” means any Person that, directly or indirectly through one or more
intermediaries, controls, is controlled by or is under common control with the
Person specified. For purposes of this definition, control of a Person means the
power, direct or indirect, to direct or cause the direction of the management
and policies of such Person whether through ownership of voting securities or
ownership interests, by contract or otherwise, and specifically with respect to
a corporation, partnership or limited liability company, also includes direct or
indirect ownership of more than ten percent (10%) of the voting securities in
such corporation or of the voting interest in a partnership or limited liability
company.

“Agreement” has the meaning given to it in the introduction to this Agreement.

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“ALTA” means the American Land Title Association, whose address is 1828 L St.,
N.W., Suite 705, Washington, D.C. 20036.

“ALTA Survey” means a survey made in accordance with the Minimum Standard Detail
Requirements for ALTA/ACSM Land Title Surveys, jointly established and adopted
by ALTA and NSPS in 2005, and includes items 2, 3, 4, 6, 7(a), 8, 9, 10, 11(a),
16, 17 & 18 from Table A thereof.

“Amended and Restated Articles of Organization” means those certain Amended and
Restated Articles of Organization of Crescent, in the form attached hereto as
Exhibit B, which are being filed with the Secretary of State of the State of
Georgia concurrently herewith.

“Amended and Restated Operating Agreement” means that certain Amended and
Restated Limited Liability Company Agreement of Crescent, in the form attached
hereto as Exhibit C, which is being executed concurrently herewith.

“Assets” of any Person means all assets and properties of every kind, nature,
character and description (whether real, personal or mixed, whether tangible or
intangible and wherever situated), including the goodwill related thereto,
operated, owned or leased by such Person.

“Assignment Agreement” has the meaning given to it in Section 2.3(a)(vii).

“Association” has the meaning given to it in Section 4.17(j).

“Association Document” has the meaning given to it in Section 4.17(j)

“Auditor’s Net Contribution/Distribution Amount Determination” has the meaning
given to it in Section 2.4(b).

“Automobile Policy” has the meaning given to in the definition of “Duke
Occurrence-Based Insurance Policies.”

“Balance Sheet” has the meaning given to it in Section 4.7.

“Benefit Plans” has the meaning given to it in Section 4.16(a).

“Business” means, as to Crescent, the business of developing high quality
commercial, residential and multifamily real estate projects, managing and
acting as leasing agent for commercial buildings and properties and managing
land holdings primarily in the southeastern and southwestern United States.

“Business Day” means a day other than Saturday, Sunday or any day on which banks
located in the State of New York are authorized or obligated to close.

“Charter Documents” means, with respect to any Person, the articles of
incorporation and by-laws, the limited partnership agreement, the partnership
agreement or the limited liability company operating agreement and certificate
of formation or articles of organization or such other organizational documents
of such Person which establish the legal personality of such Person.

“Claim” means any demand, claim, action, investigation, legal proceeding
(whether at law or in equity) or arbitration.

“Claiming Party” has the meaning given to it in Section 7.5(a).

“Closing” means the closing of the transactions contemplated by this Agreement,
as provided for in Section 2.2.

“Code” means the United States Internal Revenue Code of 1986, as amended.

“Commercial Leases” has the meaning given to it in Section 4.17(i).

“Confidentiality Agreement” means that certain Confidentiality Agreement, dated
May 17, 2006, between Duke Parent and MSREF V U.S.—GP, L.L.C., on behalf of
itself and MSREF, MSREI, MSREF Special, MSP, MSP Co-Investment Partnership
V., L.P. and MSREF V Domestic Funding, L.P., as amended from time to time.

“Contract” means any contract, lease, license, evidence of indebtedness,
mortgage, indenture, purchase order, binding bid, letter of credit, security
agreement or other legally binding arrangement, including any of the foregoing
entered into with any Governmental Authority.

“Credit Support Instrument” has the meaning given to it in Section 4.11(b).

“Crescent” has the meaning given to it in the introduction to this Agreement.

“Crescent Consents” has the meaning given to it in Section 4.3.

“Crescent Disclosure Letter” has the meaning given to it in the introduction to
ARTICLE IV.

“Crescent Membership Interests” has the meaning given to it in the Recitals to
this Agreement.

“Crescent Subsidiary” means any corporation, partnership, limited partnership,
limited liability company, joint venture or other legal entity of which
(i) Crescent or a Crescent Subsidiary is the general partner or manager or
(ii) Crescent or any Crescent Subsidiary owns, directly or indirectly, fifty
percent (50%) or more of the stock or other equity or partnership interests, it
being understood that LandMar Group, LLC, Rough Hollow Development, Ltd., Las
Ventanas Land Partners, Ltd., and JH West Land Ventures, Ltd. shall constitute
Crescent Subsidiaries.

 

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“Developable Property” means, as to any parcel of Real Property, that portion of
the land which is located outside of all of the following, to the extent
delineated or reasonably susceptible of delineation from information in the
possession of Crescent: (a) any lakes, streams, rivers or other bodies or
courses of water; (b) any swamps or marshes; (c) the floodway or the 100-year
flood plain as designated on recent flood zone maps produced by the Federal
Emergency Management Agency; (d) any areas designated by the U.S. Environmental
Protection Agency or other federal or state agency as areas where development is
prohibited or restricted due to the presence of threatened or endangered
wildlife; (e) currently designated mineral drill sites; (f) easement areas;
(g) wetlands and/or waters that are regulated by federal and/or state agencies;
and (h) any other areas upon which no development activities can occur for any
reason.

“Duke Disclosure Letter” has the meaning given to it in the introduction to
ARTICLE III.

“Duke Liability Insurance Policies” shall mean the policies of insurance
maintained by Duke Parent or any Non-Crescent Affiliate prior to the Closing
identified as Part I.E and Part I.F of Section 4.13(i) of the Crescent
Disclosure Letter.

“Duke Occurrence-Based Insurance Policies” shall mean the policies of insurance
maintained by Duke Parent or any Non-Crescent Affiliate prior to the Closing
identified as Part I.A, Part I.C and Part I.D of Section 4.13(i) of the Crescent
Disclosure Letter (the “Automobile Policy”) and Part II.A, II.B, II.C and II.E
of Section 4.13(i) of the Crescent Disclosure Letter (the “Workers Compensation
Policy”).

“Duke Parent” means Duke Energy Corporation, a Delaware corporation.

“Duke Release Date” has the meaning given to it in Section 6.8(a).

“Duke Ventures” has the meaning given to it in the introduction to this
Agreement.

“Effective Date” has the meaning given to it in the introduction to this
Agreement.

“Employee Matters Agreement” has the meaning given to it in Section 2.3(a)(iv).

“Employment Agreement” has the meaning given to it in the Recitals to this
Agreement.

“Enterprise Value” means $2,075,000,000.

“Environmental Law” means the applicable Laws of any Governmental Authority
having jurisdiction over the assets in question relating to the prevention of
pollution, regulating discharge or emission of Hazardous Materials, remediation
of contamination, protection of natural resources, or the preservation of
environmental quality, each as amended on or prior to the Effective Date.

“Environmental Representations” has the meaning given to it in Section 7.2(a).

“Equity Value” has the meaning given to it in the definition of “Purchase
Price.”

“ERISA” has the meaning given to it in Section 4.16(a).

“ERISA Affiliate” has the meaning given to it in Section 4.16(b).

“ERISA Representations” has the meaning given to it in Section 7.2(a).

“ESA” has the meaning given to it in Section 6.5.

“Estimated Net Contribution/Distribution Amount” means $30,000,000, which Duke
Ventures represents is a good faith estimate of the Net
Contribution/Distribution Amount.

“Expenses” means all reasonable out-of-pocket documented expenses (including
Transfer Taxes and all fees and expenses of counsel, accountants, financing
sources, experts and consultants to a Party hereto and its Affiliates and fees
and expenses incurred in connection with obtaining title commitments, Title
Policies, environmental reports and other reports and creating the electronic
data room maintained by Crescent in connection with the transactions
contemplated by this Agreement) incurred by a Party or on its behalf on or prior
to the thirtieth (30th) day following the Effective Date in connection with or
related to the transactions contemplated in this Agreement, including the
authorization, preparation, negotiation, execution and performance of this
Agreement, the Operating Agreement, the Amended and Restated Articles of
Organization, the Amended and Restated Operating Agreement and the New Debt
Financing, the formation of Holdco and the MS Members’ due diligence review of
Crescent, the Crescent Subsidiaries and their Assets and the other transactions
contemplated in this Agreement, but in all events excluding fees and expenses of
investment bankers or financial advisors.

“Final Net Contribution/Distribution Amount” has the meaning given to it in
Section 2.4(c).

“Financial Statements” has the meaning given to it in Section 4.7.

“Financing District” has the meaning given to it in Section 4.20.

“Flooding Easements” has the meaning given to it in the definition of “Permitted
Lien.”

“GAAP” means generally accepted accounting principles in the United States,
applied on a consistent basis.

“Governmental Authority” means any applicable federal, state or local
government, regulatory or administrative authority, or any court, agency,
commission, tribunal, or judicial or arbitral body or self-regulated entity,
whether domestic or foreign.

 

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“Hazardous Material” means each substance designated as a hazardous waste,
hazardous substance, hazardous material, pollutant, contaminant or toxic
substance under any Environmental Law, including, without limitation, any
asbestos, polychlorinated biphenyls, urea formaldehyde foam insulation, and
petroleum or any fraction of petroleum.

“Holdco” has the meaning given to it in the Recitals to this Agreement.

“Holdco Membership Interests” has the meaning given to it in the Recitals to
this Agreement.

“Indemnified Party” has the meaning given to it in Section 7.1(a).

“Indemnifying Party” has the meaning given to it in Section 7.1(a).

“Independent Accounting Firm” means and includes any of the following
independent certified public accounting firms: PricewaterhouseCoopers, LLP, KPMG
LLP, Deloitte & Touche LLP, Ernst & Young LLP and any combined entity including
one or more of such firms; or any other certified public accounting firm
approved by the Parties.

“Intellectual Property” means the following intellectual property rights,
whether arising by statute or under common law: (a) copyrights, registrations
and applications for registration thereof, (b) trademarks, service marks, trade
names, slogans, domain names, logos, trade dress, and registrations and
applications for registrations thereof, (c) patents, as well as any reissued and
reexamined patents and extensions corresponding to the patents, and any patent
applications, as well as any related continuation, continuation in part and
divisional applications and patents issuing therefrom and (d) trade secrets and
confidential information, including ideas, designs, concepts, compilations of
information, methods, techniques, procedures, processes and other know-how,
whether or not patentable.

“IRS” has the meaning given to it in Section 4.16(a).

“Knowledge” when used with respect to Duke Ventures means the actual knowledge
of the individuals listed in Section 1.1(i) of the Duke Disclosure Letter; when
used with respect to Crescent means the actual knowledge of the individuals
listed in Section 1.1(i) of the Crescent Disclosure Letter; and when used with
respect to the MS Members means the actual knowledge of the individuals listed
in Section 1.1(i) of the MS Disclosure Letter.

“Lake Mary Environmental Condition” has the meaning given to it in
Section 7.1(b).

“Lake Mary Site” has the meaning given to it in Section 7.1(b).

“Landmar Certificate” means the certificate signed by Edward E. Burr and LandMar
Management, Inc. with respect to certain matters relating to Landmar Group, LLC.

“Laws” means all laws, rules, regulations, ordinances, court orders and other
pronouncements having the effect of law of any Governmental Authority.

“Leased Personal Property” has the meaning given to it in Section 6.7(a).

“Legacy Land” means the Real Property listed as such in Section 1.1(ii) of the
Crescent Disclosure Letter.

“Legacy Land Agreements” have the meaning given to it in Section 2.3(a)(v).

“Lender” has the meaning given to it in the Recitals to this Agreement.

“Letters” means, collectively, the Duke Disclosure Letter, the Crescent
Disclosure Letter and the MS Disclosure Letter.

“Licensed Software” has the meaning given to it in Section 6.7(b).

“Lien” means any mortgage, pledge, deed of trust, assessment, security interest,
charge, lien, option, warranty, purchase right, lease or other similar property
interest or encumbrance.

“Loss” means any and all judgments, losses, liabilities, amounts paid in
settlement, damages, fines, penalties, deficiencies, losses and expenses
(including interest, court costs, reasonable fees of attorneys, accountants and
other experts or other reasonable expenses of litigation or other proceedings or
of any claim, default or assessment).

“Material Adverse Effect” means any circumstance, event, occurrence, change or
effect that is, would be, or would reasonably be expected to be, individually or
in the aggregate, materially adverse to the Business, Assets, condition
(financial or otherwise) or results of operations of Crescent and the Crescent
Subsidiaries, taken as a whole; provided, however, that none of the following
shall in and of itself constitute, and no event, occurrence, change or effect
resulting from or related to any of the following shall constitute, a Material
Adverse Effect: (a) any change generally applicable to the industry or market in
which Crescent operates or changes or effects that are consequences of war,
terrorist activity or weather or meteorological events, (b) any change in
general political, regulatory or economic conditions, including the financial
and securities markets, (c) any change in any Laws (including Environmental
Laws) of national or statewide effect, (d) any change in the financial condition
or results of operation of Crescent caused by the transactions contemplated by
this Agreement, (e) any actions to be taken pursuant to or in accordance with
this Agreement and (f) the negotiation, execution, announcement or pendency of
this Agreement and the transactions contemplated in this Agreement, except that
the exclusions set forth in clauses (a), (b) and (c) shall only be effective if
Crescent is not disproportionately impacted by such events when compared to
other companies in

 

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the industries and markets in which Crescent operates; provided further that a
Material Adverse Effect shall be deemed to include any (i) circumstance, event,
occurrence, change or effect that is, would be, or would reasonably be expected
to result in the cessation of lot sales at Palmetto Bluff for a period of
twenty-four (24) months or longer or (ii) substantial damage, destruction, or
loss (whether or not covered by insurance) to the Inn at Palmetto Bluff that
would reasonably be expected to cause the Inn at Palmetto Bluff to be closed for
a period of eighteen (18) months or longer.

“Material Contracts” has the meaning given to it in Section 4.11(a).

“Material Lease” has the meaning given to it in Section 4.11(a)(vii).

“Material Properties” means each of the Projects listed on Section 1.1(iii) of
the Crescent Disclosure Letter.

“Mr. Fields” has the meaning given to it in the Recitals to this Agreement.

“MS Disclosure Letter” has the meaning given to it in the introduction to
ARTICLE V.

“MS Members” has the meaning given to it in the introduction to this Agreement.

“MSP” has the meaning given to it in the introduction to this Agreement.

“MSREF” has the meaning given to it in the introduction to this Agreement.

“MSREF Special” has the meaning given to it in the introduction to this
Agreement.

“MSREI” has the meaning given to it in the introduction to this Agreement.

“MSSI” has the meaning given to it in the introduction to this Agreement.

“Net Contribution/Distribution Amount” means an amount equal to (x) the sum of
all capital contributions by Duke Ventures to the equity of Crescent from
January 1, 2006 to and including the Effective Date, minus (y) all dividends or
other distributions of capital of Crescent by Crescent to Duke Ventures from
January 1, 2006 to and including the Effective Date (exclusive of the Net Debt
Proceeds), it being understood that such amount may be a positive or a negative
number.

“Net Contribution/Distribution Amount Determination” has the meaning given to it
in Section 2.4(a).

“Net Contribution/Distribution Amount Dispute Notice” has the meaning given to
it in Section 2.4(b).

“Net Contribution/Distribution Amount Review Period” has the meaning given to it
in Section 2.4(b).

“Net Debt Proceeds” has the meaning given to it in the definition of “Purchase
Price.”

“New Credit Support Instruments” has the meaning given to it in Section 6.8(a).

“New Debt Financing” has the meaning given to it in the Recitals to this
Agreement.

“No Further Action Letter” has the meaning given to it in Section 7.2(o).

“Non-Crescent Affiliate” means any Affiliate of Duke Ventures, except for
Holdco, Crescent and the Crescent Subsidiaries.

“NSPS” means the National Society of Professional Surveyors, Inc., whose address
is 6 Montgomery Village Avenue, Suite 403, Gaithersburg, MD 20879.

“Occurrence” shall mean an accident or other event that gives rise to a Third
Party Insurance Claim, and the term “Occurrence” shall be interpreted in
accordance with and as construed under applicable law and Duke Liability
Insurance Policies.

“Operating Agreement” has the meaning given to it in the Recitals to this
Agreement.

“Other Interests” has the meaning given to it in Section 4.6(b).

“Parties” means each of the parties to this agreement identified in the Preamble
to this Agreement and their respective successors and permitted assigns.

“Permits” has the meaning given to it in Section 4.8.

“Permitted Lien” means:

(a) any Lien for Taxes not yet due or delinquent, or being contested in good
faith by Duke Ventures or Crescent by appropriate proceedings (i) for which
adequate reserves have been provided in the Balance Sheet as a current liability
or (ii) that results from a liability for Taxes that arose or was incurred after
December 31, 2005;

(b) any Lien arising in the ordinary course of business by operation of Law with
respect to a liability that is not yet due or delinquent, or that is being
contested in good faith by Duke Ventures or Crescent (i) for which adequate
reserves have been provided in the Balance Sheet as a current liability or
(ii) that results from a liability that arose or was incurred after December 31,
2005;

(c) imperfections or irregularities of title and other non-monetary Liens of a
type not covered by other clauses of this definition that would not reasonably
be expected to result in a Loss with respect to the affected Real Property in
excess of $250,000 for all Real Property within any single Project or $250,000
for any Real Property within a single parcel of Legacy Land;

 

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(d) zoning, planning and other similar limitations and restrictions, and all
rights of any Governmental Authority to regulate real property;

(e) mechanics’ and materialmen’s Liens (i) for which adequate reserves have been
provided in the Balance Sheet as a current liability or (ii) that result from
work performed after December 31, 2005;

(f) the terms and conditions of the Material Contracts and other Contracts
listed in Section 4.11(a) of the Crescent Disclosure Letter or of leases which
are not Material Leases;

(h) the matters identified in Section 1.1(iv) of the Crescent Disclosure Letter;

(i) easements (other than Flooding Easements, which are addressed by subsection
(m) below) for utilities, access, drainage, open space, buffer areas,
conservation and similar purposes that would not reasonably be expected to
interfere materially with the use or development of such Real Property for
purposes contemplated by Crescent as of the Effective Date;

(j) declarations of covenants, conditions and restrictions that would not
reasonably be expected to interfere materially with the use or development of
such Real Property for purposes contemplated by Crescent as of the Effective
Date;

(k) any other non-monetary Lien, encumbrance or matter affecting title, of a
nature not otherwise covered by other clauses of this definition, and which is
(i) reflected in the Title Policies obtained by Crescent, the Lender or the MS
Members on or prior to the Effective Date or (ii) reflected in the title
policies, title reports or title commitments delivered by or made available by
Crescent to the MS Members on or prior to the Effective Date provided that the
impact thereof is reasonably ascertainable in the absence of a current survey;

(l) with respect to Legacy Land, easements, cartways and similar restrictions or
rights (other than Flooding Easements, which are addressed by subsection
(m) below) for utilities, transmission lines, access, drainage, flood plains,
open space, buffer areas, conservation and similar purposes that, to Crescent’s
Knowledge, would not reasonably be expected to interfere materially with the use
or development of such property for purposes contemplated by Crescent as of the
date hereof; and

(m) rights, privileges and easements reserved by Duke Power Company LLC over
Legacy Land, including Projects being developed on former Legacy Land, for
backing, ponding, raising, flooding or diverting the waters of a lake or river;
provided, however, that such rights, privileges and easements shall not extend
to a contour at an elevation of more than 10 feet above the contour of at the
elevation of the common boundary of the Real Property and such lake or river
except for Real Property fronting Lake Keowee as to which the easement
elevations may vary, but in no event shall any such right, privilege or easement
materially interfere with the use or development of such Real Property for
purposes contemplated by Crescent as of the date hereof (“Flooding Easements”).

“Person” means any natural person, corporation, general partnership, limited
partnership, limited liability company, unlimited liability corporation,
proprietorship, other business organization, trust, union, association or
Governmental Authority.

“Project” means a residential or commercial development owned, completed or
currently planned to be completed by Crescent or a Crescent Subsidiary on any
portion of the Real Property.

“Purchase Price” means $415,030,000, representing the amount equal to the
product of (A) forty-nine percent (49%) and (B) an amount equal to (i) the
Enterprise Value minus $71,000,000 (which the Parties acknowledge is the
outstanding indebtedness of Crescent as of December 31, 2005); plus
(ii) $30,000,000, representing the Estimated Net Contribution/ Distribution
Amount; minus (iii) $1,187,000,000, representing the actual amount of net
proceeds of the New Debt Financing distributed to Duke Ventures (which, for
avoidance of doubt, represents the gross proceeds of the New Debt Financing,
less (x) the financing fees, any reserves required under the terms of the New
Debt Financing and related transaction costs of Crescent in connection with the
New Debt Financing, (y) Expenses reimbursed by Crescent pursuant to Section 8.3
hereof and (z) initial working capital in the amount of $10,000,000 (the amount
set forth in this clause (iii) is referred to herein as the “Net Debt
Proceeds”)); provided, that all charges by Duke Ventures to Crescent that relate
to federal or state income Taxes, payroll and benefits, allocated benefit plan
and retirement plan costs, and other services (including, without limitation,
surveying, vehicle maintenance, legal representation, and computer time sharing)
that Crescent treats for accounting purposes as equity distributions to Duke
Ventures upon payment shall not be deemed to constitute dividends or other
distributions of capital of Crescent for purposes of determining the Net
Contribution/Distribution Amount (the amount calculated in accordance with this
clause (B) is referred to herein as the “Equity Value”).

“Purchased Interests” has the meaning given to it in the Recitals to this
Agreement.

“Real Property” means all real property that is owned or leased or used by
Crescent or any Crescent Subsidiary or that is reflected as an asset of Crescent
or any Crescent Subsidiary on Crescent’s consolidated balance sheet.

“Release” means any release, spill, emission, migration, leaking, pumping,
injection, deposit, disposal or discharge of any Hazardous Materials into the
environment.

“Relevant Entity” or “Relevant Entities” has the meaning given to it in
Section 4.10(a).

 

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“Relevant Projects” has the meaning given to it in Section 4.6(d).

“Report” or “Reported” shall mean, with respect to an Occurrence, that Crescent
has informed Duke Ventures in writing of (a) the factual circumstances of the
Occurrence known by employees of Crescent familiar with the factual
circumstances of the Occurrence and the name(s) of any Persons suffering bodily
injury, property damage, and other damage or injury as a result thereof,
(b) Crescent’s good faith estimate of the amount of any claim that may arise
therefrom, (c) the location of the Occurrence, and (d) the name(s) of Crescent’s
employee(s) most knowledgeable about and familiar with the factual circumstances
of the Occurrence. An Occurrence shall be deemed to be Reported when such
writing is actually received by Duke Ventures.

“Representatives” means, as to any Person, its and its Affiliates’ officers,
directors, partners, members, employees, counsel, accountants, financial
advisers and consultants.

“Responding Party” has the meaning given to it in Section 7.5(a).

“Securities Act” has the meaning given to it in Section 5.7.

“Subsidiary Entity” or “Subsidiary Entities” has the meaning given to it in
Section 4.10(a)(i).

“Surety Bond Release” has the meaning given to it in Section 6.8(c).

“Survey Representations” has the meaning given to it in Section 7.2(a)(i).

“Tax” or “Taxes” means all taxes, charges, fees, imposts, levies or other
assessments, including all or any such tax on net income, alternative minimum,
gross receipts, premium, capital, sales, use, gains, ad valorem, value added,
transfer, franchise, profits, inventory, goods and services, capital stock,
license, withholding, payroll, employment, social security, unemployment,
disability, welfare, workers’ compensation, excise, severance, stamp,
documentary stamp, occupation, real or personal property, mortgage recording,
environmental, estimated and other taxes of the same or of a similar nature to
any of the foregoing, together with any interest, penalties, or additions
thereto imposed by a Governmental Authority.

“Tax Representations” has the meaning given to it in Section 7.2(a)(i).

“Third Party Claim” has the meaning given to it in Section 7.5(a).

“Third Party Insurance Claim” shall mean a claim against Crescent or any
Crescent Subsidiary for payment of damages, defense costs and any other losses
covered by insurance, which claim (a) arises out of an underlying claim asserted
by a third party against Crescent or any Crescent Subsidiary or with respect to
which Crescent or any Crescent Subsidiary is alleged to have liability, and
(b) would have been covered under the Duke Liability Insurance Policies
immediately prior to the Effective Date.

“Title Policies” means the extended coverage ALTA owner’s form (or its
equivalent in any jurisdiction where such form is not available) title policies
listed on Section 1.1(v) of the Crescent Disclosure Letter.

“Title and Authority Representations” has the meaning given to it in
Section 7.2(a)(i).

“Trademarks and Logos” has the meaning given to it in Section 6.11(a).

“Transfer Taxes” means all share transfer, real property transfer, documentary,
sales, use, registration and other such Taxes and related fees (including any
penalties, interest and additions to Tax) incurred in connection with this
Agreement and the transactions contemplated in this Agreement.

“Transition Services Agreement” has the meaning given to it in
Section 2.3(a)(iii).

“Workers Compensation Policy” has the meaning given to in the definition of
“Duke Occurrence-Based Insurance Policies.”

 

ARTICLE II

CLOSING ACTIONS

 

Section 2.1 Closing. The Closing shall take place at the offices of Skadden,
Arps, Slate, Meagher & Flom LLP, 4 Times Square, New York, New York 10036
concurrently with the execution hereof, or such other location as the Parties
may determine.

Section 2.2 Closing Actions. At the Closing, the following events shall occur:

(a) Duke Ventures shall contribute to the capital of Holdco one hundred percent
(100%) of the Crescent Membership Interests, and Holdco will issue one hundred
percent (100%) of the Holdco Membership Interests to Duke Ventures;

(b) in accordance with the Employment Agreement, Holdco will then issue
additional Holdco Membership Interests to Mr. Fields such that the Holdco
Membership Interests will then be held 98% by Duke Ventures and 2% by
Mr. Fields;

(c) simultaneously with the transactions contemplated by Sections 2.2(a) and
2.2(b), the Lender shall advance loans to Crescent in an amount of
$1,225,000,000 (equal to the New Debt Financing), and Crescent shall immediately
thereafter distribute $1,187,000,000 (equal to the Net Debt Proceeds) to Holdco,
which will then distribute the Net Debt Proceeds solely to Duke Ventures as a
distribution of capital;

 

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(d) immediately following the transactions contemplated by Sections 2.2(a)
through 2.2(c), Duke Ventures shall sell, assign, convey, transfer and deliver
to the MS Members jointly, and the MS Members shall jointly purchase and acquire
from Duke Ventures, all of Duke Ventures’ right, title and interest in and to
the Purchased Interests, for a cash payment equal to the Purchase Price, payable
by wire transfer of immediately available funds to an account designated by Duke
Ventures; and

(e) immediately following the foregoing transactions contemplated by Sections
2.2(a) through 2.2(d), the ownership of Holdco shall be as follows: Duke
Ventures (49%), the MS Members (49%) and Mr. Fields (2%).

Section 2.3 Closing Deliveries. In addition to the actions set forth in
Section 2.2, the Parties agree to make their respective deliveries set forth
below.

(a) At the Closing, Duke Ventures shall deliver, or cause to be delivered, to
the MS Members the following deliveries:

(i) the Crescent Consents marked with an asterisk (*) in Section 4.3(a) of the
Crescent Disclosure Letter;

(ii) the Operating Agreement, duly executed by Duke Ventures;

(iii) the Transition Services Agreement, dated as of the Effective Date, by and
among Duke Energy Business Services LLC and Crescent in the form attached hereto
as Exhibit D (the “Transition Services Agreement”), duly executed by Duke Energy
Business Services LLC and Crescent;

(iv) the Employee Matters Agreement, dated as of the Effective Date, by and
among Duke Parent, CRE, LLC and Crescent in the form attached hereto as Exhibit
E (the “Employee Matters Agreement”), duly executed by Duke Parent and CRE, LLC
and Crescent;

(v) the Agreement Relating to Certain Legacy Land, dated as of the Effective
Date, by and among Holdco, Crescent and Duke Ventures (the “Legacy Land
Agreement”), duly executed by Holdco, Crescent and Duke Ventures, and the Right
of First Offer Agreement, dated as of the Effective Date, by and among Duke
Energy Business Services LLC and Crescent duly executed by Duke Energy Business
Services LLC and Crescent (collectively, the “Legacy Land Agreements”);

(vi) the Title Policies;

(vii) the Assignment and Assumption of Membership Interests relating to the
transfer of the Purchased Interests from Duke Ventures to the MS Members, dated
as of the Effective Date, by and among Duke Ventures and the MS Members (the
“Assignment Agreement”), duly executed by Duke Ventures;

(viii) the Landmar Certificate, executed by Edward E. Burr and LandMar
Management, Inc.; and

(ix) a certificate under Section 1445(b)(2) of the Code providing that Duke
Parent is not a foreign person.

(b) At the Closing, the MS Members shall deliver, or cause to be delivered, to
Duke Ventures the following deliveries:

(i) the Operating Agreement, duly executed by each of the MS Members;

(ii) the Legacy Land Agreement, acknowledged by each of the MS Members;

(iii) the Assignment Agreement, duly executed by each of the MS Members; and

(iv) a cash payment equal to the Purchase Price.

(c) At or prior to the Closing, Duke Ventures and the MS Members shall cause
Holdco to make all filings with Governmental Authorities that are necessary in
connection with the formation of Holdco, including the filing of a Certificate
of Formation in the form of Exhibit F with the Secretary of State of the State
of Delaware.

(d) At or prior to the Closing, Duke Ventures and the MS Members shall (i) cause
Crescent to amend and restate its Articles of Organization by filing with the
Secretary of State of the State of Georgia the Amended and Restated Articles of
Organization and (ii) cause Crescent to amend and restate the Limited Liability
Company Agreement of Crescent by entering into the Amended and Restated
Operating Agreement.

(e) Attached hereto as Exhibit G is a calculation of the Purchase Price.

(f) Each of Duke Ventures’ obligation, on the one hand, and the MS Members’
obligation, on the other hand, to make the foregoing closing deliveries set
forth in this Section 2.3, and the other provisions of this ARTICLE II, is
conditioned upon receipt by such Party of the other Party’s foregoing closing
deliveries set forth in this ARTICLE II. Each of the closing deliveries is
deemed to occur in a sequence consistent with the terms of Section 2.2.

Section 2.4 Post-Closing Adjustment of Net Contribution/Distribution Amount.

(a) As promptly as practicable, but no later than thirty (30) days after the
Effective Date, Duke Ventures shall prepare and deliver to the MS Members a
written statement setting forth the final Net Contribution/Distribution Amount
together with a certificate of Duke Ventures that such statement has been
prepared in good faith in accordance with the requirements of this Agreement and

 

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shall provide the MS Members with a written copy of such statement, along with
reasonable supporting information and calculations (the “Net
Contribution/Distribution Amount Determination”).

(b) The MS Members shall have thirty (30) days following receipt of the Net
Contribution/Distribution Amount Determination (the “Net
Contribution/Distribution Amount Review Period”) to review the Net
Contribution/Distribution Amount Determination. During such 30-day period the MS
Members and its auditors shall be permitted to review the working papers
relating to the Net Contribution/Distribution Amount Determination. If the MS
Members object to the Net Contribution/Distribution Amount Determination, then
the MS Members shall provide Duke Ventures written notice thereof within thirty
(30) days after receiving the Net Contribution/Distribution Amount
Determination, specifying the specific matters in dispute (the “Net
Contribution/Distribution Amount Dispute Notice”). If the Parties are unable to
agree on the Net Contribution/Distribution Amount within 30 days following
delivery of Net Contribution/Distribution Amount Dispute Notice, the Parties
shall, within five days after the expiration of the foregoing 30-day period,
mutually agree upon and engage an audit partner at an Independent Accounting
Firm (the “Accounting Expert”) to resolve such dispute as provided below;
provided, however, that if the MS Members and Duke Ventures are unable to agree
upon and engage such Accounting Expert within such five-day period, then either
Party may submit to the AAA the responsibility for the selection of the
Accounting Expert, which selection shall be final and binding on both Parties;
and provided, further, that if the Accounting Expert from an Independent
Accounting Firm is unable or unwilling to serve as the Accounting Expert, an
Accounting Expert may be chosen from such other nationally recognized
independent certified public accounting firm as the Parties may mutually agree
or as the AAA shall select. The Parties shall refer such dispute to the
Accounting Expert, which shall make a final and binding determination as to all
matters in dispute (and only such matters) and thus the Net
Contribution/Distribution Amount on a timely basis and promptly shall notify the
Parties in writing of its resolution (the “Auditor’s Net
Contribution/Distribution Amount Determination”). The Accounting Expert shall
not have the power to modify or amend any term or provision of this Agreement.
The determination of the Accounting Expert shall be final and binding on the
Parties and may be entered and enforced in any court having proper jurisdiction.
Crescent shall bear the fees and other costs charged by the Accounting Expert.
If the MS Members do not object to the Net Contribution/Distribution Amount
Determination within the time period and in the manner set forth in the first
sentence of this Section 2.4(b), or if the MS Members accept the Net
Contribution/Distribution Amount Determination, then in each case the Net
Contribution/Distribution Amount as set forth in the Net
Contribution/Distribution Amount Determination shall become final and binding
upon the Parties for all purposes hereunder.

(c) Following the end of the Net Contribution/Distribution Amount Review Period
(if timely Net Contribution/Distribution Amount Dispute Notice is not given), or
upon the resolution of all matters set forth in the Net
Contribution/Distribution Amount Dispute Notice by the mutual agreement of the
Parties or by the issuance of an Auditor’s Net Contribution/Distribution Amount
Determination, there shall be an adjustment equal to the amount by which (if
any) the Net Contribution/Distribution Amount, as finally determined pursuant to
this Section 2.4 (the “Final Net Contribution/Distribution Amount”), is greater
(expressed as a positive number) or less (expressed as a negative number) than
the Estimated Net Contribution/Distribution Amount. If the Final Net
Contribution/Distribution Amount exceeds the Estimated Net
Contribution/Distribution Amount, then the MS Members shall pay, or shall cause
one of its Affiliates to pay, to Duke Ventures an amount equal to 49% of such
excess (together with interest thereon at the rate of 8% per annum from the
Effective Date to and including the date paid) within five (5) Business Days
after such final determination. Alternatively, if the Estimated Net
Contribution/Distribution Amount exceeds the Final Net Contribution/Distribution
Amount, then Duke Ventures shall pay, or shall cause one of its Affiliates to
pay, to the MS Members an aggregate amount equal to 49% of such excess (together
with interest thereon at the rate of 8% per annum from the Effective Date to and
including the date paid) within five (5) Business Days after final determination
of the Net Contribution/Distribution Amount.

 

ARTICLE III

REPRESENTATIONS AND WARRANTIES OF DUKE VENTURES

 

Concurrently with the execution and delivery of this Agreement, Duke Ventures
has delivered to the MS Members a letter (the “Duke Disclosure Letter”) setting
forth, among other things, items the disclosure of which is necessary or
appropriate either in response to an express disclosure requirement contained in
a provision hereof or as an exception to one or more of Duke Ventures’
representations or warranties contained in this ARTICLE III. Duke Ventures
represents and warrants to the MS Members as follows:

Section 3.1 Organization. Duke Ventures is a limited liability company duly
organized, validly existing and in good standing under the Laws of the state of
Nevada. Duke Ventures is duly qualified or licensed to do business in each other
jurisdiction where the nature of the business conducted by it or the character
or location of its Assets and the actions to be performed by it hereunder makes
such qualification or licensing necessary, except in those jurisdictions where
the failure to be so qualified or licensed would not reasonably be expected to
result in a material adverse effect on Duke Ventures’ ability to perform such
actions hereunder.

Section 3.2 Authority. Duke Ventures has all requisite limited liability company
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder and has the authority to execute, deliver and perform the
other documents and agree -

 

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ments contemplated hereby to be executed, delivered and performed by it. The
execution and delivery by Duke Ventures of this Agreement, and the performance
by Duke Ventures of its obligations hereunder, have been duly and validly
authorized by all necessary limited liability company action. This Agreement has
been duly and validly executed and delivered by Duke Ventures and constitutes
the legal, valid and binding obligation of Duke Ventures enforceable against
Duke Ventures in accordance with its terms, subject to the effect of any general
principles of equity, whether applied in a court of law or a court of equity,
and by bankruptcy, insolvency and similar Laws affecting creditors’ rights and
remedies generally, including all Laws relating to fraudulent transfers.

Section 3.3 No Conflicts. The execution and delivery by Duke Ventures of this
Agreement, the performance by Duke Ventures of its obligations hereunder and the
consummation of the transactions contemplated in this Agreement do not
(a) conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the Charter Documents of Duke Ventures,
(b) (i) conflict with, violate or breach any material term or provision of any
Law applicable to Duke Ventures or (ii) require any material consent or approval
of any Governmental Authority or material notice to, or material declaration,
filing or registration with, any Governmental Authority under any Law or
judgment applicable to Duke Ventures, or (c) conflict with or result in a
violation or breach of any of the terms, conditions or provisions of any
indenture, mortgage, deed of trust, agreement, instrument, order, arbitration
award, judgment, decree or Contract, except in the cases of (b) and (c) above as
would not reasonably be expected to have a material adverse effect on Duke
Ventures’ ability to perform its obligations hereunder.

Section 3.4 Claims. Except as set forth in Section 3.4 of the Duke Disclosure
Letter, no Claim is pending or, to Duke Ventures’ Knowledge, has been threatened
against Duke Ventures that seeks a writ, judgment, order or decree restraining,
enjoining or otherwise prohibiting or making illegal any of the transactions
contemplated by this Agreement.

Section 3.5 Brokers. Except as provided in this Agreement, none of Duke Ventures
or any of the Non-Crescent Affiliates has any liability or obligation to pay
fees or commissions to any broker, finder or agent with respect to the
transactions contemplated by this Agreement for which the MS Members, their
Affiliates, Holdco or Crescent or any Crescent Subsidiary could become liable or
obligated.

Section 3.6 Ownership.

(a) Duke Ventures owns one hundred percent (100%) of the Crescent Membership
Interests free and clear of all Liens other than those (a) arising pursuant to
this Agreement or the Charter Documents of Crescent or (b) for Taxes that would
constitute a Permitted Lien under clause (a) of the definition thereof. The
issuance of the Crescent Membership Interests was duly authorized by Crescent,
and the Crescent Membership Interests are not subject to any voting agreements
or any Contracts restricting or otherwise relating to the voting, distribution
or disposition of such Crescent Membership Interests, other than those arising
hereunder or pursuant to the Charter Documents of Crescent.

(b) Duke Ventures owns the Purchased Interests free and clear of all Liens other
than those arising pursuant to this Agreement or the Operating Agreement. The
issuance of the Purchased Interests was duly authorized by Holdco, and the
Purchased Interests are not subject to any voting agreements or any Contracts
restricting or otherwise relating to the voting, distribution or disposition of
such Purchased Interests, other than those arising hereunder or pursuant to the
Operating Agreement.

Section 3.7 No Other Representation. Except as expressly set forth in this
Agreement, neither Duke Ventures, its Representatives nor any other Person has
made any representation or warranty, expressed or implied, to the MS Members as
to any matter relating to Duke Ventures, Crescent, the Crescent Subsidiaries or
the transactions contemplated by this Agreement, including as to the accuracy or
completeness of any information regarding Duke Ventures, Crescent or the
Crescent Subsidiaries furnished or made available to the MS Members and their
Representatives, including any information, documents or material made available
to the MS Members in any physical or electronic “data rooms,” management
presentations or in any other form in connection with the other transactions
contemplated by this Agreement.

 

ARTICLE IV

REPRESENTATIONS AND WARRANTIES OF CRESCENT

 

Concurrently with the execution and delivery of this Agreement, Crescent has
delivered to the MS Members a letter (the “Crescent Disclosure Letter”) setting
forth, among other things, items the disclosure of which is necessary or
appropriate either in response to an express disclosure requirement contained in
a provision hereof or as an exception to one or more of Crescent’s
representations or warranties contained in this ARTICLE IV. Crescent represents
and warrants to the MS Members as follows:

Section 4.1 Organization. Each of Crescent and the Crescent Subsidiaries is a
corporation, limited partnership, limited liability company or other entity duly
organized, validly existing and in good standing (in each instance where such
concepts are legally applicable) under the Laws of the jurisdiction of its
organization and has the requisite corporate, limited company, partnership,
limited liability company or other entity (as the case may be) power and
authority to own, lease and operate its properties and to carry on its business
as it is now being conducted. Each of Crescent and the Crescent Subsidiaries is
duly licensed or qualified in all material respects to do business

 

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in each jurisdiction (whether federal, state, provincial, territorial, local or
foreign) in which the nature of the Business or the character or location of the
Real Property and its Assets makes such licensing or qualification necessary.

Section 4.2 Authority. Crescent has all requisite limited liability company
power and authority to execute and deliver this Agreement and to perform its
obligations hereunder. The execution and delivery by Crescent of this Agreement,
and the performance by Crescent of its obligations hereunder, have been duly and
validly authorized by all necessary limited liability company action. This
Agreement has been duly and validly executed and delivered by Crescent and
constitutes the legal, valid and binding obligation of Crescent enforceable
against Crescent in accordance with its terms, subject to the effect of any
general principles of equity, whether applied in a court of law or a court of
equity, and by bankruptcy, insolvency and similar Laws affecting creditors’
rights and remedies generally, including all Laws relating to fraudulent
transfers.

Section 4.3 No Conflicts. The execution and delivery by Crescent of this
Agreement, the performance by Crescent of its obligations hereunder and the
consummation of the transactions contemplated in this Agreement do not
(a) subject to receipt of those consents set forth in Section 4.3(a) of the
Crescent Disclosure Letter (the “Crescent Consents”), (i) conflict with or
result in a violation or breach of any of the terms, conditions or provisions of
the Charter Documents of Crescent, or any Crescent Subsidiary, (ii) trigger any
“change of control”, buy-sell, buy-out, right of first offer or refusal or
termination rights or remedies, give rise to any Lien (other than any Permitted
Lien) or accelerate any rights or remedies thereunder, or (iii) violate or
result in a default (or give rise to any right of termination, cancellation or
acceleration or the creation of any Lien (other than any Permitted Lien)) under
any Material Contract, or (b) (i) conflict with, violate or breach any material
term or provision of any Law or judgment applicable to Crescent or any Crescent
Subsidiary or (ii) require any material consent or approval of any Governmental
Authority or material notice to, or material declaration, filing or registration
with, any Governmental Authority under any Law applicable to Crescent or any
Crescent Subsidiary, except in the cases of (a)(ii), (a)(iii), and (b) above as
would not reasonably be expected to have a Material Adverse Effect or a material
adverse effect on Crescent’s ability to perform its obligations hereunder.

Section 4.4 Claims; Orders. Except as set forth in Section 4.4 of the Crescent
Disclosure Letter, no Claim is pending or, to Crescent’s Knowledge, has been
threatened against Duke Ventures, Crescent or any Crescent Subsidiary, including
any Claim that seeks a writ, judgment, order or decree restraining, enjoining or
otherwise prohibiting or making illegal any of the transactions contemplated by
this Agreement. There are no judgments, orders, decrees or injunctions imposed
upon or otherwise affecting Crescent or the Crescent Subsidiaries or any of
their respective Assets.

Section 4.5 Brokers. Except as provided in this Agreement, none of Duke
Ventures, Crescent or any of the Crescent Subsidiaries has any liability or
obligation to pay fees or commissions to any broker, finder or agent with
respect to the transactions contemplated by this Agreement for which the MS
Members, their Affiliates, Holdco, Crescent or any Crescent Subsidiary could
become liable or obligated.

Section 4.6 Capitalization.

(a) The Crescent Membership Interests are the only authorized, issued or
outstanding membership interests or securities of Crescent, including any
securities or membership interests convertible therein to or exchangeable
therefor. Duke Ventures is not in default under any of the Charter Documents of
Crescent. Crescent is not a party to any agreement for the purchase,
subscription, allotment or issue of any unissued interests, units or other
securities (including convertible securities, warrants or convertible
obligations of any nature) or for the purchase or redemption of any outstanding
interests, units or other securities of Crescent other than those set forth in
Section 4.6(a) of the Crescent Disclosure Letter or arising hereunder or arising
pursuant to the Charter Documents of Crescent.

(b) Each outstanding share of capital stock (or other unit of equity interest)
of each Crescent Subsidiary is duly authorized, validly issued, fully paid and
nonassessable (where such concepts are legally applicable) and was issued free
of preemptive (or similar) rights, and, except as set forth in Section 4.6(b)(i)
of the Crescent Disclosure Letter, each such share, unit or other equity
interest is owned by Crescent and/or by one or more wholly owned Crescent
Subsidiaries, free and clear of all options, rights of first refusal,
agreements, limitations on Crescent’s or, except as set forth in the applicable
Charter Documents any Crescent Subsidiary’s voting, dividend or transfer rights,
charges and other encumbrances or Liens of any nature whatsoever. None of
Crescent or any Crescent Subsidiaries is a party to any agreement for the
purchase, subscription, allotment or issue of any unissued interests, units or
other securities (including convertible securities, warrants or convertible
obligations of any nature) or for the purchase or redemption of any outstanding
interests, units or other securities of such Crescent Subsidiary other than
those set forth in Section 4.6(a) of the Crescent Disclosure Letter or arising
pursuant to the Charter Documents of such Crescent Subsidiary. Sections
4.6(b)(ii) and 4.6(b)(iii) of the Crescent Disclosure Letter set forth (w) a
true and complete list of all Crescent Subsidiaries, (x) the jurisdiction of
organization of each Crescent Subsidiary and all jurisdictions in which it is
licensed or qualified to do business, (y) the ownership of all outstanding
equity interests in the Crescent Subsidiaries that are held by Crescent or any
Crescent Subsidiary, and (z) a true and complete list of all other Persons in
which Crescent or any Crescent Subsidiary owns an equity interest (the “Other
Interests”), and, to Crescent’s Knowledge, the owners of all other outstanding
equity interests in such Persons. For each Crescent Subsidiary, there are no
voting trusts or other agreements to which such Crescent Subsidiary, Crescent or
any other Crescent

 

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Subsidiary is a party or to which any of them are bound relating to the voting
of the equity capital interests in such Crescent Subsidiary, other than the
Charter Documents of such Crescent Subsidiary. Except for the capital stock of,
or other equity interests in, the Crescent Subsidiaries disclosed in
Section 4.6(b)(ii) of the Crescent Disclosure Letter and the Other Interests
described in Section 4.6(b)(iii) of the Crescent Disclosure Letter, neither
Crescent nor any Crescent Subsidiary owns any stock or other ownership or equity
interest in any Person. Neither Crescent nor any Crescent Subsidiary has
violated any provision of any organizational documents governing or otherwise
relating to its rights in any Other Interests that would constitute a Material
Adverse Effect.

(c) Crescent has provided or made available to the MS Members a complete and
accurate copy of the Charter Documents for Crescent and each Crescent
Subsidiary. Each Charter Document is in full force and effect, and no other
documents, instruments, agreements or certificates are in effect that govern the
relative rights and obligations of the shareholders, partners or members in
those capacities, as applicable, of any of the Crescent Subsidiaries. Neither
Crescent nor any Crescent Subsidiary is in material breach of, or material
default under, any Crescent Subsidiary Charter Document, and no event has
occurred that, with the giving of notice or the passage of time, or both, would
constitute a material default by Crescent or any Crescent Subsidiary under any
Crescent Subsidiary Charter Document (other than the Charter Document of a
Crescent Subsidiary directly or indirectly wholly owned by Crescent), and
neither Crescent nor any Crescent Subsidiary has given written notice to, or
received any written notice that, any third party is in material breach of, or
material default under, any of the Crescent Subsidiary Charter Documents.

(d) Section 4.6(d) of the Crescent Disclosure Letter sets forth the amount of
funds advanced by Crescent or the applicable Crescent Subsidiary as of June 30,
2006 (the “Advanced Amounts”) to the entities in respect of the Projects
identified thereon (the “Relevant Projects”) since the initial capitalization of
the Relevant Projects. Crescent or the applicable Crescent Subsidiaries are
entitled to receive distributions (if any) made by the Relevant Projects up to
the applicable portion of the Advanced Amounts made by the applicable Relevant
Project entity before payment of any portion of such distributions (if any) is
made to any other equity holders of such Relevant Projects.

Section 4.7 Financial Statements. Crescent has delivered or made available to
the MS Members (a) the audited consolidated balance sheets of Crescent and the
Crescent Subsidiaries as of December 31, 2005 and December 31, 2004 and the
audited consolidated statements of income, member’s equity and cash flow for the
years ended on such dates, together with the related notes thereto and a report
thereon from Deloitte & Touche LLP, and (b) the unaudited consolidated balance
sheet of Crescent and the Crescent Subsidiaries as of June 30, 2006, and the
unaudited consolidated statements of income, member’s equity and cash flow for
the six (6) months ended on such date (the audited consolidated balance sheet of
Crescent and the Crescent Subsidiaries as of December 31, 2005 being the
“Balance Sheet,” and all of the foregoing being the “Financial Statements”). The
Financial Statements fairly present, in all material respects and in accordance
with GAAP, the financial position, the results of operations and cash flows, as
the case may be, of Crescent, as at the dates and for the periods indicated,
except for the absence of footnotes and for normal year-end adjustments in the
unaudited Financial Statements. None of Crescent or any Crescent Subsidiary has
any liabilities (whether accrued, absolute or contingent), except for
liabilities (i) reflected or reserved against in the Financial Statements,
(ii) disclosed in Section 4.7 or any other Section of the Crescent Disclosure
Letter, (iii) incurred in the ordinary course of business consistent with past
practice since June 30, 2006 and which would not reasonably be expected to
result in a Material Adverse Effect or (iv) arising under any Contract to which
Crescent or any Crescent Subsidiary is a party, but exclusive of any liabilities
arising from a material default by Crescent or any Crescent Subsidiary under any
such Contract.

Section 4.8 Permits; Compliance with Laws. Crescent and the Crescent
Subsidiaries hold all licenses, franchises, registrations, permits and
authorizations (“Permits”) necessary for the ownership of the Assets and lawful
conduct of the Business under and pursuant to applicable Law, and, except as
disclosed on Section 4.8 of the Company Disclosure Letter, are in compliance
with all Laws applicable to Crescent and the Crescent Subsidiaries or by which
any of their respective Assets are bound, except in the cases where the failure
to hold any such Permit or any such noncompliance would not reasonably be
expected to result in a Material Adverse Effect; provided, however, that this
Section 4.8 does not address matters relating to Taxes, which are exclusively
addressed by Section 4.10, matters relating to Environmental Laws, which are
exclusively addressed by Section 4.12, or matters relating to Benefit Plans,
which are exclusively addressed by Section 4.16. The Permits are in full force
and effect, and neither Crescent, nor any Crescent Subsidiary is in default or
violation of any of the Permits, except in the cases where such default or
violation would not reasonably be expected to result in a Material Adverse
Effect.

Section 4.9 Absence of Certain Changes. Except as set forth in Section 4.9 of
the Crescent Disclosure Letter or as contemplated by this Agreement, at all
times after December 31, 2005 through the Effective Date, Crescent and the
Crescent Subsidiaries have operated in the ordinary course of business and there
has not been (nor has Crescent or any Crescent Subsidiary committed to take any
action that could result in):

(a) any event which would reasonably be expected to result in a Material Adverse
Effect;

 

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(b) any increase in compensation (including severance or termination pay)
payable to or to become payable to any consultants, officers, directors,
employees or agents working in connection with the Business or any change in any
insurance, pension or other benefit plan, payment or arrangement made to, for or
with any of such consultants, officers, directors, employees or agents, in each
case other than increases that are in accordance with past practice and are not
material in the aggregate;

(c) any hiring or employment, or termination of employment of any officer or
employee of Crescent or any Crescent Subsidiary making in excess of $150,000 per
annum of total compensation;

(d) any change in financial accounting methods, principles or practices by
Crescent which materially affects its Assets, liabilities or Business, except
insofar as may have been required by a change in GAAP or as would not reasonably
be expected to result in a Material Adverse Effect;

(e) any indebtedness for borrowed money incurred by Crescent or any Crescent
Subsidiary or any issuance of debt securities by Crescent or any Crescent
Subsidiary or the creation of any Lien related to a third-party financing (other
than (i) a Permitted Lien or (ii) the Liens contemplated by the New Debt
Financing) against any of Crescent’s Assets;

(f) any damage, destruction, or loss (whether or not covered by insurance)
experienced by Crescent or any Crescent Subsidiary with respect to their
respective Assets, where the cost to repair, replace or restore such Assets
exceeds $5,000,000;

(g) any amendment of the Charter Documents of Crescent or any Crescent
Subsidiary or the liquidation, dissolution or other winding up of Crescent or
any Crescent Subsidiary or the merger or consolidation with any other Person or
any amendment of any term of any outstanding security of Crescent or any
Crescent Subsidiary;

(h) any issuance, sale, pledge, disposition of or creation of any Lien on any
shares of any class of capital stock or other equity interest of Crescent or any
Crescent Subsidiary or any options, warrants, convertible securities or other
rights of any kind to acquire any shares of such capital stock or any other
equity interest of Crescent or any Crescent Subsidiary;

(i) any material capital expenditure other than (i) pursuant to the terms of any
existing Contract, including tenant improvements required under existing
Commercial Leases; (ii) capital expenditures in the ordinary course of business
and consistent with past practice or current development plans; (iii) any other
capital expenditure not exceeding $250,000 individually or $5,000,000 in the
aggregate; and (iv) capital expenditures in accordance with the annual budget of
Crescent or any project budget for any Project;

(j) any acquisition (by merger, consolidation, acquisition of entity interests
or assets or any other business combination or by entering into an option to
acquire or by exercising an option or other right or election) of (1) any
corporation, partnership, limited liability company, joint venture or other
business organization or property exceeding $1,000,000 or (2) any real property
exceeding $1,000,000;

(k) any sale, lease, transfer or disposition of any of the Assets of Crescent or
the Crescent Subsidiaries having a book value in excess of $5,000,000, in each
case other than (1) pursuant to the terms of any existing Contract;
(2) Commercial Leases other than Material Leases; (3) sales of Legacy Land,
sales of parcels that are not divided into lots in a Project, and bulk sales of
lots in a Project, in a single transaction or series of related transactions,
less than $5,000,000; (4) sales of single-family residential lots or condominium
units to homeowners in the ordinary course of business and (5) as disclosed to
the MS Members in management presentations prior to the Effective Date;

(l) any new, or change in any existing, material election with respect to Taxes;

(m) any failure to maintain in full force and effect the existing material
insurance policies or to replace such insurance policies with comparable
insurance policies covering Crescent, the Crescent Subsidiaries and their
respective properties, assets and businesses;

(n) any new or amended agreement or arrangement with Duke Parent or any
Affiliate of Duke Parent or Crescent;

(o) any waiver, release, assignment, settlement or compromise of any pending or
threatened action or claim other than settlements or compromises for litigation
(other than any litigation described in the definition of Lake Mary
Environmental Condition) where the amount paid (after reduction by any insurance
proceeds actually received) does not exceed $500,000 in the aggregate; or

(p) any agreement or commitment to do any of the foregoing.

Section 4.10 Taxes. Except as set forth in Section 4.10 of the Crescent
Disclosure Letter:

(a) (i) each of Crescent and the Crescent Subsidiaries (each a “Relevant Entity”
and collectively, the “Relevant Entities”) and, to Crescent’s Knowledge, each
other entity in which Crescent has a direct or indirect interest (collectively,
with the Relevant Entities, the “Subsidiary Entities”, and each of them, a
“Subsidiary Entity”) is and has been classified either as a partnership or a
disregarded entity for U.S. federal income tax purposes since the later of
December 31, 2004 or its inception, (ii) no election has been filed with any
U.S. federal or state Tax authority electing to treat any Relevant Entity or, to
Crescent’s Knowledge, any Subsidiary Entity, as an entity other than a
partnership or disregarded entity for U.S. federal or state income tax purposes,
and

 

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(iii) each Relevant Entity and, to Crescent’s Knowledge, each Subsidiary Entity,
that is required to file a partnership Tax return has filed Tax returns as a
partnership for U.S. federal or state income tax purposes since the date it was
required to do so, and to Crescent’s Knowledge, no partner or member nor any Tax
authority has taken a position inconsistent with such treatment.

(b) Duke Ventures and each Relevant Entity have accurately prepared in all
material respects and filed or caused to be filed in a timely manner (within any
applicable extension periods) all material Tax returns required to be filed by
the Code or by applicable state, local or foreign tax laws. All material Taxes
of Duke Ventures and each Relevant Entity shown as due and payable on such Tax
returns have been timely paid in full to the respective Tax authority or have
been properly accrued and will be timely paid in full by the due date thereof.

(c) No material Tax return of a Relevant Entity is under audit or examination by
any Tax authority and no written notice of an intention to commence such an
audit or examination of a Relevant Entity or, to Crescent’s Knowledge, a
Subsidiary Entity has been received from any Tax authority by Duke Ventures,
Crescent or the Relevant Entities. There are no outstanding agreements extending
or waiving the statutory period of limitations applicable to any material Tax
return of a Relevant Entity and no request for any such waiver or extension is
currently pending.

(d) No Relevant Entity has any material liability for the Taxes of any Person
other than itself (i) under Treasury Regulations Section 1.1502-6 (or any
similar provisions of state, local or foreign law), (ii) as a transferee or
successor, or (iii) by Contract.

(e) None of the Relevant Entities has engaged in any transaction that has given
rise to or could be reasonably expected to give rise to (i) a disclosure
obligation with respect to any Person under Section 6111 of the Code, the
regulations promulgated thereunder, and published tax administrative guidance as
of the Effective Date, (ii) a list of maintenance obligations with respect to
any Person under Section 6112 of the Code, the regulations promulgated
thereunder, and published tax administrative guidance as of the Effective Date,
or (iii) a disclosure obligation as a “reportable transaction” under
Section 6011 of the Code, the regulations promulgated thereunder, and published
tax administrative guidance as of the Effective Date.

(f) None of the Relevant Entities is party to or bound by any material tax
sharing agreement, tax indemnity obligation or similar agreement with respect to
Taxes.

(g) Duke Ventures and all of the Relevant Entities have in all material
respects, properly withheld and remitted to the proper Tax authority all
material Taxes required to be withheld with respect to amounts paid or owed to
any employee, independent contractor, partner, member, creditor, or other
Person.

(h) Duke Ventures and Crescent are not “foreign persons” for purposes of
Section 1445 of the Code.

(i) None of Duke Ventures, Crescent or any Crescent Subsidiary has requested or
received any private letter ruling from the IRS or comparable ruling from any
other Tax authority.

(j) None of the Relevant Entities has outstanding a power of attorney with
respect to U.S. federal income Taxes on Form 2848.

(k) Duke Ventures has made available to the MS Members true and correct copies
of all material federal, state and local Tax returns filed by the Relevant
Entities on which the statute of limitations has not expired.

(l) The transactions contemplated by this Agreement will not cause a
“termination” of any of the Subsidiary Entities for purposes of Section 708(b)
of the Code which would be prohibited under any Contract or under any Charter
Document of a Subsidiary Entity and would result in a material liability
thereunder.

Section 4.11 Contracts.

(a) Excluding Contracts pursuant to which neither Crescent nor any Crescent
Subsidiary, nor any of their respective Assets, will be bound or have liability
after the Closing, and excluding Benefit Plans, Section 4.11(a) of the Crescent
Disclosure Letter sets forth a list as of the Effective Date of the following
Contracts to which Crescent or any Crescent Subsidiary is a party or by which
their respective Assets may be bound (the Contracts listed in Section 4.11(a) of
the Crescent Disclosure Letter that meet the descriptions in Section 4.11(a)
being collectively, the “Material Contracts”):

(i) each Contract under which Crescent or any Crescent Subsidiary has incurred,
assumed or guaranteed any outstanding indebtedness for borrowed money (excluding
performance or surety bonds incurred in the ordinary course of business) or any
material capitalized lease obligation, or under which any of their material
Assets are subjected to a Lien securing outstanding indebtedness for borrowed
money;

(ii) each Contract with Duke Ventures or any Non-Crescent Affiliate;

(iii) each Contract that purports by its terms to materially limit the freedom
of Crescent or any Crescent Subsidiary, or, to Crescent’s Knowledge, any of
their officers, to compete in, or conduct, any line of business or in any
geographic area, other than “radius clauses” in shopping center leases entered
into in the ordinary course of business, none of which would reasonably be
expected to result in a Material Adverse Effect;

 

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(iv) each Contract entered into after January 1, 2003 pursuant to which Crescent
or any Crescent Subsidiary has material continuing indemnification, earn-out or
contingent payment obligations, pursuant to which the maximum liability is
reasonably likely to exceed $500,000, excluding any Contract relating to the
sale of Real Property entered into after such time;

(v) each Charter Document of a Crescent Subsidiary (other than Crescent
Subsidiaries directly or indirectly wholly owned by Crescent) and of any Person
relating to the Other Interests;

(vi) each Contract (or group of Contracts entered into in connection with the
same capital expenditure or acquisition of fixed assets) for capital
expenditures or the acquisition of fixed assets requiring aggregate future
payments by Crescent or any Crescent Subsidiary in excess of $5,000,000 other
than Contracts for purchase of Real Property;

(vii) each Contract (or group of Contracts entered into in connection with the
same lease) for the lease of any Real Property by Crescent or a Crescent
Subsidiary as landlord of (A) 5,000 rentable square feet or more for retail use
or (B) 10,000 rentable square feet or more leased for any other use (a “Material
Lease”);

(viii) each Contract (or group of Contracts entered into in connection with the
same lease) for the lease of over 5,000 rentable square feet of Real Property to
Crescent or a Crescent Subsidiary as tenant;

(ix) each Contract (or group of Contracts entered into in connection with the
same lease) for the lease of personal property or equipment to or from any
Person providing for lease payments in excess of $250,000 per annum;

(x) each Contract (or group of such Contracts entered into in connection with
the same transaction) for the sale of Real Property entered into since
December 31, 2004, other than (A) sales of single-family residential lots and
condominium units to homeowners in the ordinary course of business and (B) sales
of Legacy Land, sales of parcels that are not divided into lots in a Project,
and bulk sales of lots in a Project, in a single transaction or series of
related transactions, less than $5,000,000, none of which would reasonably be
expected to result in a Material Adverse Effect;

(xi) each Contract (or group of such Contracts entered into in connection with
the same purchase) for the purchase by Crescent or any Crescent Subsidiary of
Real Property entered into after December 31, 2005, other than any purchase of
parcels of Real Property not greater than $1,000,000;

(xii) each Contract (or group of related Contracts) for the purchase or sale of
supplies, products or other personal property by Crescent or any Crescent
Subsidiary requiring payments in excess of $500,000, other than Contracts
terminable without penalty upon sixty (60) days or less prior written notice;

(xiii) each Contract (or group of related Contracts) for the furnishing or
receiving of services, including management, operating, listing, brokerage,
supply, leasing, construction management, marketing, advertising and maintenance
agreements which require annual payments by Crescent in excess of $250,000 or
which may result in total payments by or liability of Crescent or any Crescent
Subsidiary in excess of $1,000,000, other than Contracts terminable without
penalty upon sixty (60) days or less prior written notice or Contracts entered
into in the ordinary course of business with respect to any Project that are
included in the project budget for such Project;

(xiv) each Contract relating to the development or construction of any Real
Property, including Contracts for the future funding of streets, sewer and water
lines, drainage facilities and similar infrastructure necessary for the
continued development of any Real Property, any subsisting master plan,
development order or other similar land development or planning document, but
only if such Contract provides for aggregate remaining payment or performance
obligations of Crescent or any Crescent Subsidiary reasonably expected to cost
in excess of $5,000,000;

(xv) each Contract (other than any Charter Documents) that provides for any
indemnification by or between Crescent or any Crescent Subsidiary, on the one
hand, and any manager or officer or director of Crescent or any Crescent
Subsidiary, on the other hand;

(xvi) each consulting services Contract of an individual providing for annual
fees in excess of $100,000 and each Contract of employment;

(xvii) each Contract that provides for any payment or benefit (or acceleration
thereof), termination or renegotiation rights upon consummation of the
transactions contemplated hereby;

(xviii) each Contract (or group of Contracts entered into with respect to the
same facilities) relating to off-site facilities necessary or desirable for the
ownership, development, operation or resale of any Real Property, including
environmental land banks, parking facilities, access easements, beach use and/or
access, golf, or any other Project amenity, other than Contracts which are not
reasonably expected to result in total payments by or liability of Crescent or
any Crescent Subsidiary greater than $500,000 per annum per Project; and

(xix) each other Contract (or group of Contracts entered into in connection with
the same matter or undertaking), other than Contracts for the purchase of Real
Property, not described above which would reasonably be expected to result in
(A) total

 

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payments by or liability of Crescent or any Crescent Subsidiary or (B) total
payments to Crescent or any Crescent Subsidiary, in each case in excess of
$5,000,000 over the term of the Contract, other than Contracts terminable
without penalty upon thirty (30) days or less prior written notice.

(b) Section 4.11(b) of the Crescent Disclosure Letter sets forth a list of all
letters of credit, performance or surety bonds, cash deposits or similar items
issued or procured by Duke Ventures or any Non-Crescent Affiliate to any Person
for the account of Crescent or any Crescent Subsidiary outstanding as of the
Effective Date (each, a “Credit Support Instrument”).

(c) Crescent has delivered to the MS Members or otherwise made available to the
MS Members true and complete copies of all Material Contracts, including any
amendment thereto. Each Material Contract is a legal, valid and binding
obligation of Crescent or Crescent Subsidiary party thereto enforceable against
Crescent or such Crescent Subsidiary in accordance with its terms, subject to
the effect of any general principles of equity, whether applied in a court of
law or a court of equity, and by bankruptcy, insolvency and similar Laws
affecting creditors’ rights and remedies generally, including all Laws relating
to fraudulent transfers. Neither Crescent nor any Crescent Subsidiary is in
breach or default under any Material Contract to which it is a party, except any
such breach or default that would not reasonably be expected to result in a
Material Adverse Effect. To Crescent’s Knowledge, no other party to any of the
Material Contracts is in breach or default thereunder, except for any such
breach or default that would not reasonably be expected to result in a Material
Adverse Effect.

Section 4.12 Environmental Matters.

(a) Section 4.12(a) of the Crescent Disclosure Letter sets forth a list of all
the reports of material environmental investigations conducted on any portion of
the Real Property that are in the possession of Crescent or any Crescent
Subsidiary, and true and complete copies of all such environmental reports have
been delivered or made available to the MS Members.

(b) Except as set forth in Section 4.12(b) of the Crescent Disclosure Letter,
(i) Crescent and the Crescent Subsidiaries are in compliance with Environmental
Laws and have obtained or timely applied for all permits required by
Environmental Laws; (ii) none of Crescent or the Crescent Subsidiaries has
received any written notice of any material Claims under any Environmental Laws
that are currently outstanding, and, to Crescent’s Knowledge, no such Claims are
threatened against Crescent or any Crescent Subsidiary by any Person;
(iii) there is no site to which Crescent or any Crescent Subsidiary has
transported or arranged for the transport of Hazardous Materials associated with
the Business that, to Crescent’s Knowledge, is the subject of any environmental
action by any Governmental Authority or that would reasonably be expected to
result in a material Claim under any Environmental Laws against Crescent or any
Crescent Subsidiary; and (iv) there has been no Release by Crescent, any
Crescent Subsidiary, Duke Ventures or any Affiliate of Duke Ventures or Crescent
(or, to the Knowledge of Crescent, any other Person) of any Hazardous Material
at or from Real Property owned or operated by Crescent or any Crescent
Subsidiary that would reasonably be expected to result in a material Claim under
any Environmental Laws against Crescent or any Crescent Subsidiary.

(c) Notwithstanding Section 4.12(b), for any individual Real Property site for
which a Phase I environmental site assessment (or the material equivalent
thereof) has not been provided to the MS Members prior to the Effective Date,
the representations and warranties provided in Section 4.12(b) shall not be
qualified with respect to materiality or Knowledge. All of the individual Real
Property sites to which the foregoing sentence applies are listed in
Section 4.12(c) of the Crescent Disclosure Letter, which list shall govern the
applicability of the foregoing sentence.

Section 4.13 Insurance. Section 4.13 of the Crescent Disclosure Letter sets
forth a list of all material insurance policies covering Crescent, the Crescent
Subsidiaries, and their respective tangible Assets or Businesses, other than any
such insurance policies related to Benefit Plans. The insurance policies set
forth in Section 4.13 of the Crescent Disclosure Letter are in full force and
effect. Crescent has delivered to the MS Members or otherwise made available to
the MS Members true and complete copies of all such insurance policies issued to
Crescent or any Crescent Subsidiary in effect as of the Effective Date, and has
made available to the MS Members true and complete copies of all insurance
policies issued to Duke Parent or any Non-Crescent Affiliate and covering
Crescent, the Crescent Subsidiaries or their respective tangible Assets or
Businesses in effect as of the Effective Date listed on Section 4.13(i) of the
Crescent Disclosure Letter. All premiums due and payable under such policies
have been paid, and Crescent is otherwise in material compliance with the terms
and conditions of all such policies. To the Knowledge of Crescent, there is no
threatened termination of any of such policies. As of the Effective Date, there
is no pending claim by Crescent or any Crescent Subsidiary under such policies
which if denied, would have a Material Adverse Effect.

Section 4.14 Intellectual Property. (a) Crescent or a Crescent Subsidiary owns
or has a license or right to use all the Intellectual Property used in the
Business, except as would not reasonably be expected to result in a Material
Adverse Effect.

(b) Except as disclosed in Section 4.14(b) of the Crescent Disclosure Letter,
(i) all Intellectual Property owned by Crescent or a Crescent Subsidiary is held
free and clear of any Liens, except as would not reasonably be expected to
result in a Material Adverse Effect, and Crescent or a Crescent Subsidiary owns
the entire right, title and interest in and to such Intellectual Property;
(ii) to Crescent’s Knowledge the conduct of the Business has not in the past six
(6) years infringed, violated or misappropriated and does

 

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not now infringe, violate or misappropriate the Intellectual Property of any
other Person, in each case except as would not reasonably be expected to result
in a Material Adverse Effect; (iii) to Crescent’s Knowledge no Person has in the
past six (6) years challenged the validity of the Intellectual Property owned by
Crescent or a Crescent Subsidiary, in each case where such act has had, or is
expected to result in, a Material Adverse Effect; (iv) to Crescent’s Knowledge
no Person has in the past six (6) years infringed, violated, or misappropriated
or now infringes, violates or misappropriates the Intellectual Property owned by
Crescent or a Crescent Subsidiary, in each case where such act has had, or is
expected to result in, a Material Adverse Effect; and (v) Crescent and each
Crescent Subsidiary have used reasonable efforts to protect the confidentiality
of all confidential information held by Crescent or a Crescent Subsidiary.

(c) Section 4.14(c) of the Crescent Disclosure Letter lists all patents,
registered trademarks, domain names, and registered copyrights owned by Crescent
or a Crescent Subsidiary. All filing, issue, registration, renewal, maintenance
or other official registry fees due with respect to such patents, domain names,
trademarks, and copyrights have been paid and will be paid until Closing.

Section 4.15 Labor Matters.

(a) Except as described in Section 4.15(a) of the Crescent Disclosure Letter,
there has not occurred, nor to Crescent’s Knowledge has there been threatened, a
labor strike or dispute, unfair labor practice complaints, request for
representation, organizing campaign, work stoppage, slowdown or lockout
involving employees of Crescent or any Crescent Subsidiary in the past two
(2) years, except any such events or occurrences that would not reasonably be
expected to result in a Material Adverse Effect. There are no charges or
complaints with respect to or relating to any employee of Crescent or any
Crescent Subsidiary pending, or to Crescent’s Knowledge, threatened to be
brought, before the Equal Employment Opportunity Commission, the Department of
Labor, the Occupation Safety and Health Administration or any other federal or
state agency responsible for the prevention of unlawful employment practices,
except any such charges or complaints that would not reasonably be expected to
result in a Material Adverse Effect.

(b) Except as set forth in Section 4.15(b) of the Crescent Disclosure Letter,
neither Crescent nor any Crescent Subsidiary is, or at any time has been, a
party to any collective bargaining agreement or other labor union agreements
applicable to Persons employed by Crescent or any Crescent Subsidiary, nor is
any such collective bargaining agreement being negotiated.

(c) There are no material claims by any employees of either Crescent or any
Crescent Subsidiary pending, or to Crescent’s Knowledge, threatened against
Crescent or any Crescent Subsidiary for indemnification under any
indemnification agreements of Crescent or any of the Crescent Subsidiaries which
are not covered by insurance.

Section 4.16 Employee Benefits.

(a) Section 4.16(a) of the Crescent Disclosure Letter sets forth a true and
complete list of all material employee benefit plans (as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended (“ERISA”)),
all material bonus, stock option, stock purchase, restricted stock, incentive,
deferred compensation, retiree medical or life insurance, supplemental
retirement, severance or other benefit plans, programs or arrangements, and all
material employment, termination, severance or other Contracts or commitments to
which Crescent or any Crescent Subsidiary is a party, or which are maintained,
contributed to or sponsored by Duke Parent, Duke Ventures, Crescent or any
Crescent Subsidiary for the benefit of any current or former employee,
consultant, officer or director of Crescent or any Crescent Subsidiary
(collectively, the “Benefit Plans”). Crescent or Duke Ventures has made
available to the MS Members a true and complete copy (where applicable) of
(i) each Benefit Plan (or, where a Benefit Plan has not been reduced to writing,
a summary of all material terms of such Benefit Plan), (ii) each trust or
funding arrangement prepared in connection with each such Benefit Plan,
(iii) the most recently filed annual report on Internal Revenue Service (“IRS”)
Form 5500 or any other annual report required by applicable Law, (iv) the most
recently received IRS determination letter, if any, for each such Benefit Plan,
(v) the most recently prepared actuarial report and financial statement in
connection with each such Benefit Plan, and (vi) the most recent summary plan
description, any summaries of material modifications and any employee handbooks
concerning the extent of the benefits provided under a Benefit Plan. Except as
set forth in Section 4.16(a) of the Crescent Disclosure Letter, none of Duke
Parent, Duke Ventures, Crescent nor any Crescent Subsidiary has any plan or
commitment to establish any new material Benefit Plan or to materially modify
any Benefit Plan with respect to any current or former employee, consultant,
officer or director of Crescent or any Crescent Subsidiary.

(b) Except as set forth in Section 4.16(b) of the Crescent Disclosure Letter,
none of Crescent or any Crescent Subsidiary or any other Person or entity that,
together with Crescent or any Crescent Subsidiary, is treated as a single
employer under Section 414(b), (c), (m) or (o) of the Code (each, together with
Crescent and any Crescent Subsidiary, an “ERISA Affiliate”), contributes to,
sponsors or maintains (i) a pension plan (within the meaning of Section 3(2) of
ERISA) subject to Section 412 of the Code or Title IV of ERISA; (ii) a
multiemployer plan (within the meaning of Section 3(37) or 4001(a)(3) of ERISA
or the comparable provisions of any other applicable Law); or (iii) a single
employer pension plan (within the meaning of Section 4001(a)(15) of ERISA) for
which an ERISA Affiliate would reasonably be expected to incur Liability under
Section 4063 or 4064 of ERISA. Except as set forth in Section 4.16(b) of the
Crescent Disclosure Letter, no Benefit Plan exists that would reasonably be
expected to result in the payment to any present

 

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or former employee, director or consultant of Crescent or any Crescent
Subsidiary of any money or other property or accelerate or provide any other
rights or benefits to any current or former employee, director or consultant of
Crescent or any Crescent Subsidiary as a result of the consummation of the
transactions contemplated in this Agreement (whether alone or in connection with
any other event). Except as set forth in Section 4.16(b) of the Crescent
Disclosure Letter, neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated in this Agreement will (either
alone or in combination with another event) result in any payment or other
benefit that has been or may be made to any current or former employee or
independent contractor of Crescent or any Crescent Subsidiary under any
employment, severance or termination agreement, other compensation arrangement
or employee benefit plan or arrangement with Crescent or any Crescent Subsidiary
to be characterized as an “excess parachute payment,” as such term is defined in
Section 280G of the Code. None of Crescent or any Crescent Subsidiary is a party
to any material Contract or plan pursuant to which it is bound to compensate any
Person for any excise or other additional Taxes paid pursuant to Section 409A or
4999 of the Code or any similar provision of state, local or foreign Law.

(c) Each Benefit Plan has been established and administered in accordance with
its terms, and in compliance with the applicable provisions of ERISA, the Code
and other applicable Laws, except to the extent such noncompliance would not
have a Material Adverse Effect, and, except as set forth in Section 4.16(c) of
the Crescent Disclosure Letter, no Benefit Plan provides post-termination
welfare benefits, and neither Crescent nor any Crescent Subsidiary has any
obligation to provide any post-termination welfare benefits other than for
health care continuation as required by Section 4980B of the Code or any similar
statute.

(d) All contributions (including all employer contributions and employee salary
reduction contributions) or premium payments required to have been made under
the terms of any Benefit Plan, or in accordance with applicable Law, have been
timely made or reflected on Crescent’s financial statements in accordance with
GAAP. No “accumulated funding deficiency” as defined in Section 302 of ERISA or
Section 412 of the Code, whether or not waived, exists with respect to any
Benefit Plan subject to Section 302 of ERISA or Section 412 of the Code and
Crescent is not, and does not expect to be, subject to (i) any requirement to
post security pursuant to Section 412(f) of the Code or (ii) any Lien pursuant
to Section 412(n) of the Code.

Section 4.17 Real Property. Section 4.17 of the Crescent Disclosure Letter sets
forth a complete list and location and ownership status (i.e. owned or leased)
of all Real Property and Crescent or Crescent Subsidiary that owns or leases
each such Real Property. With respect to the Real Property:

(a) Title. Except as set forth in Section 4.17(a) of the Crescent Disclosure
Letter, each of Crescent and each of the Crescent Subsidiaries owns fee simple
title to each parcel of Real Property shown thereon as being owned by it, and a
valid leasehold interest in each parcel of Real Property shown thereon to be
leased by it, in each case free and clear of Liens other than (i) Permitted
Liens and (ii) in the case of leased Real Property, the interest of the lessor
thereof.

(b) Title Policies. Section 4.17(b) of the Crescent Disclosure Letter lists
(i) all fee title insurance policies insuring title of Crescent and the Crescent
Subsidiaries in the Material Properties that are in the possession of Crescent
or the Crescent Subsidiaries and all other fee title insurance policies insuring
title of Crescent and the Crescent Subsidiaries in owned Real Property that are
in the possession of Crescent at its Charlotte, North Carolina headquarters and
(ii) the most current surveys in the possession of Crescent or any Crescent
Subsidiary of the Material Properties and other surveys of owned Real Property
that are in the possession of Crescent at its Charlotte, North Carolina
headquarters, and true and complete copies of all such policies and surveys
(other than maps, surveys and drawings of Legacy Land) have been delivered or
made available to the MS Members.

(c) Options. Except as set forth on Section 4.17(c) of the Crescent Disclosure
Letter, neither Crescent nor any Crescent Subsidiary has granted any unexpired
option agreement, right of first offer, right of first negotiation or right of
first refusal with respect to the purchase of any Real Property or any portion
thereof, other than any Material Contract.

(d) Condemnation. Except as set forth in Section 4.17(d) of the Crescent
Disclosure Letter, none of Crescent or any Crescent Subsidiary has received any
written condemnation notice from a Governmental Authority with respect to any
portion of the Real Property; no condemnation or similar proceedings are pending
with respect to any portion of the Real Property; and to Crescent’s Knowledge,
there are no condemnation or similar proceedings threatened regarding any
portion of the Real Property, excluding in all cases any dedication of Real
Property to a Governmental Authority in connection with or incident to
development activity of Crescent and the Crescent Subsidiaries consistent with
Crescent’s current development plans.

(e) Site and Zoning Approval. All work required to be performed, payments
required to be made and actions required to be taken prior to the Effective Date
pursuant to any Contract entered into with a Governmental Authority in
connection with a site approval, zoning reclassification or other similar action
relating to any Real Property (e.g., local improvement district, road
improvement district, environmental mitigation) have been performed, paid or
taken, as the case may be, other than any such actions the failure of which
would not result in a liability to Crescent or any Crescent Subsidiary in excess
of $500,000.

 

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(f) Real Property Taxes. Except as disclosed on Section 4.17(f) of the Crescent
Disclosure Letter, to Crescent’s Knowledge, all Real Property Taxes are paid in
the ordinary course of business and such payments are reflected in the books and
records of Crescent and the Crescent Subsidiaries.

(g) Project Schedule. Section 4.17(g) of the Crescent Disclosure Letter sets
forth for each Project the following information as of July 1, 2006:

(i) the Project name and location;

(ii) whether such Project comprises predominately (A) commercial property,
(B) multi-family residential property, or (C) single-family residential
property;

(iii) with respect to each Project that includes commercial property: (A) the
status of the construction of the improvements located (or to be located)
thereon and (B) the approximate amount of rentable square feet currently
existing or which will exist upon completion of construction of such Project,
broken down by type (i.e., office, warehouse, industrial or retail);

(iv) with respect to the residential properties included in each Project that
includes single-family residential property, to Crescent’s Knowledge: (A) the
number of lots that are shown on a recorded plat with respect to such Project
and (B) the number of unimproved lots that are currently contemplated to be
created within the remaining acreage of Developable Property in accordance with
the current internal general plan for the continued development of the Project;
and

(v) with respect to each Project that includes multi-family residential
property: (A) the status of the improvements located (or to be located) thereon,
including the total number of currently contemplated condominium units or rental
apartments within the Project; (B) the number of condominium units or apartments
completed; (C) if applicable, the number of condominium units under Contract to
be sold; and (D) if applicable, the number of condominium units remaining to be
sold.

(h) Legacy Land. Section 4.17(h) of the Crescent Disclosure Letter sets forth
the state and county in which each parcel of Legacy Land is located and the
approximate acreage thereof.

(i) Commercial Property. Section 4.17(i) of the Crescent Disclosure Letter sets
forth a rent roll with respect to each Project that is a commercial property;
and such rent roll contains a true and correct list of the leases of space
within such commercial property (the “Commercial Leases”), and for each such
Commercial Lease sets forth the name of the tenant, base rent and percentage
rent, any rent escalations, any tenant security deposit, the commencement and
expiration dates and any renewal or expansion rights of the Commercial Leases.
Except for unfunded work allowances, commissions and other obligations listed in
such rent roll or otherwise listed in Section 4.17(i) of the Crescent Disclosure
Letter, Crescent and the Crescent Subsidiaries have performed all material
obligations currently required to be performed by them to date under each
Material Lease. Section 4.17(i) of the Crescent Disclosure Letter sets forth a
true and correct list of tenants under the Material Leases for which a tenant is
currently in occupancy as of the dates set forth on Section 4.17(i) of the
Crescent Disclosure Letter and Crescent or any Crescent Subsidiary has received
written notice of lease termination or lease cancellation. Except as disclosed
in Section 4.17(i) of the Crescent Disclosure Letter, no tenant or other Person
has any unrecorded option to purchase or first refusal rights to purchase the
building in which space is leased under such Commercial Lease. All rent has been
properly calculated and billed to tenants in all material respects pursuant to
the Commercial Leases, except as would not have a Material Adverse Effect; no
rentals or other amounts due under the Commercial Leases have been paid more
than one month in advance; and all security and other deposits of any type
required under the Commercial Leases have been paid in full and are being held
by Crescent or a Crescent Subsidiary, as applicable.

(j) Residential Property. With respect to the portion of any Project comprising
residential property that is one hundred percent (100%) owned by Crescent and/or
the Crescent Subsidiaries, Section 4.17(j) of the Crescent Disclosure Letter
lists all of the condominium or homeowners’ associations (each an
“Association”). Except as listed in Section 4.17(j) of the Crescent Disclosure
Letter, there are no unpaid sums due and payable by Crescent or any Crescent
Subsidiary under the Charter Documents governing the association (each an
“Association Document”), other than amounts in the ordinary course of business
or being contested in good faith, and none of Crescent or the Crescent
Subsidiaries is in material default under any of the Association Documents.

(k) Access Rights. Except as set forth on Section 4.17(k) of the Crescent
Disclosure Letter, each parcel of the Real Property either abuts and has actual
vehicular and pedestrian access to and from a public right of way or has an
insurable appurtenant easement for vehicular or pedestrian access over and
across adjacent land which provides such access to and from the Real Property
and a public right of way; provided, however, that for any Project or Legacy
Land that is comprised of more than one parcel, it shall not be considered a
breach if not all of such parcels are benefited with such access rights so long
as the parcels that are not directly benefited with such access rights can
indirectly obtain the benefit of such access rights over one or more contiguous
parcels included in the Real Property.

(l) Survey Issues. Other than Permitted Liens and such matters listed on
Section 4.17(l) of the Crescent Disclosure Letter, there exists no encumbrance,
encroachment, claim or other title defect on the Real Property (other than
Legacy Land) that would be disclosed by an inspection of an accurate ALTA Survey
of the Real Property and would reasonably be expected to interfere materially

 

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with the marketability or financeability or use or development of such property
for purposes contemplated by Crescent for such property as of the Effective
Date.

Section 4.18 Personal Property.

(a) As of the Effective Date, Crescent and the Crescent Subsidiaries own and
hold valid title to the personal property owned, leased or used by them in their
respective businesses, free and clear of all Liens, except for Permitted Liens
and such Liens which, individually or in the aggregate, would not reasonably be
expected to cause a Material Adverse Effect.

(b) None of the material personal property used by Crescent or the Crescent
Subsidiaries for the use, operation, repair or maintenance of any Real Property
as currently used, operated, maintained and repaired is leased from or otherwise
owned by third parties, except (i) for equipment owned or leased by third party
vendors providing maintenance or repair services to any Real Property or
(ii) for leases of operating equipment or vehicles which leases either are
Material Contracts or provide for lease payments below the threshold in
Section 4.11(a)(ix).

Section 4.19 Accounts Receivable. The accounts receivable of Crescent and each
Crescent Subsidiary reflect actual transactions, arise from bona fide
transactions in the ordinary course of conduct of the business of and by
Crescent and the Crescent Subsidiaries and to Crescent’s Knowledge, are not
subject to any setoff or counterclaim.

Section 4.20 Financing Districts. Section 4.20 of the Crescent Disclosure Letter
sets forth a true and accurate list as to any individual Project of (a) amounts
heretofore expended by Crescent or any Crescent Subsidiary in connection with
any Project for which Crescent or any Crescent Subsidiary, as applicable,
currently projects being reimbursed) by a community development district,
municipal utility district, or other analogous governmental agency program (a
“Financing District”) and (b) amounts that Crescent or any Crescent Subsidiary
expects to be reimbursed following future expenditures in connection with
development of each such Project. None of Crescent or any of the Crescent
Subsidiaries has taken any action or failed to take any action that would limit,
restrict, or impair the ability of any Financing District to issue bonds as
necessary to make such reimbursements. None of Crescent or the Crescent
Subsidiaries is in breach or default under any agreement with any Financing
District. To Crescent’s Knowledge, no Financing District is in breach or default
under any such agreement. None of Crescent or the Crescent Subsidiaries has
sold, factored, or encumbered any of their rights to any such reimbursement from
a Financing District.

Section 4.21 Related Party Transactions. Except for (i) the Transition Services
Agreement, (ii) the Employee Matters Agreement, (iii) the Legacy Land
Agreements, (iv) the letters of credit, performance or surety bonds, cash
deposits or similar items identified on Section 4.11(b) of the Crescent
Disclosure Letter, (v) other transactions contemplated by this Agreement,
(vi) the arrangements relating to Leased Personal Property and Licensed Software
described in Section 6.7 hereof and (vii) the matters set forth on Section 4.21
of the Crescent Disclosure Letter, there are no material agreements or any
indebtedness for borrowed money between Duke Ventures and/or any Non-Crescent
Affiliate, on the one hand, and Crescent and/or any Crescent Subsidiary, on the
other hand. For the avoidance of doubt, all accounts payable by Crescent and/or
any Crescent Subsidiary, on the one hand, and Duke Ventures and/or any
Non-Crescent Affiliate, on the other hand, will remain outstanding after the
Effective Date and will be paid in the ordinary course of business consistent
with past practice (which amount is estimated to be $4,000,000 payable by
Crescent or any Crescent Subsidiary to Duke or any Non-Crescent Affiliate).

Section 4.22 Bankruptcy. There is no petition in bankruptcy or any petition or
answer seeking an assignment for the benefit of creditors, the appointment of a
receiver or trustee, liquidation or dissolution or similar relief under the U.S.
Bankruptcy Code or any state law filed by or against or threatened to be filed
by or against any of Duke Ventures, Crescent or the Crescent Subsidiaries.

Section 4.23 No Other Representation. Except as expressly set forth in this
Agreement, neither Crescent, its Representatives nor any other Person has made
any representation or warranty, expressed or implied, to the MS Members as to
any matter relating to Crescent or the Crescent Subsidiaries or the transactions
contemplated by this Agreement, including as to the accuracy or completeness of
any information regarding Crescent or the Crescent Subsidiaries furnished or
made available to the MS Members and their Representatives, including any
information, documents or material made available to the MS Members in any
physical or electronic “data rooms,” management presentations or in any other
form in connection with the other transactions contemplated by this Agreement.

 

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ARTICLE V

REPRESENTATIONS AND WARRANTIES OF THE MS MEMBERS

 

Concurrently with the execution and delivery of this Agreement, the MS Members
have delivered to Duke Ventures a letter (the “MS Disclosure Letter”) setting
forth, among other things, items the disclosure of which is necessary or
appropriate either in response to an express disclosure requirement contained in
a provision hereof or as an exception to one or more of the MS Members’
representations or warranties contained in this ARTICLE V. Each of the MS
Members jointly and severally represents and warrants to Duke Ventures as
follows:

Section 5.1 Organization. Each of the MS Members is duly formed, validly
existing and in good standing under the Laws of its jurisdiction of formation.
Each of the MS Members is duly qualified or licensed to do business in each
other jurisdiction where the actions to be performed by it hereunder make such
qualification or licensing necessary, except in those jurisdictions where the
failure to be so qualified or licensed would not reasonably be expected to
result in a material adverse effect on such MS Member’s ability to perform such
actions hereunder.

Section 5.2 Authority. Each of the MS Members has all requisite power and
authority to execute and deliver this Agreement and to perform its obligations
hereunder. The execution and delivery by each of the MS Members of this
Agreement, and the performance by each of the MS Members of its obligations
hereunder, have been duly and validly authorized by all necessary action. This
Agreement has been duly and validly executed and delivered by each of the MS
Members and constitutes the legal, valid and binding obligation of each of the
MS Members enforceable against it in accordance with its terms, subject to the
effect of any general principles of equity, whether applied in a court of law or
a court of equity, and by bankruptcy, insolvency and similar Laws affecting
creditors’ rights and remedies generally, including all Laws relating to
fraudulent transfers.

Section 5.3 No Conflicts. The execution and delivery by each of the MS Members
of this Agreement, the performance by each of the MS Members of its obligations
hereunder and the consummation of the transactions contemplated in this
Agreement do not (a) conflict with or result in a violation or breach of any of
the terms, conditions or provisions of the Charter Documents of such MS Member
or (b) (i) conflict with, violate or breach any material term or provision of
any Law or judgment applicable to such MS Member or (ii) require any material
consent or approval of any Governmental Authority, or material notice to, or
material declaration, filing or registration with, any Governmental Authority
under any Law applicable to such MS Member, except in the cases of (a) and
(b) above as would not reasonably be expected to have a material adverse effect
on such MS Member’s ability to perform its obligations hereunder.

Section 5.4 Claims. Except as set forth in Section 5.4 of the MS Disclosure
Letter, no Claim is pending or, to the Knowledge of the MS Members, has been
threatened against any of the MS Members that seeks a writ, judgment or order
restraining, enjoining or otherwise prohibiting or making illegal any of the
transactions contemplated by this Agreement.

Section 5.5 Brokers. None of the MS Members nor any of their respective
Affiliates has any liability or obligation to pay fees or commissions to any
broker, finder or agent with respect to the transactions contemplated by this
Agreement for which Duke Ventures, the Non-Crescent Affiliates, Holdco, Crescent
or any Crescent Subsidiary could become liable or obligated.

Section 5.6 Acknowledgement. The MS Members have conducted their own independent
investigation, review and analysis of the Business, Assets, liabilities,
financial condition, results of operations and prospects of Crescent and the
Crescent Subsidiaries. Each of the MS Members acknowledges that it and its
Representatives have been permitted full and complete access to the books and
records, facilities, equipment, Tax returns, Contracts, insurance policies (or
summaries thereof) and other Assets of Crescent and the Crescent Subsidiaries
that it and its Representatives have desired or requested to see or review, and
that it and its Representatives have had a full opportunity to meet with the
officers and employees of Crescent and the Crescent Subsidiaries to discuss the
Business. In entering into this Agreement, each of the MS Members acknowledges
that it has relied solely on such independent investigation and not on any
factual representations of Duke Ventures, Crescent or their respective
Representatives (other than those expressly set forth in the Agreement). Each of
the MS Members further agrees, to the fullest extent permitted by applicable
Law, that none of Duke Ventures, Crescent or the Crescent Subsidiaries shall
have any liability on any basis based on information regarding Crescent and the
Crescent Subsidiaries furnished or made available to the MS Members and their
Representatives, including any information, documents or material made available
to the MS Members in any physical or electronic “data rooms,” management
presentations or in any other form in connection with the transactions
contemplated by this Agreement, except that the foregoing limitations shall not
apply (i) in the event of fraud or willful misrepresentation or (ii) to Duke
Ventures or Crescent insofar as Duke Ventures and Crescent have made the express
representations and warranties in this Agreement, but always subject to the
limitations set forth in ARTICLE VII.

Section 5.7 No Registration. Each of the MS Members understands and acknowledges
that (i) the Purchased Interests have not been registered under the Securities
Act of 1933, as amended (the “Securities Act” ), or any state securities laws
and are being offered and sold in reliance upon exemptions provided in the
Securities Act and state securities laws for transactions not involving any
public offering and, therefore, cannot be resold or transferred unless they are
subsequently registered under the Securities Act and applicable

 

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state laws or unless an exemption from such registration is available and
(ii) the MS Members are purchasing the Purchased Interests for investment
purposes only for the account of the MS Members and not with any view toward a
distribution thereof.

Section 5.8 No Other Representation. Except as expressly set forth in this
Agreement, none of the MS Members, their respective Representatives nor any
other Person has made any representation or warranty, expressed or implied, to
Duke Ventures or Crescent as to any matter relating to the MS Members or the
transactions contemplated by this Agreement, including as to the accuracy or
completeness of any information regarding the MS Members furnished or made
available to Duke Ventures, Crescent and their Representatives, including any
information, documents or material made available to Duke Ventures or Crescent
in any form in connection with the other transactions contemplated by this
Agreement.

 

ARTICLE VI

COVENANTS

 

Section 6.1 Legacy Land. The Parties acknowledge and agree that certain matters
regarding certain Legacy Land held by Crescent are governed by the Legacy Land
Agreements.

Section 6.2 Tax Matters.

(a) No election shall be made by Duke Ventures, the MS Members or any of their
respective Affiliates to classify Crescent, any Crescent Subsidiary or any
Subsidiary Entity as an association taxable as a corporation pursuant to U.S.
Treasury Regulation Section 301.7701-3 or any comparable provision of state or
local law.

(b) Duke Ventures shall cause elections under Section 754 of the Code to be
timely made by each Subsidiary Entity that is a partnership for U.S. federal
income tax purposes in order to allow for an adjustment to the tax basis of the
assets of each such Subsidiary Entity as necessary to reflect the acquisition by
the MS Members of the Purchased Interests as contemplated by this Agreement, and
Crescent and Holdco shall each also timely make such an election to make an
adjustment to the tax basis of their assets to reflect such acquisition.

(c) The Parties agree to allocate U.S. federal income tax items of income, gain,
deduction and loss, under an “interim closing of the books” method unless a
different method is required by the Code and the applicable Treasury Regulations
thereunder.

(d) The Parties agree to report the transactions described in this Agreement as
a sale by Duke Ventures of a forty-nine percent (49%) interest in Holdco,
subject to Section 741 of the Code, to the MS Members occurring after the
transactions set forth in

Section 2.2(a), (b) and (c) hereof. None of Duke Ventures, Mr. Fields nor the MS
Members or any of their respective Affiliates shall take any position
inconsistent with such treatment for U.S. federal income tax purposes.

Section 6.3 Public Announcements. The initial press releases issued by each
Party announcing the transactions contemplated by this Agreement shall be in a
form that is mutually acceptable to Duke Ventures and the MS Members.
Thereafter, Duke Ventures and MSREF, on behalf of the MS Members, shall consult
with one another before issuing any press releases or otherwise making any
public announcements with respect to the transactions contemplated by this
Agreement, and except as may be required by applicable Laws or by the rules and
regulations of the New York Stock Exchange shall not issue any such press
release or make any such announcement prior to such consultation, except that
(a) Duke Ventures and MSREF, on behalf of the MS Members, shall agree on the
content of the first announcement made to Crescent’s employees regarding the
execution of this Agreement and the transactions contemplated in this Agreement
and (b) Crescent may, with reasonable advance notice to MSREF, on behalf of the
MS Members, otherwise communicate with Crescent’s employees as it deems
appropriate with respect to the transactions contemplated by this Agreement,
provided, that such communications are not inconsistent with the announcement
agreed to in clause (a).

Section 6.4 Employee Benefits. The Parties acknowledge that certain employee
benefits matters are governed by the terms of the Employee Matters Agreement.

Section 6.5 Environmental. At any Real Property site at which Lender, in the
course of providing the New Debt Financing, requires a Phase I environmental
site assessment (“ESA”), Crescent shall engage a nationally recognized
environmental consulting firm to prepare such ESA pursuant to ASTM Standard
E-1527.05 or, if acceptable to Lender, ASTM Standard E-2247-02. In the event any
such ESA identifies Recognized Environmental Conditions (as that phrase is
defined in ASTM Standard E-1527.05), the response to any such Recognized
Environmental Condition (including further investigation, sampling, and
remediation) shall be limited to such response as would be undertaken by a
reasonably prudent owner or operator of such Real Property site, in the context
of the site use and the nature of the Recognized Environmental Condition, or as
required by Environmental Law. Copies of all such ESA reports shall be promptly
provided to Duke Ventures and the MS Members.

Section 6.6 Insurance.

(a) Claim Reports. Duke Ventures shall cause each insured act or occurrence that
is known by Duke Ventures and involves or relates to Crescent or any Crescent
Subsidiary which is required to be reported to its insurer(s) under any policy
of insurance

 

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maintained by Duke Parent or any Non-Crescent Affiliate that provides coverage
for Crescent or any Crescent Subsidiary, to be promptly reported to such
insurer(s) in accordance with the applicable insurance policy or policies.
Except as provided below, all insurance maintained by Duke Parent or any
Non-Crescent Affiliate that provides coverage for Crescent or any Crescent
Subsidiary shall be terminated as of the Closing as to any claims made or
reported under such insurance policies after the Closing, and neither Duke
Parent nor any of its Non-Crescent Affiliates shall have any liability under
this Section 6.6 for any such claim. Crescent shall be solely responsible for
providing its own insurance after the Closing. Notwithstanding the foregoing,
Duke Ventures and the MS Members may agree to provide such additional insurance
coverage in respect of Crescent and the Crescent Subsidiaries under policies of
insurance held by Duke Parent and/or the MS Members, or their respective
Affiliates, in lieu of providing such coverage through new policies of insurance
to be held by Crescent and the Crescent Subsidiaries.

(b) Third Party Coverage.

(i) If and to the extent that an Occurrence for which coverage is available
under the Duke Liability Insurance Policies, in whole or in part, happens prior
to the Closing, and a claim arising therefrom has been or is eventually asserted
against Crescent or any Crescent Subsidiary and such claim is Reported on or
before the date which is one hundred eighty (180) days after the Effective Date
with respect to any of the Duke Liability Insurance Policies, then Duke Ventures
shall cause an insurance carrier selected by Duke Ventures (or, at Duke
Ventures’ option, Duke Parent or any Non-Crescent Affiliate) to Administer the
Third Party Insurance Claim arising therefrom. Except as specifically provided
in this Section 6.6(b)(i), no Duke Liability Insurance Policy shall be available
for payment of any damages, costs of defense, or other sums with respect to any
other Occurrence, and Crescent agrees and covenants (on behalf of itself,
Crescent and each Crescent Subsidiary) not to make any claim or assert any
rights against Duke Ventures, any Non-Crescent Affiliate, or any Duke Liability
Insurance Policy with respect to any such Occurrence.

(ii) Duke Ventures shall maintain, or caused to be maintained, coverage for
Third Party Insurance Claims under the Duke Liability Insurance Policies during
the one-hundred eighty (180) day period described in Section 6.6(b)(i) above.
For the avoidance of doubt, the terms of this Section 6.6(b) shall not limit the
coverage under the Duke Occurrence-Based Insurance Policies as provided in
Section 6.6(d).

(c) Other. Neither Duke Ventures nor any Non-Crescent Affiliate has any
obligation to reimburse Crescent or the MS Members or any of their Affiliates
under this Section 6.6 for the amount of any Third Party Insurance Claim (or any
other loss, expenditure, payment, or damage) (i) for which coverage under any
Duke Liability Insurance Policy is unavailable (in whole or part) for any reason
(other than as a result of a breach of Section 6.6(b)(ii)) or (ii) in excess of
the policy limits specified for the applicable Duke Liability Insurance Policy
on Section 4.13(i) of the Crescent Disclosure Letter. Neither Duke Ventures nor
any Non-Crescent Affiliate shall be required to bear the cost of the
Administration of any Third Party Insurance Claim to the extent that Crescent or
any Crescent Subsidiary Administers such Third Party Insurance Claim. Duke
Ventures shall use commercially reasonable efforts to Administer all Third Party
Insurance Claims in a manner consistent with the administration by Duke Ventures
or a Non-Crescent Affiliate of Duke Ventures’ insurance claims. The Parties
agree that Crescent shall provide (and shall cause the Crescent Subsidiaries to
provide) such assistance and resources as Duke Ventures may reasonably request
in connection with the Administration of any Third Party Insurance Claim
hereunder. Crescent shall promptly Report to Duke Ventures its receipt of notice
of any Occurrence that occurs prior to the Closing.

(d) Duke Occurrence-Based Insurance Policies. Duke Ventures agrees that,
notwithstanding anything to the contrary contained herein (i) the insurance
coverage under the Duke Occurrence-Based Insurance Policies shall continue to
remain available for the benefit of Crescent and the Crescent Subsidiaries to
the extent provided for in such policies of insurance and (ii) Duke Ventures or
its Non-Crescent Affiliate shall be responsible for (A) all losses subject to
the Automobile Policy in excess of $25,000 and (B) all losses subject to the
Workers Compensation Policy, in each case, up to the limits set forth on
Section 4.13 of the Company Disclosure Letter applicable to such policies. For
avoidance of doubt, neither Duke Ventures nor any Non-Crescent Affiliate shall
be required to renew any Duke Occurrence-Based Insurance Policies beyond the
term of such policies in effect on the Effective Date.

Section 6.7 Leased Personal Property; Licensed Software.

(a) From the Effective Date until December 31, 2006, the Parties shall use
commercially reasonable efforts to cause each lessor of all computers, servers
and related hardware, copiers and fax machines leased by Duke Parent or any of
its Non-Crescent Affiliates and currently used primarily by Crescent
(collectively, the “Leased Personal Property”) to agree as soon as reasonably
practicable to (i) have Duke Parent or any of its Non-Crescent Affiliates assign
the lease related to such Leased Personal Property to Crescent, effective as
soon as practicable (but in no event later than December 31, 2006, unless such
date is extended by the Parties in accordance with Transition Services
Agreement) and (ii) release Duke Parent or any of its Non-Crescent Affiliates
from all obligations under any such lease that accrue or arise after the
Effective Date. Such efforts shall include, without limitation, Crescent
providing financial information regarding Crescent to such lessors, and meeting
with such lessors. Duke Ventures and the MS Members agree to cause Holdco to
execute a guaranty (in a form reasonably acceptable to Parties) of the lessees’
obligations under

 

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any such lease if requested by the lessor. In the event that on or prior to
December 31, 2006, any lessor of any Leased Personal Property does not agree as
provided in the first sentence of this Section 6.7(a), then from and after
December 31, 2006 (or such later date agreed to by the Parties in accordance
with the Transition Services Agreement), (a) Crescent shall have no right to use
such Leased Personal Property; (b) Duke Parent or such lessor shall have the
right to remove and take possession of such Leased Personal Property; and (c) no
party hereto shall have any further obligations to perform under the first
sentence of this Section 6.7(a) related to such Leased Personal Property. Set
forth on Section 6.7(a) of the Crescent Disclosure Letter is a listing of the
Leased Personal Property reflected on Crescent’s records as of the date set
forth thereon.

(b) From the date hereof until December 31, 2006, the Parties shall use
commercially reasonable efforts to cause each licensor of all software licensed
by Duke Parent or any of its Non-Crescent Affiliates and currently used
primarily by Crescent (collectively, the “Licensed Software”) to agree to
(i) have Duke Parent or any of its Non-Crescent Affiliates assign the license
related to such Licensed Software to Crescent, effective as soon as practicable
(but in no event later than December 31, 2006, unless such date is extended by
the Parties in accordance with Transition Services Agreement) and (ii) release
Duke Parent or any of its Non-Crescent Affiliates from all obligations under any
such license that accrue or arise after the date of the assignment to Crescent.
Such efforts shall include, without limitation, Crescent providing financial
information regarding Crescent to such licensors, and meeting with such
licensors. Duke Ventures and the MS Members agree to cause Holdco to execute a
guaranty (in a form reasonably acceptable to Holdco) of the licensee’
obligations under any such license if requested by the licensor. In the event
that on or prior to December 31, 2006, any licensor of any Licensed Software
does not agree as provided in the first sentence of this Section 6.7(b), then
from and after December 31, 2006 (or such later date agreed to by the Parties in
accordance with the Transition Services Agreement), (a) Crescent shall have no
right to use such Licensed Software; (b) Duke Parent or such licensor shall have
the right to remove and take possession of such Licensed Software; and (c) no
party hereto shall have any further obligations to perform under the first
sentence of this Section 6.7(b) related to such Licensed Software. To the extent
any Licensed Software is supported by a maintenance agreement with any third
party, it is Crescent’s sole responsibility to change, at Crescent’s sole
expense, the beneficiary of such maintenance agreement effective as soon as
practicable (but in no event later than December 31, 2006) from Duke Parent or
any of its Non-Crescent Affiliates to Crescent. Set forth as Section 6.7(b) of
the Crescent Disclosure Letter is a listing of the Licensed Software reflected
on Crescent’s records as of the date set forth thereon.

Section 6.8 Surety Bonds; Letters of Credit.

(a) Duke Ventures agrees that the Credit Support Instruments shall remain
outstanding following the Effective Date for a period not to exceed the third
anniversary of the Effective Date (the “Duke Release Date”). Crescent shall
continue to pay all fees, costs and expenses in respect of the Credit Support
Instruments which it has historically paid in a manner consistent with past
practice, and Duke Ventures shall continue to pay all fees, costs and expenses
in respect of the Credit Support Instruments which it has historically paid in a
manner consistent with past practice and shall cause the applicable Non-Crescent
Affiliate to continue to use their financial statements consistent with past
practice to support such Credit Support Instruments along with any new letters
of credit, performance or surety bonds, cash deposits or similar items (“New
Credit Support Instruments”) for existing projects (but not new projects)
provided that in no event shall the aggregate face amount of the Credit Support
Instruments and the New Credit Support Instruments for which Duke Parent and any
applicable Non-Crescent Affiliate must continue to use their financial
statements for support exceed $215,000,000.

(b) From and after the Effective Date, Crescent shall be solely responsible for
procuring New Credit Support Instruments for new projects, and in all other
cases under Section 6.8(a) where Duke Ventures is not responsible for causing
Duke Parent and any applicable Non-Crescent Affiliate to continue to provide
their financial statements for support.

(c) Notwithstanding the provisions of Section 6.8(a), Crescent shall take such
action as is necessary to (i) obtain complete and unconditional release of Duke
Ventures and any Non-Crescent Affiliates with respect to each of the Credit
Support Instruments and the New Credit Support Instruments supported by Duke
Ventures or any Non-Crescent Affiliate, in each case, outstanding at such time,
and (ii) cause the beneficiary or beneficiaries of each such Credit Support
Instrument and New Credit Support Instrument to terminate and redeliver to Duke
Ventures and such Non-Crescent Affiliates such Credit Support Instruments and
New Credit Support Instruments (collectively, the “Surety Bond Release”), in
each case on or prior to the Duke Release Date. The actions required by this
Section 6.8(c) shall include offer and delivery to the beneficiary of such
Credit Support Instrument and New Credit Support Instrument, promptly upon
request by Duke Ventures (i) in the case such Credit Support Instrument or New
Credit Support Instrument is a surety or performance bond, a replacement surety
or performance bond issued to such beneficiary by a Person having a net worth or
a credit rating at least equal to those of the issuer of such existing surety or
performance bond, and which replacement surety or performance bond contains
terms and conditions that are substantially identical to the terms and
conditions of such existing surety or performance bond or (ii) in the case such
Credit Support Instrument or New Credit Support Instrument is a letter of
credit, a replacement letter of credit issued to such beneficiary by a Person
having a net worth or a credit rating at least equal to those of the issuer of
such existing letter of credit, and which replacement letter of credit contains
terms and conditions that are substantially identical to the terms and
conditions of such existing letter of credit.

 

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(d) In the event any Credit Support Instrument or any New Credit Support
Instrument supported by Duke Ventures or any Non-Crescent Affiliate is not
replaced as of the Duke Release Date as contemplated by Section 6.8(c), then
from and after such date, Crescent shall transfer to Duke Ventures and the
Non-Crescent Affiliates an amount in cash or one or more letters of credit
reasonably satisfactory to Duke Ventures and the Non-Crescent Affiliates, in
either case, equal to the aggregate Credit Support Instruments and New Credit
Support Instruments outstanding at such date until the complete and
unconditional release of Duke Ventures and any Non-Crescent Affiliate’s
obligations with respect to each such Credit Support Instrument or New Credit
Support Instrument (which amount will be reimbursed to Crescent as and to the
extent any such Credit Support Instruments or New Credit Support Instruments
expire or Duke Ventures or the Non-Crescent Affiliates are otherwise fully and
unconditionally released). In the event Crescent does not timely comply with its
obligation under the foregoing sentence, the Parties agree that, from and after
the Duke Release Date, no distributions shall be made by Holdco to its Members
until such time as Crescent has complied with the foregoing sentence. Duke
Ventures shall be permitted to retain the funds transferred by Crescent to Duke
Ventures as described in the initial sentence of this Section 6.8(d) to the
extent that Duke Ventures or the Non-Crescent Affiliates incurs any Losses
arising from or related to any Credit Support Instrument or New Credit Support
Instrument supported by Duke Ventures or any Non-Crescent Affiliate.

(e) From and after the Effective Date, Crescent hereby agrees to indemnify and
hold harmless Duke Ventures and each Non-Crescent Affiliate that is a party to
or has furnished any Credit Support Instrument or New Credit Support Instrument
supported by Duke Ventures or any Non-Crescent Affiliate from and against any
and all Losses suffered or incurred by Duke Ventures or any Non-Crescent
Affiliate arising from or related to any Credit Support Instrument or New Credit
Support Instrument.

Section 6.9 Reasonable Best Efforts; Further Assurances. Upon the terms and
subject to the conditions of this Agreement, each Party agrees to use its
reasonable best efforts to effect the consummation of the transactions
contemplated in this Agreement as soon as practicable after the Effective Date.
From time to time, as and when requested by any Party, the other Parties shall
execute and deliver, or cause to be executed and delivered, all such documents
and instruments and shall take, or cause to be taken, all such further or other
actions (subject to Section 6.3), as such Party may reasonably deem necessary or
desirable to consummate the transactions contemplated by this Agreement.

Section 6.10 Sale of Additional Interests in Holdco. Within ninety (90) days
following the Effective Date, subject to and in accordance with applicable Laws
(including federal and state securities laws) and Section 3.01(b) of the
Operating Agreement, the Parties acknowledge that it is their intent to cause
Holdco to offer to sell additional Holdco Membership Interests to certain
employees (not to exceed ten (10)) covered by the Employee Matters Agreement as
determined by the Executive Committee of Holdco in consultation with the Chief
Executive Officer of Holdco in an aggregate amount not to exceed three percent
(3%) of the then-issued and outstanding Holdco Membership Interests.

Section 6.11 Corporate Names.

(a) Crescent and Duke Ventures acknowledge that, from and after the Effective
Date, Crescent and Duke Ventures shall have no rights with respect to any names,
marks, trade names, trademarks and logos (collectively, “Trademarks and Logos”)
incorporating “MSREF” or “Morgan Stanley” by themselves or in combination with
any other Trademark or Logo, including the corporate design logos associated
therewith, and that the MS Members shall retain absolute and exclusive
proprietary rights thereto or goodwill represented thereby or pertaining
thereto. From and after the Effective Date, unless the MS Members agree in
writing otherwise, Crescent and Duke Ventures shall not, nor shall they permit
any of their respective Affiliates to, use any name, phrase or logo
incorporating “MSREF” or “Morgan Stanley” or such corporate design logo or any
confusingly similar name, phrase, logo or corporate design logo in or on any of
its literature, sales materials or products or otherwise in connection with the
sale of any products or services.

(b) Crescent and the MS Members acknowledge that, from and after the Effective
Date, Crescent and the MS Members shall have no rights with respect to
Trademarks and Logos incorporating “Duke” by itself or in combination with any
other Trademark or Logo, including the corporate design logos associated
therewith, and that Duke shall retain absolute and exclusive proprietary rights
thereto or goodwill represented thereby or pertaining thereto. From and after
the Effective Date, unless Duke Ventures agrees in writing otherwise, in
Crescent and the MS Members shall not, nor shall they permit any of their
respective Affiliates to, use any name, phrase or logo incorporating “Duke” or
such corporate design logo or any confusingly similar name, phrase, logo or
corporate design logo in or on any of its literature, sales materials or
products or otherwise in connection with the sale of any products or services;
provided, however, that Crescent may continue to use any signage, printed
literature, sales materials, purchase orders and sales or lease agreements, and
sell any products, that are included in the inventories of Crescent or the
Crescent Subsidiaries on the Effective Date and that bear a name, phrase or logo
incorporating “Duke” or such corporate design logo, until the supplies thereof
existing on the Effective Date have been exhausted, but in any event for not
longer than one-hundred eighty (180) days from the Effective Date.

 

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ARTICLE VII

INDEMNIFICATION, LIMITATIONS OF LIABILITY, WAIVERS

AND THIRD PARTY CLAIMS

 

Section 7.1 Indemnification. (a) Subject to Section 7.2, from and after the
Closing, each of Duke Ventures, on the one hand, and the MS Members, on the
other hand (the “Indemnifying Party”) shall indemnify, defend and hold harmless
the other Party (being the MS Members, on the one hand, or Duke Ventures, on the
other hand, as the case may be) and its or their respective Affiliates,
directors, officers, equityholders, Representatives, agents and employees (the
“Indemnified Party”) from and against all Losses incurred or suffered by such
other Party resulting from:

(i) any breach or inaccuracy of any representation or warranty of the
Indemnifying Party contained in this Agreement; and

(ii) any breach of any covenant or agreement of the Indemnifying Party contained
in this Agreement.

(b) Subject to Section 7.2(e) through 7.2(k) hereof, and Sections 7.2(m) through
7.2(o) hereof, Duke Ventures shall indemnify, defend and hold harmless the MS
Members and any of their respective Affiliates, directors, officers, equity
holders, Representatives, agents and employees from and against any and all
Losses or Claims arising from the Lake Mary Environmental Condition, provided
that, (i) such indemnification shall not be subject to the provisions of
Sections 7.2(a), (b), (c), (d) or (l) hereof, and (ii) for the purposes of this
Section 7.1(b), Losses shall also include any diminution in the fair market
value of the Lake Mary Site as of the third anniversary of the Effective Date
attributable to the presence of Hazardous Materials at such site on such
anniversary except to the extent that either (A) the appropriate Governmental
Authority either has issued a No Further Action Letter or has agreed that the
remediation may be limited to periodic groundwater monitoring, with respect to
such Hazardous Materials or (B) the Parties reasonably agree that the Lake Mary
Site has been adequately remediated (except for long term monitoring of
groundwater) to permit such site to be developed for commercial purposes on or
before such third anniversary. The indemnification provided in this
Section 7.1(b) shall survive the Closing without time limit. For purposes of
this Agreement, the following terms shall have the meanings specified below:

“Lake Mary Environmental Condition” means (i) Hazardous Materials located on or
released at the Lake Mary Site prior to the Effective Date, (ii) Hazardous
Materials located on or released from the adjacent Siemens property prior to the
Effective Date that impacted the Lake Mary Site, including a chlorinated solvent
plume in the drinking water aquifer in the area, and (iii) the current and any
future litigation brought against Crescent actually or allegedly arising out of
the foregoing, including Brottem et al. v. Crescent Resources LLC, et al., Case
No. 6:06-cv-306-Orl-31KRS, and related cases pending in the U.S. District Court,
Middle District of Florida, Orlando Division, brought by workers or former
workers at the Siemens property, Brottem et al. v. Siemens Communications, Inc.
f/k/a/ Siemens Information and Communications Networks, Inc., et al., Case
No. 06-CA-1543-11-K, and Cycle Canada et al. v. Siemens Communications Networks,
Inc. et al. Case No. 06-CA-1544-11-W.

“Lake Mary Site” means the Real Property owned or operated by Crescent as of the
Effective Date and abutting Interstate Highway 4 and Rinehart Road, in Lake
Mary, Seminole County, Florida containing approximately 175 acres, and which is
sometimes referred to as the New Century Park and Primera-Rinehart tracts.

(c) Notwithstanding anything else set forth in this Agreement, for purposes of
this Agreement, Duke Ventures shall be the Indemnifying Party with respect to
any Losses incurred or suffered by the MS Members for which Crescent would
otherwise be considered the Indemnifying Party, and Duke Ventures shall be the
Indemnified Party with respect to any Losses incurred or suffered by Crescent
for which Crescent would otherwise be considered the Indemnified Party.

Section 7.2 Limitations of Liability. Notwithstanding anything in this Agreement
to the contrary (but subject to the limitations on applicability set forth in
Section 7.1(b)):

(a) the representations, warranties, covenants, agreements and obligations in
this Agreement shall survive the Closing; provided, however, that no Party may
make or bring a Claim for liability with respect to (i) any representations or
warranties contained in ARTICLES III, IV or V (other than those representations
and warranties contained in Sections 3.2, 3.6, 4.2, 4.6 and 5.2 hereof
(collectively, the “Title and Authority Representations”), Section 4.10 hereof
(the “Tax Representations”), Section 4.12 hereof (the “Environmental
Representations”), Section 4.16 hereof (the “ERISA Representations”) and
Section 4.17(l) (the “Survey Representations”)) after March 31, 2008, (ii) the
Title and Authority Representations, the Environmental Representations and the
Survey Representations after the three-year anniversary of the Effective Date,
and (iii) the Tax Representations and the ERISA Representations and the
covenants in Section 6.2 (Tax Matters), after the expiration of sixty (60) days
following the expiration of the applicable statute of limitations (including
extensions thereof consented to in writing by the Parties, such consent not to
be unreasonably withheld, conditioned or delayed);

(b) any breach of a representation or warranty in this Agreement in connection
with any single item or group of related items that results in Losses of less
than $100,000 shall be deemed, for all purposes of this ARTICLE VII, not to be a
breach of such

 

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representation or warranty; provided, however, that the foregoing limitation
shall not apply to any Losses as a result of a breach of the Tax
Representations;

(c) no Party shall have any liability for breaches of representations or
warranties in this Agreement until the aggregate amount of all Losses incurred
by the other Party (which term shall include the MS Members as a group, and not
individually) equals or exceeds $4,000,000 (and then, subject to Section 7.2(d),
only to the extent such aggregate Losses exceed such amount); provided, however,
that the foregoing shall not apply to Duke Ventures’ indemnification obligations
with respect to breaches of the Tax Representations;

(d) in no event shall a Party’s aggregate liability (i) arising out of or
relating to breaches of representations or warranties in this Agreement (other
than a breach of a Title and Authority Representation, ERISA Representation or
Tax Representation) exceed $40,000,000, except as set forth in
Section 7.2(d)(ii) hereof and (ii) arising out of or relating to a breach of a
Title and Authority Representation, ERISA Representation or Tax Representation
(together with the aggregate liability pursuant to Section 7.2(d)(i) hereof)
exceed the Purchase Price (for the avoidance of doubt, the indemnity set forth
in Section 7.1(b) shall not be subject to this Section 7.2(d));

(e) the right to indemnification, reimbursement or other remedy based upon such
representations, warranties, covenants and obligations shall not be affected by
any investigation (including environmental investigation or assessment)
conducted with respect to, or any Knowledge acquired (or capable of being
acquired) at any time, whether before or after the execution and delivery of
this Agreement or the Effective Date, with respect to the accuracy or inaccuracy
of or compliance with any such representation, warranty, covenant or obligation;

(f) a Party must give written notice to the other Party within a reasonable
period of time after becoming aware of any material breach by such other Party
of any representation, warranty, covenant, agreement or obligation in this
Agreement; provided, however, that such notification or the failure to give such
notice shall have no effect for the purpose of determining whether any Person is
entitled to indemnification pursuant to this ARTICLE VII, except to the extent
that such other Party is prejudiced by the failure to give such notice;

(g) the Parties shall use reasonable best efforts to mitigate any Loss in
connection with this Agreement;

(h) the Parties shall use commercially reasonable efforts to structure any
indemnity payment in a manner such that the Indemnifying Party will obtain any
deduction or other Tax benefit arising from having made such indemnification
payment in order to avoid any duplication of after-Tax benefit to the
Indemnified Party;

(i) the amount of any Losses incurred by the Indemnified Party shall be reduced
by the amount of any insurance benefit received by the Indemnified Party or by
Crescent in respect of such Losses;

(j) any liability for indemnification under this Agreement shall be determined
without duplication of recovery by reason of the state of facts giving rise to
such liability constituting a breach of more than one representation, warranty,
covenant or agreement;

(k) no matter shall be the subject of any Claim hereunder to the extent that the
Party bringing such Claim has otherwise been compensated therefor, including
through calculation of the Purchase Price;

(l) no claim or cause of action for indemnification under this ARTICLE VII
arising out of the inaccuracy or breach of any representation or warranty of the
Indemnifying Party may be made following the termination of the applicable
survival period; it being understood that in the event good faith notice of any
claim for indemnification under this ARTICLE VII shall have been given within
the applicable survival period, the representations and warranties that are the
subject of such indemnification claim shall survive until such time as such
claim is finally resolved. The Parties intend to shorten the statute of
limitations and agree that, after the Effective Date, with respect to the
Parties, any claim or cause of action against any of the Parties, or any of
their respective directors, officers, employees, Affiliates, successors,
permitted assigns, advisors, agents, or Representatives based upon, directly or
indirectly, any of the representations, warranties, covenants or agreements
contained in this Agreement, or any other agreement, document or instrument to
be executed and delivered in connection with this Agreement may be brought only
as expressly provided in this ARTICLE VII;

(m) for the avoidance of doubt, (i) the MS Members shall be deemed to have
suffered a Loss equal to forty-nine percent (49%) of any Loss suffered directly
or indirectly by Crescent or Holdco and (ii) in the event that any Loss for
which the MS Members may become entitled to indemnification under this ARTICLE
VII shall also constitute a direct or indirect Loss of Crescent, Duke Ventures’
obligation to provide indemnification to the MS Members shall be limited to
forty-nine percent (49%) of such Loss;

(n) with respect to any matter which is the subject of a claim for
indemnification (A) arising from a breach of the representations and warranties
provided in Section 4.12 hereof (Environmental Matters), or which otherwise
arises under Environmental Law for which the amount of the Claim is reasonably
expected to exceed $5,000,000, or (B) which arises under Section 7.1(b) hereof
(Lake Mary Site environmental indemnification), the Parties agree that Duke
Ventures shall have the right, at its sole expense, to conduct and retain
exclusive control over any investigation, remedial action, correction of
noncompliance, or other action to be undertaken in

 

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response thereto, including, without limitation, the exclusive right, at its
sole expense, to (i) investigate any suspected contamination or noncompliance,
(ii) conduct and obtain any tests, reports, surveys and investigations,
(iii) contact, negotiate or otherwise deal with Governmental Authorities,
(iv) prepare any plan for such investigation, remedial action, correction of
noncompliance, or other action, (v) conduct or direct any such investigation,
remedial action, correction of noncompliance, or other action and (vi) conduct
any legal proceedings, provided, that Duke Ventures shall in all events act in a
timely manner with due diligence and with reasonable efforts to minimize
disturbance to the development or occupancy of the affected property, and, if
requested by MSREF, on behalf of the MS Members, Duke Ventures shall use
reasonable efforts to consult with MSREF, on behalf of the MS Members, in good
faith prior to conducting any such investigation, remedial action, correction of
noncompliance, or other action; and

(o) Duke Ventures’ indemnification obligations provided herein for the Lake Mary
Environmental Condition or Environmental Representations shall be subject to the
following limitations: Any investigation, remedial action, correction of
noncompliance, or other action (x) shall be the most commercially reasonable
method under the circumstances and based upon the understanding that the
relevant Real Property site is and will continue to be used for the purposes
reasonably anticipated as of the Effective Date (except to the extent of
circumstances preventing such use which are not related to the environmental
condition of such site), (y) shall not exceed the least stringent requirements
of any applicable Environmental Law or any clean-up standards set forth,
established, published, proposed or promulgated under, pursuant to or by an
Environmental Law or Governmental Authority having jurisdiction over such
remedial action, correction of noncompliance, or action, in each case as in
effect on the date of such remedial action, correction of noncompliance, or
other action or any requirement or order of any Governmental Authority having
jurisdiction over such remedial action, correction of noncompliance, or action,
and (z) shall be conducted in compliance with all Environmental Laws. To the
extent necessary to achieve the purposes set forth in the preceding sentence,
Crescent shall agree to a deed restriction or other institutional controls on
the Real Property site that is subject to such action, provided that such deed
restriction or other institutional controls shall not materially restrict or
limit the commercial use to which such site was reasonably anticipated to be
used as of the Effective Date (except to the extent of circumstances preventing
such use which are not related to the environmental condition of such site). The
cost of any such maintenance required for such deed restriction or institutional
controls shall be considered a Loss subject to Duke Ventures’ indemnification
obligations provided herein for the Lake Mary Environmental Condition or
Environmental Representations. Crescent shall, in good faith, seek to enter,
when necessary, into an agreement with the Governmental Authority having
jurisdiction over the remedial action, correction of noncompliance or other
action, to allow Crescent to use the most commercially reasonable method and
least stringent standard in connection with remedial action, correction of
noncompliance, or other action under such circumstances and use. The issuance of
a “no further action” letter or the equivalent indicia of completion issued by
any Governmental Authority having jurisdiction over the condition, area of
concern, or operable unit or the like (“No Further Action Letter”) shall
constitute completion of Duke Ventures’ obligation under this Agreement for any
such condition, except in the event of a third party claim or compliance with
any conditions set forth in such No Further Action Letter. Duke Ventures shall
provide MSREF, on behalf of the MS Members, with any material correspondence,
report, technical data or other material information generated as a result of
such investigation, remedial action, correction of noncompliance, or other
action conducted by Duke Ventures. Any expenditures incurred by the MS Members
to review such work or monitor Duke Ventures’ conduct of such investigation,
remedial action, correction of noncompliance, or other action (including
retention of third party contractors or services of in-house employees) shall be
at the sole expense of the MS Members.

Section 7.3 Waiver of Other Representations.

(a) NOTWITHSTANDING ANYTHING IN THIS AGREEMENT TO THE CONTRARY, IT IS THE
EXPLICIT INTENT OF EACH PARTY, AND THE PARTIES HEREBY AGREE, THAT NO PARTY NOR
ANY OF THEIR RESPECTIVE AFFILIATES OR REPRESENTATIVES HAS MADE OR IS MAKING ANY
REPRESENTATION OR WARRANTY WHATSOEVER, EXPRESS OR IMPLIED, WRITTEN OR ORAL,
INCLUDING ANY IMPLIED REPRESENTATION OR WARRANTY AS TO THE CONDITION,
MERCHANTABILITY, USAGE, SUITABILITY OR FITNESS FOR ANY PARTICULAR PURPOSE WITH
RESPECT TO THE BUSINESS, CRESCENT ITSELF OR ANY OF CRESCENT’S ASSETS, OR ANY
PART THEREOF, EXCEPT THOSE REPRESENTATIONS AND WARRANTIES CONTAINED IN
ARTICLES III, IV AND V OR IN ANY DOCUMENTS DELIVERED AT CLOSING. IN PARTICULAR,
AND WITHOUT IN ANY WAY LIMITING THE FOREGOING, (i) NO PARTY MAKES ANY
REPRESENTATION OR WARRANTY REGARDING ANY ENVIRONMENTAL MATTERS EXCEPT AS
EXPRESSLY SET FORTH IN SECTION 4.12 AND (ii) NO PARTY MAKES ANY REPRESENTATION
OR WARRANTY WITH RESPECT TO ANY FINANCIAL PROJECTIONS OR FORECASTS RELATING TO
CRESCENT OR CRESCENT’S ASSETS.

(b) EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THE REPRESENTATIONS AND WARRANTIES
IN ARTICLE IV, THE MS MEMBERS ARE ACQUIRING THEIR INTERESTS IN CRESCENT AND ITS
ASSETS “AS IS, WHERE IS, WITH ALL FAULTS,” AND EACH PARTY EXPRESSLY DISCLAIMS
ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND OR NATURE, EXPRESS OR IMPLIED, AS
TO THE CONDITION, VALUE OR QUALITY OF THE BUSINESS, CRESCENT AND ITS ASSETS OR
THE PROSPECTS (FINANCIAL OR OTHERWISE), RISKS AND OTHER INCIDENTS OF CRESCENT
AND ITS ASSETS.

 

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Section 7.4 Waiver of Remedies.

(a) The Parties hereby agree that no Party shall have any liability, and no
Party shall make any Claim, for any Loss or other matter, under, relating to or
arising out of this Agreement or any other document, agreement, certificate or
other matter delivered pursuant hereto, whether based on contract, tort, strict
liability, other Laws or otherwise, except as provided in this ARTICLE VII.

(b) Notwithstanding anything in this Agreement to the contrary, no
Representative or Affiliate of a Party shall have any liability to another Party
or any other Person as a result of the breach of any representation, warranty,
covenant, agreement or obligation of such Party in this Agreement.

Section 7.5 Procedure with Respect to Third Party Claims.

(a) If any Indemnified Party becomes subject to a pending or threatened Claim of
a third party (a “Third Party Claim”) and such Party (the “Claiming Party”)
believes it has a claim against the other Party (the “Responding Party”) as a
result, then the Claiming Party shall notify the Responding Party in writing of
the basis for such Claim setting forth the nature of the Claim in reasonable
detail. The failure of the Claiming Party to so notify the Responding Party
shall not relieve the Responding Party of liability hereunder except to the
extent that the defense of such Claim is prejudiced by the failure to give such
notice.

(b) If any Third Party Claim is made and the Claiming Party gives notice to the
Responding Party pursuant to Section 7.5(a), then the Responding Party shall be
entitled to participate in such proceeding and, to the extent that it wishes, to
assume the defense of such proceeding, if (i) the Responding Party provides
written notice to the Claiming Party that the Responding Party intends to
undertake such defense, (ii) the Responding Party conducts the defense of the
Third Party Claim actively and diligently with counsel reasonably satisfactory
to the Claiming Party, and (iii) if the Responding Party is a party to the
proceeding, the Responding Party or the Claiming Party has not determined in
good faith that joint representation would be inappropriate because of a
conflict in interest. The Claiming Party shall, in its sole discretion, have the
right to employ separate counsel (who may be selected by the Claiming Party in
its sole discretion) in any such action and to participate in the defense
thereof, and the fees and expenses of such counsel shall be paid by such
Claiming Party. The Claiming Party shall fully cooperate with the Responding
Party and its counsel in the defense or compromise of such Third Party Claim. If
the Responding Party assumes the defense of a proceeding, no compromise or
settlement of such Claims may be effected by the Responding Party without the
Claiming Party’s consent unless (A) there is no finding or admission of any
violation of Law or any violation of the rights of any Person and no effect on
any other Claims that may be made against the Claiming Party and (B) the sole
relief provided is monetary damages that are paid in full by the Responding
Party.

(c) If (i) notice is given to the Responding Party of the commencement of any
third party legal proceeding and the Responding Party does not, within thirty
(30) days after the Claiming Party’s notice is given, give notice to the
Claiming Party of its election to assume the defense of such legal proceeding,
(ii) any of the conditions set forth in Sections 7.5(b)(i) through 7.5(b)(iii)
become unsatisfied, (iii) a Claiming Party determines in good faith that the
Claiming Party and Responding Party have significantly divergent interests,
(iv) the named parties to such Third Party Claim include both the Responding
Party and the Claiming Party and the Claiming Party has defenses available to it
that are unavailable to the Responding Party, or (v) such Third Party Claim
seeks injunctive relief, specific performance, or other equitable relief from,
or seeks to impose any criminal penalty, fine or sanction on, the Claiming
Party, then the Claiming Party shall (upon notice to the Responding Party) have
the right to undertake the defense, compromise or settlement of such Third Party
Claim; provided, however, that the Responding Party shall reimburse the Claiming
Party for the costs of defending against such Third Party Claim (including
reasonable attorneys’ fees and expenses) and shall remain otherwise responsible
for any liability with respect to amounts arising from or related to such Third
Party Claim, in both cases to the extent it is ultimately determined that such
Responding Party is liable with respect to such Third Party Claim for a breach
under this Agreement. The Responding Party may elect to participate in such
legal proceedings, negotiations or defense at any time at its own expense.

 

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ARTICLE VIII

MISCELLANEOUS

 

Section 8.1 Notices.

(a) Unless this Agreement specifically requires otherwise, any notice, demand or
request provided for in this Agreement, or served, given or made in connection
with it, shall be in writing and shall be deemed properly served, given or made
if delivered in person or sent by facsimile or sent by registered or certified
mail, postage prepaid, or by a nationally recognized overnight courier service
that provides a receipt of delivery, in each case, to the Parties at the
addresses specified below:

If to Duke Ventures, to:

Duke Ventures, LLC

c/o Duke Energy Corporation

526 South Church Street

Charlotte, North Carolina 28202

Attention: General Counsel

Facsimile No.: (704) 382-7705

With a copy to:

Duke Energy Corporation

526 South Church Street

Charlotte, North Carolina 28202

Attention: Anders K. Torning, Esq.

Facsimile No.: (704) 382-8137

With an additional copy to:

Skadden, Arps, Slate, Meagher & Flom LLP

1440 New York Avenue, NW

Washington, DC 20005

Attention: Pankaj K. Sinha, Esq.

Facsimile No.: (202) 393-5760

If to Crescent, to:

Crescent Resources, LLC

400 South Tryon Street, Suite 1300

Charlotte, North Carolina 28202

Attn: Arthur W. Fields Facsimile No.: (704) 382-5429

With a copy to:

If to any MS Member, to:

c/o MSREF V U.S.–GP, L.L.C.

1585 Broadway, 37th Floor

New York, New York 10036

Attn: Michael J. Franco

Facsimile No.: (212) 507-4571

With a copy to:

MSREF V U.S.–GP, L.L.C.

1585 Broadway, 37th Floor

New York, New York 10036

Attn: Michael E. Quinn

Facsimile No.: (212) 507-4175

With an additional copy to:

Jones Day

2727 North Harwood Street

Dallas, Texas 75201

Attn: David J. Lowery, Esq.

Facsimile No.: (214) 969-5100

 

30

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With an additional copy to:

Morgan Stanley Strategic Investments, Inc.

1585 Broadway

New York, New York 10036

Attn: James Bolin and Thomas Doster

Facsimile No.: (212) 507-4213

(b) Notice given by personal delivery, mail or overnight courier pursuant to
this Section 8.1 shall be effective upon physical receipt. Notice given by
facsimile pursuant to this Section 8.1 shall be effective as of the date of
confirmed delivery if delivered before 5:00 P.M. Eastern Time on any Business
Day at the place of receipt or the next succeeding Business Day if confirmed
delivery is after 5:00 P.M. Eastern Time on any Business Day or during any
non-Business Day at the place of receipt.

Section 8.2 Entire Agreement. Except for the Confidentiality Agreement, the
Employee Matters Agreement, the Transition Services Agreement and the Legacy
Land Agreements, this Agreement together with the Letters supersedes all prior
discussions and agreements among the Parties and their respective Affiliates
with respect to the subject matter hereof and contains the sole and entire
agreement among the Parties and their respective Affiliates with respect to the
subject matter hereof.

Section 8.3 Expenses.

(a) Each Party represents that the amount of Expenses set forth on Exhibit H
opposite such Party’s name is a good faith estimate of such Party’s aggregate
actual Expenses to be incurred in connection with this Agreement and the other
transactions contemplated hereby.

(b) Simultaneously with the execution hereof, the Parties shall cause Holdco to
reimburse each of the MS Members and Duke Ventures an amount equal to the good
faith estimate of the Expenses each such Party incurred in connection with this
Agreement and the other transactions contemplated hereby as set forth on Exhibit
H, but in no event shall the aggregate amount reimbursed to the MS Members and
Duke Ventures exceed $12,500,000 without the approval of the Executive Committee
of Holdco (other than Expenses incurred in connection with the New Debt
Financing, which shall not be subject to the foregoing cap); provided, however,
that if the aggregate amount of such Expenses exceeds $12,500,000, the amounts
reimbursed to the MS Members, on the one hand, and Duke Ventures, on the other
hand, shall be reduced by a proportionate amount that each Party’s Expenses
bears to the aggregate Expenses. Within forty-five (45) days following the
Effective Date, each Party shall provide Crescent with copies of all invoices in
respect of Expenses, and Crescent shall promptly reimburse such Party such
additional amount of Expenses actually incurred by such Party less any amount
previously reimbursed; provided, however, in the event that the amount
previously

reimbursed to a Party exceeds the actual Expenses, such Party shall promptly
reimburse Crescent in an amount equal to such excess.

(c) Except as otherwise expressly provided in this Agreement, each Party shall
pay its own costs and expenses incurred in anticipation of, relating to and in
connection with the negotiation and execution of this Agreement and the
transactions contemplated in this Agreement.

Section 8.4 Disclosure. Duke Ventures, Crescent or the MS Members may, at their
option, include in the Letters items that are not material in order to avoid any
misunderstanding, and any such inclusion, or any references to dollar amounts,
shall not be deemed to be an acknowledgment or representation that such items
are material, to establish any standard of materiality or to define further the
meaning of such terms for purposes of this Agreement. Information disclosed in
any section of any Letter shall constitute a disclosure for purposes of all
other section of such Letter notwithstanding the lack of specific
cross-reference thereto. Notwithstanding anything in this Agreement to the
contrary, the mere inclusion of an item in a Letter as an exception to a
representation, warranty or covenant shall not be deemed an admission by a Party
that such item represents a material exception to such representation, warranty
or covenant.

Section 8.5 Waiver. Any term or condition of this Agreement may be waived at any
time by the Party or Parties that are entitled to the benefit thereof, but no
such waiver shall be effective unless set forth in a written instrument duly
executed by or on behalf of the Party or Parties waiving such term or condition.
No waiver by any Party of any term or condition of this Agreement, in any one or
more instances, shall be deemed to be or construed as a waiver of the same or
any other term or condition of this Agreement on any future occasion.

Section 8.6 Amendment. This Agreement may be amended or supplemented only by a
written instrument duly executed by or on behalf of each Party.

Section 8.7 No Third Party Beneficiary. The terms and provisions of this
Agreement are intended solely for the benefit of the Parties and their
respective successors or permitted assigns, and, except for the rights of the
Non-Crescent Affiliates set forth in Section 6.8 hereof, it is not the intention
of the Parties to confer third party beneficiary rights upon any other Person,
including any employee of Crescent, any beneficiary or dependents thereof, or
any collective bargaining representative thereof.

 

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Section 8.8 Assignment; Binding Effect. Neither this Agreement nor any right,
interest or obligation hereunder may be assigned by any Party without the prior
written consent of the other Parties, and any attempt to do so shall be void,
except for assignments and

transfers by operation of Law; provided, however, that, upon ten (10) days’
prior written notice from MSREF, on behalf of the MS Members, to Duke Ventures,
any of the MS Members shall have the right at any time on or after the Effective
Date and without Duke Ventures’ consent to assign all or a part of such MS
Member’s rights and obligations under this Agreement to any MS Permitted
Transferee (as such term is defined in the Operating Agreement), provided that
such MS Permitted Transferee is controlled by Morgan Stanley. Any such assignee
shall execute and deliver to Duke Ventures and Crescent a written assumption
agreement whereby it shall agree to be bound by this Agreement as if a Party
hereto to the extent of the interest assigned to it and whereupon such assignee
shall be jointly and severally obligated hereunder as if one of the Parties
encompassed by the term “MS Member.” MSREF, on behalf of the MS Members, must
obtain the written consent of Duke Ventures for any other assignment of this
Agreement, which consent may be withheld or conditioned in Duke Ventures’ sole
discretion. Any assignment not made in accordance with this Section 8.8 will be
null and void. No assignment described in this Section 8.8 shall release any of
the MS Members from any liability under this Agreement. Subject to this
Section 8.8, this Agreement is binding upon, inures to the benefit of and is
enforceable by the Parties and their respective successors and permitted
assigns.

Section 8.9 Headings. The headings used in this Agreement have been inserted for
convenience of reference only and do not define or limit the provisions hereof.

Section 8.10 Invalid Provisions. If any provision of this Agreement is held to
be illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any Party under this Agreement will not be materially
and adversely affected thereby, such provision shall be fully severable, this
Agreement shall be construed and enforced as if such illegal, invalid or
unenforceable provision had never comprised a part hereof, the remaining
provisions of this Agreement shall remain in full force and effect and shall not
be affected by the illegal, invalid or unenforceable provision or by its
severance herefrom and, in lieu of such illegal, invalid or unenforceable
provision, there shall be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.

Section 8.11 Counterparts; Facsimile. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument. Any facsimile
copies hereof or signature hereon shall, for all purposes, be deemed originals.

Section 8.12 Governing Law; Venue; and Jurisdiction; Waiver of Trial by Jury.

(a) This Agreement shall be governed by and construed in accordance with the
Laws of the State of Delaware, without giving effect to any conflict or choice
of law provision that would result in the imposition of another jurisdiction’s
Law.

(b) Any suit, action or proceeding seeking to enforce any provision of, or based
on any matter arising out of or in connection with this Agreement or the
transactions contemplated hereby or thereby shall be brought in a federal court
sitting in New Castle County, Delaware and each Party hereby consents to the
exclusive jurisdiction of any federal court sitting in New Castle County,
Delaware (and of the appropriate appellate courts there from) in any suit,
action or proceeding, and irrevocably waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the laying of the venue
of any such suit, action or proceeding in any such court or that any such suit,
action or proceeding which is brought in any such court has been brought in an
inconvenient forum; provided, that, if any federal court in New Castle County,
Delaware would not have subject matter jurisdiction over such suit, action or
proceeding, it shall be brought in any state court in New Castle County,
Delaware. Each Party hereby waives the right to commence an action, suit or
proceeding seeking to enforce any provisions of, or based on any matter arising
out of or in connection with this Agreement or the transactions contemplated
hereby or thereby in any court outside of New Castle County, Delaware. Any
judgment in any such suit, action or proceeding rendered by such federal court
sitting in New Castle County, Delaware, may be entered, filed, registered and
enforced by suit upon such judgment in any court of competent jurisdiction
(within or outside of New Castle County, Delaware) or as otherwise permitted by
applicable law. Any judgment in any such suit, action or proceeding rendered by
such federal or state court sitting in New Castle County, Delaware, may be
entered, filed, registered and enforced by suit upon such judgment in any court
of competent jurisdiction (within or outside of New Castle County, Delaware) or
as otherwise permitted by applicable law. Process in any suit, action or
proceeding may be served on any party anywhere in the world, whether within or
without the jurisdiction of any court. Without limiting the foregoing, each
party agrees that service of process on such party as provided in Section 8.1
shall be deemed effective service of process on such party.

(c) EACH OF THE PARTIES HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY LAW
TRIAL BY JURY IN ANY ACTION ARISING OUT OF MATTERS RELATED TO THIS AGREEMENT,
WHICH WAIVER IS INFORMED AND VOLUNTARY.

Section 8.13 Attorneys’ Fees. If any of the Parties shall bring an action to
enforce the provisions of this Agreement, the prevailing Party shall be entitled
to recover its reasonable attorneys’ fees and expenses incurred in such action
from the unsuccessful Party.

 

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Section 8.14 MS Member Representative; Joint Liability. The Parties acknowledge
and agree that MSREF shall be the agent for the MS Members for purposes of
delivering or receiving notices or other communications required or permitted to
be delivered by or to the MS Members hereunder. The obligations of MSREF, MSREF
Special, MSREI, MSP, MSSI and each other MS Member under this Agreement shall be
joint and several.

[signature page follows]

 

33

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IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by the
duly authorized officer of each Party as of the date first above written.

 

DUKE VENTURES:       DUKE VENTURES, LLC             By:                    
Name:                 Title: CRESCENT:       CRESCENT RESOURCES, LLC            
By:                     Name:                 Title:

--------------------------------------------------------------------------------

MS MEMBERS:      

MORGAN STANLEY REAL ESTATE FUND V U.S., L.P.,

a Delaware limited partnership

            By:   MSREF V U.S.-GP, L.L.C., a Delaware limited liability company,
its General Partner                 By:                     Name:              
          Title:            

MSP REAL ESTATE FUND V, L.P.,

a Delaware limited partnership

            By:   MSREF V U.S.-GP, L.L.C., a Delaware limited liability company,
its General Partner                 By:                     Name:              
      Title:            

MORGAN STANLEY REAL ESTATE INVESTORS V U.S., L.P.,

a Delaware limited partnership

            By:   MSREF V U.S.-GP, L.L.C., a Delaware limited liability company,
its General Partner                 By:                     Name:              
      Title:            

MORGAN STANLEY REAL ESTATE FUND V SPECIAL U.S., L.P.,

a Delaware limited partnership

            By:   MSREF V U.S.-GP, L.L.C., a Delaware limited liability company,
its General Partner                 By:                     Name:              
      Title:            

MORGAN STANLEY STRATEGIC INVESTMENTS, INC.,

a Delaware corporation

                By:                     Name:                     Title:    

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EXHIBIT A

AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT

OF CRESCENT HOLDINGS, LLC

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EXHIBIT B

AMENDED AND RESTATED ARTICLES OF ORGANIZATION

OF CRESCENT RESOURCES, LLC

 

These Amended and Restated Articles of Organization of Crescent Resources, LLC
(the “Company”) are made pursuant to Section 14-11-210 of the Georgia Limited
Liability Company Act (the “Act”) and are hereby filed with the Secretary of
State of the State of Georgia pursuant to Section 14-11-206 of the Act.

(a) The name of the limited liability company is Crescent Resources, LLC;

(b) The original Articles of Organization were filed on December 31, 2000;

(c) Those Articles of Organization are hereby amended to convert the Company
from being manager managed to being member managed (and eliminate Article 2
thereof); and

(d) Those Articles of Organization are hereby amended and restated in their
entirety to read as follows:

1. Name. The name of the limited liability company continues to be Crescent
Resources, LLC;

2. Management. The Company shall be managed by its Members (as set forth in that
certain Amended and Restated Limited Liability Company Agreement entered into
effective as of September 7, 2006, as amended from time to time).

3. Registered Office and Registered Agent. The name of the Company’s registered
agent for service of process will continue to be CT Corporation Systems, and the
address of the Company’s registered agent and the address of the Company’s
registered office in the State of Georgia will continue to be 1201 Peachtree
Street, N.E., Atlanta, Georgia 30361.

IN WITNESS WHEREOF, the undersigned has executed these Amended and Restated
Articles of Organization, to be effective on the date of their filing with the
Secretary of State of Georgia.

 

CRESCENT HOLDINGS, LLC, a Delaware

limited liability Company

By:                                      
                                                   

Name:                                     
                                                

Title:                                     
                                                  

 

 

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EXHIBIT C

 

AMENDED AND RESTATED OPERATING AGREEMENT

OF CRESCENT RESOURCES, LLC

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EXHIBIT D

 

TRANSITION SERVICES AGREEMENT

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EXHIBIT E

 

EMPLOYEE MATTERS AGREEMENT

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EXHIBIT F

 

FORM OF CERTIFICATE OF FORMATION

OF CRESCENT HOLDINGS, LLC

 

CERTIFICATE OF FORMATION

 

OF

 

CRESCENT HOLDINGS, LLC

 

1. The name of the limited liability company is Crescent Holdings, LLC.

2. The address of its registered office in the State of Delaware is c/o The
Corporation Trust Company, 1209 Orange Street, Wilmington, New Castle County,
Delaware 19801.

3. The name of its registered agent at such address is The Corporation Trust
Company.

IN WITNESS WHEREOF, the undersigned has executed this Certificate of Formation
of Crescent Holdings, LLC on this 30th day of August, 2006.

 

Crescent Holdings, LLC

By:  

--------------------------------------------------------------------------------

   

Name:

Title: Authorized Person

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EXHIBIT G

 

PURCHASE PRICE CALCULATION

 

1. Enterprise Value:

   $2,075,000,000  

2. less debt of Crescent as December 31, 2005:

   ($71,000,000 )

3. plus the Estimated Net Contribution/ Distribution Amount (estimate of net
capital contributions made by Duke Ventures, and capital distributions made to
Duke Ventures, from January 1, 2006 through the Effective Date):

   $30,000,000  

4. less the actual amount of net proceeds from the New Debt Financing
distributed to Duke Ventures:

   ($1,187,000,000 )     

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Equity Value:

   $847,000,000  

5. multiplied by 49%:

   *0.49       

--------------------------------------------------------------------------------

--------------------------------------------------------------------------------

Purchase Price:

   $415,030,000  

 

 

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EXHIBIT H

 

ESTIMATED TRANSACTION EXPENSES OF THE PARTIES

 

Duke Ventures:

   $ 5,500,000

MS Members:

   $ 3,500,000